The Government’s spending watchdog, the National Audit Office (NAO), has warned that up to 60 per cent of businesses may not pay back the 100 per cent Government-backed Bounce Back Loans Scheme (BBLS) because of fraudulent applications and minimal credit checks.
The concerns were raised in a report by the NAO into the BBLS, with taxpayers set to lose up to £26 billion if firms cannot pay back the coronavirus business support loans.
The BBLS was set up to provide small businesses affected by the impact of the coronavirus with loans of up to £50,000, and 1.3 million firms have now borrowed £38 billion through the scheme, according to the latest figures from the Treasury.
The NAO has projected that should the scheme reach £43 billion by its current closing date at the end of November, then taxpayers could have to cover around £26 billion in bad debts.
Gareth Davies, Head of the NAO, said: “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.
“It should also take this opportunity to consider now the controls it would put in place to protect against the abuse of any future such schemes.”
The NAO added that the BBLS had “succeeded in quickly supporting businesses” since its introduction in May, but emphasised that it believed that the quick application process, which relied on self-supporting from businesses, had presented difficulties.
The National Crime Agency and British Business Bank, which oversees the coronavirus loan schemes, has warned about fraud linked to the BBLS, with the Cabinet Office’s Government Fraud Function estimating that losses will be ‘significantly above the usual level of fraud linked to public sector schemes’.