1% of business support lost due to fraud and error, report says

The public spending watchdog said that just 1% of the estimated 1.1 billion lost from the government's Covid business support programme in England has been recovered as a result of fraud and error and had to learn lessons from the scheme.

The National Audit Office NAO said in its report on the rushed-through efforts, a majority of fraud and error occurred during the initial incarnation of the grant scheme, which was launched in March 2020 and did not require prepayment checks.

The total of 1.1 billion lost in grants was less than 5% of the total for the scheme, according to business department statistics. The latest figures of retrieved money, collated by the newly renamed Department for Business and Trade DBT and cited by the NAO, show that only 11.4 m of that has been recovered 1% of the amount lost.

The business department was only asked by the Treasury in late February to examine how such a system might work, and the sheer speed at which the eight separate grant schemes for businesses were developed and launched, according to the report.

The first version began on March 11 with a second on March 17th. The NAO said that the lack of a shared contingency plan between local and national government on how to support businesses in the event of an emergency made matters worse, with councils generally only hearing about new schemes when they were announced publicly, at which point they were already dealing with queries from local businesses.

There was an initial wave of fraud and error that resulted in the accelerated timetable. Later versions of grants used prepayment checks but also had access to more accurate local information about businesses.

The report says that the DBT and Treasury should draw up formal contingency plans with councils by the end of the year about similar financial assistance if there is a future national emergency, using the lessons from the Covid scheme.

Gareth Davies, the boss of the NAO, said that the business department and local government deserve credit for working quickly to set up and distribute grants to businesses, but that the full impact of fraud and error is not clear.

The government does not know the impact of these grants on maintaining jobs or how much support might have been given to businesses that didn't need it. Without such an assessment, an overall judgement about the value of the schemes remains open, he said.

The government's experience of working with local authorities to channel financial support during the epidemic is important lessons to be learned if similar crises occur. The lessons can be used to improve contingency planning and build government resilience for responding to future national emergencies, according to the new Department for Business and Trade.