Tackling Fraud and Preventing Government Waste

Pat McFadden Excerpts

Tuesday 1st February 2022 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Thank you, Madam Deputy Speaker. I begin by wishing you a very happy birthday and wishing everyone in No. 10 a very happy end to dry January. I thank all right hon. and hon. Members who have spoken in the debate.

We began with the Paymaster General, No. 10’s fireman, coming once again to pour oil on troubled waters. Members raised a number of important issues. Several rightly raised the need for an economic crime Bill. They also raised the mismanagement of public finances, banks with poor records, losses other than those we are focused on today, crony contracts, and other examples described by the Public Accounts Committee. The overall picture is one of serious deficiencies in the management of our constituents’ money.

Let me focus on the issues in our motion. I turn first to the numbers. On 12 January, HMRC published figures on its website estimating the losses in covid grants due to fraud and error, which it broke down by saying they would be 8.5% of furlough payments and 8.7% of eat out to help out payments. It said that, all in all:

“This equates to £5.8 billion”.

Adding up what has been recovered so far and what it is estimated will be recovered through the taskforce that the Paymaster General referred to in his opening speech gives us a figure of £1.5 billion between 2021 and 2023, leaving us with the £4.3 billion that we have been talking about for the last couple of weeks. Put another way, the Government state on their own website that they expect to recover only a quarter of the sum that they estimate has been lost in fraud and error on these grant schemes. It is important to understand that the losses on bounce back loans are additional to that. Estimates of those losses vary, but they are on top of the £4.3 billion estimated to have been lost through the grant schemes.

The Government say they are chasing down every pound, but on the same website, they say that these losses were

“in line with the original planning assumptions,”

so from the get-go there was an assumption that a significant amount of money would be lost. Loans were made to over 1,000 companies that were not even trading when coronavirus began. Duplicate applications were made, with checks only introduced after 60% of the loans had been made. These are huge amounts of money.

The Government’s defence is that there was pressure to get money out of the door because genuine businesses and individuals needed help; for example, many businesses had been ordered to cease trading as part of the public health measures. Of course it is true that there was pressure to get money out of the door—no one is denying or disputing that—but that cannot be an excuse not to have even a semblance of controls in place. One control could have been asking whether a company had ever traded in the past. Another could have been checking whether the same company was submitting multiple applications to different organisations. Those basic checks were not put in place.

Neither can the legitimate desire to get money out of the door quickly be an excuse for the lack of action since. The Government were warned of the risk of fraud. Before the bounce back scheme was even launched, the chief executive of the British Business Bank wrote to the Secretary of State for BEIS at the time:

“The scheme is vulnerable to abuse by individuals and by participants in organised crime.”

In June 2020, the Fraud Advisory Panel warned that

“we feel we should draw your attention to serious weaknesses that enable fraudsters and corrupt insiders to exploit the”

bounce back loan scheme

“and CBILS loan scheme. Not only does that see public funds diverted to criminal enterprises, but it risks painting the scheme in a bad light and reducing public support for the government’s actions.”

In December 2020, the Financial Times described bounce back loans as a

“giant bonfire of taxpayers’ money”.

One source told the newspaper that

“the scheme was being abused…on an industrial scale.”

Three months before that, in September 2020, former detective Martin Woods said that criminals had identified the scheme as “a fabulous opportunity”. Another said: “This is basically” a criminal’s “dream scenario”, adding that it was an

“incredibly lucrative fraud that requires very little work and has almost no chance of law enforcement action.”

I accept that there was pressure to get money out of the door and get help to people, but that is not an excuse for not having even basic checks in place, and it is not the case that the Government were not warned about the risks. Indeed, as I said, their own website shows that assumptions of the levels of losses that we are talking about were built in from the very beginning.

Let me turn to the lack of action since. The speech by the former Minister for fraud has been extensively quoted in this debate, and it is no wonder. Ministers cannot just come here, thank him for his service and ignore what he said. The quotes from his speech, of which we have heard many today, are completely damning:

“Schoolboy errors…indolence and ignorance…no knowledge of, or little interest in, the consequences of fraud to our economy or society.”—[Official Report, House of Lords, 24 January 2022; Vol. 818, c. 20-21.]

That is not the verdict of the Opposition; it is the verdict of the Government’s own Minister on the issue. He also said that this is not an issue of the past. It matters now, because this is the time when the 100% Government guarantee starts to kick in—that is, when the taxpayer starts having to pay the cost of the defaulted loans. It is impossible not to draw a contrast between the dismissal of all those warnings, and the lax way that money was allowed to go to the unscrupulous, with the Government’s determination not to give help to many of the freelancers and others that got no help at all. How angry must they feel watching our proceedings today, when they see billions of pounds being discussed that we may never see again, while their claims were rebuffed by the Treasury time and again.

Lord Agnew rightly made the link between the huge sums that we are discussing and tax, because the context of this debate is that in the year following those losses the Government will bring in a tax rise that will add hundreds of pounds a year to the average family’s tax bill and raise the overall tax burden to the highest levels since the 1950s. It does not matter how many times the Chancellor and the Prime Minister describe themselves as tax-cutting Thatcherites: between them, they have raised taxes far more than any Chancellor of either party since she left office. It is completely absurd for the Chancellor to stand up and give a tax-raising Budget and then try to wash his hands of it at the end.

There is now a yawning gap between the rhetoric and the actual record of stewardship of public money. It smacks of a Government who have been in power for too long, and who have become complacent and, overall, arrogant—although I would never accuse the Minister of that, as I have enormous respect for him. There is an arrogance about the mismanagement of the money, and it is totally cynical to drive through tax increases when families are being squeezed by rocketing energy bills and declining real wages, just so the Chancellor can cut taxes before the next election. Taxes should be geared to the needs of the country, not the political campaign grid of the Conservative party.

This is not just about covid grants and loans. As my hon. Friend the Member for Wansbeck (Ian Lavery) highlighted, it has emerged, on page 199 of the Department of Health and Social Care annual report, that £8.7 billion of losses in PPE have had to be accounted for in that Department’s spending. We should pause and think about that—£8.7 billion of losses. What could that money have done in the NHS? It is twice the Government’s entire hospital building programme, but it is dismissed on page 199 of the Department’s annual report. If we add, for example, that £8.7 billion to the £4.3 billion that we have highlighted today, we get a whole year’s worth of receipts from the national insurance rise that will be imposed on families in April. The Chancellor says those tax rises are all about public services, but it is impossible to escape the conclusion that they are, at least in part, to fill the hole caused by that colossal mismanagement of public money. Working people across the country are being asked to pay the cost of the Government’s mistakes.

The Department of Health and Social Care report does not get any better. The public sector’s auditor in chief has refused to give a clean bill of health to the Department’s 2020-21 accounts, because £1.3 billion has been spent without Treasury approval, and he has pointed out the risk of fraud. This is about grants, loans and departmental spending, and it matters because there is now a direct link with the cost of living crisis that our constituents face. The Chancellor was very keen to claim ownership of the money that has been distributed: he must also claim ownership of the entire record, including the money that has been lost.

Finally, I return to the calls in this debate for an economic crime Bill. That has been called for time and again, and it is supported by the Opposition. We need to bring forward the registration of overseas entities Bill, which the Government know has cross-party support but which they have been sitting on for four years. We need not just to talk about reforming Companies House, but to get on and do it.

We need to implement the Russia report; I saw the Foreign Secretary at the weekend saying that there would be no hiding place for oligarchs. Why have the Government not acted on the Russia report, which is now some two years old? The UK should not be an easy home for illicit finance, the proceeds of looting and kleptocracy. At the end of the day, it is not just a matter of finance and taxation, although it is that, but a matter of national security. The Government’s inaction on that has been gaping for far too long.

I appeal to the Minister: the Government must act on fraud, on both public finance and national security grounds, particularly when they are asking working people to pay more tax. That is what our motion today is all about.