Tens of millions of pounds loaned to Swindon businesses
Businesses around Swindon have received tens of millions of pounds through one of the government’s coronavirus loan schemes.
But suspected fraud and some firms' inability to repay the
borrowed money could cost taxpayers across the UK tens of billions, an official
report has warned.
Companies in the borough's two parliamentary constituencies
received 3,294 loans worth £92.5 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 per cent 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
per cent to 60 per cent 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.
Head of the NAO Gareth Davies 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 and 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.”
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