Source · Select Committees · Public Accounts Committee
Recommendation 6
6
Government has no apparent plans to measure the Scheme’s impact, including identifying how many businesses...
Recommendation
Government has no apparent plans to measure the Scheme’s impact, including identifying how many businesses have been unable to access support. The Department indicates that its initial barometer for success was delivering cash to as many businesses in need, as fast as possible. However, no written objectives were outlined at the inception of the scheme and no business case was put forward. The Bank, HM Treasury and the Department, did not agree the Scheme objectives until 15 July 2020 and there are no plans in place to measure the scheme’s impact. The performance measures—for example the number of insolvencies prevented— have therefore not been decided, making it difficult to evaluate and measure the success of the scheme to date. This is similar to the Bank’s other schemes, where it has not brought together information on costs, activity, and outcomes to be able to effectively measure impact and evaluate success. Furthermore the Scheme has likely reduced competition in the small business lending market as the five largest UK lenders have provided most loans. This has, in the short term at least, increased their market share which works against the Bank’s target of creating a more diverse finance market for smaller businesses. The Government intends to set up a further lending scheme in the new year meaning learning lessons from this Scheme is very important for the value for money of future schemes. Recommendation: The Department and the British Business Bank should set out, within the Treasury Minute response, how they plan on measuring the Scheme’s impact on businesses. They should ensure that any new schemes have, prior to launch, agreed performance measures. The Department should also analyse the impact of the Scheme on the lending market, paying attention to levels of competition and consumer choice. 8 Covid-19: Bounce Back Loan Scheme 1 Scheme design and launch
Government Response
Acknowledged
HM Government
Acknowledged
2020. HM Treasury, the Department for Business, Energy & Industrial Strategy (the department) and the British Business Bank (the Bank), based on a limited evidence of the underlying challenges for businesses, developed the Bounce Back Loan Scheme (the Scheme). The Scheme sought to provide businesses with loans of up to £50,000, or a maximum of 25% of annual turnover, to maintain their financial health during the covid-19 pandemic. The loans are delivered through commercial lenders such as banks and building societies. The Scheme expects lenders to approve and pay out the loans within 24 to 48 hours of application. To make the process as fast as possible the Scheme does not require lenders to check the information on the loan application form or to perform credit and affordability checks. Borrowers are expected to repay the loans in full but owing to the absence of these checks government provides lenders a 100% guarantee on the loans: if the borrower does not repay the loan, government will. The loans have a fixed interest rate of 2.5% and a maximum length of ten years; in the first year of the loan there are no capital repayments due, and government pays the interest—making it interest-free for the borrower. As of 15 November, the Scheme had provided over 1.4 million loans to businesses, totalling £42.2 billion. The Scheme will now run until 31 January 20211. Based on a report by the National Audit Office, the Committee took evidence, on 5 December 2020 from the HM Treasury, the department and the Bank. The Committee published its report on 16 December 2020. Relevant reports • NAO report: Investigation into the Bounce Back Loan Scheme – Session 2019-21 (HC 860) • PAC report: COVID 19: Bounce Back Loan Scheme – Session 2019-21 (HC 687) Government responses to the Committee