Hidden losses risk new crisis, warns adviser.

Byline: Paul Waugh Deputy Political Editor

SOME of Europe's biggest banks may be hiding "nightmare" losses that could trigger another global financial crisis, one of Gordon Brown's closest aides has warned.

Baroness Vadera, a former business minister now advising the G20 group of leading nations, said some institutions had yet to "come clean" on the scale of their losses. Fiscal stimulus packages would keep the world's economy afloat next year but she was worried that the withdrawal of the assistance posed a serious risk.

Speaking at a conference in Sussex, she revealed that an IMF study had found that banks had declared only half of the losses. She said: "Some European banks still have issues. The danger point comes not now, and not in 2010, but at the start of 2011."

MEDIUM-SIZED BUSINESS

Outsourcery Limited (Mobile communications and hosted IT solutions)

Chief executive: Piers Linney Staff: 250 Annual turnover: [pounds sterling]50 million Annual operating profit: [pounds sterling]1 million Home: Camden

What does the pre-Budget report mean for you? Small and medium-sized businesses are the foundation of the economy and the last 18 months have been tough for many. At some point in the future we are going to have to repay the billions borrowed through increased taxes and fiscal tightening, but it is not clear whether now is the time to apply pressure or whether continued government support is required to avoid a double dip. Increases in the cost of employment as a result of higher National Insurance contributions could deter hiring in advance of an upturn. The spectre of higher taxes could result in short-term profit maximisation instead of investment. Taxation affects our profitability, our ability to invest and therefore our competitive advantage.

Can Labour still be trusted with the economy? We are all trying to navigate uncharted waters and I'm not sure that any political party has a completely reliable route out of the economic situation.

The deficit we face will have to be reduced and that will occur through higher taxation and the removal of unnecessary costs and wastage.

The public sector is going to have to become more efficient, just as the private sector has had to.

It is concerning that the Government is able to identify billions that can be saved as surely the armies of consultants that have been employed should have spotted these excesses by now.

It is unlikely that we'll see Labour rock the boat too much before the next election.

SMALL BUSINESS

RPM Associates Ltd (Hotel refurbishment and interior design)

Managing director: Robert Malleson Staff: One full-time Annual turnover: [pounds sterling]200,000 Annual operating profit: [pounds sterling]45,000 Home: Enfield What does the pre-Budget report mean for you? My pet hate is red tape -- such as overzealous health and safety regulations and general taxation administration. We are not getting value for money with our taxation. The Government should axe quangos and trust the people instead of relying on reports and star ratings. I'm a great believer in allowing people to get on with their jobs. It would be a great help to have more money put in to assist first-time exporters, and if taxation -- both personal and corporate -- was lowered. Fuel costs don't affect me hugely, but I have found my suppliers have started adding a surcharge for them. This, along with the decline of the pound, has put my costs up 10 to 15 per cent. I'd rather buy British but that's not always available.

Can Labour still be trusted with the economy? No. They've screwed it up badly enough already, right from the time they took office. They don't know how to run a country. They inherited a favourable situation but then started frittering it away. They've steadily increased taxes over the past 12 years. I will vote Conservative because they're the most favourable party for businesses.

What does the pre-Budget report mean for you? standard.co.uk/budgetreport

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Case studies by Miranda Bryant and Ellen Widdup