Source · Select Committees · Public Accounts Committee
Recommendation 8
8
Deferred
High levels of unrecovered fraud and error found in first wave business grants.
Conclusion
The Department estimated fraud and error levels of £985 million were contained in the £11.7 billion grant funding provided for the first wave of business support grant schemes (Small Business Grant Fund; Retail Hospitality and Leisure Grant Fund; and Local Authority Discretionary Grant Fund). The estimated fraud and error in these three schemes is significantly higher than the estimates for the second and third wave of grant schemes.12 The Department explained that this was due to the first wave of business support grant schemes not being application-based and relying on the existing system data of the local authorities, which in some cases led to overpayments in error.13 We asked the Department if it had attempted to recover the irregular payments for these schemes. The Department told us that the majority of the grants were paid in error and consequently will not be recovered as they were made to legitimate businesses who were struggling.14 The Department’s 2021–22 Annual Report and Accounts does not disaggregate their fraud and error estimate into separate fraud and error values.15
Government Response Summary
The government agrees with the committee's observations but states that recovery of irregular payments for early grant schemes is largely unrealistic. It has initiated a review by a Non-Executive Director into ongoing assurance, reconciliation, and recovery activity, with a target conclusion by Summer/early Autumn 2023, but does not address the point about disaggregating fraud and error estimates.
Government Response
Deferred
HM Government
Deferred
1.1 The Government agrees with the Committee’s recommendation. Target implementation date: Summer/early Autumn 2023 1.2 The Department for Business and Trade (DBT), previously the Department for Business, Energy and Industrial Strategy, can conclude recovery is unrealistic for the following reasons: • the business has ceased trading, with no residual assets and is not in administration; • recovery is poor VFM (the cost of litigation actions is higher than the debt) or • recovery is accepted as a significant reputational risk for DBT. 1.3 The government set out the latest position to the Committee at a hearing in relation to the Local Authority COVID-19 schemes which took place on 11 May 2023, following the recent report by the National Audit Office. The DBT has asked one of the Non-Executive Directors to undertake a review of the ongoing assurance, reconciliation, and recovery activity in relation to irregular payments and will write to the Committee following the conclusion of this review. 1.4 The review is aimed to conclude in Summer/early Autumn 2023.