Furlough fraud caused by scheme being ‘hastily drawn up’, report finds

16 Oct 2020 By Francis Churchill

Parliamentary committee chair calls for a list of all companies receiving money through the job retention scheme to be published

A group of MPs has criticised the level of fraud happening through the furlough scheme, and called on the government to publish a list of all the companies receiving money through the system.

A report by the parliamentary Public Accounts Committee (PAC), published today (16 October), confirmed an estimated £3.5bn of furlough payments may have been fraudulent, and warned that the full effects of the outbreak on taxpayer compliance was yet to be seen.

HMRC had “understandably” carried out fewer investigations since the start of lockdown as it prioritised the implementation of the job retention scheme and other coronavirus support measures, the report said. However, this had led to a “large backlog” of furlough fraud cases and “significant fraud and error” in the scheme.

Giving evidence to the committee, Jim Harra, permanent secretary for HMRC, had previously admitted the department estimated between 5 and 10 per cent of the £35.4bn furlough payments made by 15 August could have been fraudulent or made in error.

Commenting on today’s report, a government spokesperson said the scheme was “designed to minimise fraud from the outset” and that thousands of fraudulent claims had been rejected.

Meg Hillier, Labour MP and chair of the PAC, said the government should have been better prepared for the economic fallout from the coronavirus outbreak, as a pandemic had been top of the national risk register for years. 

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“Our finding of the astonishing lack of economic planning for a pandemic shows how the unacceptable room for fraud against taxpayers was allowed into the government's hastily drawn-up economic support schemes,” she told the BBC.

“I would like to see the government publish a list of the companies which received furlough money,” Hillier added.

In a statement, the government said it made “no apology” for the speed in which the furlough scheme was rolled out. “The government’s number one priority from the start of the outbreak has been on protecting jobs and getting support to those who need it as quickly as possible,” a spokesperson said.

“Our income support schemes have provided a lifeline to millions of hard working families across the UK and we make no apology for the speed at which they were delivered,” they added.

The PAC report said that to date, HMRC had received 8,000 notifications from employees about employers potentially breaking the rules of the job retention scheme. It also noted that HMRC was reviewing 27,000 “high-risk” claims and that – after providing employers with the opportunity to correct any mistakes – it expected to investigate 10,000 of them.

Ther report came as an amnesty for businesses that may have made wrongful claims through the scheme came to an end. Since the end of July, HMRC has had the power to reclaim any furlough grants made in error. But the department had said it would give employers a three-month window to admit any mistakes to the government. This comes to an end on Tuesday (20 October).

Many employers have also already voluntarily returned millions of pounds worth of correctly claimed furlough grants to the government. This most recently included homeware retailer Dunelm, which today (16 October) announced it would pay back all of the £14.5m it received in furlough payments following better than expected third quarter results. 

"Recent months have seen homewares become even more relevant, as people spend more time in their homes up and down the country,” said the firm’s chief executive, Nick Wilkinson.

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