Former Chancellor Rishi Sunak Discusses COVID-19 Loan Scheme and Highlights Fraud Risks
Former British Chancellor Rishi Sunak has defended the “Bounce Back” loan scheme launched during the pandemic, responding to allegations of high levels of fraud within the program. Sunak acknowledged that he was aware of the risks but emphasized that, given the urgent need for speed, he would make the same decision again.
The “Bounce Back” scheme provided small businesses with loans of up to £50,000, backed by a 100% government guarantee. This meant taxpayer money would be used to repay banks if businesses failed to return the funds. A government anti-fraud report indicated “specific difficulties with fraud and error” in the scheme. In response, Sunak noted that delaying the launch by even a few weeks to introduce more controls would have jeopardized thousands of businesses.
Approximately 1.5 million Bounce Back loans were issued, totaling an estimated £46 billion, making it the largest of the government’s pandemic loan programs. The value of loans flagged as potentially fraudulent by investment portfolios has risen to about £1.9 billion. A report released last week by the Covid Corruption Commissioner, Tom Howe, estimated the total volume of fraud and error at up to £2.8 billion.
Mr. Howe stated the scheme was launched in less than two weeks in May 2020, with “limited application checks beyond standard banking anti-fraud controls.” While terms dictated that loans should not exceed 25% of turnover, lenders were forced to rely on information provided by business owners, leaving the door open for fraud.
Providing testimony for the second consecutive year to the COVID-19 Inquiry, Sunak addressed accusations regarding inadequate vetting procedures. “I hear that there were insufficient checks, that we did nothing to prevent fraud, or that we were unaware of what we were getting into. All of these accusations are completely wrong. Of course, we were aware of the risks we faced,” he said.
However, Sunak maintained that he “decided the risks were outweighed by the necessity of rapid access to funds.” He added that vetting measures, such as a system to prevent multiple loan applications from different companies, were added after the launch.
“You could reduce final fraud levels by waiting and working to incorporate some of these additional controls. But you must be confident in accepting the loss of businesses that would result from that,” Sunak stated. He noted that 40% of the original Bounce Back loans were granted within the first two weeks, and a month’s delay would have rendered many of those businesses unviable.
“At the time, there was no one pushing to reject measures, calling for the process to be slowed down, for more checks, or for more form-filling!” Sunak remarked, adding that “millions would do the same thing in the same situation.”
Sunak pointed out that the 4% fraud rate in Bounce Back loans is comparable to other large government schemes like tax credits, work bonuses, and housing benefits. He suggested that if a similar scheme were needed again, improvements in corporate data and other measures would mitigate the conflict between speed and fraud prevention. However, the former Chancellor warned, “We should never think that there is an inevitability that there will be no conflict. There will be a conflict.”
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