Read the detail here

Fraud and error from a loan scheme to help businesses cope with the Covid-19 pandemic could cost the British taxpayer up to £27 billion, on top of some £50 billion a year lost to criminals and mistakes, a report said on Wednesday.

The Bounce Back Loan Scheme was launched in May last year to allow banks to quickly lend businesses up to £50,000 with 100 per cent state guarantee to help them cope with losses during national lockdowns.

But, the government’s business department (BEIS) estimates that between 35-60 per cent of loans may not be repaid because of fraud or credit issues, amounting to up to £27 billion, parliament’s Public Accounts Committee (PAC) said in a report.

This will be read as “fraud”. Damn Tories.

The more perceptive will look at “fraud and error”. Damn bastard Tories.

Very few indeed will look at “fraud, error and credit issues” which is the real point. Some of those loans won;t be paid back because, even despite those loans, peeps are still going to go bust.

Well, that’s the reason for the loan scheme, wasn’t it? To try to reduce this but nothing is ever reduced to zero now, is it?

This isn’t, in the slightest, to argue that it was a good scheme nor well done. Or even that it wasn’t. It’s about the language that will be used to describe it.

4 thoughts on “Read the detail here”

  1. “business department (BEIS) estimates that between 35-60 per cent”

    35 to 60%? That’s not an estimate, that’s pulling numbers out of your arse.

  2. https://www.fca.org.uk/publication/research/future-funding-sme-uk.pdf

    Gives bank lending (loan balances) to SME’s (though I can’t see what the definition of SME is) at £90Bln in probably around 2014/5 or so.

    If £27Bln at risk is potentially 60% of the scheme’s funding, then the total additional lending supplied would be on the order of £45Bln, about 50% of existing loan balances – not new loans normally created per year.

    As the scheme was capped at £50,000 per business, that would map nicely to average revenues for micro (1-9 employees) or single person businesses in whatever sector, given the BEIS’ own estimates of business demographics, over the loan duration initially envisaged.

    As far I can see, that’s a massive expansion of credit in a single period for businesses that traditionally have limited assets for security, and have also historically had other problems accessing bank credit.

    Most likely just credit risk from those that banks would normally be wary of, and the estimates are so wide as nobody knows what the default rate or the recovery rate might be, and about two-thirds or more of businesses fail in the first three years anyway.

    Presumably, the other £50Bln is the normal losses experienced from other existing schemes.

  3. Wasn’t the point to lend money to businesses that could not otherwise survive the covid slump of unknown depth and unknown duration? How is it surprising that some of them couldn’t survive it anyway? Grrrr.

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