The Government is inundated with fraud cases, a new report reveals. David Hencke has the details

Thousands of businesses that took advantage of the £47 billion ‘Bounce Back’ loan programme launched during the pandemic may avoid repaying a penny because the Government lacks to resources to chase up the money, a new report reveals today.

The loans scheme, launched by Chancellor Rishi Sunak and run by the Department of Business, Energy and Industrial Strategy (BEIS), aimed to provide loans of up to £50,000 to help 1.5 million firms hit by the collapse of the economy during the worst months of the pandemic.

The money was handed to firms without the most basic credit checks, and by the time more rigorous due diligence was put in place, more than £25 billion – 61% of the scheme – had already been awarded.

The National Audit Office (NAO) report highlights that firms may have cheated the Government by inflating their turnover to receive more cash. Indeed, officials didn’t start checking published company turnover until June this year – when all the money had been paid out. According to the NAO, the scheme was also exploited by organised criminals – who put in multiple applications for Government finance.

The Government has produced figures claiming that only £4.9 billion has been lost from the scheme, though the NAO described this figure as “highly uncertain”.

Some £17 billion of the loans may never be repaid, the report says, with only £2 billion returned before September this year. Companies had defaulted on another £1.3 billion.

“The Department prioritised its fraud response by grouping loans into three tiers and concentrating on the highest risk areas,” the NAO report states. “Top-tier loans are those involving organised crime groups with sums of more than £100,000; mid-tier – some evidence that borrowers acted dishonestly but not on a large scale; and bottom-tier – where individuals might have dishonestly received loans. The Department could not tell us how many cases were in each tier. It decided not to focus its investigative resource on borrowers who overstated turnover by less than 25%.”

Meg Hillier, the chair of the House of Commons Public Accounts Committee, said that the “Government has tried to impose some counter fraud measures but it’s too little, too late. It’s now focusing on recovering money from organised crime, yet many of the smaller scale fraudsters will have slipped through its fingers.”

The Government has handed the most serious cases over to the National Investigation Service (NATIS) – to investigate, prosecute and recover funds. But the report reveals that fraud has been so widespread on COVID-19 schemes – including Rishi Sunak’s “Eat Out to Help Out” scheme – that it is inundated with cases. There are more than 2,100 suspected fraud reports on its books, despite only usually being able to handle 50 cases a year.

So far, the NATIS has only recovered £3 million in 33 cases and 43 people have been arrested. The body has been given three years to investigate people and has been set a target of recovering £6 million – a tiny proportion of the money lost.

Gareth Davies, the head of the NAO said: “Government prioritised getting Bounce Back Loans to small businesses quickly but failed to put adequate fraud prevention measures in place. One impact of these decisions is apparent in the high levels of estimated fraud. The true level of fraud will become clearer over time, but it is clear Government needs to improve on its identification, quantification and recovery of fraudulent loans within the scheme.”


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