The Business Secretary’s suggestion at the Liberal Democrat conference of a new British Business Bank to help fund SME’s is not unwelcome. Our street banks have pulled in their horns and are restricting credit for fear of default. A new Business bank is supposed to fund such businesses via Government money (and perhaps somewhat optimistically match funded from private sources). Presumably it will take greater ‘risks’ e.g. supporting businesses that are not ‘asset’ rich in property and lend over a longer period than private banks.

Whilst we cannot object to a scheme that is more ‘user friendly’ than our own private banks it will still, we assume, lend at interest and operate for profit? One of the greatest problem with banks has been their greed, not just in bonuses, but in (interest) charges and credit creation i.e. lending out far more than they actually have (in the hope that most people won’t withdraw their deposits). The latter directly led to the US sub-prime crash and ultimately the ‘Debt Crisis’ because they lent money (to potentially increase profits) secured by lower assets to people who could ill afford to pay it back i.e. on benefits.

Instead Mr. Cable, what we actually need is a not-for-profit National People’s Bank, run by salaried (no bonuses) civil servants, and charging lower fees (rather than interest rates).

This is not a new idea. The National Liberals called for such a bank a few years ago (see also http://nationalliberal.org/a-state-bank that explains how it could work in competition with existing state banks). So while welcoming anything that weakens the power of the privately owned banks (and bankers) that have been so ruinous for public and personal finances, we need a People’s Bank that can lend cheap money to small businesses and the public alike!