Transparency data shows that Innovate UK (formerly the Technology Strategy Board) has offered grants totalling over £3.5 billion of taxpayers’ money in the past decade.
Much of this cash has undoubtedly gone to innovative businesses run by entrepreneurial and motivated individuals. However, is it all necessary, particularly given the current state of the public finances?
The UK has a flourishing venture capital industry and so risky, early stage financing ought to be left to private investors. In 2013, 159 British Venture Capital Association members made 154 small (less than £10m) investments, and in 2012 these companies financed 171 such deals.
The companies that Innovate UK works with are prime candidates for private funding. Of the 708 investments made by BVCA members in 2013, 135 were in healthcare and 184 were in technology. The total investment made by BVCA members was over £10 billion in 2013. Programmes such as Innovate UK are clearly not the only funding resource for the UK’s high-tech businesses.
Corporate welfare has become a major expense, and it reflects general government mission creep. Taxpayers’ money is increasingly channelled into‘grants for this’ and ‘funds for that’ because they are crowd-pleasing vote winners. But government has over-reached itself and spent too much. Part of the consequence of that is the £1.479 trillion mountain of debt.
It is not the government’s purpose to help companies succeed. It can shape the conditions that businesses operate in, and that should be sensible regulation and low taxes. Beyond that, the Department for Business Innovation and Skills should be scrapped and we should certainly be looking to do the same to organisations like Innovate UK.
The government likes to tell us that it has created jobs, or it has boosted growth. But success is often in spite of the government, rather than thanks to it. The government can't "create" private sector jobs - it can only create the conditions for job growth. To promote business, our politicians should implement simple, stable and competitive rates of tax.
To compare to Innovate UK’s gross expenditure: £3.5 billion would be equivalent to around 130,000 NHS nurses or 52 times the amount spent by India on its Mars Orbiter Mission. It is a vast sum that should have been left in taxpayers’ pockets to invest and generate economic growth or to give away as Tim Cook (Apple CEO) pledged to do today.