Whitehall’s efficiency minister resigned on Monday after sharply criticizing the UK government’s ‘dismal record’ of cracking down on fraud under a flagship state-backed coronavirus business loan scheme .

Lord Theodore Agnew, who had served as Minister for Efficiency and Transformation in the Treasury and Cabinet since February 2020, and was responsible for anti-fraud efforts, has resigned in the House of Lords.

In response to an urgent question from Labor about Covid loan fraud, he told his peers he was unable to defend the government’s record.

More than £47billion has been given to more than 1.1million small businesses under the Government’s Bounce Back Loan Scheme (BBLS), which aimed to rescue at-risk small businesses during the pandemic. The scheme was the largest component of England’s £77billion state-backed Covid-19 loan scheme.

Agnew claimed the government, which had agreed to fully guarantee loans in the BBLS, had so far reimbursed banks almost £1bn for defaulted loans. He added that more than a quarter of this amount was estimated for fraudulent loans. Previous official estimates of government loan guarantees – made in September 2021 – totaled just £19million.

Agnew criticized the Department for Business, Energy and Industrial Strategy (BEIS) and the state-owned British Business Bank, which administered the BBLS.

“The monitoring by BEIS and the British Business Bank of lenders on the BBLS panel has been nothing short of dismal,” Agnew said. “They were ably assisted by the Treasury which appears to have no knowledge or interest in the consequences of fraud on our economy or our society.”

The National Audit Office and BEIS estimated that up to £5billion could be at risk from fraudsters exploiting weak controls that had been built into the bounce-back loan scheme.

Agnew said BEIS only employed two fraud managers at the start of the pandemic, “none of whom had fraud experience.” He alleged they refused to engage with the Cabinet Office fraud team.

In his resignation letter to Prime Minister Boris Johnson, Agnew denounced the “desperately insufficient” record in the fight against fraud. “It is certainly not for lack of trying, but the machinery of government has been almost impregnable to my endless exhortations,” he wrote.

Agnew insisted his resignation was “in no way related” to the other scandals involving the Johnson government and focused his blame on Whitehall. “Any prime minister in this country should have a reasonable expectation when he takes office that the levers of government will actually be tied to the delivery of services to our citizens,” he said.

The former minister called for ‘urgent improvements’ to lending data, a ‘much greater challenge’ from lending banks when data inconsistencies are detected and more training for Treasury and BEIS officials in the fight against fraud.

He warned of a “new and dangerous phase” in the BBLS, as banks were able to claim money from loan guarantees without “a standard bar of quality assurance on what we expect as basic measures against the fraud”.

Agnew also alleged that “schoolboy mistakes” had been made by officials and lenders, noting that more than 1,000 companies that received bounce-back loans (BBLS) were not trading before the pandemic began.

BEIS estimates suggest that overall losses from fraud and businesses failing to repay loans across all Covid schemes would likely amount to almost £20bn, of which around £17bn is related to BBLS .

The BBLS has been criticized by public spending watchdogs for providing full government guarantees on loans made with only minimal checks on the identity of the borrower.

Critics say it has opened the door to massive fraud and the loss of taxpayers’ money, with officials and banks slow to tighten the rules to prevent obvious criminal activity, such as multiple job applications or job applications. companies created after the start of the pandemic or dissolved before. has begun.

Agnew’s comments will focus on the behavior of lenders during the pandemic. Bankers stressed they had doubts about the scheme when it was set up and dismissed accusations that they should have carried out stricter vetting of BBLS borrowers, arguing the scheme was set up by the government to distribute money as quickly as possible.

Officials from BEIS, the British Business Bank and the Treasury acknowledged the program was risky, but said they were responding to pressure during the first lockdown to work quickly to help small businesses whose operations have been hit. actually arrested.

The NAO also criticized the government’s efforts to limit taxpayers’ exposure to fraudulent loans as inadequate in a report last month, and warned that resources devoted to tackling organized crime were insufficient.