Source · Select Committees · Public Accounts Committee
Recommendation 14
14
Registrations of new companies on Companies House increased sharply during 2020–21.
Conclusion
Registrations of new companies on Companies House increased sharply during 2020–21. During the period 2015–16 to 2019–20, annual new company registrations averaged 640,000. By comparison, in 2020–21 there were more than 810,000, making new company registrations in that year more than 20% higher than in any of the preceding five.51 Companies House does not validate information provided to them when a new company is registered, or do checks to confirm a person with a role in a company exists.52 The Department told us that disruption can create legitimate business opportunities and the increase in and of itself is not an indicator of anything adverse; however, the Department did not evidence this assertion, and we are sceptical that creative disruption accounts for the 170,000 new companies and feel that this should have been a warning warranting closer scrutiny.53 The Department did not know whether it sought or received information from Companies House for company formation trends, and as such these ‘unusual patterns’ 45 Qq 33–36; Department for Business, Energy & Industrial Strategy, Annual report and accounts 2020–21, 25 November 2021, Accountability report, page 122 46 The COVID-19 cost tracker, available at: COVID-19 cost tracker – National Audit Office (NAO) 47 Q 41 48 Ministerial directions are formal instructions from ministers telling their department to proceed with a spending proposal, despite an objection from their permanent secretary (on grounds of risks to regularity, propriety, value for money or feasibility: the parliamentary expectations of the stewardship of public funds) 49 Qq 9, 17 50 Correspondence from Department for Business, Energy & Industrial Strategy Accounting Officer to Secretary of State for Business, Energy & Industrial Strategy seeking ministerial direction on the introduction of the Bounce Back Loan Scheme, 1 May 2020 51 Q 19 52 Q 84 53 Qq 18–21 Department for Business, Energy & Industrial Strategy Annual Report and Accounts 2020–21 1
Government Response
Not Addressed
HM Government
Not Addressed
4.1 The government agrees with the Committee’s recommendation. Recommendation implemented 4.2 The economic crisis brought about by the COVID-19 pandemic required an extraordinary response from government. The department was clear at the outset that the design of certain COVID-19 business support schemes, combined with the pace at which they were being implemented, would create a heightened vulnerability to fraud and there would be a significant risk of credit losses. Where schemes were implemented under Ministerial Direction, the exchange of letters have since been published on GOV.UK. 4.3 For the Bounce Back Loan Scheme (BBLS), the request for ministerial direction made clear that the residual fraud risk would be very high, even after mitigations, and set out the reasons behind this. As mentioned in the request for ministerial direction, the department received external advice ahead of the scheme’s launch on measures to try to mitigate fraud. In certain cases, it was not possible to implement mitigating actions before the scheme was launched, and some mitigating actions were developed at a later stage as government’s understanding of the fraud risk matured.