I missed this letter in the Guardian on Tuesday from Philip King, CEO of the Institute of Credit Management, but it's well worth noting:
The business secretary announced on 4 March that small firms will no longer have to produce independently audited accounts in a measure he believes will save 42,000 businesses £40m per year. I've always respected Vince Cable and have no doubt of his commitment to helping small business, but such a move demonstrates a naivety that verges on madness. I agree with him when he says that "one of the barriers to growth is the burden of regulation ‚Ķ it takes up time and stops business growing, and that means our economy does not grow". That is why the ICM supports the reduction of red tape. But please can we understand that producing accounts is not "administration" and neither is it unnecessary red tape.
Far from helping small businesses, the move is more likely to damage a company's access to credit, therefore restricting growth and in fact adding to their costs. The government needs to get away from this idea that reducing red tape will always mean reducing costs to small businesses. Businesses extend credit to one another based on the trust that comes from knowing that the company is financially viable, and one of the essential proof points is a set of audited accounts.
Banks too look to lend on the basis of sound financial data, so limiting the amount of financial information available will do more harm than good. The government must stop sending mixed messages. If it wants small businesses to drive the economy, this is not the way to do it.
Precisely.
But the neoliberals who think all government is bad and all regulation a burden continue their march towards........well, the verges of madness.
And yet more evidence is provided of the economics of the playground dominating thinking in the Treasury, BIS and elsewhere.
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Madness may be, Richard, but two other explanation also come to mind.
The first is that Cable’s advisors/civil servants are so ill informed that they have no idea that this policy runs directly counter to the actual functioning of small businesses.
The second is that they are aware of this – and specifically the point Philip King makes – and therefore realise that in practice this policy will have little or no real impact (for the reasons identified by King). In that case we can safely assume, I think, that this is an announcement of a ‘non’ policy simply to make it look like the holy grail (to the rightwingers) of too much regulation is being attacked, not to mention millions of £ being saved.
If the second then maybe this is a clever tactic on Cable’s part and more evidence – albeit hidden like so much else the Lib Dems in government do – of the LibDems ‘moderating’ influence on the Tory government.
Re my previous post: I should, of course have said ‘…the Lib Dems in government alledgedly do…’ 😉
@Ivan Horrocks
I know Vince a bit – and it’s true he does not know much of small business and since being in office his advisers are dire – and neoliberal fundamentalists whose experience of business is all in the City
I think that the best explanation
@Richard
Point taken, and you have the benefit of a bit of personal insight I don’t. But honestly, Cable does have enough sense surely to know when he’s being sold a certain line or not. After all he was sharp enough to see through a lot of neo-liberal bullshit while out of government. So, as far as I’m aware, as a minister he has the power to choose his advisors. Maybe he should exercise that option and/or seek views more widely. One option would be to log on to your blog, of course 😀
@Ivan Horrocks
Matthew Oakeshott certainly does – or so he said to me yesterday!
It’s not just credit that is an issue with this – accounts are increasingly needed to secure business when tendering.
The worst example I have heard of is an Irish Bank ( yes really) that has come back to Property developers and said in effect ” oh dear we do not think your properties are now worth what they were valued at 2 years ago, so we will write down our values to as little ass possible then we will charge you 9% above base rate.”
The developer in question has been given 2 months to accept it or effectively hand back the keys. I assume that they can mess about with existing loans as they probably should not have lent in the fuirst place or some similar new rule. ouch.
Obviously this is so uneconomic as to put another company on the list of “waiting to close” companies.
Is this what awaits people coming to the end of fixed term mortgage arrangements in the coming months? I predict a rise in suicides if it is.