The National Audit Office (NAO) has warned the government that it faces a potential loss of £15 billion to £26 billion as a result of criminals taking advantage of the coronavirus (COVID-19) Bounce Back Loan Scheme (BBLS).
The BBLS was announced on 27 April 2020 and is designed to quickly provide loans of up to £50,000, or a maximum of 25% of annual turnover, to small businesses to support their financial health during the COVID-19 pandemic.
Over the coming months, the extent of losses due to fraud will become clearer, the NAO said, but the full extent of losses, both credit and fraud, will not emerge until BBLS loans are due to start being repaid from 4 May 2021.
When compared to other COVID-19 support schemes, the BBLS has less strict eligibility criteria in place, the NAO said. It stated that the lower level of checks presents credit risks as it increases the likelihood that loans are made to businesses which will not be able to repay them.
Commenting on the issue, Gareth Davies, Head of the NAO, said: 'With concerns that many small businesses might run out of money as a result of the COVID-19 pandemic, government acted decisively to get cash into their hands as quickly as possible.
'Unfortunately, the cost to the taxpayer has the potential to be very high, if the estimated losses turn out to be correct.
'Government will need to ensure that robust debt collection and fraud investigation arrangements are in place to minimise the impact of these potential losses to the public purse.'