(Bloomberg) -- The U.K. failed to put effective measures in place to protect taxpayers exposed to as much as 4.9 billion pounds ($6.5 billion) of fraudulent pandemic loans to businesses, the government’s spending watchdog said.
The Bounce Back Loan program rolled out in May 2020 was designed to lend quickly with “limited verification and no credit checks on borrowers,” making it vulnerable to fraud, the National Audit Office said Friday in a report. While 13 additional measures to counter fraud were introduced later, “most came too late to prevent fraud and were focused instead on detection,” it said.
Read More: Millions in U.K. Covid Loans Went to Inactive or Brand-New Firms
Boris Johnson’s government has estimated that as much as 17 billion pounds of the 47 billion pounds lent out under the program may never be repaid, including 4.9 billion pounds of fraudulent loans. The program was designed to help small businesses weather successive lockdowns during the pandemic.
Yet the NAO said those projections are “highly uncertain,” and urged the government to produce a formal strategy for managing fraud by April.
“The true level of fraud will become clearer over time,” said NAO chief Gareth Davies. “But it is clear the government needs to improve on its identification, quantification and recovery of fraudulent loans within the scheme.”
Figures from the British Business Bank, which accredited the lenders under the program, show that about 2 billion pounds’ worth of loans had been repaid, with 1.3 billion pounds defaulted on.
It also found that some 100,000 loans, or 7% of the total, are already at least a month in arrears. While the loans were issued by commercial lenders, the government provided a 100% state guarantee.
“We are continuing to crack down on Covid-19 fraud and will not tolerate those that seek to defraud the British taxpayer,” the U.K. Business Department, which overseas the business bank, said in a statement. “We are working closely with lenders and enforcement authorities to minimize fraud and ensure those that have committed fraud face consequences.”
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