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The head of Whitehall’s spending watchdog warned ministers that “there will be no excuse” if billions of pounds worth of fraud within government schemes continues under a second coronavirus lockdown.
Gareth Davies, the comptroller and auditor general for the National Audit Office, said there had already been “significant” abuse of the licensing scheme and the payback loan scheme, which would take months to identify.
In an interview with The Guardian, Davies also revealed that auditors had initiated investigations into the procurement processes due to concerns that there was a lack of transparency and potential conflicts of interest when handing over the coronavirus contracts.
Chancellor Rishi Sunak is coming under increasing pressure from conservative MPs, opposition parties and business organizations to expand the job retention plan, which is due to end next month.
Since its launch in April, the scheme has paid out £ 35 billion and been used by 1.2 million employers, allowing 9.6 million jobs to be suspended.
The recovery loan scheme was launched in May to distribute fast bank loans of up to £ 50,000, and the government promised to cover 100% of losses.
Davies, whose role as chief auditor gives him legal responsibility to control all public spending, said abuse of the licensing scheme had been of deep concern to auditors.
“You mentioned the licensing plan as a […] source of significant fraud and error. It would also include the recovery loan scheme on that list where it was clear that the ministers made the decision to launch it knowing that those responsible for delivering it could not guarantee the normal level of control.
“Banks suspended their normal processes to verify loan applicants, verify if they had the ability to pay them and in the early stages, it was not even possible to identify duplicate claims in that scheme. […] It’s probably the riskiest on the set, ”he said.
Davies said he understood the urgency with which the schemes were introduced, but cautioned that the government must introduce new controls if similar measures are to be extended or introduced in a second wave of the virus.
“While you can understand why part of this was not anticipated, there is no excuse for it to happen a second time.
“Who knows exactly what will be needed in the future, but we must have better contingency plans so that they can be implemented quickly and the level of fraud is properly controlled,” he said.
Both schemes have reportedly been targeted by scammers who have requested the money using false identities.
The HMRC is examining 27,000 “high risk” claims, and several criminal investigations are now underway into alleged fraud, the prime minister’s spokesman said. Two people were arrested in Walthamstow, north west London, last week on suspicion of £ 70,000 fraud.
Met and Suffolk police officers seized more than £ 110,000 worth of cryptocurrency in August that is believed to have come from the payback loan scheme. A 35-year-old woman was arrested in Ipswich on suspicion of fraud and money laundering.
Detectives discovered that mule bank accounts, used to transfer criminal cash on behalf of others, had allegedly been used to receive the proceeds of fraudulent applications to the scheme.
Referring to a claim from HMRC officials who said their estimate of fraud and error in the licensing scheme could amount to £ 3.5 billion, Davies said auditors were trying to uncover the exact amount of fraudulent activity.
“[It] It will be a long time before we know the full extent of fraud and error in these schemes, ”he said.
A Whitehall source said the full extent of the problems in Rishi Sunak’s licensing scheme might not be clear until April, when the loans were due to be repaid.
Public officials were now trying to recover cash and pass possible fraud cases on to the police, Davies said.
“If the controls could not be carried out before the money was released, they are being done now. People who committed fraud in these schemes can hope that there is a good chance that they will be detected and followed and … that the process of law is used accordingly in those cases, ”he said.
Davies also said the NAO hoped to produce a report on public procurement processes during the coronavirus pandemic later this year. The government has been criticized for awarding contracts to associates of senior conservatives, including Dominic Cummings and Michael Gove, under emergency regulations that allow urgent commissioning of services in response to the crisis.
“We are looking at the procurement process, many public comments, and concerns about the transparency of some of the procurement contracts around PPE and other areas. We are doing detailed work, ”he said.
It was not even possible to identify duplicate claims in that [bounce-back] scheme … is probably the most risky of the set
The auditors may also launch an investigation into Boris Johnson’s ‘moonshot’ vaccine, the prime minister’s massive ambitious program to develop 20-minute rapid tests that are said to cost £ 100 billion.
“If £ 100 billion is to be spent, then of course [we would look into it], because it’s a huge amount of public spending, “said Davies, who took office at the NAO in June 2019.
Sunak told MPs on Tuesday that he would continue to act in “creative and effective ways” to protect jobs, following requests for a specific extension of the licensing plan.
The chancellor was pressured by Mel Stride, the conservative chairman of the Treasury Select Committee, to develop more support after October.
Sunak said: “I hope you feel confident that throughout this crisis I have not hesitated to act creatively and effectively to support jobs and employment and will continue to do so.”
Responding to Davies’ comments, an HMRC spokesperson said: “The Coronavirus Job Retention Plan is part of the collective national effort to protect jobs. This is taxpayer money and fraudulent claims limit our ability to support people and deprive public services of essential funds. “
A government spokesman said officials would take criminal action against the most serious fraud cases.
“All of our support is aimed at making sure we use public funds responsibly. In the recovery loan scheme, specifically the banks are taking adequate precautions against fraud, including customer checks and monitoring of transactions, ”he said.
• Gareth Davies was speaking to The Guardian’s politics podcast, which will be Posted today at 4.30 p.m. (Wednesday, September 16)
