Much of the £10.9bn of taxpayers' money lost due to fraud and errors in Covid support schemes is now “not recoverable”, a report says.
The response to the pandemic has led to a “huge waste of public money which has left many organizations at risk of fraud and error” unprepared, Covid Fraud Commissioner Tom Hayhoe has said.
Job support schemes set up by the previous Conservative government, including furlough and help for the self-employed, were hit by £5 billion in fraud, the report said.
Many support measures are credited with supporting the economy during the Covid lockdown. However, Mr Hayhoe said the “outrage” over fraud, abuse and errors had “not abated”.
Chancellor Rachel Reeves asked Mr Hayhoe to investigate the amount of public money lost to fraud, given his experience in procurement as a former chairman of the NHS trust.
The estimated £11 billion lost to fraud and error is close to what the government spends on the UK justice system. The report said £1.8 billion had been recovered, although: “Much of the deficit is now not recoverable.”
However, he added that there are still areas “where investment in recovering monies paid incorrectly makes sense and work should continue.”
When asked live on BBC Radio 5 how much more money could be returned, Mr Hayhoe replied: “I don't know.” But he added that the new laws extend the period within which authorities must uncover cases of fraud.
Mr Hayhoe said that for him the main question that the study would have to address was “the extent to which people were willing to act quickly and make money from taxpayers in a crisis”.
“If there is one lesson to be learned from this, it is that we cannot assume that everyone – even in difficult times like Covid-19 – will do the right thing.”
The report said weak accountability, poor data quality and poor contracts contributed to the losses.
Most government agencies were unprepared for “a crisis that required spending on such a scale and with such urgency.”
“Consequently, some measures to protect against potential fraud were found to be insufficient.”
This applied to personal protective equipment (PPE) procurement, where the volume of orders “overwhelmed the newly established supply chain and required measures that created mistrust, opportunism and profiteering.”
It found that £13.6bn was spent on PPE procurement, with 38bn units purchased, although £11bn remained unused by 2024. Losses are estimated at £10 billion from re-ordering and £324 million from fraud.
Support for small businesses was also criticized, where “lending was based on self-certification with inadequate checks to prevent abuse.”
It said the design of the loan recovery scheme “created certain vulnerabilities to fraud and error”. Fraud associated with this program, as well as other business lending schemes, is estimated to have cost the public around £1.7 billion.
The report acknowledged that the schemes were developed and implemented very quickly, and Mai Heyhoe paid tribute to civil servants who “worked their butts off during really difficult times during the crisis”.
However, given the pressure, they “did things that, in retrospect, weren't necessarily right,” he said. The report recommends that fraud prevention be better integrated into future disaster responses.
In September, the government launched a voluntary debt repayment scheme for people and businesses to repay money from the pandemic program, no questions asked, until the end of December.
Rachel Reeves welcomed the report and said the government would respond fully to it in the new year.
Speaking in the House of Commons, she criticized the previous Conservative government, saying they “played fast and loose with the public purse and left the front door wide open to fraud”.
“This government will leave no stone unturned because this money belongs to the taxpayers.”
Conservative leader Kemi Badenoch said fraud was something she was absolutely concerned about when she was in government, but she took pride in getting money to people who needed it.
Asked if she would apologize for this, she replied: “We are not the ones who took out fraudulent loans. We put a scheme in place in record time to ensure we could pay people in the middle of a pandemic and I will always be proud of what the Conservative government did back then.”
