MPs have called for answers from the government after it was revealed the British Business Bank (BBB) had raised concerns about fraud and value for money with its emergency support schemes.
In May, Keith Morgan, then-chief executive of the state development bank, wrote two letters, published yesterday, to business secretary Alok Sharma, highlighting reservations about the bounce back loan scheme (BBLS) and future fund.
In the BBLS letter, Morgan highlighted that the bank was concerned about the propriety, value for money and feasibility of the scheme.
He said BBLS had a “very high” risk of fraud according to the PwC, claimed it could be “vulnerable to abuse by individuals and by participants in organised crime” and had the potential risk of causing market disruption due to the scheme’s low 2.5 per cent interest rate.
Meanwhile, in the future fund letter, Morgan warned about the feasibility of the scheme, that it could be too focused on London and the South East and may not be value for money.
Darren Jones, chair of the business, energy and industrial strategy committee, has now written to Sharma to ask what action was taken by the department to address the bank’s concerns.
With regard to BBLS, he asked for estimates from the department or the BBB on the fraud resulting from the scheme and analysis conducted on the credit risk resulting from removal of “significant elements” of conventional credit checks.
Additionally, Jones asked what assessment was made about the impact of BBLS on competition in the small business lending market and its ability to support the economic recovery.
With regard to the future fund, Jones asked what consideration was given to ‘alternatives’ to the fund and who the department and BBB consulted in relation to the scheme.
He asked whether the government will release more detailed information on the companies that have received support from the fund, so that it can be properly assessed and scrutinised, and the steps taken to ensure it has been evenly distributed across the UK.
“The publication yesterday of the BBB’s reservation notices shows a host of concerns about the BBLS and future fund were raised with the secretary of state before they were launched,” Jones said.
“Every £1 of borrowing must be spent wisely and it’s crucial ministers come forward and outline what steps they have taken to address the serious concerns about fraud, value for money, and the impact of BBLS on competition in the small business lending market.”
Furthermore, Jones also sent a separate letter to Sharma asking what conditions are being sought from private equity firms for their receipt of taxpayer-backed loans.
This follows an announcement from the BBB that its new guidance will allow more flexibility about whether a business is deemed an “undertaking in difficulty” in relation to the coronavirus business interruption loan scheme and the coronavirus large business interruption loan scheme.