MPs have attacked the government for being complacent in recovering funds and missing opportunities to prevent fraud from the bounce back loan scheme (BBLS).
In its latest report on BBLS loan fraud, the public accounts committee said it is “unacceptable” that the department for business, energy and industrial strategy (BEIS) has no plans to recover outstanding debt after lenders have pursued borrowers for up to 12 months.
The MPs added that they are “concerned that the department is placing too much reliance on lenders” to minimise taxpayer losses without incentivising them to do so.
The committee blasted BEIS for being complacent in preventing fraud, saying it took them eight months to introduce checks to ensure businesses’ claimed turnover was correct, by which time 93 per cent of the loans by value had been issued and some received more than they were entitled to.
The department and the British Business Bank (BBB) have been found to have placed less emphasis on tackling smaller scale fraudsters than on organised crime.
MPs were also “not convinced” that the BEIS has the data it needs to manage the risk of fraud, with its £4.9bn estimate of fraudulent loans not counting all the possible different types.
The government department has only allocated £32m to countering fraud and does not know whether lenders or law enforcement agencies have the resources they need to do so, the report added.
The committee also said that BBLS has distorted the small- and medium-sized enterprise (SME) lending market in favour of the largest UK banks, which goes against the bank’s objective of creating a diverse finance market for SMEs.
Dame Meg Hillier MP, chair of the public accounts committee, said that the government did not learn from their mistakes during the 2008 crisis, but they must do better in the aftermath of the pandemic.
“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,” said Hillier.
“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.”
A government spokesperson said the Covid support schemes were implemented at “unprecedented speed” to protect millions of jobs and businesses and it will focus on recovering taxpayer money lost to fraudulent loans.
“We’re continuing to crack down on Covid support scheme fraud and will not tolerate those who seek to defraud consumers and taxpayers,” the spokesperson said.
The BBB said that it acknowledges the committees’ recommendations, particularly those for the bank around evaluation of the scheme and market distortion.
“The bank will publish an early evaluation and impact assessment of the Covid-19 emergency loan schemes, including bounce back loans, this summer with further assessments to follow in 2023 and 2024,” a spokesperson from the BBB said.
Lord Agnew of Oulton, who stepped down in January, has previously attacked the government for its handling of the fraud, describing it as a “Dad’s army” operation and said that non-executives must be held to account for the lack of oversight.