Covid furlough scheme lost billions of pounds to error and fraud, says watchdog

Billions of pounds awarded as part of Covid-19 employment support schemes were lost in fraud and error, a public spending watchdog has warned.

The National Audit Office has criticised the Government for not doing more to prevent mistakes and fraudulent claims when rolling out the furlough scheme and the self-employment income support scheme, warning that billions of pounds could remain unrecovered.

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.

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.”

The two measures, the Self-Employment Income Support Scheme and the Coronavirus Job Retention Scheme, were introduced when the Covid-19 pandemic struck and formed part of a massive spending package designed to protect workers across the country left out of work after lockdowns were introduced.

Detailed report

In a detailed 55-page report, published today, October 13, auditors found that the unprecedented schemes met their objectives of protecting workers and businesses.

The actual cost of the schemes was also lower than estimated by the Government, the NAO said.

Around £5,900 was the average paid for each furloughed job over the course of the scheme, while £9,700 was the average amount each self-employed claimant received.

The report also reveals that on average an increase of over £2,200 was recorded in the profits of self-employed people who received Covid-19 grants in 2020 and 2021.

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.

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.