The British government acknowledged on Tuesday that it may end up paying out as much as £3.5 billion of taxpayer funds in fraudulent or wrong claims for its job retention scheme, which covers up to 80% of an employee's salary while they are on furlough. That's the equivalent of 10% of all the money disbursed by the furlough program by mid-August.
"We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%," Jim Harra, the top civil servant at HM Revenue & Customs (HMRC), told members of parliaments on the Public Accounts Committee, adding that an academic study had estimated that the level of fraud and error could be even higher than 10%.
The jobs retention program is not the only British stimulus program that's proven to be susceptible to fraud. The Bounce Back Loan program, which was launched to help small businesses survive the lockdown and its lingering aftermath, has been exploited by a minority of applicants to buy luxury cars, property or even premium bonds.
One of the reasons this is happening is that the loans are self-certified, so that they can be granted within 24 hours. They are also fully guaranteed by the State, meaning that banks are not liable for any unpaid debts and are therefore quite happy to release the funds with little in the way of background checks. Much of the debt — 40%-50% according to the Financial Times — will never be repaid, since many of the businesses will collapse.