Tuesday, 25 September 2012

State Owned Business Bank UK

The State Ready to Establish Business Bank
Business Secretary Vince Cable has announced the imminent creation of a State-owned business bank to help Britain's productive economy. Speaking from the 2012 LibDem party conference in Brighton, the Liberal Democrat Minister announced the Government is set to invest £1 billion of taxpayers' money into the project, a sum which the Treasury will not claim back. It is expected that this sum will be matched or exceeded by private money. The objective is to increase lending capacity to small and medium-sized firms in the British productive sector.

According to Sky News on 24 September 2012, Mr. Cable intends to boost British manufacturers, announcing: “We need a new British Business Bank with a clean balance sheet and an ability to expand lending rapidly to the manufacturers, exporters and high growth companies that power our economy.”

No More Property Speculation and Financial Gambling
In a bid to signalise a break from Britain's notorious system of financial speculation within the economy, Vince Cable went on to state: “We are so good at so many things in this Country – but for too long the mirage of growth based on property speculation and financial gambling has hidden the harder virtues of making things productively.”

The project for a new State-owned business bank, which could start operating in late 2013 or early 2014, has met the enthusiastic support of the British Chambers of Commerce, whose Director General, John Longworth, said: “We are pleased that ministers are heeding our call to create a business bank that goes well beyond a re-badging of existing schemes.”
According to the British Chambers of Commerce, 60% of firms say they would be more confident with a State-backed business bank in the United Kingdom.

Accountability in the Banking System
The UK banking system essentially crashed in 2008 as a result of speculation-driven investments, whereby the debtors, both in Britain and abroad, were faced with artificially high mortgages and high interest rates and could not pay back their debt, thus leaving many banks to declare a state of insolvency. The banks had progressively participated in the creation of a pyramid debt in the property market, whereby profits were made through the systematic and relentless increase in house prices, steadily pushing property values far in excess of their real value.
Other forms of financial gambling, often interlinked with the property market, and with no anchor in the real economy, were all designed to assure consistent profits to the banks, and, not least, to ensure consistent bonuses to bankers.

However, since 2008, British banks have done nothing to reverse the artificial prices of properties, and many people in Britain are burdened with mortgages and other forms of private debt, in many cases coupled with high interest rates. The uncertainty attached to regular repayment of debt has led the banks to become reluctant in giving out loans, even to businesses, with the banks preferring to sit on their stock of cash.

As all this is proof of fake accountability on the part of UK banks towards the real economy, the business bank envisaged by the British Government must surely be based on accountability, on economic reality, and not less importantly, on the basis that a lending bank cannot make enormous profits if it is to serve free market enterprises, such as small and medium-sized businesses.

Furthermore, in the free market sector of private businesses striving to perform in the economy, there can be no scope for self-serving bankers attempting to line their pockets with annual bonuses that by far exceed their top-salary. Whenever bankers collectively detract billions of pounds a year in bonuses from the banks' balance sheet, surely this money must come from the customers who have been grossly over-charged, or misled into investing in schemes that later become toxic debt.

In conclusion, the British productive economy cannot afford to rely on private banks whose first and foremost objective is to garner billions of pounds a year in bankers' bonuses, as this money would have to come from free enterprise, which in turn would tend towards bankruptcy.

Written by D. Alexander

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