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.