Submitted by Bill Fernie
8th September 2026
Britain has a curious habit when it comes to helping businesses. When a company needs support, the first instinct of government is often to offer a grant.
The money is announced, the headlines appear, ministers visit the factory and the cheque is eventually written.
Then it is gone.
Perhaps it is time to ask a different question: why does taxpayers' money always have to disappear?
There is another possibility. Government could invest more of its business-support money and expect at least part of it to come back.
The idea came to me through my own experience of charitable giving to LendwithCare. Its approach is remarkably simple. Money is lent to small entrepreneurs in poorer countries to help them develop their businesses. As loans are repaid, the money can be lent again to another entrepreneur.
The original donation therefore continues working.
It struck me that there is a lesson here for Scotland and Britain.
Government obviously cannot operate exactly like a charitable organisation making tiny loans to individual entrepreneurs. But the principle of lend, recover and reinvest could potentially be applied on a much larger scale.
We already have organisations in Scotland that invest public money in businesses. The Scottish Government has Scottish Enterprise and the Scottish National Investment Bank, while at UK level there are institutions designed to encourage business investment.
The issue is whether we should move much further in that direction.
Consider a hypothetical £500 million government business fund.
Rather than giving the whole £500 million away as grants, perhaps most of it could be invested through long-term loans, revenue-sharing agreements or small equity stakes.
Some companies would fail. There is no escaping that.
But others would succeed and repay their investment. Some might even produce a modest profit.
That money could then be invested in another group of businesses.
The £500 million would not simply be spent once. It could become a revolving pool of economic capital.
That is a fundamentally different way of thinking about public expenditure.
A £5 million grant is £5 million spent.
A £5 million investment could potentially help one business today, another business in ten years and another after that.
Of course, Government should not expect the same return as a private venture capitalist.
The purpose of public investment is different.
A private investor may demand a very high return because the investment is risky. Government can take a longer view because it is also interested in the wider economic benefits.
If an investment creates 300 skilled jobs, increases exports, develops new technology and supports dozens of suppliers, the taxpayer is already receiving an economic return.
If the Government also gets its original money back, perhaps with a modest return, that is an additional benefit.
In other words, taxpayers could receive two returns: the financial return and the economic return.
This could be particularly important as Britain tries to rebuild its manufacturing base.
We have seen the difficulties facing Jaguar Land Rover. We have seen the problems confronting Alexander Dennis in Scotland. Britain's bus and train industries have also struggled with the consequences of changing technology, foreign competition and inconsistent investment.
If Government believes that maintaining manufacturing capability is strategically important, why should all its support have to take the form of grants?
Suppose a company wants £20 million to build a new factory.
Instead of giving it £20 million, Government might provide £5 million as a grant and invest the remaining £15 million as patient capital.
The company could repay the £15 million over a long period once the factory becomes profitable.
The Government would not run the factory. It would simply be a financial partner.
And if the company eventually becomes highly successful, the taxpayer could receive a modest share of that success.
That seems a much more reasonable arrangement.
There would, of course, need to be strict safeguards.
Investment decisions must be made independently rather than by politicians looking for favourable headlines. Professional investors should decide where money goes. There must be proper assessment of risk and complete transparency about successes and failures.
And Government must accept that some investments will lose money.
That is the nature of investment.
But this is where the argument becomes interesting. We already take risks with taxpayers' money.
When Government gives a grant to a business, there is a risk that the project fails and the money is lost.
If the business succeeds spectacularly, however, the taxpayer generally receives no direct financial benefit from that success.
Why should the arrangement not work both ways?
If taxpayers are prepared to share the downside, perhaps they should also share modestly in the upside.
This is not an argument for Government becoming a giant venture capitalist or trying to decide which companies will become the next global success stories.
It is an argument for recognising that public money can sometimes be capital rather than expenditure.
And that distinction matters enormously when public finances are under pressure.
Britain is likely to face difficult choices for years to come. Governments will have to decide what they can afford to fund and what they cannot.
A revolving investment fund offers a possible alternative to the traditional cycle of announcing a grant programme, spending the money and then returning to the Treasury for another allocation a few years later.
Why not build something permanent?
Invest £1 billion.
Accept that some investments will fail.
Recover money from successful investments.
Reinvest it.
Do it again.
After 20 or 30 years, the original public investment could have supported thousands of businesses without Government having to provide the same amount of new money every time.
After 20 or 30 years, the original public investment could have supported thousands of businesses without Government having to provide the same amount of new money every time.
It would become a kind of economic endowment for the country — a permanent pool of capital whose returns could continually be reinvested in the next generation of British businesses.
There should still be grants.
Some projects will never produce a commercial return but are nevertheless worth supporting because they create enormous social or strategic benefits.
But where Government is helping a business that has a realistic prospect of generating profits, perhaps the default question should be:
Why are we giving this money away?
Could we invest it instead?
My experience with LendwithCare has convinced me that there is something powerful about money that keeps working.
A relatively small sum can help one entrepreneur, return to the lender and then help another.
Imagine applying that principle to the British economy.
Instead of give, spend and start again, we could have invest, recover and reinvest.
It would not eliminate the risks of government intervention. It would not guarantee that every business succeeds.
But it would give taxpayers something they rarely receive from business grants: a continuing stake in the economic future they are helping to finance.
At a time when Britain desperately needs more investment, more productive businesses and stronger manufacturing, perhaps the most important change we could make is not how much public money we spend.
It is how effectively we make that money work.
The taxpayer should not always be the person who writes the cheque. Sometimes the taxpayer should be the investor.
Note
Bill Fernie has been a contributor to Lend Wth Care for about 10 years. For relatively small contributions you can help small enterprises in poor countries and continually repeat the process as money gets repaid into your account. Easy to do so check it out HERE