When we examined the Bounce Back Loan Scheme in December 2020, we warned that the Department for Business Energy & Industrial Strategy’s (the Department) focus on the speed of delivery had exposed the taxpayer to potentially huge losses. The latest data shows that business survival has come at a cost to the taxpayer: the Department estimates that an eye-watering £17 billion of taxpayers’ money given out in loans will be lost, £4.9 billion of which is the result of fraud. These losses are money that could have been spent on improving existing public services, reducing taxes or to reduce government borrowing. The Department admits that fraud within the Scheme is well outside what it would normally consider tolerable but cannot specify what that level should be. We are not yet convinced that it had done all in its power to prevent fraud. The Department and the British Business Bank (the Bank) missed opportunities to prevent fraud and the Department’s focus on ‘top-tier’ fraudsters could put other government schemes at risk due to the lack of a deterrent effect.
The Bank delivered the Scheme at impressive speed, but the Scheme’s long-term impact is uncertain and will need careful management. Early indications show that the Scheme has helped businesses to survive the pandemic in the short-term. But it is only when borrowers reach the end of their six- or ten-year loan period and either repay their loans, or they are written off if businesses have not survived, that we will be able to judge the Scheme’s impact. So far, the Scheme met its initial goal to get money to a range of businesses quickly, delivering 1.5 million loans totalling £47 billion, with most issued within the first two months.
The Department is relying heavily on lenders to fix credit and fraud risks. As the taxpayer underwrites the scheme it is vital that lenders pursue debt but at present the scheme does not incentivise lenders to do this. Lenders did not always know the business they were lending to (the speed and limited number of original lenders contributed to this). The department has also lacked data to hold lenders to account. It is unacceptable that the Department has no long-term plans for recovering overdue debts and it cannot just accept the current level of accepted debt. Government as a whole must to learn the lessons from this Scheme to plan more effectively for future crises and protect taxpayers’ money.