EDITORIAL : THE GUARDIAN, UK

          

 

Green Investment Bank: Don't blow it

It could form a crucial part of the answer to how Britain develops an alternative-energy industry, but the portents are not great

Early next week will bring two pieces of news about whether Britain is getting any closer at all to having the sort of banks it needs. The first concerns a short-term but serious problem: lenders' unwillingness after the financial crisis to support perfectly sound businesses.

In February HSBC, Barclays, Royal Bank of Scotland and Lloyds signed a deal with the Treasury to provide more credit to firms. The first indication of how the big four are faring on that goal comes on Monday, with the Merlin lending figures for the first quarter of this year. If all that follows is politicians and commentators comparing the reality with the promises then the bankers will probably not be too displeased, since their initial commitments were pretty risible. The £190bn of credit that the banks said they would lend to businesses was a non-binding aspiration, rather than a hard-and-fast target; and it was for all loans, both old and new. The financiers know the old trick of accounting perspective, which states that most things can be made to look large if your yardstick is small enough.

The second big banking event concerns not the City but government. It looks likely that early next week ministers will provide some details of the Green Investment Bank, an idea invented by Alistair Darling and inherited by George Osborne. This could form either a crucial part of the answer to how Britain develops a world-beating alternative-energy industry – or it could be yet another damp squib.

The portents are not great. George Osborne and his civil servants have attempted to run the Treasury watering can over many of the better, bolder proposals from Chris Huhne and his climate change officials. But there are two key areas that must be protected if the Green Investment Bank is to be a worthwhile initiative. The first is powers to borrow from financial markets, rather than the narrower confines of the Treasury. This is important not just because of the broader and bigger range of funds that the GIB will have access to, but also as a step towards to giving it independence from Mr Osborne's officials. Paradoxically, it may also provide the bank with greater discipline, since investment managers should ask hard questions about where their money is going.

The second key consideration is the range of businesses the GIB will be able to lend to. Nicholas Stern, in his review on the economics of climate change, described global warming as "the greatest market failure the world has seen"; where markets are not extending credit, a public bank can lead the way and channel private credit. The short-termism of the City is famed: next week will show just how bad it is and how it may be circumvented.

Vince Cable: The politics of parsimony

If Dr Cable is reading things right, tough times will soon get far tougher than we have imagined

The business secretary cuts an unlikely Churchill. Vince Cable's sparse language in his Guardian interview about Britain having to adjust from being a "price-setter" to a "price-taker" is a world away from the old bulldog's grandiloquent offer of blood, toil, tears and sweat. But there is a parallel in their political purpose: to tell the grim truth as they see it.

If Dr Cable is reading things right, and he makes a strong case, tough times will soon get far tougher than we have imagined – due not merely to cuts, but also to sterling's collapse and an economic model whose bankruptcy is rendering us "a poorer country". His message is that even if growth picks up, and this week's employment and retail sales figures were encouraging, the squeeze on living standards will endure for years.

The most immediate question is how Dr Cable's coalition colleagues will respond. The last time the Panglossian code of politics was so flagrantly breached was back in 2008, and also in a weekend Guardian interview: chancellor Alistair Darling spoke bluntly of the worst financial crisis in 60 years. The prime minister of the time was Browned off, and little good it did him: it was Mr Darling's independent stature that was enhanced. The prime minister of today will be relieved that his business secretary has not outright contradicted him, but may be peeved that his most turbulent minister is now taking such a different tone from the official, oft-repeated line about edging out of the danger zone. At a time when the coalition is already creaking over health, crime and policing, Dr Cable's intervention raises the question of what exactly the government is going to do to help families facing the prolonged pinch.

If Mr Cameron is smart, however, he will not be panicked into a row. Defending the parsimonious future in prospect is uncomfortable, to be sure, but the real question about the awkward twists in politics is whether they are more awkward for the other side. Each of the great retrenchments of the 20th century damaged the left more than the right. The Geddes Axe of 1922, the cutbacks after the 1967 devaluation and the cap-in-hand approach to the IMF in 1976: each of these was followed by a Conservative victory. More poignantly still, cutbacks in the Depression broke a Labour government and cemented a centre-right coalition in power.

While it has been adjusting to opposition, Labour has contented itself with economic fuzz. It has argued, with good reason, that coalition cuts are too thick and too fast, but has used this qualified general criticism against all manner of specific cuts – even though Labour's own financial plans implied rolling the state back a long way. Glance back at Mr Cameron's claim during last year's campaign that any minister proposing cuts that would actually hurt would be packed off back to their department and told to think again, and you can see the electoral attraction of peddling false hope.

The optimistic note Ed Miliband strikes on our comment pages could hardly be more different from Dr Cable's, and at first blush his suggestion that with Labour long-neglected fields such as housing could somehow now be tackled might seem of a piece with the prime minister's easy pre-election talk. In fact, there is a little more subtlety in the thinking – a recognition that a cash-strapped government will need to concentrate on quality-of-life promises that "look beyond the bottom line", a recognition, too, that the rich will have to shoulder new responsibilities, and a hope that more proactive industrial policies will be able to fix the economy, and through that to shrink the deficit. If Mr Miliband can develop this final thought into something more credible than a hunch, then he can plausibly go to the electorate wearing something more comfortable than Dr Cable's hair shirt. As Labour ought to be painfully aware, however, the hard intellectual spadework required has barely begun.

Unthinkable? Electing Elizabeth II

A national vote of confidence on her diamond jubilee would lend triumphant legitimacy to her final days

To watch a woman just into the second half of her ninth decade traipse round function after function – without a stick and without ever wilting – is to be impressed. To witness Queen Elizabeth do so in Dublin this week was to be doubly so. By putting neither a figurative nor a literal foot wrong she made a modest personal contribution to the banishment of the historical demons that others had arranged for her to exorcise – and emerged with enough energy to go and meet some thoroughbreds. Whether it is down to upbringing, a thousand-year bloodline or (more plausibly) good luck, she is evidently cut out for her odd line of work. But it does not follow that others might not do it well too. A Times editorial this week attributed the Irish trip's success to the hereditary monarch's unique place above politics. This is a leap of logic which ignores the equally accomplished role in proceedings played by Ireland's elected president, Mary McAleese. After a sure-footed first term, she sailed through to her second without opposition, having clambered above the partisan fray through her own efforts. Were the British to choose their own head of state, they would surely have the sense to resist President Clarkson, and choose the best woman for the job. Even republican voices such as our own acknowledge that the Windsors' reign will not predecease the body of the Queen. By calling a national vote of confidence on her diamond jubilee, Elizabeth would change history – and lend triumphant legitimacy to her final days.