More than £50 billion is lost each year to fraud and error across Government
Businesses that tap into Gouvernement furlough support should have their names published, an influential group of MPs a dit, after concerns that taxpayers could have lost billions to fraudsters during the pandemic.
The Public Accounts Committee (PAC) called on the Treasury to set out new transparency guidance for Government support in the next six months.
This should include a presumption that the names of businesses that benefitted from the furlough scheme will be published.
HM Revenue and Customs (HMRC) has published some data on companies that claimed furlough money for their staff. But the data has “insufficient detail to allow proper public scrutiny”, MPs said.
HMRC itself will not have a statistically valid estimate of how much fraud and error there was in the furlough scheme until December this year, 22 months after it launched.
Other estimates are still sketchy, but suggest that up to £27 billion could have been lost from just one of the Government’s loan schemes that helped companies through the crisis.
Under the bounce back loan scheme, the Government said that banks could lend up to £50,000 to businesses, and if companies did not pay back the taxpayer would cover the lender’s losses.
It unleashed a huge amount of support, much of it lifesaving for small companies across the UK. But the Government now thinks that up to 60% of the £46.5 billion banks lent under the scheme may never be repaid.
The committee said that banks – who are responsible for chasing payments – simply did not have the incentives to go after borrowers because they know the Government will step in.
“If BEIS (the Department for Business, Energy & Industrial Strategy) is worried that 100% taxpayer loan guarantees mean the lending banks don’t have enough skin in the game, departments across Government show a worrying, similar lack of urgency,” Dame Meg said.
“The Covid emergency masks a more worrying underlying approach to managing risk and taxpayers’ money.”
Even in a normal year the Government knows that it loses around £26 billion to fraud and error. It also estimates that there is another £25 billion it does not even detect.
“That’s over £50 billion worth of public services a year given away to fraudsters and by mistakes in payments – before the frightening losses racking up in our Covid-19 spending so far, and against the backdrop of a massive surge in need,” Dame Meg said.
Government departments need to ensure that they draft in fraud experts when designing schemes, the MPs said.
Environ 16,000 people who form part of the Government’s Counter Fraud Function work in the public sector, mostly in the Department for Work and Pensions and HM Revenue and Customs.
Yet, the MPs said, the Cabinet Office does not know if these people are working in the right areas, and BEIS did not consult them when setting up the bounce back loans.
And while there is some work between Government departments, “opportunities to prevent fraud in real time were missed,” the committee said.
It said that by publishing the names of businesses claiming support, the Government could give whistleblowers a chance to come forward.
Yet, BEIS will not commit to publish the names of companies who have tapped into the three loan schemes it ran during the pandemic.
Officials will use different methods from the furlough scheme to estimate the rate of fraud and error in the Self-Employed Income Support and Eat Out To Help Out schemes, which between them paid out more than £25 billion.
HMRC says such estimates will be published in its annual report this autumn.
The Government said: “Our priority was to act at speed to protect workers and businesses, including through loans, grants, furlough and the Self-Employment Income Support scheme which have provided a lifeline to millions across the UK – helping them to survive the pandemic and protecting jobs.
“These schemes were designed to minimise fraud from the outset and we have rejected or blocked thousands of fraudulent claims. We won’t tolerate those who seek to defraud taxpayers and will take action against perpetrators, including through criminal prosecution.”
Liberal Democrat business spokesperson Sarah Olney, who also sits on the PAC, mentionné: “While it was essential that businesses and families were given support to get through this pandemic, the public still expect ministers to not be so negligent with their money. These are funds that could have gone to struggling people and small businesses.
“As we attempt to recover from Covid, the Government should really pay closer attention to who they give our cash to, or they face making our economic recovery even harder.”