Faced with the disastrous consequences of years of compulsive borrowing, the British government has adopted the twin-track strategy of trying to cut the public sector and hoping the private sector will take up the slack.

Yet the British economy remains very sluggish. Many talk of the need for a “Plan B”. They might be more credible if some of them were not the very people who got us into this mess in the first place, and if their “Plan B” were not the same policies that caused the mess – excessive spending, borrowing, and printing of money.

So the government’s strategy remains the best option, perhaps the only option, on the table. Indeed, it would be nice if they actually implemented it. The economy is weak because they have not done what they say needs to be done. It is not enough simply to wish the private sector to grow. They need to help it, or at least stop hindering it.

Of course, tax cuts would be a good idea, but we need to accept fiscal and political realities. They would generate growth that would pay for them in the longer term, but in the short term the government must pay its bills. That said, a genuine and meaningful cut in the taxes that businesses face befoere they even make a profit - payroll taxes and business rates - is still probably essential. And, that cut needs to be substantial - halving the burden of each at the very least. Tinkering with a 1%  here and 1/2% will not make a difference.

On top of this, for a realistic hope, government needs to listen –actually listen, and then respond – to some of the things business has been saying for years. We may sound like a cracked record when we go on about Britain’s failed education system and excessive regulation, but the consequences are now too obvious to be ignored any longer.

The reform of education will take years – and we will believe it when we see it – but the effects of deregulation could be immediate, if only there was the political will to implement it seriously. The evidence is against there being such a will. The government pays lip service to the need for it, and has abolished a few obscure rules of which most of us have never heard, but whenever the government faces a real choice, it funks.

The current administration failed its first test when it implemented the previous government’s notorious Equality Act. Its most recent failure was its burying the obvious truth, known by the Prime Minister’s own adviser, that excessive maternity and paternity leave entitlement discourages business from generating new employment.

If government wants business to give it growth, put us to the test. Suspend demands for unnecessary paperwork for six months, and, during the same six months, allow business to employ new workers on contracts exempt from statutory impositions like maternity and paternity leave. Such signals of a serious commitment to change would be enough to re-establish Britain as a desirable business venue, and trigger a tsunami of new enterprise, new businesses, new growth, and new employment unparalleled in the West in recent times.

The business community is generally behind efforts to reduce government deficits, especially in the US and UK. Yet at the same time, it is often said that deficit reduction alone is not enough. There has to be a strategy for positive business growth.

At first sight, there seems to be a paradox. Deficit reduction means cutting expenditure or raising taxes or both – any of which is bad for growth. However, in the longer term, deficit reduction is essential if growth is not to lead to inflation, which will in turn destroy growth.

In an effort to simplify the whole debate, here are the three main ways by which growth might, in theory, be encouraged – and the obstacles to their delivering that growth.   

1   Maintain high government spending. This can be done only by raising taxes or by continuing to run the current huge deficits. Higher taxes simply reduce growth – even Keynes, the economist usually (mis)quoted by those who favour big state spending, said as much. Running up deficits is itself the problem, not the solution. It cannot go on forever. Apart from anything else, it is inefficient because government spending rarely goes to those sectors with the greatest potential for viable growth. 

2   Cut taxes. This is the most effective way of stimulating growth, because the money released can be targeted at the most productive parts of the economy. In the longer term, intelligent tax cuts will produce growth that will increase government revenue, which will in turn reduce the deficit. The obvious problem with this is that it takes time: in the very short term, tax cuts will actually increase the deficit – unless accompanied by spending cuts which are politically and administratively difficult in a democracy.

3   Cut regulation. This could be done at the same time as either of the other two strategies, or on its own. It is the only strategy that does not increase the deficit in the short term. Indeed, it might reduce it immediately, since fewer rules out to mean fewer bureaucrats to enforce them. The downside is that for deregulation to make much of a difference to growth, it will have to be radical – and so far governments have been very reluctant to give up any of their power over business. We are not holding are breath.  

What are we to make of the UK’s higher than expected 1.1% growth in the last quarter?

Not too much. It is a one-off combination of a slight rise in confidence as a result of having a new government and the economic effects of the high spending policies of the previous government.

Neither will last. The high spending was always going to end after the General Election, irrespective of who won, and the novelty of having a new government will soon wear out when the spending ends and the cuts begin. There is no doubt that those cuts are necessary – indeed, long overdue – but they are going to hurt, and they are going to hurt business more than most. Many businesses rely on government contracts, and civil servants will cut outside contract before they cut their own numbers or salaries. Even businesses with no government contracts will see their overall markets contract.

Added to this is the weakness of the EU as a whole identified in a recent IMF report. This is the culmination of problems that have been building up for years – over-regulation of business, pension obligations, structural deficits, and all the other “usual suspects”. Some have been warning about these for years, but those in power have laughed at them and simply borrowed more money. Now the bill collectors are at the door.

Although the UK is guilty of some of the same economic crimes, Britain is not as badly exposed as some other EU states – at least not yet. The more immediate danger for British businesses is that their European markets may be contracting at the same time as their domestic markets.

However, we should not be too gloomy. The dreaded “double dip” recession still seems unlikely. Yet the fact that the Bank of England predicts that interest rates will remain low for some time is hardly a sign of confidence.

Things are never as bad as they seem – but they are never as good as they seem either.

Government bullies business and big business bullies small business. Such is the order of things.

However, although business can exist without government, and often has done, government cannot exist without business to finance it – and small business is in many ways more indispensible to the country than big business.

We have always stressed the importance of small business but the statistics that prove it still come as a bit of a shock.

According to figures from the British government – a source not exactly biased in favour of small business – there are 4,800,000 small businesses in the UK, as opposed to 7,000 big businesses.

Those small businesses contribute more than half of the nation’s turnover – and more than our fair share of the taxes that fund its public services: governments give tax breaks to individual citizens because they can vote, and to big businesses because they can always move offshore, but we are the easy targets.

At a time when politicians profess particular concern about jobs, you would think that they would love small business for employing 58% of the private sector workforce in the UK – and, of most immediate importance, providing the vast majority of new posts. Small business is the most efficient engine of recovery from a recession caused by the follies of governments and big businesses.

Small business is also the country’s best hope for the longer-term future – the provider of 69% of apprenticeships and the source of 64% of commercial innovations.

We should be valued for this. We should be loved. Politicians should be falling over each other to ask us how they can make our work easier, so that they can help us rebuild our country.

Yet we are ignored. The loudest voices when it comes to actual policy are those of the bureaucrats and the politicians themselves, then those of big business and other special interest groups. The polite complaints and requests of the small business lobby, such as it is, carry no weight.

The only protest we can make is with our feet: we retire or we emigrate. Even then, the politicians do not notice our passing. They only complain that the economy is not growing as fast as they want – but they profess to be mystified why this is the case. We could tell them – indeed, we have told them – but they do not want to listen.