The Government sees the advantage of a (Japanese) state investment bank
Last year a TUC report, ‘Banking After Vickers’, argued that the banking system in the UK was failing to support the real economy. One failing (on top on well publicised problems in the SME loans market) is the seeming unwillingness of the banks to lend to finance new infrastructure projects and green investments. As that paper argued, the government’s Green Investment Bank is both too small and too constrained to really address the challenge and there is a string case for some form of state backed lending vehicle modelled either on the German KfW or the European or Nordic Investment Banks to address the problem.
Today’s FT reports some relatively good news, David Cameron has arranged for a state-backed lender to step into the breach and help finance infrastructure projects, including wind farms, in the UK to the tune of ‘billions of pounds’.
The state-backed lender is the Japanese Bank for International Cooperation.
Given that the UK’s own Green Investment Bank is currently limited to £3bn it is perfectly possible that the UK’s green industries will recieve more funding form the Japanese state than the British one. This strikes me as an odd development.
The IPPR’s Nick Pearce recently urged the government to learn lessons from Japan. Amongst those lessons was:
Similarly, just as Japan profited from public development and export banks in the postwar period, Britain would benefit from a national investment bank today, capitalising on historically low interest rates to fund investment in key sectors
Perhaps, following some financing from a Japanese public development bank, the Government might actually start to see the potential upside of a UK State Investment Bank?