Grants to large firms ‘waste of taxes’

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Grants to firms of more than 150 employees trying to revive Britain’s poorest regions are a waste of taxpayers’ money, according to a study by academics at the London School of Economics (LSE).

It found thatGovernment subsidies such as the the Regional Selective Assistance (RSA) programme or its successor, the Grants for Business Investment scheme, created jobs only when given to concerns employing less than 150 workers.

Asked why smaller businesses were the only ones taking advantage of the subsidies, Professor John Van Reenen said: “It may be that larger firms are manipulating the system and just pocketing the subsidy or it may simply be that grants have a bigger effect on small firms as they are much more cash-strapped.”

The authors of the study, called The Causal Effects of an Industrial Policy, also warned the Government that subsidies could put a dent in productivity figures because they “probably” help less efficient businesses grow.

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