The NAO found that the HMRC’s program of random checks would not have picked up certain types of fraud and it did not commission sufficient research with employees to understand how much went undetected.
It also acknowledged that it is unlikely ever to know how much it paid to employers opportunistically claiming furlough for working employees, which was the main cause of fraud and error.
The employment support schemes introduced during the COVID-19 pandemic were introduced to protect jobs and businesses, but the NAO found that the speed at which they were rolled out led to some flaws and significant levels of fraud and error.
In March 2020, the government announced two schemes to support employment during the pandemic: the Coronavirus Job Retention Scheme (CJRS) to provide grant payments to employers to cover part of the wages of furloughed employees; and the Self-Employment Income Support Scheme (SEISS) to provide grant payments to self-employed individuals whose businesses had been adversely affected by the pandemic.
The NAO found that the employment support schemes achieved their primary aim of protecting jobs and businesses during the pandemic. HM Treasury and HMRC distributed SEISS grants worth £28.1 billion to 2.9 million individuals and CJRS furlough payments worth £68.9 billion to 1.3 million employers covering 11.7 million individual jobs.
Due to the urgency created by the pandemic, the departments had insufficient time to produce the detailed documentation that would normally be expected to support major spending decisions. They decided the spending on the schemes was ultimately beneficial compared to the expected negative impacts for households and the labour market if no support was provided.
The NAO found that several billion pounds were distributed to taxpayers whose incomes were not significantly affected by the pandemic. An HMRC survey of employers between November 2020 and February 2021 found that 15 per cent of companies receiving CJRS experienced no reduction in turnover during the first six months of the scheme, although a large majority of these firms said that without the scheme, they would have made redundancies or closed.
Firms that said they would not have made redundancies or closed permanently and saw their incomes stay the same or increase as a result of the pandemic still claimed grants for 354,000 jobs, equivalent to £1.5 billion.
In June 2022, HMRC analysis of the first three SEISS grants found that 18 per cent of the first three SEISS grants were paid to people who saw their turnover increase even without the scheme. This equates to £3.5 billion of grants paid during that period.
HMRC expects to recover around £1.1 billion of fraud and error by 2023–24, but the Taxpayer Protection Taskforce in-depth checks of high-risk CJRS cases are taking longer than expected to complete and it is falling short of original expectations.
