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Home » News » Furlough Scheme Fraudulent Claims & Errors to Cost up to £7.9bn

Furlough Scheme Fraudulent Claims & Errors to Cost up to £7.9bn

The government has claimed that up to £3.5bn of payments made under the Coronavirus Job Retention Scheme have been paid out in error or claimed fraudulently.

MPs on the Public Accounts Committee were informed by HM Revenue and Customs that they estimate around 5-10% of furlough cash has been wrongly paid out. The latest figures released highlight that the total cost of the scheme so far to the government has been £35.4bn to date, and, as the scheme doesn’t end till October, this figure is set to further increase.

Jim Harra, HMRC’s permanent secretary said, “We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%. That will range from deliberate fraud through to error.”

It has been estimated that a total of £30bn was lost in tax last year (2019), as a result of taxpayer error and fraud. HMRC and HM Treasury appeared in front of MPs to explain their plans for reducing the problem.

Mr Harra explained: “What we have said in our risk assessment is we are not going to set out to try to find employers who have made legitimate mistakes in compiling their claims, because this is obviously something new that everybody had to get to grips with in a very difficult time.”

Mr Harra added that employers are expected to check their claims, repaying any excess payments, but that their main focus would be on those who have used the scheme fraudulently.
HMRC’s fraud hotline has already received 8,000 calls, and 27,000 ‘high risk’ cases – where it is thought a serious error has occurred regarding the amount claimed by an employer – are now being looked into. Any employee who believes their employer may have fraudulently claimed through the scheme is being encouraged to report this to HMRC by using the relevant form on its website.

He added: “While we can’t get involved in any relationship between the employee and employer, we can certainly reclaim any grant that the employer is not entitled to, which includes grants they have not passed on in wages to their employees.”

Investment Manager at GAM investments, Swetha Ramachandran, said: “The speed with which they wanted to expedite this programme in order to ensure that this was available to employers, to minimise the damage that could have been caused, means there was always a likelihood that this was going to happen. So, I don’t think it’s that surprising.”

Back in July, it was warned by the centre-right think tank, Policy Exchange, that the government could find fraud/error costing them anything between £1.3bn and £7.9bn. This calculation has been made based on ‘expected fraud rates for government expenditure’ from both the Cabinet Office and the Department for Work and Pensions. It is believed that the true value of the fraud that has taken place could be towards the higher end of the estimate.

The report containing the calculation stated: “This is a serious squandering of public finances and properly resourced post event assurance will be required to reassure the public that every possible step has been taken to reduce this level of fraud.”

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