Governments don’t like risk but growth economies need risk takers.  So why is the default setting for debate on the needs of business stuck on red tape?  
Small medium enterprises (SMEs) are not just the engine rooms of any new economy or one needing to grow.  They are the nimble footed, responsive and resilient matter that help protect a stalled economy from falling back into recession and hold the potential to take an economy from good to great.  The issues that small businesses face involve cash flow, investment, the cost of recruiting talented people, and getting paid by clients on time.  Cash flow problems can put a business under and cause an increase in local unemployment.  With over 75% of the UK economy relying on SME’s, the problems they overcome go way further than any government policy to retain people in work, so protecting against greater unemployment.  
Small firms on the front line of Britain’s emerging industries experience a lack of knowledge and understanding from others about their expertise or industry and the opportunity they present to the challenge of growing our economy.  They are misunderstood, ignored or overlooked by those we elect or expect to identify such prospects.  
Rather than side stepping the complex factors SME’s face our policy makers and ministers should demonstrate an improved knowledge of business and a modern view of the small business.  Appeasing tired arguments from a minority who continue to pretend employment legislation, seeking a fairer workplace with equal opportunity for all, is hampering their growth or profit-making potential should cease.  It does not.  And has not for some time.  Move on they must, and so must Labour’s lead here.
Let’s give some thought to the policies which may aid the natural growth of these industries and contribute to solving the problems outlined.  The focus on smaller organisations is right as too often in the stretch from small to large size these businesses achieve scale, inject structure and process and this very injection will will meter out its impact on that organisations ability to strike out with new ideas as they once did.
I would like to introduce the concept of thermal economics here, an economic equivalent to what physicists refer to as thermal expansion which can be described as: the general increase in the volume of a material as its temperature is increased.  The economies and sectors of which our future national livelihood depends are sectors which will expand in direct accordance with the attention they receive – not heat but investment.  
Investment is not just money but priority and attention.  It is true that the more time spent in research and development (r&d) the greater the prospect, potential and impact of the product or the scope of the industry in question.  The problem comes when r&d has to be suspended while these same businesses apply their talent to just staying in business, so suspending the pursuit of what comes next because of what has to be done now.  
Concentrating on addressing these circumstances can provide Labour with a renewed vigour and an updated application of a Keynesian approach to supporting business.  This approach would help cultivate higher levels of employment, arrive at inventive solutions to modern life and better compete globally if emerging high specification technical, digital industries and manufacturing or green futures sectors get the support they need.  These industries of small and micro sized enterprises are calibrated according to the investment or monies available to them at any given time.  A principle of thermal economics is a belief that these sectors will reward high levels of investment with high growth and increasing employment.  If we miss this, we perhaps risk overlooking a way out of our stalled economic state.  Labour, as Her Majesty’s Alternative should take this digital Keynesian view and outline investment plans to help create and sustain these fresh economies for Britain.
Labour must broaden the conversation with business and make the running on this. This is not about getting close to business but a closer understanding of the daily experience of running a business and the challenges they really face.  This is Labour’s duty in a bid to build its credible alternative for the UK, for new jobs, new money, fresh ideas and a future economy. 
Banks are being encouraged to lend more to businesses.  Labour should be telling banks to charge businesses less and stop taking so much of their earnings thereby assisting with cash flow and letting them grow out of their restricted state.  Micro and small businesses rely on cash flow to survive.  Very often, valuable business can be on the horizon, items or services sold for the future with invoices raised and payable but the delay in the arrival of the cash risks seizing up their operation.  Invoice discounting is one way a small firm can survive this risk with the factoring of invoices, receiving 80% of the value in advance of cleared funds.  The problem with this is that it is an expensive way of earning revenue and restricts growth with the reduced returns on the business made.  Can Labour achieve a detailed enough appreciation of this and provide a competitive alternative to invoice discounting provided by the state?  This could ensure a modest return for the taxpayer for its support for those businesses’ growth and their emergence as large employers in our broader economy.  Labour should also commit to granting town halls the right to retain, for reinvestment, the business rates they collect.
Regional Investment Communities (RIC) could combine a social democratic parties’ commitment to investment for growth, support for independent and private enterprise whilst also restoring power to local communities.  RICs are aimed at expanding the identified growth sectors and set up to receive direct capital funding with few conditions for use.  This money is divided into risk categories and available to independent, public, private and 3rd sectors.  Each of these sectors is free to pitch for the capital with their proposition being presented visually, in theatre and online to the communities they seek commission from.  Capital for investment and growth is split into proportions allocated to high, medium and low risk investments.  The investments are offered to local communities with all sectors and organisations presenting their ideas to the assembled.  Voting would determine progress on investments of all risk levels.  The financial returns are set to come back to the local economy.  Crowd sourcing and its instinctive caution can provide a discipline with the community sharing the idea, its success and open to its possible failure.  The issuing of this capital is done alongside a communication explaining the need for management of risk and the sharing of the decision making among the community.  
With few formally appointed officers these Communities will be organic and rely on the judgements and collective agreement on projects in those Communities they emerge from.  The community will not need unanimous decisions but a democratic process can ensure majority.  Where highly sensitive or specialist knowledge is required to assist decision making this can be a constitutional matter in the terms by which RICs operate.  Communities can have chances to buy in further expertise as part of any commission.
Where the projects commissioned enjoy profitability so the local community benefits with increased investment in local provision or a bonus return for those involved.  Statutory duty can help safeguard significant failure or losses.  The engagement and decision making is key with the community gravitating towards the best pitch and one which offers a fine and attractive balance between prosperous returns and security on investment.
Profits from the community investments should be subject to local decision making as to how these are spent.  If Labour wanted to take this further it could advocate that tax payers should, after a volume of tax paid proportionate to earnings, be able to opt into paper trailed tax codes.  As with the example of profits from community investment, this would be an opt in request that their tax goes on specific capital investments, local work or government sectors.  One tax payer may choose research into dementia, another to scientific research or the arts and a local enterprise within an identified sector for growth.
Labour’s record in government from 1997 to 2010 is a proud one in which Britain enjoyed more openness, greater prosperity and fairness.  Indeed, at its most radical, Labour prevented a great depression with its swift, clear and precise recapitalising of the banks. Much of Britain’s improved settlement enjoyed by many during this period is now at risk by the Tory disassembling underway.  A swift return to power for Labour has to be our priority.  Reflections on our period of government provide us with opportunity to reframe our proposition whilst we serve as Her Majesty’s Alternative.
During Labour’s period of government, enterprise, aspiration and economic growth were the returns for the early prudence demonstrated in the first term.  The government enjoyed the taxes taken from the City’s high value financial trading and a booming house market.  It oversaw a public and eventually unhealthy culture of large private borrowing against inflated home values to fuel weekend spending in out of town retail parks.  This growth in consumption helped economic growth, the en masse purchase of furniture, white goods etc will always be a key part of any macro economic concern, but the borrowing by government and its citizens was never sustainable.  It was an error to suggest boom came without bust, that spending came without a bill and appear to affirm a view that high levels of borrowing, by us all, was sustainable.
Investing in areas outlined previously will help create wealth with new jobs from emerging sectors.  Investment in nimble footed, responsive smaller independents can ensure benefits from new technologies or inventive approaches in Labour’s continuing commitment to reform in public services.  To commission a contract, or simply hand over services to a private sector, as the Tories wish is the wrong approach and will darken much of the improved experiences of public services improved between 1997 and 2010.
I wish to draw on the distinction between a contract and a covenant.  Whilst Tory central and local governments line up to privatise public services, Labour should begin with a covenant with the nation.  This distinction between the two approaches would provide an approach Labour could apply to its commitment to the provision of public services whilst enabling independent and small provider growth.  
The management of a school by a headteacher, to take one such example, can be achieved more effectively with the freedom to choose from a range of market provisions for discretionary or supplementary needs.  They can do so on less than the typical 11% surcharge applied to a schools budget with local authority control.  This should not remove the requirement for the public sector assurances and statutory duties of care provided by an LA.  It seeks to counter an unhealthy familiarity or an old order of en masse provision where a monopolistic approach to public services might prevent benefit from cutting edge or the newest products and services.  Development of digital technologies, equipment or scientific progress to take three examples emerge traditionally better from independent and smaller sectors in advance of a broader public sector acquiring or adopting them.
Labour should lay out its covenant for public services, setting out enshrined standards it would govern to deliver.  This is an advance on the public, private funding models from recent terms of government which demonstrated themselves as effective though too often far too heavily weighted to the private capital investor.  A balanced public and private funding approach provides the healthiest prospect for sustained investment in public services.  It is a Labour mind that agrees that towns shouldn’t have to wait endlessly for its hospital, new school or walk in medical centre when such an approach could be taken.  With certainty though, these funding arrangements shouldn’t, for example, come with a ten year profit making sting in their tail for the tax payer and Labour must lead on these expectations.  
Defining Labour’s future offer should include ensuring that handsome agreements come with the state’s conscience.  This includes determining sustainability, limiting profits, demanding reinvestment and focussing hard on competences to deliver minimum service levels as good or better than the entirely public provision preceding it.  Labour’s covenant must include its unending support for workers and with these thoughts in mind, should extend to a campaign to improve trade union representation in the private sector.
Labour needs to summon a dedicated enthusiasm and a central strategic vision to create new and private sector jobs if it is to offer a counter to the shrinking proportion of private sector employees to public sector levels of employment over recent decades.  This will need to be a combination of investment in capital projects and public provision but it must also feature a credible strategy to support new business, start ups, entrepreneurial activity and new economies for the future.  It will not be enough to churn the money that exists or simply use government to plug future holes in demand.  New money is required from new ideas and a fresh approach to emerging sectors if our own economic credibility is to become an attractive proposition for Britain.

James Frith is the Managing Director of U-Explore and councillor for Elton, Bury North