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Lib Dem conference: Cable promises £1bn 'business bank' Lib Dem conference: Cable promises £1bn 'business bank'
(35 minutes later)
By Justin Parkinson Political reporter, BBC News, in BrightonBy Justin Parkinson Political reporter, BBC News, in Brighton
The government is to put £1bn into setting up a bank designed to increase the amount of lending to businesses, Vince Cable is to announce.The government is to put £1bn into setting up a bank designed to increase the amount of lending to businesses, Vince Cable is to announce.
The business secretary will tell the Liberal Democrat conference this will help many small and medium-sized companies who have struggled for credit since the financial crisis.The business secretary will tell the Liberal Democrat conference this will help many small and medium-sized companies who have struggled for credit since the financial crisis.
He will promise to fight short-termism and "get behind" good firms.He will promise to fight short-termism and "get behind" good firms.
The bank will operate via existing lenders, and start within 18 months.The bank will operate via existing lenders, and start within 18 months.
It is hoped the money will be matched by private sector investment.It is hoped the money will be matched by private sector investment.
The details of where the state funding will come from and the bank's operation will not be made public until the autumn statement on 5 December, Lib Dem officials said.The details of where the state funding will come from and the bank's operation will not be made public until the autumn statement on 5 December, Lib Dem officials said.
Government support will be in the form of both guarantees and equity, and will go on to the balance sheet of the new institution and not be reclaimed by the Treasury. There is a chance it could generate returns, however.Government support will be in the form of both guarantees and equity, and will go on to the balance sheet of the new institution and not be reclaimed by the Treasury. There is a chance it could generate returns, however.
'Ambitious''Ambitious'
The Lib Dems have been keen to promote their business credentials at their annual conference in Brighton, with proposals for boosting housing and the "green economy" also being revealed.The Lib Dems have been keen to promote their business credentials at their annual conference in Brighton, with proposals for boosting housing and the "green economy" also being revealed.
Just a few weeks ago Vince Cable said his idea of a bank for business was still "in gestation". He had some tough negotiations ahead with the Treasury. While the details of the new "business bank" won't be known until December's Autumn Statement, it is believed that it will focus on supporting long-term lending to small firms.
But, while he now wants to declare that he has given birth to the new bank, this may turn out to be premature. What he has secured is a promise of £1bn from the Treasury which, it is hoped, will then help attract a further billion or more from the private sector It is expected to do this by buying up existing loans that banks have made to such companies.
But we don't yet know where the Treasury has found the money, and so far not a pound of private money has been pledged. While small businesses would get longer term financial security, the government will hope that its move will free up more capital for the sector.
No staff have been recruited. And the bank won't share the characteristics of some of its namesakes. Critics however will argue that the business bank plan will only add to confusion about what schemes are available to small firms, and accusations that the government keeps chopping and changing.
Small and medium-sized businesses which need cash won't be able to go to the bank direct for a loan - they will have to go through intermediaries which will in turn approach the bank. This is because Mr Cable's confirmation of the business bank plan comes less than two months after the government announced the launch of a separate initiative called Funding for Lending.
The new bank won't take deposits and it won't have branches. And it's not yet clear where it will be based. The Funding for Lending scheme is to replace the National Loan Guarantee Scheme, which was only first unveiled in March.
But Mr Cable is upbeat because he says similar ideas have successfully been put in to practice in Germany. And politically he is keen to make the case that state can and should do more to boost the economy. Prior to that there was an initiative called Enterprise Finance Guarantee Scheme.
So if some small firms are confused, others continue to argue that bank loans remain difficult to secure, because the banks are demanding large deposits.
On the other hand, the banks say that they are meeting their lending targets, and that they would lend more if there was an increase in demand for loans from small firms.
On Sunday, delegates voted to maintain opposition to a third runway at Heathrow Airport, a policy which puts them at odds with an increasing number of Conservatives and many firms.On Sunday, delegates voted to maintain opposition to a third runway at Heathrow Airport, a policy which puts them at odds with an increasing number of Conservatives and many firms.
But in his speech, Mr Cable will promise a more coherent strategy to help get the UK out of recession.But in his speech, Mr Cable will promise a more coherent strategy to help get the UK out of recession.
He will say: "We need a new British Business Bank with a clean balance sheet and an ability to expand lending rapidly to the manufacturers, exporters and high-growth companies that power our economy.He will say: "We need a new British Business Bank with a clean balance sheet and an ability to expand lending rapidly to the manufacturers, exporters and high-growth companies that power our economy.
"Today I can announce we will have one. I am working with the chancellor to develop a state-backed institution that will combine up to a billion pounds of new government capital with a larger private sector contribution."Today I can announce we will have one. I am working with the chancellor to develop a state-backed institution that will combine up to a billion pounds of new government capital with a larger private sector contribution.
"This will then apply further leverage through guarantees to support up to £10bn of finance to SMEs [small and medium enterprises] and mid-sized business - a significant portion of all the lending available.""This will then apply further leverage through guarantees to support up to £10bn of finance to SMEs [small and medium enterprises] and mid-sized business - a significant portion of all the lending available."
He will add: "To that end, I believe we need an industrial strategy - a positive and ambitious vision, built around long-term investment and innovation, in skills and science.He will add: "To that end, I believe we need an industrial strategy - a positive and ambitious vision, built around long-term investment and innovation, in skills and science.
"We are so good at so many things in this country - but for too long the mirage of growth based on property speculation and financial gambling has hidden the harder virtues of making things productively."We are so good at so many things in this country - but for too long the mirage of growth based on property speculation and financial gambling has hidden the harder virtues of making things productively.
"We must get behind successful British-based firms in vehicles, aerospace, life sciences and creative industries and our world-class scientists and universities.""We must get behind successful British-based firms in vehicles, aerospace, life sciences and creative industries and our world-class scientists and universities."
Mr Cable will argue that markets "fail" and governments "can sensibly intervene and support enterprise".Mr Cable will argue that markets "fail" and governments "can sensibly intervene and support enterprise".
He will call for a "will to fight the British curse of short-termism - both in the corporate world and government".He will call for a "will to fight the British curse of short-termism - both in the corporate world and government".
BBC business editor Robert Peston said the government was aiming for a long-term improvement in lending to small firms rather than a quick change.BBC business editor Robert Peston said the government was aiming for a long-term improvement in lending to small firms rather than a quick change.
He added: "The intention is that these would be longer-term loans with a maturity of about 10 years, that small businesses find hard to prise out of our risk-averse banks."He added: "The intention is that these would be longer-term loans with a maturity of about 10 years, that small businesses find hard to prise out of our risk-averse banks."
John Longworth, director general of the British Chambers of Commerce, said the government had "taken a decisive step toward the creation of a British Business Bank by committing real money to get it off the ground.John Longworth, director general of the British Chambers of Commerce, said the government had "taken a decisive step toward the creation of a British Business Bank by committing real money to get it off the ground.
"We are pleased that ministers are heeding our call to create a business bank that goes well beyond a re-badging of existing schemes."We are pleased that ministers are heeding our call to create a business bank that goes well beyond a re-badging of existing schemes.
"The funding announced by Vince Cable is the first step in a journey toward a British business bank that enables new and growing companies to get access to capital in the same way that they do in Germany, South Korea, and the USA.""The funding announced by Vince Cable is the first step in a journey toward a British business bank that enables new and growing companies to get access to capital in the same way that they do in Germany, South Korea, and the USA."
Do you own a small or medium-sized company which has struggled for credit? What do you think of the plan? Send us your comments and experiences.Do you own a small or medium-sized company which has struggled for credit? What do you think of the plan? Send us your comments and experiences.