The ringleader of an organised crime gang, with 48 convictions to his name, managed to secure £50,000 from the UK’s coronavirus bounceback loans scheme (BBLS). It was the second such case in a matter of weeks to come before an incredulous Manchester judge, who two weeks ago ordered an official explanation as to how a man with such a long criminal record could obtain money from the BBLS without even the most cursory of checks.
Lord Theodore Agnew had the answer. The minister responsible for counter-fraud in the Treasury and Cabinet Office resigned last week, citing the government’s “egregious” failure to tackle fraud. The “cack-handed implementation and catastrophic follow-through” of the BBLS was likely to be costing taxpayers hundreds of millions of pounds a month, he wrote in the Financial Times. Such eye-watering amounts erode the trust of taxpayers in the competence of a government whose reputation is already tarnished.
The BBLS, launched in May 2020, was intended as much-needed life-support for small businesses during lockdown. It guaranteed bank loans of up to £50,000. Paperwork was minimal; applications were self-certified and there were no credit checks. This was by design: earlier government efforts to support businesses were criticised for being too cumbersome, when time was of the essence. Unsurprisingly, the scheme proved wildly popular. A quarter of all UK businesses applied for the loans. In total, £47bn has been extended under the BBLS. The National Audit Office reckons as much as £5bn of it may be lost to fraud.
Warnings of fraud abounded, including from within the Department for Business, Energy and Industrial Strategy, when the BBLS was being designed. A ministerial direction was required to override concerns. But fraud was seen as a necessary evil if a lifeline was to be thrown to an economy hit by its worst crisis since the second world war. By their very nature, emergency schemes will be imperfect. The UK is not unique in this respect: a US watchdog reckons about 5 per cent of $1tn lent to support American businesses during the pandemic was through fraudulent applications.
But doing something about it ought to be a priority for the government, rather than shrugging its shoulders. Fraud generally in the UK is woefully under-investigated: £190bn a year is reckoned to be lost to fraud versus £852mn spent fighting it. The scale of the fraud epidemic within the BBLS makes it galling, too, that the government chose to shelve its long-promised economic crime bill. This would have enabled the UK’s corporate registry to do more to crack down on the abuse of shell companies by criminals and kleptocrats. Liz Truss, the foreign secretary, has promised a revival of the bill by the end of 2022, as part of a response to a potential Russian invasion of Ukraine. That is too little, too late.
In the case of the BBLS, accredited banks that extended the loans were hardly motivated to do more than basic checks when they knew loans were fully guaranteed. Now that the emergency of the pandemic has eased, banks should step up efforts to recover as much money as possible from any suspicious lending.
As it was, the government was warned it was setting up a gold mine for fraudsters: a system where they could, with very little effort, scam thousands of pounds with little chance of ever being caught. But in a country where the government, as Agnew told peers, appears to have little “knowledge or interest in the consequences of fraud to our economy or society”, that is shocking but sadly not surprising.