Recommendations & Conclusions
26 items
2
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
The potential Scheme losses are eye-watering, and we are not convinced the Department has the data it needs to manage the risks to the taxpayer. The Department estimated in its 2020–21 Annual Report and Accounts that it would lose £17 billion as a result of the Scheme, of which £4.9 …
Government response. 2023. This will reflect the revised costs for defueling/deconstruction and uncontracted liabilities. 2.3 As noted to the Committee, Électricité de France’s (EDF) strategies, plans and the estimated costs are scrutinised, challenged, and approved by the Non-NDA liabilities assurance team (NLA) …
HM Treasury
3
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
The Department has been complacent in preventing Scheme fraud and its prioritisation of ‘top tier’ fraudsters puts other government Schemes at risk. The risks that we identified at the outset of the Scheme have now materialised. The Department requested, and received, a ministerial direction at the start of the Scheme …
Government response. 3: PAC conclusion: The Department has been complacent in preventing Scheme fraud and its prioritisation of ‘top tier’ fraudsters puts other government Schemes at risk. 3a: PAC recommendation: Next time the Department launches an emergency business support scheme, it should …
HM Treasury
4
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
We are concerned that the Department is placing too much reliance on lenders to minimise taxpayer losses without incentivising them to do so. When the Scheme launched the Department relied solely on lenders to prevent taxpayer losses by requiring them to do ‘know your customer’, and ‘anti-money laundering’ and some …
Government response. 4: PAC conclusion: We are concerned that the Department is placing too much reliance on lenders to minimise taxpayer losses without incentivising them to do so. 4a: PAC recommendation: The Department should, as part of its Treasury Minute response, set …
HM Treasury
5
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
It is unacceptable that the Department has no plans to recover outstanding debt after lenders have pursued borrowers for up to 12 months. There is no minimum term that lenders are required to pursue borrowers for payments. Lenders are not expected to continue to pursue borrowers after 12 months. Lenders …
Government response. 5: PAC conclusion: It is unacceptable that the Department has no plans to recover outstanding debt after lenders have pursued borrowers for up to 12 months. 5a: PAC recommendation: The Department should, as part of its Treasury Minute response, set …
HM Treasury
6
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
The Scheme has distorted the Small and Medium Enterprise (SME) lending market in favour of the largest UK banks, which goes against the Bank’s objective of creating a diverse finance market for SMEs. The Scheme’s low interest rate made it uneconomical for smaller or alternative lenders to participate to the …
Government response. 6: PAC conclusion: The Scheme has distorted the Small and Medium Enterprise (SME) lending market in favour of the largest UK banks, which goes against the Bank’s objective of creating a diverse finance market for SMEs. 6a: PAC recommendation: The …
HM Treasury
7
Recommendation
Fiftieth Report - Bounce Back Loans Sch…
The Department has not yet identified how it will share the lessons from the Scheme. The Department asserts that it has applied some of the lessons it has learned from this Scheme in the subsequent Recovery Loan Scheme, such as introducing additional reporting requirements on lenders. It also recognises that …
Government response. 1. PAC conclusion: The considerable uncertainty facing the Programme has caused a loss of the critical skills needed to develop the business case, created delays and increased the risk of nugatory spending and health and safety incidents. 1. PAC recommendation: …
HM Treasury
1
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Business, Energy & Industrial Strategy (the Department) and the British Business Bank (the Bank) about the Bounce Back Loan Scheme. We also took evidence from HM Treasury and the Financial Conduct …
Government response. Based on a report by the National Audit Office, the Committee took evidence on 10 January 2022 from HM Treasury, the Department for Business, Energy and Industrial Strategy, the British Business Bank and the Financial Conduct Authority. The Committee published …
HM Treasury
8
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
The Department’s estimate of the credit loss within the Scheme is also uncertain, as there is no credit score data for borrowers because this was not a scheme requirement. Repayments will also be affected by future macroeconomic conditions which are themselves uncertain. In addition, because loans did not begin repayment …
HM Treasury
9
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
The Bank began collecting Scheme loan data from the 24 Scheme lenders in July 2021, where lenders provide data to the Bank via a collections system. The Bank said that it holds loan data from lenders across 70 different datapoints, including the name and address of the borrower, term of …
HM Treasury
10
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
The Scheme rules required commercial lenders to deliver loans and pursue recovery processes in line with their existing business-as-usual standards. The Department and HM Treasury stated that the majority of recoveries and counter-fraud efforts comes from lenders. The Department told us that the commercial banking sector was the “best of …
Government response. 4: PAC conclusion: We are concerned that the Department is placing too much reliance on lenders to minimise taxpayer losses without incentivising them to do so. 4a: PAC recommendation: The Department should, as part of its Treasury Minute response, set …
HM Treasury
11
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
Although the Department referred to lenders as the “arms and legs” of the Scheme, none of the witnesses could tell us how much lenders are spending on counter-fraud activities. The FCA said, for example, that lenders had “scaled up quite significantly”, but it could not tell us when they had …
Government response. 4: PAC conclusion: We are concerned that the Department is placing too much reliance on lenders to minimise taxpayer losses without incentivising them to do so. 4a: PAC recommendation: The Department should, as part of its Treasury Minute response, set …
HM Treasury
12
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
The Scheme requires lenders to pursue borrowers for missed repayments for up to 12 months after the issue of a formal demand. The Department initially told us that lenders had to wait until after the 12 month period to make a claim on the guarantee.25 However, it wrote to us …
Government response. 4: PAC conclusion: We are concerned that the Department is placing too much reliance on lenders to minimise taxpayer losses without incentivising them to do so. 4a: PAC recommendation: The Department should, as part of its Treasury Minute response, set …
HM Treasury
13
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
The NAO reported that the arrangements for pursuing borrowers offered limited commercial incentive for lenders to maximise recovery of overdue loans.28 In contrast, the Bank told us that it believed that lenders have strong legal, contractual and regulatory obligations to recover loans. This included oversight by the FCA and lender …
Government response. 4: PAC conclusion: We are concerned that the Department is placing too much reliance on lenders to minimise taxpayer losses without incentivising them to do so. 4a: PAC recommendation: The Department should, as part of its Treasury Minute response, set …
HM Treasury
14
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
Almost 86,000 borrowers have been in arrears for more than 90 days as of 10 January 2022.34 We asked the Department what steps it was taking to ensure that its approach to recovering loans was as effective as possible and made best use of the data available to it. We …
HM Treasury
15
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
The Department and the Bank recognised that there was a trade-off between getting loans to businesses quickly by removing lender checks and slowing down the delivery of the loans by putting in place more counter-fraud measures. The Bank said that this would have had consequences for the economy, but argued …
Government response. 3: PAC conclusion: The Department has been complacent in preventing Scheme fraud and its prioritisation of ‘top tier’ fraudsters puts other government Schemes at risk. 3a: PAC recommendation: Next time the Department launches an emergency business support scheme, it should …
HM Treasury
16
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
The Scheme has also made trade-offs in its response to countering fraud and the associated deterrent effects. The Department based its counter-fraud response on the 31 Qq 15, 16 32 Qq 74–75 33 Qq 74–75, 83 34 Correspondence from Catherine Lewis La Torre, Chief Executive, British Business Bank, Re Bounce …
Government response. 3: PAC conclusion: The Department has been complacent in preventing Scheme fraud and its prioritisation of ‘top tier’ fraudsters puts other government Schemes at risk. 3a: PAC recommendation: Next time the Department launches an emergency business support scheme, it should …
HM Treasury
17
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
We asked the Department if it was confident that enough was being done to tackle medium and bottom-tier fraud, to ensure there is a sufficient deterrent for smaller-scale fraud. It recognised that deterrence is “important” and was “on their minds”. In such cases, the Department said that although criminal prosecution …
Government response. 3: PAC conclusion: The Department has been complacent in preventing Scheme fraud and its prioritisation of ‘top tier’ fraudsters puts other government Schemes at risk. 3a: PAC recommendation: Next time the Department launches an emergency business support scheme, it should …
HM Treasury
18
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
We reported previously that the Department had no apparent plans to measure the Scheme’s long-term impact, and no agreed performance measures.44 In its Treasury Minute response to our report, the Department gave a high-level summary of the Scheme’s evaluation plans which aimed for an initial assessment by Autumn 2021. However, …
Government response. 1: PAC conclusion: The Department and The Bank delivered the Scheme at breakneck speed, but the long-term impact of the Scheme is uncertain. 1a: PAC recommendation: The Department should put in place a clear strategy to manage the long-term legacy …
HM Treasury
19
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
We asked the Department whether it currently had the information that it needed to determine whether the Scheme had been a success. The Department told us that it considered that the quality of information that it had about what was currently happening with the Scheme was “very good”, but there …
Government response. 1: PAC conclusion: The Department and The Bank delivered the Scheme at breakneck speed, but the long-term impact of the Scheme is uncertain. 1a: PAC recommendation: The Department should put in place a clear strategy to manage the long-term legacy …
HM Treasury
20
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
Business survival rates are a key metric for measuring the Scheme’s impact. The Bank has commissioned an external evaluation study, which will report in stages over the next three years.50 We therefore asked the Department when we could expect to see the results from the first stage of its evaluation. …
Government response. 1: PAC conclusion: The Department and The Bank delivered the Scheme at breakneck speed, but the long-term impact of the Scheme is uncertain. 1a: PAC recommendation: The Department should put in place a clear strategy to manage the long-term legacy …
HM Treasury
21
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
Lenders used their own funds to make Scheme loans, with government guaranteeing to reimburse lenders if borrowers do not repay. How lenders raise funds differs according to size and type of lender; the more cheaply they can raise funds the more profitable the loans might be. While many large lenders …
HM Treasury
22
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
The NAO reported that there were seven accredited lenders when the Scheme launched in May 2020, consisting of five main UK banks and two other banks.55 The Bank acknowledged that it took several months to accredit the additional 21 of 28 lenders in total to the Scheme, by which time …
Government response. 6: PAC conclusion: The Scheme has distorted the Small and Medium Enterprise (SME) lending market in favour of the largest UK banks, which goes against the Bank’s objective of creating a diverse finance market for SMEs. 6a: PAC recommendation: The …
HM Treasury
23
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
The Bank recognised that it was “absolutely true that [the Scheme] had a distortive effect” but suggested that this was “diluting over time”.59 It confirmed that it still had an objective of encouraging diversity in lending markets. It explained that it reports on market shares of lenders in its annual …
Government response. 6: PAC conclusion: The Scheme has distorted the Small and Medium Enterprise (SME) lending market in favour of the largest UK banks, which goes against the Bank’s objective of creating a diverse finance market for SMEs. 6a: PAC recommendation: The …
HM Treasury
24
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
We highlighted previously that government needed to use the lessons learned from this Scheme to inform future schemes.62 We therefore asked the Department about examples of where it had identified and responded to lessons from the Scheme. The Department said that it had implemented learnings in the new Recovery Loan …
Government response. 7: PAC conclusion: The Department has not yet identified how it will share the lessons from the Scheme. 7a: PAC recommendation: The Department and The Bank should establish a strategy on how it intends to share lessons from the scheme …
HM Treasury
25
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
We were concerned that the Department should have identified these lessons when it supported businesses in the 2008 Financial Crisis. In 2010, the NAO’s report on the Department’s support to business during a recession concluded that the “impact [of the Department’s response to the financial crisis] could have been improved …
Government response. 7: PAC conclusion: The Department has not yet identified how it will share the lessons from the Scheme. 7a: PAC recommendation: The Department and The Bank should establish a strategy on how it intends to share lessons from the scheme …
HM Treasury
26
Conclusion
Fiftieth Report - Bounce Back Loans Sch…
We asked whether, with hindsight and more time, it would have been possible to design a scheme that would have had significantly less exposure to fraud and error than 61 Q104; Public Accounts Committee, Covid-19: Bounce Back Loan Scheme, Thirty-Third Report of Session 2019–21, HC 687, 16 December 2020, para …
Government response. 7: PAC conclusion: The Department has not yet identified how it will share the lessons from the Scheme. 7a: PAC recommendation: The Department and The Bank should establish a strategy on how it intends to share lessons from the scheme …
HM Treasury