“Those who still owe Covid scheme money to the public purse have been given a time-limited opportunity to pay it back before tougher sanctions apply”. So ran the government’s press release on 12 September, as it launched a “no questions asked” voluntary repayment scheme for people to repay outstanding money they were not entitled to or did not need.
At the National Audit Office we have done a lot of work on Covid fraud and I welcome any measure that increases the chance of recovery. And there is plenty to recover.
The scale of fraud – the opportunity to get money back
The scale and nature of the pandemic and the government’s response were without precedent in recent history. Many people died, and many lives, families and businesses were adversely affected. By the end of March 2022, we estimated the lifetime cost of measures, announced as part of the government’s response, were £376bn.
Much of this spending was inherently vulnerable to fraud and corruption, as government needed to respond quickly to unfolding events. It often did so by prioritising speed when setting up these new initiatives over reducing the risk of fraud, and diverted compliance and counter-fraud staff away from their normal roles.
We carried out extensive work examining Covid schemes and the fraud risks that accompanied them. In our Overview of the impact of fraud and error on public funds for the new Parliament 2023-24, we showed the estimated loss from temporary Covid support at around £10.5bn. This covered Bounce Back Loans, Coronavirus Job Retention and “Eat Out to Help Out” among others.
More information continues to come in.
Last month, we qualified the Department for Business and Trade’s annual report and accounts over the Future Fund, a pandemic support scheme set up in May 2020 to provide loans to early-stage, equity-backed businesses struggling to access finance. It lent more than £1.1bn to nearly 1,200 firms. The suspected fraud since inception is now estimated at 7% of the total value (around £79.5m).
The new repayment window sends a clear message
The Covid counter-fraud commissioner, Tom Hayhoe, has now opened the “voluntary repayment window”. His message was clear; those who wrongly claimed Covid-era cash should “pay now, clear your conscience, or face the consequences.”
Alongside the repayment scheme sits a new Covid fraud reporting website, designed to let whistleblowers and the public flag suspected wrongdoing. And there is also an implied threat – the government is giving itself more time to investigate these crimes.
The Public Authorities (Fraud, Error and Recovery) Bill, currently going through its Report stage in Parliament, extends the limitation period for bringing criminal actions to twelve years from the date the fraud is discovered or could have been discovered with reasonable diligence.
But we need to have realistic expectations
When we first started to pull together statistics on the overall level of losses due to fraud during the pandemic we warned that while departments were attempting to recover some of the money lost to fraud, it was very unlikely that most will be recovered. The last time we reported, government had recovered some £1.4bn of the £10.5bn lost.
So surely the correct way to judge the success of the voluntary repayment scheme is not whether it recovers a significant proportion of the £10.5bn lost, but whether it increases the amount recovered over what would be expected if there was no voluntary repayment scheme. This will depend on people who took money having either a guilty conscience or a worry that they will otherwise get caught.
What next?
The Covid counter-fraud commissioner’s full report is expected before the end of the year and should give the clearest account yet of what went wrong, and what has been recovered.
Our role will then be supporting Parliament to provide accountability for this. Such scrutiny is important to ensure lessons are learnt, so that when the next crisis comes, government can move fast without leaving the door open to billions in fraud.
Joshua Reddaway is director of fraud and propriety at the NAO. See all our work on Covid here