Miliband backs a National Investment Bank

The Labour's leader proposal is good economics and smart politics.

Ed Miliband's speech on banking this morning received little media attention, largely since the main points were previewed in his Mail on Sunday interview. But one story that few have noticed is that the Labour leader has come out in support of a National Investment Bank.

In an interview with the New Statesman last September, Miliband said: "It's an interesting idea. It's something Ed [Balls] and I have talked about. It's definitely an idea worth exploring." He went on to commission Nick Tott, a former partner of Herbert Smith LLP, to examine the case for such an institution. Toot's report has now been published and has concluded that "there is a strong case for a British Investment Bank." In his speech, Miliband said:

Partly because it’s always cheaper for banks to lend to big companies than small ones.

We don’t believe the banks we already have will be equal to the task of lending enough to small businesses.

That’s why we believe there is a case for a British Investment Bank.

Government recognising its role to guarantee lending to small business to provide the long-term finance it needs.

It was a similar institution in the United States which gave a young entrepreneur a loan in the early eighties when nobody else understood his sector.

His name was Steve Jobs.

And he founded Apple.

Every other major country understands that government needs to act to tackle this problem of financing.

It’s time that British business stopped having to compete with one hand tied behind its back.

As Robert Skidelsky argued in our special "plan B" issue last year, a National Investment Bank, with the power to borrow [unlike the coalition's Green Bank], and a mandate to invest in infrastructure, would both stimulate recovery and support long-term growth.

Miliband's decision to support the proposal is also smart politics. Vince Cable, who called for part of RBS to be converted into a National Investment Bank in a private letter to David Cameron, is growing increasingly frustrated with the coalition's failure to stimulate growth. In his interview with Andrew Marr yesterday, he accused the banks of "throttling the recovery" through their obsession with obsession with "short-term trading profits". It is precisely this problem that a National Investment Bank is designed to address. But the constraints of the coalition mean Cable is unable to say so. In coming out for an Investment Bank, Miliband is reminding the Lib Dems that they are, in many respects, closer to Labour on economic policy than the Tories.

Labour leader Ed Miliband said a National Investment Bank would provide "long-term finance". Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.