Much of the £10.9bn in taxpayer money lost to fraud and error in Covid support schemes is now “beyond recovery”, a report has said.
The response to the pandemic had led to “enormous outlays of public money which exposed it to the risk of fraud and error” with many organisations unprepared, the Covid Counter Fraud Commissioner, Tom Hayhoe, said.
Employment support schemes set up by the previous Conservative government, including furlough and help for the self-employed, suffered £5bn of fraud, the report found.
Many of the support measures were credited with propping up the economy throughout the Covid lockdowns. However, Mr Hayhoe said the “outrage” at fraud, abuse and error was “undiminished”.
Mr Hayhoe had been asked by Chancellor Rachel Reeves to investigate the amount of public money lost to fraud given his experience in procurement as the former chair of an NHS trust.
The near £11bn lost to fraud and error is close to what the government spends on the UK’s justice system. The report said £1.8bn had been recovered, although: “Much of the shortfall is now beyond recovery.”
However, it added that there were still areas “where investing in recovering money paid out incorrectly is worthwhile and work should continue”.
The report said weak accountability, bad quality data and poor contracting were among the main reasons for the losses.
Most public bodies 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 inadequate.”
This applied to the procurement of Personal Protective Equipment (PPE) where the volume of orders “overwhelmed the newly created supply chain and involved measures that invited mistrust, opportunism and profiteering”.
It found £13.6bn was spent on PPE procurement, with 38 billion items purchased – although 11 billion were unused by 2024. Losses were estimated at £10bn from over-ordering and £324m of fraud.
The support for small businesses was also criticised, where “lending relied on self-certification with inadequate checks to prevent abuse”.
It said the design of the Bounce Back Loan Scheme “created specific vulnerabilities to fraud and error”, with the programme estimated to have incurred fraud and error losses of up to £2.8bn.
The report acknowledges that the schemes were designed and rolled out at speed but Mr Hayhoe says that fraud prevention should be more embedded into future disaster responses.
Rachel Reeves welcomed the report and said the government would respond fully in the new year.
Speaking in the Commons, she criticised the previous Conservative government, saying they “played fast and loose with the public purse and left the front doors wide open to fraud”.
“This government will leave no stone unturned, because that money belongs to taxpayers, not with cronies or crooks.”
The Conservatives have been approached for comment.
In September the government launched a voluntary repayment scheme for people and businesses to return pandemic scheme money with no questions asked until the end of December.
A previous report from Mr Hayhoe had found that pandemic-era PPE contracts cost the British taxpayer £1.4bn on undelivered contracts and unusable gowns, masks and gloves. Only a small fraction of that – £400m – has been recovered.
