Up to £3.5bn furlough claims fraudulent or paid in error - HMRC

From the BBC:

Up to £3.5bn in Coronavirus Job Retention Scheme payments may have been claimed fraudulently or paid out in error, the government has said. HM Revenue and Custom told MPs on the Public Accounts Committee it estimates that 5-10% of furlough cash has been wrongly awarded.

Latest data shows the programme has cost the government £35.4bn so far. The scheme has paid 80% of the wages of workers placed on leave since March, up to a maximum of £2,500 a month.

That’s hardly surprising, as the whole thing was conceptually flawed from the very start:

1. People on furlough were allowed to go and work for another employer, so didn’t really need it.

2. Many were under pressure from their employer to work unofficially and many did so, even though that was completely against the rules.

3. There were lots of arbitrary cut-off points, so people did a bit of back-dating and post-dating, accelerating or deferring bonuses to maximise what they could claim.

4. The self-employed nearly all fell through the cracks. There was an insane rule that the payments were based on the tax return submitted for 2018-19, for example.

5. A government has to make sure that everybody can at least afford the essentials*, so sure, introduce a Citizen’s Income.

6. A Citizen’s Income would not be enough to cover rent or mortgage payments. The excess of Furlough scheme payments over and above the Citizen’s Income level (call it £80 a week per adult) mainly went to landlords and banks. In the circumstances, the burden would have been shared more fairly if the government had just given everybody who was laid off a rent and mortgage holiday, and of course a mortgage freeze for landlords whose tenants were entitled to the rent holiday.

7. For sure, there will always be fraud, but fraud rates for non-means tested benefits (Child Benefit and state pension) are barely measurable. If you claim the Citizen’s Income but “don’t need it” because you are still working (or have other income), that costs the government/taxpayer nothing because by claiming the CI you have to waive the tax- and NIC-free personal allowances so you pay back (in tax and NIC) as much as you get (in CI).

* Yes, it has to. Either out of common humanity; to keep the economy ticking over; and/or to stave off riots.