Furlough fraud: UK government criticised for poor recovery efforts

The UK government’s COVID-19 job retention scheme, also known as furlough, has come under fire from MPs, who have criticised HM Revenue & Customs (HMRC) for its poor efforts to recover funds that were incorrectly claimed by employers.

In its report on COVID-19 employment support, the cross-party Commons Public Accounts Committee (PAC) stated that HMRC’s compliance activity has had little success in recovering funds from employers who claimed furlough for employees that continued to work.

The report highlighted that HMRC estimated that it paid out £2.3 billion of furlough to employees who were, in fact, still working. By March 2022, HMRC’s compliance intervention targeting employers claiming furlough for working employees had yielded only £640,000, equivalent to just 0.03% of the money claimed incorrectly.

The Chair of the Committee has said that too many companies claimed for furlough support that shouldn’t have and now won’t give it back

The PAC stated that HMRC needs to do more to collect evidence on risky claims through visits and interviews, especially since it is difficult to prove after the event that employers were claiming furlough for employees who were still working, particularly if they were only furloughed part-time.

The PAC called on HMRC to set out how it plans to improve its ability to recover furlough claimed for employees who continued to work.

The COVID-19 pandemic has highlighted the need for effective and targeted support in times of crisis.

The UK government’s employment support schemes have been a lifeline for many individuals and businesses during the pandemic, but the PAC’s report highlights the shortcomings of the furlough scheme’s design and management.

The report calls on HMRC to improve its ability to recover funds that were incorrectly claimed by employers and to do more to collect evidence on risky claims.

The PAC’s findings call into question the effectiveness of the furlough scheme and its ability to protect taxpayers’ money from fraud and unnecessary costs.

The government must learn from the shortcomings of the scheme to ensure that all those in need receive assistance in future crisis interventions, and that the public purse is protected from fraud and unnecessary costs.

The PAC’s report highlights the need for the government to take swift action to address these issues and improve the recovery of incorrectly claimed funds.

Dame Meg Hillier MP, Chair of the Committee, said

“Bad actors in British business are running rings around the Revenue. Perhaps some of the same companies that were complaining about even the minimal levels of transparency over billions and billions that were paid out in order to save jobs in this country but are now just lost to the public purse, likely forever.

“While money that genuinely saved jobs and households was got out admirably quickly, the weak recovery effort will fail to deter potential future criminals.”

“Too many companies claimed that shouldn’t have and now won’t give it back.”