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Furlough Fraud Probe Into £4 Billion Paid to Firms with Working Employees

A new report by the National Audit Office reveals that the Government is launching an inquiry and considering ‘naming and shaming’ the employers involved

Photo: PA Images

Furlough Fraud Probe Into £4 Billion Paid to Firms with Working Employees

A new report by the National Audit Office reveals that the Government is launching an inquiry and considering ‘naming and shaming’ the employers involved

A fraud probe is to be launched after the Government has found it could have been cheated out of nearly £4 billion from its furlough programme to help people laid off by the COVID-19 pandemic, the National Audit Office (NAO) reveals today.

The programme, which subsidised 9.6 million jobs and finishes at the end of the month, has seen £39.3 billion paid out to 1.2 million employers up until 20 September. Another scheme helped 2.5 million self-employed people. The overall total is expected to rise to £69.7 billion for both schemes by the end of this month.

Under the scheme, workers were initially paid 80% of their wages if they were laid off. But auditors have discovered that firms have been employing people while claiming their wages from the Government which is against the rules of the scheme.

Employers were not required to inform workers if they had applied for the furlough scheme – so some were working for them not knowing that they were getting paid by the state.

HM Revenue and Customs’ fraud hotline has received more than 10,000 reports, many referring to cases in which employees worked despite their employer claiming money for them as furloughed staff. The NAO found that 9% of people it surveyed admitted to working in lockdown at the request of their employer and against the rules of the scheme. 

When some of the firms were challenged by tax authorities, a number refused to co-operate with them while others admitted that they had made a mistake.

Now HM Revenue and Customs is to recruit 500 staff to run a fraud inquiry into companies that claimed the money but still employed their staff, and is even considering “naming and shaming” the firms involved.

The NAO found much less fraud among the self-employed who claimed money from the Government as officials dealt directly with these individuals. Firms often employed agents to claim the money which the NAO believes could have led to impersonation in some cases and opened the way to organised crime benefitting from the scheme.

The scheme, which was rushed in by the Chancellor Rishi Sunak, was very successful initially in preventing mass unemployment. The NAO report says that 134,000 people lost their jobs between April and June, compared to 311,000 in the first three months of the 2009 financial crisis when no such scheme existed.

The report does partially stand up Boris Johnson’s claim at Prime Minister’s Questions on Wednesday that the UK has spent more money than its European counterparts to help workers.

But it also reveals that many other European countries were more generous in their support for individuals than the UK, which set a £2,500 maximum monthly payment for people. For instance, France’s scheme, which will run to the end of December, pays up to £6,249 a month and has not yet been costed; while the Netherlands pays up to £8,603; Sweden £3,827; and Denmark £3,637.

“It appears that the scale of fraud and error could be considerable, particularly for the furlough scheme,” said Gareth Davies, the head of the NAO. “HM Revenue and Customs could have done more to make clear to employees whether their employer was part of the furlough scheme. In future, the departments should do more while employment support schemes are running to protect employees and counter acts of fraud.”

Labour MP Meg Hillier, chair of Parliament’s Committee of Public Accounts, said: “HM Revenue and Customs managed to stop tens of thousands of fraudulent claims against the self-employment scheme. But it doesn’t know how many managed to slip through the net. It also missed chances to find out which companies were pocketing cash meant for their staff or forcing them to work while furloughed. HM Revenue and Customs has paid out billions of pounds to fraudsters. Most of this is likely to be gone for good.”

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