My Lords, I am most grateful to the noble Baroness for moving this Motion, because it provides us with an opportunity to learn more about the business bank. It seems to have been below the horizon in recent months, but I notice it published a strategy document last month, in June.
The noble Baroness puts the business bank in the context of an industrial policy strategy. My response is: what strategy? Yes, she explained actions that the Government are taking, and Ministers refer to an industrial strategy that was announced in 2012. Last Thursday, the Minister spoke of a strategy in a debate on manufacturing and mentioned several initiatives, all of which are very welcome. However, the noble Baroness described initiatives reacting to market opportunities or to issues that have arisen in the economy: skills, training, technologies and sectors for support, exporting and, yes, financing. She also described existing businesses.
However, that does not add up to a strategy. Those are piecemeal responses to changes or problems that have arisen over the years. A strategy has to be intellectually coherent. It has to provide a framework for all of these activities. It has to be a means to an end—a means for achieving a vision. If we have one, perhaps the Minister can tell us what is the purpose of our strategy? Is it economic growth, or to benefit us all?
Ministers like to learn from Germany. Fifteen years ago, Germany was the sick man of Europe. Their strategy was laid out in Lisbon 2000 and the Haas report. It was economic, social and environmental, and yes—it has worked. It has provided a path for everybody in Germany to improve their quality of life and their ability to earn a living, and their economy is winning the race to the top. That is a strategy.
The noble Baroness is therefore right to put the question of the business bank in the context of a strategy. However, I put it to her that this is yet one more example of the Government reacting to events. Indeed, she told us as much when she said that the bank had resulted from what occurred during the banking crisis, because of lack of investment funds for small and medium-sized enterprises.
I welcome what the bank has done, acting as an intermediary in supplying credit, unlocking funds through guarantees and filling in other small funding gaps. I also welcome the way it has tidied up the work of the small loans guarantee and the capital for enterprise initiatives. The website gives us the numbers, but it does not make clear how much are loans on the bank’s own account and how much are for acting as intermediariaries. Perhaps the Minister can tell us that. Although welcome, the amounts are quite small in relation to the size of the financial market and will have a modest impact on the market.
A proper strategy would deal with the financial market itself, not just one of its failures. It should be a market which provides patient capital to allow small and medium-sized enterprises to develop their businesses. It should provide investment in capital intensive schemes such as power stations or cement works, which are mainly foreign owned because our financial market is adverse to this kind of investment. The same goes for infrastructure investment. The market should work for us all instead of finance largely being an end in itself.
We know that just giving the banks more money to lend to business obviously does not work—the money goes elsewhere. A proper strategy would encourage putting money into industry for the public benefit instead of inflating the value of our homes for private benefit. For instance, in many European countries, including Germany, you cannot borrow against the rising value of your house, so rising property values do not suffocate lending to business. A proper strategy would encompass more competition. In this morning’s Financial Times there was news of the potential for 30 new banks. That is good.
If the objective of the business bank is to raise the quality of life of us all and help our industry win the race to the top, all those issues have to be part of a strategy, throughout government. An industrial bank can help, especially as part of a coherent strategy, but it cannot do it alone.