- Commons Urgent Question
- The following Answer to an Urgent Question was given in the House of Commons on Tuesday 18 January.
- “Since March 2020, the Government have delivered a comprehensive multibillion-pound package to support individuals and businesses during the pandemic. As the House would expect, the Government have taken the issue of potential fraud relating to Covid grant schemes extremely seriously.
- Robust measures were put in place to control error and fraud in the key Covid support schemes from their inception. For instance, to minimise the risk of fraud and error and unverified claims, the coronavirus job retention scheme and self-employment income support scheme were designed in a way to prevent ineligible claims being made up front, and made grants for employees and businesses using existing data held on Her Majesty’s Revenue and Customs’ systems. That included cut-off dates around scheme eligibility and the need for customers to be registered for pay-as-you-earn online or self-assessment. In 2020-21, HMRC recovered £536 million of overclaimed grants.
- To further bolster anti-fraud measures, at the spring Budget last year, the Government invested more than £100 million in a taxpayer protection taskforce of more than 1,200 HMRC staff to combat Covid-related fraud. This taskforce is expected to recover between £800 million and £1 billion from fraudulent or incorrect payments during 2021-22 and 2022-23.
- The Government’s Bounce Back Loan Scheme supported more than £46 billion of finance to 1.5 million businesses. We are continuing to actively work with the British Business Bank, lenders and fraud authorities to tackle fraud and to recover loans obtained fraudulently. The value of prevented fraud was £2.2 billion, and we continue to recover further funds through our counter-fraud work. In addition, as part of the spring Budget last year, we announced plans to significantly strengthen enforcement activity against fraudulent bounce-back loans. That included introducing processes with the Insolvency Service to prevent the fraudulent dissolution of companies being used as a means to escape liabilities, granting the Insolvency Service new powers and investing further in the National Investigation Service.
- Importantly, throughout the pandemic we have been transparent about the estimated level of fraud and error in the Covid schemes, and HMRC’s annual report and accounts, which were laid before the House in November last year, included the latest information on error and fraud in the HMRC-administered Covid-19 schemes. Figures on estimated losses and the bounce-back loans, including those due to fraud, were published in the Department for Business, Energy and Industrial Strategy’s annual reports and accounts.
- Given the unprecedented efforts that the Government have made to protect jobs and livelihoods during this pandemic, it would have been impossible to prevent all related fraud. However, we have taken reasonable steps, and will continue to do so, to deflect and combat that fraud, and we will continue to be vigilant.”
- 3:31 pm
- My Lords, last week, the Government objected to the £4.3 billion figure quoted in various news reports. In many senses, we would be delighted if the extent of fraud arising from the Government’s coronavirus support scheme was smaller than first thought. Is the Minister able to provide a more accurate or precise figure today? If not, how will the department calculate this and when can we expect to see the correct sum?In looking ahead to this UQ last Thursday, the Minister did not answer my question about fairness. Is he able to comment today on why the Government expect working people to cancel out these losses? That would be bad enough in normal times, but is surely worse when families face an unprecedented cost-of-living crisis.
- I thank the noble Lord for his important question. I am here to defend the Government’s record in the deployment of counter-fraud measures over the last two years or so. However, I will only be able to do that in part. The assertion made by the Economic Secretary to the Treasury in the Commons debate last week that the priority was speed of distribution of funds is absolutely correct, but what has followed has been nothing less than desperately inadequate. Given the time available, I will focus on one or two emblematic failures, but these issues run far wider.The oversight by both BEIS and the British Business Bank of the panel lenders of the BBLS has been nothing less than woeful. They have been assisted by the Treasury, which appears to have no knowledge of, or little interest in, the consequences of fraud to our economy or society. Much store has been given to the extra money allocated to HMRC, but it took a year to happen, and this department was already the most competent and well-funded in that discipline; whereas at the beginning of Covid, BEIS had the grand total of two counter-fraud officials on its staff, neither of whom were experienced in the subject. They refused to engage constructively with the counter-fraud function that sits in the Cabinet Office, has considerable expertise and reports directly to me.Schoolboy errors were made: for example, allowing more than 1,000 companies to receive bounce-back loans which were not even trading when Covid struck. They simply failed to understand that company formation agents hold in stock companies with earlier creation dates. I have been arguing with Treasury and BEIS officials for nearly two years to get them to lift their game; I have been mostly unsuccessful.We move now to a new and dangerous phase: banks’ ability to claim on the 100% state guarantee for non-payment. We do this without implementing a standard bar of quality assurance on what we expect as counter-fraud measures; we know that we have serious discrepancies. For example, three out of the seven main lenders account for 87% of loans paid out to companies already dissolved. Why is the ratio so skewed? Two of the seven account for 81% of cases where loans were paid out to companies incorporated post-Covid, as I referred to a moment ago. One of the seven accounts for 38% of the duplicate BBL application checks that were not carried out after the requirement was enforced. Bizarrely, it took six weeks to get the duplicate check into place, during which time 900,000 loans, or 60% in total, were paid out, bearing in mind that some £47 billion has been paid out.
- Noble LordsHear, hear!
- My Lords, I think we have just witnessed one of the most dramatic moments we have ever seen in your Lordships’ House, from a Minister who felt his integrity meant that he could no longer ensure he remained a member of the Government. I do not know if the noble Lord on the Front Bench wishes to comment; there is nobody else to take questions, so he may wish to just move to the next business.
- My Lords, may I take this opportunity to say on behalf of these Benches how much we appreciate the honour and integrity that has just been displayed by the Minister’s resignation? His resignation has not yet been accepted, so he still remains the Minister, but I do not think anybody could have raised questions more forcefully, accurately or completely than he has. On a personal level, I want to say how much we will miss the noble Lord, Lord Agnew, in this role, not least because of his integrity.
- My Lords, we must now move on.