Second Labour MP suspended over Covid loan repayments

Perran Moon, the Labour MP for Camborne and Redruth, has been suspended while the party investigates a Covid loan connected to Autoswot, a training company he co-directed. The investigation matters because taxpayers guaranteed these loans, and the scheme later faced major fraud and error concerns.

Moon referred himself to the Labour Party’s investigations process. He said he applied for £50,000 within the rules, used it for staffing and essential business costs, and made partial repayments before Autoswot stopped trading in late 2022. The company had been set up in June 2019.

The BBC understands Moon was repeatedly told in writing that no further accounts needed filing after the company sought to be struck off, but that guidance was wrong. Moon says he will cooperate fully and continue representing constituents. Labour said it could not comment further while the investigation continues.

Bounce Back Loans were pandemic-era loans made available to small businesses. Their purpose was to help companies manage the financial shock caused by Covid. The scheme offered loans of up to £50,000, giving eligible businesses access to funds when normal trading conditions were severely disrupted.

The article gives Autoswot as an example. It used its loan for staffing and other essential business costs during the pandemic. The company later made partial repayments before ceasing trading in late 2022. Moon said the application was made in good faith and followed the rules.

The scheme became important beyond individual businesses because the government guaranteed every loan in full. That meant banks could lend with protection if companies failed. It also shifted much of the eventual financial risk to taxpayers, helping explain why suspected misuse and unpaid loans became matters of public concern.

The Bounce Back Loan scheme was enormous. It issued loans worth £46bn when launched in May 2020. The article describes it as the biggest of the government’s pandemic-era loan schemes. Its size meant that even a relatively small rate of fraud, error, or business failure could create a major public cost.

At the individual level, a business could borrow up to £50,000. Autoswot, the training company co-directed by Labour MP Perran Moon, applied for the maximum amount. Moon said its turnover forecast was accurate and properly based, and that the loan funded staffing and essential business costs.

The loans carried a 100% government guarantee. Banks were therefore protected if borrowing companies failed. The guarantee encouraged lending during the crisis, but it also meant taxpayers could ultimately cover losses. A later estimate put fraud and error affecting the public purse at up to £2.8bn.

A government guarantee changes who carries the risk when a business loan is not repaid. Under the Bounce Back Loan scheme, the government promised to cover the bank’s loss if the borrowing company failed. In practical terms, public money could be used to repay the lender.

The scheme’s guarantee was 100%. The article explains that taxpayers’ cash was used to pay back banks when companies failed. Autoswot made partial repayments, but the company ceased trading in late 2022, illustrating why a government-backed loan can become a public liability when a business cannot continue.

This arrangement helped provide emergency finance during the pandemic, but it also exposed the public purse. The Covid counter-fraud commissioner later estimated total fraud and error at up to £2.8bn. Questions about eligibility, repayments, and business records therefore mattered beyond the companies involved.

These details mattered because the scheme was governed by conditions about which businesses could borrow, how much they could request, and how applications were supported. Eligibility showed whether a company belonged in the scheme. The turnover forecast helped establish the basis for the application. Loan spending showed how the money was used.

Moon said Autoswot had been established in June 2019 and had forecast revenues above £200,000. He said he applied for the maximum £50,000 within the rules, supplied accurate information, and used the loan for staffing and other essential business costs during the pandemic.

Those claims are now relevant to the Labour investigation. Moon also said he regularly sought professional advice about the loan’s obligations. The company made partial repayments before ceasing trading in late 2022. The article does not set out every eligibility condition, but it shows why these records are central to judging compliance.

The Bounce Back Loan scheme was created quickly to support small businesses during the pandemic. A government report found it vulnerable to fraud and error. The article does not specify every weakness, so it does not provide a complete explanation of how the problems occurred.

The main mechanism behind the public exposure was the guarantee. Each loan was backed by the government for 100%, meaning taxpayers’ money could repay banks when borrowing companies failed. The scheme’s huge size increased the importance of accurate applications and proper records.

Loans worth £46bn were issued after the scheme launched in May 2020. The Covid counter-fraud commissioner later estimated total fraud and error at up to £2.8bn to the public purse. Investigations involving MPs, including Perran Moon and Bayo Alaba, show that questions about individual loans remain politically significant.

A limited company borrows in its own name, creating a debt that it is expected to repay. Government does not normally pay that debt simply because the company is private. But a guarantee changes the outcome if the company fails and cannot meet its obligations.

Under the Bounce Back Loan scheme, the government guaranteed 100% of each loan. If a borrowing company failed, taxpayers’ money was used to repay the bank. Autoswot made partial repayments, then ceased trading in late 2022, so its loan became part of the wider issue of business debts backed by public money.

This structure combines private business activity with public financial exposure. It can help banks lend during a crisis, but it makes accurate applications and responsible use important. The scheme issued £46bn, while later estimated fraud and error reached up to £2.8bn to the public purse.