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BCN-07
BRITAIN-ECONOMY-BUSINESS
UK virus loans may cost taxpayer up to o26bn: watchdog
LONDON, Oct 8, 2020 (BSS/AFP) – Britain’s emergency coronavirus loans for small businesses could cost the taxpayer up to o26 billion ($34 billion, 29 billion euros) due to fraud and non-repayment, its spending watchdog said Wednesday.
The so-called “bounce back” loans, which are provided by commercial banks but guaranteed by the government, were launched in May as part of British Prime Minister Boris Johnson’s costly plan to combat severe economic fallout from the deadly Covid-19 pandemic.
“Today the National Audit Office (NAO) reports that the bounce back loan scheme succeeded in quickly supporting small businesses — but government faces a potential loss of o15 billion to o26 billion through businesses not being able to repay the loans and fraud,” the watchdog concluded in a report into the matter.
The scheme, which remains open until late November, will lend a total of between o38 billion and o48 billion by November 4, according to state estimates.
That is far more than the initial plan to lend between o18 billion and o26 billion.
The NAO, which vets public expenditure for parliament, warned in its report that the scheme was more susceptible to fraud than other state pandemic loans.
“The government imposed less strict eligibility criteria for the bounce back loan scheme than other Covid-19 related business loan schemes to improve quick access to finance for smaller businesses,” the report added.
“It relies on businesses self-certifying application details with limited verification and no credit checks performed by lenders for existing customers.
“This lower level of checks presents credit risks as it increases the likelihood that loans are made to businesses which will not be able to repay them, leading to losses of taxpayers’ money.
“Government also recognises that the decision to provide funds quickly leaves public money exposed to the risk of fraud.”
The lending programme provided businesses with one-off loans of up to o50,000 or a maximum of 25 percent of annual turnover, in order to help them survive the devastating economic fallout from the disease.
BSS/AFP/MMA/1000HRS