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

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Find the EU renegotiation demands dull? Me too – but they are important

It's an old trick: smother anything in enough jargon and you can avoid being held accountable for it.

I don’t know about you, but I found the details of Britain’s European Union renegotiation demands quite hard to read. Literally. My eye kept gliding past them, in an endless quest for something more interesting in the paragraph ahead. It was as if the word “subsidiarity” had been smeared in grease. I haven’t felt tedium quite like this since I read The Lord of the Rings and found I slid straight past anything written in italics, reasoning that it was probably another interminable Elvish poem. (“The wind was in his flowing hair/The foam about him shone;/Afar they saw him strong and fair/Go riding like a swan.”)

Anyone who writes about politics encounters this; I call it Subclause Syndrome. Smother anything in enough jargon, whirr enough footnotes into the air, and you have a very effective shield for protecting yourself from accountability – better even than gutting the Freedom of Information laws, although the government seems quite keen on that, too. No wonder so much of our political conversation ends up being about personality: if we can’t hope to master all the technicalities, the next best thing is to trust the person to whom we have delegated that job.

Anyway, after 15 cups of coffee, three ice-bucket challenges and a bottle of poppers I borrowed from a Tory MP, I finally made it through. I didn’t feel much more enlightened, though, because there were notable omissions – no mention, thankfully, of rolling back employment protections – and elsewhere there was a touching faith in the power of adding “language” to official documents.

One thing did stand out, however. For months, we have been told that it is a terrible problem that migrants from Europe are sending child benefit to their families back home. In future, the amount that can be claimed will start at zero and it will reach full whack only after four years of working in Britain. Even better, to reduce the alleged “pull factor” of our generous in-work benefits regime, the child benefit rate will be paid on a ratio calculated according to average wages in the home country.

What a waste of time. At the moment, only £30m in child benefit is sent out of the country each year: quite a large sum if you’re doing a whip round for a retirement gift for a colleague, but basically a rounding error in the Department for Work and Pensions budget.

Only 20,000 workers, and 34,000 children, are involved. And yet, apparently, this makes it worth introducing 28 different rates of child benefit to be administered by the DWP. We are given to understand that Iain Duncan Smith thinks this is barmy – and this is a man optimistic enough about his department’s computer systems to predict in 2013 that 4.46 million people would be claiming Universal Credit by now*.

David Cameron’s renegotiation package was comprised exclusively of what Doctor Who fans call handwavium – a magic substance with no obvious physical attributes, which nonetheless helpfully advances the plot. In this case, the renegotiation covers up the fact that the Prime Minister always wanted to argue to stay in Europe, but needed a handy fig leaf to do so.

Brace yourself for a sentence you might not read again in the New Statesman, but this makes me feel sorry for Chris Grayling. He and other Outers in the cabinet have to wait at least two weeks for Cameron to get the demands signed off; all the while, Cameron can subtly make the case for staying in Europe, while they are bound to keep quiet because of collective responsibility.

When that stricture lifts, the high-ranking Eurosceptics will at last be free to make the case they have been sitting on for years. I have three strong beliefs about what will happen next. First, that everyone confidently predicting a paralysing civil war in the Tory ranks is doing so more in hope than expectation. Some on the left feel that if Labour is going to be divided over Trident, it is only fair that the Tories be split down the middle, too. They forget that power, and patronage, are strong solvents: there has already been much muttering about low-level blackmail from the high command, with MPs warned about the dire influence of disloyalty on their career prospects.

Second, the Europe campaign will feature large doses of both sides solemnly advising the other that they need to make “a positive case”. This will be roundly ignored. The Remain team will run a fear campaign based on job losses, access to the single market and “losing our seat at the table”; Leave will run a fear campaign based on the steady advance of whatever collective noun for migrants sounds just the right side of racist. (Current favourite: “hordes”.)

Third, the number of Britons making a decision based on a complete understanding of the renegotiation, and the future terms of our membership, will be vanishingly small. It is simply impossible to read about subsidiarity for more than an hour without lapsing into a coma.

Yet, funnily enough, this isn’t necessarily a bad thing. Just as the absurd complexity of policy frees us to talk instead about character, so the onset of Subclause Syndrome in the EU debate will allow us to ask ourselves a more profound, defining question: what kind of country do we want Britain to be? Polling suggests that very few of us see ourselves as “European” rather than Scottish, or British, but are we a country that feels open and looks outwards, or one that thinks this is the best it’s going to get, and we need to protect what we have? That’s more vital than any subclause. l

* For those of you keeping score at home, Universal Credit is now allegedly going to be implemented by 2021. Incidentally, George Osborne has recently discovered that it’s a great source of handwavium; tax credit cuts have been postponed because UC will render such huge savings that they aren’t needed.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle