The government has unveiled a plan to guarantee up to 20 billion pounds of loans to help small businesses survive the credit crunch.

But there are concerns that will not be enough to get the banks lending sufficient funds to help businesses get access to cash.

The Conservatives want ministers to go further and underwrite 50 billion pounds of loans.

Some businesses are sceptical about the government's plan. They say they have applied for these loans in the past and have found the caveats to be a deterrent.

What do you think of the plan? Are you the owner of a small business that has found the banks less than helpful? Tell us of your experiences.

James Saft is a Reuters columnist. The opinions expressed are his own.

Even in the good times, many British consumers were borrowing against their houses just to fund routine consumption, indicating a big hit to come for retail sales and for the banks who hold the loans.

With house prices falling rapidly and mortgage debt tougher to get, it is no surprise that homeowners are less able and inclined to borrow against their houses in order to spend.

That will be hitting the High Street now - analysts are expecting a 0.6 percent fall on the month in retail sales for November when data are released later this week. But a rise in unemployment next year could expose a really serious weakness in household finances, as consumers who counted on being able to extract wealth from their houses to smooth consumption in bad times find that, when bad times come, the wealth isn’t there and the banks don’t want to lend anyway.

Researchers at Durham University looking at survey data found that 37 percent of homeowners borrowed against their house between 2002 and 2005, typically realising about 6,000 pounds. That’s a lot people borrowing a lot of money against very illiquid and now hard to realise assets.

Even more interesting is the pattern of what householders were doing with the money and what was happening to them when they decided to borrow. Over time the proportion of people borrowing to re-invest in their houses through improvements fell, while more was finding its way into day-to-day costs, according to Susan J. Smith, a professor at Durham and one of the authors of the study.

This was borne out by a high percentage of equity borrowers who had lost their jobs, become pregnant or had a child in the year they borrowed.

How exactly a borrower who has lost his job gets a bigger mortgage is a puzzle, but one that evidently banks and borrowers in Britain together have somehow managed to solve. The record in the United States shows that the housing boom brought with it a tremendous amount of mortgage fraud, much of it abetted by people within the lending industry.

In short, it seems that even during boom times in Britain people weren’t borrowing against their houses simply to buy BMWs and fund vacations, but often to keep their households ticking over during tough times.

“The rising property market was central to encouraging people to borrow more for non housing expenditure,” said Ross Walker, economist at Royal Bank of Scotland in London.  “And with the housing market now in reverse you would expect to see a retrenchment. It reinforces the potential fault line for the UK household sector: there is a big debt exposure and the real test will come next year as unemployment rises.”

BORROW NOW, DEFAULT LATER
The housing safety net, such as it was, simply won’t be there next year when unemployment vaults higher, which is very likely to exacerbate a spending slowdown which itself will feed unemployment. And remember, these weren’t people who were defaulting on their house loans in order to be able to pay their grocery bills, but people who were in part paying their grocery bills because they could borrow against their houses.

I wouldn’t want to be the bank that made those loans, or the government that insures that bank. It also goes some way, in my view, towards explaining the very precipitous fall in the pound, which is down more than 30 percent on a trade-weighted basis this year.

According to a survey of households just released by the Bank of England, credit is much harder to get as compared with a year ago. A total of 16 percent of households said they had put off spending because they were concerned about access to credit, up by a quarter from a year ago.

Only six percent of mortgage borrowers said they had taken out an additional secured loan, compared with 10 percent last year and 14 percent in 2006. Nearly 40 percent took out these loans to pay down other debts. That points to higher credit card losses and delinquencies next year, as unemployment interacts with an inability to access fresh secured loans.

So 2009 looks like it will feature higher unemployment, much reduced consumer spending, impaired access to credit and a default cycle that will worsen the already difficult capital problems of the banking sector. There has been a lot of effort and exhortation to try and keep banks lending to consumers in Britain, presumably on the view that it’s best to sober up gradually.

That can only work so long, and if it comes at the expense of capital for businesses that make and sell things, especially overseas, it may in prove to be a mistake.

And while big ticket items like automobiles, which are easy to defer, are now suffering, next year may see very tough times on the British high street for more basic items.

(At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund.)

(UPDATED Dec 18 - This post is now closed for questions)

Conservative Party leader David Cameron will be speaking on the economy and the credit crunch at Thomson Reuters’ Canary Wharf office on Monday, followed by a question and answer session.

The Tory leader has argued that two main problems face Britain at present – a recession coupled with a record level of government debt, and that the government is trying to tackle one while ignoring the other.

“Every week this government is in power the mortgaging of the future gets greater. Every week the debt gets larger. Every week the burdens on our children mount up higher,” Cameron has said. He has accused Gordon Brown of “economic crimes” saying the Prime Minister “has brought this country to the brink of bankruptcy and the worst recession in the G7.”

Here is your chance to put your questions to the man credited with making the Conservative Party electable again. We will be putting questions from our Web readers to Cameron at the event.

For full coverage of the event, including a live Web cast from 1000 GMT on Monday, see our David Cameron Newsmaker page.

Readers who use the Twitter micro-blogging service can also use the tag #askDC and we will monitor all the responses.

-- Paul Taylor is a Reuters columnist. The opinions expressed are his own --

It's time to get Russia back into proportion.

Moscow's resurgence as a major power, determined to be treated with respect and to stamp its influence on its neighborhood, has been one of the big stories of 2008.

The sight of Russian tanks rolling into Georgia in August, coupled with a Kremlin drive to extend its control over energy supply routes to Europe, sent shivers through former Soviet satellite countries and drew loud condemnation from Washington.

President Dmitry Medvedev's threat to site short-range missiles in Kaliningrad aimed at Poland if Warsaw deploys part of a planned U.S. missile shield raised the rhetorical stakes.

Yet the global financial crisis, the collapse of oil prices, the aftermath of the Georgia war and U.S. President-elect Barack Obama's victory have all cast doubt on Russia's real weight.

The credit crunch has hit Russia harder than other emerging economies, hammering confidence in its stocks, bonds and the rouble and forcing the central bank to spend some of its huge foreign currency reserves to stabilize the financial system.

Foreign portfolio investors have fled and many Russian investors have parked more of their money in foreign currency abroad, at least partly due to heightened political risk since the military action in Georgia.

State gas monopoly Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz), feared in many parts of Europe as a predator seeking a stranglehold on the continent's gas supply, has lost more than two-thirds of its market capitalization since May.

SHRINKING POPULATION

With oil prices down from a peak of $147 a barrel in July to below $50 now, the heavily oil-and-gas-dependent economy looks more vulnerable, especially since Russia needs Western technology to boost its energy extraction.

Alexander Shokhin, president of the Russian Union of Industrialists and Entrepreneurs, says that after a 10-year boom, growth will fall to between 0 and 3 percent next year.

Russia remains a lucrative market for Western consumer goods, but concerns about state meddling in business, widespread corruption and shortcomings in the rule of law have contributed to its failure to diversify away from hydrocarbons and minerals.

Compounding the weakness of its non-energy economy, Russia's demographics are among the worst in the world, with a life expectancy of just 67 (60 for men) and the combination of a low birth-rate, an aging population and a public health crisis.

The Organization for Economic Cooperation and Development (OECD) projects the population could shrink by nearly one-third by 2050 to 100 million from 143 million.

Diplomatically, Russia overreached itself after its lightning military victory in Georgia by recognizing the breakaway regions of South Ossetia and Abkhazia as independent.

Only Nicaragua followed suit. Major allies such as China and India, fearing the precedent, pointedly declined.

The European Union, the main customer for Russian gas, has responded by accelerating efforts to reduce its dependency, planning an alternative supply corridor through Turkey and seeking new suppliers in Africa, the Middle East and Central Asia.

Other former Soviet republics, including Azerbaijan, Belarus and Turkmenistan, have sought closer ties with the West.

True, the U.S.-led NATO alliance has gone no further toward giving Georgia and Ukraine a roadmap to membership -- the issue is off the agenda for now -- and it has now resumed some frozen contacts with Russia, as has the EU.

But Moscow's efforts to reshape the security architecture of Europe, sidelining the role of the United States and of the Organization for Security and Cooperation in Europe, loathed by Moscow for its election monitoring, have gained little traction.

STATUS QUO POWER?

Russian analysts insist the Georgia war was a defensive action responding to pro-Western Georgian President Mikheil Saakashvili's bid to retake control of South Ossetia by force.

"Russia is a status quo power, not a recidivist aggressor on the prowl," says Dmitry Trenin, head of the Moscow office of Carnegie Endowment for International Peace.

Moscow has taken a number of steps recently to suggest it wants peaceful solutions to other "frozen conflicts" in its neighborhood, brokering the first summit talks between Armenia and Azerbaijan over Nagorno-Karabakh, and seeking a deal between Moldova and its breakaway region of Transdniestria.

In Ukraine, the biggest former Soviet republic where a democratic "Orange Revolution" in 2004 infuriated the Kremlin, Russia has other political and economic levers it can pull to maintain influence without having to use force.

Getting Russia into proportion does not mean ignoring Moscow or its security interests. Its location and the fact it supplies 40 percent of Europe's gas imports mean it cannot be neglected.

The United States and the EU have an interest in binding Moscow rapidly into rule-based international bodies such as the World Trade Organization and the OECD, although they put both processes on hold in reprisal for the Georgia war.

Some Western analysts believe a weak Russia could be more dangerous, if mishandled, than a strong one.

In NATO circles, some see a risk of the "Weimarisation" of Russia, comparing it to Germany's economically enfeebled Weimar Republic that was swept away by the rise of Hitler's Nazi party.

Political humiliation and economic instability could lead to a surge of aggressive nationalism.

After the collapse of the Soviet Union in 1991, wags branded Boris Yeltsin's rump Russian Federation "Upper Volta with nukes," capturing the paradox of a failed state with a ruined economy sitting on a huge arsenal of atomic weapons.

When Vladimir Putin succeeded Yeltsin in 2000, he was determined to restore Russia's power and pride after a decade in which many Russians felt the West ignored their interests by expanding NATO in ex-communist eastern Europe.

Today, it sometimes seems that Russophiles and Russophobes in Europe and the United States have become objective allies in exaggerating the importance of or the threat from Moscow.

A more self-confident Europe and a less unilateralist America need to find a way of engaging with Russia according to its true weight, without treating it as a giant.

Prime Minister Gordon Brown has suggested he will push expansionary fiscal policies to help boost the economy. Brown's comments were the latest in a series from him and Chancellor Alistair Darling stressing the importance of boosting the economy, which shrank in the third quarter of 2008 for the first time in 16 years and is expected to contract more sharply next year.

Bank of England Governor Mervyn King has also put his weight behind "some fiscal stimulus", just as the Bank predicted in its quarterly inflation report that the economy would shrink sharply next year.

But what is the way forward - tax cuts or higher public spending?

The dividing line between Brown and Tory leader David Cameron is whether to borrow to fund tax cuts. Cameron has argued that Britain's deficit is too high to allow further borrowing. Brown says Cameron's claim that he can pay for his tax cut by savings on welfare benefits isn't realistic.

Tax cutting is a populist measure and it may be tempting for Brown, who no longer appears to be married to fiscal prudence, to go down that road, not least because of the backlash he faced earlier this year over scrapping the 10 percent tax band.

But there are a number of reasons why tax cutting may not result in a boost to the economy: government borrowing gets dangerously high and will limit the economy's ability to recover swiftly from a recession, and people may decide to save rather than spend any extra money they might have in their pocket due to tax cuts.

What's your view - do you think increased public spending will stoke demand, are tax cuts the way forward to boost the economy or should the government go for a mix of both?