Cheap money and more debt won’t help the young
OVER the next three years, £82m of taxpayers’ money – or debt, to be more precise – will be funnelled into a scheme to provide loans worth on average £2,500 to entrepreneurs aged 18 to 24. Cue politicians, business people and other sycophants tripping over themselves to be linked to this intrinsically popular policy. After all, who in their right mind could be against start-up loans for young, gifted entrepreneurs?
Certainly not any famous entrepreneurs. And definitely not James Caan, ex-star of Dragons’ Den, who will chair the body overseeing the allocation of the loans. Nor the godfather of entrepreneurship Sir Richard Branson – who has been pushing for this with his own band of young entrepreneurs, the Virgin Media Pioneers, that he so admirably supports.
And you won’t find a politician with a bad word to say against the scheme. No wonder. Forget austerity Britain, it harks back to when things could only get better. It could easily have been dreamt up by Tony Blair – or more precisely Alastair Campbell, with the perfect ingredients for good press: young bright things, entrepreneurship and loans to small businesses. But it’s a smokescreen – and a wasteful smokescreen to boot.
Although young entrepreneurs are an inspiring bunch, the government shouldn’t lend them money for the same reason that you probably aren’t digging into your back pocket to help them out. Most of their businesses will fail. And the government’s money comes from taxpayers, or more accurately future taxpayers.
Every time the government takes money from private citizens, it’s also taking money from the small businesses that these very same citizens would spend of their own volition. Because they are driven by what people actually want, they are genuinely private businesses in the real economy, and are therefore – for want of a better word – more sustainable.
Rather than create viable businesses, the idea of the scheme may merely be to prepare young people for a future of starting businesses. If so, the scheme is barking up the wrong tree. Branson – like many precocious young businessmen – started out on the back of orders for things he didn’t own, in his case audio records. Start-up capital isn’t necessary for those born to innovate.
We should turn to our schools if we wish to instil the next generation with a broad mindset for entrepreneurship. The key skill that children need to build if they are going to be the next Mark Zuckerberg is their capacity for risk. And even then they might fail and fail hard. Not everyone is cut out to be an entrepreneur.
It’s easy to hand over other people’s money. But doing so avoids tough decisions. Further indebting the next generation isn’t the solution. Paying down public debt, taking personal responsibility and instilling the next generation with the skills to change the world without state handouts – now that’s a policy for entrepreneurship worthy of the name.
Philip Salter is the Business Features Editor of Morning Wire