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Nearly £1bn in Covid loans paid out in error or fraud set to be ‘written off’ - THE I

MAY 01, 2023

The Government is set to write off nearly £1bn in Covid-support loans that were paid out in error or to fraudsters, according to a critical report by MPs.

Of an estimated £2.2bn lost to fraud and error in Covid schemes, ministers and officials were making slow progress getting the money back with only about £11m recovered so far, MPs on the influential Public Accounts Committee (PAC) said.

Since March 2020, the Business Department has provided councils with £25bn of pandemic business-support grants to help eligible firms, but errors in council databases led to millions being paid out erroneously – the total is estimated to be as much as £985m.

“The department believes it will not recoup the majority of this, given there was not deliberate fraud, and the businesses were generally struggling due to Covid,” the report says.

The payments “were not paid in line with Parliament’s intention therefore it is unclear why the department is not attempting to recover grants paid in error”, it adds. The committee’s MPs said they have yet to see the defence from officials that most of the missing money was paid in error rather than fraud.

It accused the department of taking a “laissez-faire approach”. The report adds: “It is not clear how the department holds to account third parties that deliver multibillion-pound programmes on its behalf. [We] are concerned that a laissez-faire approach may lead to failure to properly protect taxpayers’ money.”

This is despite promises from Rishi Sunak that the losses were not “written off” and Government investigators would pursue those who took improper advantage of the Covid support. Failures over how Covid Bounce Back loans were awarded has also increased the risk of taxpayer losses, the PAC warned.

Taxpayer funds were also paid out to fraudsters but shortcomings in the performance of the Companies House businesses register is making it easy to defraud taxpayers, MPs warn.

Confidence in the register of companies and directors is being undermined by errors and inaccuracies, the report says. “False statements, fake entries, errors, fictional company directors and individuals named without their consent can be used to commit crime, including fraud. Making a false declaration to Companies House has been a criminal offence since 2009 but there has only been a single conviction for this offence, in 2018.”

PAC Chair, Dame Meg Hillier, said: “At a time of financial crisis the Department for Business has lost billions of taxpayers’ desperately needed funds. It shows no real signs of making the improvements that would prevent the big mistakes it has made… happening all over again.

“Years of slogans about Britain being open for business are undermined by a dysfunctional company registration system that gives no confidence either in the proper operation of business and VAT systems, or that it will help to prevent the fraud, now the biggest crime in this country,” she said.

A Department for Business and Trade spokesperson said: “Our Covid-19 loan schemes provided a lifeline to almost 1.7 million businesses across the UK and protected up to 2.9 million jobs.

“£5.1bn of Bounce Back loans have been fully repaid, £24bn worth of loans are being repaid on schedule, and we are bearing down on fraud by working with lenders, law enforcement and other partners to recover taxpayers’ money.


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