Taxpayers could lose tens of billions of pounds to Covid loan fraud, because basic checks and controls were not carried out in the rush to get funding out to struggling businesses.
According to the latest Fraud and Error report from the Public Accounts Committee of MPs, the department for business, energy and industrial strategy (BEIS) has estimated that the bounce back loan scheme will cost the taxpayer £27bn in fraud or credit losses.
The committee suggested that the 100 per cent taxpayer guarantee credit on bounce back loans may have left BEIS “reliant on banks that it admits lack incentives given it is not their money on the line”.
The report also found that Universal Credit fraud and error rose to an all-time high of £5.5bn between April 2020 and March 2021.
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Fraud accounts for 40 per cent of all crime across the UK, and costs the taxpayer up to £51.8bn per year, the committee said.
Around £26.8bn of this loss is due to fraud and error in the tax and benefits system, but the Cabinet Office has estimated that undetected fraud and error could cost the taxpayer up to £25bn, before any losses to Covid-19 schemes are taken into account.
“That’s over £50bn worth of public services a year given away to fraudsters and by mistakes in payments – before the frightening losses racking up in our Covid-19 spending so far, and against the backdrop of a massive surge in need,” said Dame Meg Hillier, chair of the committee.
“Fraud is never acceptable and when so many were suffering as a result of Covid the government needs to tackle fraudsters robustly. The committee has long been concerned about the impact of departments’ own errors – including overpayments which need to be clawed back – which leads to further hardship for the already vulnerable.”
Hillier added that the government has shown a worrying lack of urgency in its administration of the BBLs.
“The Covid emergency masks a more worrying underlying approach to managing risk and taxpayers’ money,” she said.
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