January 2009: Should the Government use public money to keep troubled firms in business?

Thank you to everyone who replied to my last e-consultation. The question was:

Should the Government use public money to keep troubled firms in business?

  • 63% of those asked said they were against using public money to help troubled firms
  • 37% of those asked said they were in favour of using public money to help troubled firms

Common arguments against:

  • Government pay-outs and loans represent too much of a risk to taxpayers’ money
  • Keeping failed companies afloat would create a dependency culture with no stimulus to be self sufficient
  • Weeding out weak firms may be a great opportunity to renew and update our economy
  • Money would be better used on training for the unemployed and on research and development to encourage new start-up businesses

Many of those who argued against felt that although firms should not receive government help, those who lose their jobs should receive training and help to find another job. Several respondents felt that the government should set up an agency to teach businesses how to run their finances, and it should be mandatory for companies to take the advice given.

Common arguments for:

  • Allowing companies to go under will cost the country more in the long term through unemployment and other benefits.
  • Many companies are well run and are innocent victims of the prevailing economic downturn – given the right support they will weather the storm and see many further decades of productivity.
  • If we allow companies to go under, many manufacturing jobs will be gone forever, as the skill base will be lost.
  • The closure of one business will have a knock-on effect on other firms, such as suppliers and retailers.

Many of those who argued ‘for’ stressed that the government must put restrictions on the recipients. The payment of bonuses for failure was particularly controversial.

It is an extremely difficult issue, and one which has no clear right and wrong answers. I believe that the Government should do what it can to support our industries, through compelling banks to keep lending and in supporting employers to adapt to the new economic climate. I understand the wish of those who believe that businesses should be kept afloat at all costs to preserve jobs, however, there is a limited amount of money to go around, and it would be impossible to help everyone.

Instead, government money should be spent to stimulate the economy, particularly by investing in green jobs. For example, a programme to insulate homes, and every school and hospital in the country would help to tackle unemployment, save money on energy bills, and reduce carbon emissions too. Those who are made redundant should be given more help to retrain and find employment than is currently available.

Thank you once again to those who participated in my e-consultation. It was a topic close to the heart of many constituents, and I found your contributions extremely helpful when considering my own position on the issue.

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