A Conservative minister has resigned over the “lamentable track record”of Boris Johnson’s government in tackling fraud over a multi-billion pound Covid loan scheme.

       Senior Tory peer Lord Agnew quit in a shock announcement in the House of Lords on Monday – blasting “arrogance, indolence and ignorance” across government departments.

       Opposition parties seized on the “damning” remarks, demanding that chancellor Rishi Sunak explains how he will reclaim billions the government had allowed to be “stolen” from taxpayers.

       Lord Agnew said “schoolboy errors” had been made over the ￡47bn given out to businesses from the bounce back loan scheme (BBLS) – including the approval of more than 1,000 loans to companies “not even trading when Covid struck”.

       The minister for efficiency at the Treasury and Cabinet Office also condemned the “desperately inadequate” efforts to claw back some of the huge sums lost to fraud in his resignation letter to the prime minister.

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       But the departing minister said his resignation was in “no way” linked to the partygate scandal engulfing No 10 – blaming Whitehall departments for the failures of the Covid scheme.

       Lord Agnew said he was “sorry for the inconvenience” it would cause Mr Johnson, but said the PM should be able to expect that “the levers of government were actually connected to delivering services for our citizens”.

       The department for Business, Energy and Industrial Strategy (BEIS) and National Audit Office has estimated that there had been up to ￡5bn of fraud from the BBLS.

       Lord Agnew had been asked to update peers about the ￡4.3bn worth of BBLS and other Covid loans effectively written off by the Treasury – which Labour claimed has gone to “fraudsters”.

       Although he offered no sums in his scathing statement, Lord Agnew attacked both BEIS and the Treasury. “The oversight by both BEIS and the British Business Bank of the panel lenders of BBLS has been nothing less than woeful,” he said.

       He added: “They have been ably assisted by the Treasury who appear to have no knowledge or interest in the consequences of fraud to our economy or society.”

       Lord Agnew said he had been arguing with Treasury and BEIS officials with two years to raise their game on fraud – claiming a mixture of “arrogance, indolence and ignorance freezes the government machine”.

       The departing minister encouraged fellow peers to carry on “scrutinising” the government over the recovery of loans. He was given a round of applause after saying “goodbye” and walked out of the chamber.

       Labour MP Rachel Reeves, shadow chancellor, said Lord Agnew’s resignation speech was “a damning indictment” of the government’s “failures on fraud”.

       She said it should be a source of “enduring shame” to Mr Sunak that the government had allowed taxpayers’ money to end up in “the hand of criminals and gangs”.

       The Liberal Democrats’ Treasury spokesperson Christine Jardine said the loss of taxpayers’ money was “outrageous” – adding that the “the buck stops” with Mr Sunak.

       “He must explain how he’s going to get back these billions he allowed to be stolen from our schools, hospitals and police forces, and if he can’t, he should resign for someone who will,” said Ms Jardine.

       HMRC permanent secretary Jim Harra told MPs last week that the ￡4.3bn figure reported for write-offs from various Covid loan schemes in 2020 and 2021 was not accurate.

       But he said a “significant proportion” of the ￡5.8bn lost to both error and loss would be very difficult to recover.

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       Mr Johnson official spokesperson said No 10 was “grateful” to Lord Agnew for his contribution towards government efficiency.

       “We’ve always been clear fraud is unacceptable and are taking action against those abusing the system with 150,000 ineligible claims blocked, ￡500m recovered last year and the HMRC taxpayer protection task force is expected to recover an additional billion pounds of taxpayers’ money.”