LONDON (UK) – The UK’s spending watchdog said on Wednesday that criminals might have hoarded billions of pounds by exploiting a government scheme to help British businesses affected by the pandemic crisis and large losses are expected from companies unable to repay loans.
Britain introduced the Bounce Back Loan Scheme in early May to help banks expedite issuing loans up to 50,000 pounds for businesses with 100% state guarantee.
According to the National Audit Office (NAO), the scheme provided succour to small companies and there could be potential losses to the tune of 15 billion to 26 billion pounds through fraud and default.
“Unfortunately, the cost to the taxpayer has the potential to be very high,” said Gareth Davies, who heads NAO.
As per the government’s business department (BEIS) and the British Business Bank, the scheme is slated to dole out 38-48 billion pounds by Nov. 4, which is in excess of the 18-26 billion originally thought of, the NAO said.
Small businesses were given more than 1.2 million loans worth nearly 37 billion pounds by early September. To expedite the whole process, the scheme depended on self-certification and there were no credit checks.
The NOA cited the estimate of BEIS and the British Business Bank that 35% to 60% of borrowers were likely to default on their repayment. A third-party review pointed out a high risk of fraud through multiple applications and criminals taking money with no intention of repaying it.
The quantum of losses can only be ascertained in May when the loans have to be repaid. Meg Hillier, who chairs parliament’s Public Accounts Committee, said it could be an “eyewatering loss of public money.”
“The scheme’s hasty launch means criminals may have helped themselves to billions of pounds at the taxpayer’s expense,” she said.