Skip to main content

Coronavirus Grants: Fraud

Volume 818: debated on Tuesday 25 January 2022

Private Notice Question

Asked by

To ask Her Majesty’s Government what is the expected cost of fraudulent claims made under the Coronavirus Grant Schemes.

My Lords, this Question might seem familiar because it is the third time that we have asked it. I thank the noble Viscount, Lord Younger, for coming to the House to answer this today.

Perhaps I should start by thanking my noble friend Lord Agnew for allowing me the opportunity to stand here today—

I promise that I shall stay the course. Throughout this dreadful crisis that we have had to endure over the past two years, the Government’s number one priority has been to protect jobs and livelihoods while also supporting businesses and public services across the UK. We had to work particularly quickly to produce some generous packages to give the necessary support back in lockdown 1.

I hesitated because I was not sure if the noble Viscount had finished—because, again, he did not answer the Question. Whistleblowing is vital in exposing undesirable or unlawful conduct. The Government rightly expect others to operate to high standards but do not seem to be able to meet those standards themselves.

Yesterday, the serious frustrations of the noble Lord, Lord Agnew, finally bubbled over, leading him to blow the whistle on his own colleagues as he departed. His lengthy statement yesterday exposed chaos and mismanagement across government, but it did not answer the question posed by my noble friend Lord Tunnicliffe. The Chancellor has gone AWOL, and, in his absence, although the noble Viscount did not give the figure today, other junior Ministers have insisted that putting the coronavirus fraud at £4.3 billion is too simplistic.

Taxpayers are footing the bill; your Lordships’ House and they deserve answers. If it is not £4.3 billion-worth of fraud, how much is it? If he has not got the answer today—I think noble Lords will understand why—can we at least be told when we will know and exactly how much of that the Treasury intends to write off?

It is a slightly complicated picture, but the Government continue to work actively with the British Business Bank, lenders and fraud authorities to identify and address fraud risks and recover loans obtained fraudulently. On the noble Baroness’s question, the £4.3 billion figure is not recognised by HMRC; it is an inference made in the report by the Times, which I am sure the noble Baroness has read. The figure that was taken out of that was £5.8 billion, which was in the report and accounts of HMRC. Some £500 million, which was returned, should be deducted from that, so we think that there is £800 million to £1 billion to recover.

My Lords, I am grateful to my noble friend. Was not the object of the loan scheme to enable existing companies to continue trading through the pandemic? If, as we heard from my noble friend Lord Agnew yesterday, banks paid out money to companies incorporated post Covid, and did so negligently, are we not entitled to revoke the 100% taxpayer guarantee?

Again, we should remember that, in lockdown 1—roughly from March to April 2020—there was a clear need for urgent action to encourage a greater take-up of different support measures. That is why we intervened to change the design of the bounce-back scheme to make it 100% backed, which led to £46 billion being sent to 1.5 million businesses. To take up my noble friend’s point, I am sure that lessons can be learned, but, at the time, it was imperative that the Government acted quickly.

My Lords, when Covid struck, HMRC stopped answering its fraud-reporting phone line—the phones just rang and rang. The alternative way of reporting fraud online required entering intrusive personal details that most people were afraid to provide. How much fraud does the Minister estimate has been unreported due to the Government’s attitude towards whistleblowers?

The noble Lord’s question is focused on HMRC, but I can say that the expected losses to error and fraud in 2021 were £5.8 billion, and expected losses for 2021-22 will be published in due course. But a lot of work is going on in terms of recovery, and the expected recovery by HMRC is estimated to be between £1.3 billion and £1.5 billion.

My Lords, did the Government anticipate the potential use of existing ready-made off-the-shelf companies as instruments of fraud? Is it yes or no?

I think the answer has to be no. We had to move particularly quickly in very difficult circumstances. Of course, there is always a risk of fraud—all fraud is unacceptable, but there was a risk because we had to move quickly. As I say, there is a lot of work and, particularly from HMRC’s point of view, in the months and years ahead there is big scope to recover.

My Lords, fraud in government is rampant and is estimated at just under £30 billion—so writes the noble Lord in the Financial Times today. Why, in those circumstances, did the Government agree to drop the long-awaited economic crime Bill from next year’s legislatory list for Parliament to consider?

I do not have an answer to that; I will have to get an answer to the noble Lord. I say again that the schemes brought forward during those very difficult times were designed in response to a pronounced market failure, particularly with the UK’s smallest businesses struggling to access the finance that they needed to survive at the start of the pandemic. Voices from across the spectrum, including from the party opposite, were shouting at us to be sure that we acted quickly. We were already doing so, but we continued to do so.

My Lords, I express sympathy for my noble friend: yesterday he took the letter and today he has drawn the short straw. Does he accept that this matter really is important now? This was an Answer to an Urgent Question in the other place, and it is important that we have a definitive Statement from the Government giving as many figures as possible. While I acknowledge that fraud is more difficult to detect than to denounce, we need to have these facts.

My noble friend makes a very good point. As I alluded to earlier, HMRC and BEIS are working very hard in conjunction with the lenders to recover as much as we possibly can. I reiterate that the figures, as noble Lords will tell me, are big. We have paid out altogether more than £400 billion to support the economy. It is fair to say that to that extent it has been a great success, because the economy is in very good shape.

My Lords, I listened to the debate yesterday, in which the noble Lord, Lord Agnew, indicated that some lenders were failing on fraud. Can the Minister say which lenders are failing on fraud?

I do not accept the premise that lenders are failing on fraud, and, of course, the noble Lord, Lord Patel, will know that I am not in a position to name individual lenders. However, lenders continue to work closely with the Government on counterfraud, including recovering £1.2 million on facilities identified as fraudulent so far. It is important that lenders are held accountable for taxpayers’ money, and all lenders continue to be subject to a robust audit process by the British Business Bank.

My Lords, two 30-second checks would have saved the Government billions of pounds. First, no one can open an ISA account without providing a national insurance number, but the Government did not require that information from anyone seeking furlough support. Secondly, all applicants for Covid loans should have been required to provide an HMRC reference number. That would have killed off all dormant companies and offshore tax haven companies. Will the Minister please explain why these two 30-second checks were not applied?

That is a very fair question and of course the sort of detailed question that I cannot answer. In terms of the fraud that we are looking to identify as part of the loan book, as of 17 December 2021 some £67 million worth of claims had been settled for the loan scheme. Of those, £13 million for 337 facilities had been flagged by lenders as suspected fraud. That is the sort of detail that we want to get into.

My Lords, I too have sympathy with my noble friend the Minister, but will he reassure the House that the Government are looking seriously at the remarks and observations made by our noble friend Lord Agnew yesterday, particularly at any recommendations that he has for improving the situation and lessons learned at both BEIS and the British Business Bank, as well as at HMRC?

I am aware that my noble friend has much experience in this area, linked to her work on pensions and in respect of HMRC. She is absolutely right: preventing fraud is incredibly important. We designed the schemes to prevent as much fraud as possible before any payments were made, while still quickly supporting those who needed them in unprecedented circumstances. For example, the first furlough payments went out within six days of being announced. We had to move quickly but, clearly, as she said, lessons will be learned.

My Lords, yesterday, my noble friend Lord Agnew of Oulton told the House that he was at odds with what he said was the Treasury relying on after-the-event audits, saying that this was “too reactive” and too late. Why have the Government relied on auditing lenders after the event instead of taking preventive steps beforehand?

That is a good point. It is certainly something that I shall need to look into and I shall need to write to my noble friend about it. There is no question but that the auditing side is particularly important.

My Lords, the sorts of fraud that we heard so vividly described yesterday would have been a lot more difficult if directors’ identities had to be verified. The Government announced some 18 months ago that they would do that. When will they start insisting that Companies House verify identities of directors?

My Lords, what is the point of designating a Minister as Minister for Fraud Prevention and then not listening to his advice? If you were the Chancellor of the Exchequer, surely you would want to listen to that advice and take some account of it.

My Lords, is it true that BEIS had only two officials working on counterfraud at the start of the scheme and they have so far refused to engage with the Cabinet Office?

My understanding is that BEIS has invested significantly in the expansion of its counterfraud function, in terms both of increased resource and, critically, of capabilities. A key role of its counterfraud function will be to embed a governed and risk-assessed approach throughout BEIS and the arm’s-length bodies.

Yesterday, the noble Lord, Lord Agnew, was accountable and did the right thing, but is not the Chancellor of the Exchequer ultimately responsible for this mess and should he not resign?

No, he should not resign. I go back to the most fundamental point, which is that we had to act particularly quickly back in lockdown 1 to support businesses. As a result, we put in the £400 billion package of economic support that I referred to earlier. That protected more than 14.5 million jobs and thousands of businesses. It is a great credit to the Chancellor that he took those bold steps.

My Lords, as we seek to claw back money misspent over Covid, can the Minister tell us whether those who benefited from fast-track VIP PPE contracts and delivered unfit goods will be paying back the money?

On PPE, we acknowledge the severity of these claims, and the DHSC takes its responsibilities around due diligence extremely seriously. Of course, this goes back a bit further. As the DHSC has recently set out, all offers that come to the mailbox are triaged by an official from the high-priority appraisals team to be processed and responded to.