Critics have hit out at a ‘waste of public money’
Rishi Sunak’s pandemic-era Future Fund has left Britain facing a £400 million black hole – equivalent to more than £10 for every UK taxpayer. The scheme, launched when Mr Sunak was Chancellor, was supposed to prop up fledgling firms during the Covid crisis.
But critics have branded it “a waste of public money” and warned it “was always going to be high risk”. Figures from the British Business Bank show that £1.14 billion was pumped into 1,190 companies through convertible loans between 2020 and 2021.
Yet by March this year, 334 firms had gone bust, wiping out taxpayers’ stakes. The portfolio is now valued at as little as £609 million – leaving a £400 million shortfall. Financial adviser Scott Gallacher, Director at Rowley Turton, said: “Yet another lesson in politicians reacting hastily to crises and, in the process, wasting taxpayer and public money.
“Governments are generally good at running public services, but they should almost never be in the business of ‘investing’ public funds in start-ups – with the possible exception of defence or medical companies during an emergency, such as the vaccine programme.”
Riz Malik, Director at R3 Wealth, demanded an urgent investigation into how the cash was lost. He told Newspage: “The government had to move quickly, so some checks were inevitably missed.
“But the rules around bounce-back loans were clear from the start. Those who abused the scheme should absolutely be investigated. This isn’t a victimless crime, especially when public finances are already under severe pressure.”
Other experts said the policy had been open to abuse, with companies created almost overnight securing loans.
Samuel Mather-Holgate, Independent Financial Adviser at Mather and Murray Financial, said: “The spirit of the policy was great, and some businesses really needed a cash injection at the time, but the ease of abuse was striking.
“Loans of up to £50,000 were given to companies only incorporated the day before, and several companies with the same directors were allowed to receive funds, creating a train of cash departing from the taxpayers’ station, with a one way ticket. Simple fraud checks at the onset would have alleviated this.”
But others argued the scheme was necessary, even if it carried huge risks. Rob Mansfield, Independent Financial Adviser at Rootes Wealth Management, said: “At around 28% the failure rate is pretty low against an average rate of 45% failing within the first five years.
“Funding new and developing businesses is always risky but there are multiple benefits that could come from this though. Ultimately, it could enable a new generation of entrepreneurs who go on to employ people and generate tax revenue for the country. In that context, a billion pounds might become a drop in the ocean.”
Harry Mills, Director at Oku Markets, also defended the policy: “Considering the total cost of the Covid pandemic was somewhere between £350-400 billion, £400million is a miniscule number barely worth talking about. These loans were designed to support British businesses, and they were made quickly at a time of great need.
“The government should be chasing fraudulent claims, but loans made to businesses that ultimately went bust much later through the normal course of business is par for the course. We have bigger things to worry about than this.”
Supporters said Mr Sunak had no choice but to act fast to save swathes of UK start-ups from collapse. Kundan Bhaduri, Entrepreneur and Landlord at The Kushman Group, said: “In April 2020, Sunak faced genuine economic armageddon with businesses collapsing like dominoes and death projections in the millions.
“Doing nothing would have meant watching Britain’s innovation sector disappear permanently while competitors like Germany and France backed their startups through the crisis. Eamonn Prendergast, Chartered Financial Adviser at Palantir Financial Planning Ltd, insisted there must be transparency.
He said: “The Future Fund was always going to be high risk, the clue was in backing early-stage businesses at the height of a pandemic. In that context, supporting innovation and keeping companies afloat had merit, but a £400m hole for taxpayers shows just how exposed the scheme was.”
