Just 1% of the estimated £1.1bn lost from the government’s Covid business support program in England as a result of the fraud and error it has so far been recovered, the public spending regulator said in a report urging ministers to learn lessons from the scheme.
The “overwhelming majority” of fraud and error occurred during the initial incarnation of the grant scheme launched in March 2020, which did not require prepaid checks, the National Audit Office (NAO) said in its report on the rushed efforts.
The total of £1.1 billion lost in grants amounted to just under 5% of the total scheme, according to statistics from the commercial department. The latest figures for money recovered, compiled by the newly renamed Department for Business and Commerce (DBT) and quoted by the NAO, showed just £11.4m was recovered, 1% of the amount lost.
The report sets out the speed at which the eight separate business grant schemes, run by local authorities, were developed and launched, noting that the Department for Business only requested in late February to examine how such a system might work.
The first version began on March 11, with a second on March 17. By April 19, the report says, local authorities had made 484,000 payments totaling £6bn, more than 50% of the total delivered in what was the largest support program of its kind beyond the license.
Matters have not been helped by the lack of a shared contingency plan between local and national government on how to support businesses in the event of an emergency, the NAO said, and councils typically only hear about new schemes when they are publicly announced, at which point in which they were already attending inquiries from local companies.
One of the results of the accelerated schedule was the initial wave of fraud and error. Later versions of the grants not only used prepaid checks, but also had access to much more accurate local information about the companies.
The report calls for the DBT and Treasury, working with the councils, to draw up formal contingency plans by the end of this year for similar financial support if there is a future national emergency, using lessons from the Covid scheme.
Gareth Davies, director of the NAO, said the business department and local government “deserve credit for working quickly to set up and distribute grants to businesses” but the full impact of the fraud and error remained unclear.
“The government doesn’t yet know the impact of these subsidies, in terms of keeping jobs or how much support could have been given to businesses that didn’t need it. Without such an assessment, a blanket judgment on the value for money of the schemes is left open,” he said.
“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 Commerce can now use these lessons to improve contingency planning and build government resilience to respond to future national emergencies.”