The government failed to put adequate measures in place to prevent fraudsters stealing billions through its Bounce Back Loan scheme to businesses, the National Audit Office (NAO) has said.
Counter-fraud activity was “implemented too slowly”, which resulted in “high levels of estimated fraud”, it said.
It added the Department for Business estimated fraudulent loans were worth £4.9bn, 11% of the total, as of March.
The Bounce Bank Loan scheme was set up in April 2020 with the aim of keeping afloat small firms struggling due to the coronavirus pandemic.
A total of 1.5 million loans worth £47bn were issued through the initiative, after about a quarter of UK businesses applied.
In its report, the NAO said the government estimated more than a third of loans, worth £17bn, may never be repaid due to both fraudulent activity and legitimate borrowers defaulting.
As of 30 September, figures from the state-owned British Business Bank, which supervises the scheme, showed £2bn worth of loans had been repaid and £1.3bn had been defaulted on. The bank said about 7% of all loans were at least one month in arrears.
Banks, building societies and peer-to-peer lenders were accredited by the British Business Bank to provide firms with 100% government-backed finance worth up to £50,000, or a maximum of 25% of annual turnover.
The NAO said the scheme had “limited verification, and no credit checks on borrowers, which made it vulnerable to fraud and losses”.
In its report, the NAO said 13 additional counter-fraud measures had been deployed to tackle the issue, but added “most came too late to prevent fraud and were focused instead on detection”.
Blimey … not another Tory government shambles …
Billions of pounds of tax-payers money spent and over a third of it lost to fraud and business failure …
The full scale of BJ’s incompetency has yet to be revealed but this disclosure adds another massive example of dereliction of duty to safeguard the public purse …
More of the same - shambles, incompetence, fraud, failure …
Meg Hillier, chair of the Public Accounts Committee (PAC), said taxpayers will be exposed to financial risks for decades. The Treasury said it rejects the claims made in the PAC report.
Ms Hillier said repeated PAC reports had made clear that a “lack of preparedness and planning, combined with weaknesses in existing systems across government, have led to an unacceptable level of mistakes, waste, loss and openings for fraudsters”. She said this would end up robbing current and future taxpayers of billions of pounds, and that the “government must be held accountable”.
“It is essential that for as long as we will be paying the costs of Covid-19, which is at least the next 20 years just in some of the loan repayment terms, the Treasury and all of government continue to account specifically for what it has spent in response to the pandemic. Crucially this must ensure lessons are learned for when the next big crisis hits - be it climate, health or financial.”
But the Treasury rejected the claims in the report, saying that no fraudulent payments have been written off and the Taxpayer Protection Taskforce it has set up is expected to recover up to £1bn from fraudulent or incorrect payments.
The Coronavirus Job Retention Scheme - commonly known as furlough - alone is estimated to have lost £5.3bn to fraud and error. That’s almost 9% of the total funding distributed through the programme.
The estimated loss to fraud and error across all Covid-19 response measures is not known but is expected to be at least £15bn across the schemes and loans implemented by various government departments.
In September, spending watchdog the National Audit Office said the government had spent £261bn on 374 measures in response to the pandemic. These measures are expected to cost a total of about £370bn over their lifetime.
That same month, the Office for National Statistics (ONS) reported that a provision of nearly £21bn had been made for defaults under loan schemes for companies, such as the Covid bounce-back loan policy.
