Ministers defend efforts to tackle pandemic fraud

Lord Agnew – who resigned having described the Treasury’s efforts to tackle pandemic-related fraud as “nothing less than woeful” –  had exposed “a total disrespect for taxpayers’ money” according to Shadow Chancellor Rachel Reeves, who accused ministers of ignoring the impact of fraud while “millions across our country face a cost of living crisis”.

During the debate, Reeves told her colleague Dame Meg Hillier (Labour) that it had been “puzzling” that ministers had not instructed HMRC to conduct basic background checks on those applying for pandemic support. She said it would be “good value for money” to invest HMRC efforts in the fight against fraudulent claims, noting the agency’s success with compliance-related activities.

Over the course of a nearly three-hour long debate, backbench Labour MPs used their contributions to highlight the challenges faced by constituents dealing with the cost of living amid a backdrop of a decade of austerity and forthcoming National Insurance increases. Conversely, Conservative MPs used their interventions to highlight the failings of Labour-led councils to distribute pandemic support, to recount the government’s successes in recovering mis-claimed or fraudulent payments, and to reflect on the need to act at speed to ensure that support schemes were in place at the outset of the pandemic.

Paymaster General Michael Ellis robustly defended the government’s approach to supporting businesses and individuals through the pandemic. Stressing that the government had been focused on ensuring value for money and providing support where needed, he said the “vast majority” of claimants had engaged honestly and appropriately. This had helped to ensure that the UK economic performance had been able to bounce back sharply from the shock of lockdown.

Ellis also pointed out that HMRC had “already recovered more than £500 million” from mistaken or fraudulent claims, but that the agency had more work still to do. He told MPs that those found to have engaged fraudulently with the system would face repayments of up to double the amount that they had received, alongside interest payments and possible criminal prosecutions.

SNP Treasury spokesperson Alison Thewliss said it was “absolutely breathtaking” that billions of pounds had been lost to fraud during the course of the pandemic, depriving the UK’s governments of money to invest in public services. She told MPs that “simple” checks, such as “a national insurance number or an HMRC reference” could have helped guard against such claims, as well as the need for wider legislative reform of Companies House, which provided a “clear open door to fraud”.

Dan Carden (Labour) accused the Treasury and HMRC of lacking the appetite to chase down fraudulent claims. Ben Lake (Plaid Cymru) spoke to wider concerns about the “serious mismanagement of public finances”, citing concerns highlighted by the Public Accounts Committee that HMRC had failed to “understand the impact of any of the largest tax reliefs” nor had it been able to “evaluate the effectiveness” of them.

Kevin Hollinrake (Conservative) spoke in support of the introduction of an economic crime bill (“It could really help”) as means of combating financial fraud, alongside reform of Companies House. Hollinrake suggested that the cost of giving Companies House the power to be “a regulator, rather than just a register” of overseas entities could be met from existing funds. The need to reform Companies House was a consistent and cross-party theme running through the debate.

Shadow Chief Secretary Pat McFadden summed up the debate for the opposition, saying that Lord Agnew had “rightly made the link between the huge sums that we are discussing and tax, because the context of this debate is that the government will bring in a tax rise that will add hundreds of pounds a year to the average family’s tax bill and raise the overall tax burden to the highest levels since the 1950s”.

McFadden accused ministers of being more attuned to the next election campaign than the needs of the British people, arguing that the National Insurance rise was a “cynical” move, “just so the Chancellor can cut taxes before the next election”.

He said the opposition supported calls for an economic crime Bill, a registration of overseas entities Bill, and said MPs needed “to get on and do” Companies House reform. And he called on the government to “act on fraud…particularly when they are asking working people to pay more tax”.

Economic Secretary John Glen responded on behalf of the government. He said MPs were “united in our recognition of the importance of tackling the twin scourges of fraud and waste” and praised the government’s overall economic response to the pandemic. Glen also gave a robust defence of HMRC’s enforcement activities, pointing towards £100 million of investment in a taxpayer protection taskforce , “one of the biggest and swiftest responses to a fraud risk ever made by HMRC” that had so far conducted a range of investigations and inquiries. He told MPs the authority was working hard to “consider every avenue when it comes to recouping money lost through fraud and error”.

The Economic Secretary also acknowledged the need to reform Companies House and said the government had begun that process with £60 million of funding at the last Spending Review.

Read the full debate here.

Chris Young, CIOT External Relations team.