A third of taxpayers’ money lent to entrepreneurs starting a business has led to bad debt, since the government backed Start Up Loans scheme launched in September 2012. So far £72.4 million worth of loans have gone into default or written off as bad debt.
These figures were released by the British Business Bank after The Press Association submitted a Freedom of Information request.
It is common knowledge that start ups are riskier to lend to than long-running businesses. The government expected a certain percentage of businesses to fail by setting the default rate ceiling at 40%.
John O’Connell from The Taxpayers Alliance believes the scheme should be handled a different way. In a statement he said, “Too often the success of these schemes is judged by inputs - how much money is shuffled out the door, and how quickly - rather than outputs.
"As a result performance tends to be patchy at best, and again we've seen that here with this stunningly high, and costly, default rate.
"But the wider question is why taxpayers are funding loans to begin with. That's what commercial banks are for and now taxpayers are on the hook for loans that were evidently deemed to be ill-advised by those same banks.
"There are answers to be found on how to increase lending from commercial banks, but the Government stepping in with a taxpayer-funded alternative should not be one of them."
Despite a proportion of new businesses struggling, the majority of businesses are thriving in the economy and hundreds of business owners have been given the opportunity to set up their own venture in the marketplace.