Xavier Rolet: Europe needs its own JOBS Act There are 23 million SMEs in the EU, of which the UK has 4.8 million. They were set up by those hero individuals prepared to work incredibly hard and risk so much in order to turn their dreams into reality. With unemployment in Europe standing at 22.7 million people, just imagine what would happen if each of the 23 million SMEs could secure the capital they need to create just one more job each... The JOBS Act is the American response to a similar situation. It has recognised the compelling need to unleash the power of equity finance to fund SMEs job creation If not through equity, how else can SMEs break our addiction to debt? More than half of British SMEs resort to credit cards to fund their business. And about the same percentage of SMEs across UK and Europe use bank debt to do the same. Just three per cent of entrepreneurs in the UK make use of equity finance. The US picture is a polar opposite, with only 18 per cent using bank debt to fund their growth. Let's say it: bank lending is never going to be the right way to fund highly innovative start-ups. Equity is. Debt creates a mismatch between the fixed returns offered to the banks, and the considerable economic risks borne by start-ups. Equity in contrast creates a partnership between the investor and the entrepreneur, it puts them on a journey together, focused on success. With equity, the entrepreneur does not need to make inflexible monthly interest payments, nor mortgage, or re-mortgage their family home. Equity rewards both the successful investor and the entrepreneur with unlimited upside. The Chancellor deserves applause for the good progress already being made.. In the last few days, the Government has got the green light from the European Commission to make the changes to the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) Schemes announced in the budget. This gives the necessary approval to relax restrictions on individuals using these tax efficient schemes to invest in unlisted SMEs. But we need to build on this. First, equity is chronically over taxed: no less than four times - at purchase, dividend and sale, plus corporation tax. In contrast debt is tax deductible. Abolishing stamp duty for AIM and PLUS companies is the next obvious step. It will also strengthen our hand against those in Europe who would impose a Europe-wide stamp duty scheme through a financial transaction tax. The respected consultancy, Oxera , calculates that its abolition would cut the cost of raising capital for SMEs by a considerable 7 to 8.5 per cent. KPMG, in a June 2010 study estimated that savings could reach 13 per cent for more volatile stocks, such as technology companies. Westminster, businesses and the City must also lobby Europe for a better deal for equities. Secondly, we should reduce the fiscal burden for those investors who support our growth companies, by revisiting Capital Gains Tax relief. We should not be penalising the appetite for risk, it is a healthy and vital part of an economy's future. Thirdly, we need to reinvigorate employee share-ownership schemes, empowering a much broader spectrum of people to invest in the company they work for. For example, in order to qualify for this type of scheme we should remove the minimum requirement for five per cent of the company to be allocated to employee investors. Fourthly, we must cut the regulatory red tape for SMEs. We need a shelf registration system that would give SMEs fund-raising flexibility even in today's volatile market, we need the FSA to review the Conduct of Business Rules - too onerous for SMEs, we must reduce the regulatory burden for small cap investors and intermediaries. The notion that SMEs are more prone to fraud or governance abuse than larger companies is simply not borne out by the facts of financial history. Lastly, we must urgently look at the impact of new regulations like Basel III and Solvency II on equity financing for SMEs. Defined Contribution Schemes have turned UK pension funds into net structural sellers of equities, halving their relative holdings in the last three years. Insurance companies" equity holdings are so small to be negligible. Investing in equities is needed to secure the long term returns required to fund our pensions. Applying Solvency II to UK Pension Funds would bring a further almighty blow to this vibrant and critical asset class. Equity is not only an economically positive, forward thinking instrument, it is psychologically positive too. As a funding tool, it promotes a "can-do" mentality and focuses on building success, rather than trying to mitigate for disaster. We need an ecosystem and policies that promote equity financing so we can bring about the confidence to fuel new investment in tomorrow's economy. We need our own bold UK JOBS Act. Our future prosperity depends on it. Xavier Rolet is the chief executive of the London Stock Exchange