This interested me because back in the days when bankers were to be trusted with the economy we did indeed have a similar body. The Bank of England created the Industrial and Commercial Finance Corporation (ICFC) in 1945 to plug the gap then extant in corporate finance for firms too small to obtain stock exchange or merchant bank capital. The Big 5 UK clearing banks also took stakes in ICFC, helping to provide capital to the infant firm. During this period ICFC was successful in providing finance for start-ups, although in a period of general industrial decline in the UK the benefits remained unclear. ICFC was renamed Finance for Industry in 1973, then became Investors in Industry, or 3i in 1983. The banks then floated on the stock exchange in 1987. Ironically 3i was later better known for its role in funding mature businesses such as National Car Parks and the German/Danish ferry operator Scandlines, than start-ups, particularly during the private equity boom of 2005-7.
It remains to be seen how Gordon Brown's proposed firm will work in the event that he wins the 2010 election, but it will be interesting to see where the capital for it comes from, how it will be constituted (hopefully he won't repeat the Alan Sugar mistake by putting the star's of TV's Dragon's Den in charge) and what schemes are considered worth investing in by the new body. And further, how long will it be before the new company, which if it invests well in rapidly growing firms, should become very valuable, ends up itself being floated off by a future government seeking a quick return? This would jeapardise the original purpose of the new company, just as the banks did with 3i.