Bounce Back Loans Scheme: Follow-up

Public Accounts Committee Closed Inquiry
Opened: 26 Nov 2021 Closed: 5 Dec 2022 Parliament page
In December 2020 the Committee published its first report on the “Bounce Back Loan” Scheme offered to registered - and unregistered - small businesses to help them get through and recover from Government-mandated closures and loss of business revenues during lockdown. At that time the PAC concluded that billions of … Read more
17 Recommendations
9 Conclusions
1 Report
2 Oral sessions
5 Letters
2 Events
Activity timeline 11 events
6 Dec
2022
Correspondence
5 Dec
2022
Oral evidence
5 Dec
2022
Formal meeting (oral evidence session) · The Grimond Room, Portcullis House
2 Sep
2022
Report published
27 Apr
2022
Report published
22 Feb
2022
Correspondence
31 Jan
2022
Correspondence
11 Jan
2022
Correspondence
11 Jan
2022
Correspondence
10 Jan
2022
Oral evidence
10 Jan
2022
Formal meeting (oral evidence session) · The Grimond Room, Portcullis House
Oral evidence sessions 2 sessions
5 Dec 2022
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Bounce Back Loans Scheme: Follow-up; BEIS Annual Report & Accounts 21-22
Andrew Harrison · NatWest Anne Boden · Starling Bank Dave Newcombe · Paragon Banking Group Gemma Peck · Department for Business, Energy & Industrial Strategy Karl Reid · HSBC Sarah Munby · Department for Business, Energy and Industrial Strategy Tom Taylor · Department for Business, Energy & Industrial Strategy
10 Jan 2022
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Bounce Back Loans Scheme: Follow-up
Catherine Lewis La Torre · British Business Bank Charles Roxburgh · HM Treasury Patrick Magee · British Business Bank Sarah Munby · Department for Business, Energy and Industrial Strategy Sheldon Mills · Financial Conduct Authority
Title HC No. Published Items Response
Fiftieth Report - Bounce Back Loans Scheme: Follow-up HC 951 27 Apr 2022 26 Responded
Recommendations & Conclusions
26 results
2 Recommendation Not Addressed
Fiftieth Report - Bounce Back Loan…
The potential Scheme losses are eye-watering, and we are not convinced the Department has the...
The potential Scheme losses are eye-watering, and we are not convinced the Department has the data it needs to manage the risks to the taxpayer. The Department estimated in its 2020–21 Annual Report and Accounts that it would lose £17 … Read more
Government Response
The government's response discusses Électricité de France’s (EDF) strategies, plans and the estimated costs, which are scrutinised, challenged, and approved by the Non-NDA liabilities assurance team (NLA) under the terms of the revised funding agreement. It does not address the committee's recommendation to develop a strategy setting out the increase needed in Scheme counter-fraud resources, or explain how to improve the accuracy and timeliness of data.
HM Treasury
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3 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
The Department has been complacent in preventing Scheme fraud and its prioritisation of ‘top tier’...
The Department has been complacent in preventing Scheme fraud and its prioritisation of ‘top tier’ fraudsters puts other government Schemes at risk. The risks that we identified at the outset of the Scheme have now materialised. The Department requested, and … Read more
Government Response
The government agrees and states that in the event of another crisis similar in scale to the COVID-19 pandemic, the government would again need to consider the trade-offs between the generosity and speed of a loan guarantee scheme, and the consequent risks for value for money. There is now increased Fraud and Financial Crime resource in the Bank and the launch of the Public Sector Fraud Authority will further strengthen the ability of the government to manage and mitigate fraud risks.
HM Treasury
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4 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
We are concerned that the Department is placing too much reliance on lenders to minimise...
We are concerned that the Department is placing too much reliance on lenders to minimise taxpayer losses without incentivising them to do so. When the Scheme launched the Department relied solely on lenders to prevent taxpayer losses by requiring them … Read more
Government Response
The government agrees and says that the Bank assesses lenders’ compliance through its audit programme and can take remedial action and issue financial penalties to encourage lenders to identify and recover fraudulent loans. The FCA is working collaboratively with the Bank, the department and HM Treasury to find areas where regulatory powers and tools can add value.
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5 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
It is unacceptable that the Department has no plans to recover outstanding debt after lenders...
It is unacceptable that the Department has no plans to recover outstanding debt after lenders have pursued borrowers for up to 12 months. There is no minimum term that lenders are required to pursue borrowers for payments. Lenders are not … Read more
Government Response
The government agrees with the recommendation to set out its strategy for collecting overdue payments after the lenders have completed their 12-month requirements and aims to implement it by Winter 2022. The long term BBLS counter fraud strategy will address the department’s strategy for enforcement and recoveries in cases of suspected fraud.
HM Treasury
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6 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
The Scheme has distorted the Small and Medium Enterprise (SME) lending market in favour of...
The Scheme has distorted the Small and Medium Enterprise (SME) lending market in favour of the largest UK banks, which goes against the Bank’s objective of creating a diverse finance market for SMEs. The Scheme’s low interest rate made it … Read more
Government Response
The government agrees with the Committee’s recommendation for the Bank to develop a strategy to mitigate the negative impact of the Scheme on the SME lending market and publish its findings in its next Small Business Finance Market report. The next iteration of the Small Business Finance Market report, expected in Q1 2023, will continue to report on the evolution of the small and medium-sized enterprises (SME) lending market. The Bank’s existing programmes continue to help challenger and specialist banks to make the SME banking market more diverse.
HM Treasury
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7 Recommendation Not Addressed
Fiftieth Report - Bounce Back Loan…
The Department has not yet identified how it will share the lessons from the Scheme.
The Department has not yet identified how it will share the lessons from the Scheme. The Department asserts that it has applied some of the lessons it has learned from this Scheme in the subsequent Recovery Loan Scheme, such as … Read more
Government Response
The government's response discusses the Programme's uncertainty and states the CEO of the Delivery Authority will remain accountable for the skills and expertise to deliver the Programme, and their independence remains unchanged. An interim CEO was announced to assess capability and capacity gaps within the sponsor function to ensure it has the necessary skills and expertise. It does not address the committee's recommendation for the Department and the Bank to establish a strategy on how it intends to share lessons from the scheme within a month of the publication of their first evaluation report, or the Bank to develop a business case for an emergency loan scheme for future crisis within 6 months of publication of this report.
HM Treasury
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1 Conclusion Acknowledged
Fiftieth Report - Bounce Back Loan…
On the basis of a report by the Comptroller and Auditor General, we took evidence...
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Business, Energy & Industrial Strategy (the Department) and the British Business Bank (the Bank) about the Bounce Back Loan Scheme. We … Read more
Government Response
The government acknowledges the committee's report and confirms the date evidence was taken and the publication date of the report.
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8 Conclusion Accepted
Fiftieth Report - Bounce Back Loan…
The Department’s estimate of the credit loss within the Scheme is also uncertain, as there...
The Department’s estimate of the credit loss within the Scheme is also uncertain, as there is no credit score data for borrowers because this was not a scheme requirement. Repayments will also be affected by future macroeconomic conditions which are … Read more
Government Response
The department has worked with the Bank to develop analytical and forward-looking expected credit loss models that are compliant with International Financial Reporting Standards (IFRS 9), which provide a sophisticated approach to forecasting expected credit losses across the COVID-19 loan guarantee schemes, utilising granular data from lenders and other sources.
HM Treasury
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9 Conclusion
Fiftieth Report - Bounce Back Loan…
The Bank began collecting Scheme loan data from the 24 Scheme lenders in July 2021,...
The Bank began collecting Scheme loan data from the 24 Scheme lenders in July 2021, where lenders provide data to the Bank via a collections system. The Bank said that it holds loan data from lenders across 70 different datapoints, … Read more
HM Treasury
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10 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
The Scheme rules required commercial lenders to deliver loans and pursue recovery processes in line...
The Scheme rules required commercial lenders to deliver loans and pursue recovery processes in line with their existing business-as-usual standards. The Department and HM Treasury stated that the majority of recoveries and counter-fraud efforts comes from lenders. The Department told … Read more
Government Response
The government agrees with the committee’s recommendation to improve lenders’ performance in managing loans and risks to the taxpayer by legal, regulatory and contractual incentives and states that ongoing management of the BBLS and associated financial risks remains one of the highest priorities for the department and the Bank. The Bank assesses lenders’ compliance through its ongoing lender audit and assurance programme and can take remedial action, ranging from creating an action plan with the lender’s management team through to cancellation of a guarantee.
HM Treasury
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11 Conclusion Accepted
Fiftieth Report - Bounce Back Loan…
Although the Department referred to lenders as the “arms and legs” of the Scheme, none...
Although the Department referred to lenders as the “arms and legs” of the Scheme, none of the witnesses could tell us how much lenders are spending on counter-fraud activities. The FCA said, for example, that lenders had “scaled up quite … Read more
Government Response
The government agrees with the committee’s recommendation to improve lenders’ performance in managing loans and risks to the taxpayer by legal, regulatory and contractual incentives and states that ongoing management of the BBLS and associated financial risks remains one of the highest priorities for the department and the Bank. The Bank assesses lenders’ compliance through its ongoing lender audit and assurance programme and can take remedial action, ranging from creating an action plan with the lender’s management team through to cancellation of a guarantee.
HM Treasury
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12 Conclusion Accepted
Fiftieth Report - Bounce Back Loan…
The Scheme requires lenders to pursue borrowers for missed repayments for up to 12 months...
The Scheme requires lenders to pursue borrowers for missed repayments for up to 12 months after the issue of a formal demand. The Department initially told us that lenders had to wait until after the 12 month period to make … Read more
Government Response
The government agrees with the committee’s recommendation to improve lenders’ performance in managing loans and risks to the taxpayer by legal, regulatory and contractual incentives and states that ongoing management of the BBLS and associated financial risks remains one of the highest priorities for the department and the Bank. The Bank assesses lenders’ compliance through its ongoing lender audit and assurance programme and can take remedial action, ranging from creating an action plan with the lender’s management team through to cancellation of a guarantee.
HM Treasury
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13 Conclusion Accepted
Fiftieth Report - Bounce Back Loan…
The NAO reported that the arrangements for pursuing borrowers offered limited commercial incentive for lenders...
The NAO reported that the arrangements for pursuing borrowers offered limited commercial incentive for lenders to maximise recovery of overdue loans.28 In contrast, the Bank told us that it believed that lenders have strong legal, contractual and regulatory obligations to … Read more
Government Response
The government agrees with the committee’s recommendation to improve lenders’ performance in managing loans and risks to the taxpayer by legal, regulatory and contractual incentives and states that ongoing management of the BBLS and associated financial risks remains one of the highest priorities for the department and the Bank. The Bank assesses lenders’ compliance through its ongoing lender audit and assurance programme and can take remedial action, ranging from creating an action plan with the lender’s management team through to cancellation of a guarantee.
HM Treasury
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14 Conclusion Accepted
Fiftieth Report - Bounce Back Loan…
Almost 86,000 borrowers have been in arrears for more than 90 days as of 10...
Almost 86,000 borrowers have been in arrears for more than 90 days as of 10 January 2022.34 We asked the Department what steps it was taking to ensure that its approach to recovering loans was as effective as possible and … Read more
Government Response
The department, working with other government and non-governmental bodies, already collects an extensive amount of data resources for fraud risk assessment and identification analysis.
HM Treasury
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15 Conclusion Accepted
Fiftieth Report - Bounce Back Loan…
The Department and the Bank recognised that there was a trade-off between getting loans to...
The Department and the Bank recognised that there was a trade-off between getting loans to businesses quickly by removing lender checks and slowing down the delivery of the loans by putting in place more counter-fraud measures. The Bank said that … Read more
Government Response
The government agrees with the Committee’s recommendation that next time the Department launches an emergency business support scheme, it should be explicit on the trade-offs and level of fraud it is prepared to tolerate from the outset. It mentions the COVID-19 pandemic required an extraordinary response from government and the scheme's design would create a heightened vulnerability to fraud and there would be a significant risk of credit losses. There is now increased Fraud and Financial Crime resource in the Bank. Additionally, the launch of the Public Sector Fraud Authority this year will further strengthen the ability of the government to manage and mitigate fraud risks, deal with vulnerabilities, and overall increase its counter fraud capacity and capability.
HM Treasury
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16 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
The Scheme has also made trade-offs in its response to countering fraud and the associated...
The Scheme has also made trade-offs in its response to countering fraud and the associated deterrent effects. The Department based its counter-fraud response on the 31 Qq 15, 16 32 Qq 74–75 33 Qq 74–75, 83 34 Correspondence from Catherine … Read more
Government Response
The government agrees with the Committee’s recommendation that next time the Department launches an emergency business support scheme, it should be explicit on the trade-offs and level of fraud it is prepared to tolerate from the outset. It mentions the COVID-19 pandemic required an extraordinary response from government and the scheme's design would create a heightened vulnerability to fraud and there would be a significant risk of credit losses. There is now increased Fraud and Financial Crime resource in the Bank. Additionally, the launch of the Public Sector Fraud Authority this year will further strengthen the ability of the government to manage and mitigate fraud risks, deal with vulnerabilities, and overall increase its counter fraud capacity and capability.
HM Treasury
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17 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
We asked the Department if it was confident that enough was being done to tackle...
We asked the Department if it was confident that enough was being done to tackle medium and bottom-tier fraud, to ensure there is a sufficient deterrent for smaller-scale fraud. It recognised that deterrence is “important” and was “on their minds”. … Read more
Government Response
The government agrees with the recommendation to be explicit on the trade-offs and level of fraud it is prepared to tolerate from the outset next time the Department launches an emergency business support scheme. The BBLS was implemented under Ministerial Direction, and the exchange of letters that were published in June 2020 shows that these risks were acknowledged at the outset.
HM Treasury
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18 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
We reported previously that the Department had no apparent plans to measure the Scheme’s long-term...
We reported previously that the Department had no apparent plans to measure the Scheme’s long-term impact, and no agreed performance measures.44 In its Treasury Minute response to our report, the Department gave a high-level summary of the Scheme’s evaluation plans … Read more
Government Response
The government agrees with the recommendation to put in place a clear strategy to manage the long-term legacy of the Scheme and aims to implement it by Autumn 2022. They are formalizing a long-term strategy to counter fraud in the BBLS, building on work to date.
HM Treasury
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19 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
We asked the Department whether it currently had the information that it needed to determine...
We asked the Department whether it currently had the information that it needed to determine whether the Scheme had been a success. The Department told us that it considered that the quality of information that it had about what was … Read more
Government Response
The government agrees and will put in place a clear strategy to manage the long-term legacy of the Scheme within a month of the publication of its evaluation report, expected in Autumn 2022, including formalizing a strategy that will set out its long-term approach to counter fraud in the BBLS.
HM Treasury
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20 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
Business survival rates are a key metric for measuring the Scheme’s impact.
Business survival rates are a key metric for measuring the Scheme’s impact. The Bank has commissioned an external evaluation study, which will report in stages over the next three years.50 We therefore asked the Department when we could expect to … Read more
Government Response
The government agrees with the recommendation to put in place a clear strategy to manage the long-term legacy of the Scheme and aims to implement it by Autumn 2022. They are formalizing a long-term strategy to counter fraud in the BBLS, building on work to date.
HM Treasury
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21 Conclusion
Fiftieth Report - Bounce Back Loan…
Lenders used their own funds to make Scheme loans, with government guaranteeing to reimburse lenders...
Lenders used their own funds to make Scheme loans, with government guaranteeing to reimburse lenders if borrowers do not repay. How lenders raise funds differs according to size and type of lender; the more cheaply they can raise funds the … Read more
HM Treasury
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22 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
The NAO reported that there were seven accredited lenders when the Scheme launched in May...
The NAO reported that there were seven accredited lenders when the Scheme launched in May 2020, consisting of five main UK banks and two other banks.55 The Bank acknowledged that it took several months to accredit the additional 21 of … Read more
Government Response
The government agrees with the recommendation for the Bank to develop a strategy to mitigate the negative impact of the Scheme on the SME lending market and publish its findings in its next Small Business Finance Market report, with a target implementation date of Spring 2023.
HM Treasury
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23 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
The Bank recognised that it was “absolutely true that [the Scheme] had a distortive effect”...
The Bank recognised that it was “absolutely true that [the Scheme] had a distortive effect” but suggested that this was “diluting over time”.59 It confirmed that it still had an objective of encouraging diversity in lending markets. It explained that … Read more
Government Response
The government agrees and will have the Bank develop a strategy to mitigate the negative impact of the Scheme on the SME lending market and publish its findings in its next Small Business Finance Market report, expected in Q1 2023. The Bank's existing programmes continue to help challenger and specialist banks to make the SME banking market more diverse.
HM Treasury
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24 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
We highlighted previously that government needed to use the lessons learned from this Scheme to...
We highlighted previously that government needed to use the lessons learned from this Scheme to inform future schemes.62 We therefore asked the Department about examples of where it had identified and responded to lessons from the Scheme. The Department said … Read more
Government Response
The government agrees with the recommendation to establish a strategy on how it intends to share lessons from the scheme and aims to implement it by Summer 2022. The department agreed to work in conjunction with HM Treasury and the Bank to produce a report covering lessons learned across the COVID-19 loan guarantee schemes.
HM Treasury
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25 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
We were concerned that the Department should have identified these lessons when it supported businesses...
We were concerned that the Department should have identified these lessons when it supported businesses in the 2008 Financial Crisis. In 2010, the NAO’s report on the Department’s support to business during a recession concluded that the “impact [of the … Read more
Government Response
The government agrees with the recommendation to establish a strategy on how it intends to share lessons from the scheme and aims to implement it by Summer 2022. The department agreed to work in conjunction with HM Treasury and the Bank to produce a report covering lessons learned across the COVID-19 loan guarantee schemes.
HM Treasury
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26 Recommendation Accepted
Fiftieth Report - Bounce Back Loan…
We asked whether, with hindsight and more time, it would have been possible to design...
We asked whether, with hindsight and more time, it would have been possible to design a scheme that would have had significantly less exposure to fraud and error than 61 Q104; Public Accounts Committee, Covid-19: Bounce Back Loan Scheme, Thirty-Third … Read more
Government Response
The government agrees with the recommendation to establish a strategy on how it intends to share lessons from the scheme and aims to implement it by Summer 2022. The department agreed to work in conjunction with HM Treasury and the Bank to produce a report covering lessons learned across the COVID-19 loan guarantee schemes.
HM Treasury
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Government Response AI assessment · 24 of 17 classified
Accepted 21
Acknowledged 1
Not Addressed 2
Total 17 recs + 9 conclusions
Correspondence 5 letters
6 Dec 2022 Correspondence from Sarah Munby, Permanent Secretary for the Department for Business, Energy and Industrial Strategy (BEIS), re Treasury Minute Response – “Bounce Back Loans Scheme: Follow-up” (50th Report of Session 2021-22) 30 November 2022
Parliament page
22 Feb 2022 Correspondence from Sarah Munby Permanent Under-Secretary of State, Department for Business, Energy & Industrial Strategy, re PAC hearing on the Bounce Back Loan Scheme, dated 9 February 2022
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31 Jan 2022 Correspondence from Catherine Lewis La Torre, Chief Executive, British Business Bank, re Bounce Back Loans, dated 27 January 2022
Parliament page
11 Jan 2022 Correspondence from Stephen Pegge Managing Director, Commercial Finance UK Finance, re follow-up evidence session on the Bounce Back Loan Scheme, dated 23 December 2021
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11 Jan 2022 Correspondence from Sarah Munby, Permanent Secretary, Department for Business, Energy & Industrial Strategy, re Covid loans - dissolutions objections incident, dated 4 January 2022
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