Recommendation 19

The NAO’s COVID-19 cost tracker presents a current estimate of the cost of write- offs of government-backed loans made in response to the pandemic of £26 billion.31 HM Treasury confirmed that it recognises this amount as a good snapshot based on current information on what the total losses might be.32 It cautioned that there is a large degree of uncertainty around this amount as there is a wide range of estimates for the proportion of loans that might default. Repayment rates will be driven by the underlying strength of the economy and the pace of the recovery.33 HM Treasury told us that until there is a reasonable record of repayments under the loans, and until there is a much clearer sense of how the economy can be expected to perform, there will inevitably be a wide range for estimates for the possible total loss.34 If the economy performs well, HM Treasury expects a lower rate of default than currently forecast.35