Delivery of employment support schemes in response to the COVID-19 pandemic

While payments under the schemes have ended, the need to bear down on error and fraud has not. HMRC should: a) as part of strengthening its methodology for remaining compliance work, analyse its performance in tackling the main risks of non-compliance and identify what further data it can use to identify and tackle risky claims, including for those where employees may have been working while being claimed for furlough

In determining how the government should respond in a future crisis: i) HMRC should identify the data it would need to increase accessibility of future schemes and reduce deadweight costs and error and fraud. It should consider plans to improve the responsiveness and resilience of the tax system to future economic shocks

k) HM Treasury should ensure it develops robust plans for responding to economic shocks linked to health, environmental or other crises. Plans should be stress-tested to identify improvements and continually refined

c) restate its expectations for compliance work in the light of performance to date and publicise the number of criminal investigations, and amounts at risk, to act as a deterrent. It should consider how its tax compliance work needs to be adapted to include erroneous grant payments and encourage non-compliant taxpayers to return overpayments in advance of this compliance work

In evaluating the value for money of the schemes and learning lessons for the future, HM Treasury should: g) as part of its evaluation of the schemes, define and assess the extent of deadweight, looking at the full range of indicators including the amount of grants paid to employers and the self-employed whose incomes increased, including commissioning research where appropriate to cover gaps in data from existing systems;

d) as part of improving its methodology for estimating error and fraud, develop scheme-specific estimates for non-detection of error and fraud and, where appropriate, involve independent experts, such as academics and fraud prevention professionals, for example in assessing the range and scale of frauds by organised crime. The use of external experts can help to mitigate the risk of group-think;

e) ensure that it routinely gathers data on the results of all its different compliance interventions and use this when it deploys compliance staff by scheme and risk, targeting resources to recover fraud where it remains cost-effective to do so.

f) HM Treasury should where it is cost-effective to tackle error and fraud, ensure sufficient resources are available to HMRC and other departments so that fraud is pursued efficiently across the government?s grant and loan schemes.

h) [HM Treasury should] when designing similar grant schemes in the future, devise measurable financial impact tests for consideration by ministers. Where data are not available to validate eligibility we would normally expect a self-assessment of expected income to be preferable to having no test as it could significantly reduce payments to those not in need, and provide clear criteria against which claimant behaviour could be assessed for possible instances of fraud

j) HMRC should draw on the lessons it has learned from its compliance response on CJRS and SEISS to consider how it would quickly identify, assess and respond to the main causes of non-compliance in future support schemes, and penalise fraud;