Cable and Osborne on a collision course over small-business bank

 

A row between Vince Cable and George Osborne was brewing last night over whether a new Government-backed bank should lend money directly to cash-starved small businesses.

The Liberal Democrat Business Secretary said yesterday that the scheme "may well" involve state lending. But when the Chancellor announced the "small-business bank" last week, the Treasury made clear it would not have a budget to channel money to firms and would merely make existing government schemes to help business more accessible.

The latest exchange between Mr Osborne and Mr Cable echoes a previous dispute over Liberal Democrat demands for the Government to fully nationalise the Royal Bank of Scotland to force it to boost lending to firms. The plan was blocked by the Chancellor, who wants to sell the state's 82-per-cent stake in the bank when the time is right.Mr Cable, who outlined a new pro-active government industrial strategy yesterday, has criticised the banks for not lending to business and is determined to see the state-sponsored bank have real teeth. "There is a battle going on about this," one Whitehall insider said yesterday.

The Business Secretary conceded that he is still discussing the new bank's "scale and scope" with the Chancellor. He insisted: "Government can make a difference. There are areas where the lending market doesn't work well and we think the Government has a role, as a catalyst, in those areas."

Mr Cable added: "There are a lot of companies – gazelles, the rapid growth success stories – which need what they call 'patient capital'. They need 20-year money, they find it very difficult to get this from the banking sector. They can get a bit of equity now through the business growth fund, but they can't get long-term loan capital.

"So there is a role for an institution that can promote that kind of lending. But I'm working at the moment with the Chancellor, on how big this should be, how it should operate, and what the sectors that it services should be."

In a speech in London, Mr Cable said the business bank could operate through one of the new smaller "challenger banks" such as Sweden's Handelsbanken, the Co-Op and Aldermore. Insisting the Government would not "pick winners" as in the 60s and 70s, Mr Cable wants to put its muscle behind high-growth sectors that need a long-term partnership – such as advanced manufacturing, the digital economy, green energy firms and higher education.

The Business Secretary said Britain could learn from Germany how to procure from domestic companies while not breaking EU single market rules, and conceded the UK had been a "bit too defensive about the EU".

He said the Government would, for example, try to ensure that as many sub-contracts went to British firms when train orders were placed.

Mr Cable's long-standing plea for a more radical industrial strategy was backed by the Cabinet yesterday. Conservative and Liberal Democrat ministers agreed that all governments, as major purchasers of goods and services, had an industrial policy – even if by default, and so it was better to have an organised, pro-active one.

John Cridland, director-general of the Confederation of British Industry, described the new strategy as a "valuable first step". While the CBI did not believe a state bank lending directly was necessary, he said there was a critical need to provide new alternatives to traditional bank financing.

Start your day with The Independent, sign up for daily news emails
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Senior VMware Platform Engineer - VMware / SAN / Tier3 DC

£45000 - £55000 per annum + benefits: Ashdown Group: Senior VMware Platform En...

Recruitment Genius: Purchasing Assistant

£10000 - £16000 per annum: Recruitment Genius: A distributor of specialist ele...

Recruitment Genius: Sales Ledger Assistant

£17000 - £19000 per annum: Recruitment Genius: A distributor of specialist ele...

Ashdown Group: Automated Tester / Test Analyst - .Net / SQL - Cheshire

£32000 per annum + pension, healthcare & 23 days holiday: Ashdown Group: A gro...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot