Thirty-third Report: Covid-19: Bounce Back Loan Scheme

Select Committee

Public Accounts Committee HC 687 16 December 2020

Report Status Government responded

Conclusions & Recommendations 21 items (15 recs)

Source View on Parliament website

Government Response (AI assessment · 21 of 21 classified)

Accepted 10

Accepted in Part 1

Acknowledged 3

Not Addressed 4

Rejected 3

Government response

Treasury minutes: Government response to the Committee of Public Accounts on the Thirty third report from Session 2019-21 · published 25 Mar 2021

Read the government response ↗ Response on the tracker

Recommendations & Conclusions

3 results

3 Recommendation Rejected

Shortcomings in the Scheme’s design have exposed the taxpayer to potentially significant losses.

Recommendation

Shortcomings in the Scheme’s design have exposed the taxpayer to potentially significant losses. Government achieved its very narrow objective of distributing cash quickly and to a very large number of small businesses across the UK. It delivered £8.4 billion in … Read more Shortcomings in the Scheme’s design have exposed the taxpayer to potentially significant losses. Government achieved its very narrow objective of distributing cash quickly and to a very large number of small businesses across the UK. It delivered £8.4 billion in the first week and £21.3 billion in the first month, and as of 6 September, 90% of loans went to micro-businesses across the UK. This was achieved by removing the checks that extended the delivery period beyond 48 hours; increasing the level of risk through the lack of credit, application and affordability checks. Applicants need only to self-certify the data provided in their loan 6 Covid-19: Bounce Back Loan Scheme application. In the first year, Government is paying interest on the loans on behalf of borrowers, costing approximately £1 billion. In addition, taxpayers are exposed to both avoidable and unavoidable risks: fraud, viability of the underlying business, and unaffordability respectively. The Department estimates potential losses from both fraud and credit risk as somewhere between £15 billion to £26 billion, with the credit losses being the largest part. This estimate is highly uncertain and could be even higher. It indicates that Government was prepared to accept a higher level of risk to ensure that loans were available to SMEs as quickly as possible. Recommendation: Before launching or renewing a Scheme, HM Treasury should be explicit on the level of losses it is likely to entail and the evidence that this analysis is based on. For the remainder of this Scheme, and future schemes, HM Treasury must better balance the interests of the taxpayer with the interests of businesses. It should demonstrate that its controls are cost effective and associated judgements reflect the appropriate balance between achieving immediate policy aims and protecting taxpayers’ money. It should start by assessing whether full reliance on self-certification is still appropriate. Show less

Government Response Summary

The government explicitly disagrees with the recommendation to be explicit about likely losses before launching schemes, citing the need for rapid action during the pandemic and the high uncertainty of early estimates. It confirms the department is refining loss estimates for future updates to Parliament and will undertake a full impact assessment in the long term.

HM Treasury

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12 Recommendation Rejected

Under the Scheme, the Government pays a borrower’s first 12 months of interest directly to...

Recommendation

Under the Scheme, the Government pays a borrower’s first 12 months of interest directly to the lender. At the end of September, when some 1.2 million loans were issued, the Department and the Bank forecast this to cost £1,068 million … Read more

Government Response Summary

The government rejected the recommendation, stating that due to urgency and uncertainty, it was not possible to make explicit statements on likely losses before the scheme's launch, but it will refine estimates and update Parliament, and commit to a full impact assessment later.

HM Treasury

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14 Recommendation Rejected

The Department has not identified what types of fraud it will prosecute, with the Department...

Recommendation

The Department has not identified what types of fraud it will prosecute, with the Department suggesting there is a range of criminality in fraud; it has euphemistically referred to ‘hard’ and ‘soft’ fraud.34 Hard fraud refers to a type of … Read more

Government Response Summary

The government rejected the recommendation, stating it does not intend to make public the details of its counter-fraud approach to avoid compromising its effectiveness, and that prosecution decisions are independent.

HM Treasury

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