UK’s anti-fraud minister resigns over ‘deplorable’ supervision of Covid loans

Whitehall’s minister in charge resigned on Monday after sharply criticizing the UK government’s “terrible results” in tackling fraud in a leading state-backed coronavirus business loan scheme.

Lord Theodore Agnew, who has served as Minister of Efficiency and Transformation in the Ministry of Finance and the Cabinet since February 2020 and was responsible for anti-fraud efforts, has resigned from the House of Lords.

In response to an urgent Labor question about Covid loan fraud, he told colleagues he was unable to defend the government record.

More than £ 47 billion has been allocated to more than 1.1 million small businesses under the government’s Loan Recovery Scheme (BBLS), which aimed to save small businesses at risk during the pandemic. The scheme was the largest component of Britain’s state-sponsored Covid-19 loan program worth £ 77 billion.

Agnew says the government, which has agreed to fully guarantee BBLS loans, has so far repaid banks nearly £ 1 billion in overdue loans. He added that more than a quarter of that was valued for loans that were fraudulent. Previous official estimates of government loan guarantees made in September 2021 were only £ 19 million.

Agnu criticized the Department of Business, Energy and Industrial Strategy (BEIS) and the state-owned British Business Bank, which administers the BBLS.

“The oversight of both the BEIS and the British Business Bank over BBLS panel lenders is no less sad,” Agnew said. “They have been skillfully assisted by the Ministry of Finance, which seems to have no knowledge or interest in the consequences of fraud for our economy or society.

The Court of Auditors and BEIS have estimated that up to £ 5 billion could be put at risk by fraudsters who use the weak checks that have been built into the loan repayment scheme.

Agnew said BEIS had hired only two anti-fraud officers at the start of the pandemic, “none of whom has experience in the subject.” He claims they have refused to engage with the cabinet’s anti-fraud team.

In his resignation letter to Prime Minister Boris Johnson, Agnew condemned the “desperately inadequate” experience in tackling fraud. “It was certainly not due to lack of experience, but the government machine was almost impregnable to my endless exhortations,” he wrote.

Rachel Reeves, the shadow chancellor, said Agnew’s resignation was “a humiliating indictment against the chancellor and the government’s failures in terms of fraud”.

“The fact that the government’s anti-fraud minister thinks he’s unable to protect the government’s billions of pounds of taxpayer money donated to criminals tells you everything you need to know about the government’s incompetence,” she said.

Agnew insisted that his resignation was “in no way connected” with other scandals involving the Johnson government, and focused his blame on Whitehall. “Every prime minister of this country must be able to reasonably expect, when he takes over the mantle of power, that the levers of government are in fact linked to the provision of services to our citizens,” he said.

The former minister called for “urgent improvements” in lending data, a “far greater challenge” for creditor banks in detecting discrepancies in data and additional training for Finance and BEIS officials to combat fraud.

He warned of a “new and dangerous phase” in the BBLS, as banks were able to demand money from loan guarantees without a “standard quality assurance tape of what we expect as basic anti-fraud measures”.

Agnew also claims that “student mistakes” were made by officials and creditors, noting that more than 1,000 companies that received repayable loans (BBLS) did not trade before the pandemic.

BEIS estimates that total fraud losses and companies unable to repay loans in all Covid schemes are likely to amount to almost £ 20 billion, with around £ 17 billion of these losses related to the BBLS.

The BBLS has been criticized by public spending oversight bodies for providing full state guarantees for loans granted with only minimal identity checks on the borrower.

Critics say it has opened the door to massive tax fraud and money laundering, with employees and banks slowly tightening rules to prevent blatant criminal activity, such as multiple apps or apps from companies set up after or after the pandemic. began.

Agnew’s comments will focus on creditors’ behavior during the pandemic. The bankers said they had concerns about the scheme when it was set up and dismissed accusations that it should have scrutinized BBLS borrowers, saying the scheme was set up by the government to distribute cash as soon as possible. .

Officials at BEIS, the British Business Bank and the Treasury have acknowledged that there are risks to the scheme, but say they have responded to pressure in the first blockade to work quickly to help small businesses whose operations have been effective. stopped.

The NAO also criticized the government’s efforts to limit taxpayers’ exposure to fraudulent loans as inadequate in a report last month, and warned that there were not enough resources to tackle organized crime.

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