£2 Billion of Fraudulent Covid Loans Remains At Large With Government Accused of ‘Passivity’ in Claiming Funds

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MPs on the Commons Public Accounts Committee have severely criticised the UK Government for its “dangerously flatfooted approach” in failing to recover nearly £2 billion in suspected fraudulent business loans lent by the last Conservative government five years ago.

The money handed out at the height of the Covid pandemic was aimed to keep businesses afloat during lockdown.

Now five years later only £130 million of £1.9 billion suspected fraud has been recovered and the ministry is unable to explain how much of this was fraudulently claimed.  Banks who lent the money have no incentive to press firms to hand it back because the last government indemnified them from having to pay them back if the money was never returned.

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Russell Scott

Sir Geoffrey Clifton Brown, Conservative chair of the committee, said “We found a passivity in Government’s approach to recovering the almost £2bn of pounds in taxpayers’ money lost to Bounce Back loan fraud during the pandemic. DBT were unable to tell us if even the tiny fraction of that sum recovered was in fact even related to fraud. Indeed, relying on government-backed lenders to recover losses, who thus lack any incentive to pursue lost funds, has been a dangerously flatfooted approach. Now that the Insolvency Service has taken over responsibility for viable cases, we look forward to hearing how it fares where others have failed.”

The report says “The Bounce Back Loan Scheme was open for applications from 4 May 2020 to 31 March 2021, and in that time 1.5 million loans were issued, to a total value of £47.4 billion.

“The BBLS was designed to reduce the time taken to pay out the loans, in part by reducing the checks which lenders were required to do. This included removing credit and affordability checks, and accepting self-certification by borrowers, rather than requiring any verification of application information. This resulted in increased risk to the taxpayer, which was acknowledged at the time.

“As at 31 March 2024, there remained 1.03 million loans outstanding, to a value of £17.8 billion. The Department estimates that total losses to the taxpayer due to fraud in the scheme will be at least £1.9 billion over its lifetime. “

The highest risk fraud cases were being passed to the National Investigation Service (NATIS) to investigate, but recoveries by NATIS have totalled just £8.6m.

Post Office Compensation

The report is also critical of the ministry and the Post Office’s handling of compensation cases due to sub postmasters following the Horizon computer scandal. This year the Post Office sent out 18,500 letters to people they suspected were still unaware they could claim compensation. Only 21 per cent replied and the ministry has decided not to pursue this any further beyond sending another 5000 letters.

The report says not all compensation for people who had their jail sentences quashed has been paid. So far 339 people have accepted a fixed £600,000 payment but people  who wanted a detailed analysis of their losses are still waiting for a final agreement which is not expected unbtil next year. They have been given interim payments.

The uncertainty over the compensation payments led the National Audit Office to qualify the ministry’s accounts for last year.

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Russell Scott

Sir Geoffrey Clifton Brown said: “This Committee would have hoped to have found government laser-focused on ensuring all those eligible were fully and fairly compensated for what happened. It is deeply dissatisfactory to find these schemes still moving far too slowly, with no government plans to track down the majority of potential claimants who may not yet be aware of their proper entitlements. It is entirely unacceptable that those affected by this scandal, some of whom have had to go through the courts to clear their names, are being forced to relitigate their cases a second time.”

A Department for Business and Trade spokesperson said:  “This report is based on a period from before last year’s election.

“Since then, this Government has quadrupled the total amount paid to affected postmasters to provide them with full and fair redress, with more than £1 billion having now been paid to thousands of claimants.  

“We will consider the recommendations and work with the Post Office, who have already written to over 24,000 postmasters, to ensure that everyone who may be eligible for redress is given the opportunity apply for it.”