Britain could have much to learn from Germany. Photo: Jochen Zick-Pool/Getty Images
Show Hide image

A small question of confidence

Much needs to be done, especially when it comes to access to credit.

Flick through the business pages, and you will find countless news articles on the latest share price and quarterly results of the multimillion-pound FTSE-100 companies. It is easy to forget that these businesses account for a small minority of firms in the UK; Britain’s small and medium-sized enterprises (SMEs) are the backbone of our economy.

According to the Department for Business, Innovation and Skills, there were 4.9 million SMEs in the UK at the start of 2013, making up 99.9 per cent of the country’s private-sector businesses. Their combined revenue accounted for £1.6bn, or 48.1 per cent of total private-sector turnover, and they employ about 14.4 million people, corresponding to 59.3 per cent of the private-sector workforce. When SMEs grow, it’s the whole country that prospers, as usually they reinvest their profits, creating more jobs and boosting exports. So, is the government doing enough to support them?

There have been a few steps in the right direction. Business regulation has been reduced and simplified, and under the government’s Employment Allowance scheme, which will start in April this year, SMEs have been granted a £2,000 tax cut on their employer National Insurance contributions.

But still much needs to be done, especially when it comes to access to credit. “A third of our members are repeatedly saying in our quarterly surveys that they are having difficulties accessing adequate finance to grow their businesses,” says Mark Cherry, national policy chairman at the Federation of Small Businesses, the sector lobby group. This is especially worrying at a time when business optimism in the country has picked up – last month it reached its highest level in 22 years, according to research by the advisory firm BDO – because this shows that some of these small businesses will find themselves unable to grow even as the economic environment finally starts to improve.

Some government initiatives to increase lending to small businesses, including the Funding for Lending and Enterprise Finance Guarantee schemes, seem to be having only limited impact on the problem. Figures from the Bank of England show that net lending to businesses fell by £4.3bn in the three months to November 2013. The state-backed British Business Bank, which should become operational next year after it receives state aid approval from the EU, will also support lending to SMEs, but we’ll need to wait and see how big an effect it will have.

Increasing competition in the banking sector should be a priority, as SMEs at present are dependent on a small number of reluctant lenders. Equally important is that this support be sustained in the long term. “Short-term initiatives aren’t really taken up by small businesses because they have to adapt their plans to take advantage of some of these schemes,” Cherry says.

Other countries, notably Germany, Europe’s industrial powerhouse, have done a better job at strengthening their SME sector (what the Germans call their Mittelstand) by providing funding for firms that want to do research to help develop products. Through KfW – Germany’s business bank – the government also provides loans on favourable terms to SMEs that want to export to developing countries or invest in energy-saving programmes.

The British economy grew by 1.9 per cent in 2013, outperforming even Germany. Now just think what would happen if we championed our very own Mittelstand.

This article first appeared in the 13 February 2014 issue of the New Statesman, Can we talk about climate change now?

Getty
Show Hide image

Justin Trudeau points the way forward for European politics

Is the charismatic Canadian Prime Minister modelling the party of the future?

Six months after Canadian election day, Justin Trudeau’s Liberal party continues to bask in the glow of victory. With 44 per cent of support in the polls, the Liberals are the most popular party amongst every single demographic – men and women, young and old, and people of all educational backgrounds. 

While most European mainstream parties only dream of such approval, this is actually a small dip for the Liberals. They were enjoying almost 50 per cent support in the polls up until budget day on 21 March. Even after announcing $29.4 billion in deficit spending, Canadians overall viewed the budget favourably – only 34 per cent said they would vote to defeat it.

Progressives around the world are suddenly intrigued by Canadian politics. Why is Justin Trudeau so successful?

Of course it helps that the new Prime Minister is young, handsome and loves pandas (who doesn’t?) But it’s also true that he was leader of the Liberals for a year and half before the election. He brought with him an initial surge in support for the party. But he also oversaw its steady decline in the lead up to last year’s election – leadership is important, but clearly it isn’t the only factor behind the Liberals’ success today.

Context matters

As disappointing as it is for Europeans seeking to unpack Canadian secrets, the truth is that a large part of the Liberals’ success was also down to the former Prime Minister Stephen Harper’s extreme unpopularity by election time.

Throughout almost ten years in power, Harper shifted Canada markedly to the right. His Conservative government did not just alter policies; it started changing the rules of the democratic game. While centre-right governments in Europe may be implementing policies that progressives dislike, they are nonetheless operating within the constraints of democratic systems (for the most part; Hungary and Poland are exceptions).

Which is why the first weeks of the election campaign were dominated by an ‘Anybody But Harper’ sentiment, benefitting both the Liberals and the left-wing New Democratic Party (NDP). The NDP was even leading the polls for a while, inviting pundits to consider the possibility of a hung parliament.

But eight days before election day, the Liberals began to pull ahead.

The most important reason – and why they continue to be so popular today – is that they were able to own the mantle of ‘change’. They were the only party to promise running a (small) deficit and invest heavily in infrastructure. Notably absent was abstract discourse about tackling inequality. Trudeau’s plan was about fairness for the middle class, promoting social justice and economic growth.

Democratic reform was also a core feature of the Liberal campaign, which the party has maintained in government – Trudeau appointed a new Minister of Democratic Institutions and promised a change in the voting system before the next election.

The change has also been in style, however. Justin Trudeau is rebranding Canada as an open, progressive, plural society. Even though this was Canada’s reputation pre-Harper, it is not as simple as turning back the clock.

In a world increasingly taken by populist rhetoric on immigration – not just by politicians like Donald Trump, Nigel Farage, Marine Le Pen and other right-wingers, but also increasingly by mainstream politicians of right and left – Justin Trudeau has been unashamedly proclaiming the benefits of living in a diverse, plural society. He repeatedly calls himself a feminist, in the hope that one day “it is met with a shrug” rather than a social media explosion. Live-streamed Global Town Halls are one part of a renewed openness with the media. Progressive politicians in Europe would do well to take note.

Questioning the role of political parties today

Another interesting development is that the Liberal party is implicitly questioning the point of parties today. It recently abolished fee-paying, card-carrying party members. While this has been met with some criticism regarding the party’s structure and integrity, with commentators worried that “it’s the equivalent of turning your party into one giant Facebook page: Click ‘Like’ and you’re in the club,” it seems this is the point.

Colin Horgan, one of Trudeau’s former speechwriters, explains that Facebook is “literally a treasure trove for political parties”. All kinds of information becomes available – for free; supporters become easier to contact.

It was something the Liberals were already hinting at two years ago when they introduced a ‘supporters’ category to make the party appear more open. Liberal president Anna Gainey also used the word “movement” to describe what the Liberals hope to be.

And yes, they are trying to win over millennials. Which proved to be a good strategy, as a new study shows that Canadians aged 18-25 were a key reason why the Liberals won a majority. Young voter turnout was up by 12 per cent from the last election in 2011; among this age group, 45 per cent voted for the Liberals.

Some interesting questions for European progressives to consider. Of course, some of the newer political parties in Europe have already been experimenting with looser membership structures and less hierarchical ways of engaging, like Podemos’ ‘circles’ in Spain and the Five Star Movement’s ‘liquid democracy’ in Italy.

The British centre-left may be hesitant after its recent fiasco. Labour opened up its leadership primary to ‘supporters’ and ended up with a polarising leader who is extremely popular amongst members, but unpopular amongst the British public. But it would be wrong to assume that the process was to blame.

The better comparison is perhaps to Emmanuel Macron, France’s young economy minister who recently launched his own movement ‘En Marche !’ Moving beyond the traditional party structure, he is attempting to unite ‘right’ and ‘left’ by inspiring French people with an optimistic vision of the future. Time will tell whether this works to engage people in the longer term, or at least until next year’s presidential election.

In any case, European parties could start by asking themselves: What kind of political parties are they? What is the point of them?

Most importantly: What do they want people to think is the point of them?

Ultimately, the Canadian Liberals’ model of success rests on three main pillars:

  1. They unambiguously promote and defend a progressive, open, plural vision of society.
  2. They have a coherent economic plan focused on social justice and economic growth which, most importantly, they are trusted to deliver.
  3. They understand that society has changed – people are more interconnected than ever, relationships are less hierarchical and networks exist online – and they are adapting a once rigid party structure into a looser, open movement to reflect that.

*And as a bonus, a young, charismatic leader doesn’t hurt either.

Claudia Chwalisz is a Senior Policy Researcher at Policy Network, a Crook Public Service Fellow at the University of Sheffield and author of The Populist Signal: Why Politics and Democracy Need to Change