Tackling Fraud and Preventing Government Waste

Peter Grant Excerpts

Tuesday 1st February 2022 Commons Chamber

[Alison Thewliss]

I agree that there needs to be probity when it comes to that kind of money and that kind of behaviour—particularly the overruling of civil servants, if that has indeed been the case.

When I raised some of these matters in the House last week, Ministers pointed to unexplained wealth orders as a great badge of success, so I tabled a parliamentary question to find out how successful they had been. In 2018, the year in which they were introduced, there were three. In 2019, there were six. I thought, “That is great—the numbers are going up”, but there have been none since then. Is this a measure that is actually effective in tackling unexplained wealth? I am not sure that it is.

[Peter Grant (Glenrothes) (SNP)]

My hon. Friend will recall that the first ever unexplained wealth order was awarded against someone who was only allowed to become a United Kingdom citizen because of the billions of pounds that she had promised to bring into the United Kingdom. Does my hon. Friend believe that that is an indication that Government policy is fighting against itself? On the one hand the Government want to get people with lots of money into the UK, and on the other hand they do not ask too many questions about where that money has come from.

[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.

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[Simon Fell]

The hon. Member makes a valid point. Too often, people are subject to fraud and they get almost no response whatsoever. That undermines faith in the system and in policing. In some truly terrible cases, it has a huge emotional and psychological impact on the victims.

As I was saying in answer to the previous intervention, we need to give law enforcement, the public sector and the private sector the tools they need to better share information so that they can drive some of this stuff down and start to turn the ship. Prevention is better than cure and, as great as the taxpayer protection taskforce is, we need to invest early on in spending a fraction of the money on stopping the money walking out the door, rather than trying to recover it after the fact. Data sharing is the key to that.

As the MP for Barrow, the home of the national deterrent, it would be remiss of me not to linger on some of the points that have been made by the Opposition on defence spending, which has been called out as an area of waste. I have read the report that this claim is based on, and I have to say that I am somewhat sceptical about some of its claims. It is of course crucial that the Government improve on the procurement of defence matériel, and on the contracts they sign. Some of the details in that report do raise eyebrows. They relate to accounting adjustments, extensions and overruns, which are not the same as waste, let us be honest. Going into the detail of the report, we see that two of the programmes commissioned by the Opposition account for half the waste being claimed: Nimrod, which accounts for £3.7 billion; and aircraft carriers, which had a £2.7 billion overspend priced in.

[Peter Grant]

The hon. Gentleman seemed to cast doubt on the reliability of some of the reports that Opposition Members have relied on. I know that he has a keen constituency interest in the MOD’s nuclear activities. The Public Accounts Committee published a report on the management of contracts for defence nuclear infrastructure—the nuclear infrastructure part of the MOD—and found a total overspend of £1.35 billion. Does the hon. Gentleman accept the reliability of that report, which was unanimously agreed and backed by a Committee with a Conservative majority?

[Simon Fell]

The hon. Gentleman makes a perfectly valid point. I am not throwing the entire report under the bus, but I think we have to be sceptical of some of the claims that were made in it. When I sit down with the managers in the shipyard in Barrow, it is clear that the programme is moving on and that we cannot look at it as a static object that is being built. The requirements are changing, and what will be delivered is also changing. There is a cost attached to that.

We need to question the constant undercutting of our national deterrent. This is a real concern. To make a political point, which I rarely do in this place, the Leader of the Opposition did not come forward and back the AUKUS deal, which will lead to a considerable number of jobs and skills, and will bottom out the supply chain, not just in my constituency but across the country. That is a tremendous opportunity for us, in partnership with Australia, and we need to support such deals. We need to show across the House that we are backing them. I have digressed, but I hope it was worth it.

I praise the Chancellor and his team for their work to cut down on fraud and waste, but much more can and should be done. I return to my point that we need an economic crime Bill; as the hon. Member for Glasgow Central says, it needs to reform Companies House, make it transparent who owns property in the UK, and introduce an offence of failure to prevent economic crime. That would strike the right balance between shining a light and providing a disincentive of peril to stop bad actors going ahead.

My other point is that there needs to be enhanced data sharing across the public and private sectors and an emphasis on fraud, so that when our constituents are hit by fraud—when they get that phone call or that scam email—they can be relieved to know that there is support for them and that we will go after the perpetrators. Fraud so badly affects so many of the people we represent. We need to step up and deal with it.

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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.

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[Peter Grant (Glenrothes) (SNP)]

Thank you, Madam Deputy Speaker, and my birthday wishes to you. You are almost a twin of my wee sister, although I think Wikipedia may have got the year wrong. We will give you a chance to correct it later, because it cannot possibly have been that long ago.

I commend the shadow Chancellor, the hon. Member for Leeds West (Rachel Reeves), for her opening speech. Some of this afternoon’s Back-Bench speeches have been quite outstanding. One thing that struck me on listening to them was that hon. Members were using very specific examples to point to themes that come back time and again—examples where there were obvious danger signs and things were going wrong, but nobody did anything. Sometimes publicising them and getting people embarrassed—those who are capable of being embarrassed—is the only way to deal with the problem.

It is very easy to make political capital in this place, which is designed to encourage the political ping-pong of playground insults that sometimes passes for debate, but vitally serious questions are being raised not just about failings in the present party of government, but, perhaps even worse, failings in the machinery of government that have to be sorted out. A change of Government just now will not fix the problem on its own unless we change the mechanisms by which decisions are taken.

Running a Government is not easy, and running a Government at a time of global crisis is even more difficult. No Government get it right all the time. Complimentary things have quite rightly been said about the Welsh Government, but the Welsh Government have got it wrong sometimes, and the Scottish Government have got it wrong sometimes.

When Governments get it wrong, they have to expect to be held to account, and it is reasonable for them to expect to be held to a reasonable standard. We are not expecting people to have been perfect or able to see into the future; we are expecting them to have planned for the most likely and foreseeable contingencies, to have been able to change their plans when circumstances changed, and to have been willing to come back and hold up their hands when they got it wrong and say, “We got it wrong.” I would like to see certain people in this place saying, “I am sorry for what I did,” instead of constantly saying, “I am sorry for what other people did” or “I am sorry for what happened to me.”

Inevitably, a lot of our comments today will be directed against this Government, but in some cases I am talking about failings that have been there for decades or even longer. The Paymaster General appeared to speak somewhat dismissively of figures cited in a National Audit Office report in October 2020. I have gone back and had a look at that report. For those who are interested, paragraph 3.7 and figure 16 gave forecasts for the levels of fraud in some of the schemes that have turned out to be over-pessimistic, but the report says in a footnote that the sources for those over-pessimistic forecasts were the British Business Bank, the Department for Business, Energy and Industrial Strategy, Her Majesty’s Treasury and the Office for Budget Responsibility.

It is a matter of public record that the advice that went with the ministerial directions required to allow some of the schemes to be established very often talked about levels of fraud of the same order of magnitude as those that the NAO talked about. The Government went into these schemes knowing that the best advice that they could get was that such eye-watering levels of fraud were possible—maybe not particularly likely, but distinctly possible.

Comments have been made about some National Audit Office and Public Accounts Committee reports that have been published recently. I want to flag up a few of them to demonstrate that wastage and inefficiency are not just a problem within one or two Government Departments; they are actually endemic in this place. On the defence nuclear infrastructure, which I mentioned earlier, the Public Accounts Committee found a total overspend of £1.35 billion. Even at that level, projects are delayed at best by 1.7 years and some by 6.3 years. If these projects are so important to the defence of all of us, then I suggest that leaving us undefended for 6.3 years in the present climate is not a particularly good idea.

As for the national law enforcement data programme, 68% of its budget was overspent—an overspend of £445 million. Things got so bad that at one point the police chief constables threatened to walk away because they had lost confidence in the way that the programme was being delivered—or not delivered.

On a smaller scale, but with a significant impact on individuals, the green homes grant voucher scheme promised to improve the energy efficiency of 600,000 homes, but managed 47,500. It still spent £50 million on administration. That is over £1,000 in administration for each house that it dealt with—almost a sixth of the entire budget.

When the Committee looked at the problems in a lot of digital change programmes across Government, we found, worryingly, that the intended transformation programme in primary care services in England was so flawed that it

“potentially put patients at risk of serious harm”.

We need to remember that this is not just about money. If there is inefficiency, mismanagement and sheer incompetence in managing the money, then the chances are that outcomes for people who rely on this work could be seriously affected as well.

A common theme in a lot of Public Accounts Committee reports is that the Government are always over-promising, giving wildly optimistic forecasts of all the benefits that will come from these schemes, and then quietly slipping out a report admitting that they have not really delivered anything like the promised benefits. It is also a standard practice of this Government that among the achievements they claim credit for having delivered now are things that they were saying they might manage to deliver sometime in future—when their track record is that if they promise 1,000 of anything, we will be lucky to see half a dozen.

Not only has there been a long track record of massive overspends, massive delays and massive inefficiencies throughout the Government, but, speaking personally from my experience over the past couple of years on the Public Accounts Committee, I am still not convinced that there has been a sufficient culture change to be willing to be accept that this level of waste is simply unacceptable. Structural and cultural problems in the way the Government are set up and the way they operate mean that we will be very limited in how much of this waste we will be able to get to grips with.

For example, HS2 has overspent by almost £40 billion above original estimates, for a single project that we have recently discovered is not actually going to get as far as it was supposed to. All these things are supposed to be accountable to us, but I discovered at the first meeting of the Public Accounts Committee I went to that in the year that the massive overspends on HS2 were brought to the attention of the National Audit Office, HS2’s own annual report did not mention the fact that it had been delayed. It managed to produce a glossy report for its shareholders and the public but somehow forgot to mention that the public money it was overspending was not even delivering what it was supposed to deliver.

Let me pick up on a few of the comments made by others. It is small money in some ways, but £900,000 could do a lot in my constituency. The Prime Minister, over the heads of the Scottish Government and against the wishes of 80% or 90% of Scottish MPs, hired a consultant and paid them £900,000 to say to him, “A bridge to Ireland? Are you daft?” I have 80,000 constituents who would have given the Prime Minister exactly the same answer for £900,000 less than he chose to spend on it. Remember that this is a Prime Minister who couldnae build a bridge over the Thames, which is not quite such a technologically innovative project as building one to Ireland.

There has been comment about the economic crime Bill. Earlier, the Chancellor promised us that nothing is off the table in relation to economic crime, but unfortunately the economic crime Bill has not got as far as the table yet. Last week, the Government said that that was because they could not find time in the parliamentary timetable. Almost exactly two hours after they said that, the business in this place collapsed three and a half hours early. For the second time in three weeks, it had collapsed over three hours early because the Government could not think of important enough business to fill up a day. I suggest that it is not about a lack of parliamentary time but a lack of Government will. This is a Government that can find the time to legislate to strip citizens of their right to peaceful protest, but cannot or will not find the time to legislate to strip Putin’s pals of their ill-gotten billions.

I entirely agree with the comments from the hon. Member for Thirsk and Malton (Kevin Hollinrake), who is no longer in his place, about the protection of whistleblowers and the encouragement of whistleblowing. When it is done properly, it is one of the best defences against any kind of financial crime that we have. I wonder what it says about this Government’s genuine commitment to protecting whistleblowers when we see the comments that Sue Gray made about the culture of bullying at the heart of Government. Nobody asked her to look to look at bullying—it was not part of her remit—but there were clearly a lot of people in No. 10 who decided that this was a chance to talk about it.

The best way to deal with fraud is to prevent it from happening, rather than trying to deal with it a year or two after it has happened. I used to do fraud awareness courses when I was a local government senior auditor, and it was always made clear—as it was when I was chair of the audit committee of the third biggest council in Scotland—that the culture has to come from the top. It is the same as dealing with bullying, harassment and other unacceptable behaviour in any organisation. The message that is sent out and the ethos that is demonstrated day in, day out by the leaders of the organisation is much more important than what is written on an official document in a policy library somewhere.

The ethos and the example set by those at the top are crucial. What example does it set when the Standards Committee of this House finds that a senior Member of the House is guilty of “egregious” and “corrupt” acts, in the words of the Chair of the Committee, and the Government’s response is to try to discredit the Committee and the Standards Commissioner and get them removed from office? Does that look like the action of a Government who are committed to setting a culture where no level of corruption and no level of abuse of position is acceptable? It does not look like that to me.

I know that there are Members on the Conservative Benches—I certainly include the Economic Secretary to the Treasury among them—who are utterly decent people. I can understand why some of the Conservative Back Benchers who were here earlier were not too pleased to be included in some of the accusations that have been levelled against their party. There are decent and honest people on Conservative Benches, but we need to say to them that it is time for them to step up. What we have just now is a system of government that has always been wide open to serious abuse, with far too much power concentrated in far too many hands and far too little genuine oversight or genuine responsibility. It is a system that has just been waiting for the wrong person to come along and abuse it, and I believe sincerely that we are bearing the fruits of that now. It is up to those who have the integrity that is needed—particularly those on the Government Front Bench—to step forward now and start clearing out the corruption in this place.

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[Peter Grant]

We all vividly remember the triumphant statements from the Chancellor at the time about how much money was being made available, but can the Minister refer us to any mention in Hansard from the Chancellor at the time about the levels of fraud that were being provided for in any of those schemes?

[John Glen]

When we designed the schemes, it was clear that we had to put in reasonable measures around the identity of individuals and that we had to allow people to self-report their turnover. The whole conversation with the banks was designed to ensure that that money was available as quickly as possible while not being reckless with those finances. We did it on the basis that, inevitably, there would be a measure of fraud. I am grateful for the measured way in which the hon. Gentleman speaks in the House. I cannot give a specific answer to his question, but that explains the context in which the schemes were designed.

The measures that we put in place were robust and comprehensive. There was no one single point in time where we said, “We’ve got everything right”—I would never stand at this Dispatch Box and say that. Some £2.2 billion of potentially fraudulent bounce back loan applications were blocked through up-front checks and extra fraud checks were introduced in relation to the bounce back scheme at the earliest practical point. The Government categorically do not accept the suggestion, however, that those checks could have been part of the scheme at its launch.

I have spoken to officials on several occasions over the last two years about what more could have been done at the inception of those schemes. The extra checks that we put in place as quickly as we could would have delayed the start of the schemes, which were already delayed because of the circumstances I explained earlier. It would have caused further delay—in some cases, not just weeks but months—and would have led to serious harm for many SMEs at a time of what we all acknowledge was acute crisis.

Subsequently, however, we have given the Insolvency Service and Companies House new powers to prevent rogue company directors from escaping liability for their loans by winding down their businesses. We have invested £4.9 million in the National Investigation Service to probe serious fraud and it has recovered £3.1 million in the last year alone.