Chancellor believed £2.6bn of public money lost to fraudsters during pandemic could be recovered
Mon 22 Jul 2024 17:24 BST
Rachel Reeves will appoint a commissioner in weeks to claw back billions from Covid contract fraud, in a move that will shine a spotlight on government waste.
The Chancellor estimates the Treasury can recover £2.6bn from waste, fraud and faulty contracts signed during the pandemic.
The process of hiring a Covid corruption tsar will begin this week, working with the Department of Health and Social Care, but is expected to deliver a report to Reeves so government lawyers can begin seeking the funds.
The commissioner will work with HMRC, the Serious Fraud Office and the National Crime Agency to examine an estimated £7.6bn of Covid-related fraud. This includes business loans and grants, wrongly claimed holiday pay and abuses of Rishi Sunak’s flagship ‘eat out to help out’ scheme.
Reeves is expected to tell parliament that the commissioner will “recover what is owed to the British people” – claiming money has “ended up in the hands of fraudsters” when it should be going to public services.
“I will not tolerate waste. I will treat taxpayers’ money with respect and restore stability to our public finances,” she will say.
She should also point the finger directly at Sunak for flawed contracts, particularly the billions wasted on unnecessary personal protective equipment (PPE).
“The previous government raised taxes, while allowing waste and inefficiency to spiral out of control,” Mr Reeves is expected to say.
“This has never been more evident than during the pandemic, particularly when it comes to PPE. Indeed, the former Prime Minister, when he was Chancellor, wrote cheque after cheque for multi-billion pound contracts that failed to deliver the NHS’s needs. This is unacceptable.”
Labour said during the election campaign that billions could be recovered from the fraudulent contracts, although costs of more than £4bn are considered irrecoverable.
The Labour manifesto plans include a review of penalties for fraud and corruption committed against UK public services, as well as reforming public procurement rules to include a “debarment and exclusion” regime for those complicit in fraud against the state.
The previous government was widely criticised for its practices during the pandemic, including suspending its usual procurement processes and introducing a “VIP route” for PPE manufacturing, often involving people with close links to government ministers.
Official figures reveal that the government has wasted almost £10 billion in total on unusable PPE during the Covid crisis. The DHSC’s annual accounts in January showed that almost three-quarters of the money spent on PPE during the pandemic had been written off.
The previous government defended this spending, citing the unique circumstances of a pandemic where PPE was in extremely short supply globally, driving up costs and leading to a scramble for protective equipment for frontline health and care workers.
Reeves has asked HMT for a new audit of the public finances, which is expected to be published next week. The Chancellor will make a parliamentary statement before the recess on the state of the public finances, at which time she is also expected to set out her response to the public sector pay review. The statement, expected to be made next Monday, will also set the date for the next budget and is expected to formally launch the process of producing the Office for Budget Responsibility’s forecasts.
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