Covid furlough scheme lost billions to fraud and error, report claims

The Government has faced criticism from the National Audit Office for not doing more to prevent mistakes and fraudulent claims while rolling out the furlough scheme and self-employment income support scheme.

In total, according to the latest report into the schemes by the National Audit Office, £4.5 billion – or nearly 4.6% of the total cost of the Government’s £96.9 billion emergency Covid-19 support – was claimed in error or in fraud.

But even that estimate is subject to “considerable uncertainty”, auditors say, with the figures ranging from between £3.2 billion to £6.3 billion.

The Government insisted compliance checks minimised fraud from the start, and said that no fraud was being written off, with work going on to identify those who abused the system.

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Gareth Davies, the National Audit Office head, said that the Government needs to ensure “sufficient resources” are available to tackle the issue.

The latest report looks not only at the role of the Treasury, but also that of HM Revenue & Customs.

“The Covid employment support schemes were introduced at speed and provided essential support to individuals, businesses and the economy during the pandemic,” Mr Davies said.

“The furlough and self-employed schemes prevented millions of job losses but billions went to people whose incomes increased during the pandemic, and billions more was lost in fraud and error.

“The Government must improve the way it estimates levels of fraud and error and allocate sufficient resources to tackle this issue.”

Officials had stern words for the Treasury and the Government over the design of the scheme, effectively suggesting that it could have done more to save money.

In particular, the Government is criticised for not making use from the outset of clear financial impact tests.

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According to the report, “it is likely that several billion pounds have been paid to claimants who saw their incomes increase during the period”.

“While the figures are highly uncertain, large amounts of error and fraud are unlikely ever to be recovered. The Departments will need to ensure they continue to bear down on fraud, where it is cost-effective to do so, and pursue the most serious cases with the full force of the law where it serves the public interest.”

As of March, the NAO notes, there were 24 criminal investigations underway into fraudulent claims, while HMRC is predicting it will recover around £1.1 billion over the next two years.

Responding to the report, a Government spokesman said: “We are not writing off any fraud from these schemes – our work to root out those who abused the system is ongoing.

“Meanwhile, we effectively minimised fraud from the start with compliance checks that did not unnecessarily delay payments when they were needed and further compliance activity undertaken by HMRC has secured and protected more than £1 billion.

“The NAO found that the employment support schemes achieved their primary aim of protecting jobs and businesses, with unemployment peaking at just 5.2%.”