Tackling Fraud and Preventing Government Waste

Kevin Hollinrake Excerpts

Tuesday 1st February 2022 Commons Chamber

[Rachel Reeves]

My hon. Friend makes an important point. Her council in Liverpool and all our councils have lost money, and this Government are handing it out to criminals. Billions of pounds of taxpayers’ money has been written off, but it was not the Chancellor’s money to write off; it is the public’s. The Government have clearly lost their grip. We must restore faith and confidence in how taxpayers’ money is spent.

We have a National Crime Agency in our country for a reason: to tackle serious and organised crime. It should be the National Crime Agency that the Government ring first on such occasions, but instead there are reports that they do not even want it to look into the matter. The Chancellor said earlier that just 13 cases are being looked at by the National Crime Agency. That is why Labour has brought our motion to the House today: to call on the Government not only to come back by 31 March with a clear answer about how much of their money has been clawed back from criminals, but to allow the National Crime Agency full access to investigate all aspects of fraud within covid support. The Government should not be resisting any effort whatever to retrieve taxpayers’ money and to hold people responsible. We need to know how it is so easy for organised criminals to steal from right under the Treasury’s nose.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

As a point of correction, the hon. Lady says that the Chancellor said that only 13 cases were being looked into by the National Crime Agency, but what he said was that 13 people have been arrested. Many more cases have been looked into.

I think the hon. Lady is in danger of missing the point. Lord Agnew actually said that the Government did a very good job of rolling out the schemes; his problems were with the checks and balances afterwards on banks drawing on the guarantee. Two banks were responsible for 81% of claims on the guarantee. That is where our attention should be focused: what are the banks doing about getting the money back?

[Rachel Reeves]

Lord Agnew did not resign from the board of a bank; he resigned as a Government Minister because of

“schoolboy errors…indolence and ignorance.”—[Official Report, House of Lords, 24 January 2022; Vol. 818, c. 20-21.]

How does the hon. Gentleman explain to constituents in Thirsk and Malton that they will be £1,175 worse off in April because of the energy price hike and the tax increases from this Government, who all the while are giving money away to criminals? That is why Labour has brought our motion to the House.

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[Michael Ellis]

As it happens, we have given, as a Government, over £60 million to Companies House to continue its necessary reforms and we have undertaken myriad measures to prevent the problems that the hon. Lady refers to.

The first lockdown came into force on 23 March 2020. By 24 May, just a couple of months later, we had already paid out almost £28 billion in loans, rising to £80 billion by the time that the schemes closed on 31 March 2021—astronomical support.

[Kevin Hollinrake]

Much has been made of Lord Agnew’s resignation and we should take his resignation points very seriously. We should also acknowledge that he described the bounce back loan scheme, in his resignation piece to the Financial Times, as an “important and successful intervention”. Is not his real point that we need to make sure that checks and balances have been followed by all banks who were given the responsibility of distributing these loans?

[Michael Ellis]

I agree with my hon. Friend on that, and also on Lord Agnew, who is a noble man and was an excellent Minister. The sheer volume of schemes introduced and the speed with which they were designed and implemented meant it simply was not possible at the time to prevent every instance of fraud and error, and I accept that. However—

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[Alison Thewliss]

My hon. Friend is absolutely correct to draw attention to that. It is one of many deficiencies in the Home Office systems as well. It seems that those with money are given a free pass, whereas those who come here with more humble undertakings to begin their lives here, to work and to build a family, end up being penalised and having to pay an awful lot more in fees, and experiencing all the challenges that that brings.

Hon. Members may think that some of these issues with Companies House seem a bit remote from the real world and the real lives of our constituents, but that could not be further from the truth. During lockdown, a company in Glasgow using myriad company structures made claims under the furlough scheme, but employees of that company never received the money that they were entitled to. Even if the company directors ended up being prosecuted, or HMRC ended up getting its money back, those employees would still get nothing. That shows the complete unfairness in the system. I would be interested to know whether the Government have any figures, from when they have chased down these companies, on how many employees never saw the money that they should have got and that they needed to get by.

For those completely excluded from the covid support schemes, this is all the more galling. Limited company directors and pay-as-you-earn taxpayers were left out because they were deemed too much of a fraud risk, and new mothers who had taken time off to have a child in the preceding three years lost out because calculating their maternity leave was thought to be too complex. Yet as they were being told that by Ministers, the real fraudsters were raking it in, with drugs gangs getting payouts, and many of the people who benefited will never be caught.

These most recent examples of the Government’s relaxed attitude to the wasting of public funds are by no means the only cases. Best for Britain’s “scandalous spending tracker” sets out the following examples—I will list just some of them; otherwise, we could be here all afternoon, and I am sure that others want to speak—since the current inhabitant of No. 10 Downing Street came to office. It categorises them in three ways: as “crony contracts”, “duff deals” and “outrageous outgoings”.

Here are a few highlights: £11 million on blue passports; over half a million on chauffeuring Government documents, never mind Government Ministers; £56 million contracting to big consulting firms outside tendering processes; £29 million on the festival of Brexit; £900,000 painting a plane; £900,000 researching a bridge to Ireland, which I could have saved the Government money on, because I did a second-year geography project—at high school, not university—that could have told them it was a ropey idea; £32 million on unusable PPE suits; over £38 million on a test and trace contract that was not fulfilled; £10 billion on a failed test and trace system; over £300 million on expired PPE, and billions more on contracts for friends and family of Ministers and Conservative party donors through the fast-track lane.

All that totalled £25 billion, and all of it at a time when the screw was being tightened on those who have the least, with cuts to universal credit, some getting no money at all, and more effort spent chasing down those who happened to wrongly claim child benefit than those who deliberately defrauded the public purse to the tune of billions.

I find it difficult to understand why the Government are so careless with our money and why they do not want to act on fraud and money laundering. The question “who benefits?” continues to rattle around in my head. While those on the Government Benches do not like the inference that it was them and their chums, I wonder whether the fact that this coincides with the undermining of the Electoral Commission and the relaxing of the rules on overseas donors is any kind of accident. It is not just me; the Centre for American Progress flagged recently:

“Uprooting Kremlin-linked oligarchs will be a challenge given the close ties between Russian money and the United Kingdom’s ruling conservative party, the press, and its real estate and financial industry.”

This should worry us all, but it does not seem to worry those on the Government Benches.

Lord Agnew’s estimate of the total fraud loss across UK Government Departments is £29 billion per year. That could go, as he suggested, to tax cuts or, as we on the SNP Benches would argue for, to investment in public services and increases in social security. Either way, there is a cost to this fraud, and it remains absolutely baffling that this UK Government have continued to let it go on their watch.

[Kevin Hollinrake]

Will the hon. Lady give way?

[Alison Thewliss]

I am just coming to a close, but I am sure that the hon. Gentleman will have a contribution to make later.

The solution is not difficult if the will is there. We have lost too much time and too many opportunities to bring forward measures in different Bills. If we are to have an economic crime plan, it must tackle all these issues; we must not miss another opportunity. If the Government will not act, they should devolve full powers in this area to the Scottish Parliament and let our colleagues in Edinburgh get on with the job. Scotland has no desire to be tarnished yet further by this grubby excuse for a Government.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to speak in this debate; I welcome the Opposition motion on fraud. I am one of several people on the Government Benches who often speak out about tackling fraud, so I object a little to one or two of the comments from the Opposition that Conservative Members are not bothered about fraud. Nothing could be further from the truth, for a number of reasons, including the cost to our taxpayers. It undermines the very system that underpins our economy if people do not feel that the game is fair for all players, and fraud undermines the principle of everything I have stood for over my whole life in business—the fundamentals of a free-market economy are that it is a fair and level playing field.

I draw the House’s attention to my entry in the Register of Members’ Financial Interests. Like my hon. Friend the Member for Broadland (Jerome Mayhew), my company took a coronavirus business interruption loan—quite a sizeable one—which was paid back in full without touching it, which I am sure the Economic Secretary will be pleased to hear: we discussed it at length at the time.

It is important to put the issue in context. I had an Urgent Question on the issue last week, following Lord Agnew’s statement, because I was very concerned by many of the things he said in it and in his subsequent press articles. He said that the bounce back loan scheme, which has been the subject of many comments in the debate today, was

“an important and successful intervention”.

It was critical at the time. It is easy with hindsight to say that mistakes were made—of course they were, given the speed with which the scheme was rolled out. The initial iterations of the loan schemes did not include a bounce back loan scheme, which was introduced at a later stage, vitally.

[Peter Grant]

I certainly would not disagree with the hon. Member about the remarkable speed from when the Treasury sat down to devise the scheme to when the first loans were delivered. Does he share my disappointment that in the 10 years from 2010, when we knew a pandemic was coming, no planning whatever was done for the economic impacts and the impact on businesses of the protective measures that the Government might be forced to implement when the pandemic finally got here?

[Kevin Hollinrake]

The hon. Member makes a very good point. The whole country would acknowledge that we need to be better prepared for a future pandemic. One of the lessons that we need to learn is to have a template ready for bounce back loans and other measures that we can roll out at pace, but we should not undermine the ability of that scheme to get money out to businesses in need.

The British Business Bank said that it had

“ensured that key counter-fraud measures consistent with the…design of the scheme were in place from the outset.”

It is not the case that the schemes were rolled out without any consideration for the potential for fraud. That highlights the issue of what checks and balances were in place—the Paymaster General set out some of them in his speech, which was useful—and which banks performed better in taking into account those measures. As Lord Agnew said, 81% of the amount that has not been repaid so far—as far as we understand from the Treasury—relates to two of the seven biggest banks. Clearly some banks did better than others with know your client checks and fraud checks.

We need to understand exactly what happened. We cannot just roll out a scheme, let it run and that is it. The implications for recovering loans are hugely important. We need the dashboard of information that Lord Agnew called for so that we can clearly understand the performance of the banks. One criticism that I would level at the Treasury is that far more transparency is needed about which banks are issuing loans, what percentage of applications are successful and the success in recovering loans. As somebody who took a loan for my business, I would advocate complete transparency about which businesses take loans. If all that were open—access to Government loan schemes or furlough, and so on—it would be far easier for the public, the media and parliamentarians to hold individual businesses to account. Businesses motivated by wrong and perhaps nefarious purposes would be far less likely to try to access the loans in the first place. Far greater transparency is needed, and to get that taxpayers’ money back there certainly needs to be transparency around the bank’s performance now.

Many people have called for an economic crime Bill, and some of us have been banging on about that for some time. It could really help. One of the elements is the failure to prevent economic crime. I think that corporate liability should extend to individuals, rather than at corporate level. The No. 1 thing we could do to deter financial organisations and corporations, even smaller corporations, from defrauding people or enabling fraud and money laundering is to say to the individuals behind those companies that they will be held personally responsible. It could have had an effect on the bounce back loan scheme if the banks that cared a little bit less about where the money went were held to account through the senior managers regime and the Financial Conduct Authority, and potentially by other charges too. Failure to prevent is absolutely fundamental to the economic crime Bill.

Companies House reform is also absolutely fundamental. It is clear that that should be the case and I know the Government are doing something on that already. One perverse situation at the moment is that if someone sets up a business through a company formation agent, they should be subject to money laundering checks by HMRC. If they set up a company directly with Companies House, however, there are no money laundering checks. It simply cannot be right that if someone goes to one and cannot get set up, they can go to Companies House. Companies House, therefore, needs to be a regulator, rather than just a register.

The register of overseas entities does not come under the taxpayer, of course, but through a simple levy attached to the cost of creating a company, currently £12. That could raise enough money for Companies House to be that regulator, so we could see who was trying to launder money through UK properties. That is absolutely critical. The Government are committed to all this stuff, but we just need them to commit to bringing it forward in the next parliamentary Session. It was great to hear what the Chancellor said on that today. He seemed to be really keen on that being in the next parliamentary Session. I hope recent events will push it up the political agenda.

One issue we neglect in the conversation about cutting economic crime is the role of whistleblowers. Most economic crime is not highlighted by our very good agencies. They are good sometimes and the legislation we are bringing forward will help them to take forward successful prosecutions, but they need the evidence in the first place. I am sure my hon. Friend the Member for Barrow and Furness (Simon Fell), who made a fantastic speech and who has huge experience in this area, agrees that we need people to come forward with the evidence. Our regulators and fraud agencies can only really be watchdogs rather than bloodhounds and they need to be given access to the information in the first place.

Whistleblower protections in the UK are pretty woeful now compared with how they used to be. We used to be world leaders in this area. If we want to uncover economic crime, we have to make sure that the people who identify and highlight it, and help the Serious Fraud Office to make prosecutions stick, are protected. That is not the case at the moment. My constituent Ian Foxley highlighted the case of GPT special projects. Some £28 million-worth of economic sanctions against that company were handed down in Southwark court, but for 10 years my constituent has gone without a penny, having had a six-figure salary in his previous role. He blew the whistle. One could say that his whistleblowing led to the Airbus fine of £3 billion, of which £860 million came to the Treasury, but he has gone without a single penny and that cannot be right. We have to make sure people are protected when they come forward, and are properly compensated for the distress and financial impact it has on their lives.