Federal Government grants in the firing line could disadvantage SMEs, expert warns

The Federal Government is clamping down on government grants with Cabinet ministers urged to find savings so it can deliver a bigger surplus ahead of an election year – but experts are alarmed by the measure.

While the government has not specified which grants are under threat, it is believed all ministers have been requested to search for savings. This would include grants available to small businesses including Commercialisation Australia and the Export Market Development Grant, which many businesses complain is already suffering funding issues.

The Australian has reported Treasurer Wayne Swan announced a freeze on federal grants on Monday as it races to arrest a drop in revenue.

Treasury was contacted this morning but unable to reply prior to publication.

SmartCompany reported on a list of the best government grants earlier this year. Many of these could be targeted.

Adrian Spencer, chief executive of grant consultancy firm GrantReady, says a simple cost-cutting exercise will result in businesses being disadvantaged.

“My concern in this current climate is where the government would stop heavily funding key initiatives,” he told SmartCompany this morning.

“By ripping up a few grant programs or key funds is just robbing Peter to pay Paul, and I think it will have a detrimental effect where critical funding is needed – especially at a time when small businesses is really under supported.”

Small businesses aren’t the only supposed victims, however, as universities, non-profits and community groups would also be targeted for savings.

The government is scrambling as iron ore prices have fallen as much as 37% below its own forecasts, putting a dint in its projected revenues.

Many businesses rely on grants for funding specific projects in industries such as textiles, while broader grant providers such as Commercialisation Australia have provided SMEs with millions to help make their products viable.

Critics say many of these grants aren’t funded properly in the first place. Specifically, the Export Market Development Grant has been criticised for only funding projects in part and leaving SMEs hanging, with a massive opportunity left untapped.

Spencer says while the existing grant structure is in need of a re-tool, simply shutting down funding isn’t the way to do it.

“If you look in the overlap that exists in grant programs already, it’s quite unfortunate that money isn’t being used to fill the gaps.”

“The big thing everyone talks about is the valley of death between R&D and Commercialisation Australia, and a lot of the state governments are already trying to fill that gap.”

But Spencer says any drop in funding should be done in a way to identify overlaps between federal and state grants, and not just in a cost-cutting initiative.

“If this is a cost-cutting exercise then it’s simply going to impact those industries that have already been identified to work.”

“A review of grants simply to save money would have unfortunate consequences.”