UK ministers will create a counter fraud task force to recover money stolen from state-backed Covid support schemes following sharp criticism of government efforts to clawback the billions lost to fraudsters.
The Treasury is to spend £25mn on recruiting a team of data analytics experts and economic crime investigators to find criminals who stole billions of pounds of taxpayers’ cash during the pandemic.
The team will be operational by the summer, Rishi Sunak, chancellor, revealed on Wednesday. However, fraud experts have said efforts to recover the money may be too little and too late given that much of the lost money will have been spent or moved out of the country.
Close to £5bn is estimated to have been lost to fraud in the state-backed bounce back loan scheme alone, which guaranteed bank loans of up to £50,000 for small businesses struggling to stay afloat in the first lockdown.
The programme came with minimal checks by banks on borrowers in order to accelerate lending, which opened the door to large-scale fraud by people inventing companies, inflating their revenues and applying to several banks for money.
MPs have fiercely attacked the Treasury and business department over the lack of resources to recover the money lost through fraud.
The House of Commons’ Treasury committee on Wednesday questioned officials from the Treasury and the British Business Bank, which administers the bounce back scheme, over the extent of the fraud losses.
MPs on the committee, which include chair Mel Stride, repeatedly asked the officials why more was not done to tackle the huge losses being uncovered in the scheme, and whether more checks should have been carried out on borrowers before they could access the loans.
But Tom Scholar, permanent secretary at the Treasury, defended the structure of the scheme given the need to lend quickly to companies at the time.
Patrick Magee, chief commercial officer at the BBB, said £62mn had been paid to banks to cover loans that were suspected to be fraudulent so far.
In total, he said £1.9bn of claims had been submitted to the government by banks of which £350mn has been paid out to cover defaulted loans as well as fraud. About £240mn in loans has been stripped off the guarantee, however, owing to mistakes made by the banks.
More than £5.5bn of taxpayer money was also stolen by fraudsters or given out incorrectly under the government’s furlough scheme, self-employed support and “eat out to help out” schemes, according to HM Revenue & Customs.
The new public sector authority will double the government’s central capacity to counter fraud. It will also be asked to spot suspicious companies and people seeking government contracts, with authority to carry out mandatory inspections on Whitehall programmes to uncover fraud vulnerabilities.
Sunak said: “People are rightly furious that fraudsters took advantage of our vital Covid support schemes, and we are acting to make sure they pay the price.”
Recruitment will start next month for a chief executive for the group who will report directly to the chancellor and the minister for Brexit opportunities and government efficiency.
Sunak will discuss further details of the team when he chairs the first meeting of the government’s new efficiencies and value for money committee on Wednesday, set up at the request of the prime minister.