The Perfect Enemy | Covid-19 support worth £4.5bn lost to error and fraud - BBC
February 18, 2024
A letter from HMRCGetty Images

An estimated £4.5bn in Covid-19 support has been lost to error and fraud since 2020, the tax authority has revealed.

The money was handed out through schemes to help households and businesses cope with the economic fallout of the pandemic.

The scale of the money lost was detailed in a letter to a committee of MPs overseeing government spending.

The letter says the estimate of £4.5bn did not count money recovered by the UK’s tax authority, HMRC.

During the pandemic the government spent billions on a package of support to keep the economy afloat when lockdown restrictions were in place.

Last year a forecast by the UK’s official economic analyst, the Office for Budget Responsibility, estimated the total cost of pandemic-related rescue measures to be £310bn.

The chair of the Treasury Select Committee, Harriett Baldwin, asked the government to provide a breakdown of how much of that money was lost to error and fraud.

In response, the chief executive of HMRC, Jim Harra, said the figure was estimated to be £4.5bn in total across two financial years, 2020-21 and 2021-22.

Of this sum, £3.5bn was lost through the Coronavirus Job Retention Scheme, £1bn through the Self Employed Income Support Scheme and £71m through the Eat Out To Help Out.

In the letter, Mr Harra wrote that Covid support schemes “helped millions of people and businesses through the pandemic”.

He said, from the beginning of the pandemic, HMRC was “clear that the schemes would be targets for fraud and also that customers operating at pace and under pressure would make mistakes”.

The schemes, Mr Harra said, were designed “in such a way as to minimise fraud and error while not unnecessarily delaying payments”.

While Ms Baldwin accepted Covid funds were dispersed in a rush, she told the BBC “we do expect the full force of the law to fall on fraudsters when they are found”.

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HMRC is in the process of attempting to recover Covid support lost to error and fraud.

By the end of March 2022, HMRC said it had recovered more than £762m through compliance activity.

Lord Agnew resigned as a Treasury minister last year, attacking the government’s handling of fraudulent Covid business loans.

Meanwhile, the Liberal Democrats say billions of pounds in tax has been left uncollected because thousands of HMRC staff have been transferred to work on Covid and Brexit schemes.

In response to parliamentary questions, Treasury minister Victoria Atkins said about 1,250 HMRC staff were redeployed to work on Covid-19 schemes in 2021-22.

She said revenue recouped by HMRC through compliance activity fell by £6bn in 2021-22, compared to the previous year.

“Civil servants are being moved from one crisis to another in a constant game of whack-a-mole,” said Liberal Democrat Treasury spokeswoman, Sarah Olney.

“This is allowing criminals to get away with dodging paying millions of pounds in tax, while hard-working families see their taxes hiked and public services are on their knees.”

HMRC said it moves resources “where and when they are most needed” and its compliance work “provides good value to the taxpayer”.