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More than £1bn of taxpayer-backed loans have been identified as potentially fraudulent by the UK government’s Covid “response” scheme, official data published on Monday revealed.
UK banks have requested or received £3.8bn in government funds to cover defaults under the scheme – a sign of the huge amount needed to cover emergency loans to small businesses in the first months of the pandemic.
The data, which is part of the bank’s new Dashboard Dashboard for Returning Loans, reveals for the first time which banks are most vulnerable to default and fraud under the scheme. It raises new questions about whether they should have done more to weed out fraudsters before issuing government-backed loans.
The loss is a reminder that the government is still covering the costs of the pandemic as incoming Prime Minister Liz Truss prepares a major funding package to help struggling households cope with rising energy bills.
Under the bailout programme, more than £46bn of government-backed loans were given to companies to encourage banks to lend more quickly.
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However, billions of pounds are now feared to be lost to fraudsters, with official estimates as high as £5bn.
Banks have been criticized by ministers for not doing enough to stop fraud in the scheme and, more recently, not raising companies to get taxpayer cash.
Bank officials deny the allegations, saying they are simply following rules set by the Treasury to make loans to struggling companies as quickly as possible.
Of the £3.8bn to cover loan defaults, £1.2bn has already been paid to banks by the Treasury, of which £263mn covers fraudulent loans.
Lenders have announced that a further £3.2bn worth of loans are in arrears and a further £1.4bn worth have now been repudiated.
Government figures show that £28.3bn of loans are being repaid on time, with a further £4.7bn paid in full.
Government Efficiency Minister Jacob Rees-Mogg asked Starling Bank at the weekend how it would recover money lost under the scheme. Under the plan, Starling’s total value was £1.6bn, of which more than £600mn was either in arrears, defaulted or claimed and settled. It identified a suspected £92mn.
“He has taken a strong and proactive stance to protect taxpayers’ money as well as support our clients and help them pay off their loans,” Starling said. “Direct comparisons between Starling Bank and other lenders” are difficult, given the limitations of the data and the unique nature of each lender’s customer base, he said.
About a third of the loans made by Tide, another online bank, are covered by the guarantee, while about half of New Wave Capital’s loan book is completed.
More than £450mn of the £1.4bn owed by Metro Bank is in arrears, arrears or claims have been settled.
“While it is too soon to draw concrete conclusions, we can see data starting to normalize and expect Metro Bank’s position to align with our overall contribution to the BBLS plan over time,” Metro said.
He added that he understood. [its] Responsibilities under the program and at all times comply with the spirit and rules of the program [taking] A rigorous approach to identify fraudulent BBLS loan applications.
The highest levels of suspected fraud were reported by Lloyds and Barclays at £304mn and £259mn respectively, but these banks have the two largest loan repayment books of £8.5bn and £10.7bn. Barclays, the biggest lender under the scheme, also filed a claim with more than £1bn of loans.
“We will continue to proactively tackle BBLS fraud, and we are committed to identifying, addressing and recovering fraud in the schemes – which meet the requirements of the Government’s lending programs,” Barclay said.
Tide, Lloyds and New Wave Capital did not immediately respond to a request for comment.
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