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

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

iJobs Job Widget
iJobs General

Guru Careers: Copywriter / Direct Response Copywriter

£20k plus sales linked bonus. : Guru Careers: We are seeking a Copywriter to j...

Recruitment Genius: Accounting Technician

£17000 - £18000 per annum: Recruitment Genius: A fantastic opportunity has bec...

Guru Careers: 3D Creative Designer

Up to £26k DOE: Guru Careers: A Junior / Mid-Level 3D Creative Designer is nee...

Recruitment Genius: Ecommerce Website Digital Marketing Manager - Fashion / Retail

£40000 - £60000 per annum: Recruitment Genius: You'll be joining a truly talen...

Day In a Page

Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen