Taxpayer foots the bill for risky business loans

Stuart Garner: “The infamous global restructuring group  got hold of my business and . . .  liquidated me”
Stuart Garner: “The infamous global restructuring group got hold of my business and . . . liquidated me”
FABIO DE PAOLA/THE TIMES

One in every five loans made to small companies and underwritten by the taxpayer under a £2.3 billion government credit scheme has ended in default.

The government has admitted that 20.2 per cent of enterprise finance guarantee (EFG) loans went sour, raising fresh questions about a scheme that is the subject of an internal investigation by Royal Bank of Scotland.

The default rates — about 15 per cent higher than would be expected under normal commercial lending — will heighten concerns that banks abused the scheme to pass risky small business liabilities on to the taxpayer.

The EFG provides a 75 per cent guarantee to lenders willing to support viable small businesses that lack the security to obtain a bank loan. It has been alleged