This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.
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Despite providing important support to businesses across the country, billions of pounds of taxpayers’ money will nonetheless be lost to fraud and error as a result of the Department for Business, Energy & Industrial Strategy’s approach to its COVID-19 business support schemes. Of £79.3 billion worth of loans guaranteed by the Department to support businesses during the first year of the pandemic, it estimates that it will lose £4.9 billion to fraud and error, where loans were issued to ineligible businesses.
Some of its eye-watering losses only represent the Department’s best estimates so far, so the actual amount of taxpayer’s money that will be lost could be even higher. Despite distributing over £21.8 billion of grant funding through local authorities, the Department lacks information on recipients of grant payments where these were administered by local authorities when acting as agents of the Department. It has only estimated the level of fraud and error in less than half of these grants, but already estimates that over £1 billion of the £11.5 billion examined will be lost.
The Department will not know the true extent of total fraud and error within its COVID-19 business support schemes for some time as its assessments gradually catch up with payments made. We are concerned that identifying fraud and error so late will hinder recovery efforts as the money will have been spent and the trails will have long ago gone cold. We are unconvinced that the Department’s current plans for recovering money claimed fraudulently will act as a sufficient deterrent to those considering committing fraud.
Given the Department had anticipated a heightened risk with these schemes, we are disappointed that it does not appear to have used all the tools at its disposal to minimise fraud and error. It is now imperative that the Department learns lessons from its COVID-19 business support schemes to inform current and future schemes, whether these are providing funds during a crisis or as part of business as usual.