The Liberal business paradox and why it is so infuriating

Wander through the nineteenth century and what you find, over and over again, is an alliance between business and Liberalism. Not so much with the Whig landowners but with the radicals and non-conformists.

Because, as I argued in my recent pamphlet with Joe Zammit-Lucia, it was a different understanding of business and its potential – based on the right of the small, weak and new to challenge the big, strong and feather-bedded with economic privilege.

What’s more, the two key Lib Dem ministers in this area have re-invented the old radical tradition with a range of important measures from clamping down on unfair competition from tax avoiders (Danny Alexander) to turbo-charging apprenticeships (Vince Cable).

But then there is the paradox. Because most modern Lib Dems have a breathtaking blindness when it comes to economics of all kinds. It isn’t that they don’t think it’s important – just that it doesn’t interest them. At all.

But worse, once the party marketing or campaigning staff get hold of it, Lib Dem economic policy takes on a smug embrace of the status quo. It reeks of self-satisfaction. It loses any sense of a radical challenge.

Why is this? I would love to know. Is it because the copywriters are just going through the motions because it is about money? Is it because they hand over to smuggest business lobbyists because they are prepared to write it?

How else are we to understand the party’s briefing on business yesterday?

It isn’t that it is wrong. It just misses the point. It is also headed by a grandiose and vacuous statement of ambition - why would we want to be the biggest economy in Europe if it isn't spreading prosperity?  Who wants to be the biggest economy if it is all earned by billionaires in London?

But the real gap is in the ‘finance for growth’ section. Vince Cable’s British Business Bank is an important achievement, but it isn’t a solution to the glaring problem faced by the UK economy - which is that small business lending is still falling.

Why?  Not because of a lack of capital - the BBB looks after that - but because there is no effective lending infrastructure and even the British Business Bank needs that to work, because it doesn't have its own.  The big banks are no longer able to lend to SMEs, the drivers of the economy, because they lack the local infrastructure, and their risk software at regional office is wholly inadequate.

So what are we going to do about it?  Pretend it isn't a problem for fear of upsetting the banks (they don't like this kind of talk)? Or doing what Lib Dem party policy now recommends:

A new, diverse local banking system, including community banks and community development finance institutions (CDFIs), funded by the big banks - which will pay for the infrastructure to lend in places and sectors where they are unable to lend themselves, using their geographical lending data to calculate how much they pay each year.

I know Danny Alexander and Vince Cable are aware of this.  But when their pronouncements get mediated by the party marketeers, it turns into vacuous mush.  What is the point in making these pronouncements if they neither identify the problem nor look forward to a solution which hasn't already been enacted?

A far better purpose for the Lib Dems, to demonstrate their clarity of thought and boldness in business, is to put enterprise - and small business especially - at the heart of every area of government.  

You want to know how to do that?  Well, you start by building the kind of lending and investment infrastructure that might have some chance of making it possible.

The UK is blessed by having the leading financial sector in the world in the City of London.  The problem is that it has no skills, no track record and no expertise in the one thing the UK really needs - turbo-charging the SME sector.

Would Lib Dems in government tackle this problem?  Because if they would, maybe it might be an idea to say so.

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