Wakefield businesses get more than £150 million in Covid bounce back loans
Businesses in Wakefield have received more than £150million through one of the Government's man Covid loan schemes to help struggling firms.
But suspected fraud and inability to repay the borrowed money could cost taxpayers across the UK tens of billions, an official report has warned.
Companies in Wakefield’s four parliamentary constituencies had received 6,071 loans worth £169 million through the Bounce Back Loan Scheme by October 4, the latest government-owned British Business Bank figures show.
The loan scheme started in April and helps small and medium-sized businesses hit by the pandemic to borrow between £2,000 and £50,000, capped at 25% of their turnover.
The Treasury backs the loans, which are handed out by commercial lenders, and borrowers do not have to pay fees or interest for the first year.
But a report by the National Audit Office, the UK’s public spending watchdog, warned the Government could face huge losses due to fraudulent claims and firms being unable to repay.
Across the UK, 1.3 million payments worth £38 billion had been issued through the BBLS by October 4.
The British Business Bank – which delivers the scheme – and the Department for Business, Energy and Industrial Strategy estimate that 35% to 60% of borrowers could fail to repay the money.
The NAO said this could lead to a maximum of £26 billion in losses if lenders pay out £43 billion by November 4, although it warned the estimates are “highly uncertain”.
The deadline for applications has been extended to the end of November.
Gareth Davies, head of the NAO, said the Government had acted decisively to get cash into businesses’ hands “as quickly as possible”.
“Unfortunately, the cost to the taxpayer has the potential to be very high, if the estimated losses turn out to be correct,” he added.
“Government will need to ensure that robust debt collection and fraud investigation arrangements are in place to minimise the impact of these potential losses to the public purse.”
The House of Commons Public Accounts Committee, which oversees government spending, will hear evidence about the scheme at a hearing on November 5.
The Labour Party’s Meg Hillier, chairwoman of the committee, also said the BBLS had been swift in getting cash to firms.
“But the scheme’s hasty launch means criminals may have helped themselves to billions of pounds at the taxpayer’s expense,” she added.
“Sadly, many firms won’t be able to repay their loans and the banks will be quick to wash their hands of the problem.
“The Government estimates that up to 60% of the loans could turn bad – this would be a truly eyewatering loss of public money.”
A National Crime Agency spokesman said its intelligence suggested the BBLS was being exploited by organised criminals.
He added: “On the basis of our assessments, we have provided red flag indicators to the banking sector to aid their detection of fraudulent applications.”
A Government spokesman said the NAO report showed that its loan schemes “have provided a lifeline to thousands of businesses across the UK”.
He added: “We targeted this support to help those who need it most as quickly as possible and we won’t apologise for this.
“We’ve looked to minimise fraud – with lenders implementing a range of protections including anti-money laundering and customer checks, as well as transaction monitoring controls. Any fraudulent applications can be criminally prosecuted for which penalties include imprisonment or a fine or both.”