Launched in May 2020, the Bounce Back Loan Scheme was launched to help keep small businesses afloat during the pandemic. Under the initiative, businesses were able to approach accredited lenders and borrow up to £50,000 or a maximum of 25 per cent of annual turnover.
However, the NAO uncovered that the loan application process did not include measures such as credit checks nor full verification of the identities of firms applying for loans, leaving the entire scheme prone to fraudulent activity.
A total of 1.5 million loans were issued through the scheme totalling £47 billion, with a quarter of UK businesses submitting applications. The Department for Business, Energy and Industrial Strategy [BEIS] estimated that 11 per cent of those applications were fraudulent, equating to around £4.9 billion in value.
Back in March, BEIS said that it expected 37 per cent of loans allocated would not be repaid.
The NAO, which scrutinises public spending, concluded that counter-fraud measures were introduced “too slowly”, leaving the door open for “high levels of estimated fraud”.
In its own report, the NAO verified BEIS' claims from earlier in the year, stating that some £17 billion worth of loans - over a third of those allocated - may never be repaid either because the money went to fraudsters, or the borrower defaulted on the debt.
The National Audit Office’s auditor general, Gareth Davies, commented: “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.”
Labour MP Meg Hillier, chair of the cross-party parliamentary Public Accounts Committee, hit out at the government for having taken “colossal risks of fraud and error” in its rollout of the scheme.
Hillier said: “It [the government] is now focusing on recovering money from organised crime, yet many of the smaller-scale fraudsters will have slipped through its fingers.”
Meanwhile, the government has said it will “not tolerate” the defrauding of taxpayers, with BEIS confirming that it was “working closely with lenders and enforcement authorities to minimise fraud and ensure those that have committed fraud face consequences.”
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