A group of MPs have said HM Revenue & Customs ‘risks rewarding the unscrupulous’ if it fails to recover furlough grants that were made in error.
The Public Accounts Committee (PAC) said HMRC needs to reassure parliament and the public that it is serious about taking action on error and fraud from the Covid-19 support schemes, after it emerged the Treasury planned to write off at least £4 billion of the estimated £5.8 billion lost in 2020-21.
HMRC has since rejected claims that it had written off the fraud.
This includes £5.3 billion thought to have been lost to error and fraud via the Coronavirus Job Retention Scheme, equivalent to around 8.7% of spending.
Total losses are expected to be even greater as HMRC has not yet published its fraud estimates for the period the schemes were running in the current financial year. Furlough came to an end on 30 September 2021.
In March 2021 the government announced the creation of a “taxpayer protection taskforce” to tackle Covid support scheme fraud, comprising 1,265 HMRC staff. However, HMRC has since suggested that it would finish most of the recovery action at the end of 2022-23, which would result in some fraudulent grants being written off, although some of the most complex cases would be settled after this time.
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Dame Meg Hillier, chair of the PAC, said: “The level of fraud and error in furlough that employers will get away with is a real concern. 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.”
The PAC’s report describes HMRC’s plans to address furlough fraud as “unambitious” and has told it to write to the committee setting out:
- The analysis it has undertaken, including the costs and benefits, in determining the amount it plans to spend on recovering error and fraud
- Whether its plans mean that it will have pursued all error and fraud where money recovered should exceed the cost which HMRC would incur in doing so
- Where further action would be cost-effective, commit to recovering more of the support payments lost through error and fraud and set out how this will be done
- A commitment to reassess whether its plans are sufficiently ambitious, once it has improved its estimates of error and fraud in 2022.
An HMRC spokesperson said: “While we acknowledge lessons that need to be learned in this report, we reject many of the statements made by the PAC. No fraudulent payments have been written off and we are taking action on multiple fronts to recover overpayments, and our Taxpayer Protection Taskforce is expected to recover up to £1bn from fraudulent or incorrect payments.
“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 amounts per case.
“Our Covid support schemes were implemented at unprecedented speed to protect millions of jobs and businesses at a time when families needed it the most.”
The report also suggests that changing working practices have left HMRC with more office space than it needs, with the PAC stating that it has had “long-standing concerns” about HMRC’s estates strategy.
HMRC suggests its attendance rate at its regional centres will reduce from its January 2021 estimate of around 67% of working days to around 50%, as staff embrace its permanent hybrid working strategy.
Headcount at HMRC has also significantly reduced. In 2003-04 Inland Revenue and HM Customs and Excise around 100,000 full time equivalent staff, but in 2020-21, HMRC’s headcount had reduced to around 58,000 in the core department and around 4,000 in its arm’s length bodies.
HMRC has told the committee that the quality and location of its office estate made it easy to offer space to other government departments, as part of the government’s broader plans to relocate civil service roles from London into other parts of the UK. Eighteen per cent of the space that HMRC leases to other organisations has been contracted to other government departments.
Earlier this week a think-tank said that growth in civil service roles in London has outpaced the rest of the UK, despite the government’s plans to “level up” the country and decentralise its departments.
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The PAC recommends that HMRC should work with Cabinet Office to draw up a plan for how they intend to make sure that spare HMRC office space is not left vacant and report the amount and cost of empty space in its estate each quarter.
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