Boris Johnson suffered another major blow to his authority on Monday after a Treasury minister staged a dramatic public resignation over the government’s decision to write off £4.3bn in fraudulent Covid loans. Theodore Agnew, a Treasury and Cabinet Office minister, called the oversight of the scheme “nothing less than woeful” and accused officials of “schoolboy errors” on multiple fronts. Speaking in the House of Lords, he accused the government of “arrogance, indolence and ignorance” in its attitude to tackling fraud estimated to cost £29bn a year. The row over the decision will leave Johnson fighting Conservative anger on yet another front, with the prime minister facing pressure from backbenchers over Sue Gray’s inquiry into alleged lockdown-breaking parties, as well as over the rise in national insurance contributions, whips’ tactics, and accusations of Islamophobia. In his statement, Lord Agnew said his resignation was not an attack on the prime minister but that he could not stay on in good conscience. “Given that I am the minister for counter-fraud, it would be somewhat dishonest to stay on in that role if I am incapable of doing it properly. It is for this reason that I have sadly decided to tender my resignation as a minister across the Treasury and Cabinet Office with immediate effect.” Agnew, a life peer since 2017, was responding to a Labour urgent question about the Treasury’s decision. He left the chamber to applause from fellow peers. Asked by the Labour peer Denis Tunnicliffe if he could provide an accurate figure for how much had been written off, Agnew said he was speaking to defend the government, adding: “But I will only be able to do that in part.” Oversight of Covid loans by the business department and the British Business Bank had been “nothing less than woeful”, Agnew said. “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, adding that two counter-fraud staff at the business department would not “engage constructively” with his counter-fraud team in the Cabinet Office. He said: “Schoolboy errors were made: for example, allowing over 1,000 companies to receive bounce-back loans that were not even trading when Covid struck.” Agnew insisted that his decision had nothing to do with “far more dramatic political events being played out across Westminster” relating to Johnson and a continuing investigation into No 10 parties. He said: “This is not an attack on the prime minister and I am sorry for the inconvenience it will cause. I hope that as a virtually unknown minister beyond this place, it might prompt others more important beyond me to get behind this and sort it out.” Labour’s Rachel Reeves, the shadow chancellor, said Agnew’s resignation was a “damning indictment of the chancellor and the government’s failures on fraud”. She said: “That the government’s own anti-fraud minister feels he is unable to defend the government’s record on billions of pounds of taxpayer cash gifted to criminals tells you all you need to know about the incompetence of this government.” Speaking after him, the Lib Dem peer Susan Kramer said: “Can I just take this opportunity to say on behalf of these benches how much we appreciate the honour and integrity that has just been displayed by the minister? I don’t think anyone could have raised questions more forcefully, more accurately or more completely than he has.” Johnson’s spokesperson said: “We are grateful to Lord Agnew for the significant contribution he has made to government. “On the wider issues that he’s raised, we introduced our unprecedented Covid support schemes at speed to protect jobs and livelihoods, helping millions of people across the UK, including nearly 12 million on the furlough scheme alone. “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 tax protection taskforce is expected to recover an additional £1bn of taxpayers’ money.” HMRC believes that about £5.8bn, or 7%, of the £81.2bn paid out by the taxpayer through the various Covid-19 emergency response schemes has been stolen. So far, just £500m has been recovered, and it expects to be able to recover between another £800m and £1bn by 2023. The National Audit Office (NAO) has singled out the government’s “inadequate” attempts to tackle fraud within the £47bn business bounce-back loan scheme (BBLS). It warned in December that loans worth £4.9bn, or 11% of the total, would be lost to fraud because anti-fraud checks had been “implemented too slowly”. “It is clear that government needs to improve on its identification, quantification and recovery of fraudulent loans within the scheme,” Gareth Davies, the head of the NAO, said in his report. HMRC said in its briefing paper on money lost to fraud through the various schemes, including furlough, the self-employment income support programme, BBLS, and “eat out to help out”, that: “From the beginning it was clear the schemes would be targets for fraud.” A British Business Bank spokesperson said: “From the launch of the [bounce-back loan] scheme, the British Business Bank has worked with lenders and across government to prevent, detect and counter fraud and put in place as quickly as possible additional measures to further mitigate fraud risks.”