Politicians in The Netherlands fail to subscribe the right medicine for small and medium enterprises and retailers. Presumably, the chain of jeweller’s stores Siebel proves my point by closing the doors of all its shops

These are trying times in The Netherlands, with respect to the economy. Everybody knows and nobody denies it.

Trying times for the workers and consumers, who have to deal with: 

• Dropping prices for their houses; 
• More and higher direct and indirect taxes; 
• And last, but not least: measures of wage restraint and sometimes even wage reduction from their employers. 

These measurements are sometimes vital for their companies to survive, but have a disastrous effect on domestic consumption.

And it are also trying times for the enterpreneurs and retailers – especially the ones that can’t export their products and produce. They have to deal with:

• A ubiquitous domestic consumer strike in The Netherlands;
• Soaring local taxes;
• Deteriorating general circumstances for their shops and companies;
• And also with a government that has increased their taxes and expenses too.

Still, the only viable way to make things better for the entrepreneurs is taking care of domestic consumption in The Netherlands, by increasing the dispensable income of consumers and workers through wage increases and real tax-breaks.

All companies, except for the very larges ones and the ones that export the majority of their products, have to deal with the plummeted consumption in The Netherlands. 

This is irrespective of whether these companies deliver to consumers themselves (b2c – business to consumer) or to other companies (b2b), which on their behalf deliver directly to consumers. 

So, as long as you don’t solve the economic problems for the consumers – higher taxes, dropping housing prices, rising unemployment, minimal yields on savings and (much) lower income – you won’t solve the crisis for the small and medium enterprises (SME) and the retail industry in The Netherlands. 

You just don't!

Unfortunately, this message falls on deaf ears with many politicians in The Hague; especially the ones who worship “Captain Entrepreneur” alone and largely ignore the normal workers and consumers, who should take care of Captain Entrepreneur’s sales and profit.

One of those politicians is Sybrand van Haersma Buma: the CDA (Christian-Democrat) partyleader, who should make his grassroots forget Jan Peter Balkenende, but whose achievements in the party are not very distinctive until now.

Today, Van Haersma Buma presented a plan to sponsor the entrepreneurs of the small and medium enterprises. Although one ideas in it was not bad and even sounded very sensible, his party blatantly failed to address the real problem again: the striking consumers and the causes for this consumer strike.

Here are the pertinent snips from the CDA’s plans:

CDA presents plans to stimulate the SME

Today, the CDA party comes with a number of aimed measures to stimulate Small and Medium Enterprises (SME). 

The SME enterprises are the backbone of our economy, but they currently go through rough times. That is the reason that the CDA wants to decrease the taxes on profits by half: to 10% from 20%. 

The duty for employers to pay two years of salary to sick workers, should be reduced to one year. 

We want also that starting entrepreneurs, with maximally three employees, will get a discount on their employer’s taxes for a maximum time period of three years. This will make it easier for successful freelancers to make the step to an enterprise with personnel.

The CDA sees all companies with 50 employees or less as SME-companies. Especially these companies have gotten the heaviest blows from the crisis. 

SME accounts for 60% of employment in The Netherlands. This turns the SME in the engine of the economy and the mortar between the 'bricks of the society'. Only 32% of the Dutch companies, which requested a loan last year, had actually one granted to them. This is the lowest percentage in the Euro-zone. 

In the meantime, one in ten workers is freelancers. However, freelancers hardly get the chance to grow into a company with personnel. This is also something that we want to endorse with our proposals.

Statistics, like the data that the CDA mentions here (second red and bold text), always sound impressive, but are very hard to check on their truthfulness. I have my doubts about these statistics and the allegations that come with it, but I didn't have the time yet to investigate them. 

Nevertheless, as a long-time bank employee (now over six years) at the business lending department of a large bank, I know that the banks have good reasons for not granting additional loans and credit lines to many of their SME customers. 

The 'special management' departments of the large banks (which manage the customers in distress) work at overtime these days and the number of credit lines under jeopardy is very high currently. The banks simply don't want to run the risk of losing too many bad loans, as their buffers need to be at high levels, due to Basel III rules and the upcoming ECB stress tests. 

The banks want to supply loans, but only when they are fairly sure that these will be paid back. That is simply their duty towards their customers and savers/lenders. As Kees de Kort, the savvy macro economist of BNR stated today: "The healthy, well-managed companies with the good business plans still get credit lines, but the others simply don't". I have little to add to this statement.

Anyway, the CDA had 'the right tata, but the wrong hoho' with this aforementioned proposal.

I actually agree with the CDA’s plan to let companies pay for only one, instead of two years of salary for sick workers. One year is already quite long, especially when there is no correlation at all between the illness and the former activities of the worker at his employer.

Two years is indeed an excessive time period and therefore it can burden (especially small) employers with enormous costs, in case of a chronically sick worker.

Consequently, this leads to general behaviour of stakeholders, in which nobody is really interested in caring for the sick worker himself:

• employers;
• bureaus for health care & labour circumstances (i.e. ‘Arbo-organisaties’ in Dutch); 
• insurance companies;
• UWV (the executive organization for social security for employee's). 

To the contrary, all these stakeholders are busy with trying to ‘pass the buck’ for their sick workers, instead of looking objectively at how they can improve their worker’s situation. In the past, this behaviour led to various cases of abuse by some of the stakeholders (spying on employees and acquiring private and secret health information, by using threats as a means).

On top of that, this ‘two year payment for sick workers’ measure scares many small would-be employers sh*tless, when they consider to hire personnel. 

They are very afraid that such personnel becomes ill and consequently saddles them up with two years of salary payments-in-vain and on top of that the necessity of hiring extra personnel to replace the sick workers.

That is why I endorse this particular CDA plan.

However, the other two plans are no good idea! 

Freelancers and SME-companies already pay fewer taxes in comparison with normal workers, due to a host of deductions and tax breaks. So why should you diminish the taxes of freelancers and SME companies by another fifty percent anyway (plan 2)?! This is even more discriminatory towards normal workers, who are in reality the brick-and-mortar of the society: where would Captain Entrepreneur be without his workers-turning-consumers?!

Also the third plan is ridiculous for various reasons: by granting much lower employer’s taxes to small entrepreneurs, the CDA hopes to spur freelancers and SME companies to hire new personnel. But: 

• First, most freelancers don’t want to have the fuzz of having personnel, as they prefer working on their own.
  
• If they would have liked to have personnel, they would have started a ‘normal’ SME company in the first place;
  
• Second, the duty to pay at least one year for sick workers, is still a much bigger dissatisfier for SME companies towards hiring personnel than the employer’s taxes on workers; 
• Third, if the small SME companies and freelancers don’t have to pay these taxes anymore, then the workers and larger companies should pay extra tax money for them instead: it’s a zero sum equasion. This increases their burden;
  
• And last, but not least: this whole CDA plan fails to address the real problem and the reason behind the consumer’s strike. That is the diminished purchase power and lack of confidence in the future, of the normal workers / consumers.

The years of austerity and wage restraint, since the crisis started in 2008, have struck an enormous blow to the purchase power of many, many workers. 

And so did the numerous tax and duty increases and the increased costs of living, caused by all kinds of extra (government-spurred) expenses.

The life savings of these consumers, which were held at the banks, were rewarded with insulting interest rates. And on top of that, these savers had to pay ridiculous taxes, based upon ‘virtual investment yields of 4%’, which had been laid upon them by the Dutch Internal Revenue Service. Yields, which no saver achieves anymore these days.

That is the root cause behind the problems of so many SME entrepreneurs and retailers. But that is something that you don’t hear from the CDA.

However, the Dutch Central Bureau of Statistics DID write about that:

Personal capital households reduced in 2012

The median personal capital of households in the Netherlands was 27.000 euros on 1 January 2012, a reduction by 10% relative to the beginning of 2011. Since the onset of the recession late 2008, the financial position of households has deteriorated continuously.

Early 2008, the median personal capital of households still was 47.000 euros, i.e. 20.000 euros more than at the beginning of 2012. The value depreciation of privately-owned residential property (the main asset of households) largely accounts for the loss of personal capital. The value was reduced from 256.000 euros early 2008 to 231.000 euros early 2012. Approximately 57% of all households own the homes they live in.

At the same time, the household mortgage debt increased from 143.000 euros early 2008 to 163.000 euros early 2012. About 48% of households have mortgages on their homes.

Compared to the situation at the beginning of 2008, the number of households whose debts exceed their assets has grown dramatically. Early 2012, some 830.000 households found themselves in this predicament, nearly 2.5 times as many as in 2008.

And today, my point about SME-entrepreneurs and retailers, which can’t exist without the availability of consumers who are willing to spend, was proven seemingly. A large chain of jeweller’s stores, Siebel, closed the doors of all its shops for undisclosed reasons.

The following snips come from an article in Het Financieele Dagblad:

Doors closed at Siebel’s jeweller’s stores

This Friday, the chain of jeweller’s stores Siebel has closed the doors of all its 36 branches in The Netherlands. This is stated by the company on its corporate website.

The store chain states that it will soon shed more light on its own future and that of its personnel. According to the latest data, 175 people work at Siebel currently.

After having had contact with Siebel, executive Niels Suijker of labour union FNV is still clueless about what is going on at the large jeweller chain. However, insiders assured him that the store chain is not going to default.

It might be true indeed that Siebel is not going to default (see red and bold text). 

However, unless there is a massive fraud going on within this organization, of which the Siebel executives want to get rid off (pure speculation – EL), there is something very wrong in the daily business of Siebel.

As far as I know, the Siebel case is unprecented: I have never heard of a retail chain which has been closed completely, while being ‘at full swing’. That is really unheard of and it is definitely not something that the owners do out of luxury or boredom.

Therefore, I assume that this company will be liquidated by its owners (the investment corporation Janivo), in order to get as much money out of it as necessary, before a default or bankruptcy occurs in the (near) future. 

When the Siebel chain would have been for sale (soon), it would be important to keep daily business running, but that does obviously not happen. 

Consequently, I suspect that the striking consumers in The Netherlands have caused an untimely end for the Siebel store chain, just like these consumers have caused the untimely end of so many other store(chain)s. 

Unlike the CDA thinks, it are the customers who decide upon life or death of many retail and SME enterprises: not a few subsidies and tax-breaks.