Recommendations & Conclusions
13 items
2
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
The age of the Self Assessment system made it more difficult for HMRC to provide financial support for the self-employed. Its tax system for the self-employed lags behind that available in other countries. The Self Assessment system was built in the 1990s, and its design and age limits the amount, …
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The age of the Self Assessment system made it more difficult for HMRC to provide financial support for the self-employed. Its tax system for the self-employed lags behind that available in other countries. The Self Assessment system was built in the 1990s, and its design and age limits the amount, timeliness and quality of the data that HMRC holds on the self-employed. HMRC had to cleanse the data in the system before it could use it, adding several weeks delay to introducing the SEISS. HMRC has an ongoing programme, Making Tax Digital, designed to upgrade its systems and permit users to provide information more frequently using digital devices—as opposed to the current annual tax return. Making Tax Digital should have been in place by 2019 but, apart from a pilot project, is now not due until 2023. By contrast, HMRC’s investment in the Real Time Information system in 2013 gave HMRC access to much more timely data about employees on the Pay-As-You-Earn system. Therefore, it was able to use this for the design of CJRS and base eligibility on more up-to-date information. Recommendation: HMRC should write to the Committee within three months to explain what it has learnt from its review of other countries’ self-employed systems and how it will apply these to its plans for delivering the Making Tax Digital programme.
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Government response AI summary
The government accepts the recommendation and committed to providing an explanation by March 2021, detailing how insights from other countries' self-employed tax systems are being applied to the Making Tax Digital programme and wider tax administration strategy.
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HM Treasury
3
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
The Departments have not done enough to reduce the number of people excluded from the schemes. The Departments still do not have a complete assessment of the number of people excluded from the first phase of CJRS and SEISS up to the end of October 2020, but the best estimate …
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The Departments have not done enough to reduce the number of people excluded from the schemes. The Departments still do not have a complete assessment of the number of people excluded from the first phase of CJRS and SEISS up to the end of October 2020, but the best estimate suggests that it may have been as many as 2.9 million workers. The extension to the schemes announced by the Chancellor in November was not accompanied by any substantial changes to the design of the schemes that would likely reduce the number of people who are excluded this time round. The more time moves on, the greater the potential number of newly self- 6 Covid-19: Support for jobs employed people that might be excluded from SEISS. The scheme continues to be based on 2018–19 tax return data submitted to HMRC by 31 January 2020—despite the fact that the 2019–20 tax year ended in April 2020 and many self-employed workers and employees who slipped through the net because of the short term nature of their employment contracts will already have submitted their 2019–20 tax returns. HMRC has also not considered whether it could use other data sources across government. Recommendation: HM Treasury and HMRC should investigate whether more data within and outside of the tax system could be used to determine eligibility for currently excluded groups and write to the committee within six weeks to explain their findings. HM Treasury and HM Revenue and Customs should liaise with departments which have a detailed knowledge of the affected sectors in order to improve access to Covid-19 related support schemes for currently excluded groups.
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Government response AI summary
The government accepts the recommendation and states it has been implemented, having investigated data sources for excluded groups and liaised with other departments. It explained that schemes balanced support with fraud prevention using existing HMRC data, and highlighted ongoing efforts through the 10-year Tax Administration …
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HM Treasury
5
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
The Departments will not know the actual levels of fraud and error within these schemes until 2021. HMRC does not expect to have a statistical estimate of the total fraud and error levels across both schemes until the end of 2021. Whilst waiting for this estimate, there are other metrics …
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The Departments will not know the actual levels of fraud and error within these schemes until 2021. HMRC does not expect to have a statistical estimate of the total fraud and error levels across both schemes until the end of 2021. Whilst waiting for this estimate, there are other metrics already available that can begin to build a picture of the levels of fraud and error, such as the amounts of overpayments detected and recovered and the number of arrests and prosecutions due to criminal activity on the schemes. Levels of opportunistic fraud, where furloughed workers continued to work whilst companies claimed grants, could have occurred in between 7% to 34% of cases. HMRC also plans to publish which companies are accessing the extended CJRS and to directly notify employees when they have been furloughed, something it decided not to implement during the first phase of the scheme between March and October 2020. We welcome this suggestion that it is making some changes to try and reduce the opportunity for fraud to occur. Recommendation: HMRC should write to the Committee within three months outlining how it can utilise the information it already collects to better estimate the levels of fraud and error; and also outline what steps it intends to take to recover CJRS and SEISS grants made during the first phase of the scheme if recipients Covid-19: Support for jobs 7 made substantial profits or were not adversely affected by the pandemic. HMRC should list companies which have signed up to the furlough scheme by the end of January 2021.
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Government response AI summary
The government accepts the recommendation, agreeing to write to the Committee by March 2021. It confirms provisional fraud and error assessments are in place, with ongoing improvement of evidence, and outlines its risk-based and post-payment compliance approach for recovering incorrectly claimed grants.
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HM Treasury
7
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
We are concerned that HM Treasury is unable to explain how much the extended schemes are forecast to cost or what would constitute value for money. HM Treasury argues that it falls to the Office for Budget Responsibility (OBR) to produce forecast costs for the scheme extensions. However, HM Treasury …
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We are concerned that HM Treasury is unable to explain how much the extended schemes are forecast to cost or what would constitute value for money. HM Treasury argues that it falls to the Office for Budget Responsibility (OBR) to produce forecast costs for the scheme extensions. However, HM Treasury is nonetheless responsible for providing assurance to Parliament of the value for money of schemes, of which costing is an important part. The OBR now forecasts that extensions to the schemes will cost the taxpayer a further £21 billion. It is also unacceptable that the Departments are unable to explain what constitutes value for money in these schemes. We accept that when the schemes were initially developed back in the spring the exceptional circumstances at that point made such analysis difficult. In the intervening period, however, we would have expected HM Treasury to have developed a more rigorous assessment of the costs and benefits of the schemes to ensure taxpayer money is spent wisely. Recommendation: HM Treasury should write to the Committee within a month to set out how it will assess value for money for the extended schemes. 8 Covid-19: Support for jobs 1 Implementing and evaluating the initial covid-19 employment support schemes
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Government response AI summary
The government agrees with the recommendation and states it has been implemented, confirming that the Permanent Secretary to the Treasury wrote to the committee on 20 January 2021, outlining how HM Treasury will assess value for money for the extended schemes.
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HM Treasury
10
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
The extension of both schemes was announced in November 2020. At that stage the initial schemes had not been formally evaluated. The Departments told us that they were undertaking informal evaluations to help them tailor their communications to those the schemes were aimed at. They explained that they would be …
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The extension of both schemes was announced in November 2020. At that stage the initial schemes had not been formally evaluated. The Departments told us that they were undertaking informal evaluations to help them tailor their communications to those the schemes were aimed at. They explained that they would be undertaking full evaluations of all of the schemes, and that these would be made public, but that full evaluations were 14 C&AG’s Report, para 1.11 15 Q 27 16 Q 27 17 C&AG’s Report, para 2.11 18 Q 75 19 Q 10, C&AG’s Report, figure 5 20 HMRC, Extension of the Coronavirus Job Retention Scheme, available at: www.gov.uk/government/publications/ extension-to-the-coronavirus-job-retention-scheme/extension-of-the-coronavirus-job-retention-scheme 21 C&AG’s Report, para 3.7 Covid-19: Support for jobs 11 not due until “later next year”. HMRC expected that such evaluations would consider the value for money of the schemes; how individuals with protected characteristics were covered, and the ability of the schemes to meet the needs of different communities.22 The NAO found that, to date, HMRC’s evaluation of the schemes had largely focused on lessons learned around project management as its sought to refine its ongoing delivery. On the wider issue of whether the schemes will have prevented mass unemployment, HM Treasury told us it was too soon to tell, but that the government felt it was the right thing to do to extend the schemes.23
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Government response AI summary
The government agrees with the recommendation and states it has already implemented it by regularly monitoring and publishing official statistics on CJRS and SEISS, including take-up by area, age, and gender, and has published a detailed evaluation plan for CJRS.
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HM Treasury
11
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
We asked whether the Departments had undertaken any evaluation on the regional differences in take-up or the schemes and take-up by groups with protected characteristics.24 HMRC currently reports monthly on the cost of the schemes and provides analysis on take-up by different demographics. The data for October 2020 showed that …
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We asked whether the Departments had undertaken any evaluation on the regional differences in take-up or the schemes and take-up by groups with protected characteristics.24 HMRC currently reports monthly on the cost of the schemes and provides analysis on take-up by different demographics. The data for October 2020 showed that CJRS had cost £41.4 billion and the two SEISS grants had cost £13.7 billion.25 Take up for CJRS was largest amongst the wholesale and retail, and repair of motor vehicles, sectors, whilst in SEISS it was largest in the construction sector. It is also possible to analyse take-up by age and gender, as well as by parliamentary constituency for both schemes.26 HMRC does not, however, monitor take-up of the schemes by different ethnic groups as it is not required to collect that data as part of its regular tax administration. HM Treasury commented that it looked at Office for National Statistics (ONS) data to consider the potential effects of the schemes on unemployment, including regional unemployment.27 ONS’ unemployment data for July to September 2020 showed that the unemployment rate was 4.8%, up from 4.0% in March 2020.28 HMRC told us it had done some preliminary research about what happened to furloughed workers once they come off furlough, which suggested that around 90% of them return to their previous job.29 The medium to long-term projections on unemployment, however, are less encouraging; the Office for Budget Responsibility (OBR) forecast, released on 25 November 2020, suggests that unemployment might peak at 7.6%, or 2.6 million people, in 2021.30
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Government response AI summary
The government agrees with the recommendation and states it has already implemented it by regularly monitoring and publishing official statistics on CJRS and SEISS, including take-up by area, age, and gender, and has published a detailed evaluation plan for CJRS.
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HM Treasury
12
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
HMRC’s initial planning assumptions suggested that the level of fraud and error would be 5% to 10% within CJRS and 1% to 2% within SEISS. We asked whether it expected the level of fraud and error to change under the new scheme. HMRC told us that it had originally estimated …
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HMRC’s initial planning assumptions suggested that the level of fraud and error would be 5% to 10% within CJRS and 1% to 2% within SEISS. We asked whether it expected the level of fraud and error to change under the new scheme. HMRC told us that it had originally estimated that around half of the fraud and error in the CJRS (2.5% to 5%) would potentially be due to fraud committed by organised criminal gangs, but it had subsequently revised that down to 0.6% due to the controls it had put in place. There were fewer controls in place, however, to tackle the risk of furlough fraud where, for example, employers furloughed workers but then continued to get them to work, against the rules 22 Qq 58–59 23 Q 61, C&AG’s Report para 1.17 24 Qq 58–59 25 HMRC, HMRC coronavirus COVID-19 statistics, available at: www.gov.uk/government/collections/hmrc- coronavirus-covid-19-statistics 26 C&AG’s Report, figures 11, 12 and 13; HMRC, Coronavirus Job Retention Scheme statistics: October 2020, available at: www.gov.uk/government/publications/coronavirus-job-retention-scheme-statistics-october-2020/ coronavirus-job-retention-scheme-statistics-october-2020 27 Q 58, C&AG’s Report, para 2.20 28 Office for National Statistics, Unemployment rate (aged 16 and over, seasonally adjusted), released 10 November
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Government response AI summary
The government accepts the recommendation, agreeing to write to the Committee by March 2021. It confirms provisional fraud and error assessments are in place, with ongoing improvement of evidence, and outlines its risk-based and post-payment compliance approach for recovering incorrectly claimed grants.
Read full response →
HM Treasury
15
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
Two further groups that were largely excluded from support were freelancers and owner-managers of companies. Freelancers generally have short-term contracts with employers and as a result many might not have been on a company’s PAYE system at the cut-off point for furlough. HM Treasury said that was aware of the …
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Two further groups that were largely excluded from support were freelancers and owner-managers of companies. Freelancers generally have short-term contracts with employers and as a result many might not have been on a company’s PAYE system at the cut-off point for furlough. HM Treasury said that was aware of the issues, but that the lack of data held by HMRC and the fact that the tax system wasn’t designed to regularly capture information on such people made it particularly difficult to bring freelancers into the scheme. Some 0.4 million freelancers may have missed out on support from the 32 C&AG’s Report, para 14 33 Qq 73, 79 34 Public Accounts Committee, Oral Evidence: HM Revenue & Customs 2019–20 Standard Report, HC 690, Q 13 35 Qq 73–75, C&AG’s Report paras 2.9–2.10 14 Covid-19: Support for jobs first schemes.36 We also asked about owner-managers of companies who may have been excluded. HMRC explained that owner-managers qualify for the furlough scheme to the extent that they pay themselves through their PAYE system. It acknowledged that many owner-managers opted to pay themselves a small amount in this way, and rely predominantly on dividend income. HMRC maintained, however, that the schemes were not aimed at supporting investors for the loss of dividend income and that it did not hold sufficient information from tax return data to be able to distinguish between what is investment income and what is income in lieu of salary. We asked HMRC whether other sources of government data could be used to verify the eligibility for the schemes from those groups currently excluded; for example, information held by Companies House might distinguish between different types of dividend income. It said that this was something it had looked at closely over the years from a tax perspective but had not found a way of distinguishing between the different types of dividend income.37 Changes to the schemes created uncertainty
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Government response AI summary
The government accepts the recommendation, stating it has been implemented by investigating data sources for excluded groups and liaising with other departments. It reiterates that schemes prioritized existing HMRC data for verification and highlights ongoing efforts through the 10-year Tax Administration Strategy for better data.
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HM Treasury
18
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
Employees who were let go after 23 September 2020 can be rehired and furloughed again with CJRS extended, but if they were let go before that date then it would not be possible to furlough them. HM Treasury told us this was similar to the approach it took when the …
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Employees who were let go after 23 September 2020 can be rehired and furloughed again with CJRS extended, but if they were let go before that date then it would not be possible to furlough them. HM Treasury told us this was similar to the approach it took when the CJRS scheme was first announced in March 2020, as eligibility for that initial phase of the scheme was backdated to 28 February to include those made redundant just before the scheme was announced.50 We asked the Departments whether they were concerned there might be some perverse incentives for regional areas to stay in higher lockdown restrictions if it meant that greater funding from the employment support schemes was available as a result. HM Treasury told us that this was not something it was directly involved in, but that the sense it had was that most areas were keen to avoid the restrictions on normal life and economic activity that went with higher tiers owing to the potential damage to jobs, livelihoods and wellbeing.51 Costing the schemes and assessing value for money
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Government response AI summary
The government agrees with the recommendation and states it has implemented it, explaining that eligibility has been extended where possible while balancing fraud prevention. They highlight past actions and state they continue to explore further options.
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HM Treasury
19
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
We asked the Departments how much they expected the extended furlough scheme and the SEISS would cost the taxpayer on top of the £55 billion spent so far. HM Treasury told us that it was not responsible for forecasting the expected cost of the scheme, which would be published by …
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We asked the Departments how much they expected the extended furlough scheme and the SEISS would cost the taxpayer on top of the £55 billion spent so far. HM Treasury told us that it was not responsible for forecasting the expected cost of the scheme, which would be published by the Office for Budget responsibility in a few weeks. We were concerned that neither Department was able to provide any details on how much the extension to the schemes would cost. HM Treasury said the final costs would depend on take-up levels which in turn depended on labour market forecasts. It told us that it had a broad range of estimates, so it had a sense of what the maximum cost of the extended schemes might be and what range the costs were expected to be within, but we unable to provide the figures during our evidence session.52 We were concerned that, even if the OBR does the detailed number crunching, HM Treasury should at the very least be providing the Chancellor with some ballpark costings before implementing any government policies.53 46 Qq 97–98 47 HM Treasury, Further details of the Job Retention Bonus announced, available at: www.gov.uk/government/ news/further-details-of-the-job-retention-bonus-announced 48 Q 101 49 Q 38 50 Q 51 51 Q 99 52 Qq 15–17 53 Q 34 16 Covid-19: Support for jobs
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Government response AI summary
The government agrees with the recommendation and states it has been implemented, confirming that the Permanent Secretary to the Treasury wrote to the committee on 20 January 2021 outlining how HM Treasury will assess value for money. Revised costs will be set out at the …
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HM Treasury
20
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
HM Treasury asserted that this was a similar approach to that it had taken when introducing the original schemes in March.54 It told us that, at the height of the initial schemes in the spring, they cost around £10 billion per month, but that this had reduced “quite significantly” over …
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HM Treasury asserted that this was a similar approach to that it had taken when introducing the original schemes in March.54 It told us that, at the height of the initial schemes in the spring, they cost around £10 billion per month, but that this had reduced “quite significantly” over the period to October. It confirmed that it expected the cost of the extended schemes to be lower as a result of differences in the restrictions in place, but did not have the data available to be able to say by how much.55
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Government response AI summary
The government agrees with the recommendation and states it has been implemented, confirming that the Permanent Secretary to the Treasury wrote to the committee on 20 January 2021 outlining how HM Treasury will assess value for money. Revised costs will be set out at the …
Read full response →
HM Treasury
21
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
The total cost of the schemes is now estimated to be £76 billion, with OBR estimating that the extensions to the schemes will add an additional £21 billion to the total. We asked the Departments what calculations they had made of the value for money provided by the schemes. HM …
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The total cost of the schemes is now estimated to be £76 billion, with OBR estimating that the extensions to the schemes will add an additional £21 billion to the total. We asked the Departments what calculations they had made of the value for money provided by the schemes. HM Treasury told us that the introduction of the schemes in March did not lend itself to traditional cost-benefit analysis because “it was not a marginal change in policy” but “a major structural change” almost without parallel in recent history. It told us that at the point at which ministers had to decide whether to intervene in the economy the cost of doing so could not be known with any certainty. It explained that it had no way of predicting in March what the impact of the schemes would be, in part because it did not know how long the lockdown would last or what the future costs of the pandemic would be.56
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Government response AI summary
The government agrees with the recommendation and states it has been implemented, confirming that the Permanent Secretary to the Treasury wrote to the committee on 20 January 2021, outlining how HM Treasury will assess value for money for the extended schemes. Revised costs will be …
Read full response →
HM Treasury
22
Recommendation
Thirty-fourth Report - Covid-19: Suppor…
Accepted
The condensed timetable for introducing the schemes meant that a lot of the standard documentation that would accompany such a major policy initiative—business cases, options appraisal and detailed cost-benefit analysis—wasn’t undertaken back in the spring.57 HM Treasury asserted that the potential economic costs and human cost of large-scale unemployment if …
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The condensed timetable for introducing the schemes meant that a lot of the standard documentation that would accompany such a major policy initiative—business cases, options appraisal and detailed cost-benefit analysis—wasn’t undertaken back in the spring.57 HM Treasury asserted that the potential economic costs and human cost of large-scale unemployment if the schemes had not been introduced meant that they were necessary even if it was not possible to quantify this.58 We were nonetheless concerned that while there was a speedy intervention with the schemes initially it was important not to lose sight of the need to undertake value for money calculations on behalf of the taxpayer.59 54 Q 16 55 Qq 18–21 56 Q 36 57 C&AG’s Report, para 1.8 58 Q 36 59 Q 39 Covid-19: Support for jobs 17
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Government response AI summary
The government accepts the recommendation and states it has been implemented, confirming the Permanent Secretary to the Treasury wrote to the committee in January 2021 to outline the value for money assessment approach for the extended schemes. It details ongoing VFM evaluations for both CJRS …
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HM Treasury