Covid support schemes left ‘open goal’ to fraudsters, says watchdog

The business department’s handling of Covid support schemes left an “open goal” to fraudsters and embezzlers that has added “billions to taxpayer woes”, parliament’s spending watchdog has found.

In its review of the annual report of the Department for Business, Energy and Industrial Strategy (BEIS), the Public Accounts Committee (PAC) said it recognised that the government offered crucial support to businesses at the height of the pandemic.

However, it said efforts to identify fraud and error had come too late, given that by the time they are confirmed the money will have been spent and “trails will have long ago gone cold”.

“BEIS says it saw this risk coming but it’s really not clear where government was looking when it set up its initial Covid response,” said the PAC’s chair, the Labour MP Dame Meg Hillier.

“It offered an open goal to fraudsters and embezzlers and they have cashed in, adding billions and billions to taxpayer woes. These lessons should have been learned from the banking crisis a decade ago, and could have been prepared in the government’s pandemic exercises.”

The comments come amid frustration over the extent of Covid fraud that has put billions of pounds worth of government cash at risk.

Of the £79.3bn worth of loans guaranteed by the government to support businesses during the first year of the pandemic, it is estimated that taxpayers will lose about £4.9bn to fraud and error. That is on top of a further £5.7bn, which is estimated to have been lost within the furlough and self-employment programmes.

The report accused BEIS of failing to sufficiently identify or reflect the potential risks from organised economic crime.

“Some of its eye-watering losses only represent the department’s best estimates so far, so the actual amount of taxpayer’s money that will be lost could be even higher,” the PAC said, noting there was also limited information about the true level of fraud related to the £21.8bn worth of Covid grants, which were distributed by local authorities.

BEIS has only estimated fraud and error levels related to £11.5bn of those grants, at about £1bn, the PAC said.

A government spokesperson said: “We’re continuing to crack down on Covid support scheme fraud and will not tolerate those who seek to defraud consumers and taxpayers.

“These schemes were implemented at unprecedented speed to protect millions of jobs and businesses. If the government didn’t move quickly, more businesses would have failed and many more jobs lost.”