Furlough fraud issues are set to reduce but redundancy fears rise as companies 'cut staff'


Furlough payments have kept millions of workers afloat over the last year or so and the scheme has been extended a number of times. Broadly, the Job Retention Scheme has been welcomed across the UK but it has created a huge cost burden and many fear the scheme has been abused for fraudulent activity.

This issue was recently brought up in a Treasury Committee review on the economic impact of coronavirus.

During this meeting, which was held on April 19 and chaired by Mel Stride, the Conservative MP for Central Devon, Felicity Buchan, the MP for Kensington, questioned the problems associated with furlough fraud: “My questions are specifically on fraud in the furlough scheme and the self-employed scheme. Can you perhaps explain what types of fraud you anticipate seeing in the furlough scheme and the self-employed scheme?”

In response to this question, Gareth Davies, the Comptroller & Auditor General and Head of the National Audit Office, laid out what the key issues were: “One obvious area here is employers overstating the furlough claim.

“As you know, the way the scheme works is that the employers are paid by the Government through a furlough grant, and they are then expected to pay 80 percent to their employees, or whatever arrangement they have made within their businesses.

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This could all prove to be very costly as in late 2020 estimated billions could have been lost through fraud and/or general mismanagement due to the “hasty” roll-out of the scheme.

However, these fraud fears may diminish over the coming months as the Government released furlough data for March 2021 this week, which showed the number of people on furlough fell by half a million by the end of March.

The number of people on furlough fell to 4.2 million in March, from 4.9 million in January.

Sarah Coles, a personal finance analyst at Hargreaves Lansdown, both welcomed and warned on this news.

She said: ” Half a million people came off furlough in March, as business owners prepared to throw open the doors of shops, beauty salons, gyms, restaurant patios and beer gardens across the country. People who are returning to work will breathe a huge sigh of relief that they still have something to go back to, and even those still stuck on furlough have hope.

“Older people returning to work will be particularly relieved because according to the ONS, a third of this group think their chances of having a job to go back to after all this is over are about 50:50.

“At the end of March, 4.2 million people continued to rely on the scheme to make ends meet, but we’re likely to see the numbers fall back again in April, as businesses prepare for the rules to relax further in mid-May and again in June.

“Unfortunately, it’s not all good news, because while many of those coming off the scheme are returning to work, others will have been taken off the scheme and made redundant. We don’t yet have redundancy figures for March, but early payroll data shows 56,000 fewer employees than in February.

“Some companies will have had to cut staff numbers to make the figures add up while the workplace looks so different. Others will have been making a loss for so long they have run out of road entirely, and been forced to give up the fight. The number of company voluntary dissolutions during March averaged more than 6,000 a week.

“However, there’s still hope. If you’re still on furlough, you have the comfort of knowing that the scheme continues through the summer, and the government will offer 80 percent of pay until the end of June, before it starts to taper. There’s still a good chance the economy will reopen sufficiently to protect your job before support starts to fall.

“If you’ve lost work, or are worried you might, the positive news is that data produced by Adzuna for the ONS showed job adverts finally rose above their pre-pandemic level in the third week of April. While it’s only an early indication from one job site, there’s the hope that if your job doesn’t come through this in one piece, there may be something else out there for you.”

Similar sentiment was shared by Myron Jobson, a Personal Finance Campaigner at interactive investor, who warned on the eventual costs of the scheme: “The latest unemployment data shows that the furlough scheme has worked, and continues to do so.

“While society has started to reopen, UK plc is still reeling from the damage done to its cashflow by a year of Covid restrictions. With 4.2 million workers still on the scheme according to latest figures, the greatest challenge for the job market may be yet to come.

“The extension of the furlough scheme has been instrumental in keeping a lid on rising unemployment. The hope is that the labour market will be in a much better position to prevent a surge in unemployment once the scheme comes to an end on September 30.

“The financial cost of the scheme is likely to be significant, and it will be taxpayers who foot the bill further down the line. However, from purely an employment standpoint, it may just be a price worth paying.”



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