Downing Street could cut 1p off income tax if it tackled Covid fraud properly, Lord Agnew of Oulton said on Monday as he dramatically quit the Government.
The peer called Downing Street’s handling of Covid business loan fraud “schoolboy” as he resigned as a minister to the Treasury and Cabinet Office while speaking in the Lords.
Speaking at the despatch box, Lord Agnew reeled off a list of alleged failings, including that 1,000 companies received Bounce Back loans that were not even trading when Covid-19 struck.
He finished the speech announcing his resignation with the words “thank you and goodbye”, before marching straight out of the Lords, as others in the Chamber applauded.
Lord Agnew, who one former MP claimed on Monday night was close to potential leadership contenders Liz Truss and Michael Gove, insisted that his resignation was not linked to the wider rebellion the Prime Minister is facing over allegations of lockdown-breaking parties.
Pressure on PM over National Insurance rise
However, his argument that Boris Johnson could deliver a major tax cut to millions of Britons before the next election if only he tackled Covid fraud more effectively will spark renewed debate about tax policy.
The Prime Minister and senior cabinet ministers on Monday argued that National Insurance must increase as planned in April to pay for the NHS, despite Tory backbench calls for the increase to be delayed or scrapped.
Lord Agnew said: “I hope that as a virtually unknown minister beyond this place, giving up my career might prompt others more important than me to get behind this and sort it out.
“It matters for all the obvious reasons, but there’s a penny of income tax waiting to be claimed if we just woke up. Total fraud loss across Government is estimated at £29 billion a year. Of course, not all can be stopped but a combination of arrogance, indolence and ignorance freezes the Government machine.
“Action taken today would give this Government a sporting chance of cutting income tax before a likely May 2024 election. If my removal helps that to happen, it’d have been worth it.”
National Insurance rise will cost the average earner an extra £256
Lord Agnew made the decision to quit after £5 billion was thought to have been lost to fraudulent applications for emergency Bounce Back business loans during lockdown.
He was appointed as a minister of state in February 2020 with a brief to deliver public sector reform and cross-government efficiency, as well as supporting the Chancellor of the Duchy of Lancaster with oversight of spending controls.
Baroness Smith of Basildon, the Labour leader in the Lords, said: “I think we have just witnessed one of the most dramatic moments we have ever seen in the House from a minister who felt his integrity could no longer ensure he remained a member of the Government.”
Lord Agnew denied the scandals dogging Mr Johnson were the reason he resigned and apologised for the “inconvenience” it would cause the Prime Minister.
However, Phillip Lee, the former Tory MP, noted on Twitter: “Agnew is a good friend of Gove and Truss. Just saying…”
Ms Truss, the Foreign Secretary, is widely tipped to run for the Tory Party leadership if Mr Johnson is forced out. Mr Gove, the Levelling-Up Secretary, has previously run.
Lord Agnew attacked what he claimed were “emblematic failures” and labelled oversight by the Department for Business, Energy and Industrial Strategy (BEIS) and the British Business Bank as “nothing less than woeful”.
“They have been assisted by the Treasury who appear to have no knowledge or little interest in the consequences of fraud to our economy or our society,” he said.
“I have been arguing for two years with Treasury and BEIS officials to get them to raise their game – I have been mostly unsuccessful.”
Lord Agnew laid out several differences of opinion with Treasury officials as he called for urgent improvements on lender performance data and said officials’ reliance on audits was “far too reactive”.
There was a “failure by Treasury [and] BEIS officials” to understand the “complete disjunction” between the scale of fraud and enforcement by the Government where it took place, he added.
In his concluding remarks, Lord Agnew said it was his “deeply-held conviction that the current state of affairs is not acceptable”.
Rishi Sunak, the Chancellor, said: “Lord Agnew has served the Treasury with diligence and commitment. I want to thank him for his dedicated service and tireless work during the pandemic.”
Number 10 insisted that the Government had been clear that fraud is “unacceptable” and is “grateful” to Lord Agnew for his “significant contribution” over the years.