BILLION OF POUNDS OF PUBLIC MONEY will be lost to fraud and error as a result of the Government’s approach to its Covid-19 business support schemes, says the Public Accounts Committee (PAC) in a new report.

Despite providing important support to businesses across the country, the latest estimate from the Department for Business, Energy and Industrial Strategy (BEIS) is that £4.9 billion will be lost to fraud and error in loans issued to ineligible businesses, but the true extent of loss will only be gradually revealed “as assessments catch up with payments made”. The Committee is concerned that identifying fraud and error so late will hinder both recovery efforts and the deterrent effect in future crises.

BEIS officials did seek ministerial directions on these schemes “highlighting some of the risks posed by fraud” but “did not sufficiently identify or reflect the potential risks from organised economic crime”. The number of new companies registered in 2020-21 rose by more than 20 per cent compared to any of the previous five years.

The Committee says 170,000 new companies at the start of a national lockdown “would certainly appear to be a warning sign warranting closer scrutiny”.  Lord Agnew suggested more than 1000 companies received emergency business support despite not trading at the start of the pandemic, referring to this as a “schoolboy error”.

BEIS also distributed £21.8 billion of grant funding through local authorities but “lacks information on recipients” of this funding: it has only estimated the level of fraud and error in under half these grants, but already expects over £1 billion of that to be lost.

Dame Meg Hillier MP, Chair of the Public Accounts Committee, said: “BEIS says it saw this risk coming but it’s really not clear where Government was looking when it set up its initial Covid response. It offered an open goal to fraudsters and embezzlers and they have cashed in, adding billions and billions to taxpayer woes. These lessons should have been learned from the banking crisis a decade ago, and could have been prepared in the Government’s pandemic exercises.  These mistakes must be written out of future crisis responses, now, and Government would do well to apply the learnings to the mounting, interrelated crises it now faces in climate change, energy supply and the cost-of-living.”

BEIS annual accounts for 2020-21 also cover the “Post Office’s mismanagement of its Horizon programme” which has “had devastating consequences for individuals wrongly accused of fraud”, with financial compensation costs “also largely falling to the public purse”. The Committee has requested BEIS formally “set out what actions are being taken to ensure Post Office Ltd remains a viable company”.

* Read the full report here.

* Source: Public Accounts Committee