£500m bill to taxpayers as firms given Rishi’s Covid loans go bust

MORE than 16,000 businesses that received bounce-back Covid loans have gone bust without paying the money back.

The mass insolvencies may have cost the taxpayer as much as £500million, a figure which will grow as more firms collapse.

The scheme was targeted by criminals because companies could self-certify to claim the cash. Dozens of individuals have been arrested, while more than 150 directors have been barred from running companies.

Last week the business department revealed that firms collectively owing £3.2billion had fallen into arrears, while 61,475 loans were in default, potentially costing the taxpayer £1.9billion. Official estimates showed that as much as £17billion of the £47billion loaned under the scheme will not be repaid.

The extraordinary sum has led critics to turn on the former chancellor Rishi Sunak, who has built his pitch to be prime minister on being fiscally responsible.

Senior Tories labelled approach to Covid handouts ‘shamefully negligent’. The latest figures, obtained by the BBC under Freedom of Information laws, were described as ‘shocking’ by a former head of the Serious Fraud Office Sir David Green.

He said: ‘You wouldn’t send an army into battle without assessing the risks. And just the same in this situation, the risks, which were obvious, should have been assessed and addressed.’

There were 114,750 small firms in arrears on their loan repayments by the end of June, or one in 14 of the 1.5million loan recipients.

In March 2021 the Government estimated £4.9billion would be lost to fraud and error, but this had fallen to £3.5billion by March this year.

But the Government’s Taxpayer Protection Taskforce had only recovered £3.5million by November 2021 – just 0.2 per cent of its £1.5billion target.

Banks claimed to have prevented £2.2billion of fraud through pre-loan checks. Mr Sunak has said he was ‘proud of my record’ and that the amount firms are repaying has ‘far surpassed anyone’s expectations’.

The bounce back loan scheme allowed small businesses to take out a Government-backed loan of up to £50,000 to help them through the pandemic.

There were 1.56million bounce back loans worth £47.4billion handed out to small firms between April 2020 and March 2021.

The Treasury was approached for comment.