City growth: Banks 'are friends not enemies'

Banks are essential to Britain's economy recovery and should be treated by politicians as "essential friends" rather than enemies, Tory peer Michael Heseltine has said.

The Coalition's growth tsar claimed the health and success of City firms were of "enormous significance" to the nation and its economic health.

Lord Heseltine said: "My view is a very clear one, the City of London is a vital part of the national economy. It is a world-class industry and brings huge wealth to this country.

"The politics (of the City) are very difficult, so skilled political judgment is needed to make sure you don't throw the baby out with the bathwater, and there are at the fringes difficult things to defend.

"But the underlying health of the City and the financial world are of enormous significance to us."

The Tory grandee, who has been appointed by the Government to oversee a 1.4bn regional growth fund, admitted mistakes had been made by banks, but said the City must be encouraged to play its part in the recovery.

He continued: "Of course things have gone wrong in the banks, but I would be very worried about political judgments that put the banks as enemies. They are essential friends, even if, like your closest friends, there are things you absolutely have to tell them."

Huge amounts of public money have been used to support banks which would have otherwise failed at the height of the recession, but the industry is still surrounded in controversy over the scale of bonuses paid to high earning staff.