You would expect Gordon Brown feels he owns quite enough banks already. But some are seeing signs that he wants more. As Ben Brogan points out, prime minister’s use of the phrase “non-bank institutions” has prompted speculation that a new government bank will be born.
The idea of creating a new lending institution has already been raised in the City. Its advocates see some merit in establishing a body to lend or take stakes in medium sized companies. David Reid Scott, chairman of the advisory firm Hawkpoint, argues that it could be based on two institutions set up after the war: the Finance Corporation for Industry and the Industrial Commercial and Finance Corporation.
Cynics would say the opportunity to invoke Churchill is probably too appealing for the prime minister to resist**. If he was feeling particularly mischievous, he could even call it GB Investments.
The body could be funded with, say, £5bn of capital, which would allow it to lend ten times that amount. It could finance “viable” businesses, buy stakes, back the “Green Deal”, or simply fund all the PFI schemes that are struggling to find backing.
Similar ideas are gaining traction in Europe. The Germans are setting up the imaginatively named “Germany fund”, which will be backed with €100bn to issue credit guarantees or take stakes in ailing companies. German officials say Nicolas Sarkozy “expressed a lot of interest” in the “Germany fund”. Will Brown be as interested when he meets with Chancellor Merkel on Thursday?
The trouble is that setting up a new lending institution is a difficult business that would take a long time. The worst of the recession may be over by the time it is ready. And what would its remit be? To make money, save the country, or save Labour? Ministers say that the concept has been looked at in Whitehall, but has not won much support — so far.
**Andrew Hill in his Lombard column quotes Sir John Anderson, the then chancellor, briefing the Commons in 1945, saying the institutions would provide “temporary or longer period finance for industrial businesses . . . with a view to their quick rehabilitation and development in the national interest, thereby assisting in the maintenance and increase of employment”.
Jim Pickard
Kiran Stacey