Further to our last article, the HMRC have just released a statement in which they concede that only around a quarter of the monies lost to furlough fraud are likely to be ultimately recovered.
Furlough Fraud
In a recent report, HMRC provided an estimate that furlough fraud amounted to £5.28bn for the 2020/21 financial year, of the £60.7bn paid out under Coronavirus Job Retention Scheme (CJRS). Hence, furlough fraud constituted 8.7% of all monies paid out under the CJRS scheme.
The £5.28bn that was lost to fulough fraud was made up as follows:-
- Organised crime – £0.18bn (3.4%)
- Opportunistic fraud – £3.7bn (70.1%)
- Errors – 1.4bn (26.5%)
Hence, of the £60.7bn that was paid out under the furlough scheme, 0.3% was lost to organised crime, 6.1% to opportunistic fraud, and 2.3 to errors.
Further monies were lost to furlough fraud on the other Covid-19 pandemic support schemes as well. Under the Self-Employment Income Support Scheme (SEISS), for instance, £19.7bn was paid out, of which £0.49bn (2.5%) was lost to fraud and errors. Moreover, with respect to the Eat Out to Help Out scheme, £840 million was paid out, of which £71.4 million was lost to fraud and errors.
The current estimate for the total amount of furlough fraud committed across all of the Covid-19 support schemes is £5.8 billion
Recovery Estimate
In a new statement released by the HMRC on the 12th January 2022, they state: "HMRC’s current estimate for the amount lost to fraud and error in the schemes during 2020 to 2021 is 8.7% in Coronavirus Job Retention Scheme, 2.5% in Self-Employment Income Support Scheme phases 1 to 3, and 8.5% in the Eat Out to Help Out scheme. This equates to £5.8 billion, against a spend of £81.2 billion, and is in line with the original planning assumptions that informed the design of the schemes."
The HMRC added that: "Work to recover fraud and error began almost as soon as the schemes launched. We recovered £500 million of overpayments in 2020 to 2021. The government then invested £100 million in a Taxpayer Protection Taskforce of 1,265 HMRC staff to combat fraud in the schemes. We expect the taskforce to recover £800 million to £1 billion between 2021 and 2023."
Hence, if the HMRC recover an addition £1 billion by 2023 to add the £500 million already recovered, that totals £1.5 billion. That would leave an incredible £4.3 billion that has been lost to furlough fraud in total, with just 25.86% of the monies having been recovered.
Reaction
Rachel Reeves, the Shadow Chancellor, stated in response to the release of the furlough fraud statistics that: "These confessions are outrageous. While prices soar, billions in hard-earned taxpayer cash has been frittered away by fraud - and the Chancellor is happy to shrug his shoulders and lose it forever."
Reeves added: "It shouldn’t be beyond the wit of government to get money where it needs to go, without allowing fraudsters to steal taxpayer funds. Leaving the till open and unattended for thieves to clear out would be a sackable offence for a shopworker, yet apparently it is acceptable for a Chancellor."
Nevertheless, the Prime Minister's official spokesperson stated: "We introduced these unprecedented Covid support schemes at speed to protect jobs and livelihoods. The result of the action is that the economy is back to pre-pandemic levels, and we are the first major European economy to report that."
HMRC also highlighted in their statement that they also prevented a lot of furlough fraud from taking place in the first place. They stated that: "By building automated controls into the digital claim process, we prevented more than 100,000 ineligible or mistaken claims, and by carrying out pre-payment checks based on our risk and intelligence profiles, we blocked more than 29,000 claims and registrations in 2020 to 2021."
