The Department for Business and Trade (DBT) is “effectively writing off” nearly £1bn paid out erroneously by local authorities on its behalf in pandemic support. Meanwhile, of an estimated £2.2bn lost to fraud and error in COVID-19 schemes, only about £10m has so far been recovered.
A report published today by the House of Commons Public Accounts Committee (PAC) says the Business Department (previously the Department for Business, Energy and Industrial Strategy or BEIS) continues to make slow progress on its counter fraud activities related to the Bounce Back Loan Scheme, and its “lack of curiosity” about lenders’ performance increases the risk of losses for the taxpayer.
The PAC report refers to the final full year annual report and accounts for BEIS before its responsibilities for energy and science were transferred to newly formed departments and it merged with the then Department for International Trade to form DBT. The PAC report cites the evidence submitted by ICAEW to the inquiry and includes ICAEW’s call for DBT to devote greater attention to fraud recovery.
Despite accepting that grant payments made through councils to their local businesses under COVID-19 business support grant schemes were “not in line with how the scheme was meant to work”, the Business Department does not expect to recoup these funds. Of the estimated £985m of grants paid out in error, only £5.3m (0.7%) has been recovered.
The first wave of grant schemes was paid to businesses by local authorities according to their ratepayer databases, but inaccuracies in these databases led to the wrong value of grant being paid out in error in some instances. The PAC report says it is unclear why the Business Department is not attempting to recover the erroneous grant payments.
“In addition, we have not seen the evidence the Department has to support its view that the majority of the first wave of business support grant scheme fraud and error estimate relates to error rather than fraud, as the Department’s fraud and error estimate has not been disaggregated in its 2021/22 Annual Report and Accounts,” the report says.
In its recommendations, the PAC calls on the Business Department to quantify its latest estimates of fraud and error in each of the COVID-19 grant schemes and explain its justification where it is not seeking to pursue recoveries from businesses.
The report also criticises a lack of clarity over how the Business Department holds to account third parties that deliver multi-billion-pound programmes on its behalf. Although HM Treasury’s Managing Public Money guidelines are clear that accounting officers are personally responsible for the resources of their own organisation – a point the PAC says was stressed by ICAEW – a laissez-faire approach to departmental oversight may lead to taxpayers’ money not being properly protected.
In its recommendations, the PAC calls on the Business Department to set out how it retains robust oversight and challenge of third parties delivering major policies and holds these bodies to account for achieving value for money and protecting taxpayer interests.
Dame Meg Hillier MP, Chair of the Public Accounts Committee, says: “At a time of financial crisis, the Department for Business has lost billions of taxpayers’ desperately needed funds. It shows no real signs of making the improvements that would prevent the big mistakes it has made over many years, especially during the pandemic, happening all over again.”
Oliver Simms, ICAEW’s Manager for Public Sector Audit and Assurance, comments: “We welcome the PAC’s report, which echoes many of the points we made in our submission.
“It is vital that the government acts on the PAC’s recommendations to recover as much as possible of the funds that were lost to fraud and error, and that lessons are learned for future schemes. ICAEW believes that greater government investment in fraud prevention and recovery would result in a net benefit for the taxpayer.”
Meanwhile, the PAC report warns that confidence in the Companies Register is undermined by errors and inaccuracies, allowing false statements, fake entries, errors, fictional company directors and individuals named without their consent to be used to commit crime including fraud.
Although making a false declaration to Companies House has been a criminal offence since 2009, there is a record of just one conviction for this offence, in 2018. New powers are being granted to Companies House to tackle incorrect entries in the Companies Register.
“Years of slogans about Britain being open for business are undermined by a dysfunctional company registration system that gives no confidence either in the proper operation of business and VAT systems, or that it will help to prevent the fraud, now the biggest crime in this country,” Hillier says.
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