Yesterday, Treasury and Cabinet Office minister Lord Agnew of Oulton stepped down after criticising the government for how it has handled fraud in its state-backed Covid loan schemes.
This raises the question, to what extent have the pandemic loan schemes been impacted by fraud?
In December, a report by the National Audit Office said the government was too slow to put effective measures in place to stop fraudsters from stealing billions of pounds through the bounce back loan scheme (BBLS). Lord Agnew’s resignation only further highlights this.
The Covid government-backed loan schemes have no doubt supported businesses. According to the British Business Bank, the first pandemic loan schemes delivered £80.4bn of finance between May 2020 and the end of March 2021, then from April 2021 to 31 October the recovery loan scheme deployed over £1bn to smaller businesses.
But BBLS loans have been under the spotlight in particular due to 100 per cent government guarantee and self-certification criteria leading to what the NAO called a lack of fraud prevention resulting in high levels of estimated fraud.
In June, the Fraud and Error report from the public accounts committee of MPs and the department for business, energy and industrial strategy (BEIS) estimated that BBLS will cost the taxpayer £27bn in fraud or credit losses.
However, Equifax has twice reduced its Covid fraud loan estimation, showing that fears of soaring levels of fraud may be unfounded to some extent.
In addition, the British Business Bank has repeatedly pointed out that the scheme was delivered to deploy money quickly, and alongside the Treasury, has revealed that total prevented fraud in BBLS so far is £2.2bn.
“The British Business Bank stepped up to deliver BBLS on behalf of government to ensure access to finance was available at pace and at scale during the pandemic,” said a spokesperson from the British Business Bank.
“The bank ensured that key counter-fraud measures consistent with the self-certification design of the scheme were in place from the outset.
“A recent NAO report finds that ‘most businesses have started to repay loans’, evidenced by recent data published by BEIS and the Bank, showing the overwhelming majority of businesses are meeting their monthly repayments.
“From the launch of the scheme, the British Business Bank has worked with lenders and across government to prevent, detect and counter fraud and put in place as quickly as possible additional measures to further mitigate fraud risks. Total prevented fraud in BBLS, based upon the fraud prevention activities that the lenders have been undertaking, is £2.2bn.
“The Bank is working with accredited lenders to ensure they fulfil their regulatory obligations along with their contractual commitments under the terms of the guarantee agreement, to recover the loans and tackle fraud. Lenders are deploying significant additional counter-fraud resources in support of these efforts.”
The Treasury has said that over £100m has been invested in a Taxpayer Protection Taskforce made up of nearly 1,300 staff, which is expected to recover an additional £1bn of taxpayers’ money.
So far £2.2bn in fraud has been prevented but around £27bn has previously been estimated and £47bn was deployed through BBLS.
The government is clawing back money from the public purse but may have plenty more work left to do.