UK fraud minister resigns over ‘dismal’ monitoring of Covid loans

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Whitehall’s efficiency minister resigned on Monday after sharply criticizing the UK government’s ‘dismal record’ of cracking down on fraud under a flagship state-backed coronavirus business loan scheme .

Lord Theodore Agnew, who had served as Minister for Efficiency and Transformation in the Treasury and Cabinet since February 2020 and was responsible for anti-fraud efforts, has resigned in the House of Lords. He told his peers he was unable to defend the government’s record ‘given the dismal record we have demonstrated since I took this job almost two years ago’.

His resignation was greeted with rare applause as he left the hemicycle.

More than £47billion has been given to more than 1.1million small businesses under the Government’s Bounce Back Loan Scheme (BBLS), which aimed to rescue at-risk small businesses during the pandemic. The scheme was the largest component of Britain’s £77billion state-backed Covid-19 loan scheme.

Agnew, a former businessman and founder of private equity fund Somerton Capital, said the government, which had agreed to fully guarantee loans in the BBLS, had so far reimbursed the banks almost a billion pounds sterling for loans in default, with more than one quarter deemed fraudulent.

He criticized the Department for Business, Energy and Industrial Strategy (BEIS) and the British Business Bank, which administered the BBLS, describing their oversight as “nothing short of dismal”. He added that they were “helped well by the Treasury which appears to have no knowledge or interest in the consequences of the fraud on our economy or our society”.

Rachel Reeves, the shadow chancellor, said Agnew’s resignation was “a damning condemnation of the chancellor and the government’s failures to cheat”.

National Audit Office and BEIS estimated that up to £5 billion could be at risk from fraudsters exploiting the weak controls built into the BBLS.

Agnew said BEIS only employed two fraud managers at the start of the pandemic, “none of whom had fraud experience.” He alleged they refused to engage with the Cabinet Office fraud team.

In his resignation letter to Prime Minister Boris Johnson, Agnew denounced the “desperately insufficient” record in the fight against fraud. “It is certainly not for lack of trying, but the machinery of government has been almost impregnable to my endless exhortations,” he wrote.

Agnew insisted his resignation was “in no way related” to the other scandals plaguing the Johnson government. “Any prime minister in this country should have a reasonable expectation when he takes office that the levers of government will actually be tied to the delivery of services to our citizens,” he said.

Downing Street said: ‘We are grateful to Lord Agnew for his significant contribution to government.

Agnew called for “urgent improvements” in lending data, a “much greater challenge” from lending banks and warned of a “new and dangerous phase” in the program, with banks potentially claiming relief. money from loan guarantees without “a standard bar of quality”. assurance on what we expect as basic measures against fraud”.

BEIS estimates suggest that overall losses from fraud and businesses failing to repay loans across all Covid schemes would likely amount to almost £20bn, of which around £17bn related to BBLS. Last month, the NAO criticized efforts to limit taxpayers’ exposure to fraudulent loans and warned that resources devoted to combating organized crime were insufficient.

Agnew’s comments will focus on the behavior of lenders during the pandemic. Bankers stressed they had doubts about the program when it was set up and dismissed accusations that they should have carried out stricter vetting of BBLS borrowers.

Officials from BEIS, the British Business Bank and the Treasury acknowledged the program was risky, but said they were responding to pressure during the first lockdown to work quickly to help small businesses whose operations have been hit. actually arrested.

The British Business Bank said it was “working with lenders and across government to prevent, detect and counter fraud”, adding that “the total fraud averted under the bounce back loan scheme, based on fraud prevention activities undertaken by lenders, is £2.2 billion”.

The Treasury said it had spent £100m on a taxpayer protection task force of nearly 1,300 people. “We are taking action on multiple fronts to crack down on anyone who has sought to exploit our schemes and bring them to justice. Absolutely no fraudulent claims have been reversed,” a spokesperson said.

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