Matthew Lynn

The great Bounce Back fraud bonanza

The great Bounce Back fraud bonanza
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Fake companies set up under false names. Phantom employees invented to claim compensation. Start-ups trousering loans for ventures that don’t exist. Meals that were never eaten. The British economy has been in a bad place for the last six months. But it turns out one small corner of the economy has been flourishing: defrauding the public purse.

The Chancellor's extraordinarily generous range of schemes to keep businesses afloat may have been necessary to prevent a complete collapse in output. But they have also proved a bonanza for spivs, chancers and con men, and that too will have a cost.

We learned today that the ‘Bounce Back’ loan scheme may well have been defrauded to the tune of £26 billion – serious cash even for a government that has recently discovered the magic money tree. According to a report from the National Audit Office there were so few checks in place when the scheme was hurriedly put together that it was simple for fraudsters to set up a company in a borrowed name, take out a state guaranteed loan, and then disappear with the cash before anyone knew what was happening.

We will find out just how many of the loans were fraudulent when repayment is finally demanded. But the NAO reckons it is more than half of them. The colossal sums of money stolen were more than the entire amount spent on police and prisons every year (which seems a shame, since they might be busy with all the fraud going on), or the total dished out to students in loans annually. In other words, it was a lot.

And yet it may simply be the tip of the iceberg. One man in Birmingham has already been arrested in connection with an alleged £495,000 furlough scam, while in London last month another company director was arrested over a suspected £70,000 fraud involving the same scheme. How much of the £35 billion the Treasury paid out in salary support will turn out to be a wheeze of one sort of another we will find out one day. But let’s put it this way. It will probably be a nine-digit number. At the same time the start-up rescue package looks like it was wide open to abuse. Experienced venture capitalists find it very hard not to get ripped off from time to time so it seems unlikely the Treasury managed to spot every deception. Even ‘Eat Out To Help Out’ may not have been perfect. Was every kebab shop keeping perfect records? Or is it just possible any extra chicken shish or two got slipped through the books? I would be happy to bet a lamb kofta it was the latter.

There is an important point here. It shouldn’t have come as much of a surprise to even the most completely un-streetwise Treasury official that when you start to throw money around with carefree abandon them lots of people will start to take advantage of that. There are plenty of lessons we will need to learn once this epidemic is finally over. But one of the most important will surely be that free money is not as free as it might appear. A rescue of the economy might well have been necessary. But in its haste the Treasury has also enabled fraud on an epic scale – and we will all be paying the cost of that for a long time to come.

Written byMatthew Lynn

Matthew Lynn is a financial columnist and author of ‘Bust: Greece, The Euro and The Sovereign Debt Crisis’ and ‘The Long Depression: The Slump of 2008 to 2031’

Topics in this articlePolitics