The recession has hit the New Forest hard: we have seen percentage increases in unemployment higher than elsewhere. Of course, we started from a very low level of unemployment so even a modest increase in numbers can look relatively larger when expressed as a percentage. That is little comfort, however, to the individuals affected and their families as they struggle to keep paying the mortgage and find another job. I think we have been relatively hard hit because of the large number of small businesses in the Forest; the fact that several construction companies have their headquarters here; and because so many residents commute to financial service companies around Bournemouth and Southampton. All of these industries have been severely affected.
It has been particularly frustrating to have large numbers of small businessmen and women come my surgeries in order to complain that, whilst they have healthy order books and viable businesses, they face severe cash flow problems and the banks which –as taxpayers- we now own, instead of extending credit are, on the contrary, either withdrawing it or making really impossible demands as the price for supplying it. They are especially angry because they know that we have bailed out the banks twice since October.
In the second bail out, earlier this year, the Government announced a scheme to insure the so called 'toxic assets' which the banks hold. However necessary this may have been, it is just not enough to stop them from carrying on like zombie banks and get them lending to business again. 13 years ago I worked in 'risk management' at the Royal Bank of Scotland. If I were doing that job now I would be urging extreme caution. In effect, I would be arguing against lending to the very small businesses that are rightly now coming to my surgeries to demand action. Lending to small business in a recession is always going to be high risk. The balance sheets of the banks are already stuffed with high risk assets so they need to consolidate and hold onto what cash they can, the last thing they need is to take on any more high risk lending. The Government's second bail out insurance scheme does not kick in until the banks lose almost all their capital base, so it still leaves the banks very exposed and consequently, and quite properly, disposed to extreme caution (if only they had shown just some of that caution over recent years).
If we are to get the banks to lend to our small and medium sized enterprises, then the insurance policy provided by the Government needs to be on the new lending that we want them to undertake and not just on the old 'toxic assets' that they already hold. Last week's budget was yet another missed opportunity to announce such an ambitious scheme to get vital credit flowing to business again. Instead all we got was a post dated budget with all the serious decisions put off until after the general election in 2010. We simply cannot afford to wait that long. If the Government doesn't want to act until after an election, the answer is simple: call that election now. |
