Only 1% of the estimated £1.1 billion of taxpayer cash lost to fraudulent or erroneous grants paid to businesses during the pandemic has been recovered, Whitehall’s spending watchdog has said.
The former Department for Business, Energy and Industrial Strategy (BEIS) initially did not require pre-payment checks when it started the handouts to firms that said they were hit by lockdowns in March 2020.
Ninety percent of the losses due to error and fraud arose during that first wave of Covid-19 grant schemes, the National Audit Office (NAO) said in a new report, while checks and improved data reduced the risk in later iterations.
Only £11.4 million, or 1%, had been clawed back by last month.
Attempts by BEIS to identify losses were delayed until at least a year after the payments had been made, and local authorities tasked with pursuing the money had no financial incentive to do so as it would be paid back to central Government, according to the NAO.
The Government must learn from its experience of working at speed with local authorities to pay out emergency grants to businesses, the NAO said.
He also said: “BEIS and local government deserve credit for working quickly to set up and distribute grants to businesses. Early schemes lost significant sums to error and fraud, but BEIS addressed this in later iterations.
“The Government does not yet know the impact of these grants, in terms of maintaining jobs or how much support might have been given to businesses which did not need it.
“Without such an assessment, an overall judgement about the value for money of the schemes remains open.”
The Labour chairwoman of the Public Accounts Committee Dame Meg Hillier said: “Government moved at speed to provide grants to businesses to support the high street during the pandemic.
“However in doing so, an estimated £1.1bn was lost to fraud and error, and to date only 1% of this has been recovered.
“It is now up to the Department for Business and Trade and the rest of government to act on the lessons from this experience it has learnt so it can be on the front foot for the next crisis.”
A spokesperson for the Department for Business and Trade, recently created after Prime Minister Rishi Sunak split up BEIS, said: “This report confirms that our Covid-19 business grant schemes helped to secure millions of businesses and livelihoods through the pandemic, supporting jobs and the economy during unprecedented times.
“No amount of error and fraud is acceptable, and we are continuing to work hard to recover these funds where possible.”
But it is not possible to recover everything, the department acknowledged.