Did anybody see Dragons’ Den last night? If you missed it, there is one pitch definitely worth watching. German entrepreneur Ralf Klinnert presented a children’s fitness game based around cones with lights attached; in five years he’s made just £7,000, and sold only fifteen sets of the game. The Dragons asked him how he has survived on this sum of money – and his response is revealing. He tells the panel that he has received a Government grant of £148,000.
Duncan Bannatyne couldn't believe the news and was visibly angry: “I’m sick and tired of seeing the money being wasted, taxpayers’ money.”
Deborah Meaden also expressed her concern: “What worries me is you won’t care if I hand my £120,000 over because it’s not your money. And when it is your money, I tell you Ralf, it feels a lot, lot different in driving costs down because I think if you didn’t get £150,000 from the grants system, we’d be sitting here with that [the game] costing a lot less money to produce.”
True, the entrepreneur eventually received his desired investment from two other Dragons. But even they were deeply critical of his current costs of production which appear to have been predominantly leveraged by the taxpayer. More broadly, the exchange showed why the policy of the Government taxing businesses too much and then giving out grants is a deeply flawed one. It’s been done for years through the Regional Development Agencies (RDAs), and past TPA research has shown that RDAs have failed in their key objectives: picking winners breeds an uncompetitive and inefficient business environment, as Deborah Meaden pointed out last night.
Lower taxes and further relief for small start-ups would stimulate genuine private sector dynamism, which is crucial for future growth and job creation. So while it’s good that the RDAs were abolished in the Budget, it’s vital that the new Local Enterprise Partnerships do not simply replace them as grant-givers. It’s certainly not something that the Dragons would approve of.
