According to a new report, ‘The Bounce Back Loan Scheme: an update’, counter-fraud activity was “implemented too slowly to prevent fraud effectively.”

The NAO confirmed that its focus is now on detection and recovery of fraudulent loans.

The Bounce Back Loan scheme issued £47 billion of loans since its implementation in May 2020. About one in four businesses applied to the scheme. The Department for Business, Energy and Industrial Strategy’s (BEIS) estimate of the value of fraudulent loans in the scheme as of 31 March 2021, is £4.9bn.

The BEIS estimates that £17bn of the loans will not be repaid.

The NAO report said that the department’s counter-fraud strategy evolved over time but lacked clear governance at the outset and sufficient resources. The NAO said that it did not find any documents which set out the Department’s long-term ambitions, objectives, or financial metrics to measure the impact of counter-fraud activity.

The NAO wrote: “Compared with the scale of its most likely estimate of £4.9 billion of fraudulent loans, both the £32 million additional budget for counter-fraud operations and its target to recover at least £6 million of fraudulent loans from organised crime are inadequate.”

Companies could apply for up to £50,000, or a maximum of 25% of their annual turnover under the scheme. The UK Government prioritised the need to quickly get funds to businesses during COVID-19, so banks were instructed to dispense with the usual checks on borrowers.

Over time, thirteen additional anti-fraud measures were introduced, but the NAO has ruled that these came “too late to prevent fraud. Due to limited resources, the NAO has said that recovery efforts are focused on organised crime rather than, for example, those who simply embellished turnover to secure a larger loan.

A spokeswoman for the business department said: “The support schemes provided a lifeline to millions of businesses across the UK – helping them survive the pandemic and protecting millions of jobs”.

“We are continuing to crack down on Covid-19 fraud and will not tolerate those that seek to defraud the British taxpayer. We are working closely with lenders and enforcement authorities to minimise fraud and ensure those that have committed fraud face consequences.”