The Covid fraud squad that turned out to be a joke

Telegraph

5 days ago

To visit the website of the National Investigation Service (Natis) was to be met with a string of scalps. Images of uniformed officers carrying out 'raids' and 'seizures' abounded – success stories, it said, from recouping cash unduly claimed during the Government's £47 billion Covid Bounce Back loan scheme (BBLS). Yet, despite the stab-proof vests and its police.uk domain name, Natis was not in fact a police body, but a department made up mostly of council staff run out of the scandal-hit Thurrock council in Essex. In five years of pandemic loan recovery efforts, the department has secured just 14 convictions, yet cost the taxpayer £38.5 million.
Last month, the Department for Business and Trade (DBT) announced that the unit was being scrapped, and that remaining 'viable' cases were being handed over to the central government-run Insolvency Service. This move 'will ensure lost funds from Covid-era fraud are recovered more quickly and effectively', according to Gareth Thomas, the business and trade minister.
But just last week, the situation got worse. It has been mooted that due to poorly managed administration and insufficient training, most Natis investigators had not been granted state-recognised investigative powers. The upshot of this revelation is that many hundreds of Natis cases – some finished and some still in the system – are ripe for a legal challenge.
It's the latest in a long list of setbacks in Natis's short and colourful history, which began in the chaotic first months of the Covid pandemic when the Bounce Back loan scheme took shape.
Easy-to-access cash
In April 2020, small and medium-sized business owners were offered the chance to secure loans of up to £50,000. The idea was to stave off pandemic-induced decline, and provide a lifeline for otherwise flagging firms; funds typically hit applicants' accounts in a matter of hours. The Government guaranteed the loans (meaning taxpayers would pick up the bill for those who defaulted, or for businesses that shuttered), with no fees or interest to pay for the first 12 months.
This easy-to-access cash inevitably caught the eye of opportunists. Loans were applied for in others' names; individuals over-egged their turnover in order to boost borrowing power, while others used the free-flowing cash to plug personal payments. A Times investigation showed that this taxpayer-funded loot had been splashed on cars and watches, gambling sprees and home improvements. Suitcases of money doled out by the scheme were seized by airport border officials, according to a Home Office source.
One gambler received £50,000 which was spent on poker games after claiming his company turnover was four times that amount – despite having £2.72 in his bank account; the owner of a sandwich shop secured £35,000 for his business, before using the funds to fix up his garden. A restaurateur, who had been evicted from the premises for not paying rent, also received Bounce Back loan cash. The Government provided around £78 billion of support to businesses, households and public services from 2021 to 2022.
According to the National Audit Office, fraud rose from £5.5 billion in the two years pre-Covid to £21 billion in the two years after, some £7.3 billion of which pertained to temporary pandemic schemes.
So what had been intended as an economy-boosting safety net soon became a public embarrassment. In 2022, ministers railed against the 'unacceptable' failure to recover funds wrongfully taken in the scheme; Lord Agnew, then minister for counter fraud, resigned at the despatch box over these dire results, lambasting the 'Dad's Army Operation' responsible for returning taxpayers' money.
And so it fell to Natis, which had been at the helm since summer 2020, to prove otherwise.
Natis had originally been set up in 2014 under a different name, the Counter Fraud and Investigation Directorate, to investigate Essex-based fraud. And it's worth mentioning that while in situ, members of the team failed to spot what was happening beneath their noses at Thurrock Council, where a £1.3 billion debt had been racked up between 2016 and 2020 via a 'borrow to invest' solar energy scandal. But in 2020, with the DBT (then the Department for Business, Energy and Industrial Strategy) without the in-house capacity to carry out investigations itself during the chaotic first months of the pandemic, it was deemed that Natis staff were the nation's brightest sparks in fraud detection.
But even back then, there were those who vehemently opposed this characterisation.
Investigating Natis
With 74 staff across the UK, 'Natis blurred lines between civil and criminal authority and the quiet complicity of police forces and government departments', says JJ Jackson, a reporter at East Anglia Bylines who has been investigating the unit for several years. 'The avalanche started well before Covid.'
There were reports of staff 'walking into crime scenes and using police interview rooms with no supervision'; the application for (and use of) a police.uk domain name – which was also emblazoned on the back of their stab-proof vests – and being set up as a for-profit enterprise, ' which is odd because they're a local authority and you can't make a profit', says Jackson.
Mike Craig, who runs the website Mr Bounce Back, a BBLS news service, first got wind of Natis a few years ago. 'They were kicking in doors and arresting people. It was all very dramatic,' he recalls, 'and they all had police [style-logo] emblazoned uniforms, so I was under the impression they were police. But then I got chatting to people, and it became apparent they weren't police at all.'
He then received a call from a barrister recounting a 'bizarre' exchange. Natis had written to his client on the basis of a suspected BBLS fraud, despite the individual being 'completely innocent'.
The barrister went to the unit's offices at Thurrock Council, and 'ended up speaking with the highest ranking person in Natis because he was the only one available. He said, 'I literally wiped the floor with him, and they dropped all charges'.' The barrister 'just left the office smirking'.
Despite the hard-as-nails images it had sought to share online – it regularly pumped out stories of doors being kicked in from London to Manchester, with the BBC tagging along to film a 2021 raid – Natis employed staff described by another source as 'either ex-policemen who were overweight and could never be a policeman again, or council employees. They have a cushy life.'
Craig says has been told repeatedly by those who have dealt with them first-hand that 'they're a bunch of amateurs' who in fact 'had as much power as a dustbin man'.
The oversight committee tasked with keeping them in check at Thurrock Council, he adds, was akin to 'a knitting circle of old ladies'. (A review commissioned by Thurrock Council found that the unit had not been sufficiently overseen either by ministers, or the council itself.)
Concerns were raised too over their apparent pursuit of the innocent. A helpline and email address urging people to get in touch if they suspected abuse of the BBLS meant anyone could be 'grassed up' with little proof; Craig has heard from a number of those wrongly accused.
It has left him wondering: 'Did they have a quota to get more money? Did they have to say, 'Well, we've done 200 investigations this quarter'? When you look at the figures, it doesn't add up. They've spent more on [the unit] than has ever got recovered.'
Jackson too says that there were BBLS applicants who 'actually didn't steal anything, never made a profit, never intended to make a loss; they were still pursued and got 18 months in prison'. Of their treatment by a council-run entity, he says: 'You don't expect that sort of chicanery.'
At one stage, the unit claimed that it had brought in £23 million of recovered money, yet a review by the Government's internal audit agency deduced that 'the overall amount recovered by Natis remains unclear'.
A DBT press release issued in mid-May added that its investigation had 'revealed problems with Natis governance and how recoveries are reported'.
According to a Natis statement provided to The Telegraph, the dozen convictions it did secure pertain to £2.25 million fraudulently taken, while 'currently there are a number of complex high-value fraud investigations ongoing… fraud investigations can be time-consuming and resource intensive'. It also cited the courts backlog, currently at a record high in England and Wales, as potentially delaying proceedings further. 'Of the Natis cases that have concluded following prosecution,' it said, 'Natis has achieved a 100 per cent conviction rate.'
The takeover by the Insolvency Service builds on BBLS investigations it has been carrying out since 2021, which have thus far resulted in disqualifications against 2,167 directors, bankruptcy restrictions against 343 individuals, and 62 criminal convictions amounting to £6 million in compensation. There is, however, a long way to go and last week's disclosure that many of the Natis cases may be legally unsound is a nothing short of body blow to the whole loan-recovery process.
The hole the BBLS has blown in the public purse appears to have been created by three fundamental issues: a system too easy to fiddle, a local unit being tasked with fighting a colossal battle, and scant oversight. The effects of the scheme roll on, both publicly and for private enterprises. Starling Bank, which issued BBLs during the pandemic, last month announced a 25 per cent dip in profits amounting to £28 million in losses as a result of improper checks on applicants.
Should the scheme have been started in the first place? 'The premise of Covid BBLs was not bad for the UK,' says Miles Hacking, the restructuring and insolvency director at Freeths, a law firm. 'What was bad however is that the application process was ripe for abuse and given that the scheme was guaranteed by the Government, the irrecoverable amounts loaned have simply increased public debt.' It was too easily manipulated, Hacking adds, 'and the hundreds of director disqualifications connected to the abuse of the BBL scheme supports this'.
Jackson says that as well as the significant financial bruising enabled by the lax scheme, Natis 'should never have been let in the front door'. His 'ultimate fear', he says, is that 'no one's done any safeguarding checks' on the unit presiding over this major abuse of public cash – and that taxpayers will be coughing up for their ineptitude for years to come.
'This isn't a police force,' he says of Natis, which is still being paid on a rolling monthly basis while cases are transferred. 'This is a kindergarten for people who wanted to play being [fictional detective chief inspector] Gene Hunt.'