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Long-term impact of Bounce Back Loans is uncertain, say MPs


The Bounce Back Loan Scheme was delivered at a breakneck speed, but two years on the government still hasn’t got a long-term plan to chase overdue debt and track down fraudsters, an influential group of MPs has said. 


27th Apr 2022
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In a new report published today, the Public Accounts Committee (PAC) said that although the Bounce Back Loan Scheme (BBLS) helped businesses survive in the short term, its long-term impact is uncertain and will “need careful management”.

The group has urged the department for business, energy and industrial strategy (BEIS) to put in place a clear strategy to manage the long-term legacy of the BBLS. 

“More than two years on BEIS has no long-term plans to chase overdue debt and is not focussed on lower-level fraudsters who may well just walk away with billions of taxpayers’ money,” said Meg Hillier, the chair of the committee. 

Following up on the committee’s 2020 BBL report, the PAC again lambasts the government delivery of the scheme at breakneck speed, yet failing to ensure lenders undertook credit or affordability checks or verify application information. 

“With weary inevitability we see a government department using the speed and scale of its response to the pandemic as an excuse for complacent disregard for the cost to the taxpayer,” said Hillier.  

Relying on lenders

The group of MPs has criticised BEIS for relying on lenders to fix credit and fraud risks. The MPs said that the scheme does not incentivise lenders to pursue debts. 

The PAC also said that it is “unacceptable” that lenders are not expected to continue to pursue borrowers after 12 months. 

“Lenders can claim on the government guarantee before the end of the 12-month period if they have conducted what they consider to be a ‘sufficient and robust level of recoveries’ and have concluded that no further payment is likely,” explained the PAC report.  

The PAC said the 100% government-backed loans mean that if the borrower doesn’t pay, “business survival has come” at a “staggering” cost to the taxpayer.

The group has called on the department to set out a strategy for collecting overdue payments after the lenders have completed their 12-month requirements.

“The committee was unpleasantly surprised to find how little government learned from the 2008 banking crisis and even now are not at all confident that these hard lessons will be embedded for future emergencies,” said Hillier. 

Distorted competition 

Another consequence of the scheme was that the low interest rates were uneconomical for smaller lenders, which left a space for larger lenders, who are less active in the SME lending market, to swoop in and take a 90% share of the scheme’s lending. 

The PAC said this distorted competition in the SME lending market and the committee expressed its concern that this could have “unforeseen consequences”, especially on the British Business Bank’s objective to create a diverse finance market.

The MPs have recommended that the Bank addresses the longer-term impact of the scheme on the lending market.  

“Eye-watering” losses

This follows on from the PAC’s previous report on Bounce Back Loans in 2020, which criticised BEIS’s focus on speed of delivery which “exposed the taxpayer to potentially huge losses”. 

The group of MPs have long scrutinised the government’s handling of Covid loan fraud, and today’s report continued that trend by highlighting the “eye-watering” £17bn lost as a result of the scheme which “could have been spent on improving existing public services”. 

The PAC report sets out that only £32m has been allocated to counter fraud and BEIS doesn’t know if lenders or law enforcement agencies have the resources to tackle the issue. On top of that, the MPs raised concerns about limitations with the banks’ loan data which is spread across 24 commercial lenders. 

There was also criticism aimed at BEIS’s placing less emphasis on smaller-scale BBL fraud. “We are concerned that its complacency towards smaller-scale fraud and turnover misstatement provides a limited deterrent effect and could encourage fraudsters to try to take advantage of other government schemes.” 

Hillier said BEIS should be explicit on the trade-offs and level of fraud it is prepared to tolerate from the outset the next time it launches an emergency business support scheme, and to identify what anti-fraud measures are needed. 

The PAC’s criticisms of complacency follows similar opprobrium from Lord Agnew, who described the Treasury civil servants' approach to tackling Covid fraud as being a “Dad’s Army operation”. 

Lord Agnew famously resigned from his position as counter-fraud minister in the House of Lords after “schoolboy errors” led “thousands of companies to receive bounce back loans that were not even trading when Covid struck”.

The PAC’s findings echo that of the National Audit Office, which reported that the government’s Covid loan counter-fraud measures were “inadequate”.

Replies (15)

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Danny Kent
By Viciuno
27th Apr 2022 09:34

They should start with low hanging fruit. Which companies fraudulently (we don't need to debate the semantics of this word again) applied for and received more than one bounce back loan?

Which companies fraudulently inflated their turnover to receive the full 50k loan?

Both these checks could be done quickly, and cheaply. Information is already at the fingertips of HMRC and the banks. I could even probably throw together a spreadsheet to do this with little trouble, and I'd consider my excel skill mediocre at best.

Wouldn't surprise me if they have already done these checks and it has transpired that the figure is much higher than £17bn.

Thanks (1)
Replying to Viciuno:
By Hugo Fair
27th Apr 2022 12:14

And ... which companies weren't even established until AFTER the eligibility date?
Which companies had ceased trading BEFORE the cut-off date?

But as well as tracking down these relatively easy to identify malefactors, BEIS should be kicking themselves (and so at least 'learning lessons' that shouldn't have needed to be learned) by focussing on those who should have performed these checks but failed to do so - safe in the knowledge that it wouldn't cost them.
The banks.

The free ride given to the banks is arguably worse than the more overt cronyism that winds-up the leader writers, and yet they're still 'too big to fail' and apparently should never be accountable for their actions.
What halfwit came up with the rule that "lenders are not expected to continue to pursue borrowers after 12 months"? Actually that's unfair on all the other hard-working halfwits scattered across across our bureaucratic government.

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Replying to Viciuno:
By philaccountant
27th Apr 2022 13:14

I think the main focus is going to be recovering whatever they can from the debacle. If people inflated their turnover but are paying the loans back, in the grand scheme of things that's never going to be the priority, considering the scale of the "losses".

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By Justin Bryant
27th Apr 2022 09:42

I find this all entirely unsurprising. No heads will roll over this. It will just be business as usual for these grossly incompetent idiots. Just think what good that £17bn (and I expect that's a conservative estimate) could have done to improve public services or avoid tax increases etc. That's at least around an entire year of SDLT receipts!

What a joke.

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By sanjay100
27th Apr 2022 10:25

This is theft yes thousands of people will have pocketed 50K free money. Do you think they would have paid tax on it too ? Its tantamount to a lottery win.

How on earth can government allow people to get away with it. Its totally unjust.

People should be put in prison for claiming two bounceback loans. What message does it send to others.

Thanks (2)
27th Apr 2022 10:55

Once again arrogant civil servants did not consider our expertise to be important.

If they had bothered to ask we would have told them there was no rush to provide the loans as all legitimate businesses would just need to know it was going to be available.

Secondly, we would have told them to use us as gatekeepers to ensure only legitimate businesses could request a loan.

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Replying to RFL H:
By sanjay100
27th Apr 2022 12:10

Totally agree. Even though I know the chancellors family well I think Rishi Sunak should resign for the fiasco on the bounceback loans not because other reasons which have been mentioned in the press recently.

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By North East Accountant
27th Apr 2022 12:35

Underlying message from the Government........rob the taxpayer blind and......we'll do nothing about it.

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By bluebaron
27th Apr 2022 12:53

Disgraceful; and national insurance has gone up because of this and other fraud and wastage on a massive scale.

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By Ian McTernan CTA
27th Apr 2022 13:28

I love how the PAC tries to blame 'the government' (ie trying to label the Tories) instead of blaming those responsible: civil servants, permanent secretaries, etc in many instances.

Maybe the PAC should recommend that some civil servants aren't up to scratch and be sacked (no, not moved department, but actually sacked!) and then come up with some concrete plans on how things could be improved.

Way too much time is spent in this country investigating why something might have gone wrong, rather than actually dealing with the issues and fixing. Blame is easy, but maybe we should change the law so that those who moan must also propose workable solutions.

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By indomitable
27th Apr 2022 13:36

This is an absolute disgrace and a complete fiasco. The pandemic really has shone a light on the inadequacies and quality of many people within government and the civil service.

£17BN Loss, I am outraged at this! Not to mention track and trace another I don't know £30BN!! Sack all that were involved in my opinion. How dare they waste so much money and then have the audacity to increase taxes.

I actually have written to my MP twice about the debacle over much of the management of the pandemic.

And where is the accountability? In every other walk of life someone would lose their job.

In government they get a knighthood or peerage!

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By anthonystorey
27th Apr 2022 15:28

I think that Rishi Sunak should be made to pay back the misspent billions out of his own wealth. Worst chancellor ever and totally out of touch with the real world.

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By Justin Bryant
28th Apr 2022 09:41

"The Treasury could not immediately confirm how many people would be recruited to the PSFA but said it would be staffed by an “elite team” of data experts and economic crime investigators tasked with recovering public funds."

I expect that 99% of these BBL frauds could have been prevented with a quick Google search of CH etc. and/or other very basic checks. It's a disgraceful and unforgivable failure to apply the simple old prevention/cure approach isn't it and instead applying the horse/stable door remedy?

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Replying to Justin Bryant:
By Justin Bryant
28th Apr 2022 10:56

"People are rightly furious that fraudsters took advantage of our vital Covid support schemes, and we are acting to make sure they pay the price."

I think he means:

"People are rightly furious that we allowed fraudsters to easily take advantage of our vital Covid support schemes, and that we are now trying to close the proverbial stable door."

Thanks (1)
By indomitable
28th Apr 2022 15:37

And don't get me started about HMRC another complete and utter shambles. Got a demand 6 weeks ago for PAYE, checked and paid it over a month ago for my practice

Today another demand comes in asking for more money for some of the same periods that were paid in full 6 weeks ago.

Tried calling gave up after 10mins no answer.

This has not only happened to me but clients of mine.

They are totally unfit for purpose, and I think it is outrageous that they make these demands, based on NOTHING. How do they get away with this?

Another organisation where all the bosses at the top need sacking.

I feel another letter to my MP coming on!

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