The Guardian’s take on a Tory resignation: Minister reflects on government failure | Editorial
Jhe hallmarks of this government have been its cavalier disregard for integrity, accountability and honesty. But there are exceptions ; Lord Agnew’s resignation shows ministers can do the right thing. The Minister for the Fight against Fraud decided to leave aside the alarming scale of thefts taking place under the government’s coronavirus support scheme, and the apparent reluctance of his colleagues to do anything about it. His departure should be a wake-up call.
Since May 2020, around £50billion had been lent to businesses under the government-backed Covid loan scheme. The National Audit Office last December warned it had “limited verification and no credit checks on borrowers, which made it vulnerable to fraud and loss.” The government also opted not to disclose the companies receiving Bounce Back loans, leaving ministers open to accusations that there was something to hide. Lord Agnew agreed, saying ‘desperately insufficient’ efforts had been made to prevent the theft of government money. The Tory peer thought Covid loan fraud was at 26 per cent, suggesting the state handed over £10billion to the thieves. The Chancellor, Rishi Sunak, refuse ‘ignore’ fraudulently claimed covid relief funds, claiming he would recover the looted funds. Lord Agnew believes it would give Mr Sunak a ‘sporting chance to cut income tax ahead of the likely May 2024 election’. This is true under Treasury budget rules. Labor says recovering such losses would mean virtually no need for a National Insurance hike.
The government has offered advances of up to £50,000, a maximum of 25% of annual turnover, to support businesses during the pandemic. More than 1.5 million loans have been granted. Yet there are only about 1.4 million private sector businesses in the UK with the employees. That more than 100% of UK businesses were able to take advantage of self-certified loans granted within 24 hours and for which the state was entirely responsible should have raised alarm bells. Lord Agnew said schoolboy mistakes had been made; over 1,000 businesses received state loans that weren’t even traded when Covid hit. Anti-fraud measures have not been put in place. Simple gestures could have helped. David Clarke, former chair of the Fraud Advisory Panel, offers MPs last year that a centralized bank data repository could have identified long-dormant business accounts that were receiving money from the government. Companies House does not carry out basic checks on its companies register. Inexplicably, ministers have sidelined long-promised redesign plans.
The former minister blame the banks for the losses. Lenders had no reason to put controls in place because there was a 100% state guarantee in the event of non-payment. Honest businesses needed money to pay the rent. This money helped homeowners pay their mortgages, which provided the banks with cash. Bankers also make money by creating and selling mortgage derivatives, a financial investment instrument that depends on the underlying value of home loans. If they go wrong, billions of pounds in the Square Mile could potentially be affected. No wonder many financial companies are posting record profits. The suspicion is that losing £10billion to fraud could have been seen as an acceptable price to pay to protect Britain’s crown jewel – the City – from harm. But if so, then this is just another example of how finance has become an end in itself, independent of the economy and the people and businesses it should serve.