Minister quits over BEIS and Treasury fraud failings

Cross-government efficiency chief Agnew says he couldn’t get officials to "lift their game"
Lord Theodore Agnew in the House of Lords yesterday. Screengrab: Parliament TV

By Jim Dunton

25 Jan 2022

Cabinet Office and Treasury minister Lord Theodore Agnew has quit the government, blaming officials for “a combination of arrogance, indolence and ignorance” in failing to cut down fraud in pandemic aid schemes.

Agnew, who was responsible for efficiency and transformation across government – and closely involved in civil-service pay issues – told the House of Lords yesterday that the current state of affairs was “not acceptable” and it would be “dishonest” of him to stay on.

His shock resignation came following a question on accountability for fraud and error in relation to the government’s coronavirus support schemes. Last week HM Revenue and Customs admitted it had revised down recovery estimates for fraud in relation to the schemes it oversees and now expects to write off at least £4.3bn.

Last month, the National Audit Office said the Department of Business, Energy and Industrial Strategy’s best estimate was that £4.9bn had been paid in fraudulent loans made through its Bounce Back Loan Scheme. But the watchdog cautioned that the figure was “highly uncertain” and that it was also estimated £17bn of the £47bn in loans issued under the scheme may not be repaid.  

In 2020, Agnew caused controversy by describing the civil service as “broken” and accused it of being obsessed with policy at the same time as lacking core skills.

Yesterday he told the House of Lords that BEIS and the British Business Bank’s oversight of the BBLS had been “nothing less than woeful” – before aiming fire at one of his own departments.

“They have been assisted by the Treasury who appear to have no knowledge or little interest in the consequences of fraud to or economy or society,” he said.

Agnew said “schoolboy errors” had been made in approving loans made under the scheme, such as giving loans to more than 1,000 companies that had not even been trading when Covid struck.

He added that while HMRC had longstanding competence in dealing with fraud and error, the business department did not – and had failed to draw on capacity available in the Cabinet Office.

“At the beginning of Covid, BEIS had the grand total of two counter-fraud officials on its staff, neither of whom were experienced in the subject,” he said.

“They refused to engage constructively with the counter-fraud function that sits in the Cabinet Office, has considerable expertise and reports directly to me.”

Agnew said that total fraud across government was an estimated £29bn a year and that dealing with the issue could reduce income tax rates by one penny. But he said “a combination of arrogance, indolence and ignorance freezes the government machine”.

“I’ve been arguing with Treasury and BEIS officials for nearly two years to get them to lift their game. I have been mostly unsuccessful,” he said.

“It is my deeply-held conviction that the current state of affairs is not acceptable. Given that I’m the minister for counter-fraud, it feels somewhat dishonest to stay on in that role if I’m incapable of doing it properly, let alone defending our track record.

“It is for that reason that I have decided to tender my resignation as a minister across the Treasury and the Cabinet Office with immediate effect.”

Chancellor Rishi Sunak said on Twitter that Agnew had served the Treasury with “diligence and commitment” and thanked him for his service”.

Shadow chancellor Rachel Reeves said Agnew’s observations were a “damning indictment” of the government’s failures on fraud.

“That the government’s own anti-fraud minister feels he is unable to defend the government’s record on billions of pounds of taxpayer cash gifted to criminals tells you all you need to know about the incompetence of this government,” she said.

“It should be a source of enduring shame to the chancellor that he has so casually written off £4.3bn of taxpayers’ money that is now in the hand of criminals and gangs.

“Coming on top of billions spent on crony contracts and billions more lost in loan fraud schemes, these levels of waste destroy any claim the Conservatives have to careful stewardship of the public finances.”

A Treasury spokesperson said fraud was “totally unacceptable” and that the department was taking action on multiple fronts to bring anyone who had tried to exploit the government’s schemes to justice.

"Our Covid support schemes were implemented at unprecedented speed to protect millions of jobs and businesses at a time when families needed it the most. As a result, our economy is back to pre-pandemic levels and growing at the fastest rate in the G7,” the spokesperson said.

“Last year we stopped or recovered nearly £2.2bn in potential fraud from the Bounce Back Loan Scheme and £743m of overclaimed furlough grants.

“We've also invested over £100m in a Taxpayer Protection Taskforce made up of nearly 1,300 staff – which is expected to recover an additional £1 billion of taxpayers money.”

This story was updated at 16:20 on 25 January 2022 to include a response from HM Treasury

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