Cable unveils ‘state bank’ lifeline for firms

A STATE-backed small business bank will team up with loan providers to break the stranglehold of the big banks, Vince Cable will say today.

The Business Secretary will set out the first details of plans for the Treasury to sponsor a new lender, which could offer credit through smaller outlets such as Handelsbanken, the Co-op and the Aldermore.

Mr Cable will admit many businesses still face ‘real issues’ in raising finance – disclosing figures showing that in the last 12 months, 33 per cent who applied for a loan were rejected.

In the Commons last night, he admitted that Project Merlin – an attempt to set tough lending targets for Lloyds TSB, Barclays, RBS and HSBC – had done little more than stabilise levels of available credit and prevent them falling further. The Lib Dem minister will use a speech today at Imperial College, London, to set out a revamped industrial strategy, with car makers, aerospace, life sciences, construction, energy, higher education and creative industries to be named among the big winners. Mr Cable will dismiss those who favour a ‘ laissez- faire’ approach to the Government’s handling of the economy, insisting it is right to intervene to support key growth sectors.

However, he will say the Government has no intention of returning to the failed 1970s policy of the state ‘picking winners’ by selecting individual firms for help.

Britain’s slide into a double dip recession appears to have shaken the Tories and the Lib Dems into agreeing to give ground to each other as the Government struggles to kickstart growth.

The new Tory business minister Michael Fallon insisted yesterday the Government was going to make it easier and cheaper for firms to dismiss staff to encourage them to hire, a consistent demand of the Tory Right which has been thwarted by the Lib Dems.

Mr Fallon, a close ally of David Cameron who was appointed to the business department behind Mr Cable’s back in last week’s Government reshuffle, said the rules would be changes to ease the ‘burdensome’ system of getting rid of underperforming employees.

He said the Coalition would not revive proposals to allow firms to ‘fire at will’ in a report commissioned by Mr Cameron’s former strategy chief Steve Hilton.

But he said: ‘ There are going to be changes announced later this week, because we do want to deal with the burdensome nature of hiring and firing people, the cost of tribunals.

‘A lot of small businesses are worrying that if they do take on somebody extra and they’re not sure whether they perform well and they turn out not to be a help to their firm, that it’s going to be very expensive and take a lot of management time to get rid of them.’

On Friday, the Government is expected to announce the introduction of settlement agreements, allowing firms to encourage employees to leave in return for a pay- off.

SHOULD you want a glimpse of a nightmare future, play back Andrew Marr’s Sunday BBC TV interview with Vince Cable and Ed Balls. The two were smirking and stroking each other — politically, I mean — like showbiz luvvies on a reality show.

Balls, Labour’s Shadow Chancellor, said: ‘Vince should be listened to on banking reform and the economy. I could work with Vince.’ Cable, the Coalition’s Business Secretary, refused to apologise for his matey relations with Labour frontbenchers, saying: ‘I am very happy to talk to Ed; I talk to my Conservative colleagues in government in an equally businesslike way.’

Yes, but there is a difference: Cable’s Conservative colleagues are members of the same ruling Cabinet, while Ed Balls is a prominent member of the Labour Opposition. The message of their on- screen exchanges is plain. Balls is looking ahead to a Lib Dem-Labour coalition in the next hung parliament; Cable fancies himself as Lib Dem leader and deputy prime minister in just such an administration.

At Westminster, MPs of all parties speculate freely about such an outcome at the next election. The Tories currently lag Labour by around five points in the polls — 34 per cent to 39 per cent — while the Lib Dems are stuck on 15 per cent.

David Cameron could achieve a comeback if the nation’s prosperity begins to recover during the next 30 months. But how likely is this? Today, the economy is 4 per cent smaller than at its 2008 precrisis level. The balance of payments is sickly, Britain’s international competitiveness is declining, and the euro crisis is much more likely to worsen than to be resolved.

The last and most serious threat is no fault of Cameron’s. But sure as eggs, the electorate will blame him for it on polling day, just as other European voters keep punishing incumbent governments for their own woes.

So Cameron’s chances of securing an absolute Tory majority are slim, and 48 per cent of Lib Dem supporters tell pollsters that, in another hung parliament, they would support a deal with Labour, against 19 per cent willing to rejoin a government with the Tories. The remainder favour rejecting deals with either.

Mistake

Ed Balls said on Sunday what we knew anyway: Labour could never do business with Nick Clegg — who is likely to end up in a roasting pan however things turn out — but could work with Vince Cable. The Business Secretary brushed away this idea as convincingly as might a lottery winner shrug that he does not want the cash.

Let us consider what a Lib-Lab government might do to Britain. First and most obvious, Balls, newly installed as Chancellor of the Exchequer, would pick up where his old boss Gordon Brown left off two years ago; Balls has never conceded that Labour’s spending boom was a mistake.

Floods of money would pour forth from the Treasury to Labour’s anointed favourites. The pay freeze for state workers would be replaced by annual rises to keep their earnings ahead of the private sector. We would hear no more of Tory proposals to end national collective pay bargaining in favour of regional deals, based on local costs of living.

The cash taps would be twirled on again for local authorities, quangos, social engineering and minority rights organisations. Caps on welfare benefits would be lifted. There would be a surge of big, brassy infrastructure projects, especially in Scotland, Wales and the north. A shuttle service of trucks bearing good things for Labour constituencies in Britain’s ‘deprived regions’ would power up the M1.

All this money would have to be borrowed, of course. Britain does not earn nearly enough to afford even our current standard of living, amid the token cuts imposed by George Osborne.

The country has not begun to face its dire financial predicament by calling time on bust households, banks and companies, because the consequences of doing so would be electorally, and perhaps socially, disastrous.

But a Lib- Lab coalition would throw to the wind any fig leaf of austerity. Ed Balls would dress up his spending spree as ‘neo-Keynesianism’ to make it sound economically respectable, but Britain’s international creditworthiness would soon be imperilled.

Lib-Lab doings at the Treasury would look terrifying to everyone except Labour’s client vote of eight million public sector workers and benefit claimants, but their policies in other departments would represent national tragedies.

Iain Duncan Smith’s attempts to reform the bloated welfare system would be abandoned, NHS spending would become a free-for-all. The last slim chance would vanish of enabling our children to inherit an affordable welfare state. Immigration and the human rights industry would gain new impetus.

Shameless

The most grievous blow of all would fall on education. Michael Gove’s crusade to overcome the entrenched education establishment — once more mobilising for battle this week with threats of national strikes — and enable our children to secure a decent education would perish within days of a Lib-Lab government forming.

Lib Dems are shameless egalitarians. State- school teachers will vote Labour almost to a man and woman, and will expect their reward — the abandonment of attempts to restore competition and standards to schools.

Universities will be forced to admit more state-school pupils — and thus fewer privately educated ones — heedless of their qualifications. The struggle to create a new generation of young British people capable of competing with Asia will be lost almost before it has begun.

Ed Balls, with Vince Cable’s enthusiastic support, would try to raise at least a fraction of the money they spend by soaking ‘the rich’. The Shadow Chancellor enthused on Sunday about a mansion tax — a policy Lib Dems also favour. Income tax would rise. Ed Miliband has invented a new codeword for rich-bashing: ‘pre-distribution’; he speaks of ‘redefining the capitalist system’.

If we want a foretaste of what a Miliband-Balls-Cable Britain might look like, cross the Channel to the France of President Francois Hollande, who is imposing a 75 per cent top tax rate which has already got the rich dashing for the exits.

If a Lib- Lab government sounds fanciful, ask yourself whether there is really anything the present Coalition government can do to make itself more respected or better loved before it is too late.

In a sensible world, the legacy of Gordon Brown would ensure that Labour did not regain power for many years to come. But electorates have pathetically short memories. At last week’s Paralympics, Brown — architect of so many of the nation’s woes — was not booed, stoned or asked to leave, but instead cheered.

The willingness of millions of voters to believe in Santa Claus, to demand a painless escape from decades of paying ourselves far more than we could afford, is painful to behold, but it is a reality. Ed Balls on Sunday used Gordon Brown’s favourite weasel word for spending — ‘investment’ — to explain his readiness to squander cash we do not have.

But for all that, Balls has a following; Labour’s 39 per cent support in the polls could even increase. Vince Cable is quite unfit to be Business Secretary, an impediment to regulatory reform and economic progress, despite all the waffle about these things in a speech he delivered yesterday.

Despised

A mushy fellow, it is hard to guess whether he is considering making a dramatic resignation within the next year, followed by an appeal to his own party to dump Nick Clegg and quit the coalition. If it heeded him, a general election could soon follow.

Maybe, instead, Cable is content to wait for 2015, gambling that Tory fortunes will by then be irretrievable.

But this much is sure: the Business Secretary is now the government’s Trojan Donkey, capable at any moment of betraying his despised leader Nick Clegg, and perhaps also of trying to pull down the house around his ears.

It seems quite plausible that by 2015, the British electorate will be crazy enough to install a Lib Dem- Labour coalition government.

However disappointed some people may feel with the present lot, if indeed we find Miliband, Balls and Cable taking control on the bridge, it will be time for us paying passengers to make for the boats.