The government was “complacent in preventing fraud” against the Covid Bounce Back Loan Scheme and will lose almost £5bn to scammers, according to a Westminster committee.
MPs on the Public Accounts Committee (PAC) said the £47bn loan scheme – which saw the government take on 100 per cent of default risk – was delivered at a “breakneck speed” and that necessary checks to stop widespread fraud were not implemented.
The committee lamented that the scheme did not require “lenders to check a businesses’ claimed turnover against its records for existing customers”, meaning “some borrowers received a larger loan than they were entitled to”.
The Bounce Back Loan Scheme allowed businesses to take out loans of up to £50,000, with minimal credit checks or paperwork required.
Figures from the Department for Business, Energy and Industrial Strategy (Beis) estimate that £17bn of loans will never be paid pack, with £4.9bn taken of this taken out by scammers.
Lord Theodore Agnew resigned from his post as efficiency minister earlier this year and called the government’s inability to stop Covid fraud as “one of the most colossal cock-ups in recent government management”.
The PAC report found the government is not concentrating enough on smaller acts of fraud and that these “fraudsters will walk away with the money”.
PAC chair, and Labour MP, Meg Hillier said: “More than two years on Beis has no long- term plans to chase overdue debt and is not focussed on lower-level fraudsters who may well just walk away with billions of taxpayers’ money.
“The committee was unpleasantly surprised to find how little government learned from the 2008 banking crisis and even now are not at all confident that these hard lessons will be embedded for future emergencies.
“Beis must commit now to identifying what anti-fraud measures are needed at the start of any new emergency scheme so the taxpayer is better protected in future. It also needs to set out the trade-offs and what level of fraud it will tolerate at the outset.”
Chancellor Rishi Sunak introduced the Bounce Back Loan Scheme in April 2020 to inject emergency capital into businesses at a faster rate, after widespread complaints that banks were not lending quick enough through other Covid loan schemes.
The loans were 100 per cent underwritten by the government to encourage a fast rollout by the banking sector.
The Treasury launched the £100m Taxpayer Protection Taskforce last year to try and recoup funds lost to scammers.
A government spokesperson said: “We’re continuing to crack down on Covid support scheme fraud and will not tolerate those who seek to defraud consumers and taxpayers.
“These schemes were implemented at unprecedented speed to protect millions of jobs and businesses. If the government didn’t move quickly, more businesses would have failed and many more jobs lost.”