Wednesday 30 June 2021 6:00 am | Updated: Tuesday 29 June 2021 4:35 pm

Taxpayers could lose billions through pandemic support schemes

Lack of scrutiny within Covid-19 loan schemes has “significantly increased” taxpayer exposure to fraud and error, warns Public Accounts Committee

Taxpayers could lose tens of billions of pounds through support schemes set up to limit the impact of Covid-19, the committee that is responsible for overseeing government expenditure has warned in a report published today.

A lack of scrutiny within Covid-19 loan schemes has “significantly increased” taxpayer exposure to fraud and error, the Public Accounts Committee (PAC) said.

The Department for Business estimates taxpayers could be on the hook for £27bn in fraud and credit losses through the Bounce Back Loan Scheme, according to PAC.

PAC added that Universal Credit fraud and error has risen sharply, up £3.8bn to an all-time high of £5.5bn between April 2020 and March 2021.

Dame Meg Hillier MP, chair of the committee, says: “The government knows it is losing over £26bn a year to fraud and error in the tax and benefits systems, but admits to another £25bn it can’t even detect.”

“That’s over £50bn worth of public services a year given away to fraudsters and by mistakes in payments – before the frightening losses racking up in our Covid-19 spending so far, and against the backdrop of a massive surge in need.”

“If BEIS is worried that 100% taxpayer loan guarantees mean the lending banks don’t have enough skin in the game, departments across Government show a worrying, similar lack of urgency. The Covid emergency masks a more worrying underlying approach to managing risk and taxpayers’ money.”

40 per cent of crime against the ‘public purse’ is due to fraud, the Cabinet Office estimates, according to PAC. This costs the taxpayer up to £51.8bn every year, £26.8bn of which can be attributed to fraud and error in the tax and benefits system.

The report comes as HMRC announced it has launched almost 13,000 probes into businesses that may have abused the government’s coronavirus business support schemes.

A government spokesperson said: “Our priority was to act at speed to protect workers and businesses, including through loans, grants, furlough and the Self-Employment Income Support scheme which have provided a lifeline to millions across the UK – helping them to survive the pandemic and protecting jobs.”

“These schemes were designed to minimise fraud from the outset and we have rejected or blocked thousands of fraudulent claims. We won’t tolerate those who seek to defraud taxpayers and will take action against perpetrators, including through criminal prosecution.”

John O’Connell, chief executive of the TaxPayers’ Alliance, says: “Abuse of the Covid schemes will appal hard-working taxpayers, who will ultimately have to foot the bill.”

“Support had to be deployed quickly without reams of red tape tying things up, but the scale of the abuse will shock those who played by the rules while worrying about their jobs and families. Ministers should protect taxpayers with more stringent measures to fine and prosecute the fraudsters that fiddled the system.”