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The Guardian - UK
The Guardian - UK
Comment
Simon Jenkins

Even Johnson’s own fraud minister couldn’t bear the stink of this government

Lord Agnew speaks in the House of Lords before resigning on Monday.
Lord Agnew speaks in the House of Lords before resigning on Monday. Photograph: PA

Theodore Agnew was the model of a modern Tory oligarch. A successful businessman, he made enough to dabble in the new politics. He did all the right things. He backed a chain of academy schools and joined a Conservative thinktank, Policy Exchange. He donated a dutiful £134,000 to the Tory party between 2007 and 2009. Part-owner of an AI consultancy called Faculty, Agnew set it to work for Johnson’s Vote Leave campaign. He received a knighthood, then a peerage, and was then offered a ministerial post in Boris Johnson’s government, at the time being advised by the former Vote Leave director, Dominic Cummings. Faculty won a fistful of government contracts worth almost £1m. All in all, Agnew could feature in an Armando Iannucci satire on Boris’s Britain.

Then this week, Agnew went bang. Even he had had enough. In February 2020, he was given the Yes Minister title of “efficiency and transformation”, and in a speech on Monday in the House of Lords he was supposed to congratulate himself on his work. He had been one of the custodians of the £47bn of public money that had been dished out to private companies and banks in bounce-back loans between 2020 and 2021. However, of this sum, Agnew reckoned £17bn had been lost and at least £5bn of those losses were to fraud, or 1p on income tax. He clearly choked on the task asked of him. And then something unprecedented took place. A Johnson minister proceeded to tell the truth and resign on the spot.

The scheme had been chaos, he said. “Schoolboy errors” had been made by the Covid loans scheme, such as bounce-back loans being given to more than 1,000 companies that had not even been trading when Covid struck. As for the government’s 100% guarantee to banks that it would underwrite any losses, this had led to gross indiscipline by lenders. By the time checks came in to weed out fraudulent duplicate applications, 60% of the £47bn had already been paid out. Agnew estimated that a quarter of the money lost through the scheme would be down to fraudulent claims rather than credit failure. Many fraudsters had simply claimed the loans, then dissolved their businesses months later.

Agnew’s speech was scathing. He declared that the government’s record as guardian of the country’s resources was “desperately inadequate”. The business department and its cash-gushing British Business Bank (BBB) had been “woeful” in their oversight and auditing of the scheme. The Treasury had shown “no knowledge of, or little interest in” the level of fraud. Using his words with care, Agnew accused them of refusing to “lift their game”, even when warned of the scale of the scandal.

As for the resistance of the system to policing itself, the BBB, a government agency, would not even share fraud data with Agnew, the counter-fraud minister. A presumably desperate letter from Agnew to the bank released this week was sent on 16 December but went unanswered. The BBB fobbed off enquirers by saying it had been “held up in the House of Lords IT system”.

Agnew estimated that total fraud across the public sector now ran at £29bn a year, or about 5p on income tax. The bounce-back loan fraud is estimated to have cost a third of the annual revenue of the new national insurance levy of 1.25 per cent due in April.

Some picture of this scandal is already emerging from the mundane world of the courts, from crimes and insolvency records. A Manchester judge last week was reportedly aghast at bounce-back loans having been granted under Treasury guarantee to two serial fraudsters to the tune of £145,000. Loans went to known gangsters involved in expensive car theft. Other loans went into paying off gambling debts or into buying a £2,400 watch, according to the Times.

Clearly much of this money will have gone to deserving businesses caught out by lockdown and genuinely faced with bankruptcy. Most world governments caught up in the pandemic felt entitled to print money to relieve what was assumed to be temporary – and unprecedented – financial hardship. This mostly took the form of “helicopter money”, disbursed to those in the furlough scheme and totalling £70bn.

The bounce-back loan scheme was more like B-52 money. It carpet-bombed the ever murkier financial no man’s land that separates productive business and the City. The £47bn must explain why banks and other financial services survived the lockdown in remarkably healthy shape.

It would seem that Cummings’ “madhouse” extended far more widely across Whitehall than just Downing Street. It embraced the Treasury and the business department, in what appears to have been a conspiracy of high-spending anarchy. The chancellor, Rishi Sunak, has already responded by promising to do “everything we can to get that money back”. So far though, HMRC investigators have recovered a mere £536m of stolen money. While Agnew in his resignation speech was kind to the prime minister, he conspicuously did not mention Sunak. It is hard to escape the suspicion that his wrath was directly largely at the Treasury.

While Sunak has been desperate to distance himself from Johnson’s spendthrift tendencies, his leadership pitch, of seeking a responsible and fiscally stable Toryism, must be damaged by these revelations. When Covid is over, there is to be an awesome day of reckoning on many fronts. Ministers can reasonably protest that they faced a wholly exceptional crisis in 2020. From this, Britain emerged hesitantly at first but with some panache later on. Surely it should not suffer comparison with banana republics or kleptocracies?

Last November, the website Politico published a leaked list of 47 companies that were awarded PPE contracts early in the pandemic through the so-called VIP lane. These went mostly with no competition or serious checking of their often dubious qualifications. The list of those who referred companies to the scheme dripped with the names of Conservative ministers, MPs, peers and party donors (including Lord Agnew himself). According to the National Audit Office, clearly now a broken reed in Whitehall, this afforded them a 10-times better chance of a contract.

All British politics relies on clubs. To Alexis de Tocqueville it was this that saved democracy from the tyranny of the majority. The ties of friendship and mutual support that hold communities together also cohere political parties in their shared ideas and interests. Debts are generated, and it is probably as well they are honoured.

But such debts require absolute transparency and audit. Public trust depends on those put in charge of the nation’s wealth being seen to distribute it competently, openly and fairly. Coronavirus has been to many Britons a traumatic experience. The fury of the reaction to “partygate” shows the delicacy of the public mood. That the club of those in power should not just party while the nation suffers but should casually line its pockets and those of its friends is intolerable.

To this there can be only one answer: ruthless inquiry and, insofar as is possible, restitution. At very least, if Sunak knows what is good for him, his penance is to say goodbye to April’s stinging rise in national insurance.

  • Simon Jenkins is a Guardian columnist

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