Lib Dems giveth to SMEs, and taketh away...

The Lib Dems may be on the up in the election run-down, but SMEs are struggling to know where they'd stand...

Last Updated: 06 Nov 2012

Nick Clegg's performances in the televised election debates have certainly thrust him into the spotlight - he's now the subject of everything Obama-style election posters to ridiculous Daily Mail front page stories on his ‘Nazi slur', and outrage that he's yet another politician who's been collecting wedge when he shouldn't - up to £250 a month from three businessmen in 2006, paid into his bank account.

But while everyone was watching to see if Clegg could keep his star on the rise (and refrain from Sieg Heiling his way around the studio) we couldn't help wondering whether his businessmen buddies will continue to see him as a pal - given the Lib Dems' contradictory fiscal reform plans. His right-hand man Vince Cable is touting a series of headline-ready policies that happen to send out a mixed message for the nation's SMEs.

On the plus side, the Lib Dems are proposing ways to encourage banks to lend to small business, not least the radical plans to break up the ‘super-banks' and return power back to  regional banks and building societies.

They are also proposing regional stock exchanges - so that SMEs unable to support bank debt or attract private equity can be matched to local investors. ‘Trying to grow businesses without money is like trying to grow plants without soil,' announces the Lib Dem blurb - and everyone from the nation's organic bakers to its Reliant Regal-driving wheeler-dealers rightly cheers in unison. Although how much capital would be attracted to the MKSE (Milton Keynes Stock Exchange) we're not sure.

The party is also pledging to revamp the financial system in other ways - promising ‘a completely different ecology of banking': more mutuals, credit unions, and Local Enterprise Funds to attract venture capital into small businesses. And a Post Office Bank. Seems ambitious, when just having a Post Office has come to be newsworthy enough.

So far, so SMEs plopping a cross in the Clegg box come 6 May. But then comes the niggling issue of capital gains tax. The Lib Dems are proposing to raise it from 18% to the same rate as income tax, to close a loophole which they reckon allows high earners to pay a lower proportion of their income in tax than those on low incomes. This they hope will go some way to funding the £17bn they'd lose by raising the income tax threshold to £10k.

This may seem counter-productive in an environment where only a fraction of start-ups thrive. Business is seeking an environment that rewards success, not punishes it. Of course, Cable may have already lost the support of the business community when he described some of their number as ‘utterly nauseating' - at least the ones who, like Stuart Rose, signed a letter attacking rises in National Insurance. Maybe he was just miffed no-one was slipping him £250 a month.



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