Efforts to recover the £2.3 billion of taxpayer cash wrongly paid to employers claiming Covid furlough support for staff who continued to work has been “woeful” and will fail to deter potential future criminals, MPs have warned.
The Commons Public Accounts Committee (PAC) said the Government has had little success recouping the cash, while it blasted the decision to wind up the Taxpayer Protection Taskforce without having recovered the money, saying it put taxpayer cash at risk.
In its report on Covid employment support, the cross-party committee said HM Revenue & Customs (HMRC) was too slow to tackle problems in the design of the support schemes launched at the height of the pandemic, which saw some of those in genuine need miss out, while others were able to fraudulently and incorrectly claim.
Bad actors in British business are running rings around the revenue— Dame Meg Hillier, Public Accounts Committee chair
It said while the schemes needed to be rushed out to provide much-needed support, HMRC’s performance in recovering incorrectly claimed cash “has been woeful”.
The report concluded that the Government does not have a good enough understanding – and lacks proof of – the impact of £97 billion of taxpayers’ money spent on furlough job support.
Dame Meg Hillier, chair of the committee, said: “Bad actors in British business are running rings around the revenue.
“Perhaps some of the same companies that were complaining about even the minimal levels of transparency over billions and billions that were paid out in order to save jobs in this country but are now just lost to the public purse, likely forever.
“While money that genuinely saved jobs and households was got out admirably quickly, the weak recovery effort will fail to deter potential future criminals. Too many companies claimed that shouldn’t have and now won’t give it back.”
The committee called on HMRC to “send a clear message on recovering fraud through its tax compliance activities and must urgently increase the rate of repayments from those who overclaimed”.
It is estimated that £4.5 billion in total has been lost to error and fraud in furlough, while at least £5 billion was paid out where incomes did not drop.
Employers who had overclaimed furlough have little incentive to voluntarily repay grants as they are unlikely to be penalised if identified by HMRC’s compliance teams— PAC report
Weaknesses in HMRC’s data contributed to the first three of the five self-employed grants giving £3.5 billion to people whose incomes had increased during 2020-21, according to the PAC.
It added that furlough payments of around £6.5 billion were also made to employers whose turnover stayed the same or increased during the pandemic, with £1.5 billion of this going to employers who reported that they would not have made redundancies or closed permanently even without the scheme.
But it said HMRC has “taken little action to punish culprits”.
HMRC was undertaking just 31 criminal investigations in November 2022 compared to the almost 50,000 civil cases it had opened by October 2022, the report shows.
By March last year, HMRC had only issued £1.1 million of penalties – just 0.5% of the value of overpayments it had identified.
“Consequently, employers who had overclaimed furlough have little incentive to voluntarily repay grants as they are unlikely to be penalised if identified by HMRC’s compliance teams,” the report claimed.
The PAC wants the Government to publish its final assessment of the furlough and self-employed income support schemes by the end of the year, detail the lessons learned and work with other countries to learn from wider international experience of providing employment support during the pandemic and see how they compare with the UK.
