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The managing director of Birmingham-based investment firm Advantage Business Angels has told Insider that he hopes some of the government's funding schemes end up failures. Discussing the role of public sector funding, Neil Mackay said that decisions like promoting high mortgage lending were a recipe for disaster.

Speaking at an Insider round table event about business finance, Mackay said: "I actually hope that some of the government's new initiatives fail.

"Things like backing 95 per cent mortgages and backing more bank loans for small businesses. It’s decisions like that got us into this mess in the first place.

"A lot of the public aid is too targeted – not just in size but in sectors - and it often misses the areas where it’s really needed."

His views were in part backed by other members of the panel, which included Sue Summers, chief executive of Finance Birmingham and Steve Walker, chief executive of Aston Reinvestment Trust.

Discussing the role of public sector funding rather than bank loans, Roger Wood, director at Birmingham private equity house Midven, said: "What I am concerned about is that the public sector’s involvement will always be skewed towards job creation and saving businesses, where really the best way of creating and preserving jobs is by making purely commercial decisions.

"One of the best tests for any investment is to say 'would I risk my personal pension on this?'"

Summers agreed, stating that the role of public sector investments "should be commercial".

"Job creation is important but we have to make a return in all our investment decisions," she said.

Jack Glonek, assistant director of investment at Birmingham City Council, echoed their views.

"We have to accept that the public sector is in this business for a reason, and that's to step in where commercial forms of funding didn’t reach," he said.

He added that there came a point where private sector investment was not enough to sustain many businesses growth plans, particularly start-ups.

"What does a business do that's won a big engineering order, and needs to buy the raw materials and equipment to gear up to meet it?," he said. "Often they can’t ask for any more from the bank because they’re overdrawn to the hilt, the idea of a contract that might one day be suddenly withdrawn means it’s too risky for private equity, and the business might not see a return in their investment for 18 months.

"That’s the point where the public sector ought to step in."

The full discussion from the round table will be featured in the January issue of Midlands Business Insider.