Recommendation 12

Under the Scheme, the Government pays a borrower’s first 12 months of interest directly to the lender. At the end of September, when some 1.2 million loans were issued, the Department and the Bank forecast this to cost £1,068 million (£847 million in 2020–21 and £221 million in 2021–22); this will rise as more loans have been issued. The Taxpayer, because of the Government guarantee, will also bear other costs: fraud and credit losses. A credit loss is where an eligible borrower does not repay a loan. Fraud results from dishonesty which can be a false representation or a failure to disclose information with the intention to cause financial gain or loss such as applications by ineligible businesses.29 The Department estimates that these losses could be anywhere between 35% and 60% of the value of the loans made: in the region of £15 billion to £26 billion, with the credit losses being the majority.30 This estimate is highly uncertain and could be even higher.31 21 C&AG’s Report, paras 13, 14 22 Q 31 23 Q 81 24 Q 3; C&AG’s Report, para 14 25 Qq 75–79 26 Q 44 27 Qq 17–19, 38 28 Q 24 29 C&AG’s Report, paras 20–21, 2.15 30 Qq 18, 27 31 C&AG’s Report, para 3.7 Covid-19: Bounce Back Loan Scheme 11 2 Scheme risks and impacts Managing the risk of fraud and non-repayment