Whitehall-backed £6bn business loan scheme set to be launched

According to the Telegraph, sources said a longer-term successor to the recovery loan scheme (RLS) is set to be signed off by the treasury and business department this week. The scheme, referred to as RLS2, will be less generous than its predecessor but aims to provide up to £3bn a year over at least two years. 

Government sources also told the outlet the announcement had been held up by efforts to toughen up fraud protections following the billions of pounds of losses resulting from the Covid support schemes. 

Under the loan guarantee schemes, the government pledged to swallow losses on loans made to businesses in a bid to boost lending by banks. The new scheme is designed to be longer lasting after several iterations of business loan support since the pandemic hit. 

Debt worth almost £80bn was issued under the initial Covid loan schemes but only £1bn was loaned out under RLS. However demand for state-backed loans is likely to rise as the economy is put under pressure by the cost of living crisis. 

Overall, the National Audit Office estimates that almost £5bn was lost to fraud under the bounce-back loan scheme, which offered a 100pc government guarantee.