UK Minister calls for RBS to be broken up as job loss announcement sinks in

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By Martin Kelly
 
Coalition Minister Vince Cable has called for the Royal Bank of Scotland to be broken up and part of it turned into a “British Business Bank” to lend to what he called ‘sound businesses’.
 
The Lib Dem MP’s proposal was contained in a leaked letter obtained by the BBC which came just a day after the announcement of 300 job losses at the bank – most of them in Edinburgh.

By Martin Kelly
 
Coalition Minister Vince Cable has called for the Royal Bank of Scotland to be broken up and part of it turned into a “British Business Bank” to lend to what he called ‘sound businesses’.
 
The Lib Dem MP’s proposal was contained in a leaked letter obtained by the BBC which came just a day after the announcement of 300 job losses at the bank – most of them in Edinburgh.

The proposal will come as a further shock to employees at the bank still reeling after the sudden announcement that hundreds of jobs were to be transferred to India.  The initial Government buy out, which saw the public acquire 82% of the organisation, came with a pledge that jobs would not be exported.

Mr Cable, who is the Secretary of State for Business Innovation and Skills, outlined his proposal in a letter to Prime Minister David Cameron and Deputy Prime Minister Nick Clegg.

In the letter the senior Lib Dem MP said that the coalition had inherited from Labour “a banking industry structurally ill placed to serve the needs of productive businesses” and insisted that RBS was effectively finished in its current form and should be broken up.

He said: “My suggestion is that we recognise that RBS will not return to the market in its current shape and use its time as ward of state to carve out of it a British Business Bank with a clean balance sheet and a mandate to expand lending rapidly to sound business.”

Conceding that it would take time to establish he added: “But this will take time and in the meantime we have to get the state banks lending to business, especially SMEs.”

In the letter, which was leaked to the BBC, Mr Cable also criticised the UK’s “industrial policy” of the past claiming it had acquired a bad reputation.

“There were however more successful, albeit different, experiences in France, Germany, Korea, Japan and Singapore” he said.

He insisted that the Coalition Government had to think ahead and plan long term, instead of simply focussing entirely on dealing with the UK’s deficit and added:

“I sense however that there is still something important missing – a compelling vision of where the country is heading beyond sorting out the fiscal mess; and a clear and confident message about how we will earn our living in future.”

Mr Cable echoed the recent statement from the SNP over procurement rules and highlighted the system left behind by the last Labour Government which he said had played a part in the loss of major contracts.

Criticising Labour for a lack of strategic pro-growth thinking, he wrote:

“Recent bad news from Bombardier, BAES and Rio Tinto Alcan will not be the last, with potentially difficult announcements from General Motors and the knock-on from the possible loss of the Typhoon contract.

“None of these can be blamed on the Coalition but the policies we inherited have played a role; notably, our procurement rules in the case of Bombardier, but also our planning rules in the case of Pinewood Studios being denied planning permission.”

The Lib Dem MP criticised the Tory/Lib Dem Coalition for not showing enough leadership and support for new technologies, he highlighted the digital industries as a success area. 

He also expressed concerns for the UK’s Aerospace capabilities and Automotive industry due to industry cut-backs and overcapacity and warned that government support may be necessary if the sector was to survive in the UK.

Mr Cable was also keen to stress the importance of Scotland with regards to energy. 

He urged that close attention had to be paid to what he termed “the Scottish dimension” and the threat posed by Alex Salmond if London was seen not to care.   This was thought to be a veiled reference to the scrapping by London of the Longannet Carbon Storage project.

Responding to criticisms of the UK tax policy by the oil and gas sector Mr Cable said:

“In recent years the oil and gas exploration industry feels it has been taken for granted, despite generating vast investment and supporting impressive supply chains with unexploited potential.”

Much of what the UK Minister said will chime with the Scottish Government who have insisted that the renewables sector will be Scotland’s new economic and industrial powerhouse.

Mr Cable’s leaked letter coincided with his public statements over the possibility of introducing a so called ‘mansion tax’ that would see owners of very expensive properties paying a levy.

Mr Cable’s public opinions will be seen as typical horse trading between two coalition parties keen to stress their separate identities to back-benchers and supporters alike just before the Chancellor’s forthcoming budget.

However some will also view it as a challenge to Chancellor George Osborne and a warning by the senior Lib Dem that an economic change of direction is needed.