Yahoo Finance Bounce back loans: Taxpayers face huge bill for COVID fraud as UK was ‘complacent’
UK taxpayers face “eye-watering” losses from COVID bounce back loan fraud thanks to poor data management and IT infrastructure, new data has revealed.
According to the Public Accounts Committee (PAC) on Wednesday, the Department for Business, Energy and Industrial Strategy (BEIS) has been “complacent in preventing fraud”, it said.
It further highlighted that it was “unacceptable” that the government had no long-term plans for recovering overdue debt.
MPs have called on the government to crack down on £4.9bn ($6.2bn) of COVID loan fraud, while pointing out that the government and the British Business Bank would have suffered fewer losses had they invested in better data management.
Read more: UK economy faces £8bn hit from long-COVID and health inequalities
The news follows a report from The Times that border police have seized suitcases filled with “large amounts of money suspected [of being] from coronavirus bounce back loans”.
It found a number of recipients were using the cash on personal spending sprees, home improvements, and to fund gambling habits, instead of its intended purpose to save jobs by preventing businesses from going under.
Dozens of company directors have since been disqualified after misusing the loans programme.
The scheme was first set up in May 2020 as the largest of three COVID-19 related business loan support schemes.
It targeted the smallest businesses and provided them with loans of up to £50,000, or a maximum of 25% of annual turnover, in an attempt to maintain their finances during the pandemic.
Watch: What is the Bounce Back Loan scheme?
“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,” Dame Meg Hillier, who chairs the committee, said.
“More than two years on BEIS has no long-term plans to chase overdue debt and is not focused on lower-level fraudsters who may well just walk away with billions of taxpayers’ money.
She added: “The Committee was unpleasantly surprised to find how little the 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.”
Read more: UK government borrowing almost 20% higher than forecasts
Hillier said that as much as 48% of the loans may not be repaid. In total £17bn is set to be lost, of which £4.9bn has been put down to fraud.
Hillier added: “This is a lot of money, when you think about the cost of living squeeze. For context, the national insurance increase is going to raise £12bn. This is £17bn which is potentially lost to this. There is a lack of curiosity and urgency to pursue it down.”
“This is taxpayers’ money. We want them to be more urgent on it, and learn lessons."
The Conservative government has faced mounting pressure on the issue, with the Labour Party slamming Rishi Sunak for not doing enough to tackle the problem.
The chancellor is now setting up a new fraud squad as he seeks to recover nearly £5bn taken by fraudsters.
The squad will enlist data analytics experts and economic crime investigators and is expected to be operational by the summer.
The £25m taskforce recover money stolen from COVID support schemes and spot suspicious companies and people seeking government contracts. Counter fraud experts will also mount mandatory inspections on Whitehall programmes to uncover vulnerabilities.
Watch: Chancellor launches small business loan scheme
