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Rishi Sunak's Future Fund, established during the pandemic, has left Britain with a £400 million deficit - roughly equivalent to around £10 for every UK taxpayer. The initiative, launched under Mr Sunak's chancellorship, was designed to support emerging businesses during the Covid crisis. However, it has been labelled "a waste of public money" and critics have cautioned that it "was always going to be high risk".
Data from the British Business Bank reveals that between 2020 and 2021, £1.14 billion was injected into 1,190 companies via convertible loans. Yet by March this year, 334 firms had folded, eradicating taxpayers' stakes. The portfolio is now estimated to be worth as little as £609 million - resulting in a £400 million shortfall.
Scott Gallacher, Director at Rowley Turton, a financial adviser, 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, has called for an immediate investigation into the lost funds. Speaking to Newspage, he said: "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 have pointed out that the policy was susceptible to exploitation, with companies being established almost overnight to secure 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 maintained the scheme was essential, despite carrying enormous 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 backed 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."
Backers argued Mr Sunak had little option but to move swiftly to prevent vast numbers of UK start-ups from going under. 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, demanded complete openness about the scheme's failings.
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."