In a new report released this week, it has been revealed that government fraud has nearly quadrupled under the watch of Rishi Sunak, reaching an alarming £21 billion from the previous £5.5 billion during Theresa May’s government.
The report, conducted by the Commons’ Public Accounts Committee, compares the two years before the 2020 pandemic under Theresa May’s government with the subsequent two years under Chancellor Rishi Sunak in Boris Johnson’s administration.
HM Revenue and Customs (HMRC), which fell under Sunak’s direct responsibility, played a significant role in the surge of fraud cases. This was mainly due to the Chancellor’s approval of £97 billion in funding for various pandemic relief schemes, including the furlough scheme, bounce back loan scheme, and the ‘Eat Out to Help Out’ program aimed at boosting the economy during the Coronavirus crisis.
According to the report, HMRC estimated that the total fraud and error associated with the lifetime of the furlough schemes amounted to £4.5 billion, although the estimate is subject to high uncertainty. The report also highlights that HMRC forecasts the recovery of only a quarter (£1.1 billion) of the losses incurred.
The bounce back loan scheme, administered by the business department, experienced an estimated £2.2 billion loss due to fraud and error. By the end of the previous year, the department had managed to recover a mere £10 million. Alarmingly, the Cabinet Office was not notified to implement counter fraud measures until several months after the scheme’s launch.
Furthermore, local government grant schemes designed to mitigate the pandemic’s impact lost approximately £1 billion to fraud and error.
A notable discrepancy arose between the resources allocated by Sunak to combat fraud arising from the funds distributed by HMRC and other departments. While the National Investigation Service received £13.2 million for counter-fraud activities, the Department for Work and Pensions invested £613 million in counter fraud measures.
During the pandemic, approximately 4,000 tax compliance staff were reassigned to handle relief programs. As a result, there was a significant drop, estimated at £9 billion, in the revenue collected from businesses and individuals compared to the previous two years.
The report classifies HMRC as a “department of concern” due to its mounting tax debt and the levels of fraud and error it is managing. The committee’s chair, Dame Meg Hillier, expressed ongoing concerns about these risks and emphasized the need for HMRC to prioritize prevention through improved fraud and error safeguards.
At the Department for Work and Pensions, fraud and error reached an all-time high of £8.6 billion, with fraud accounting for £6.5 billion. This increase was primarily attributed to the expansion of Universal Credit payments during the pandemic.
The Department for Health and Social Care is also listed as a “department of concern” due to the substantial funds wasted on ineffective personal protection equipment amounting to £14.9 billion. Additionally, the UK Health Security Agency, responsible for the costly test and trace program, failed to provide sufficient data for the National Audit Office to audit its accounts.
The report also highlights the high turnover of ministers during this period, which corresponded to civil servants leaving or changing positions. For instance, the Ministry of Defence experienced an average turnover of senior civil servants handling procurement contracts every 22 months, while the time taken to complete a contract averaged 77 months. Consequently, several civil servants could be involved in managing a contract before its completion, leading to inefficiencies.
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