Invest NI’s chief executive boasted about the success of the scheme which is now on course to lose taxpayers £30 million, it can be revealed.
Four years ago, Stormont’s business development agency’s boss, Alastair Hamilton, appeared before the Assembly’s Enterprise Committee and told MLAs that his scheme was less “bureaucratic” than similar schemes elsewhere in the UK which had been more cautious in handing out public money.
During the hearing, Mr Hamilton, a former DUP special adviser (Spad) who is paid almost £200,000 a year to manage the quango, claimed that a Westminster minister was “envious” of the Access to Finance scheme because of how much money it was giving out to businesses.
However, this week the Audit Office revealed that the scheme is on course to lose taxpayers almost £30 million, while private investors on the same scheme will likely walk away with £44m profit.
Auditors said that the fund managers running the scheme - one of whom Invest NI had to pay in order to cancel its contract - were incentivised to hand out money.
It is not clear how many of the firms to which loans were made have ceased trading, but the Audit Office estimated that taxpayers will lose £28.8 million, while private investors in the same project will likely walk away with a £44 million profit. There was not a bonus for handing out money – and there was a bonus for a good return on investments. However, auditors found that the bonuses were difficult to achieve and were less lucrative than the fees. And the ‘key performance indicators’ – which if not met could lead to lost fees – were focused on investment activity, rather than around the quality of that investment.
Mr Hamilton told MLAs in November 2013: “Slide 14 shows that we are in a good place for access to finance suite, which we have talked about many times in the committee.
“There is £140 million of funding in that suite of products, at both equity and debt level.
“Various people, including Vince Cable, have been here over the past five or six months and looked enviously, not only at our suite of products but at our traction in the business community on the uptake of those products.
“Many schemes announced across the UK have not been particularly well taken up or are too bureaucratic, according to the feedback from some of the small businesses that struggle to access them.”
This week’s Audit Office report showed that in one case, Invest NI gave a contract to a company, E-Synergy, to manage one of the funds, despite it being the most expensive firm to bid for the contract.
Then, after Invest NI become unhappy with the company’s actions and attempted to terminate the contract, there was a costly legal battle and taxpayers had to pay the company to walk away earlier this year.
North Antrim MLA Jim Allister was one of several people to raise questions about E-Synergy as far back as 2012 with Arlene Foster, who was the minister responsible for Invest NI.
The News Letter asked Invest NI whether Mr Hamilton stood over his comments.
In a statement, the body said: “Invest NI set up its Access to Finance strategy with the full understanding that it may not recoup all the monies it invested. We viewed this as vital to stimulating the venture capital and loan market which, as a result, now has an additional £77 million of private investment available.
“Investing in early stage businesses is inherently high risk and consequently not all will deliver a return. However, our investment has the potential to create 4,500 new jobs, and up to £1.07 billion in the economy, and we would see this as delivering a positive return.
“As the NIAO report states, it is stakeholders’ view that the strategy has considerably assisted local SMEs.”