A fortnight ago I shared a platform at the Munich Economic Summit with the boss of BMW, and told a true story that sums up what has gone wrong with our economy by letting the banks grow so powerful at the expense of manufacturing.
Going to a match in Cologne in the World Cup in 2006, silly English fans around me started singing anti-German songs. A German fan said to them in perfect English: "You're only here because you drive a German car."
That shut them up.
Sound small businesses here cannot get the banks' support to fulfil orders and build more jobs. Last week, a small contracting firm told me it could not take a job in the Gulf because its bank refused to give it a performance bond unless backed by a 100 per cent cash deposit.
When banks lend to us, it is on tough terms with strict limits. It is high time the Government treated them the same way when they break their commitments, starting with the two we own.
So far we've kept the confidence of foreign investors – but we're losing the confidence of British consumers. We must get the deficit under control, but there is a risk demand will become too depressed and we will not get the jobs growth we need.
So we also need to boost productive investment, both public and private. Despite Labour's spending bonanza, our capital stock has run right down – overcrowded trains, potholed roads, clapped-out sewers and utilities are all bad for British business.
And there is one sensible tax cut that would tick all the boxes to help small businesses, boost jobs and bring derelict homes up to a decent standard. That's a targeted tax cut costing £2bn a year, unlike Ed Balls's irresponsible and indiscriminate £20bn VAT hand out to everyone.
Why do we charge VAT at a crippling 20 per cent on housing reconstruction and improvements? That is a serious distortion to the market when there is no VAT on new-build. Cutting VAT to 5 per cent would get white van man motoring and kickstart productive investment to meet desperate housing need.
This is an abridged version of an article by Lord Oakeshott, a Lib Dem peer, in Friday's propertyweek.comReuse content