Only 1% of the £1.1billion lost to fraud and error in Covid business grant schemes has been recovered

Only 1% of the £1.1billion lost to fraud and mistakes in Covid business grant schemes has so far been recovered, a new report has found.

According to the National Audit Office, the Department for Business and Trade had recovered just £11.4m from huge losses across eight schemes last month.

It also found that the government “does not yet know” how effective the programs have been in saving jobs and that a judgment on their value for money “remains open”.

Whitehall officials are now facing calls to learn ‘lessons’ from the Covid crisis to improve contingency planning ahead of possible future national emergencies.

The NAO reviewed eight separate grant programs launched by ministers between March 2020 and December 2021.

By the end of March last year, these schemes had benefited from £26.9billion of funding provided by the government to local authorities, of which £22.6billion had been distributed through 4 .5 million business payments.

Business support grants were the second largest government intervention to support businesses during the pandemic, behind employment support measures such as the furlough scheme.

According to the NAO, the Department for Business and Trade had recovered just £11.4m from huge losses from eight projects last month.

Business support grants were the second largest government intervention to support businesses during the pandemic, behind employment support measures, such as furloughs

They included the Small Business Grant Fund; Retail, Hospitality and Leisure Grant Fund; Local authority discretionary grant funds; Local Restrictions Support Grant; Grant for additional restrictions; Christmas support payment; Restart Grant; and the Omicron Fellowship for Hospitality and Leisure.

The NAO has praised the Department for Business, Energy and Industrial Strategy (BEIS) – as it was known before the Whitehall Departments reshuffle last month – for getting the programs in place and doling out support quickly. initial to companies.

But they found that local councils were not informed of new schemes until they were publicly announced and therefore endured ‘significant practical challenges as they rushed to respond’.

The report found that 90% of the estimated £1.1bn loss due to error and fraud occurred in the first wave of schemes.

The risk of losses was then significantly reduced later in the pandemic as prepayment checks were introduced and improvements were made to local council data, the NAO found.

Much of the losses have yet to be recovered, with the report adding: ‘BEIS, working through local authorities, had by mid-February 2023 recovered £11.4m of the £1.1bn pounds of estimated losses (about 1%). ”

The NAO said there was little financial incentive for local councils to identify losses as “all monies recovered must be repaid to central government”.

It was also found that the Department of Business and Trade had yet to report on the impact of the programs on saving jobs, or whether support could have been given to businesses that did not need it.

He called on both the DBT and the Treasury, by the end of this year, to draw up contingency plans on providing financial support in the event of a future national emergency.

Gareth Davies, Head of the NAO, said: “BEIS and local government are to be commended for working quickly to create and distribute business grants.

“Early schemes lost significant sums due to errors and fraud, but BEIS addressed this issue in later iterations.

“The government does not yet know the impact of these subsidies – in terms of maintaining jobs or the extent of the support that could have been given to businesses that did not need it.

“Without such an evaluation, an overall judgment on the value for money of the schemes remains open.

“The government’s experience of working quickly with local authorities to channel financial support during the pandemic offers important lessons should similar crises occur.

“The new Department of Business and Trade can now use these lessons to improve contingency planning and build government resilience to respond to future national emergencies.”

Labor MP Meg Hillier, chair of the House of Commons Public Accounts Committee, said: “The government has moved quickly to provide business grants to support the high street during the pandemic.

“However, in doing so, approximately £1.1 billion has been lost to fraud and error, and to date only 1% of this has been recovered.”

“It is now up to the Department of Business and Trade and the rest of government to act on the lessons of this experience it has learned so that it can be at the forefront of the next crisis.”

A spokesperson for the Department of Business and Trade said: ‘This report confirms that our COVID-19 business grant programs have helped secure millions of businesses and livelihoods during the pandemic – supporting jobs and the economy during unprecedented times.

“No amount of error and fraud is acceptable, and we continue to work hard to recover these funds whenever possible.”