HMRC reveals that up to £3.5bn furlough cash paid out in error

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The FINANCIAL — Up to £3.5bn in Coronavirus Job Retention Scheme payments may have been claimed fraudulently or paid out in error, the government has said. HMRC has calculated that between five and 10% of payments have been wrongly calculated, possibly as a result of employers abusing the scheme. The job retention scheme covers up to 80% of an employee’s salary while they are on furlough.

HM Revenue and Customs told MPs on the Public Accounts Committee it estimates that 5-10% of furlough cash has been wrongly awarded. Latest data shows the programme has cost the government £35.4bn so far. The scheme has paid 80% of the wages of workers placed on leave since March, up to a maximum of £2,500 a month. Speaking to MPs on Monday, HMRC’s permanent secretary, Jim Harra, said: “We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%.” So far, 8,000 calls have been received to HMRC’s fraud telephone hotline. HMRC is now looking into 27,000 “high risk” cases where they believe a serious error has been made in the amount an employer has claimed, as reported by BBC. 

“We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between five per cent and 10 per cent,” the permanent secretary said. The Government has so far paid out £35.4 billion in furlough cash, according to the latest official figures. If HMRC’s working assumption proves to be accurate it will mean that somewhere between £1.75 billion and £3.5 billion could have been paid out by mistake or as a result of fraud, according to Daily Mail.

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Mr Harra then stated that an academic study has estimated that the level of fraud and error might be even higher than 10 per cent and that will range from deliberate fraud through the error. He also stated that what they have said in their risk assessment is that they are not going to set out to try to find employers who have made legitimate mistakes in compiling their claims, because this is obviously something that everybody had to get to grips with in a very difficult time.

It is the first time HMRC has spoken publicly about the level of potential fraud that could have been committed as part of the job retention scheme, which covered up to 80 per cent of an employee’s salary while they were on furlough. The government rolled out the massive scheme at breakneck speed, causing many experts to say that a certain amount of fraud was inevitable, The Independent wrote.

The scheme had been rolled out a breakneck speed during lockdown and was considered a huge feat – but it also caused experts to warn a certain amount of fraud was inevitable. It is winding down now and expected to end for good next month, but businesses who bring staff back from furlough will receive another £1,000 if the employee is still in work by the end of January. Some 9.6 million people had been put on government-supported furlough, with 1.2 million employers having claimed the support by 16 August, according to MSN.

It is also noteworthy that The UK Government is investing £7.2 million in twenty research projects across the UK, including the universities of Edinburgh and Strathclyde, to help provide developing countries with sustainable solutions to respond to Covid-19 and future pandemics. One of these projects, led by the University of Edinburgh’s Dr Thomas Molony, will receive £367,000 to investigate the impact of the Covid-19 pandemic on elections in Africa. Working in partnership with colleagues in the Central African Republic, Ghana and Tanzania, the study will find ways to protect the electorate from Covid-19 transmission. The project team – comprising of country specialists, leading public health researchers, and election experts – plan to investigate multiple stages of each election, tracking patterns of turnout and using surveys (with gender-balanced samples) to investigate attitudes towards voting so that any emergent gender inequality is highlighted.

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