Former Cabinet Office and Treasury minister Lord Theodore Agnew has accused civil servants of suffering from a combination of “paranoid risk aversion”, ignorance and a lack of confidence for failing to name recipients of the government’s £47bn Bounce Back Loan Scheme.
Agnew told a committee of MPs probing fraud in the government’s Covid support scheme packages that it was “absolutely inexcusable behaviour” on the part of the Department for Business, Energy and Industrial Strategy not to publish the data.
Agnew resigned from government in January over the government’s handling of fraud in the business-support schemes – particularly targeted at the Bounce Back Loan Scheme, which was administered by BEIS via the British Business Bank, which it owns. The bank accredited commercial lenders, such as high-street banks and building societies, who extended the loans of up to £50,000.
Last year the National Audit Office said BEIS’s best estimate was that around £4.9bn in payments had been made to fraudulent applications. Earlier this month, Treasury permanent secretary sir Tom Scholar told MPs on parliament’s Public Accounts Committee the estimate had been revised down to £3.3bn.
Appearing before parliament’s Business, Energy and Industrial Strategy Committee today, Agnew urged MPs to demand specific data about the Bounce Back Loan Scheme’s recipients, arguing there was still time to recover some of the funds lost to fraud.
The ex-minister said he had supported the loan scheme when it was introduced, but said the implementation had been “woeful”.
“The system broke down, the government was absolutely terrified of the implications of Covid,” he said of the early weeks of the pandemic in 2020.
“This was seen as an important response to protect the commercial part of our economy, particularly the smaller businesses.”
Agnew said that officials were willing, there would still be time to recover some of the fraudulent payments and that some of the information he had been pressing for related to transfers made from the business bank accounts of loan recipients to their personal accounts.
“We all heard anecdotally of sports cars being bought up and down the country by recipents of Business Bank loans,” he said.
“That is a fraud. It was in the wording of the agreements. It is perfectly legitimately able to be recovered if the will was there.”
Agnew said repeated requests for information and publication of key details to the British Business Bank and BEIS had been refused while he was still in office.
He said notoriously secretive Switzerland had published details of the recipients of its counterpart to the Bounce Back Loan Scheme, and he could see “no justification” for BEIS not agreeing to do the same.
“Taxpayers have paid for this and they should know what’s happening,” he said. “That is a classic stalling tactic that you get from the machine when you’re trying to break it open, and it’s total rubbish.”
Agnew was asked whether by “the machine” he meant civil servants “possibly trying to hide the extent of mistakes”.
The ex-minister responded: “It’s a paranoid risk aversion, combined with ignorance… lack of confidence… it’s a whole mass of activity. The lack of training of civil servants so they don’t understand this stuff.”
He added that the blanket refusal to publish information about the scheme was an attempt to shut down scrutiny.
British Business Bank board ‘should be sacked’
Agnew said the British Business Bank did not have a counter-fraud function in place when it embarked on the Bounce Back Loan Scheme and called on MPs to demand to see a report it commissioned from consultants on the issue in spring 2020. Agnew said he believed that at least some of the recommendations would have been ignored.
“The crucial weakness of the British Business Bank is that it’s not regulated like any other bank in the country. Its regulator is BEIS,” he said. “BEIS have no experience in the regulation of a bank. No-one was watching them properly.
“The accounting officer of BEIS hasn’t a clue about banking; I bet if you asked the sponsorship team, which is the team that manage all their [arm's-length bodies], how many of them have got banking regulatory oversight experience, I bet none of them have it. You’ve got this whole chain of weakness.”
Asked by select committee chair Darren Jones whether the British Business Bank should be moved out of BEIS, Agnew proposed more immediate and direct action.
“The first thing that should happen is that the board should be sacked,” he said.
“We’re in this ridiculous position now where they are doubling down on their defensiveness, and that’s why you can’t get any information out of them because they’re trying to defend the flaws of two years and beyond ago.
“They’ve got to go. The sooner the better. You’ll get a new team in and they will want to solve the problem.”
Agnew agreed that in future the bank should also be regulated by the Prudential Regulation Authority and the Financial Services Authority, like commercial banks.