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Business lending initiative 'needs £40bn'

Date Added: 19/09/2012  

A new business lending initiative proposed by the government would require £40 billion of state aid if it was to be a success, it has been claimed.

According to the think tank IPPR, the business bank must be able to tap into bond markets for up to £100 billion for the scheme to work.

Business minister Vince Cable has suggested that the launch of the bank would "shake up the market" in the UK, as well as improving the flow of credit to companies.

But IPPR's chief economist Tony Dolphin accused chancellor of the exchequer George Osborne of using "indirect" schemes such as the investment bank to boost the economy, due to the fact that the Conservative MP will not spend more government money boosting aggregate demand.

"What we need in the UK is a fully-fledged British investment bank designed to suit the particular circumstances of our economy," he said.

Liberal Democrat MP Mr Cable has stated the plans for the new business bank remain in "gestation" while the details of how it would operate in practice are worked out.

It is claimed that Mr Osborne is against using state money to fund the initiative, although this is one of the ideas that may be floated by the business minister in the coming weeks.

The IPPR claimed what is being proposed by the coalition government is a new small business lending service, rather than the foundation of a major bank.

Mr Dolphin stated the reluctance of the chancellor to inject public money into the business bank may prevent it from being as effective as it could have been if it was supported by state funds.

John Walker, national chairman of the Federation of Small Businesses, is among those to have announced their support for the new business bank in recent weeks.

He stated many firms are being held back from growing and boosting the economy as a result, due to an inability to be approved for the loans they need to expand their operations.

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Posted by Michael Beam

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