Tackling Fraud and Preventing Government Waste

Debate between Siobhain McDonagh and Jerome Mayhew

Tuesday 1st February 2022 Commons Chamber

[Jerome Mayhew (Broadland) (Con)]

Like my hon. Friend the Member for Barrow and Furness (Simon Fell), I am rather surprised to be called so early. I am grateful to Her Majesty’s loyal Opposition for securing this debate, because fraud and the efficient use of public resources is a topic that we in this place should always be discussing and hold close to our hearts. I could have started with a mutual blame game, where we look back to the Blair years and point to fraud. A couple of my examples have already been drawn to the attention of the House, so I will not do that, save for one issue that is particularly close to my heart, because I remember feeling so angry about it at the time: the private finance initiative scheme, so beloved by Tony Blair and Gordon Brown.

The Centre for Health and the Public Interest has recently come out with a report that has calculated that, for the benefit of £12.4 billion of hospital assets, the taxpayer will now be paying £80 billion by the time those assets expire in 2050. If we are talking about waste of public money, Labour is late to the party, and I am not sure there are many lessons to be learned from that.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

I know the hon. Gentleman is giving a speech about a popular view of the private finance initiative, but I wish to make him aware of the Atkinson Morley wing at St George’s Hospital, which is a brilliant neurological centre that cost £50 million through PFI. It was built in the late 1990s, and it has saved hundreds and thousands of people. It is a building, and an opportunity to have a service, that was not coming any other way. I give thanks for that PFI deal, and I give thanks for those people who have been saved by it.

[Jerome Mayhew]

I am grateful for the hon. Lady’s intervention. I was not suggesting that the assets should not be built; it is about the way they were financed. Think how many more hospitals we could have built, and how many more people who could have been helped, if we had taken a more responsible approach to PFI.

Turning to the meat of today’s debate, we have heard a lot of speeches about the covid response and the fraud that has been associated with it, and it is right that we focus on fraud. However, there seems to be a case of partial amnesia about this, because if we cast our minds back to the early months of 2020—it was not that long ago—the conversation was expressly about the trade-off between speed and the level of security needed to protect the public purse from fraud. That was not an after-the-event discussion; that discussion was going on, certainly on the Government Benches, at the time of the innovative and brilliant polices brought in by the Chancellor and the Government to support our economy and the people working in it. This was a deliberate trade-off, but it was not “get the money out” with no defence against fraud. We have heard in a number of contributions that there were a significant number of effective protections against fraud, including for business bounce back loans, and more than £2 billion of applications were caught by that protection.

We must recognise, in the fullness of our hindsight, the urgency of need. I refer to my entry in the Register of Members’ Financial Interests, because I used to be the managing director and a significant shareholder of a company that employed about 1,200 people in a leisure centre. On 23 March 2020, it was ordered to close by the Government. That was its week of minimum cash flow for the entire year. It is substantially closed during the winter, and it employs another 750 to 800 people at the start of the season and trains them up ready for Easter. By ill chance, the lockdown, which started on 23 March, coincided with that planned dip in cash flow. Without quick public support, that business would have had a very high chance of going under. It did not, because it was able to take advantage of the Government’s coronavirus business interruption loan scheme, and also the furlough scheme, which was enormously important as well. As a result, on 4 July 2020, when the economy was substantially reopened and recreation and leisure was reopened, those jobs were saved. The business was still going, and it has gone on to thrive. That is just a simple example of how the speed at which the Government acted was effective in saving jobs.

We can expand that out to the national economy, because hon. and right hon. Members will recall that the economists were predicting an unemployment rate of 12% in response to the covid closure. We forget that now, because in fact the unemployment rate nationally today is 4.2%. That is millions of jobs and millions of families—hundreds of thousands of families, certainly—whose economies and lifestyles have been protected by the very speed at which the Government acted, but there was a partial cost to pay for that.

I accept, and it was accepted at the time, that with speed necessarily comes a reduced ability to follow up on every single aspect of fraud prevention. Given that, it is noteworthy that the estimated percentage fraud rate is about 7.5% for the bounce back loan scheme and much less for CBILS. That compares with a national average for Government contracts of about 5%. To my mind, given the necessary need for speed, the differential between those two rates is surprisingly small, and it is coming down month by month in estimates from such bodies as PwC. We have already heard reference to the reduction in the estimates of overall fraud.

What is more worrying to me is not the headline rate of 7.5%, but the ongoing long-term rate of 5% for estimated fraud in Government contracts. That is a scandal, and I strongly encourage my hon. Friend the Economic Secretary to the Treasury to take that enormously seriously, because we need to focus on the real costs to the economy and to society that Lord Agnew ably demonstrated in his resignation speech. He highlighted the economic costs as being about £29 billion a year, or 1% off the cost of income tax. That is enormously important. We could do a huge amount with that money should we not choose to return it to its rightful owner, the taxpayer.

Arguably the greater damage to our society is if we as a society and a Government accept that fraud is one of the costs of doing business. That should never be the case. The morality of our society and the realistic expectation of our constituents is that people who do right are stood by—that is terrible English, but I hope the House understands what I am trying to say there—that fraudsters are not tolerated, and that we go after them and there is an ongoing war against fraud.

I commend Lord Agnew for having highlighted the need for a renewed focus on this issue. I do not accept that there are huge lessons to be learned from Labour on this, but I look forward with interest to the Government’s renewed long-term focus on fraud throughout the economy. I also adopt the multiple pleas from my hon. Friend the Member for Barrow and Furness for an economic crimes Bill.