Member Article

UK needs German-style banking says Shadow Business Secretary

The UK needs a British Investment Bank underpinned by a system of local banking akin to the German Sparkasse model, the Shadow Business Secretay has told Bdaily.

Speaking exclusively to Bdaily during a visit to the North East, Chuka Umunna said the UK needs a network of locally mandated banks with the needs of small businesses at their core.

Chuka said: “We are looking to implement this in all regions of the country and have been consulting with organisations like the local chambers of commerce to see what the best model would be.

“The Government has made huge promises that have failed to deliver, starting with project Merlin through to credit easing and funding for lending. The main transmission mechanism of these schemes has been the existing high street banks who stand obstacles.

“We’re an outlier internationally. We are the only G8 country without a state-backed investment institution to help and support small businesses. Germany is often used as an example, but when the credit crunch hit in April 2009, overnight, the KfW was able to double the amount of money made available to business overnight - we didn’t have an equivalent institution here.”

The MP for Streatham laid out how Labour will go about building relationships with the SME community before the next general election.

Regional development is crucial to Labour’s popularity and Chuka, like many of his party contemporaries, is sceptical of the impact that Local Enterprise Partnerships can have without further resource.

He is also critical of the Regional Growth Fund, which he says has been “mired in chaos and delay,” and lacks strategy. The answer to this, he 34-year-old says, is to build on the resource of the LEPs and equip them with more powers to deliver locally.

He added: “This government has a lamentable record on empowering regions to drive growth. The abolition of the regional development agencies was a huge retrograde step and I completely agreed with Lord Heseltine when he said it was a mistake to have done that.

“With every passing month they realise the extra value and the usefulness of the RDAs. Not all of them were perfect, but I think we can see just what an impact they had. Nowhere is this more evident than in infrastructure projects.

“There’s no coincidence that after dismantling that architecture, the Government have only seen only seven of 570 infrastructure projects completed.”

Chuka says he is fiercely proud of his party’s introduction of the national minimum wage and now suggests the “cost of living crisis” is not only impacting people at home, but also the UK’s competitiveness on a world stage

He continued: “People are saying they work harder and harder but seem to earn less and it’s a struggle. ‘The system doesn’t appear to be working for me,’ is what they say. That means government has to be more active in developing the structure of the economy, not just to deliver fairer outcomes at home but so that we can compete abroad.”

Back in late 2012, Labour leader Ed Miliband threw his weight behind the idea of a living wage, which has sparked much debate - just this week the Archbishop of York has waded in, in favour of one.

Chuka explained: “It would be completely disingenuous of me to say that this isn’t a hard nut to crack. If you look at the retail sector, the biggest private sector employer in the country, they tell me they simply cannot afford to pay the living wage.

“There has to be round this. We don’t believe that you should have a statutory minimum wage - that would simply become merged into the national minimum wage. Living wage is different in different parts of the country. We think it better to achieve a living wage incrementally over time, without any unintended consequences.”

This was posted in Bdaily's Members' News section by Tom Keighley .