UK virus loans may cost taxpayer up to £26 billion – watchdog

Britain’s emergency coronavirus loans for small businesses could cost the taxpayer up to £26 billion ($34 billion, 29 billion euros) due to fraud and non-repayment, its spending watchdog said Wednesday, October 7.

The so-called “bounce back” loans, which are provided by commercial banks but guaranteed by the government, were launched in May as part of British Prime Minister Boris Johnson’s costly plan to combat severe economic fallout from the deadly COVID-19 pandemic.

“Today the National Audit Office (NAO) reports that the bounce back loan scheme succeeded in quickly supporting small businesses – but government faces a potential loss of £15 billion to £26 billion through businesses not being able to repay the loans and fraud,” the watchdog concluded in a report into the matter.

The scheme, which remains open until late November, will lend a total of between £38 billion and £48 billion by November 4, according to state estimates.

That is far more than the initial plan to lend between £18 billion and £26 billion.

The NAO, which vets public expenditure for parliament, warned in its report that the scheme was more susceptible to fraud than other state pandemic loans.

“The government imposed less strict eligibility criteria for the bounce back loan scheme than other COVID-19-related business loan schemes to improve quick access to finance for smaller businesses,” the report added.

“It relies on businesses self-certifying application details with limited verification and no credit checks performed by lenders for existing customers.

“This lower level of checks presents credit risks as it increases the likelihood that loans are made to businesses which will not be able to repay them, leading to losses of taxpayers’ money.

“Government also recognizes that the decision to provide funds quickly leaves public money exposed to the risk of fraud.”

The lending program provided businesses with one-off loans of up to £50,000 or a maximum of 25% of annual turnover, in order to help them survive the devastating economic fallout from the disease. – Rappler.com