The shadow chancellor Ed Balls set out some pre-election promises this morning for what he hopes will be the first Labour Budget.
The relevance of the announcement for the alternative finance space lies in Mr. Balls’ comments about the country’s small businesses. If Labour is elected, one of Mr. Balls’ main concerns when delivering the first Budget in the summer of 2015 will be to slash business rates. Specifically, Labour would look to cut business rates by 1% in 2015 in pursuit of “a fairer deal for small businesses across Britain”. On the surface – a highly positive development for British SMEs.
“The government has rightly identified SMEs as the engine of economic growth and job creation. They have tried to stimulate the funding of this sector but with disappointing results – highlighted by the relative failure of the Funding for Lending Scheme.
“This is because the government is pushing on the wrong button: it should direct its focus on the emerging alternative finance platforms which are proving highly effective at channelling finance to small and micro-sized businesses. We call on the government to make sure its planned referral scheme (high street banks referring SME loan applications that don’t fit them to alternative sources of finance) is carried through and done so in a way that actually works for SMEs. If it just becomes a box-ticking exercise with no tangible solution offered to the SME, it will be a damp squib and a missed opportunity.”
Although RateSetter is specifically focused on consumer lending, it’s astute of Mr. Lewis to call on the British government not to neglect the alternative finance space in general. Up to now the government’s supportive approach (ISA confirmation, the bank referral scheme, etc.) has been warmly welcomed but has thus far amounted to little more than words. The execution of these promises is critical – particularly if the government (whichever the party at the helm) wants to make good on plans to make London the global centre of financial innovation.