UK taxpayers lose £15bn to COVID fraud in government schemes

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Prime minister Boris Johnson and chancellor of the exchequer Rishi Sunak. Taxpayers are set to lose £15bn to COVID fraud in government schemes. Photo: Justin Tallis/ AFP via Getty Images
Prime minister Boris Johnson and chancellor of the exchequer Rishi Sunak. Taxpayers are set to lose £15bn to COVID fraud in government schemes. Photo: Justin Tallis/AFP via Getty Images

British taxpayers have been exposed to "substantial, long-term financial risks" as billions of pounds in taxpayer’s money will be lost to fraud and error in government's COVID schemes, a new report claims.

According to a Public Accounts Committee (PAC) report the total cost of UK government losses in the response to the coronavirus pandemic is unknown, but is expected to be at least £15bn ($20.4bn).

The loss is across schemes and loans implemented by HM Revenue & Customs (HMRC), the Department for Work & Pensions (DWP) and the Department for Business, Energy & Industrial Strategy (BEIS).

The furlough scheme (Coronavirus Job Retention scheme) alone is estimated to lose £5.3bn to fraud and error. This is 8.7% of the funding distributed through the scheme.

Dame Meg Hillier MP, chair of the PAC, said that the treasury and government must "continue to account" for what it has spent in response to the pandemic as long as taxpayers are paying the cost of loan repayments.

She added: "It is essential that for as long as we will be paying the costs of COVID-19, which is at least the next 20 years just in some of the loan repayment terms, the Treasury and all of government continue to account specifically for what it has spent in response to the pandemic."

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The National Audit Office COVID cost tracker reports that the government has spent £261bn on 374 measures in response to the pandemic.

The measures are expected to cost a total of £370bn over their lifetime. This is up to 10 years in the repayment term of the Bounce Back Loan Scheme (BBLS) and typically 20 years in the Cultural Recovery Fund.

Table of total costs of UK pandemic response from the National Audit Office's COVID tracker. Image: PAC
Table of total costs of UK pandemic response from the National Audit Office's COVID tracker. Image: PAC

The PAC said its "concerned" that HM Treasury does not currently plan to distinguish the pandemic costs from departments’ business-as-usual spending in future.

The committee said that "as the UK recovers from the pandemic it is more vital than ever that government maintains accountability for public money and transparency over what is being spent".

It added that it had "repeatedly said this will be crucial to ensure lessons are properly learned and embedded" so the mistakes that led to the "unacceptably high" losses and risk are not repeated in future crises.

The PAC urged the treasury to write to the committee by the end of the financial year with an estimate of:

  • How much taxpayers’ money has been lost to fraud & error within schemes introduced in response to the pandemic

  • How much it expects will be recovered for each pound it spends doing so

"Government must be held accountable in this way to all the future taxpayers who will be paying for this response. Crucially this must ensure lessons are learned for when the next big crisis hits — be it climate, health or financial," Miller said.

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