Just 1% of the estimated £1.1billion of taxpayers’ money lost to fraudulent or incorrect grants paid to allegedly struggling businesses during the pandemic has been recovered, a Whitehall spending watchdog reveals.
The “overwhelming majority” of losses happened in the early stages of the crisis when the Covid-19 business grant scheme did not require pre-payment checks for businesses, it finds.
Yet by mid-February 2023 the new Department for Business and Trade has still only clawed back £11.4million, according to a National Audit Office (NAO) report published today.
The review lays bare that “no contingency plans existed between central and local government for supporting firms during a national emergency” when the pandemic hit.
The NAO says the Treasury asked the business department to consider how a grant scheme might work in February 2020 - just a month before it ended up being announced.
Councils were then forced to “scramble to understand” the scheme and answer questions from businesses, with local authorities only being notified of the scheme when they were publicly announced by the Treasury, it highlights.
The NAO notes the department “learned lessons from the initial response in 2020… which helped to greatly reduce the level of losses in later schemes.”
It adds the Government must learn "important lessons" from its experience of paying £22.6billion in grants to businesses during the pandemic - of which just under 5% was lost to fraudulent or incorrect payments.
Ipsos is currently carrying out a government-commissioned evaluation of the grant schemes to assess the scheme's value for money - including how much support was given to businesses that didn't need it.
A draft final report is expected in late spring 2023.
Shadow Chancellor Rachel Reeves said: “It is damning that such a low sum has been recovered by the government, made all the worse by the fact that Rishi Sunak ignored repeated warnings and then signed the cheque for billions of pounds of taxpayers’ money to be lost.
“This tells you all you need to know about how his government look after the public finances.
“The rampant fraud under the Tories is a badge of shame and instead of writing off the losses they should be chasing every pound for taxpayers and explaining how on earth they allowed this.”
Gareth Davies, head of the NAO, said: “Early schemes lost significant sums to error and fraud, but [the business department] addressed this in later iterations.
“The government does not yet know the impact of these grants - in terms of maintaining jobs or how much support might have been given to businesses which did not need it.
“Without such an assessment, an overall judgement about the value for money of the schemes remains open.”
A Department for Business and Trade spokesman said: “This report confirms that our COVID-19 business grant schemes helped to secure millions of businesses and livelihoods through the pandemic - supporting jobs and the economy during unprecedented times.
“No amount of error and fraud is acceptable, and we are continuing to work hard to recover these funds where possible.”
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