Monday, March 25, 2013

ECOBATE 2013 - 3 Vince Cable: 'We need lots of Banks of Dave'

Pity your government minister. He accepts an invitation to speak at a pioneering economics conference but, being in town everyone wants to see him and bend his ear. So his time is taken up in personal lobbying and he misses hearing much of the valuable contributions to the banking crisis from other speakers. 

Vince Cable MP, the UK Secretary of State for Business, Innovation and Skills said in Winchester that the banking situation in the UK is a 'massive problem', with the collapse of major banks and the absence of local banking. As earlier speakers had done, he gave us more history: JS Mill described UK bank collapses in the early 19th century but ever since, until Northern Rock in 2007 we had escaped them, with even the mid-20th century depression which affected US banks not troubling the UK in that way. He mentioned the Cruickshank Report of 2000 on competition in UK Banking which called for government to address the monopoly position of banks; to bring about diversity to the flows of money in the economy; to examine the effectiveness of the FSA in bringing increased competition. Dr Cable, in opposition at the time, had championed the report but ministers dithered and it went away as a political issue.  The failure to take it seriously meant that the chickens came home to roost, as bank customers queued for their money at Northern Rock branches in 2007. 

Dr Cable spoke of government support for bank lending to small businesses and welcomed the ventures of Dave Fishwick  'we need lots of Banks of Dave',  Handelsbanken, Metro Bank and others new banks. He extolled the virtues of the German Sparkassen (savings bank) movement a  'superb model', 'wonderful system, localised, decentralised' and wondered why 'we don't have anything remotely like the Sparkassen system?'. He called the UK banking system 'horribly inappropriate', having lost its  local banking when the building societies were de-mutualised. Watch his speech on YouTube.

A welcome VC quote: 'I come here to learn as much as to preach'. Earlier in the day Alex Templeton had indicated clearly what needs to be done to introduce a Sparkassen type system in the UK even under existing local authority powers.  He gave a short but highly convincing case for local authority backed local banks.  He described specific current merits of the German Sparkassen system in producing jobs and growth and carbon reduction, contrasted with a potential sustainable growth venture in Hampshire which is stalling due to lack of ready credit.
Watch Alex Templeton's  speech on YouTube (9 mins).  

It looks as though Dr Cable really wants local banks. He need do no more than actively encourage local authorities to back local community banks. With government cash grants and/or guarantees Vince Cable could soon have local credit flows invigorating the economy from the bottom up, bringing growth and jobs, rather than the prospect of another failure of the 'horribly inappropriate' current system overtaking us. 

Posted by Charles Bazlinton reporting on the European Conference on Banking, Finance and Sustainable Development. Winchester, 6th March 2013.

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