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COVID-19 Fraud Could Cost UK Government Billions

British taxpayers could lose at least £4 billion ($5.3 billion) of COVID-19 support funds to fraudsters and mistakes, according to a report from the UK Public Accounts Committee, which scrutinizes state spending.

The committee found that the British government’s lenient approach to finding and combatting fraud in COVID-19 programs will encourage future criminal activity, going so far as to say the government risks “rewarding the unscrupulous” with its “soft on fraud” stance, Reuters reported.

The Coronavirus Job Retention Scheme cost £70 billion, paying grants to employers of up to £2,500 per month per employee to keep people on the payroll while businesses were shuttered to limit the spread of COVID-19—at its peak, the program paid a third of British workers’ wages. A parallel scheme for self-employed people cost £28.1 billion, and a further £840 million was used to offer discounted meals at restaurants, pubs, and cafes to keep them afloat. The government found that some employers claimed money for workers who did not exist, however, and others took cash while their staff continued to clock in—rather than using it to pay for workers who could not come into work.

The committee criticized Her Majesty’s Revenue and Customs (HMRC) for “ignorance and inaction” in recouping the funds, warning that the agency has essentially written off £4 billion of the £6 billion total estimated fraud losses from these coronavirus relief efforts and calling the plan “unambitious.”

HMRC responded, noting that it would likely recover £2 billion out of that total, but it would be pursuing the entirety of fraud cases discovered in relation to the schemes, according to The Guardian. The report noted that HMRC has already recovered £850 million, but the report said that HMRC was not doing enough to reclaim the money.

“HMRC outlined the challenges it faced in recovering some of this money. It told us, for example, that for some aspects of the furlough scheme it was in practice difficult to establish fraud, such as cases where there was collusion between an employer and employee who was working whilst being claimed for under the furlough scheme,” the report said. “HMRC also told us that the increasing number of business insolvencies may affect its ability to collect overpayments from businesses facing genuine financial hardship. HMRC said that it would be targeting the most egregious behaviors and cases, but it was not going to argue with people about fine judgements or try to find genuine mistakes that people made.”

A government spokesperson said in response to the report, “The vast majority of payments in the schemes were made correctly to employers, and most error and fraud was legitimate claimants making mistakes or inflating their claims, often small per case.”

A Taxpayer Protection Taskforce of nearly 1,300 workers is working on recovering additional funds from fraudulent claims.

The spokesperson continued, “The cost of inaction would have been far greater than the cost of fraud and error in the support schemes.”

Analysis from the Royal United Services Institute (RUSI) Centre for Financial Crime and Security Studies previously found that widespread fraud in the United Kingdom poses national security ramifications. 

“If you’re not responding to the fraud against hard-working people, you’re eroding the compact between the people and the state at a fundamental level—and that has broader consequences for society,” says Helena Wood, associate fellow, RUSI Centre for Financial Crime and Security Studies, in an interview with Security Management.

Learn more about the state of COVID-19 fund fraud in the March/April issue of Security Management, coming soon.