A TORY minister has dramatically quit his post at the despatch box after launching a scathing attack on the “arrogance, indolence and ignorance” in the Government.

Lord Agnew of Oulton was applauded by fellow peers after he slammed his folder shut, said “thank you and goodbye”, and literally walked out of his job and the Lords chamber.

His exit, after he complained about “schoolboy errors” in tackling Covid-related fraud, was described as “one of the most dramatic moments ever seen” in the Upper House.

The former businessman had been working with the Deprtment for Business, Energy and Industrial Strategy (BEIS) and the Treasury on counter fraud measures.

He had been due to update peers about £4.3billion of Covid loans - written off by the Treasury - which Labour said went to “fraudsters”.

He appeared at the despatch box as expected, then surprised peers by venting his deep unhappiness about the failures within government to tackle fraud.

Lord Agnew said the Treasury had prioritised the speed of distributing emergency funds to business during the pandemic, but added: “What has followed has been nothing less than desperately inadequate.”

The oversight of the bounce back loans by BEIS and the British Business Bank of the panel lenders had been “woeful”, he 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.”

The Tory peer said BEIS had just “two counter-fraud staff” at the start of the pandemic who 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.”

Lord Agnew said he had been “arguing” with Treasury and BEIS officials for nearly two years to “get them to lift their game”, adding: “I have been mostly unsuccessful.”

He went on to raise further concerns, including over duplicate loans and an apparent lack of ability to scrutinise the performance of lenders.

He said he had a “deeply held conviction that the current state of affairs is not acceptable”.

He said: “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, let alone defending our track record.

“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.”

He passed his letter to a frontbench colleague.

Lord Agnew denied the scandals dogging Boris Johnson were the reason he resigned and apologised for the “inconvenience” it would cause the Prime Minister.

He told peers: “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.”

Labour leader in the Lords, Baroness Smith of Basildon, 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.”

No 10 insisted the Government had been clear that fraud is “unacceptable” and is “grateful” to Lord Agnew for his “significant contribution” over the years.

The Prime Minister’s official spokesman said: “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, £500 million recovered last year and the HMRC tax protection taskforce is expected to recover an additional £1 billion of taxpayers’ money.”

Shadow chancellor Rachel Reeves said Lord Agnew’s resignation was a “damning indictment of the Chancellor and the Government’s failures on fraud”.

It is not the first time a minister has resigned at the despatch box in the House of Lords.

In 2018, Lord Bates stunned peers when he announced he would quit as he was “ashamed” for failing to turn up on time in the upper chamber.

However, the international development minister’s offer of resignation was rejected by the then prime minister Theresa May.

He subsequently left the Government the following year to walk from Belfast to Brussels in search of “common ground” amid the fractious Brexit debate.

SNP MP Alison Thewliss said: “It is unacceptable that millions of people were excluded from Treasury support through this pandemic while the UK government is prepared to write off the billions of pounds of taxpayers’ money stolen by crooks and fraudsters.

“The dire reality is that the Tory government has cut crucial Universal Credit for struggling households and still refuses to deliver meaningful support to tackle the cost of living crisis.

"This money could have gone a long way to supporting people who need it the most.

“It speaks volumes of the Tory government’s priorities that while ordinary people are being pushed into hardship and poverty, it lets people who have stolen public funds off the hook.”