This is the next in our series of Guest Blogs.  RussRec is an entrepreneur, with his own small business, the very person that forms the bedrock of this great nation.  But whilst he takes risks and works all the hours he can to help his business survive and grow, the Government is not…NOT…helping entrepreneurs and small businesses like Russrec’s….small businesses who create employment, create investment and will help pull this economy out of recession.  This is a personally written blog and one I think you will find very powerful. 

Thanks RussRec. 

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I run a small business specialising in recruitment. As early as December 2007 we saw that there was a likely credit crunch coming as the world owed trillions of dollars, and that the level of credit was unsustainable. Despite our continued success we downsized our office space, delayed decisions on replacing IT infrastructure and reduced our overheads. We increased our margins, and enjoyed a very successful period of trading from January 2008 through to July, we did begin to question our judgement but held firm as interest rates, inflation and the price of food, oil and energy were continuing to rise.

Around September 15^ththe business world literally stopped. Within a week the job briefs we were working on went ‘on-hold’ and no new ones came in. In one respect we were relieved as we were proved right but the lack of job briefs was increasingly worrying. We were busy though with hundreds of middle managers being made redundant – so we helped them the best we could. We setup new services, looked at new ventures with third parties and spoke to hundreds of our contacts, seeking briefs to fill. Whilst there were roles, there were not enough to sustain the business  so we had to make some decisions. Recognising that we were going to run out of money by the last quarter 2009, we set about radically slashing our overheads. We took pay cuts, and reduced our other overheads significantly. Our efforts in generating new business was beginning to pay off, however, people were very wary about hiring  so we spoke to our bank (Barclays) with whom we had been with for almost 20 years about a business loan – just in case. We were ‘allocated’ an Account Manager – Darren, who we met and seemed confident that we would be applicable, if not from the bank but via the Government’s much lauded Working Capital Scheme. We provided young Darren, with information, then more information, and even more information. His positive demeanour turned increasingly cautious.  Some 6 weeks after we had approached our bank, Barclays Bank he said our application had been declined, as our sector is ‘too high a risk’.  Part of the money was to pay Corporation Tax for the previous financial year, where our prudence resulted in greater profit which meant more tax. We have now applied to defer the tax payment and are waiting for a decision. In the meantime we have had to reduce our overheads further, moving out of our office, taking an even bigger pay cut and not making pension payments.

As I write this I worry for the future. The current government have failed people like me – at a time when I should be really planning for my long term financial security, I find myself in a situation where all my savings, assets, and income which I have built up steadily have decreased significantly in the past 18 months. The blame lies with this government’s, indeed the current Prime Minister’s inability to manage the financial services industry. The world followed the UK, bought into Brown’s eulogies about prudence and was duped by Gordon Brown’s fiscal policy that allowed greedy bankers to make millions, creating a credit bubble that burst.

The schemes to help small businesses the Government have created are nothing but hot air as far as I am concerned, even deferring of tax is a rigmarole. I have to pay  some income tax ‘on account’ for this year’s earnings! I can ill-afford it and my salary has been reduced by 30%, yet my accountant is not confident I will be able to defer it – if the Inland Revenue demands his Corporation Tax, we will put the business into voluntary liquidation and they can be our other creditor (Barclays!). Even though we are hopefully over the worse – as I wtite this in my makeshift office in my kitchen at home it makes me VERY angry that I am here as a direct result of bad Government.    

Second in our series of grassroots bloggers is Sue Doughty.  Sue has been an active contributor to the comments thread on both this site and TBB’s Facebook page.  She is incredibly sharp, perceptive and always has a valuable insight into latest issues.  It is therefore a real pleasure that she has provided this blogpiece today.  Thanks Sue. 

The world of work is fading away or changed by Sue Doughty
 
It used to be that people over 60 for women and 65 for men were not allowed to be employed. This was brought in to make way for school leavers to get jobs (because there had been a Labour government who had destroyed all the jobs as is their way) but before that people had the right to work for as long as they wanted to. Now we see people of pensionable age working to be able to eat and pay mortgages and school fees, tuition fees etc, while young people are finding avenues to employment blocked. What to do? It would be wrong to bring back the unemployment in older years because people are healthier now and their pensions and savings have gone.

There has to be a way of encouraging the creation of starter jobs.
 
At present unemployed young people with only ten GCSEs and 2 A levels have to settle for cleaning council buildings, flats and offices, care homes; or working shelf stacking or on the checkout in shops. But those shops will close as shopping trips make way for internet and phone shopping in the face of the flu epidemic.

Apprenticeships made way for Modern Apprenticeships, which were seen as not worth doing because you get pocket money pay and no qualifications to put in your CV. They were actually detrimental to your CV.

There are proper apprenticeships on offer now but few and far between. They are hard to find and getting to the assessment venue is a challenge of initiative and parents disposable income for transport – again in a trading estate with no usable, same day, public transport access.

So this government has again tilted the playing field in favour of the middle classes, that is to say those young people with caring parents, while penalising those families fiscally tooth and nail.

We need this country to be creating jobs in manufacturing. It is time the old Labour mantra that we don’t need to make things any more because we can import whatever we want went by the board. They said that we don’t need to have food production in these islands because it is cheaper to import but now we know they meant only from the EU. I note that coffee; tea, oranges, mangoes, springcrop potatoes, bananas, rice and many other basic foodstuffs do not come from within the EU but from the Commonwealth.

We are seeing an end to crop picking gangs advertising vacancies only in the language of the gangmaster and often only in the country of the gangmaster but the end is not complete and not good enough.

We need old people to be allowed to keep earning, and we need them to pass on their skills and ethics. We also need job vacancies to open up for this lost generation. We need to be able to compete with China. To achieve this a whole load of working regulations need to be weeded out of our statute book so that it is easier to employ people in this country.  

Today, we turn a new page on this blog, as we have our first guest blogger take the reins and give their views on the issue of the day.  This is a new feature and other bloggers are lined up.  I know many of you want to run your own blog site but don’t have the time to do it…hence posting articles gives you the same kind of thrill and exposure. Bloggers don’t have to share my views, (and yes, Socialists are lined up to post as well).  This site is about debate and discussion not smears and gossip!  Let me know if you want to gain exposure by emailing me at:  grassroots@trueblueblood.com 

John Laity shared some great insights last week into Afghanistan in the comments thread, which we turned into a main blog article, that John Redwood shared with his vast blog community.  So over to John for his first entry.  Sincere thanks John.

The FSA, Wheelie bins and Cowboy Builders…
 
Unlike some countries, England has no separate administrative or constitutional court exercising a broad jurisdiction, though it has two specialised courts, the restrictive practices court and the Employment Appeal Tribunal.
 
This means that the role of Regulators (Such as the FSA) is an “administrative process”, where a relevant Act of Parliament establishes independent sector-specific regulatory offices.
 
Administrative process is a way of handling multiple issues outside of the courts. For example, Town Planning offices and Local Authorities can make local decisions and handle the application of rules and regulations, without having to involve the Courts. They are empowered to do so under an Act of Parliament that grants them the powers they need to apply within a strict framework.
 
Where administrative process is applied there is (usually) clear routes for appeal against a decision and decisions are usually only over-turned should the rules of “Natural Justice” seem to be breached…I.E. Wrong doing of some kind!
 
As administrative process is empowered by an Act of Parliament, a regulator is answerable to a Minister for State, who (usually) will control funding for the Regulatory Office and be able to over-rule any decision made by the office.
 
It is under administrative process that Local Authorities can ask you to pay for rubbish collection or refuse your building project. It is under administrative process that local Trading standards can prosecute a cowboy builder for not finishing your building project. It is also under administrative process the that FSA can regulate the banking sector:
 
From the Commons Select Committee on Regulators, First Report:
 
“In May 1997, the government announced its intention to create the Financial Services Authority (FSA) as a single financial services regulator, independent of government, responsible for both financial services prudential regulation and the conduct of business regulation. The regulator’s duties and powers were set out in the Financial Services and Markets Act (FSMA) which came into force in 2001.
 
The FSA does not have a duty to promote competition in the industry nor to regulate prices since the regulated companies already operate in competitive markets. However, the regulator is required to meet its statutory objectives in ways consistent with facilitating and maintaining competition (internationally and domestically) and minimising adverse effects on competition from regulation.
 
August and September 2007 brought a liquidity crisis at Northern Rock, which ultimately led to the first run on a bank in Britain since 1866.

Inevitably, the Northern Rock crisis casts a new light, and indeed casts doubt, on the claims of financial regulators to prioritise effectively their supervisory activities, especially for such major financial institutions as Northern Rock. It also raises questions of the effectiveness of joint working between the FSA, HM Treasury and the Bank of England.” 
 
Obviously we all have concerns as to how the money markets went into la la land. But can it be blamed entirely on the FSA? Consider the statements made by the House of Commons Treasury Committee, Sixth Special Report of Session 2008–09:

“There is an existing formal statutory link between the FSA and the Bank of England at Deputy Governor level, in relation to the two institutions’ work on financial stability. In November 1997, the Treasury, the Bank of England and the FSA entered into a Memorandum of Understanding which created a framework for co-operation between the parties on Financial Stability. As part of that document, provision was made for the Deputy Governor (Financial Stability) to be a member of the FSA Board and for the Chairman of the FSA to sit on the Court of the Bank of England.”

So it can’t be avoided that the structure of the FSA and its relationship to the Bank of England isn’t working. Does that mean the FSA should go?

The problem for Regulators is that the administrative process they operate within restricts their operations on a day-to-day basis. To overcome this, the FSA operate under a system that uses principles-based regulation to try and keep pace with a fast moving sector.

Principle based regulation is a good idea to promote best practice and limit bureaucracy. However, it relies on the players in the market having a vested interest in making the market work well for all. Unfortunately, such regulation only works well when there is a real engagement by all concerned.

From the Commons Select Committee on Regulators, First Report:

“We recognise the dissatisfaction of many Independent Financial Advisers (IFAs) with the work of the FSA. We welcome moves by the FSA to improve relations with the large number of smaller firms that it regulates. The FSA must continue to cultivate these relationships.”

My Grandfather once told me that “a man can be valued by his principles”. Now I am older, I think also means “Some people’s principles can be bought”…
We all now face increased taxation until we die, because of the failure of the money markets and the principles that regulated them. This the not the fault of the FSA, it is simply the fact that the administrative process wasn’t up to the job of regulating a unique market…A process enacted by Parliament…

Scrap it, rename it, consume it within the Bank of England…It doesn’t really matter. What matters is what powers we enact to prevent future erosion’s of our principles and also the flexibility of the processes to accommodate market change.

The Conservatives have grasped this issue by the thorns and have a strategy for change. If we do nothing we may recover from the recession, only to face the same issues of failed principles in the future.

John Laity