Criminals have taken £2BN in furlough cash fraud


Organised criminals have siphoned off up to £2 billion intended for furloughed workers, tax officials believe.

HM Revenue and Customs has estimated that between 5 and 10 per cent of £39 billion in payments made under the Treasury’s job retention scheme are likely to have been claimed fraudulently.

Of these, it is “almost certain” that more than half has been paid to organised criminals posing as legitimate businesses to make claims under the emergency scheme, tax officials have told the National Audit Office.

As well as organised crime, the NAO said that other types of fraud included employers making furloughed employees work or inflating claims.

Rishi Sunak, the chancellor, has announced further support for workers and businesses hit by the new wave of lockdowns, less than a month after his previous bailout. The measures are estimated to cost £11 billion.

He pledged money for employers struggling to keep people on full-time, more generous help for the self-employed and further cash grants for hospitality businesses.

The chancellor tacitly admitted that his “winter economy plan” last month had underestimated the support needed as a ban on socialising now covered more than half of England’s population.

Mr Sunak rejected demands that he increase the subsidy paid to workers at businesses forced to shut in Tier 3 areas — those in which the Covid alert is highest. The support will remain at two thirds rather than the four fifths paid in the original scheme. He has, however, made significantly more generous wage support for those that remain trading.

Under the original scheme employers had to find a third of the cost of unworked hours, with staff losing a third and the government picking up a third, to a maximum of £700 a month.

In the new scheme employers will pay 5 per cent of unworked hours and workers need to put in only a fifth of their usual hours to qualify. He also announced new cash grants for those hospitality businesses in Tier 3 areas worth £3,000 a month for those that are closed. It will be backdated. Businesses in Tier 2 can access grants of up to £2,100. The Treasury said that the grants, to be distributed by local authorities according to criteria decided locally, could amount to £1 billion.

Today’s NAO report is likely to increase concerns about how far Britain’s tax authorities can go in making sure that payments are legitimate.

The job retention scheme cost the taxpayer £39 billion between March and September, of which HMRC believes between £2 billion and £3.9 billion may have been fraudulently paid out.

The NAO publicised internal survey data showing that on top of organised fraud nearly one in ten workers whose wages were covered by the government said that their bosses had asked them to work during furlough, against the rules of the scheme.

The auditors said that while the speed at which the scheme had to be put into operation meant that it was always likely to be open to abuse, officials should have made more checks on where the money was going. It added that HMRC should have made sure that employees knew their employer was taking furlough cash, so they could challenge potential fraud.

“It appears that the scale of fraud and error could be considerable, particularly for the furlough scheme,” Gareth Davies, head of the NAO, said.

Senior government sources defended the scheme and said HMRC’s figures were only an estimate. They added that Mr Sunak had been under pressure when he opened the scheme to increase the eligibility of employers but had resisted to minimise the fraud risk.

With enormous amounts of money introduced during the pandemic, it is no wonder that the government’s financial schemes have been exploited.

Organised criminals quickly realised that cash grants, introduced at a fast pace to lessen the impact of Covid-19, could be secured with fake details because applications were approved with less scrutiny than usual.

The millions of employees working from home were also more vulnerable to hacking and online scams without the oversight of their office IT security system.

As the National Audit Office warns today, criminals have stolen taxpayers’ identities to make fraudulent claims, or, worse, coerced people into making such claims themselves.

There are also fears of widespread furlough fraud by opportunistic employers who claimed payments but kept employees at work.

In total, billions of pounds are likely to have been fleeced from the public purse and innocent members of the public.

Criminals used blunt methods at the start of the lockdown, such as selling fake PPE gear or posing as police to issue fines for social distancing breaches, but methods are now increasingly complex.

Gangsters have created fake websites that mirror official slogans “Stay at Home” and “Protect the NHS” to try to fleece business owners who go online to apply for government help. More than 60 fake sites relating to coronavirus scams have been taken down.

HMRC has also warned of text messages which falsely claim that recipients can apply for a coronavirus tax rebate.