Fraud investigator
Image caption The BBC revealed how criminal gangs had set up fake companies to claim loans.

Up to 60% of emergency pandemic loans made under the Bounce Back scheme may never be repaid, a report by the government’s spending watchdog says.

The National Audit Office (NAO) said taxpayers could lose as much as £26bn, from fraud, organised crime or default.

The lending scheme carried lighter checks than others and was aimed at small businesses unable to access other pandemic funding support.

A recent BBC investigation revealed how fraudsters were using the loan system.

Many of them will have no idea their names have been used until repayment letters begin arriving in early summer.

One of the victims spoken to by the BBC, Mark Telling, said he was worried “to death” to discover a company set up in his name by a criminal had “borrowed” £50,000 from the bail-out scheme.

The BBC also spoke to Sue Burden, who had also found her identity had been stolen to set up a bogus company to access the scheme. She said she had gone “from tears to anger… now I’m going to be scared to do anything”.

The BBC reported last week that the government was warned back in May that the scheme was at “very high risk of fraud” from “organised crime”.

The government said it has tried to minimise fraud through lenders’ background checks.


The scheme provides firms with 100% government-backed finance worth up to £50,000.

Demand has been greater than anticipated, and the total value of these loans is now expected to be £38bn-£48bn, up from an estimate of £18bn-£26bn.

They do not have to be paid off for 10 years and offer a range of flexible payment options.

The loan scheme is an extension of earlier offers which some businesses complained they could not access as the lending criteria was too strict.

The NAO report warned that the speed with which the scheme was rolled out heightened the fraud risk. It took a month to ensure businesses could not receive more than one loan.

The Public Accounts Committee said it was the government’s largest and most risky business support scheme.

It says it will not assess the value-for-money of the scheme, as the loans will not start being paid back until May next year.

The NAO analysis said losses from the scheme are likely to reach “significantly above” normal estimates for public-sector fraud of 0.5% to 5%.

The report also said the UK’s five biggest banks will make nearly £1bn between them from the scheme.

‘Taxpayer’s expense’

Meg Hillier, chair of the Public Accounts Committee, said the loans had been a vital lifeline for many businesses.

But she added that “the government estimates that up to 60% of the loans could turn bad – this would be a truly eye-watering loss of public money”.

“The bounce back loan scheme got money into the hands of small businesses quickly, and will have stopped some from going under.

“But the scheme’s hasty launch means criminals may have helped themselves to billions of pounds at the taxpayer’s expense.

“Sadly, many firms won’t be able to repay their loans and the banks will be quick to wash their hands of the problem.

Analysis: Angus Crawford, BBC news correspondent

Today’s report confirms what many people had suspected.

In May, the government had to get money to small businesses as quickly as possible, before tens of thousands of them went bust.

But to do that, they had to make compromises on credit and fraud checks. This opened the doors to a whole range of problems – including fraud by organised criminal gangs.

We’ve found evidence of more than 100 bogus firms set up by scammers to make fraudulent applications – getting the maximum £50,000 each time.

They’ve used the stolen, personal details of innocent victims to set up the fake companies – victims who won’t know anything about it until the letters demanding repayment start arriving through their doors next summer.

How it’s done:

  • Gangs steal victims’ personal details using phishing emails or buying them on criminal forums.
  • They then set up a bogus business in their name.
  • After opening a business bank account they then apply for a Bounce Back Loan through the same bank.

The taxpayer is in the same position – waiting to find out how much the scheme will ultimately cost us. The warning from the National Audit Office is clear – it has the potential to be “very high”.

Sue and Dave Burden, from the south of England, were shocked to find that Sue’s identity had been stolen to set up a company and claim a bounce back loan.

“I’ve gone from tears to anger,” she told the BBC. “Now I’m going to be scared to do anything.”

The state-owned British Business Bank (BBB), which supervises the bounce back loan scheme, twice raised concerns, firstly in May.

The BBB expects it will pay out £1.07bn in interest payments to the high street lenders that provided the cash.

Most of this will go to UK’s five biggest banks, Barclays, HSBC, Lloyds, NatWest and Santander, which provided £31.3bn of funding.

According to latest Treasury figures, there have been 1.55 million applications for the loans, with 1.26 million approvals.

“We targeted this support to help those who need it most as quickly as possible and we won’t apologise for this,” a government spokesperson said.

“We’ve looked to minimise fraud – with lenders implementing a range of protections including anti-money laundering and customer checks, as well as transaction monitoring controls.

“Any fraudulent applications can be criminally prosecuted for which penalties include imprisonment or a fine or both.”

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