It did not take many minutes for Lord Agnew to shine light onto the UK Government lack of concern for covid fraud, when giving evidence to the Treasury Select Committee this week. You can view the session for yourself online on the Parliament website.
Labour MP Dame Angela Eagle was in the chair for the usual committee chair, the Conservative MP Mel Stride. When she invited Lord Agnew to open the afternoon, he said: “I just hate to see mammoth inefficiency.” His job title was minister for efficiency and transformation at the Treasury and Cabinet Office; he accepted the post in early 2020, just before covid struck, and resigned while giving a speech in the House of Lords in January. As featured in the March edition of Professional Security magazine, by the sedate standards of the Lords he caused a sensation.
“I was appointed because I believe very strongly that the taxpayer deserves government should use their money wisely,” and an issue like counter-fraud is a cross-party issue, he added. Money however through the various loan schemes arising from the pandemic was allowed to fall into the hands of crooks. “You try and bring about change inside the tent; you get to a point where that just doesn’t seem to be working.”
As for his resignation, he explained that he was asked to defend the record of the Treasury on the bounce back loans scheme, ‘and I could not stand up with any integrity and say we had done a great job, because we hadn’t’.
The day after his resignation, Lord Agnew wrote an article in the Financial Times; now he was before the cross-party committee of MPs – and is due to speak to another – and was duly invited to share his views about the bounce back loans scheme. He began by stating that at the top, policy level, such an intervention ws important, to protect small businesses when facing so many loans (in the first few weeks of covid lockdown in spring 2020). The principle was reasonable, ‘but it’s all about implementation’. He also accepted that such a loan scheme would have credit losses, because it had been a lifeline to legitimate businesses.
“But on the fraud side it was just a Dad’s Army operation,” by which he meant the complacency that grips the civil service. Here Lord Agnew referred to a letter from Tom Scholar, Permanent Secretary to the Treasury – in other words, one of the country’s most senior civil servants – to the committee chair Mel Stride of March 2.
If as Lord Agnew suggested, Tom Scholar ‘could have done an awful lot better’, what about Lord Agnew himself, whose many responsibilities had included the counter-fraud function? He was at the start of the pandemic ‘derailed’ by being made ‘the ventilator manufacturing minister’, working six and a half days a week trying to have ventilating machines built: “I wasn’t focused on this [countering fraud].”
The (small) counter-fraud team in the Cabinet Office were ‘simply closed out of the room’, Lord Agnew complained; never consulted in the establishing of the bounce back scheme, ‘for reasons I never got to the bottom of’.
Lord Agnew proceeded to do some dissecting of Tom Scholar’s letter, as released on the committee’s website. Lord Agnew complained that Tom Scholar went to the audit firm PwC for advice, but not to the counter-fraud people ‘on his doorstep’. Tom Scholar was also ambiguous about what PwC’s recommendations were and which ones were taken up.
Lord Agnew mentioned the database by the fraud prevention trade association Cifas, as widely used by financial firms making loans. “You can do a Cifas check for fraud in moments; they didn’t do that at the beginning of the bounce back process, it wouldn’t have delayed getting the money out to legitimate people.” As for checking for duplicate loans – that the same business applied for more than one – it took six weeks to build such a check, and by the time that was finished, some 60 per cent of the loan money had already gone out of the door; and HSBC did not get its duplicate system implemented for another four months. Meaning that the state had no idea how many duplicate loans had gone out, Lord Agnew said.
Hence Lord Agnew’s metaphor of Dad’s Army; because the state was loaning money to companies that did not exist before covid, ‘because of the total naivety in the system, and not making appropriate checks’. He took on the ‘endless excuses’ that such schemes were about getting money out, quickly. In the commercial lending world, if you don’t respond to customers, you lose the business, was Lord Agnew’s answer. “So the whole system is geared up to move quickly, but also to mitigate against the risk.” The Treasury ignored the fraud risk until far too late, he added. Making checks would have caused a couple of days’ delay to loans, he went on; civil servants were sheltering behind the excuse, that checks would have taken too long.
While the committee covers only the Treasury, Lord Agnew went on to the Department for Business (BEIS) and the British Business Bank, that was not regulated like a normal bank, he said, and had no culture of proper oversight; and nobody at BEIS had the skill to oversee the bank, though its balance sheet ‘exploded’ because of covid. BEIS did not have a counter-fraud specialist; and did not hire one, until too late.
The committee picked up that in his resignation speech Lord Agnew spoke of the Treasury not having concern for fraud. Lord Agnew told the committee that he was annoyed about Tom Scholar’s letter, for not showing any humility; Lord Agnew said that he was frustrated that civil servants did not admit any mistakes; Lord Agnew admitted his, that he should have tackled Tom Scholar more. All of the (civil service) ‘waffle’ disappears if you have a ‘data dashboard’ about finances and what’s missing,whether due to fraud or error; Lord Agnew said he was not sure if such a dashboard existed in the Treasury. As for such a dashboard being possible, he handed over to the committee paperwork about the equivalent Swiss one (in English). A lack of a dashboard means that BEIS, the Treasury and the business bank are all ‘blind’ about fraud losses.
As Lord Agnew set out, fraud losses will become more apparent. By July 2021, 60 per cent of the loan book should have started coming back in re-payments. He asked what is the data about how many have started re-paying; since then, the Treasury should have nine months of data. The biggest alarm bells on fraud, he added, are that you never get a payment, ‘because they have taken the money and legged it’. That is the place to start looking; ‘but we have nothing’.
He questioned how much of the loan money went into a company bank account, and then into private accounts of the company proprietor; ‘because that is a signal’, of possible fraud, such as (as anecdotally heard in 2020) company directors buying sports cars with the loan. Similarly, how much of the bounce back money went into business accounts, and then left the country?
More extraordinarily, Lord Agnew spoke of cases of Border Force officers intercepting suitcases of (presumably loaned) money leaving. He concluded: “It was happy days if you were a crook in those first few weeks.”
He predicted an ‘avalanche’ of claims on the state guarantee coming into the Treasury in the coming weeks.
