Vince Cable determined to force banks to lend to small and medium enterprises (Wantage and Didcot Liberal Democrats)

Wantage and Didcot Liberal Democrats <info@wantagelibdems.org.uk>

Vince Cable determined to force banks to lend to small and medium enterprises

June 6, 2010 10:24 AM

Secretary of State for Business, Innovation and Skills, Vince Cable MP

In his first major speech as Business Secretary, reported in The Independent, Vince Cable has warned that the nation still faces a "very fragile" recovery, being held back by the crisis in the eurozone, the "massive" budget deficit and a "dysfunctional banking system". Mr Cable pledged to tackle "an economy that is seriously unbalanced both in its sectoral mix and in its regions".

The banks, said Mr Cable, would be forced to lend: "I will redouble our efforts to ensure that bank lending agreements from banks that have benefited from taxpayer subsidy are being honoured - especially for small and medium enterprises. We do not expect to see viable businesses deprived of credit or working capital by banks that are largely owned by the taxpayer, or the general beneficiaries of wider public support.

"The banks claim that there is no demand. That is not right. If the bar is set too high, of course no one is willing to jump. The current risk aversion by banks in the small and medium enterprise sector will stifle recovery and, if it does, will actually rebound on the banks through bad debt."

The Independent went on to report that in an echo of the arguments about the timing of cuts that were aired during the election campaign, Mr Cable said he had now been persuaded of the need for immediate cuts, but still stressed the dangers of slashing too much too quickly, hinting at arguments going on within the Government. And while pushing his department as "the Department for Economic Growth", he was careful not to challenge the Treasury's authority directly: "It is, in any event, a major economic department, complementary to the Treasury. A key measure of the success of this Government is that both succeed. We cannot have sustainable growth without fiscal stabilisation. And fiscal stabilisation will only be successful if it leads to growth.

"There is a critically important issue of timing. There is a balance of risk. If deficit reduction comes too rapidly there is a danger of deeper recession and even bigger deficits. But like the Governor of the Bank of England, and like the OECD, I have been persuaded that early action on the deficit is essential. Going forward, policy must be driven always by the same rational calculation of economic risk and benefit."

The Government's commitment to "green growth" was stressed by Mr Cable, so the various electric vehicle pilot schemes and a £20m loan to Nissan to develop and produce the "Leaf" electric car in Sunderland may be more secure.

Returning to unfinished business from previous Labour and Conservative governments, the Business Secretary confirmed that he would seek to "resolve the nagging problem of the Royal Mail" with more private sector involvement and a worker share ownership scheme.

Mr Cable's agenda