Majority of £11bn Covid Relief Fraud ‘Irrecoverable’, Claims Report

A recent report indicates that a substantial portion of the £10.9 billion in public funds lost to fraud and mistakes within Covid assistance programs is now considered “irretrievable.”

According to Tom Hayhoe, the Covid Counter Fraud Commissioner, the pandemic response resulted in massive public expenditure that left the system vulnerable to fraudulent activities, largely due to the unpreparedness of various organizations.

The report highlighted that employment support initiatives, including the furlough scheme and aid for the self-employed, established by the prior Conservative administration, incurred fraud losses totaling £5 billion.

Impact of Covid Support Measures

While these financial support measures played a crucial role in sustaining the economy during lockdown periods, Hayhoe noted that public outrage regarding fraud and mismanagement remains “unabated.”

Chancellor Rachel Reeves commissioned Hayhoe, leveraging his background in procurement as a former NHS trust chair, to probe the extent of public funds lost to fraudulent activities.

The report’s findings reveal that the nearly £11 billion lost to fraud and mistakes approaches the annual budget of the UK’s justice system, with £1.8 billion recovered. However, it warns that “much of the deficit is now irretrievable.”

Potential for Recovery

Nonetheless, the report asserts that there are still opportunities to pursue recovery in certain areas where efforts could be beneficial.

It identified inadequate accountability, poor-quality data, and ineffective contracting as primary contributors to these financial losses.

Most public agencies were ill-equipped for a crisis demanding such extensive and urgent financial outlay, leading to insufficient fraud prevention measures.

PPE Procurement Issues

This lack of preparation was particularly evident in the procurement of Personal Protective Equipment (PPE), where the surge in orders overwhelmed the newly established supply chain and facilitated conditions for distrust and exploitation.

The report disclosed that £13.6 billion was spent on PPE, resulting in the acquisition of 38 billion items, of which 11 billion remained unused by 2024. Losses from over-purchasing and fraud were estimated at £10 billion and £324 million, respectively.

Additionally, the support extended to small businesses faced criticism due to its reliance on self-certification without sufficient checks to deter fraudulent behavior.

Concerns Regarding Loan Schemes

The Bounce Back Loan Scheme was particularly highlighted for its design flaws, which rendered it susceptible to fraud and errors, with losses estimated up to £2.8 billion.

While recognizing the rapid design and implementation of these schemes, Hayhoe emphasized the necessity of embedding fraud prevention strategies in future emergency responses.

Reeves expressed her approval of the report, asserting that the government would provide a comprehensive response in the coming year.

During a session in the Commons, she criticized the previous Conservative administration for their lax management of public finances, stating they “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,” she declared.

The Conservative Party has been contacted for their input on this matter.

In September, the government initiated a voluntary repayment program, allowing individuals and businesses to return funds received from pandemic support programs without facing inquiries until the end of December.

A prior investigation by Hayhoe revealed that PPE contracts from the pandemic era cost taxpayers £1.4 billion due to undelivered contracts and unusable protective gear, with only a small fraction of £400 million having been recovered.