Names of companies benefiting from huge Covid loans will be secret | Business
The names of thousands of businesses who have received billions of pounds from Covid-19 loan schemes must remain confidential under new government rules to only publish state grants of £500,000 or more.
The higher threshold was introduced after Brexit despite warnings that it could hamper the fight against fraudsters believed to have plundered billions from such schemes. The loan programs have been dubbed a “bonanza for fraudsters.”
Under EU rules in place until the end of 2020, all pandemic business loans over €100,000 had to be made public with details of the beneficiaries. The new £500,000 threshold for public disclosure of state aid, including pandemic loans, applies from 1 January 2021 and is set out in the Government’s Grant Control Bill which is pending in Parliament.
Disclosure rules mean that the vast majority of companies claiming loans will never be revealed. According to the British Business Bank, the state-owned bank that provided the aid, only 3% of businesses that applied for help under the largest bounce-back loan scheme are expected to be named.
Treasury Secretary Lord Agnew resigned at the Lords dispatch box last month over what he described as a series of ‘schoolboy mistakes’ in the fight against fraud. He said the loans scheme was more vulnerable to fraud due to a mixture of ‘arrogance, indolence and ignorance’.
The government estimated around £4.9billion had been lost in fraud under the bounce back scheme which provided loans of up to £50,000 to small businesses.
Ministers did not release figures on estimated fraud losses for two other schemes, the Coronavirus Business Interruption Loan Scheme and the Coronavirus Business Interruption Loan Scheme. Loans worth almost £80bn were distributed to businesses across the UK between March 23, 2020 and March 31, 2021.
The government is facing a challenge under freedom of information laws by campaign group Spotlight on Corruption which submitted a request last July for details of all recipients of the loan schemes.
The British Business Bank declined to release details, warning that identifying the companies could negatively impact trade. The Information Commissioner’s Office (ICO) upheld the decision to withhold the information, but the campaign group is appealing.
George Havenhand, of Spotlight on Corruption, said: “Covid loans were a boon for fraudsters. Publication of these names would support the government’s efforts to recover money lost to fraud and increase accountability for this national scandal.
The ICO’s denial decision in December 2021 stated that under a temporary EU framework, all UK loans granted in 2020 had to be made public when they were over €100,000 (or over €10,000 for farming or fishing).
From 1 January 2021, under the UK’s post-Brexit regime, businesses in England, Wales and Scotland are only required to disclose loans equal to or greater than £500,000. Loans in Northern Ireland remain subject to the EU reporting regime under Article 10 of the Northern Ireland Protocol.
The legal challenge has highlighted concerns that the transparency requirements of the new subsidy control bill are inadequate. EU state aid is usually disclosed at a threshold of €500,000, a threshold that has been reduced for pandemic loans.
Campaigners want ministers to introduce tougher rather than weaker transparency requirements for the UK outside the EU and call for all grants over the £500 threshold to be disclosed. The peers backed an amendment to the bill in the Lords to reduce it to that level.
Anna Powell-Smith, director of the Center for Public Data, a data transparency group campaigning for a lower threshold for disclosure, said: “The Subsidy Control Bill reforms the way the UK grants grants and business loans after Brexit, but it also makes grants less transparent, for no clear reason.
“The law should require all grants over £500 to be published. This will help prevent cronyism and fraud and will have support from across the political spectrum. British Business Bank officials say the government’s higher reporting threshold for pandemic support will only affect lending over a three-month period as all three schemes were closed on March 31, 2021.