Complacency over ‘eye watering’ levels of fraud in Covid scheme

The Public Accounts Committee has said that the government was ‘complacent in preventing fraud’ in the 100 per cent taxpayer-guaranteed Bounceback Loan Scheme.

A new report by the committee says that the government ‘cannot just accept’ the level of unpaid debt it currently plans to, calling it ‘unacceptable’ that the Department or Business Energy & Industrial Strategy ‘has no long-term plans for recovering overdue debt’.

Latest estimates show that of the £47 billion paid out in Bounceback Loans, £17 billion is already expected to be lost, £4.9 billion of that to fraud.

The committee says that the focus on delivery of the loans ‘at breakneck speed’ meant that lenders were not required to do credit or affordability checks or even verify application information, and to offset this risk to lenders the government guaranteed the loans 100 per cent - meaning that if the borrower does not repay the loan, the taxpayer will. As such, ‘business survival has come at a staggering cost to the taxpayer’, which MPs argue could have been better spent on ‘improving existing public services, reducing taxes or to reduce government borrowing’.

Dame Meg Hillier, chair of the Public Accounts Committee, said: “With weary inevitability we see a government department using the speed and scale of its response to the pandemic as an excuse for complacent disregard for the cost to the taxpayer. 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.”