Everyone seems to agree there is a shortage of finance for social enterprises. So what should the Goverment do about it?
Imagine you are the Minister for Tractors.
Everyone acknowledges the country needs tractors. Just about everyone. But there aren’t enough tractors being produced to serve the needs of the country. What are your options?
1. Fiscal incentives – create a tax break for tractor producing.
2. Regulation – make laws which force manufacturers to produce a certain number of tractors every year.
3. Spending – use public funds to produce your own tractors.
4. ‘Nudging’ – make lots of speeches about the importance of tractors.
5. Any other ideas?
So what would you do? each option has advantages and disadvantages. Just a few examples…
1. Fiscal incentives – they can be quite complex and involve a lot of paperwork. Some people might buy tractor factories just as a way to evade tax but no more tractors actually get produced.
2. Regulation – will manufacturers make good tractors if they don’t really want to – or just churn out a few token low quality tractors?
3. Spending – government is not always very smart at making tractors. for example, they often spend a long time drawing up the plans and then try to build the tractor in a big rush at the end of the financial year.
4. ‘Nudging’ – what happens if people don’t pay any attention to being nudged?
5. Any better ideas?
But you have to do something. Let’s say, for example, you settle on spending. You try to plan properly, you manage to produce a number of decent tractors every year and, despite the hitches and inefficiency, you do manage to increase the level of tractor production to a point which actually surpasses demand. Well done! Then every subsequent year you can try to iron out the problems and get a bit better at producing tractors more effectively. Job done.
But imagine you then found that the tractor think tank, the tractor business, the tractor taskforce, the agricultural machinery association, the rural industrial transport organisation, the institute of 4-wheeled heavy slow-moving vehicles and the ancient and venerable guild of tractor drivers started to churn out reports calling for you to not only spend more money on tractors, but to introduce a tractor tax relief, a range of different tractor funds, a tractor wholesale bank, a tractor act, a tractor levy, a tractor retail bank and to loosen the rules on who was allowed to produce tractors.
Then what?