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Do something - three ways to help Welsh firms now

There are still those who believe that the Welsh Assembly Government can do very little to help the Welsh economy which, given the way that the current lot in power seem to have given up on devolved powers, is not surprising.

However, as pro-devolutionist and an optimist, here are three suggestions as to how the Welsh Assembly Government could help the business sector tomorrow if they so wished to:

Business Rates

First, it must urgently re-assess the current business rate regime and reduce the burden on small firms across Wales.

It seems to me that, while the Assembly currently has devolved responsibility for this form of taxation, it has yet to realise that it is exactly the worst sort of tax during a recession. This is because, unlike other forms of taxation on firms, business rates remain the same regardless of the performance of the business as it is based on the property occupied by the business and not on turnover or profitability.

To many businesses it is a fixed cost that must be paid regardless of the success of the business and is one that becomes disproportionately higher for many small firms as their income reduces. I would therefore suggest that if the Assembly Government wants to ensure that owner-managers remain solvent during the current crisis, it should examine whether it could suspend business rates for our smallest firms during the next twelve months.

While a couple of thousand pounds of rate relief may not seem much to a civil servant, it could mean the difference between survival and failure, especially for many small shops up and down our high streets

European funding

Second, we need to start spending European funds quickly and get them out to businesses. As many of you are aware, Wales qualified for an additional £1.5bn of European funding in 2006 and, as the Western Mail has pointed out during the past few weeks, there are fears being expressed by business groups there is very little spend being undertaken on the business sector and, more critically, projects to help develop businesses across Wales are being swamped under through an over-exuberance of unnecessary bureaucracy.

Of course, the governance and accountability of the use of such funds is important but even more critical is the need to get this funding, which other UK regions do not have, out to businesses, universities and communities.

Certainly, if this situation does not improve in the next couple of months, then there may well be a danger that the Welsh business sector may not be in the position to provide the necessary matched funding to support key projects with the consequence that these projects will fail and, worst of all, the funding will need to be returned to Europe.

Welsh Loan Guarantee Scheme

Finally, and most importantly, is the need to get cash flowing within businesses again and I reiterate my call again the establishment of a Welsh National Loan Guarantee Scheme which, by working alongside banks, would be used to underwrite a significant percentage of new loans to business, particularly on short-term credit lines, overdrafts and trade credit.

Whether this funding comes from the Assembly itself or from European funds is irrelevant. What is critical for Welsh businesses is that they can secure their cash position during the next few months and this must be something that Welsh ministers should consider urgently as probably the most effective way of ensuring that funding flows into the small firm sector.

Comments

Anonymous said…
According to Tomos Livingstone, Brown is thinking of having a loan guarantee scheme for small firms.
Why haven't the useless Assembly done something similar? The more they prevaricate, the more people see them as a complete waste of time.
Anonymous said…
John Dixon - Chairman of Plaid Cymru - seems to be agreeing with your stance on business rates.

http://borthlas.blogspot.com/2009/01/cut-business-rates.html

Perhaps he can have a word with his leader Ieuan.
Business rates are ludicrous.
Pls see my view on http://bizbach.blogspot.com/
Unknown said…
Welsh Loan Guarantee Scheme from the WAG, on past performance they might establish a committee or two, which in turn could ask for the views of the public. 6 months later a report would be produced for R&I.

Then, Rhodri and Ieuan could chew the fat until it's no longer needed.

Don't hold your breath waiting.
Anonymous said…
There already is a loan Guarantee scheme in place - its just that neither the banks or the government are too keen on anyone knowing about them!

The business rates idea is quite good, although most councils have a hardship reduction scheme in place which would help out the companies which really need the help - again, because the funding comes from the council rather than the Assembly, it isn't something the council likes to talk about!

You can possibly work out from my tone that many ideas that keep doing the rounds are already in existence within the system, however, there is a reason why WAG isn't interested in actually letting the money go.

2012 sees the olympics and there is no way the government will be able to raise the required money to make everything happen the way it should.
One way of trying to find the funds is to swipe the funds from other schemes, by slight of hand!
I am sure you will find that the funding for business will have been allocated in time for the funding audit - however, look for some physical evidence of any improvements, and that will be difficult to find.

It isn't so much a conspiracy, as the way things are actually done!
Thanks for the comments.

In terms of the Loan Guarantee Scheme, the latest annual report showed that in 2007-2008, 2,619 loans with a total value of around £207 million were guaranteed (i.e. the average loan value was £78,950). I would argue that the demand is probably higher than that at the moment.

Perhaps one of the issues is that the SFLG is restricted to start-ups only (less than five years old) so would exclude any established or family firms.

In terms of business rates, the actual rate relief is provided directly by the Assembly Government. As a result, it would have to increase the rate relief from the local government budget to ensure a better deal for small firms but, given the current economic conditions, there is no reason why this shouldn't happen.

However, I agree with the general cock-up not conspiracy approach - I have been working in Wales too long to think otherwise!

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