Conservative minister resigns in anger over Covid fraud

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Lord Agnew accuses the Treasury of having "little interest in the consequences of fraud to our society"

A Conservative minister in the House of Lords has resigned attacking the government's handling of fraudulent Covid business loans.

Lord Agnew accused the Treasury of having "little interest in the consequences of fraud to our society".

But he said his departure was "not an attack on the prime minister".

Last year, the National Audit Office criticised the government for failing to implement measures to prevent people exploiting Covid schemes.

Lord Agnew, a Treasury minister with responsibility for cross-government efficiency, said "a combination of arrogance, indolence and ignorance" was "freezing the government machine".

He accused the government of making "schoolboy errors" by giving loans to over 1,000 companies who were not trading when Covid struck.

"I hope that as a virtually unknown minister beyond this place giving up my career might prompt others to get behind this and sort it out," he said.

In a dramatic moment in the House of Lords, he read out his resignation speech in response to a question from Labour about the £4.3bn of Covid loans written off by the Treasury.

He concluded with a "thank you and goodbye", before marching out of the chamber to a round of applause - a rare occurrence in the Lords.

A No 10 spokesman said: "We are grateful to Lord Agnew for the significant contribution he has made to government."

The spokesman said the government was taking action against fraud, adding that 150,000 ineligible claims have been blocked and £500m recovered last year.

An HMRC tax protection taskforce was also expected to recover an additional £1bn, the spokesman added.

Media caption,
WATCH: Hunting down the Covid loan fraudsters

The Bounce Back Loan scheme was set up in April 2020 with the aim of keeping small businesses afloat during the coronavirus pandemic.

A total of 1.5 million loans worth £47bn were issued through the initiative, after about a quarter of UK businesses applied.

Banks, building societies and other accredited lenders loaned companies up to £50,000, or a maximum of 25% of annual turnover, with the government guaranteeing them repayments if the firms defaulted.

In September, the state-owned British Business Bank, which oversees the scheme, said £2bn of loans had been repaid and £1.3bn had been defaulted on.

In December 2021, the public spending watchdog the National Audit Office said counter-fraud activity had been "implemented too slowly".

It estimated that the business department had put the estimated cost of fraudulent loans at £4.9bn - 11% of the total given out.

In response to Lord Agnew's resignation, the British Business Bank said "key counter-fraud measures" had been put in place at the start of the scheme, and it had worked with the scheme's lenders to put additional measures in place.

"Arrogance, indolence, ignorance", "schoolboy errors", and "nothing less than woeful".

As the political joke goes, Lord Agnew may not have been a household name, even in his own household, but the manner of his attack on the government from the ministerial despatch box points to a serious issue.

There was always a trade-off between due diligence on pandemic rescue loans and getting some £72bn of cash into the bank accounts of businesses.

The government made a strategic decision to prioritise speed "in good conscience", as ministers put it.

As a result, a process that would have taken months, in some cases took just days.

This undoubtedly helped the whole economy bounce back.

But it is the scale, not of the losses in general (expected to top £20bn, mainly on Bounce Back loans) of the £4bn at least that will be written off due to fraud, that led to this highly public exit from the minister.

In particular, over 1,000 businesses that were not even trading, received Bounce Back loans, said the minister.

Right now, the banks that operated the scheme are deciding how to account for the loans in their full year results.

Over a quarter of the £1bn given to banks by taxpayers has so far been for fraudulent loans, Lord Agnew told peers.

And he fears a "new dangerous phase" where banks act less than rigorously in seeking repayment, given they know they can reclaim the cash from the taxpayer.

At a time of tight budgets, rising prices and taxes, banks could come under pressure to try a little harder to collect the monies owed.

Labour's shadow chancellor Rachel Reeves described Lord Agnew's departure as "a damning indictment" of the chancellor's failures on fraud.

"It should be a source of enduring shame to [Rishi] Sunak that he has so casually written off £4.3bn of taxpayers' money," she added.

Liberal Democrat Treasury spokesperson Christine Jardine said the government had "allowed fraudsters to steal billions of taxpayers' money" and urged the chancellor to explain how he would get the money back.

Lord Agnew was appointed a Treasury minister in February 2020. He has also sat as a non-executive director for the Department for Education.

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