This conference calls upon Her Majesty's Government to establish in perpetuity, a 100% State owned bank with a clear mandate to set the benchmark for responsible and fair funding of all small businesses.

Proposed:                Chris Prentis

Seconded:                Henry Joynson

Policy Respondee:    Ash Farag

Region:                    Mid-Devon

The motion was not passed

Personal votes for:         71

Personal votes against:  116

Branch votes for:            43625

Branch votes against:     89814

The Motion from mid Devon branch clearly has its origins in the current financial crisis and proposes a possible solution. Chris Prentis set out the historical failings of the banking system and its tendency towards boom and bust, describing the recent change as being ‘from excessive exuberance to reckless caution'.

Common to all speakers was the impact on small businesses. Variously describing how they are struggling without a banking service of sufficient quality and effectiveness for the full potential of their businesses to be realised – or even to survive. Examples quoted how the banks have failed to provide the funds required and a manager almost boasting that the credit scoring was now so high that nobody would qualify for a loan, whether or not it was underwritten b y the Government.

The Government already owns so many of our financial institutions, yet this has had no effect on the support provided for small businesses.  One delegate ably described how most of the funds were going abroad, either as loans or as insurance on toxic debt.

The core of the debate was whether a bank which was 100% owner by the government would provide the quality and kind of financial service that the economy as a whole and small businesses in particular are currently so lacking.

The proposers of the motion suggested that a good banking system was so fundamental to the operation of the economy that it had to be run by the Government. Chris Prentis quoted the experience of the ‘Kiwibank' and the high satisfaction levels it has enjoyed since its creation in 2002. The seconder, Henry Joynson suggested that not just banking, but several of our utilities would be better operated by Government.

Pauline from Lincolnshire speaking in support, reminded delegates of FSB debates in the 70s and 80s, when a state owned commercial bank was the FSB's preferred solution to the high levels of taxation and interest prevailing at the time.

The North Staffs delegate effectively proposed that people abstain. He agreed in principle with the idea but had concerns about such a bank being 100% state owned and just for businesses. He called for the banks to be radical and innovative as there is now a huge opportunity in providing the financial services that are needed.

Policy did not take a view. On their behalf Ash Farag agreed with mid Devon's analysis of the problem, but felt the time for advocating such a bank was not yet.

All the other speakers were strongly against the idea. Many felt that the lack of effective regulation was at the heart of the problem and wanted see private sector banks doing the job they exist to do, with effective regulation keeping them on the straight and narrow. They looked to the Government to make the banks fulfil their promises, taking the view that this would be more likely to be effective than the establishment of a state bank.

Other objections included the level of bureaucracy which was almost automatically assumed to be inevitable and excessive. One delegate was concerned that the banks would use the Competition Law to immobilise any state bank.

Underlying many of the contributions was a real concern that government does not understand the problems facing small businesses and so neither would a state bank.

Chris Prentis summed up by calling on conference to follow the example of New Zealand which is very much a free market country.