COVID support schemes – misuse of data and tools set to leave UK taxpayer with multi-billion pound fraud and error bill

(Image by Engin Akyurt from Pixabay)

While the early stages of the COVID pandemic required a rapid response from the UK government to ensure businesses and people could survive months-long lockdowns – putting systems and processes in place to provide financial support within a matter of days – that does not mean that the approach taken, while thought-provoking, should not be immune to criticism.

And yes, the speed of providing assistance was crucial for people during an incredibly trying time, but it is also true that COVID is set to cost UK taxpayers exorbitant sums. That’s why accuracy of support was so critical in those early months – mistakes made could amount to billions of pounds.

Which, unfortunately, is the situation in which the British government currently finds itself. According to a report released this week by MPs sitting on the influential Public Accounts Committee (PAC), the COVID support programs that have been introduced to provide financial assistance to businesses across the country will likely result in bill fraud and fraud. £4.9 billion error, which will ultimately be funded by the taxpayer.

That’s £4.9billion that could have been paid out to a range of people who received little or no support during the COVID pandemic, which didn’t fit the current administration’s criteria. for “in need”.

The Panel highlights a number of shortcomings on the part of the Department for Business, Energy and Industrial Strategy (BEIS), including a lack of quality data shared with local authorities, which distributed some of the funding, and it also failed to use some of the tools it has to fight fraud and error.

BEIS was responsible for the government’s business support loan programs, including the Rebound Loan Program, the Coronavirus Business Interruption Loan Program and the Coronavirus Business Interruption Loan Program. In 2020-21, its budget has risen from £14bn in 2019-20 to £44bn, with much of the increase directly attributable to the government’s response to the COVID crisis and associated support to businesses.

He also points out that BEIS has yet to outline its broader learnings from the mistakes made to ensure something similar doesn’t happen again.

Commenting on the Committee’s report, MP Dame Meg Hillier, Chair of the PAC, said:

BEIS says it saw this risk coming, but it’s really unclear where the government was looking when it put together its initial response to Covid. It offered an open target for fraudsters and embezzlers and they cashed in, adding billions and billions to taxpayer woes. These lessons should have been learned from the banking crisis ten years ago and could have been prepared in the government’s pandemic exercises.

These mistakes must be weeded out of future crisis responses, now, and the government would do well to apply the lessons to the growing and interrelated crises it currently faces over climate change, energy supply and the cost of living.

Main flaws

The PAC outlined a number of areas where BEIS fell short and made key recommendations on how to move forward.

First, he notes that the Department does not have a good assessment, or insight into the data, of the levels of fraud and error in business support grants administered by local authorities. Between 2020 and 2022, BEIS has relied on local authorities to distribute funds to local businesses in nine programs, but the Department has so far only “attempted” to assess the extent of fraud and errors in the first three programs administered in the spring of 2020.

The Ministry’s sample reviewed only 476 grants, which represents 0.05% of grants paid by number. She told the Committee that she planned to expand this sample, but work has not yet started and the success of any future work also depends on the willingness of local authorities to cooperate. CAP said:

We are concerned that local authorities have little incentive to do so given that all recovered funds must be transferred to the Department, and the limitations of fraud and error estimates make it difficult for the Department and local authorities to assess the time and the resources needed to recover those funds.

The report also states that BEIS was aware of the heightened fraud risks under its COVID business support programs from the outset, but “did not fully utilize all the tools at its disposal to prevent and detect fraud.”

The Department expected fraud attempts, requested ministerial guidance, but did not attempt to quantify potential exposure – and the requests did not sufficiently identify or reflect potential organized economic crime risks.

For example, the number of new businesses registered in 2020-21 increased by more than 20% compared to any of the previous five years. The ministry, at the time, failed to acknowledge that around 170,000 new businesses were suspicious.

Finally, the Committee also points out that BEIS has not yet explained how it plans to protect taxpayers in the future. He notes:

The Department now has two years of experience designing, implementing and managing COVID-19 business support programs, and some experience in recovery activities where fraud and error have been identified. He identified some learnings that, for example, allowed him to refine his approach to identifying fraud and error in COVID-19 business support grants.

However, it is about reducing the shortcomings of existing regimes, and we would expect to see the Department demonstrate that it is learning broader lessons from these regimes that it could then apply to improve its stewardship of public funds in the coming. Several of the Department’s key spending areas in the coming years, such as supporting public sector decarbonization and achieving net zero, will again require channeling taxpayer funds through third parties, such as this has been the case with COVID-19 business support programs.

We expect that the lessons the Department has learned during the pandemic will support the design and implementation of these future programs.

my catch

I would say that’s a fundamental failure, again, that the government hasn’t put in place proper data sharing principles. Something is thrown over the wall and it seems like from there it will never be understood again. Yes, there are barriers when it comes to the regulatory responsibilities of different institutions, but we need a way for the public sector to (safely) have a better understanding of its broader business. In the end, failure to do so ends up costing the taxpayer significant dollars, time and time again.

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