Leading article: There is nothing pro-business about risking another slump

Mr Cameron seems to have missed the fact that small firms were critical of his deficit-cutting plans

Share
Related Topics

It was a day when the world of politics came to pay tribute to the world of business. David Cameron, Ed Miliband, Vince Cable and Nick Clegg all made their way yesterday to the CBI's annual conference to speak of the importance of the private sector. And all these politicians sought to portray themselves as thoroughly "pro-business".

Yet this raises the question: what is the appropriate way for the state to promote the private sector? The Prime Minister made approving reference in his speech to the letter last week by 35 well-known businessmen in support of the Coalition's plans to wipe out the deficit over the course of the Parliament. But a danger lies in the assumption by ministers that the heads of large businesses speak for the entire private sector. Very often, they do not. Mr Cameron seems to have missed the fact that the Federation of Small Businesses was sharply critical of the Government's deficit cutting plans.

Large companies and smaller firms have had very different experiences since the recession began two years ago. Banks that made crippling losses in the credit bust drastically reduced their flows of lending as they sought to repair their balance sheets. Large firms have been able to tap finance from the bond markets directly. But smaller firms, which are mostly reliant on bank lending, have suffered much more during the ongoing credit crunch. There are other areas of divergence between the interests of large and small firms. The head of Topshop, Sir Philip Green, suggested in his recent review of Whitehall waste that the Government should delay paying its suppliers in order to save taxpayers' money. The impact of such a shift on firms with billion pound turnovers would be negligible, but it would be disastrous for many smaller companies with government contracts.

The Coalition is keen to promote British exports. But there seems to be an assumption in parts of the Government that this means promoting existing large firms abroad. Mr Cameron demonstrated this tendency when he packed his official plane to India this summer with the great and good of the British business establishment. Yet, historically, small firms are more likely to be a source of growth than large ones. Some of the biggest and most successful firms of today – such as Vodaphone and EasyJet – did not exist two decades ago. At times Mr Cameron seems to regard his function as being a cheerleader for large businesses, rather than a promoter of competition and a guarantor of a level playing field.

There is a split personality in the Coalition when it comes to business. The Prime Minister yesterday cited the £30bn of state investment in transport projects over the next four years. But capital spending is still being cut dramatically in real terms by the Coalition. And, as the Labour leader, Mr Miliband, pointed out, the Government is seeking to eradicate the budget on a recklessly short timetable. There is nothing "pro-business" about risking another recession by sucking public spending out of the economy in this fashion.

The Prime Minister talks the talk when it comes to the need to support smaller firms, telling the CBI "we've got to back the big business of tomorrow, not just the big businesses of today". Yet his actions often suggest a philosophy of supporting existing winners.

Meanwhile, the Business Secretary, Mr Cable, clearly understands the imperative of compelling the banks to lend to small firms, but has given his support to a needlessly draconian deficit reduction plan that could undermine, rather than encourage, the kind of long-term investment he wants to see. It is too soon to tell which of the two sides of the Coalition's approach to business will prevail. But if this confusion continues, there is a danger that the British economy will be left with the worst of all worlds.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Austen Lloyd: Regulatory / Compliance / Exeter

Excellent Salary: Austen Lloyd: Exeter - An excellent opportunity for a Solici...

Ashdown Group: IT Support Technician - 12 Month Fixed Term - Shrewsbury

£17000 - £20000 per annum: Ashdown Group: IT Helpdesk Support Technician - 12 ...

The Jenrick Group: Maintenance Planner

£28000 - £32000 per annum + pension + holidays: The Jenrick Group: Maintenance...

The Jenrick Group: World Wide PLC Service Engineer

£30000 - £38000 per annum + pesion + holidays: The Jenrick Group: World Wide S...

Day In a Page

Read Next
Mary Christmas: the Bethlehem story is Mary's moment, when a poor peasant girl gives birth to the Son of God in a stable  

The appeal of the Virgin Mary: A supernatural hope at a time of scepticism

Peter Stanford
 

Letters: Why Cameron is wrong about EU child benefits

Independent Voices
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there