Businesses in Bedford have received more than £150million through one of the Government’s main coronavirus loan schemes to help struggling firms.
But suspected fraud and inability to repay the borrowed money could cost taxpayers across the UK tens of billions, an official report has warned.
Companies in Bedford’s three parliamentary constituencies had received 6,212 loans worth £184.6million through the Bounce Back Loan Scheme (BBLS) by October 4, the latest government-owned British Business Bank figures show.
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The loan scheme started in April and helps small and medium-sized businesses hit by the pandemic to borrow between £2,000 and £50,000, capped at 25 per cent of their turnover.
The Treasury backs the loans, which are handed out by commercial lenders, and borrowers do not have to pay fees or interest for the first year.
But a report by the National Audit Office (NAO), the UK’s public spending watchdog, warned the Government could face huge losses due to fraudulent claims and firms being unable to repay.
Across the UK, 1.3million payments worth £38billion had been issued through the BBLS by October 4.
The British Business Bank – which delivers the scheme – and the Department for Business, Energy and Industrial Strategy estimate that 35 per cent to 60 per cent of borrowers could fail to repay the money.
The NAO said this could lead to a maximum of £26billion in losses if lenders pay out £43billion by November 4, although it warned the estimates are “highly uncertain”.
The deadline for applications has been extended to the end of November.
Gareth Davies, head of the NAO, said the Government had acted decisively to get cash into businesses’ hands “as quickly as possible”.
“Unfortunately, the cost to the taxpayer has the potential to be very high, if the estimated losses turn out to be correct,” he added.
The House of Commons Public Accounts Committee, which oversees government spending, will hear evidence about the scheme at a hearing on November 5.
The Labour Party’s Meg Hillier, chairwoman of the committee, said: “Sadly, many firms won’t be able to repay their loans and the banks will be quick to wash their hands of the problem.
“The Government estimates that up to 60 per cent of the loans could turn bad – this would be a truly eyewatering loss of public money.”