In the UK, controversy swells over PGE fraud

Posted Jan 27, 2022, 4:58 PMUpdated Jan 27, 2022, 5:56 PM

This is the reverse of “whatever the cost”. In the UK, controversy is brewing over the amount of fraud linked to state-guaranteed loans (PGEs) granted during the pandemic. Questioned on this subject in parliament, the Minister of Finance, Rishi Sunak, was forced to react on Wednesday to alarming reports of several billions of public money paid to fraudsters, even to criminal groups.

On his Twitter account, the Chancellor of the Exchequer denied having ignored the problem. “Clearly, criminals have sought to exploit our support patterns,” he acknowledged. We have invested £100 million in a team to protect taxpayers’ money, staffed by 1,265 people. This is one of the fastest and strongest responses to a risk of fraud. According to him, this effort would have avoided 2.2 billion in potential fraud.

Record time of 48 hours

The extent of the problem was highlighted in a December report by the National Audit Office, the UK’s equivalent to the Court of Auditors. The auditors pointed to a particular risk with the loan scheme dedicated to small businesses – called “Bounce Back Loan” – set up urgently in April 2020, in the face of the slowness of the procedures to obtain a loan guaranteed by the State.

Entrepreneurs could obtain a loan of up to 50,000 pounds, or 25% of their turnover, within a record 48 hours. To go faster, loan applicants themselves certified the details of their file. It should be noted that the State guarantee was then 100%, whereas it was only 80% in the other loan schemes.

4.9 billion fraudulent loans

Success was not long in coming. In the space of a few months, this so-called “rebound” loan has become the most popular device in the arsenal of state aid put in place by the United Kingdom. From April 2020 to March 2021, the period during which these loans were distributed, some 47 billion pounds were granted, while their potential volume had initially been estimated at 26 billion.

In December, the National Audit Office established an alarming finding: 17 billion will not be reimbursed, of which 4.9 billion pounds would be linked to fraudulent loans. The “Financial Times” mentioned in its columns appearances in corrections for cases of car theft or drug trafficking, where the accused had benefited from a “rebound” loan.


The controversy took on a new dimension on Monday with the resignation of the Secretary of State for the fight against fraud. In the House of Lords, Theodore Agnew justified his action by the inability of the government to fight against fraud. According to him, “the clumsy set-up and catastrophic follow-up” of this loan scheme “is probably costing us several million pounds each month. “Primary school grade mistakes were made, like allowing 1,000 businesses to get a loan when they weren’t even active,” he said.

UK banks fear the scandal will tarnish their reputations, having been accused in the decade since the financial crisis of failing to support the real economy enough. They fear becoming the scapegoat in a case where the State should have set stricter conditions for the granting of aid. In the House of Lords, some parliamentarians have raised the possibility that the state guarantee will be revoked if the banks that have distributed these loans have not put in place sufficient safeguards against fraud.

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