Concerns mount over British companies’ ability to repay Covid commercial loans | Policy

Whitehall’s spending watchdog has warned that taxpayers could lose up to 26 billion pounds in the government’s most popular commercial loan program due to the COVID-19 virus due to fraud or an inability to repay money.

The concerns were raised in the National Audit Office (NAO) report about the 100% government-backed rebate loan scheme (BBLS), which is designed to quickly disburse cheap loans of up to £ 50,000 to small businesses hit by the Covid-19 crisis.

The watchdog has warned that up to 60% of clients may fail to pay off loans due to minimal credit checks and fraudulent applications.

In the most recent figures available from the Treasury Department, a total of £ 38 billion was borrowed under the scheme by 1.3 million companies. Assuming total lending through the scheme is £ 43 billion by the time it closes at the end of November, taxpayers could end up paying a bill between £ 15 billion and £ 26 billion to cover bad debt, the office warned. Internal audit.

“The rapid launch of the scheme means that criminals may have helped themselves with billions of pounds at the taxpayers’ expense,” said Labor Representative Meg Hellyer, who chairs the Public Accounts Committee. “Unfortunately, many companies will not be able to repay their loans and banks will speed up the problem.”

“The government estimates that up to 60% of loans could go bad – that would really be a terrible loss of public funds.”

The National Bureau of Review is now calling on the government to take action to try to avoid losing too much public money.

“The government will need to ensure that strict debt collection and fraud investigation arrangements are in place to minimize the impact of these potential losses on the public purse. It should also take this opportunity to consider now what controls it will put in place to protect against misuse of any future schemes,” said Gareth Davies, head of the Civil Aviation Bureau. Like this “.

The report comes just weeks after the government extended the deadline for submitting Covid loan applications including BBLS for two months to the end of November, as it tries to avoid further fallout from the coronavirus crisis.

The spending watchdog acknowledged that the BBLS program had “succeeded in supporting small businesses quickly” since May, but the expedited application process – which eliminated credit checks and relied on self-reporting from clients – came at a cost.

The National Audit Office said the lack of affordability checks meant that hundreds of thousands of customers would struggle to pay off their debts, resulting in the government guaranteeing that taxpayer money is used to cover bank losses.

Meanwhile, the decision to provide the funds quickly left public money vulnerable to fraud – which the OIA said would not be apparent for several months. However, the Cabinet Office government fraud function estimates losses will be much higher than the usual levels of fraud associated with public sector schemes, which typically range between 0.5% and 5%.

The office said both fraud risk and affordability mean that between 35% to 60% of companies that borrow may default on loans. However, the National Bureau of Statistics warned that these estimates are “very uncertain” and that the full extent of losses will only become apparent once the loans begin to be repaid in May 2021.

Police have already made multiple BBLS-related arrests. In one case, two men were in London Claim over £ 500,000 From the emergency loan program by recruiting several people to set up fake companies and bank accounts to launder cash money.

Davis warned ministers weeks ago that there would be no “excuse” if billions of pounds in fraud continued on government plans under the second coronavirus lockdown. Davis told the Guardian That there was already a “significant” abuse of the approval system and the BBLS, which would take months to identify.

The National Crime Agency and the state-owned UK Business Bank – which oversees the Covid loan schemes – have also warned. Fraud associated with loan return.

A government spokesperson defended the Covid loan plans, saying they had provided a lifeline to thousands of British companies. We have targeted this support to help those who need it most as quickly as possible, and we will not apologize for that.

“We have sought to minimize fraud – with lenders implementing a range of safeguards including anti-money laundering and client screening, as well as transaction monitoring controls. Any fraudulent criminal requests that include penalties for perpetrators can be prosecuted, imprisonment, fines, or both.”