Source · Select Committees · Public Accounts Committee
Recommendation 19
19
The NAO’s COVID-19 cost tracker presents a current estimate of the cost of write- offs...
Conclusion
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
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.