There is a real risk that the plight of small business, the so called SME (small and medium enterprises) are becoming a political football as each party attempts to outdo the other. Labour are saying they will “do whatever is necessary“, where have we heard that before? Then they put up a pittance to address the issue, to put this in perspective, the amount proposed is probably much less than they paid the consultants for advice on the banking bailout. I am not advocating state aid as such, but less government interference and an understanding of what makes small business tick.

David Cameron suggests that a 1% cut in national insurance contributions for companies employing less than 4 people. This he claims will save these businesses up to £600 per year! What? Is he serious, this would barely cover an organisations business rates for one month. He then suggests that small businesses should be allowed to defer VAT payment and PAYE etc., for up to 6 months. Yes, I agree, this will aid cashflow, but the reality is, for many who need to take advantage of this option, it will only delay the inevitable, leaving a large hole in the HMRC balance sheet.

What is clear, is that none of these ministers really have a clue how small businesses operate, what is important, or what policies will make a real difference. They seem to believe that a little tinkering here and there will make it look like they are doing something positive. Wrong, wrong, wrong! Our MP’s visit one or two businesses, ask a few questions and then try and portray themselves as in touch, or knowledgeable on the subject. Instead, they have had, at best, a very limited overview of a couple of businesses. There are 13.5m small and medium sized businesses, yet they talk to a handful, what is the point?

What is clear is that there are many ways in which government can aid small business, some initiatives will cost money, most will not. Some options will work for some businesses and others may only receive a small benefit, but it is something. That said, there has to be a starting point, and I would like to include my two penneth. Firstly we need to look at some hard facts, so that government, ministers and members of parliament can truly understand the risks of doing nothing or just tinkering with the issues. This subject is so important, that it needs to be addressed in the same way as the banking bailout, I am not talking about numbers, but effort and thought.

The UK’s 4.4m small and medium-sized businesses (SMEs) are the engine room of our economy, accounting for 47% UK employment (13.5m), 99.7 per cent of all enterprises and 48.7% of UK Plc turnover. Within the SME sector, some 4.2m actually employ less than 10 employees and a further 167,000 less than 50. In fact, SME’s actually employ 60% of the ‘private sector’ workforce. It is, therefore, self-evident that small business is the primary vehicle for innovation which leads to new jobs, new industries and new wealth for this country and its people. Tangible and effective moves on issues such as tax, regulation, education and infrastructure are areas which are most likely to have a positive impact on small businesses. Only government can do this, because in most cases, they caused to problem in the first place.

It is worth noting that the government currently has in excess of 3000 ‘business support schemes’, yet the Federation of Small Business claims that just 4.4% of their respondents confirmed that they had used any of these schemes. This cannot, by any stretch of the imagination be called a success, but that is hardly surprising, with this number of schemes. Where is a small business to start? Okay, so the government has indicated that they want to rationalise this to around 100 schemes, but given few of these schemes have any tangible method to measure success, it is difficult to see how this government will determine which schemes to scrap.

Business Link is probably one of the best known and supported schemed, but even this ‘local’ initiative has many detractors, who complain that emails are not answered, those charged with supporting small business have little understanding of their needs and that there is very little depth within the organisation. This would imply that whilst the initiative has merit, it needs a vast overhaul.

So what would I do? Well I am going to put forward some of my ideas, some relatively simple, others rather more controversial and perhaps complex. Nonetheless, if we are to avoid a genuine catastrophe within the SME sector, it will require bold, new initiatives and the introduction of some former programmes that have been withdrawn by this government.

I believe Business Link is a good programme, but it truly lacks depth and promotion. There are a good number of semi-retired and retired business people and out in the market and their skills are going to waste. I believe Business Link should look to recruit these people and bring them on board on a casual or self-employed basis and utilise them as business mentors. Many will have sector experience and/or specific skill sets such as finance, sales, marketing and so on. To waste this resource is ridiculous and many, I am sure, will be grateful of the opportunity to get involved in something tangible and the additional income that could top up their pensions. Of course, the recruits don’t have to be retired, there is no reason why full-time, experienced business people should not be recruited to this programme.

In addition, I believe that Business Link should be able to provide small business with specific advice on key areas, such as sales, marketing, health & safety, legal, employment law, exports, finance and so on. I know that Business Link will claim that they already do this, but my point is that they should seek to employ the best, not the cheapest, so that the small businesses can have access to the best advice.

This government has wielded the stick over everyone ever since they came into office, particularly where it comes to HMRC and regulation. They do not appear to have understood, that most ‘normal’ people use and respond better to a combination of carrot and stick. The New Labour government has always and continues to act as a schoolyard bully, not supporters of small business. They are the first to claim to be business friendly and that may be the case where businesses can afford the services of lobbyists, but it is most certainly not the case for small business. This has go to stop. Government must act and act now to reduce the burden of red tape imposed on small business.

Here are my proposals, in no particular order.

• Government must reduce personal tax for all by 5%. This will cost around £40bn over 5 years. However, it will reduce the pressure on businesses to increase wages, it will negate the public service sectors claims for higher wages to take account of higher inflation, so at least in this sector it will be self-financing and above all, it will (potentially) provide a natural stimulus to the economy. If people spend more, jobs can be saved and government will not have to pay out tax payer funded benefits. Instead, they will benefit from tax receipts through national insurance contributions, income tax, VAT and so on. Contrary to popular belief, this type of initiative introduced now may even be self-financing.
•  Government must extend the ’small business rate scheme’. Business rates are often the third largest expenditure for a small business, after wages and rent and proportionally higher for those with turnovers of less than £1m. I believe businesses with a turnover of less than £1m or employing less than 10 people should receive a 100% rebate, with a progressive programme for larger businesses. Furthermore, business should not have to apply for these rebates, they should be automatic, given many small businesses are not even aware that they have an entitlement.
• There should be a cut in small business corporation tax (businesses with a turnover of less than £5m) from the proposed 22% (2009) to 17.5% and the introduction of a tax threshold (before tax is payable) of £50k
• The VAT registration threshold should rise from £67k to £200k. HMRC, whilst retaining their vital role of collecting VAT revenues, should be directed to be supporters of business, in partnership, rather than assuming that every unpaid tax collector (anyone registered for VAT), is out to shaft them. They must also stop issuing threats to “wind up” companies that are a little late with their returns. A late return does not mean that the business is in danger of folding, it is more often than not, something that is considered a bind, a burden and therefore, not necessarily something at the top of the priority list. Fines for late returns from small business should be ceased immediately, except for persistent offenders, particularly in the current climate.
• VAT rules on exports need to be simplified. Current HMRC will offer advice, but cannot be held responsible for it, unless they agree to put it in writing (a ruling). Missing Trader Fraud has now meant that HMRC assumes that everyone is trying to do something dodgy on exports. As a consequence, they make life very difficult, especially when it comes to Europe, because often HMRC will tell the trader that they must charge VAT, the European customer argues that this is wrong and the order is lost to the business and, of course, UK Plc. In addition, small business are expected to shoulder the financial burden if VAT cannot be recovered by HMRC, even if the HMRC provided the information that exempted a transaction. I know many companies that despair of HMRC when it comes to exports, so much so, that many now avoid European exports,rather than take on the VAT risk!
• Unlike sole traders, for tax purposes, if you are a director of a limited company, you are an ‘employee’ of the company. You are therefore liable to pay Class 1 NIC’s on your earnings. The limited company is also liable to pay Class 1 NIC’s as your ‘employer’. This practice should cease for businesses that turnover less than £1m or employ less than 5 people.
• Small business should be encouraged to take on the long term unemployed and those that in receipt of disability benefits (some 2.5m), but can work. Small business employers could be offered a full rebate on all employer NIC’s for employees that are classed in either of these categories. This will assist small businesses, increase the opportunities available for the long term unemployed and result in a massive reduction in the burden on the state from those who are in receipt of benefits, rather than contributing. This initiative could be self-funding or even offer a surplus.
• Small business often have to use large commercial vehicles out of necessity, yet they are now being penalised as a consequence of the increased vehicle excise duty, under the guise of an environmental or green tax. This should be reduced to the lowest tariff for small businesses with a turnover of less than £5m
• Government should understand that a ‘one size fits all’ approach to business is not appropriate, especially where employment laws are concerned and specifically in the case of businesses with a small workforce. For example, parental or maternity leave obligations may not adversely affect a company employing 100 or more people, but a small business employing 4 people, could lose 25% of its resources overnight. The employment laws must be relative to the size of the workforce and the regulations relaxed for all employers with a workforce of less than 50. Employees have a choice, if they want all of the benefits of parental leave, maternity leave, paid sick leave and so on, they must look to find a job with a larger employer.
• Government bodies, local authorities, NHS trusts, agencies and so on, must be required to actively encourage trading with small, local businesses. Most small businesses are not aware of  supply opportunities with government agencies and if they are,  they find the paperwork too time consuming or complicated, especially for what may be low level or uncertain returns. Therefore, many do not pursue this opportunity. Businesses with a turnover of less that £1m should be given free access to www.supply2gov.uk, rather than charged £180. Many local authorities, for example, use the same suppliers as they have done for years, instead, they must be required to encourage new suppliers, they must assist these companies to complete the paperwork and offer constructive advice. Tenders have to remain open and unbiased, but the process of encouraging new local suppliers has to become a priority. Similarly, where possible local government bodies should be required to share their tenders amongst more companies, rather than using a single source.

Cashflow
Cashflow is important to small business. In fact, many small businesses fail or cannot expand, not because of a poor business model, but because of the pressures on cashflow. Invariably, this is the fault of larger companies that will not adhere to agreed payment terms, this problem now is all too common. The small business is often reluctant to chase too hard, in case the supplier refuses to place further orders. Government must legislate, to require all large companies, perhaps those with turnovers of over £5m, to pay on time and where they do not, offer a fast track legal recovery system for small businesses to recover their outstanding invoices.

Public companies should be required to sign up to an ‘ethical small business practice’, where they undertake to pay all SME’s businesses within 30 days. This objective should be audited by the firms auditors and included in the company’s year end accounts. Where public companies fail to meet these obligations, they should lose the support of investment funds and/or face fines based on turnover. Further’ all companies with a turnover of over £5m should be required to provide their ‘average payment terms’ to Companies House in the form of, for example: 1. Average payment terms 30 days., 2. Percentage paid within terms 85%. Legislation does already exist in part, but it is not enforced by Companies House.

Banks & Credit Card Processors
Two organisations that can have a significant impact on small businesses are banks and credit card processors and yet, they are very lightly regulated and, for the most part, operate a virtual monopoly in terms of financial support services to small business. Banks can change terms, conditions and rates on a whim and often do, whilst credit card processors, successfully pass of much of their financial risk in relation to fraud, directly on to the retailer, through a set of onerous terms and conditions.

Many small business operate with a bank overdraft. Banks can, in many cases, withdraw these facilities with 24 hours notice, change the risk profile requiring further security, higher charges or apply penal interest rates and/or the interest rates are variable. Government must legislate, alternatively the regulators must insist that banks offer their customers the alternative of a fixed rate of interest or variable on all bank overdrafts, reviewed annually. Banks must be required to provide small business at least 6 months notice of their intention to withdraw or reduce overdraft facilities. Banks must permit small business to convert, on request, overdrafts into short or medium term loans at rates no less favourable than the overdraft rates.

Government or the regulator must come up with a formula to ensure that interest rates are ‘reasonable’ taking account of the risk, available security and Bank of England rates. For example, many overdrafts are charged at very high rates, even though banks have personal guarantees and/or a fixed and floating charge over all business assets. Where a bank acts unreasonably, small businesses should be able to refer the matter to a fast-track arbitration service which is binding on both parties. Banks that ignore these rules should be open to litigation if a business suffers or fails.

Currently all business credit card processors have a similar set of terms and conditions. These terms, in effect, pass off the risk of fraud to the retailer. Even when the retailer has had the transaction ‘authorised’ by the card processor and followed all of the rules. The card processors have an appeals process, but this is long-winded and I am not aware of anyone that has ever ‘won’ their case.  It is estimated that credit card fraud costs small business upwards of £200m every year and the figure is rising rapidly with the advent of the Internet.

Card processors automatically charge the retailer, whenever there is a suspected fraud, it is then up to the retailer to demonstrate that they followed the rules. However, where the transaction is ‘cardholder not present’, even if the retailer has used a terminal to verify the validity of the card, the address, transaction amount and signature strip number…if it turns out to be a fraudulent transaction, the card processor re-charges the retailer. Worst still, the card processors, may take 6 weeks or more, before they re-charge the retailer, even then, the first time the retailer is aware of it is, invariably, when they receive their statement.

These terms would undoubtedly be considered unreasonable in a court of law, however, any business that needs to transact debit or credit cards, has little choice, because all of the card companies have the same onerous conditions attached. If the retailer complains, the card processor will just terminate the contract. Government must legislate, alternatively the regulator must investigate this unreasonable practice as a matter of urgency. Card processors that have approved a transaction, must be required to honour the transaction, unless they can provide incontrovertible proof that the retailer was party to the fraud.

Now, I know that I have not included everything here and I am sure that more ideas could be added. Equally, I am certain that it is possible to pick holes in some of my arguments or suggestions. Although I hope that anyone that wants to criticise will be constructive and perhaps, offer alternatives. What I am adamant about however, is that whatever steps are taken to assist small business, they must be bold, swift and meaningful. Not all of my suggestions will cost money, some just require new or tighter legislation. Some will be self-funding and other initiatives may cost money, at least in the short-term. However, to ignore the plight of this sector, is, in many ways, more risky that allowing the banks to fail. Too much of our economic well-being is reliant on the SME businesses, from GDP, to taxes and employment to enterprise. Politician’s that use this aspect of UK Plc as a football, do so at their peril!

Now that Gordon Brown and Alistair Darling have committed some £500bn to the banks in loans, guarantees and shares, it is time to reflect, to allow the city, time to digest the level of this intervention before going any further. There is now a real risk that the government could become its own worst enemy, by saying they “will do whatever is necessary to stablise the UK economy”, they are sending the wrong message to the city. Yes, I mean the wrong message, city investors are not uninterested parties here. Whilst the taxpayer is shoring up balance sheets, buying up shares, rescuing companies and intervening in the money markets, the ‘city types’ have their own investment portfolios protected. The government is continuing to speculate at our expense, with limited or no risk to the investors.

As I have said before, I am no economist, I am no expert, but I have been blessed with some commonsense. This tells me that if you are constantly running at full pelt, you don’t have time to see what you have passed, what you have left behind and whether you are still in the race. The government must stop NOW, before they bankrupt this country. They have oiled the wheels and reduced much of the investor risk through these interventions and the substantial injections of cash underwritten by the UK taxpayer. No more open-ended promises.

Government must also look at which stocks are falling. For example, most people accept that we are about to face a world recession, therefore, you can expect organisations that are involved in commodities to see their share prices fall. And, of course, these are some of the largest companies, in terms of value, on the stock exchange. Add this to banking and financial stocks and of course we will see a massive fall in the value of the FTSE. On top of the so called banking crisis, a recession means that city experts will be looking at companies that will do well out of a downturn and those that won’t, this will then be reflected in their share price. So, given there is a recession looming, it is fair to assume that stock prices would have fallen anyway.

Virtually from day one, this government has used taxpayers money as if they had been given their very first credit card. They have gone on a spending spree, thinking they are rich and there is an endless money supply. Then, once they realised they had overspent or reached their credit limit, they simply came after the taxpayer for more money. As a consequence, this Labour government has set a poor example to everyone else, now we must all pay for our excesses…but that includes government who must haul back on their investment commitments, they must learn to live within their means, just like everyone else must do.

My concern, is that the current banking crisis has them on that road again, they think they can spend more and more of our future tax revenues in the name of saving us all from some type of doomsday scenario. Now I accept, some form of intervention was necessary, but this must have limits and I am worried that this government has exceeded those limits with an intervention that is worth at least as much as that provided by the American’s, who’s economy is 3 times the size of our own. It is also worth noting, that £500bn is more than double all tax receipts, based on the 2007 figure. Given we are likely to have much reduced tax revenues because of company losses (they can carry these forward to offset against future profits), falling employment and lower sales, this £500bn might end up being the equivalent of 3 years worth of tax receipts.

Now the government have told us there may be some upside for the taxpayer. I don’t like the word ‘may’, nor do I really trust this government to negotiate a good deal for the taxpayer. It has been suggested that this government has lost close to £110bn in poorly negotiated contracts, mistakes and failed projects. This record does not bode well for the taxpayer, when the same people are negotiating with experts. Lets hope, this time they have learned some lessons, though I will not hold my breath. But in the meantime, I would like to advice Alistair Darling and Gordon Brown to STOP, pause for thought, look at whether what you have done has had any positive affect and stop offering the city a blank cheque, no-one could blame them for taking advantage.

At the moment one day pretty much blends into another, but on one of the evening news programmes this week, another fat cat, fee-earner had the temerity to say, when questioned, that auditors had played no part in the financial mire that is the bane of every UK taxpayer. I have to admit, that I wanted to throw something at him, because I have been arguing for weeks that the auditors have failed in their duty to the shareholders and worst still, shall be one of the few ’industries’ that will make money out of this fiasco, through company administrations, receivership’s, consultancy fees and so on.

Lets look at the generally accepted definition of a Finance Audit:
The process of verifying a company’s financial information. Auditors are certified public accountants who are independent of the corporation. An auditor examines a company’s accounting books and records in order to determine whether the company is following appropriate account procedures. An auditor issues an opinion in a report that says whether the financial statements present fairly the company’s financial position and its operational results in accordance with Generally Accepted Accounting Principles (GAAP).

And here is a common definition of an Auditor
Auditor is the person appointed to conduct an examination of the records, to form an opinion about the authenticity and correctness of such records, by verifying the correctness and reliability of the recorded transactions from the evidences available, opinion and inference reachable based on his expertise.

Most, if not all, stock market listed companies in this country and, for that matter, around the world, use the services of one of the so called ‘Big Four’ accountancy firms. These big firms charge huge sums for their audits, often running into £millions, and the audit teams are lead by high ranking ‘fee earners’. In other words, as the businesses, banks and financial institutions they audited expanded, so have the fees earned by the auditors and yet, not one audit firm appears to have asked any questions about what is now being described as “questionable accounting” practices within the financial services and banking sectors.

For example, do we know of any audit firm that qualified a set of accounts within the banking sector because of the heavy reliance on a particular financial model, such as in the case of Northern Rock? Has an audit firm raised any prior concern over the way that ‘bundled’ mortgage debt was traded, sold and then re-sold, with each party taking a profit or commission, without really knowing the risks or true value of the asset.

You would think that after Enron and Worldcom, auditors would be even more cautious, especially given investors and business people alike, will have increasingly come to rely on the expertise and the independence of the auditors before they make financial investment decisions related to the company being audited. It is absolutely essential that the audits of company’s that rely on external investors for funding are wide-ranging, thorough and probing, a failure to do this and ask questions, is, in my impinion a dereliction of the auditors responsibility to the shareholders. If an audit is not indepependent, or in-depth, why on earth do so many companies pay so much money out every year for their audits?

I personally believe that, when the investigation begins, as it surely will, the part played by company auditors also needs investigating. Given they will be the only party to have profited in the ‘boom’ as well as profited out of the ‘bust’, yet they were also the only party, other that the regulatory authorities, that had a duty to ensure that they reported the facts, discovered questionable practices and reported their findings in an open, direct and a frank manner. I do not say that any of these accountancy firms are culpable, because I would have nothing to back this up with (other than logic of course), but I can say that, I believe they have failed, for the most part, in their duty to appropriately and competently assess the risks associated with some of the more questionable practices adopted by the banking and financial industries.

I also believe that shareholders that have lost money should consider individual or class actions against any audit firms that are left wanting in this current mess. For them to be preening themselves in front of the cameras, whilst rubbing their hands with glee, behind the scenes, is stomach churning. If there job was not to highlight risks, operating and reporting practices, asset values and profit claims, what on earth were they charging such massive audit fees for? The Audit Firms must not be allowed to extract themselves from any form of responsibility whilst the rest of us are left to pick up the tab and the pieces of what is left.

This Labour government is not really known for getting a good deal for the taxpayer, so I am left wondering what sort of quid pro quo, is received by the UK taxpayer, in return for the monies that are being loaned or gifted to the banks. Let me explain.

The justification given by the government for the intervention of the Bank of England is that they need to get the credit market going, increase liquidity, encourage the banks to lend to one another etc. However, what guarantees have the Bank of England or the government sought from these banks? After all, no-one is claiming that it is now easier to get a loan, a bank overdraft, a mortgage and so on. Therefore, is it fair to assume that the banks are not using the money they have been loaned for the purpose it was provided, or is the government just lying to us? Or perhaps, no-one has though of including any pre-conditions for the loans, so that banks are just using this money to shore up their immediate cash flow issues?

The Bank of England has had to intervene by taking over the mortgage debt of Northern Rock and Bradford & Bingley, much of which would be termed sub-prime, or ‘dodgy’ if you are English. If we are to believe all that we are told, then the banking sector is so intertwined, that somewhere, another bank, or more likely several banks have benefited from the effective underwriting of this so-called toxic debt. So, what do we, the taxpayer, having taken on all this risk get in return?

Perhaps I am just missing the point here, I am not a banker, nor an economist. However, I am a taxpayer and as such, my signature has been used to underwrite these debts and therefore, I believe I deserve a full account of precisely what has been taken on in my name, the risks, returns and the conditions, if any. The government and the Bank of England keep using terminology that is foreign to me, why… have they got something to hide? Surely if they are going to use our money to bail our both the banks and the city, we deserve an explanation in laymans language, not just a doomsday scenario designed, in my view, to frighten us all into submission and asking as few questions as possible.

I don’t trust this government, they have consistently lied to the public, manipulated figures and misled us whenever they could get away with it. Then there is the Bank of England, which is run by bankers and economists, the former (bankers), the government would have us believe are in part responsible for this mess and the latter (economists), should perhaps have seen this disaster coming. Whatever the situation, this government is spending billions of pounds our money and we don’t know what chance we have of getting it back. We don’t know if they have secured any form of agreement in return, such as a loosening of consumer and business borrowing facilities, nor do we really understand the government or BoE’s primary objective, so at least, we could measure whether they had been successful on our behalf or not. No doubt this is the whole point, if they don’t tell us what they are trying to achive, we won’t know if or when they fail!

In spite of all this intervention by so called experts, the stock market has plummeted by some 7% at the time of writing this post, so something isn’t working. Worst still, we are given to understand that the Bank of England has intervened in the stock market to slow the decline, so does this mean that we have also had massive paper losses. My message to the Government and the Bank of England is that it is time to come clean with the shareholders of UK Plc…right now!

If you have heard him say it once, you have heard him repeat it 100 times. Gordon Brown keeps telling is that the UK economic fundamentals are strong. Now I am no economist and that will become self-evident when reading this blog, but I am blessed with a little commonsense and logic. My conclusion, the so called fundamentals don’t look so great from where I am sitting, so common Gordon enlighten us.

At the CBI Scotland Annual Dinner, Gordon Brown outlines what he considered those fundamentals to be, they are;

“First, Bank of England independence has given us low interest rates founded on sound macroeconomic management and so despite increases in the prices of food and fuel - and I understand the impact this is having on families and businesses - the sound framework for monetary policy which we have established means inflation remains far below the double-digit levels we saw in the earlier decades. And this will help ensure that interest rates remain similarly low by historical standards.

Second, the most flexible labour market in Europe means that even though unemployment has risen in recent months, employment remains close to record highs - and wage pressures are subdued, led by our own responsible decisions on public sector pay. And with the investment in the New Deal and our latest welfare reforms there is more support than ever before to help people back into work and to fill the 600,000 vacancies still in our economy. And a balanced approach to migration allows businesses to benefit from the specific skills that economic migrants can bring to our country and improves the responsiveness of our labour market to fluctuating demand.

Third - the underlying financial strength of British business reflects its improved efficiency - driven by your hard work in achieving the fastest growth in average productivity in the past decade across the whole of the G7. Britain remains a magnet for overseas investment and our export performance is improving, with our manufacturing productivity growth strong.

Fourth, low debt. The significant debt repayments we made since 1997 mean we have cut public debt as a share of national income from 43 per cent in 1997 to today’s 37.3 per cent. This means that, unlike in earlier economic slowdowns, we can sustain our ongoing commitment to investment in fixed capital infrastructure - up 58 per cent in real terms in the last decade. In 1997 we invested £144.5 billion. Today it is £229 billion. Even after inflation a 58 per cent rise.

And - while  no government can hope to protect people from the full impact of the global credit crunch or the worldwide spike  in commodity prices - I am determined that we should do what we reasonably can to help families and businesses through this difficult period of adjustment. So we will back up our investment commitments with careful interventions designed to provide targeted support for hard-pressed families - such as this week’s home-owners’ support package and the £120 a year tax cut for basic rate taxpayers that will start to feed into pay packets later this month.

Fifth – we are making all the long term decisions, difficult as they are, to boost our competitiveness; on energy, planning, transport, housing, digital technology, science and skills. And the 2002 Enterprise Act has given us one of the most robust, independent competition regimes anywhere in the world. The support for British enterprise - strengthened over the last decade with the launch of Enterprise Capital Funds, the Small Firms Loan Guarantee and administrative burden reduction targets. Britain today has four and a half million businesses - more than ever before. And the OECD says Britain has the lowest barriers to entrepreneurship of any OECD country. ”

Now lets have layman’s take on this, as I said, I am no expert on economics, but I am one of the people that is expected to understand what the government is telling us.

Fundamental One

One of the primary movers in determining interest rates is inflation and as we have seen over the past few months, Gordon Brown is limited in what he can do to control inflation. Yes he can keep public sector wage deals low, but he cannot control commodity prices such as fuel and food, which can have, as we have seen, a significant impact on inflation. Furthermore, government borrowing can also affect inflation, but Gordon Brown’s fancy footwork has managed to keep long term debt such as the PFI initiatives off the government balance sheet. This may have the affect of massaging government borrowings, thereby providing a knock-on affect in terms of lower interest rates.

Fundamental Two

Gordon Brown goes on to lecture us that the second part of the fundamentals is a flexible workforce, low unemployment, low wage settlements, economic migrants and welfare reforms. Really? Firstly, there is no explanation of what a flexible workforce is, but whatever it is, the government cannot claim the credit for it. The low unemployment figure doesn’t stand up to close scrutiny either. There are now 1.7, people out of work and on top of that those claiming disability benefits have risen to 2.5m, many of which, under the old system, would have been classed as unemployed. So, once again, this would appear to be a deliberate manipulation of the true jobless total.

Granted, the government can be credited with reaching low wage settlements with the public sector, although their ability to maintain these agreements may be questionable given the increasing militancy of the the public sector unions. But there is something else that Gordon Brown has omitted to include here. Many public sector employees benefit from excellent, final salary pension schemes and, even though many of these have been withdrawn in the private sector, Gordon has not had the courage to likewise in the public sector. Therefore, whether Gordon Brown likes it or not, it is an inconvenient truth that pensions are a cost of employment and it is estimated that our public sector pensions deficit is some £890bn, yet the government does not include this obligation anywhere in their figures.

So what about economic migrants, who do they benefit? Well yes, they benefit private companies that cannot or more likely, will not offer a wage sufficient to get ‘local’ workers to join their business, even though we have 1.7m unemployed. But what about the hidden cost, economic migrants can bring their families if they wish and many do, so when they are here, we must provide them with, at the very least, free education and free healthcare. So, in effect, by offering these benefits free, we, the tax payer are effectively subsidising employers looking for cheap labour. As the government knows only too well, these economic migrants could not possibly pay enough in tax and national insurance to cover the cost of these free benefits. If I was Mr Brown, I would be keeping my mouth shut, unless of course, he thinks we are all too stupid to work it out.

Fundamental Three

Gordon claims that we have the fastest growth in average productivity in the past decade across the whole of the G7. This may be true and therefore I will accept it at face value. But, can he really claim that their is an underlying financial strength in British business? Over the past few months, we have seen a high street bank have to be rescued by the tax payer, we have had a series of profit warnings from major retailers and manufacturers, we have had a number of high profile companies having to go to the stock market for more money to shore up their balance sheets and we have seen the failure of several airlines and the UK’s third largest travel companies. This doesn’t look strong.

In addition, we are now starting to see the highest level of business failures in over a decade, particularly small and medium sized businesses. Gordon Brown would do well to be remember that it is the SME market that has created many of the new jobs that he takes credit for, but also, because they cannot afford to go offshore or look at fancy methods of tax avoidance, they loyally pay their taxes. So what has he done for them?

Despite promised to the contrary, he has saddled them with a mountain of red tape, punitive fines and penalties for even the smallest misdemeanor in respect of tax or VAT returns. He has ensured through legislation that, the SME employer now has to have expensive experts on hand either as employees or consultants to advise on health and safety issues and employment issues as they have become one of the largest burdens on any small or medium sized business. In doing so, Gordon Brown, his cohorts and civil servants have demonstrated that they know nothing about running a business of this size.

Further, as a result of reduced central government funding to local authorities, business are having to pay ever higher business rates, even though they are getting less and less in return. Typically business rates now equate to 50% of the SME’s lease or rental costs. That is not business friendly, it is punishment. Far from taking credit for the business sector success, certainly in terms of the SME’s, he and his penal policies have made it increasingly difficult for them to survive as will be demonstrated over the coming months with a disproportionate number of SME business failures. You mark my words Mr Brown. This government also withdrew tapered tax relief a few short years after it was introduced to encourage entrepreneurship.

Fundamental Four

This takes the biscuit, Gordon Brown claims that government debt, as a percentage of national income has fallen from 43% in 1997, to 37.3%. As I have mentioned before, this is not a true figure, it is massaged. Mr Brown has become adept at using fancy footwork to ensure that government obligations do not end up on the government balance sheet. Now, I am not suggesting that he can’t do this, because he has, but what is the point in kidding himself, unless of course, the plan is to kid us? Between now and 2032, we will have to pay back some £170bn through the various PFI schemes used to pay for our schools, hospitals and other infrastructure projects. This doesn’t appear as a borrowing, so what is it? Then there is the debt from the failed Network Rail project and Northern Rock, as well as countless other obligations, why don’t these show up?

This man, even claimed in his speech, that he is using government intervention to assist families and business, bragging that basic rate tax payers will receive £120 a year in tax cuts. Have I missed something, this is the man that though he could rip us off using a classic trick of smoke and mirrors, got caught out and had to back down, Then he is trying to claim that it is some gift from the government. What an arrogant, deluded little man he is. 

Fundamental Five

This is really a more detailed repetition of Gordon’s ‘Fundamental Three’, but there are many more grandiose claims that do not bear scrutiny, but I haven’t got the time to analyse them one by one, so perhaps Gordon can enlighten as all be telling us how many of the 4.5m businesses he alludes to have actually been able to benefit from the Enterprise Capital Funds and the Small Firms Loan Guarantee? Precisely what red tape burdens has he removed and does this assessment include the new red tape this government has introduced.

I would also be very keen to hear precisely how this government can claim credit for boosting our competitiveness; on energy, planning, transport, housing, digital technology, science and skills. I don’t remember any of the companies operating in this sector thanking the government for their contribution. He also claims that our exports are improving, could this be anything to do with the fact that Sterling has weakened against all of the other major currencies, one of the primary reasons that our bills and inflation is rising, given we are a net importer of goods.

There are also other things that a government should be doing, such as planning. Gordon Brown makes no mention of the fact that as a direct consequence of his government’s prevaricating over nuclear power stations, there is a very real risk that we could suffer major power shortages in  3 or 4 years few years time, as the older power stations are de-commissioned and new one’s which take 10 years to build, are not ready. We could be reduced to third world levels of power shortages, with an estimated reduction of some 35%, affecting every family, every home and every business in the country. There is your legacy Mr Brown.

As I have stated at the outset, I am not a financial or economic expert, but when I analyse what Gordon Brown has said, against what had actually happened, I see a massive gulf. Therefore, this man must be deluding himself, or attempting to hoodwink the public. Either way, it is not good for us or our country. Step aside Mr Brown, before it is too late.