Vince Cable's business bank 'needs £40bn'

The business secretary's lending scheme might need £40bn to get off the ground. Who's going to lend him that much?

by Michael Northcott
Last Updated: 19 Aug 2013

For those of you who were sceptical about Vince Cable’s ‘business bank’, today is a day of vindication. According to the Institute for Public Policy Research (IPPR), the bank would need £40bn in cash to provide any sort of boost in lending to UK firms, and would also need to tap bond markets for a further £100bn. The think-tank also said that should the bank come to fruition, it should be allowed to invest in infrastructure projects to help boost the economy.

So, with these new insights, can we expect the bank to materialise? Well, unfortunately, these are cloud cuckoo land figures: George Osborne remains strictly in favour of austerity and private business has been tightening its belt for the last five years. Furthermore, Saint Vince of Cable has been less than clear about how the bank would be structured and how he would get his hands on enough money to launch it.He has made only the vaguest possible comments about the bank, such as ‘it will shake up the market’ and ‘boost overall lending to firms’. He has also said that the plans are in ‘gestation’ and that the deal may involve some state lending. 

This all sounds great, but as with a thousand policies before, many are sceptical that the bank will amount to anything meaningful – especially since the chancellor, George Osborne, remains keen to keep a lid on public spending. Chief economist at the IPPR, Tony Dolphin, told the BBC: ‘Because the chancellor will not spend more government money boosting aggregate demand in the economy, he has been reduced to indirect schemes like funding for lending to support growth.’ A pretty damning assessment of the Cable/Osborne duo’s efforts for business…

What it certainly does do is damage Cable's credibility, a quality which wee-Georgie is pretty short on himself. But playing politics over such a crucial issue could backfire on both of them...

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