Furlough fraud could spell doom for Harra
Philip Fisher investigates Jim Harra's estimate of the extent of furlough fraud and considers a problem that this could cause for accountants.
Jim Harra is a brave man. Once again, he has decided to cross swords with his political boss Rishi Sunak, while being cross-examined by every accountant’s favourite Parliamentary group, the Public Accounts Committee (PAC).
There is every chance that Mr Harra reads this column, since his latest prognosis echoes an article published soon after the furlough scheme was announced.
During the PAC meeting, the senior civil servant did not hold back, boldly asserting that between 5% and 10% of the £35bn payments to date under the Job Retention Scheme (the posh name for furlough), has either been paid out in error or fraudulently claimed.
BBLS, CBILS and impact on accountants
It can only be a matter of time, ie the next PAC meeting to discuss such matters, before we discover how much has been fraudulently claimed under the Bounce Back Loan Scheme (BBLS) – which could be an even bigger sum and probably to a significantly lesser extent, the Coronavirus Business Interruption Loan Scheme (CBILS).
Each of these situations could have a serious impact for accountants, since we all have an obligation to notify suspicion of fraud to our internal Money-Laundering Reporting Officers and, in turn, they have to pass information to the National Crime Agency. Such action could obviously lead to embarrassing and compromising situations, as well as the risk of accusations and finger-pointing, if the correct steps are not taken.
Is Harra next for the chop?
In case Mr Harra hasn’t noticed, his bold speaking could have personal consequences, as a significant number of his peers (many of whom will soon become peers) are seeking pastures new.
Under the benign guidance of Dominic Cummings, Boris Johnson and his cabinet colleagues appear to have instituted a policy that seeks to replace many of the country’s most senior and respected civil servants. The line connecting each of those former, or soon to be former, top officials has been a Harra-like refusal to accept excessive political interference in their areas of expertise. In almost every case, the new incumbents appear to be less experienced, which begs its own questions.
For those who are not well versed in such matters, Jim Harra currently holds the rather grandiose title of First Permanent Secretary and Chief Executive of HM Revenue and Customs. In common parlance, this means that he runs the UK’s taxing authority. He has already crossed swords with the Chancellor, questioning the advisability of both the August cheap meals scheme and furlough bonus.
Who is Harra?
Unusually in this day and age, Mr Harra has spent pretty much the whole of his working life in the department.
If Wikipedia is to be believed, he became a tax inspector in 1984, straight out of university in Northern Ireland. In fact, given that he was only 22 at the time, despite his remarkable talents it is more likely that he joined the Inland Revenue as it was in that year and actually became a fully-fledged inspector some time later.
One has to hope that such plain speaking does not land Jim Harra in the House of Lords several years earlier than planned, since he clearly has his head screwed on and should be regarded as a key adviser by the Chancellor of the Exchequer and other Treasury colleagues.
Furlough fraud, mass redundancies, and an army of agents
There is a more significant point to be made about these fraudulent and erroneous claims. Recently, there was a media frenzy about the prospect of big tax hikes in the autumn Budget. We have already seen mass redundancies across the country and those have only been the first wave of something that will undoubtedly be considerably worse for the economy when furlough ends and in the longer term. Putting these two major economic problems together, it is possible to see a big opportunity.
If one assumes, for the sake of argument, that furlough and loan fraud and error have currently cost the Exchequer £5 billion, which may not be an unreasonable estimate, then HMRC should be seeking to take on large numbers of capable but unemployed individuals with a view to turning them into ace investigators charged with reeling in as much as possible of this deficit.
In one fell swoop, the government will have cut unemployment numbers substantially and reduced the deficit by material amounts. To me, that sounds like a dream scenario.