Government risks ‘wasting taxpayer money’ through emergency loan schemes
The chair of the Business, Energy and Industrial Strategy committee has criticised the government over its management of emergency loans for businesses affected by the coronavirus pandemic.
Darren Jones MP warned that unless ministers “learn lessons” from initial rounds of support, they risk “wasting more taxpayer money”.
In particular, he raised concerns over the fact that the government had turned down requests to publish the names of companies receiving money through the schemes including the Coronavirus Businesses Interruption Loan Scheme (CBILS), the Bounce Back Loan Scheme (BBLS) and the Future Fund.
“I am still not satisfied by the Government’s explanation as to why it isn’t publishing the data of which companies have received what funding, including through the Future Fund, given taxpayers could end up as shareholders of a whole portfolio of start-up businesses”, he wrote.
Jones also said that it was “disappointing” that business secretary Alok Sharma had “resisted calls” to set conditions on how public funds could be used.
He pointed especially to the fact that private-equity owned firms could use taxpayer money to pay off the debt used to buy them while owners sit “on mountains of cash”.
“If private equity firms are receiving this public money then there should be some conditionality around their commitment to protecting jobs and helping UK businesses get through this pandemic”.
The last month has seen the emergency schemes come under increasing scrutiny amid fears that the government is underwriting loans that will never be repaid.
Earlier this month the National Audit Office (NAO) reported that taxpayers could lose as much as £26bn alone through BBLs.
It said that up to 60 per cent of the loans that have thus far been given out under the Bounce Back scheme for small businesses were at risk of fraud, organised crime, or default.
Prior to that, the former chief exec of the British Business Bank (BBB) wrote to Sharma expressing concerns over the same risks.
Launched in May, BBLs are 100 per cent government-backed loans of up to £50,000 introduced to help keep small businesses mitigate the disruption caused by Covid-19.
As of 18 October, bounce back loans totalling just over £40bn had been approved for 1.3m small businesses, according to the latest figures from the Treasury.
But although the loan scheme was extended until the end of November due to the ongoing disruption caused by the pandemic, all but one of 28 banks accredited to lend under the scheme have now shut applications to new customers.
Yorkshire Bank and Clydesdale today slammed the door on new applicants, leaving challenger bank Starling the only place to go for many struggling business owners.
Earlier this month City PM reported that small businesses bosses were being shut out from the scheme despite being eligible for funding.