Billions of pounds of taxpayers’ money will be “lost to fraud and error” as a result of the UK government’s handling of COVID business support schemes, a new report published on Wednesday alleges.
A Public Accounts Committee (PAC) report said losses due to fraud and error in the Department for Business, Energy & Industrial Strategy’s (BEIS) pandemic loan schemes stood at approximately £4.9bn ($6bn).
Fraud and error in BEIS’s business grants was just over £1bn as of the end of March 2021.
BEIS guaranteed £79.3bn of COVID-19 loans and £21.8bn of grants as part of its business support schemes during 2020 and 2021.
The department has only estimated levels of fraud and error in £11.5bn of grants and does not yet know how much will be lost in total within the remaining grants, PAC said.
“BEIS says it saw this risk coming but it’s really not clear where government was looking when it set up its initial COVID response, said Dame Meg Hillier MP, chair of the PAC.
“It offered an open goal to fraudsters and embezzlers and they have cashed in, adding billions and billions to taxpayer woes.”
The true extent of loss will only be gradually revealed “as assessments catch up with payments made”, the committee report noted.
According to the PAC, BEIS officials sought ministerial directions on these schemes “highlighting some of the risks posed by fraud” but “did not sufficiently identify or reflect the potential risks from organised economic crime”.
It said there were several “warning signs” that warranted “closer scrutiny”, especially as the number of companies that registered during the period rose by more than 20% compared to the five years before.
The committee said 170,000 new companies at the start of a national lockdown “would certainly appear to be a warning sign warranting closer scrutiny”.
Lord Agnew suggested more than 1,000 firms received emergency business support despite not trading at the start of the pandemic, referring to this as a “schoolboy error”.
Hillier added: “These lessons should have been learned from the banking crisis a decade ago, and could have been prepared in the government’s pandemic exercises.
“These mistakes must be written out of future crisis responses, now, and government would do well to apply the learnings to the mounting, interrelated crises it now faces in climate change, energy supply and the cost of living.”
The PAC called on the BEIS to continue to “refine its estimates” of the levels of fraud and error across its COVID-19 business support schemes, and “recover monies to reduce losses” to the public purse.
It comes after former Post Office workers were wrongly convicted of theft, fraud and false accounting due to the defective Horizon IT system.
The department estimates that the “Historical Shortfall Scheme”, set up by the Post Office to compensate those who may have experienced and repaid shortfalls, could cost £153m. BEIS set aside £65m.
The PAC requested BEIS, which is the service’s only shareholder, formally “set out what actions are being taken to ensure Post Office Ltd remains a viable company”.
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