This blog by Charles Seaford discusses the recommendations for a state owned business bank from the Good Jobs Taskforce that is presented in the report 'The British Business Bank'.
By the end of
next year, the UK government’s British Business Bank, currently under
construction, will have landed. It’s mission? To boost the UK economy by
increasing flows of finance to our cash-strapped small businesses.
It’s good news,
for sure – but is that all the new institution could do? In a recent report, the new economics foundation (nef) makes
the case for dramatically extending the mandate of the British Business Bank.
We argue that its core purpose should be to support not just any small
businesses, but specifically the kinds that create good, sustainable jobs. That
is, jobs that deliver high well-being, contribute to a fairer society, and will
remain viable as we move to a low-carbon future.
It’s an easy
objective to state. But the details matter. That’s why our report aims to prove
that it is possible in practice to create and
deliver against a new set of economic policy objectives, beyond simply growing
GDP or reducing unemployment.
All this means
particular attention has to be paid to the bank’s performance indicator
framework, which will be used to guide lending and investment decisions. For these
will need to take into account questions such as: how good an employer is the
loan applicant? How does its environmental record compare with other similar
businesses? Is the business in a sector that is financially sustainable given
global trends? What impact will it have on the rest of the regional economy? The report goes into a lot more detail about what such questions mean both for
the indicator framework and targets set for the bank’s managers, and for the
kind of products and processes they use.
It is important
that the bank serves all parts of the country and the indicators would need to
be constructed on a regional basis. In addition, international experience
suggests the bank should work with a network of partner regional banks.
Unfortunately the latter don’t exist in the UK – one of the UK economy’s big
problems. However, we do have a possible way of dealing with this: it may be
possible to break up the Royal Bank of Scotland (currently 82% owned by the
state) to provide the necessary network of branches. This would have a number
of other benefits – above all bankers who understand the localities they serve
– and we are investigating just how feasible this would be.
Discussion of
banking performance indicators may seem a rather dry topic – but this is the
kind of low key policy lever that could make a big difference to people and
small businesses for years to come.
Charles Seaford
Head of the Centre for Wellbeing at the nef (new economics foundation)
Charles Seaford
Head of the Centre for Wellbeing at the nef (new economics foundation)
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