Schoolboy errors in Covid-19 fraud scandal
Boris Johnson suffered another “major blow” to his authority on Monday after a Treasury minister staged a “dramatic public resignation over the government’s decision to write off £4.3bn in fraudulent Covid19 loans”, says The Guardian. Theodore Agnew said oversight of the scheme was “nothing less than woeful” and accused officials of “schoolboy errors” on multiple fronts, including allowing over 1,000 firms that were “not even trading when Covid-19 struck” to receive bounce-back loans.
The government will argue that some mistakes were inevitable given that it made a “strategic decision to prioritise speed”, with processes that would normally have taken months taking just days, says Faisal Islam on the BBC. This enabled £72bn of support to be handed out quickly, which “undoubtedly helped the whole economy bounce back”. Still, the overall bill is likely to be large, with some estimating that total losses (from bad loans as well as fraud) could top £20bn. Banks could come under pressure to “try a little harder” to collect what is owed, but they will have little incentive, given they can reclaim it from the taxpayer.
Agnew has “sparked alarm in the industry” by suggesting that the government stop paying out on the guarantees it made to the banks until there is “clarity on what lenders were doing to tackle fraud”, say Daniel Thomas and Stephen Morris in the Financial Times. In response, bankers pointed out that they had “flagged the potential for a wave of fraud” to government officials, but were told to just get the cash out. A clampdown also risks damaging a reputation they have spent the past decade trying to rebuild.