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

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 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.

In a detailed 55-page report, published today, 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.

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.”

As of March, the NAO notes, there were 24 criminal investigations under way into fraudulent claims, while HMRC is predicting it will recover around £1.1 billion over the next two years.

Dame Meg Hillier, chair of the Commons public accounts committee, said: "HM Revenue & Customs must get a grip on how it measures and tackles fraud and error.

"Particularly at a time of constrained public finances, this could go a long way to supporting millions of citizens and essential public services."