Source · Select Committees · Public Accounts Committee
Recommendation 5
5
The total value of government-backed loans has increased greatly during the crisis.
Recommendation
The total value of government-backed loans has increased greatly during the crisis. To provide businesses with access to funding quickly during the pandemic, government launched a number of loan schemes, delivered by private sector COVID 19: Cost Tracker Update 7 providers under the direction of the British Business Bank. The total value of loans issued is currently expected to be £92 billion. Government guaranteed these loans by up to 100% of their value in order to compensate the private sector for an increased risk of borrower default. Government currently estimates that the calls on these guarantees may amount to as much as £26 billion, which would represent a significant drain on the public sector budget. HM Treasury expects all loans to be repaid but accepts that there is a high degree of uncertainty around this, as the repayment profile will depend on the strength of the economy and of the underlying businesses. HM Treasury is unclear about how it plans to manage the expanded loan book and the associated risks. Recommendation: Through the autumn Spending Review, HM Treasury should set out how it is managing the significant expansion of the value of government loan guarantees and the associated risk of write-offs, and the steps being taking to reclaim the taxpayer’s investment.
Government Response
Acknowledged
HM Government
Acknowledged
5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 HM Treasury has provided the resources for the British Business Bank (BBB) to deliver the ongoing administration of the government loan schemes and manage the associated risks to the taxpayer. Spending Review 2021 provides funding for the operating expenditure of the COVID-19 schemes, such as the running costs of the operations centre, developing the BBB’s financial crime capability and delivering the COVID-19 schemes audit and assurance programme. It additionally provides funding for BBB’s programme to transform its Data, IT, Outsourcing and Risk functions, which are critical to mitigating the risks linked to the COVID- 19 schemes. This is on top of the funding provided to the Department of Business, Energy and Industrial Strategy at Spring Budget 2021 and Spending Review 2021 to support counter fraud and strengthen enforcement for Bounce Back Loans. Further details on the loan schemes will be published in the Department of Business, Energy and Industrial Strategy’s annual report and accounts. 5.3 The government is also working closely with lenders to monitor and manage the government guaranteed loan scheme portfolios. Lenders are responsible for the recovery of these loans in line with the standards and legal obligations set out under the scheme. Lenders’ performance of their obligations is subject to a robust audit programme overseen by the British Business Bank. If lenders do not meet their obligations, the government has the right not pay out on any guarantee claims in scope.