Weak monitoring of UK Covid loan schemes was a gift to fraudsters | Business
When announced in the early days of the coronavirus pandemic in March 2020, Chancellor Rishi Sunak described the furlough scheme as “one of the most significant economic interventions at any time in the history of the British state and any government”. around the world”.
Boris Johnson and Sunak were proud of an innovative scheme which would pay 80% of the wages of up to 11.7 million workers up to a maximum of £2,500 a month. “We have set aside ideology and orthodoxy to harness the full power and resources of the British state,” Sunak said from the lectern at 10 Downing Street.
Furlough payments were just one of many hastily introduced by the government at the start of the pandemic to financially support individuals and businesses. Others included the self-employed income support scheme, “eat out to help” – and the Bounce Back Business Loan Scheme (BBLS).
In the House of Lords on Monday, Theodore Agnew, the minister responsible for Whitehall efficiency and enforcement, denounced the BBLS’s lax oversight in his dramatic resignation speech.
Lord Agnew criticized the monitoring of Covid loans by the Department for Business, Energy and Industrial Strategy and the British Business Bank, a state lender, saying it had been ‘nothing short of dismal’ . He added that Sunak’s department, the Treasury, appeared to have “no knowledge or little interest” in the consequences of the fraud.
The warning signs have been visible for a long time, such as the creation of several companies at the same address. And the first lawsuits began to flow.
The government has long stressed the wartime context in which its support programs have been deployed and the urgent need to pump money into the economy or risk the collapse of large numbers of businesses.
During a debate in the House of Commons earlier this month, John Glen, Economic Secretary to the Treasury, claimed the Government had “taken very seriously the issue of potential fraud relating to Covid grant schemes”, but stated “that it would have been impossible to prevent any related fraud”.
However, from the start, announcements of Covid financial support raised concerns at HM Revenue and Custom headquarters lower down in Whitehall.
‘From the start it was clear the schemes would be targets of fraud and customers would make mistakes,’ HMRC said last year as it canceled £4.3bn stolen through the various aid schemes Covid-19 emergency.
HMRC estimates around £5.8billion – or £1 for £14 of the £81.2billion paid out in the schemes – was stolen. So far only £500million has been recovered, and he expects only another £800-1billion can be recovered by 2023.
In March, the commercial department estimated that 37% of bounced loans, worth £17billion, would not be repaid and that 11% came from fraudulent claims.
A subsequent investigation by accountancy firm PwC in October reduced the fraud rate to 7.5%, although the National Audit Office said in its December report that it had not had time to check this estimate himself.
The NAO had long pointed to the government’s “inadequate” attempts to tackle fraud under the £47billion BBLS scheme designed to try to rescue businesses threatened with bankruptcy during the pandemic.
He said fraud checks for the scheme had been “implemented too slowly”, with limited verification and no credit checks on borrowers. As the program progressed, 13 additional anti-fraud measures were introduced, but most came too late to prevent fraud and instead focused on detection.
Gareth Davies, the head of the NAO, warned that the fraud already identified could be just the tip of the iceberg. “The true level of fraud will become clearer over time,” he said.