Will the Sparks light up SME lending?

Ed Miliband is a man with a plan.

George reports that Ed Miliband is to take inspiration from the German Sparkassen system, and establish a new network of regional banks in the UK.

Miliband, and his shadow business secretary Chuka Umunna, are positing the new banks—apparently to be anglicised as "Sparks"—as a solution to Britain's lending crisis. The idea is that by devolving state-supported lending to SMEs down to the regional level, the banks may be able to use their local knowledge to get more return on their investment—helping the business with strong links to the local community and a record of job creation, rather than just the one which has the healthiest profit/loss ratio.

The move is supported by many. David Green, the director of the Civitas think-tank, says that, "the Sparkassen were a major factor in helping Germany bounce back from the recession so much more quickly than the UK, which has been held back by the coalition Government's miserable failure to learn the most obvious lessons from overseas."

But the problem with Britain's SME lending is more complex than just greedy bankers. The ever-perceptive Dan Davies sums it up in just a few tweets:

 

 

 

 

 

 

 

 

The meme of "greedy bankers not lending to embattled small businesses" is a strong one, but as Davies says, there are far more structural problems when it comes to that market. Basicall

What we should really be looking for in the Sparks, then, is whether they can overcome those problems. They clearly can't fix our housing market, and if defaulting on a business loan locks you out of the housing market forever then risk aversion on the part of the business owners is understandable. At the same time, to remove that barrier—to let SMEs take out loans which don't require personal guarantees—is inviting fraud.

The big hope for the Sparks is that they will be able to crack down on fraud in other ways. If their regional basis really does render them better-placed to work out whether a particular application is fraudulent than commercial banks, then they could stand a chance of making un-guaranteed loans profitable. Alternatively, of course, the government could decide that, in a recession, the profitability of the banks is no longer an issue. The Sparks could be run at a loss, deliberately making riskier loans than is commercially sensible, until growth picks up.

That wouldn't work as a stated policy, because the minute it was announced that they would be deliberately amenable to fraud, fraud would shoot up. But if Labour were more interested in fixing the economy than getting credit for fixing the economy, it could be a smart way to go.

A German Sparkasse. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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A swimming pool and a bleeding toe put my medical competency in doubt

Doctors are used to contending with Google. Sometimes the search engine wins. 

The brutal heatwave affecting southern Europe this summer has become known among locals as “Lucifer”. Having just returned from Italy, I fully understand the nickname. An early excursion caused the beginnings of sunstroke, so we abandoned plans to explore the cultural heritage of the Amalfi region and strayed no further than five metres from the hotel pool for the rest of the week.

The children were delighted, particularly my 12-year-old stepdaughter, Gracie, who proceeded to spend hours at a time playing in the water. Towelling herself after one long session, she noticed something odd.

“What’s happened there?” she asked, holding her foot aloft in front of my face.

I inspected the proffered appendage: on the underside of her big toe was an oblong area of glistening red flesh that looked like a chunk of raw steak.

“Did you injure it?”

She shook her head. “It doesn’t hurt at all.”

I shrugged and said she must have grazed it. She wasn’t convinced, pointing out that she would remember if she had done that. She has great faith in plasters, though, and once it was dressed she forgot all about it. I dismissed it, too, assuming it was one of those things.

By the end of the next day, the pulp on the underside of all of her toes looked the same. As the doctor in the family, I felt under some pressure to come up with an explanation. I made up something about burns from the hot paving slabs around the pool. Gracie didn’t say as much, but her look suggested a dawning scepticism over my claims to hold a medical degree.

The next day, Gracie and her new-found holiday playmate, Eve, abruptly terminated a marathon piggy-in-the-middle session in the pool with Eve’s dad. “Our feet are bleeding,” they announced, somewhat incredulously. Sure enough, bright-red blood was flowing, apparently painlessly, from the bottoms of their big toes.

Doctors are used to contending with Google. Often, what patients discover on the internet causes them undue alarm, and our role is to provide context and reassurance. But not infrequently, people come across information that outstrips our knowledge. On my return from our room with fresh supplies of plasters, my wife looked up from her sun lounger with an air of quiet amusement.

“It’s called ‘pool toe’,” she said, handing me her iPhone. The page she had tracked down described the girls’ situation exactly: friction burns, most commonly seen in children, caused by repetitive hopping about on the abrasive floors of swimming pools. Doctors practising in hot countries must see it all the time. I doubt it presents often to British GPs.

I remained puzzled about the lack of pain. The injuries looked bad, but neither Gracie nor Eve was particularly bothered. Here the internet drew a blank, but I suspect it has to do with the “pruning” of our skin that we’re all familiar with after a soak in the bath. This only occurs over the pulps of our fingers and toes. It was once thought to be caused by water diffusing into skin cells, making them swell, but the truth is far more fascinating.

The wrinkling is an active process, triggered by immersion, in which the blood supply to the pulp regions is switched off, causing the skin there to shrink and pucker. This creates the biological equivalent of tyre treads on our fingers and toes and markedly improves our grip – of great evolutionary advantage when grasping slippery fish in a river, or if trying to maintain balance on slick wet rocks.

The flip side of this is much greater friction, leading to abrasion of the skin through repeated micro-trauma. And the lack of blood flow causes nerves to shut down, depriving us of the pain that would otherwise alert us to the ongoing tissue damage. An adaptation that helped our ancestors hunt in rivers proves considerably less use on a modern summer holiday.

I may not have seen much of the local heritage, but the trip to Italy taught me something new all the same. 

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear