The bounce-back loan scheme had minimal cheques, lent to insolvent companies and allowed a company to borrow £50,000 despite having a turnover of just £354.
Mr Sunak’s leadership campaign has frequently cited the success of the measures he has taken to protect the economy during the pandemic.
Rishi Sunak faces fresh questions about Covid scams after I analyzed disturbing evidence of how the bounce-back loan scheme he set up for struggling businesses was being abused.
But the extent of the mismanagement of the £47bn bounce back is evident in cases of financial misconduct that show the maximum amount was often awarded to clearly ineligible companies.
Government auditors have estimated a total of almost £3.5 billion has been wrongly claimed.
I can show that a business manager who was subsequently disqualified for 11 years was able to take out a loan of £50,000 – the maximum amount – even though his packaging business only had a turnover of £354.
Last night a Labor colleague and finance expert accused Mr Sunak of telling a “one-sided story” about the loans.
“The government is giving away public money and the money has to stop with them,” said Lord Sikka, Professor Emeritus of Accounting at the University of Sheffield.
“A lot of the scams are amateurish, if someone wanted a loan the HMRC reference numbers should have been checked. Without a reference, a bank would usually not give you a loan.
“I find [Sunak] tells a one-sided story, people didn’t ask how these scams went on and when they became aware of them. It was way too easy to set up a fraudulent company. He should be asked questions about it in the future – we are yet to see the worst.”
The Bankruptcy Service analyzed conduct reports of financial misconduct I also uncover instances where bounce back loads were given to companies that were already in bankruptcy or clearly going in that direction.
Examples of this included Beauty & Melody Shop Ltd – a company that took out a £50,000 loan almost a year before the pandemic started, despite accounts publicly saying it had defaulted on 30 June 2019.
Mr Sunak repeatedly cited the success of the furlough scheme during his campaign for Conservative Party leadership. But he’s been careful not to refer to bounce-back loans.
When asked about the plan at Hustings on Thursday, the former Chancellor claimed the task force he was setting up to fight fraud was expected to raise over £1billion but that he didn’t know as he was no longer at the Treasury.
Conservative MP David Jones said: “I think, to be fair to Rishi, of course he was trying to keep the businesses alive. However, this does not mean that certain minimum standards of due diligence should not have been applied.
“Given what has been uncovered, it is now of the utmost importance for the Treasury Department to conduct a thorough review.”
Thousands of financial misconduct cases published by the Bankruptcy Service over the last year have been analyzed by I, which revealed details of £5m bounce-back loan abuse. Examples of fraud are well documented in The times as political pressure has built on the Treasury Department to release more details about the debt.
They show more than £1m of the bad debt was issued by Barclays, £760,000 by Lloyds and a further £600,000 by NatWest.
The data is just a snapshot of fraud levels, with new cases being published every week.
Because the loans were government-backed, banks faced few penalties for letting ineligible loans slip through, but many applicants, who often made simple mistakes in their applications, faced severe penalties for years.
In the past three months, nearly a third — 28 percent — of new financial misconduct cases reported to the Bankruptcy Service involved bounce-back loans.
The Ministry of Finance has been asked for comment.