Governments on both sides of the Atlantic are shovelling billions into big business and busted banks - but would giving small businesses the money instead stimulate the economy more efficiently? Is it better value to look to small business for a revival rather than fund failing automakers, banks and insurance companies? "It makes total sense," says Alistair Anderson, Director of the Centre for Entrepreneurship at Scotland's Aberdeen Business School. "The small business sector, both in the UK and the US, is like a huge Darwinian experiment - small firms are efficient because they have to be to survive. So money spent by small business usually gets a big bang for its buck." The bucks being spent by governments are huge and escalating. Obama's US stimulus programme starts at almost $800 billion but could go much higher; the UK government has spent more than £75 billion buying shares in banks and lent them another £500 billion while the Bank of England creates a further £150 billion of new money to revive the economy. But there is no evidence yet this financing is working. Small-business owners look agog at such sums. These firms provide most private-sector jobs and dividing that money between them could do much to stimulate local economies. Allocating the $800 billion US programme over the country's 20 million small businesses - or to the 20 million Americans working in businesses with fewer than 20 staff - would give them $40,000 each. If even just the money used to buy British bank shares had been spread among that country's 4.5 million small businesses, each would have nearly £17,000 to spend. As those companies or workers used the cash to buy more food or a better car, it would put money into other businesses which in turn would buy new goods or pay wages - possibly keeping on staff they might have fired without the extra sales. Those wages are spent in shops and those suppliers also buy goods and employ people. By what economists call the multiplier effect, money gets spent several times. Even if the recipients of a state windfall saved it or repaid debt, this allows the bank to give loans to another consumer or company that will spend it. Even if they use it to pay tax bills it returns cash to the government to finance these stimulus schemes. Not a cent is wasted. And money lent directly to business passes through immediately to the rest of the productive economy whereas cash lent to the banks can sit in their vaults, be used to pay bonuses or disappear into the global financial system. The cash actually being given to small firms is minute. This year's American Recovery & Reinvestment Act gave the US Small Business Administration $730 million for firms to fight the credit crunch. Canada's C$80 million cost of cutting taxes to small companies contrasts with the C$4 billion the government lent to Chrysler and General Motors. The £1.3 billion of loans the UK government is making available is dwarfed by its support for troubled banks. George Derbyshire, Chief Executive of the National Federation of Enterprise Agencies, says: "It sticks in the throat to see all these billions of dollars, pounds and euros handed out to businesses which have let themselves and their countries down." Catherine Swift, President of the Canadian Federation of Independent Business, representing small employers, adds: "Since monies are going to the auto sector and the banks, we would like to see firm conditions imposed on these funds. In the auto sector that would mean major restructuring commitments, including reductions in labour costs and benefits; on the banking side, despite money going into the system, small firms are facing credit problems involving both cost and availability." Dan Danner, President of her US equivalent, the NFIB, puts it more bluntly, saying a $50 billion bailout of the big auto manufacturers is a misguided attempt to save companies that are victims of their own mismanagement rather than the crunch. "Don't ask us to send our tax dollars to Detroit to pay for their mistakes without significant restructuring and effective independent oversight," he says. The National Federation of Independent Business advertises itself as the voice of small business and its typical member employs five staff and turns over $350,000 a year. A share of the Tarp programme would make a big difference to such firms. "Entrepreneurs need significant incentives for the investments necessary to fuel an economic recovery," says Danner. "The current stimulus plan doesn't contain much to help small employers restart America's economy." There are many ways governments can enhance the tax allowances, loans and grants most already provide for small firms. The UK announced a year-long reduction in VAT, but the cut was small and applied to goods sold by firms of all sizes - including imports and motor cars. However, some believe making a direct payment to firms on the VAT register would not only allow it to be directed at firms with low turnover but also encourage rogue firms to fill in tax forms, thus boosting state revenues. But Anderson says: "Actually, most small businesses don't want government aid in this way. They would rather be allowed to get on with their business with fewer regulations, red-tape and taxation." A recent study of businesses in the US and Britain found different propensities to accept state aid. The research by Babson College, Massachusetts, with London's Kingston University found almost three-quarters of UK firms has taken up public-financed support compared with only 22 percent in its US sample and Robert Blackburn, who headed the study, says: "US owner-managers were less likely to want to be involved with government, although in the UK, owner-managers were ambivalent about the role of government in their growth." Britain's Federation of Small Businesses has joined with the Trades Union Congress to call for short-term wage subsidies to avoid temporary lay-offs or short-time working. This unusual alliance of entrepreneurs with the body representing all unionised workers says a subsidy could ensure up to 600,000 workers a year receive 60 percent of their past pay. It would cost £3.3 billion a year, say their economists, but it would save paying £1.2 billion in unemployment benefits and generate £850 million in income tax, thus cutting the state outlay to £1.2 billion. The US already offers government vouchers to pay rents and school fees and some think they could be used to put state money into small firms. However, Swift, says: "A voucher system should not be necessary as we have a perfectly capable banking sector that should not be let off the hook in doing their job. Banks have very great privileges in Canada and they should fulfil their obligations." Indeed, governments do not have the choice between giving money to big banks or small business because the whole economy, including small firms, depends on a properly capitalised and functioning banking system. Anderson says: "The problem is we are not comparing like with like. The governments' claim the bailout is to support the system rather than to help the banks. They argue that if the system failed we would all suffer. "This recession is about a systemic banking problem rather than the failure of businesses - especially small firms - to deliver the goods. Small firms will help to get us out of the recession but we need to have a robust system to do so."