David Prosser: The Chancellor's mixed message for lenders to Britain's small businesses
Outlook The problem with robbing Peter to pay Paul, which is what this Autumn Statement is all about, is that Peter isn't likely to take it lying down. So it may prove with the difficult balance the Chancellor continues to try to strike with Britain's banks.
On the one hand, Mr Osborne seeks to address the complaints of small business about access to loans with an ambitious credit easing scheme: it will help banks raise cash on the wholesale markets more cheaply and thus to provide more affordable loans to SMEs. On the other, the Chancellor also has to address the shortfall he faces on his bank levy, so he's raising the rate at which it is charged.
The two measures exert quite different pulls on the big banks. Lending more, to whoever, raises the size of a bank's balance sheet. A bank's levy bill is calculated according to the size of the balance sheet, so a higher rate is an incentive to shrink it.
Which of those pulls will prove strongest? Well, each bank will take a different view, depending on their circumstances. But note that the trend at all our banks since the credit crisis has been to shrink the balance sheet, in the face of higher capital requirements imposed by regulators.
This is not to say that either credit easing or a higher bank levy is the wrong policy. The Chancellor's blueprint for the former is ingenious in that it leaves lending decisions in the hands of the banks, though the taxpayer will ultimately be on the hook for losses. On the latter, Mr Osborne had no choice but to raise the rate as the levy would otherwise have produced less revenue than expected.
Banks will remain cautious though. The Government will not unveil its formal response to the Vickers report on banking reform until next month. Nor does the City believe regulators will use their new counter-cyclical powers to relax capital requirements during an economic downturn, when more lending is required.
One final point on the bank levy. The Chancellor took the opportunity yesterday to yet again make his hostility to a financial transactions tax clear. He fears that introducing such a tax across Europe, as the European Commission wants, would drive banks into territories that do not introduce the levy.
How does that anxiety square with his plan to increase the bank levy, a tax that applies only in this country? On the Chancellor's own logic, Barclays, HSBC and the rest will be packing their bags as we speak.
Have shock jocks gone too far after Rush Limbaugh called Sandra Fluke a slut?
The ‘Beverly Hills’ of Surrey pays more income tax than big cities of the North
British business: We need to stay in the European Union - or risk losing up to £92bn a year
World news in pictures
British father faces charges after confessing to slitting his two children's throats in Lyon flat
- 1 The ‘Beverly Hills’ of Surrey pays more income tax than big cities of the North
- 2 Tottenham to smash pay scale with £150,000-a-week contract in attempt to tie Gareth Bale to club
- 3 'Revenge porn' is no longer a niche activity which victimises only celebrities - the law must intervene
- 4 The moral case on tax avoidance is overwhelming - and we all know Google wants to do the right thing
- 5 Sam Wallace: The second coming of Jose Mourinho at Chelsea will be a reunion that can only end in tears
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Win anything from gadgets to five-star holidays on our competitions and offers page.
iJobs Money & Business
£500 per day: Orgtel: A top tier banking client urgently requires Finance Busi...
£425 - £550 per day: Orgtel: Senior Finance Project Manager - £550 - Bristol -...
£150 - £250 per day: Orgtel: KYC Analyst - London - Banking - £150-250/day C...
£500 per day: Orgtel: A top tier banking client urgently requires Finance Gove...