Rishi Sunak’s £20 Billion COVID Fraud Black Hole
With the Government facing a massive shortfall in its finances, MPs report on how billions were lost by the Treasury during the time the current Prime Minister was Chancellor
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Rishi Sunak’s schemes to help businesses and individuals during the COVID pandemic has left the taxpayer with a fraud and error bill running to tens of billions of pounds, according to an analysis of reports by MPs and the National Audit Office.
As the Chancellor, Jeremy Hunt, prepares to announce a £50 billion package of tax rises and spending cuts, the total cost of fraud and error has been estimated to be anywhere between £14 and £22 billion.
Fraudsters, including organised criminals and even people who were bankrupt, rushed to take advantage of lax controls and hasty decisions in Whitehall to obtain cash aimed at preventing genuine businesses and individuals from going bust during the lockdown.
Dame Meg Hillier, Labour chair of the Public Accounts Committee, told Byline Times: “Faced with the necessity to act fast in a global emergency, a shamefully underprepared Government acted fast and loose, dropping the most basic checks and controls on grants and guaranteed loans and offering an open goal to fraudsters. The direct result is billions and billions more taxpayers’ money lost and wasted, with precious little hope of recouping much even though it’s so desperately needed as we face crisis after crisis.”
An official table of the estimates of fraud and error across Whitehall and local government prepared for MPs shows three scenarios of estimates – a low one estimated at £12.4 billion, a central projection of £15.6 billion and high estimate of £20.1 billion. But since these were published earlier this year figures have been revised upwards – most dramatically by £2 billion in the Department for Work and Pensions – and also through a failure by HM Revenue and Customs to account for estimates to cover organised crime.
The biggest loss has been in the Department for Work and Pensions which revised its figure for fraud and error from £3.85 billion to £5.9 billion after its accounts were audited. This came when claims rose tenfold and the number of claimants doubled to six million in March 2021. This is the highest-ever level of fraud and error recorded by the ministry since 2005.
The second biggest loss was in the furlough scheme which lost between £4 billion and £7.2 billion mainly through companies receiving furlough cash for laid-off workers who were still working for them. MPs on the Public Accounts Committee are holding a hearing on Thursday to examine what happened.
The third biggest loss – between £3.9 billion and £6.7 billion was in the Department for Business, Energy and Industrial Strategy, which ran the ‘Bounce Back’ scheme for small and medium-sized businesses offering low-interest loans of between £2,000 and £50,000. This was exploited by criminal gangs but also, it is now revealed by people running failing businesses.
The Insolvency Service is reporting growing numbers of people whose businesses have failed after taking out of bounce bank loans under false pretences. Company directors who did this have been disqualified for up to 11 years from being directors. Successful cases have been reported in Leicester, Nottingham, Glasgow, Harrow, Manchester, Plymouth and West Bromwich. In some cases, the people were already bankrupt or their company was in liquidation when it got the loan. Often the money is used to buy property or cars or just transferred into personal bank accounts.
In one example, West Bromwich Mohammed Abdul Subhan, the owner of Thania Spice applied and got two loans totalling £70,000 faking his turnover at £200,000 a year. It was under £4000 a year and would not have qualified for a Bounce Back loan When he went bust last March the Official Receiver discovered the loans and he has now been disqualified as a company director for 11 years.
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The Insolvency Service explained that more cases were being discovered by the Official Receiver or where people had lodged a complaint.
The National Investigation Service is looking at £160m of fraud involving 273 cases – but this is still well below the suspected level of fraud.
Other smaller areas of fraud include Rishi Sunak’s Eat out to Help Out scheme where between £43 million and £99 million is suspected fraud or error – mainly caused by restaurants inflating their bills to get more money from the Government.
There is also suspected fraud in error in the scheme to help the self-employed and among local government grants and loans.
The Treasury has told the Public Accounts Committee it will continue to publish the latest estimates for fraud but is not planning to do so until April next year.