Covid scheme fraud hit almost £11bn but much ‘beyond recovery’, report says

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”.

When asked on BBC Radio 5 live how much more money could be recovered, Mr Hayhoe said “I don’t know.” But he added that new laws extended the amount of time authorities had to uncover fraud cases.

Mr Hayhoe said that, for him, the main issue to come out of study was “the scale at which people were prepared to pull a fast one and make money out of the taxpayer in a crisis”.

“If there’s one single lesson that comes out of this is the lesson that you can’t assume that everyone – even in difficult times like Covid-19 was – will do the right thing.”

The report found weak accountability, bad quality data and poor contracting contributed to 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”. Fraud related to that programme, together with other business loan schemes, is estimated to have cost the public about £1.7bn.

The report acknowledges that the schemes were designed and rolled out at speed, and My Hayhoe paid tribute to public servants who “were working their socks off in really difficult time during the crisis”.

However, given the pressure they “did things that in retrospect were not necessarily the right things”, he said. The report recommends that fraud prevention should be more embedded into future disaster responses.

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.

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.”

Conservative leader Kemi Badenoch said fraud was absolutely something she was concerned about when she was in government, but that getting money to people who needed it was something she was proud of.

Asked if she would apologise for it, she said: “We’re not the ones who took out the fraudulent loans. We set up a scheme in record time to make sure we could pay people in the middle of a pandemic and I will always be proud of what the Conservative government did then.”