The Government's efforts to tackle fraudulent attacks on the £47 billion bounce back loan scheme are "inadequate" and have been "implemented too slowly to be effective", the public spending watchdog has warned.
As the scheme progressed, 13 additional anti-fraud measures were introduced, but these came "too late to prevent fraud" the audit office says.
The loan scheme began in May 2020 and provided £47.4 billion of credit through 1.6 million loans, with private-sector lenders given a 100 per cent state guarantee to cover any losses.
Martin McTague, national vice chairman of the Federation of Small Businesses, noted that the Government had faced " a challenging task: getting cash into as many of these small firms as possible, as quickly as possible, whilst rightly doing all they could to shut out fraudsters in a fast-moving situation".
The watchdog said, " "Compared with the scale of its most likely estimate of £4.9 billion of fraudulent loans, both the £32 million additional budget for counter-fraud operations and its target to recover at least £6 million of fraudulent loans from organised crime are inadequate,"
The department had only two full-time staff working to counter fraud at the scheme's start. At the same time, £32 million, or 0.07 per cent of the total loan value, was provided in October last year to "enhance" its ability to pursue stolen funds.
The watchdog says that the Government's counter-fraud strategy has "evolved" after the scheme was launched "but lacked clear governance at the outset and sufficient resources".
A spokeswoman for the business department said: the support schemes "provided a lifeline to millions of businesses across the UK – helping them survive the pandemic and protecting millions of jobs". Although as much as £4.9 billion of the credit is thought to have been taken by fraudsters, the audit office has highlighted "limited resources" for recoveries.
The National Audit Office has criticised the Department for Business, Energy and Industrial Strategy for what it says was a lack of action to mitigate the billions of pounds of losses that are set to arise from the scheme.
The NAO told the business department to produce a formal strategy for managing fraud in the scheme by April next year.
Gareth Davies, head of the audit office, said: "Government. . .
Companies could apply for up to £50,000, or a maximum of 25 per cent of their annual turnover via the scheme.
The National Investigation Service, a partnership between Government and police, has made 43 arrests across 33 investigations and recovered £3 million.
The audit office noted that the service received more than 2,100 relevant intelligence reports by October this year but can pursue a maximum of 50 cases a year. However, it is clear the Government needs to improve its identification, quantification and recovery of fraudulent loans in the scheme."
A closely watched survey has found that growth in Britain’s mainstay services sector slowed last month as inflationary pressures hit levels not seen for at least a quarter of a century.
Analysts argue that the services sector, which has been slower to recover from the pandemic than manufacturing, is more vulnerable to Covid outbreaks and anti-virus measures, clouding the outlook for an expected revival in consumption.
Tim Moore, economics director at IHS Markit, said that so far, “surging price pressures” had failed to dent business and consumer spending.
Nevertheless, he warned that Omicron had the “potential to derail near-term growth prospects and add to international supply chain disruption”.
The IHS Markit/CIPS UK services purchasing managers’ index fell to 58.5 last month, from 59.1 in October. “Though the government has introduced relatively minor restrictions so far, consumers may adopt a more cautious approach, particularly to social consumption activities, such as going out to eat,” he said. However, he noted that order growth was at its highest level in five months, job creation was strong and that services companies had backlogs of work to keep them busy over the coming months. As a result, the Caixin/Markit services purchasing managers’ index fell to 52.1 in November from 53.8 in October but remained above the 50-point mark, separating growth from contraction.
The private survey readings, which focus more on small companies in coastal regions, tallied with those of an official survey. As a result, new orders rose at the fastest pace in five months, and export sales grew at their most rapid clip in more than four and a half years, it said.
The composite PMI, which combines the services and manufacturing sectors, eased to 57.6 last month from 57.8 in October. “Unless the potential impact of the Omicron variant becomes clearer in the next two weeks, we expect the MPC to err on the side of caution and wait for the February meeting before raising the Bank Rate,” he said. However, the services index remained above the 50 mark, separating growth from contraction. IHS Markit predicted that the economy would grow more rapidly in the fourth quarter than in the third.
Martin Beck, the chief economic adviser to the EY Item Club, the forecasting body, said that the services sector would “lose some momentum in December” because of the new Covid-19 variant.
Moreover, the survey’s gauges of costs paid by services companies and the prices they charged to customers hit their highest levels since at least 1998, which may bolster the case for an interest rate rise when the Bank of England makes its next policy decision on December 16. “Worryingly, the fastest-growing parts of the services sector are also the most exposed to the return of tighter pandemic restrictions, especially as we approach the crucial festive spending period,” he said.
IHS Markit said that the hospitality industry had been one of the best-performing sectors in recent months, adding that many services firms had enjoyed a boost in overseas orders after the government loosened travel restrictions.
According to a survey, activity in China’s services sector expanded more slowly in November amid rising inflationary pressures and continuing small-scale Covid 19 outbreaks.
Companies’ input prices grew for the 17th month in a row and at the fastest pace since May because of rising labour and raw material costs.
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