Budget Memo to George

A mañana budget is the only way to describe it.

The pre-budget hype, radical moves on pensions for example, is simply not matched by the way you seek to gently tinker with a failing system. Many of the changes in personal taxation are delayed until 2013, although the economy could do with a genuinely redistributive boost now, and an automatic future extension of the pension age means that people will eventually be completely stuffed by the system.

Funding state pensions from current day receipts is simply not sustainable. At the moment it is a struggle and already people have to work for around 50 years to enjoy perhaps 30 on a pension that is a tiny fraction of what they earn, or even contributed. In 15 years time, according to my rough calculations, around 22% more people will be drawing pensions than today, relative to those in work. Extending the age at which you can draw a pension to match increases in life expectancy will simply not plug that hole and unless you plug the hole now it is likely to be unpluggable.

The Unofficial Green Paper contains suggestions on ways to deal with this, but the budget is just another missed opportunity. Yet again a government seems to be slowly releasing cash to engender a feel good factor just around election time rather than genuinely planning for the long term.

There are three things that you should urgently do:

• Fully review the future of all pensions
• Fully review the future of health and social care funding (not delivery as in the current NHS Bill)
• Fully review the status of social enterprise and its capacity to support the above two categories of expenditure.

Once you have done this you should be open with people about exactly what they will get for their contributions for the whole of their lives. The Green Paper carries the full list of suggestions. This is urgent and matters hugely to the '99%' many of whom do not yet realise how much. Please do not leave it much longer.

Memo to Dave re Roads

Oops! Thinking out loud again by you and George has set the hares running. Perhaps that is what you wanted so that a watered down version of the plan to allow private business to tax us even more for travelling would not seem so bad when it is announced.

Yet again though the pronouncements miss the point and the fine words about having a strategy and taking a long term view are not matched by the ideas. I do agree that 20 years is a long time, but committing the taxpayer to pay private companies to build and run roads for four terms of government is not a strategy, it is a straightjacket.

The Unofficial Green Paper (www.bigsocietygreenpaper.org) proposes a national system of social enterprise and the roads could be a perfect test case for such a body. Why not create a national company, owned by the state pension fund but run by business people and give it the entire roads network as an asset? Give it the income from road tax as an income, targets for measurable outcomes and allow it to do the rest? It's all very simple and such a business would be hugely successful provided that its investment in new roads is properly measured for all outcomes, not just based on immediate financial return.

The new business could partner with private enterprise where appropriate but could also over time spawn hundreds, perhaps thousands of new social enterprises and new small British-owned businesses to provide the services that it would need.

This is all very simple and could be set up and announced within a few weeks. As always I am happy to help if needed!

Memo to Dave re Business Lending

The 'new' Loan Guarantee Scheme which is supposed to free up business lending is of course more PR than AU (actually useful). I haven't been able to find precise details of the scheme but a similar one has been in  existence for 20 years or more, when I was a lending banker actually trying to lend the things. The supposed 1% discount is a nonsense.

The traditional scheme has several weaknesses for business:

• It requires repayment over a relatively short term, 2-5 years, making it unsuitable for many large investments
• Banks can still require security for any unguaranteed portion of a loan
• Interest rates can be flexible, providing longer term risk to affordability
• The Loan Guarantee Premium is passed on to the customer adding further cost to the loan

There is insufficient detail of the new scheme to see what if anything is improved but the trumpted 1% saving on interest cost over a normal loan is simply not real. Banks will credit profile a customer through his application and come up with whatever rate they want to earn the profit they choose from that piece of business. It is pointless saying that if they would have lent at 7% they will now lend at 6%. Banks are far more devious than that.

And all of this slightly misses the point. Short term loans may help some businesses, but not that many. If I want to buy a piece of machinery to last 20 years I am unlikely to be able to afford to buy it over three years. Another flaw in the scheme is that the taxpayer now takes the risk on the banker's decision but gets none of the reward when it goes well. What is needed is a national investment scheme, preferably targeted at social enterprise but able to help all small and medium business which returns a share of any resulting profit to a central pot. This is proposed in the Unofficial Big Society Green Paper (www.bigsocietygreenpaper.org) and would really help business to create jobs whilst potentially helping to solve other problems.

Memo to Dave

On your return from the USA you will find that not much has changed. The unloved and scary NHS Bill mysteriously continues to win votes whilst alienating people. Social Enterprise continues to peck for crumbs around the capitalist feeding table that is public expenditure and the vast majority of people continue to look at all your 'reform' and 'change' and wonder why. Not why as in 'why are you doing it?', they're all reasonably convinced that you're doing it for your capitalist mates, but why as in 'where is the plan?'. They're wanting to know if it all fits together and if so, in what. Is it really an attempt at improving lives or is it fiddling while their Rome burns but someone else's Mammon is further gilded?

This is a valid question as it is becoming increasingly accepted that the current incarnation of capitalism has failed and yet you continue to prop it up. In a situation where your actions appear illogical people will naturally suspect impure motives. We have a short window of opportunity to produce a new world-class economic system from the rubble of 20th century capitalism. As Adam Smith might have said, the next system is unlikely to perfect, but with hindsight we should at least be able to make it better than the last one.

The Unofficial Big Society Green Paper (www.bigsocietygreenpaper.org) argued that social enterprise should be at the forefront of any new system. It contends that we should not try to change capitalism but force it to change itself, or die. We can very easily do this by the creation of a new social enterprise trading structure which measures social value and social return as part of the criteria for the award of any state contract. Christopher White's recent 'social value' bill goes half way to addressing this, but there remains a big gap and we allow too much capital to flow out of our system before it has reached all parts.

In addition, social enterprise is often a poor cousin to business, relying on handouts, grants and specialist funding to gain a foothold next to 'real' business. This is wrong and whilst there are many worthy attempts at improving access to funding and real contracts, these are always coming from the view that social enterprise needs a leg up because it is worthy or trendy. It's a bit big society, but apparently not interesting enough to be part of any formal policy. That needs to stop. Capitalism has become anti-social. It is anti-social enterprise and social enterprise needs to be seen as the purest form of Adam Smith's capitalism that currently remains. It needs to have pride of place in the pecking order before it is too late.

The next thing we need therefore is a social return bill, to go alongside the social value bill. An act that enshrines in law the obligation for any public body to measure the return of profit to a community from a social enterprise. This needs a very careful piece of legislation which defines social enterprise, gives it a structure within which to operate and ensures that all of its returns are key parts in the award of any contract. This will make anti-social enterprises think much more closely about how they operate and how they bid for business. It is not red tape, or an attack on capitalism, it is levelling the playing field between social and anti-social enterprise.

We have come some way towards it but have much further to go. The Green Paper also discusses ways that these returns can be co-ordinated to a much greater good, but more of that another day. I have just spent 5 years of my life battling against small p politics in a local setting, so I know how Steve Hilton feels, but don't give up on the Big Society if you really want one, just support it with a big plan. Soon.