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Government Fraud Quadruples on Rishi Sunak’s Watch, New Report Reveals

HMRC contributed enormously to the rise in fraud after the then Chancellor approved tens of billions to be spent on pandemic support schemes

Rishi Sunak while Chancellor. Photo: PA/Alamy

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Government fraud has almost quadrupled under Rishi Sunak from £5.5 billion to £21 billion, a new report reveals today.

The Commons’ Public Accounts Committee compares the two years before the 2020 pandemic under Theresa May’s Government with the two years that followed when Rishi Sunak was Chancellor under Boris Johnson.

HM Revenue and Customs, which was the direct responsibility of Sunak, contributed enormously to the rise in fraud after the then Chancellor approved £97 billion to be spent on the pandemic furlough scheme, the bounce back loan scheme, and his ‘Eat Out to Help Out’ scheme to combat the downturn in the economy during the Coronavirus crisis.

“HMRC estimates that total fraud and error across the lifetime of these [furlough] schemes was £4.5 billion, although its estimate is highly uncertain,” the report states. “HMRC is forecasting that it will recover only a quarter (£1.1 billion) of the losses.”

The bounce back loan scheme – run by the business department – has lost an estimated £2.2 billion  to fraud and error, and at the end of last year the department had only recovered £10 million. It did not contact the Cabinet Office to put in place counter fraud measures until months after the scheme had already been launched.

Another £1 billion was lost to fraud and error on grant schemes run by local government to mitigate the effects of the pandemic.

There was a huge discrepancy between the money Sunak put aside to tackle fraud caused by the money handed out by HMRC to alleviate the effects of the pandemic. The National Investigation Service has been provided with £13.2 million for counter-fraud activities, compared to the Department for Work and Pensions’ £613 million investment in counter fraud.

One side-effect of the measures to tackle the pandemic was that 4,000 tax compliance staff were transferred to run the programme, resulting in a big drop – estimated at £9 billion – in the revenue collected from businesses and people in the two years during the pandemic, compared to the previous two years.

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As a result, HMRC has been classified as a “department of concern “in the report.

The committee’s chair, Labour’s Dame Meg Hillier, said: “HMRC made the list last year because of growing tax debt and the levels of fraud and error that it is managing. I continue to be concerned about these two areas of risk. I am not convinced that HMRC is prioritising this work.

“HMRC has a clear case for focusing on recouping money that is owed. But prevention is better than corrective action and it must plan and implement better fraud and error safeguards in the future.”

Fraud and error reached it highest ever known figure at DWP, totalling £8.6 billion – of which £6.5 billion was fraud. This was almost entirely due to the expansion of Universal Credit payments during the pandemic.

 The Department  for Health and Social Care is also listed as a “ department for concern” because of the huge sums wasted on ineffective personal protection during then pandemic – amounting to £14.9 billion – and the fact its agency, the UK Health Security Agency,  which the ran the hugely expensive test and trace programme, could not provide enough figures to allow the National Audit Office to audit its accounts.

The report also highlights that the turnover of ministers during this period was higher than previously and it was mirrored by civil servants leaving or moving jobs. In the Ministry of Defence, for instance, turnover of senior civil servants handling procurement contracts averaged 22 months, while the time to complete a contract was 77 months. As a result, a contract could be managed by three or four different civil servants before it was completed.

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