Rishi Sunak will launch the new Public Sector Fraud Authority in July. It follows reports that £4.9billion worth of Government bounce back loans, given out by the Government to help struggling businesses during the pandemic, were squandered or smuggled out of the UK.
The Government said the new body will recruit data analytics experts and economic crime investigators to recover money stolen from Covid support schemes and identify suspicious companies.
“We will chase down fraudsters who rip off the taxpayer,” Mr Sunak said.
“This elite fraud squad, backed by £25 million, will ensure the latest counter fraud techniques are being used to track down these criminals.
“People are rightly furious that fraudsters took advantage of our vital Covid support schemes, and we are acting to make sure they pay the price.”
An investigation by the Times revealed fraudsters had fleeced the taxpayer using the Government’s Covid loan scheme.
The bounce back scheme was designed to help small businesses through lockdown. Businesses could apply for loans of up to £50,000 based on their turnover, which they self-declared.
The loans were offered at a fixed rate of 2.5 per cent and the money was supposed to be paid back over six years.
For the first year the Government covered the interest. The money was provided by banks, but guaranteed by the taxpayer if businesses failed to pay it back.
In many cases businesses or individuals took out loans before immediately sending the money to personal bank accounts, which was forbidden under the scheme.
At least £100 million of the Covid loans went to companies formed after the pandemic began.
In December a report from the National Audit Office found the loan scheme was implemented too slowly to be effective and the Government’s activity to limit taxpayers’ exposure to fraudulent loans was inadequate.
It was estimated that 11 per cent of bounce back payments worth £4.9 billion were fraudulent.
Mr Sunak unveiled details of the new counter fraud squad at the first meeting of the Government’s new Efficiencies and Value for Money Committee on Wednesday.
The committee is chaired by the Chancellor and co-chaired by Simon Clarke, Chief Secretary to the Treasury and Jacob Rees-Mogg, Minister for Brexit Opportunities and Government Efficiency.
Mr Rees-Mogg said:"Hardworking taxpayers must and will be protected. Anyone who tries to defraud the public purse will know that we as a government are coming for them and we are going to put them behind bars."