By Colin Borland
For about a week now, every day has brought another reminder that, if not unprecedented, these are exceptional economic times.
We’ve had predictions that real household incomes are set to fall by over 7 per cent compared to a few years ago. The world’s major central banks have clubbed together to shore up the global financial system. And, regardless of whether you regard it as a damp squib or a resounding success, we saw the largest strike for decades over changes to public sector workers’ pensions.
So, against all this, will the measures the chancellor George Osborne announced (or, rather, confirmed) in his autumn statement make any difference?
The top line for many small businesses will be the moves to increase access to – and lower the cost of – finance. Enhanced tax breaks to encourage investment in start-ups will be most welcome for the specific businesses which are attractive to private equity investors. But this specialised solution will not be for the majority of small businesses in need of investment.
More joy may be found with “credit easing”, whereby the government will underwrite up to £40 billion in lower-interest loans to firms. We all get frustrated when we see historically low Bank of England base rates which bear no relation to the rates we get offered, so the idea of passing on these savings is a commendable one.
But will it deliver? Some small firms will roll their eyes when they discover the banks will be the scheme’s gatekeepers. And how do we avoid this public money simply subsidising loans which would have been granted at a certain rate anyway? To work, this underwriting must become the bridge between the business community’s definition of a good investment and that of the banks. Subsidising a few dead certs will not have the desired outcome.
With many businesses having no option but to use a vehicle on a daily basis – and every penny spent at the pump is not being spent elsewhere in the economy – it’s no surprise that the chancellor was also under pressure to act on the cost of fuel. The cancellation of next year’s proposed fuel duty increase of course has to be welcomed. However, not imposing an extra future increase will not fill those already struggling to pay at the pumps with a huge amount of confidence. Devising a fiscally neutral method of offsetting rises in oil prices and against duty rates should not be beyond us.
On the new funding for infrastructure projects, of which the Scottish government will get its share, this cannot simply be handed to multinationals with the expectation it will magically trickle down to the rest of the economy. We need to ensure local businesses win contracts directly and that subcontractors are treated – and paid – fairly.
If the autumn statement is to prove a shot in the arm rather than an economic placebo, these initiatives must be delivered in a way which maximises their benefit – and that means ensuring they reach the small businesses which will rebuild our economic base and drive the recovery.
– Colin Borland is head of external affairs for the Federation of Small Businesses in Scotland
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