Taxman condemned over efforts to recover Covid fraud billions

HM Revenue & Customs risks sending the message that it is “soft on fraud”, MPs have said in an attack on its “unambitious plans” for recouping public funds lost on pandemic support schemes.

The tax office’s approach to tackling fraud and error in such payments could lead to “at least” £4 billion of taxpayers’ money being written off and risks “rewarding the unscrupulous”, the Commons public accounts committee found.

Last month Lord Agnew of Oulton resigned as the anti-fraud minister over the matter. He accused the Treasury of making “schoolboy errors” in its oversight of the £47 billion Bounce Back Loan Scheme, which provided 1.3 million loans to small businesses and was particularly vulnerable to fraudsters.

This week Sir Keir Starmer attacked Bois Johnson and Rishi Sunak, the chancellor, over fraud losses. The Labour leader said that the cabinet was “turning a blind eye to scammers”.

The Bounce Back programme is run by the state British Business Bank, not HMRC. However, the tax authority has estimated that error and fraud across the Covid-19 grant schemes it ran — wage furlough, grants for the self-employed and Eat Out to Help Out — were close to £6 billion in 2020-21. It expects to recover only about £2 billion.

The committee said that HMRC needed “to reassure parliament and the public that it is serious about tackling error and fraud” in Covid schemes, including by identifying where further recovery action would be cost-effective. The MPs said that HMRC was focusing on cases of “egregious abuse and it is currently planning that most recovery action will stop at the end of 2022-23”.

Meg Hillier, Labour chairwoman of the committee, said: “What signal does it send when HMRC rolls over on billions of pounds of fraud and error directly related to Covid support packages? With the current parlous state of the public finances we can ill afford to be so cavalier over so much taxpayers’ money. Every taxpayers’ pound lost to a fraudster will lead to honest ordinary people feeling the post-pandemic pinch harder and harder.”

A spokesman said that HMRC rejected “many of the statements” made by the committee, adding: “No fraudulent payments have been written off and we’re taking action on multiple fronts to recover overpayments.”

He pointed to a task force set up to recover an additional £1 billion paid out in error or stolen by criminals and noted the schemes were “implemented at unprecedented speed to protect millions of jobs and businesses at a time when families needed it the most”. He indicated that while the task force was due to be wound down in 2023, Covid losses would continue to be tackled.

Some in the tax authority are understood to be frustrated over what they see as a change in tone from the committee compared with when officials appeared before MPs to discuss the issues, at which point Hillier thanked staff at HMRC for helping tackle “some of the huge challenges of Covid-19”.

The Times revealed last year that hundreds of companies set up after the wage furlough scheme was established had claimed tens of millions of pounds worth of suspicious payments.

However, cases such as that of an alleged furlough fraudster accused of stealing £27.4 million from taxpayers without setting foot in Britain are said to be outliers, with only a tiny proportion of losses on grant schemes attributed to organised criminals. The majority of losses are instead said to relate to inflated claims and errors. Officials are said to feel that it is not realistic nor in the public interest to pursue many minor or technical breaches of furlough rules, such as a pet shop owner returning to work to feed their animals.

The furlough scheme, which cost £69 billion, helped to pay the wages for 11.7 million jobs, about a third of the UK workforce.