A ‘gift’ for scammers: the true cost of furlough fraud

With “Partygate” still dominating the headlines it was always going to be a tough start of the working week for Boris Johnson. The prime minister’s Monday, however, got even worse when his counter-fraud minister quit over the government’s decision to write off £4.3bn in fraudulent Covid loans.

At the dispatch box in the House of Lords yesterday, Theodore Agnew “staged a dramatic public resignation”, The Guardian said. Lord Agnew, who was a Treasury and Cabinet Office minister, said his decision was not an attack on the PM, but the row will leave Johnson “fighting Conservative anger on yet another front”, the paper added.

Reading out his resignation speech in response to a question from Labour, Agnew accused the government of making “schoolboy errors” by giving loans to more than 1,000 companies who were not trading when the pandemic struck, the BBC reported.

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Calling the oversight of the scheme “nothing less than woeful”, he added: “Given that I am the minister for counter-fraud, it would be somewhat dishonest to stay on in that role if I am incapable of doing it properly.”

‘Enormous wage bailout’

When Rishi Sunak first announced details of the Coronavirus Job Retention Scheme in March 2020, he declared that Britain was facing a “generation-defining moment” and that “unprecedented measures” were needed to protect the futures of businesses and workers.

Described as an “enormous wage bailout” by The Times, the furlough scheme saw the government pay 80% of people’s salaries, up to £2,500 a month, if they were put on leave as a result of the pandemic. VAT payments were also deferred and out of work benefits were increased.

Helping employers retain staff during the pandemic, the furlough scheme came into effect on 20 April 2020. After 529 days, including a period of winding down, it officially came to an end on 30 September last year.

Since its launch, 11.6m jobs were supported by the scheme and Bloomberg reported in October that the UK spent £69bn paying the wages of furloughed workers. “That’s a huge sum”, the BBC said, “around one fifth of the money the government has spent on the response to Covid”.

Tip of the iceberg?

In August 2020 a study by academics at Oxford, Cambridge and Zurich universities revealed “widespread abuse” of the scheme. Surveys of almost 9,000 furloughed workers found that 63% – which equates to around six million nationwide – carried on working, putting in an average of 15 hours of illegal labour a week.

The HMRC said “from the beginning” that the furlough programme, the Self Employment Income Support Scheme (SEISS) and eat out to help out would be “targets for fraud”, the FT reported. And it emerged in November that that £5.2bn paid out by the government “ended up in the hands of fraudsters or was paid in error”, The Guardian said.

The Treasury revealed that it expects its anti-fraud taskforce to write off £4.3bn in Covid-19 payments lost to fraud during the pandemic, Yahoo! Finance reported. A total of £5.8bn is believed to have been “unlawfully taken” and “just £1 for every £4 stolen by scammers” will be recovered.

Agnew criticised the Treasury for appearing to have “no knowledge or little interest” in the consequences of fraud. The warning signs “have long been visible”, The Guardian said, and the “feeble oversight” of the UK’s Covid loan schemes was “a gift to fraudsters”.

Gareth Davies, head of the UK National Audit Office, believes the fraud already identified could be just the tip of the iceberg. “The true level of fraud will become clearer over time,” he said.