The government should be helping, not hindering, start-ups

I’m hugely enjoying meeting the finalists for The Spectator’s Economic Innovator of the Year Awards. This year’s bumper entry was strong on paths to decarbonisation — as you’d expect for the new era of climate action — and on ventures rocket-boosted by the pandemic, whether designed to take pressure off the NHS or in the ‘edutech’ field of online learning. By contrast, ‘fintech’ and consumer apps were less prominent than in earlier years, reflecting changed priorities. And come to think of it, common to all the entrants I’ve talked to so far is that not one has said: ‘We couldn’t have done it without the help we’ve had from government.’

I’m prompted to this observation by two news items on adjacent pages of Tuesday’s Financial Times. The first reveals that the Treasury (on the recommendation of the Department for Work and Pensions, from whose budget it comes) is planning to scrap the New Enterprise Allowance, which has provided £1,000-plus start-up grants, plus mentoring, for some 250,000 benefit recipients since it was launched by David Cameron in 2011. In its early phase, against a background of recession, it was fuelling the creation of 2,000 new businesses a month.

Why stop it now? Perhaps Downing Street would rather see today’s unemployed retraining as HGV drivers than trying to start new businesses. Whatever the thinking, the scrapping sits oddly with the other story, which is that the Treasury has ended up holding equity stakes in 158 small companies (with potentially hundreds more in the pipeline), ranging from a vegan foodmaker to a mobile beauty service and a luxury handbag rental venture, as a result of the conversion of loans under a £1.1 billion Future Fund that was one of Rishi Sunak’s pandemic business-support wheezes.

What all this seems to tell us is that government is never properly joined up and that its ‘enterprise initiatives’ inevitably tend to be short-lived headline-grabbers which generate somewhat random outcomes.