Action promised on business lending

In his first major speech as Business Secretary, Vince Cable committed the government to taking a tougher line on parts of the banking system that have "not served enterprise in this country as well as they could".

Addressing an audience at the Cass Business School in London, Mr Cable promised to "redouble our efforts to ensure that bank lending agreements from banks that have benefited from taxpayer subsidy are being honoured - especially for SMEs".

He resisted arguments that there was little demand for business loans, pointing the finger of blame at the high cost of much business credit.

Mr Cable said: "If the bar is set too high, of course no one is willing to jump. The current risk aversion by banks in the SME sector will stifle recovery and, if it does, will actually rebound on the banks through bad debt."

He set out three possible routes to improving the present squeeze on lending: separating retail and investment banking, resolving the question of a levy on the banks to reflect the fact the taxpayer is providing insurance, and ensuring that banks' lending agreements are being kept.

In a broad ranging speech, Mr Cable touched on other areas where measures were needed to help business and to re-balance the economy away from too great a reliance on household demand and public sector spending.

As well as overhauling the business regulatory system, the government will look to create new apprenticeship schemes.

He committed himself to making the UK a "place where enterprise and innovation can succeed".

Referring to the problems in the eurozone, Mr Cable conceded that while the "worst of the crisis" was over there was still a risk that difficulties could resurface.

He emphasised that growth would need to come from the business sector and trade, and pledged less regulation: "Often the most useful thing governments can do is simply to get out of the way."

The Business Department wants to see closer ties between business and universities, and a greater focus on science and research.

It is likely, too, that the government will introduce a reform of the regional development agencies, switching extra support towards areas with the worst problems.

However, some business concerns have arisen, particularly over the future of a series of major project loans promised by the Labour government.

During business question time in Parliament, Mr Cable was pressed to commit the new government to supporting the loans.

But Mr Cable replied that "all projects are being reviewed" according to their affordability and value for money.