Since the great depression of the 1930s things were never as tough as they are today. From financial institutions, big and small, to individuals, rich and poor, it is clear everyone is feeling the pains of the credit crunch.

Policymakers worldwide are tirelessly working to proffer an enduring solution. Yet none is in sight. In the last six months the UK Government, for example, tried a number of moves to tame the crisis. But like the proverbial hydra-headed monster, it keeps regenerating its ugly heads, remaining insurmountable.

The UK Government’s bailouts and expectations

A £50 billion liquidity was early introduced and it made no impact at all. And only last month was another bailout pumped into the country’s financial market, with the aim of revitalising the banking sector, to enable it ease the squeeze on lenders.

While the gesture was warmly welcomed even by banks themselves, the original logic of those behind it – to make it easier for banks to offer cheaper loans easily to individual borrowers and small businesses - is still is a mirage. Small businesses, particularly, have seen a massive nosedive. A report by the Financial Times report this week estimates that as many as 4.7 million small businesses have faced the toughest challenges of their existence since the 1930, prompting Chancellor Alistair Darling to want to act to save them. That they are in dire need of help is not in doubt. What is, however, in doubt is whether help will come soon and how it will come.

How will help come to small businesses?

In the last few days several measures have been speculated in the media. One of the moves is whether the Government, following its most recent £37 billion life-line to banks like Lloyds TSB, HBOS and RSB etc will insist on a payback now or resort to legal options. While it was agreed that the High Street banks would reciprocate the Government’s gesture by offering loans at affordable rates to smalls businesses, their failure to, up until now, honour this agreement by passing rate cuts to borrowers is drawing anger and frustration from top government officials. Chancellor Darling, according to reports is “exasperated” and the media are suggesting that he might resort to some legal moves to compel banks to act.

Even as this speculation is rife Prime Minister Gordon Brown’s spokesman has reportedly denied the move. He was said to have told reporters that the Government would look for constructive means to make the banks fulfil the commitments that they agreed to earlier. From the spokesman’s statement, one would deduce that the Government is very reluctant to risk any major controversy by being seen to be compelling the banks to revert to 2007 lending level. At the same time it wants to be seen as the champion of people’s interest.

The trouble with this middle position is that it can hardly work. While seeking to resolve the issue constructively is important, the fact that small businesses badly need help is equally important. At this point unless the Government takes all the necessary steps to help them obtain loans at cheaper rates, many of them will run out of business and lay off their workers. The labour market is already so saturated that this can only make the stress more critical for the economy.

In the meantime, to counter all the claims that small businesses are experiencing difficulties in accessing loans from banks, the British Association of Bankers has released figures showing that lending to the sector has risen by 10 per cent. In its third-quarter statistics it said customer numbers, loans, overdrafts and deposits have increased, although admitting that the rate was slower than in the previous three months.