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Implementing employment support schemes in response to the COVID-19 pandemic — National Audit Office (HC 862)

Summary

A report by the Comptroller and Auditor General of the National Audit Office, "Implementing employment support schemes in response to the COVID-19 pandemic," HC 862, Session 2019–2021, dated 23 October 2020, examining HM Treasury and HM Revenue & Customs. It reviews the implementation of the Coronavirus Job Retention Scheme (CJRS) and the Self-Employment Income Support Scheme (SEISS). Its key facts report £52.7bn in total costs up to 20 September 2020, 9.6 million jobs furloughed, and an HMRC upper estimate of £3.9bn of fraud and error on CJRS. The summary finds that the schemes were implemented quickly and ahead of schedule and states that as many as 2.9 million people were not eligible. The document closes with a correction dated 12 October 2020 changing a figure in paragraph 2.19 from one-third to 12%.

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                                               A picture of the National Audit Office logo




Report
by the Comptroller
and Auditor General




HM Treasury, HM Revenue & Customs




Implementing employment
support schemes in response
to the COVID-19 pandemic




HC 862   SESSION 2019–2021   23 OCTOBER 2020
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HM Treasury, HM Revenue & Customs




Implementing employment
support schemes in response
to the COVID-19 pandemic

Report by the Comptroller and Auditor General
Ordered by the House of Commons
to be printed on 21 October 2020
This report has been prepared under Section 6 of the
National Audit Act 1983 for presentation to the House of
Commons in accordance with Section 9 of the Act
Gareth Davies
Comptroller and Auditor General
National Audit Office
16 October 2020




HC 862 | £10.00
This report examines the role of HM Treasury and HM Revenue
& Customs (HMRC) in implementing the Coronavirus Job
Retention Scheme (CJRS) and the Self-Employment Income
Support Scheme (SEISS). The report considers how well the
schemes were implemented, recognising the need to deliver
at speed in response to the COVID-19 pandemic.




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009194    10/20    NAO
                                Contents
                                Key facts 4
                                Summary 5
                                Part One
                                HM Revenue & Customs’ implementation
                                of the employment support schemes 14
                                Part Two
                                Beneficiaries of the employment
                                support schemes 25
                                Part Three
                                Fraud and error affecting the employment
                                support schemes 42
                                Appendix One
                                Our audit approach 59
                                Appendix Two
                                Our evidence base 61                                                                               The National Audit Office study team
                                                                                                                                   consisted of:
                                Appendix Three                                                                                     James Ball, David Betteley,
                                International comparisons 65                                                                       Anthony Pitt, Tom Tyson, Nigel Vinson
                                                                                                                                   with support from Andrea Jansson
                                Appendix Four                                                                                      and Stephen Jobling, under the
                                Evolution of HM Revenue & Customs’                                                                 direction of Andy Morrison.
                                employment support schemes 67
                                                                                                                                   This report can be found on the
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4 Key facts Implementing employment support schemes in response to the COVID-19 pandemic




                        Key facts



                        £52.7bn £69.7bn £3.9bn
                        Total costs reported for   Combined total forecast   HM Revenue & Customs’
                        the Coronavirus Job        spend for CJRS and first   (HMRC’s) upper estimate
                        Retention Scheme (CJRS)    two grants of SEISS       of fraud and error on
                        and the Self-Employment                              CJRS to 20 September,
                        Income Support Scheme                                based on 5% to 10%
                        (SEISS) up to 20                                     fraud and error levels on
                        September 2020                                       £39.3 billion of payments.
                                                                             The 5% estimate equates
                                                                             to £2.0 billion




                        9.6 million       total jobs furloughed with 1.2 million employers (61% of those
                                          eligible) making at least one CJRS claim1

                        2 million         estimate of workforce (to nearest million) remaining furloughed
                                          based on employers surveyed, 7 to 20 September 2020

                        9%                proportion of furloughed employees in our survey telling us
                                          that they worked at their employer's request while furloughed

                        2.6 million       self-employed individuals made a first grant claim to the SEISS
                                          scheme (77% of those potentially eligible) to 31 July 2020

                        99.5%             CJRS claims paid within six working days

                        97.5%             SEISS claims paid within six working days

                        £278 million      amounts companies repaid voluntarily to HMRC for CJRS
                                          payments they did not need or took in error

                        £275 million      overpayments HMRC estimates it could recover on
                                          10,000 CJRS payments it believes are at high-risk of fraud



                        Note
                        1 The latest HMRC COVID-19 statistics are available at: www.gov.uk/government/collections/hmrc-
                          coronavirus-covid-19-statistics
Implementing employment support schemes in response to the COVID-19 pandemic Summary 5




     Summary



     Introduction
     1    On 20 March 2020 government announced the Coronavirus Job Retention
     Scheme (CJRS), followed on 26 March by the Self-Employment Income Support
     Scheme (SEISS) as part of its economic response to the COVID-19 pandemic.
     Our report refers to these as ‘the schemes’.

     2    Initially government’s overriding ambition for both schemes was to provide
     financial support to businesses and individuals as quickly as possible in the wake
     of the COVID-19 pandemic to protect jobs. In summary:

     •    CJRS: The initial aim was to provide rapid financial support to help firms
          continue to keep people in employment. Employers could put workers on
          temporary leave and government would pay them cash grants of 80%
          of employees’ salaries, up to £2,500 a month (CJRS 1). From July and
          under a ‘flexible furlough’ phase (CJRS 2), the objectives changed to give
          firms flexibility to support the recovery and in August, by introducing an
          employer contribution.

     •    SEISS: The aim was to provide fast grant payments to self-employed
          individuals whose businesses had been ‘adversely affected’ by the pandemic.
          The grant was intended to help support self-employed individuals with
          living costs, but they could also continue to work, start a new trade or take
          up a new employment. A second SEISS grant was available to claim from
          17 August 2020.

     3     The schemes were only open to existing taxpayers who met certain
     eligibility criteria. At 20 September 2020 CJRS had supported 1.2 million
     employers and 9.6 million jobs, with claims totalling £39.3 billion. The Office for
     Budget Responsibility (OBR) expects CJRS claims to reach £54.5 billion in total.
     By 20 September 2020 the SEISS scheme had at least 2.6 million claims, totalling
     £13.4 billion. OBR forecasts SEISS claims will total £15.2 billion, bringing total
     forecast spending for these schemes to nearly £70 billion. The CJRS scheme will
     end on 31 October. On 24 September 2020 government announced a new Job
     Support Scheme (JSS) intended to provide help for short-time working (reduced
     hours) and an extension to SEISS until April 2021. On 9 October government
     announced an extension to JSS (referred to as ‘expanded JSS’) to support
     companies whose businesses are legally required to close as a direct result of
     coronavirus restrictions.
6 Summary Implementing employment support schemes in response to the COVID-19 pandemic




                       4    HM Revenue & Customs (HMRC) and HM Treasury – collectively referred
                       to as ‘the Departments’ – were responsible for advising ministers on the design of
                       the schemes. HM Treasury led on policy design and HMRC led on administrative
                       design and then the implementation and administration of the schemes.


                       Scope of this report
                       5    The scale and nature of the current COVID-19 pandemic, and government’s
                       response to it, is unprecedented in recent history. This report considers how
                       well HM Treasury and HMRC have managed risks thus far in implementing these
                       schemes. This report considers whether the Departments have:

                       •     managed design and delivery risks effectively in implementing the
                             schemes. Part One assesses the Departments’ implementation of these
                             schemes against evaluative criteria that draw upon our work analysing
                             the government’s response to other crises;

                       •     understood whether the schemes are reaching the people intended.
                             Part Two examines the Departments’ approach to ensuring that the
                             schemes were reaching their intended recipients, whether they had a good
                             understanding of the consequences of their design decisions and what the
                             impact of those decisions has been; and

                       •     managed fraud and error risks effectively. Part Three considers how far
                             fraud and error risks have been addressed.

                       6    This report does not consider HMRC’s other COVID-19 interventions
                       designed to support businesses, including the Coronavirus Job Retention Bonus
                       and Eat Out to Help Out, or the relationship between the schemes and wider
                       government support such as business loans and benefits. We have previously
                       reported on the Bounce Back Loans Scheme.1

                       7   Our audit approach is described in Appendix One and the evidence base we
                       used is in Appendix Two. Appendix Three provides international comparisons and
                       Appendix Four shows how the schemes have evolved over time.




                       1   Comptroller and Auditor General, Investigation into the Bounce Back Loan scheme, Session 2019–2021,
                           HC 860, National Audit Office, October 2020.
Implementing employment support schemes in response to the COVID-19 pandemic Summary 7




     Key findings

     Designing and implementing the employment support schemes
     8    The Departments implemented the schemes quickly and ahead of schedule.
     Ministers set clear objectives that both schemes should be delivered quickly.
     Government announced the CJRS scheme on 20 March 2020. HMRC planned
     to make initial CJRS payments by the end of April 2020, but made it available
     to employers from 20 April, just a month after the government’s announcement.
     Government announced the SEISS scheme on 26 March. HMRC intended to
     make SEISS payments by the beginning of June but made the scheme available
     from 13 May, two weeks early. HMRC accelerated the original timetable for the
     SEISS scheme, recognising the need to provide financial support to eligible
     customers as quickly as possible (paragraphs 1.1 to 1.4 and Figure 2).

     9     The scale of the challenge was potentially increased by the lack of
     pandemic contingency planning and existing employment support schemes
     the Departments could easily adapt. Instead, HM Treasury told us it drew on
     economic contingency planning designed for financial rescues, developed
     following the credit crisis; and draft policy work on wage subsidy schemes
     and lessons learned from other countries, such as Germany, in implementing
     short‑time working schemes (paragraph 1.7).

     10 Given the compressed timeframe to design each scheme, the Departments
     could not follow standard processes comprehensively. In the circumstances, the
     Departments had insufficient time to produce detailed documentation – such as
     business cases, options appraisal and detailed cost-benefit analysis – that we would
     normally expect to be available to support key investment decisions. Instead, policy
     and operational officials worked closely together to rapidly develop employment
     support schemes that they could implement quickly. HMRC agreed clear principles
     for both schemes, including that the claim process should be simple and the grant
     calculation straightforward. HMRC used existing supplier relationships and contracts
     to develop the IT solution (paragraphs 1.5 to 1.6, 1.8, 1.9).

     11   HMRC implemented the schemes quickly through strong project
     management, risk management and service testing. Detailed planning and project
     management were central to rapid delivery. The Departments took a structured
     approach to identify and manage risk, using government’s Orange Book on risk
     management. HMRC’s IT staff took four weeks to implement the CJRS scheme,
     compared with an average of around 18 months that they normally need to deliver
     major IT projects. HMRC tested customer journeys and developed guidance for
     customers and training for staff to enable the effective operation of the schemes
     (paragraphs 1.10 to 1.18 and Figure 3).
8 Summary Implementing employment support schemes in response to the COVID-19 pandemic




                       12 Other countries, at the start of the pandemic, were able to adapt existing
                       schemes to deliver support more quickly. We contacted 20 national audit
                       institutions to understand how their respective governments designed and
                       implemented similar employment support schemes. Most countries implemented
                       their schemes faster than CJRS, but almost all had pre-existing arrangements
                       they could adapt. Countries such as Germany and France already had short‑time
                       work schemes in place to support companies with salary costs at times of
                       economic crisis (paragraphs 1.19 to 1.23 and Figure 4).


                       Supporting the people intended
                       13 The schemes have been largely successful in protecting jobs through the
                       lockdown period, with at least 12.2 million people benefitting from support.
                       The CJRS scheme supported 9.6 million jobs and, at its peak in May, around
                       30% of the workforce eligible for the scheme across the UK were furloughed.
                       The SEISS scheme supported at least 2.6 million self-employed people, around
                       77% of the 3.4 million people potentially eligible for the scheme. The number of
                       jobs furloughed fell to around five million by the end of July, while unemployment
                       levels remained broadly stable at around 4% of the workforce. This suggests
                       the schemes provided an effective bridge during the early phases of the
                       pandemic, allowing some people to return to work when the national lockdown
                       eased. However, the number of people on payrolls fell by 0.5 million between
                       March and April. We found one in five people we surveyed who were in paid
                       employment were not furloughed but had their pay or hours reduced, presumably
                       because they could continue to work in some capacity through lockdown without
                       their employer drawing on CJRS (paragraphs 2.12 to 2.16, Figure 7 and Figure 9).

                       14 A combination of policy decisions and constraints in the tax system
                       meant that as many as 2.9 million people were not eligible for the schemes.
                       People were excluded from the schemes either because of ministerial decisions
                       about how to target the schemes, or because HMRC did not have data needed
                       to properly guard against the risk of fraud. The precise number of people needing
                       help is uncertain because not everyone will have been sufficiently affected by the
                       pandemic to need financial support. Groups ineligible for support were as follows:

                       •     CJRS: an estimated 1.1 million people were ineligible because HMRC had
                             limited data to verify claims. HMRC has not estimated the number affected
                             but third-party estimates suggest around 0.4 million short-term contractors
                             moving between jobs were ineligible. Additionally, 0.7 million limited company
                             directors could not claim for company dividends paid instead of salaries.
                             The tax system treats company dividends as investment income and
                             HMRC cannot separately identify those payments from other investments.
                             However, company directors could still claim for earnings registered with
                             the Pay-As-You-Earn scheme and apply for bounce back loans.
Implementing employment support schemes in response to the COVID-19 pandemic Summary 9




     •      SEISS: HMRC estimated that around 1.6 million self-employed people did not
            meet the scheme’s policy criteria. Of these, 1.4 million people had trading
            profit that was less than their non-trading income; 0.5 million people had
            a trading profit of £0 or made a loss; and 0.2 million people were ineligible
            because their trading profits exceeded £50,000.2

     •      SEISS: third-parties estimated a further 0.2 million people who were newly
            self-employed in 2019-20 were ineligible because they had not yet submitted
            a Self Assessment return. Therefore, HMRC did not have verified records on
            which to confirm their activity and estimate their income. This figure could
            have been greater had lockdown occurred further from the January 2020
            deadline for annual tax Self Assessment returns. HMRC intends to introduce
            more frequent (quarterly) reporting for self-employed people under Making
            Tax Digital from April 2023 (paragraphs 2.6 to 2.11 and Figure 6).

     15 The Departments considered the equality implications of their design
     decisions. The Departments carried out equality impact assessments for both
     schemes. They identified that 12% of self-employed workers had a Black,
     Asian or minority ethnic background and undertook work to raise awareness of
     the SEISS scheme with stakeholder groups. HMRC’s monitoring data provide
     information on the age and gender profiles of people covered by the schemes but
     do not report on other protected characteristics, such as ethnicity, as these data
     are not necessary for the administration of taxes. The data show that a greater
     proportion of younger workers were furloughed. A greater proportion of men were
     furloughed initially, but this reduced over time and by September there was little
     difference between men and women. In August 2020 HMRC began tendering
     for survey and qualitative research to gain additional feedback on the schemes
     (paragraphs 2.17 to 2.22 and Figure 10).

     16 In the long-term the number of jobs protected will depend on wider
     government support. Around two million (9%) workers remained furloughed in
     mid-September. Retail, accommodation and food services, manufacturing and
     construction have claimed the most financial support from the schemes to date.
     Many of these sectors have also utilised bounce back loans. The long-term
     impact of the schemes is likely to be difficult to disentangle from the effects of
     wider government support and the ongoing impact of COVID-19. The new JSS is
     intended to support short-time working between November 2020 and April 2021.
     Government has also announced an extension to SEISS over the period and
     further furlough support (expanded JSS) for businesses legally required to close
     due to lockdown restrictions (paragraphs 2.23 to 2.28 and Figure 11).




     Post publication this page was found to contain an error which has been corrected (Please find Published Correction Slip)
10 Summary Implementing employment support schemes in response to the COVID-19 pandemic




                       Managing fraud and error
                       17 In implementing the schemes, the Departments accepted there may be a
                       higher risk of fraud and error than normal, in order to provide rapid financial support
                       and protect jobs. Recognising the priority placed on speed, the Departments have
                       tolerated greater risk than normal. Limiting the schemes only to taxpayers with
                       current records has helped to reduce the risk of certain types of fraud significantly
                       because applicants had to be known to HMRC and had to be paying tax. However,
                       the aim to make payments within six working days limited HMRC’s ability to carry
                       out pre-payment checks. For example, HMRC did not validate some data upfront
                       or require details of the amounts claimed for every employee before making
                       payments. It made a systematic assessment of the risks and prospects of recovery
                       from different groups and prioritised its response for the time constraints it faced.
                       HMRC did not have the enforcement powers to recover overpayments by the time
                       the schemes went live. It took a calculated risk that powers would be granted and
                       received these in July 2020 (paragraphs 3.5 to 3.9 and Figure 15).

                       18 There is evidence that significant levels of furlough fraud occurred, with
                       limited controls over employers’ arrangements with employees. Employers
                       committed furlough fraud if they claimed furlough payments but kept employees
                       working for them against CJRS rules. HMRC’s fraud hotline has received more
                       than 10,000 reports, mainly of furlough fraud, but it has not yet carried out survey
                       work or random sampling to estimate the scale of the issue. Of furloughed people
                       responding to our survey, 9% admitted to working in lockdown at the request
                       of their employer, and against the rules of the scheme. Other surveys indicate
                       between 7% and 34% of furloughed employees surveyed worked at the request
                       of their employer while furloughed. HMRC concluded it would tackle fraud through
                       whistleblowing and retrospective compliance work. However, employees would not
                       have known if their employer was part of the government furlough scheme unless
                       their employer had informed them. Controls such as contacting employees directly
                       or publicising which companies claimed furlough payments were considered but
                       rejected. HMRC concluded it would have been unrealistic to contact employees
                       because of the large numbers involved, and that publishing a list of employers
                       risked deterring too many legitimate claims. HMRC intends to publish the names
                       of employers claiming the JSS scheme and to notify employees through their
                       personal tax accounts when an employer has claimed JSS (paragraphs 3.10
                       to 3.21 and Figure 18).
Implementing employment support schemes in response to the COVID-19 pandemic Summary 11




     19 The scale of total fraud and error is likely to be considerable, particularly for
     CJRS, but HMRC will not know the actual levels for some time. HMRC’s planning
     assumption was that total fraud and error could range from 5% to 10% on CJRS,
     which would equate to £2.0 billion to £3.9 billion based on payments made by
     mid-September. For the first SEISS grant, HMRC’s planning assumption was that
     fraud and error could range from 1% to 2%. Both these estimates were largely
     assumption-based rather than evidence-based. At the end of September 2020,
     HMRC was developing a programme of work to understand the full scale of fraud
     and error. It aims to refine its provisional estimates again by the end of 2020 and in
     spring 2021 as it undertakes more compliance work and receives more operational
     intelligence. HMRC does not expect to have a complete assessment of the total
     fraud and error it needs to tackle until the end of 2021 at the earliest. HMRC is
     monitoring the levels of organised criminal activity including the stealing of taxpayer
     identities and coercion of taxpayers to make fraudulent claims. To date, HMRC has
     blocked only £10 million of CJRS claims. It intends to measure its effectiveness in
     mitigating the risk in due course (paragraphs 3.20 to 3.28 and Figure 16).

     20 HMRC’s initial assessment was that it must divert resources from tax
     compliance activities to tackle fraud on these schemes. HMRC estimates it could
     deploy around 500 staff to recover £275 million on 10,000 of the most high-risk
     CJRS grants awarded. While this offers a high rate of return, HMRC estimates
     that redeploying staff will come at a cost to tax revenue because HMRC’s
     tax compliance work offers even higher rates of return. In June 2020 HMRC
     concluded that its only option to address grant fraud and error was to redeploy
     existing, trained staff. It concluded it could not bring in additional staff because
     they would take up to 18 months to recruit and train to undertake complex
     compliance work, and this would be too long. In October 2020 HMRC told us
     that with the announcement of new schemes, and better understanding from the
     operation of SEISS and CJRS, it was now planning to use private contractors to
     supplement its compliance capacity where necessary. HMRC does not yet know
     the scale of fraud and error it needs to tackle to any degree of certainty, and it is
     not yet clear for how long its compliance activity will be affected by the COVID-19
     pandemic (paragraphs 3.29 to 3.31 and Figure 19).


     Conclusion on value for money
     21 HM Treasury and HMRC met their objective to rapidly implement the
     schemes and the Departments should be commended for making these available
     ahead of schedule. The schemes were relatively straightforward to apply for, and
     payments quickly reached those who applied. Indications are that this has helped
     to protect jobs in the short term and the numbers of people moving from furlough
     arrangements back to work are encouraging. However, many other people have
     lost earnings and have not been able to access support. The long-term impact
     of the schemes will also depend on wider financial support and the ongoing
     impact of COVID-19.
12 Summary Implementing employment support schemes in response to the COVID-19 pandemic




                       22 A key value-for-money test for these schemes will be how far the
                       Departments can mitigate fraud and error. The pace at which the schemes
                       were designed and implemented meant the Departments had to accept a greater
                       risk than normal. As such, there are likely to be considerable amounts of fraud
                       and error, particularly on the furlough scheme. Limiting applications to existing
                       taxpayers should have reduced the fraud risk, but HMRC could have done more to
                       make clear to employees whether their employer was part of the furlough scheme.
                       In future, the Departments should do more while employment support schemes
                       are running to protect employees and counter acts of fraud. The Departments will
                       need to ensure sufficient resources are committed to recover money where it is
                       cost-effective to do so.


                       Recommendations
                       23 To learn from their experience in implementing the employment support
                       schemes, and to protect taxpayer interests HM Treasury and HMRC should:

                       a     consider how to ensure that reliable data covering as many people as
                             possible can be used to determine eligibility so that fewer people suffering
                             loss of income are excluded from future similar schemes;

                       b     monitor how far employment support schemes protect jobs, recognising that
                             the approach may need to adapt rapidly in response to how the pandemic
                             evolves over the coming months;

                       c     increase the emphasis on using preventative controls for tackling fraud and
                             error in the new schemes. Where appropriate for future schemes, carry out
                             more direct work with employees to ensure employers treat them according
                             to scheme rules, and increase visibility of which employers use employment
                             support schemes;

                       d     more quickly assess the total value of error and fraud; and explore the
                             feasibility of commencing assessment activity earlier for future schemes so
                             that some testing is undertaken while schemes are live;

                       e     review whether a faster programme of recruitment and training can be
                             provided for grant compliance staff, recognising that the activity may differ
                             to tax compliance work; and

                       f     review how to organise HMRC’s compliance response to ensure that
                             sufficient resources are committed to recover overpayments and fraudulent
                             payments on both schemes where it is cost-effective to do so.
Implementing employment support schemes in response to the COVID-19 pandemic Summary 13




      24 As the COVID-19 pandemic continues, leading to ongoing uncertainty,
      the Departments may need to develop longer-term plans to support businesses
      and jobs which will involve balancing speed of response with risks to value for
      money. This includes targeting support to those who need it, treating employees
      in accordance with the scheme rules, and reducing fraud and error. In balancing
      these, the Departments should:

      g    ensure that their consideration of options, including under the JSS and
           extended schemes, are sufficiently well-documented to demonstrate how
           risks to value for money have been considered and resultant risks are clearly
           understood and managed;

      h    specify how performance and value for money will be judged as the
           schemes progress, monitoring outcomes and adapting arrangements quickly
           if required; and

      i    consider how HMRC should organise its systems and capabilities to provide
           this targeted support, which may require different choices in digitising the
           tax system, more frequent filing of tax return data, better linking of customer
           records, and changes to customer services.
14 Part One Implementing employment support schemes in response to the COVID-19 pandemic




                        Part One



                        HM Revenue & Customs’ implementation of the
                        employment support schemes
                        1.1 In late March 2020 the government announced two UK-wide employment
                        support schemes in response to the coronavirus crisis. The schemes,
                        administered by HM Revenue & Customs (HMRC) following HM Treasury’s
                        direction, were:

                        •     The Coronavirus Job Retention Scheme (CJRS): to provide grant
                              payments to employers to help firms continue to keep people in employment.
                              Employers could put workers on temporary leave and the government would
                              pay them cash grants of 80% of employees’ salaries, up to £2,500 a month.
                              Phase 1 (CJRS 1) of the scheme operated to the end of June 2020. From
                              July to October 2020 a modified, second phase (CJRS 2) allowed employers
                              to bring employees back to work part-time.

                        •     The Self-Employment Income Support Scheme (SEISS): to provide a
                              grant payment to self-employed individuals whose business has been
                              ‘adversely affected’ by the pandemic. The grant was intended to help
                              support self‑employed individuals with living costs, and they could continue
                              to work, start a new trade or take up a new employment. A second SEISS
                              grant was available to claim from 17 August 2020.

                        1.2 The schemes are part of a wider government response targeting businesses
                        and individuals (Figure 1).3




                        3   Our May 2020 report on government’s response to COVID-19 gives a fuller description of its crisis response.
                            See Comptroller and Auditor General, Overview of the UK government’s response to the COVID-19 pandemic,
                            Session 2019-21, HC 366, National Audit Office, May 2020.
                            Implementing employment support schemes in response to the COVID-19 pandemic Part One 15




Figure 1
The schemes are part of a wider portfolio of government support
The schemes provided grant support for businesses and for individuals during the pandemic


    Wider context of government support for businesses and individuals

     Support for businesses                                                   Support for individuals
     Loans and liquidity.                                                     Benefits and sick pay.
     Grants and other funding support.                                        Direct support to individuals and households.
     Additional reliefs.                                                      Deferring tax payments.
     Support for retaining jobs –                                             Support for self-employed people –
     Coronavirus Job Retention Scheme (CJRS).                                 Self-Employment Income Support Scheme (SEISS).




    HM Revenue & Customs
    employment and income
    support interventions
    announced March 2020


     Coronavirus Job Retention Scheme                                         Self-Employment Income Support Scheme
     Phase One (CJRS 1) March to June 2020                                    Two grants paid between April and October 2020 to
                                                                              eligible self-employed people who had:
     Employers received grant payments for their furloughed
     employees up to 80% of their salary, capped at £2,500                    •   traded in the 2018-19 tax year;
     per month. Employer can top up voluntarily.
                                                                              •   trading profits up to £50,000;
     Phase Two (CJRS 2) July to October 2020
                                                                              •   at least half of their income from trading sources; and
     Employers were expected to contribute an increasing
     proportion of costs:                                                     •   continued to trade in 2019-20 and expected to
                                                                                  continue in 2020-21.
     •   July and August 2020: 80% of salary, capped
                                                                              First grant was for 80% of three months of an individual’s
         at £2,500 per month. From August, employer
         pays employers National Insurance and                                trading profits capped at £7,500.
         pension contributions.                                               Second grant was for 70% of three months of an
                                                                              individual’s trading profits capped at £6,570.
     •   September 2020: 70% of salary, capped at £2,187.50
         per month. Employer tops up to at least 80%.

     •   October 2020: 60% of salary, capped at £1,875 per
         month. Employer tops up to at least 80%.



Notes
1   For information on the government’s initial response to the Coronavirus pandemic, see Comptroller and Auditor General, Overview of the UK
    government’s response to the COVID-19 pandemic, Session 2019-21, HC 366, National Audit Office, May 2020.
2    CJRS 2 is also referred to as the Flexible Furlough scheme.
3    On 24 September 2020, the Government announced that it was creating the Job Support Scheme to replace the Coronavirus Job Retention
     Scheme and was extending the Self-Employment Income Support Scheme. Further information on these developments can be found at:
     www.gov.uk/government/publications/winter-economy-plan/winter-economy-plan

Source: National Audit Office analysis of HMRC and other government departments’ information
16 Part One Implementing employment support schemes in response to the COVID-19 pandemic




                        The Departments implemented the schemes quickly and ahead of
                        their schedule
                        1.3 Ministers asked HM Treasury and HMRC to develop schemes to protect
                        jobs and for these to be operational very quickly. The Departments were set clear
                        targets for each scheme:

                        •    CJRS: to build and launch a claims service before the end of April 2020,
                             with claims being processed and paid within six working days.

                        •    SEISS: to build and launch a claims service by the beginning of June 2020,
                             with at least 80% anticipated to claim, and claims processed and paid
                             within six working days.

                        1.4 The Departments implemented both schemes ahead of schedule, with CJRS
                        available to employers from 20 April and SEISS to the self-employed from 13 May.
                        HMRC accelerated the original timetable for the SEISS scheme by almost two
                        weeks, recognising the need to provide financial support to eligible taxpayers
                        as quickly as possible. The two new digital services could be accessed from the
                        GOV.UK website.


                        Developing the strategic response
                        1.5 Initial strategy work focused on CJRS. HMRC and HM Treasury officials
                        worked collaboratively to develop the response under lockdown conditions,
                        engaging regularly with senior ministers. Policy and operational staff in both
                        Departments worked closely to ensure that policy choices were feasible, seeking
                        to balance the need to implement support for people quickly with the need to
                        guard against fraud.

                        1.6 HMRC agreed clear design principles for the schemes including that the
                        claim process should be simple, that the data used to determine eligibility should
                        be easy to obtain and the grant calculation straightforward. The Departments
                        recommended that only people and businesses with an existing taxpayer record
                        could apply for support to reduce the risk of fraud.

                        1.7 The Departments had little contingency planning for a pandemic and
                        limited experience of designing schemes of this type and scale. Contingency
                        planning for pandemics had focused on the public health response and not
                        on the economic response. HM Treasury told us it drew instead on economic
                        contingency planning for financial rescues, draft policy work on wage subsidy
                        schemes and short-time working schemes, and lessons learned material provided
                        by German counterparts.
Implementing employment support schemes in response to the COVID-19 pandemic Part One 17




     Devising robust plans and governance
     1.8 Given the compressed timeframe to design each scheme, the Departments
     could not follow standard processes comprehensively. In the circumstances,
     the Departments had insufficient time to produce the detailed documentation
     – such as business cases, options appraisal and detailed cost-benefit
     analysis – that we would normally expect to be available to support key
     investment decisions.4 HMRC’s Accounting Officer accepted the Department’s
     responsibility for delivering CJRS grants following verbal advice on the legality,
     propriety, deliverability and value for money of the scheme from his officials on
     20 March 2020, just prior to the Chancellor’s announcement of the scheme.
     However, due to time constraints, HMRC’s Accounting Officer did not receive
     formal written advice on the legality, propriety, deliverability and value for money
     of the scheme until after the Chancellor’s announcement.

     1.9 HMRC moved quickly to put effective governance arrangements in place, with
     core project teams set up to work on both schemes. It used its experience from
     EU Exit work and the Statutory Sick Pay Rebate scheme to inform its approach.
     HMRC deployed staff familiar with EU exit governance arrangements, with high
     levels of engagement from senior staff. HMRC appointed a senior responsible
     officer at director-general level and created a dedicated director‑led COVID-19
     response unit. There was a clear escalation route to HMRC’s senior management
     with its Accounting Officer involved in decision-making. HM Treasury officials
     worked with HMRC programme leads and attended meetings. HMRC’s Internal
     Audit function which provided support and assurance to the schemes noted no
     significant issues with the Departments’ governance approach.


     Implementing the schemes
     1.10 HMRC implemented a structured approach to managing and recording
     project progress, risks, issues and decision-making for the schemes, making
     use of the government’s Orange Book on risk management best practice.
     HMRC also consulted with other government departments familiar with good
     practice in administering grant programmes.

     1.11 In challenging circumstances, HM Treasury and HMRC staff worked long
     hours, at weekends and through the Easter period to develop the schemes.
     HMRC made use of its existing supplier contract to build the digital systems
     for the schemes. The demands on the Departments’ core project teams were
     considerable with its IT project team reporting it completed the work in just
     four weeks. HMRC’s IT staff told us major IT projects normally take 18 months
     to 21 months to deliver, while small projects normally take between 8 months
     and 13 months.




     4   See HM Treasury, Guide to Developing the Business Case, 2018 at: https://assets.publishing.service.gov.uk/
         government/uploads/system/uploads/attachment_data/file/749086/Project_Business_Case_2018.pdf
18 Part One Implementing employment support schemes in response to the COVID-19 pandemic




                        1.12 HMRC developed comprehensive customer journey mapping which it tested
                        internally and with tax agents and developed guidance for customers and staff,
                        providing additional online training.

                        1.13 HMRC identified that developing the schemes at pace had caused some
                        difficulties. For example:

                        •    Record-keeping of key documents such as process maps was not always
                             controlled and internal reviewers found gaps in the logging of project risks,
                             although HMRC told us these omissions were minor.

                        •    Guidance to front-line staff was sometimes issued with little notice due to
                             the delivery timescales and HMRC identified issues with staff compliance
                             with the guidance. Changes to guidance were not always communicated
                             clearly, meaning staff used it inconsistently, which increased the risk of
                             fraud and miscommunication. Some staff failed to take customers through
                             security processes or read out key statements to customers.

                        •    The planned model for processing claims did not work as anticipated at first.
                             HMRC planned a three-tiered approach in which certain staff would process
                             simple claims, with more experienced staff at a second and third tier dealing
                             with more complicated or higher risk claims. Roles and responsibilities
                             for each tier were unclear, resulting in customer calls being unnecessarily
                             escalated and placing pressure on upper tiers. At one point, 80% of SEISS
                             calls were handed to a higher tier. HMRC believes that earlier involvement
                             of front-line operations teams in the work of the project development teams
                             would have improved implementation. It revised its three-tier model from
                             June 2020 and told us that it became more efficient. HMRC has also since
                             taken steps to clarify advisor roles and responsibilities.


                        Measuring and evaluating performance
                        1.14 HMRC developed performance dashboards for reporting CJRS and SEISS
                        progress to support management decision-making, and it published statistics
                        on the take-up of schemes. Dashboards were reported regularly to HMRC’s
                        executive management with information on scheme take-up, claim values,
                        project risks and ‘risk profiling’ of fraudulent claims.

                        1.15 HMRC achieved most of its early ‘ambition criteria’ for the schemes
                        (Figure 2). The vast majority of payments were processed within target
                        timeframes, meeting the key objective to get financial support to claimants
                        quickly. HMRC was able to maintain processing performance and meet payment
                        targets despite, in the week of 11 May 2020, receiving over 2.5 million claims for
                        support under the two schemes.
Implementing employment support schemes in response to the COVID-19 pandemic Part One 19




     Figure 2
     HMRC performance against its early performance criteria
     HM Revenue & Customs (HMRC) achieved most of its early performance criteria


      Coronavirus Job Retention Scheme (CJRS)

     Criteria                                                  Performance
     Build, test and launch a claims service by                CJRS launched on 20 April 2020.
     20 April 2020.

     Make vast majority of payments within six                 99.5% of claims were processed within three
     working days, ensuring a risking window of                working days.3
     no more than 72 hours.1

     Deliver payments by 30 April 2020 for those               99.8% of claims were paid.
     who claimed by 23 April 2020.

     Enable access for agents.2                                Agents able to apply for CJRS on behalf
                                                               of employers.

      Self-Employment Income Support Scheme (SEISS)

     Criteria                                                  Performance
     Build and launch a claims service by                      SEISS was launched on 13 May, well ahead
     early June.                                               of schedule.

     80% take-up from eligible customers.                      77% claimed under SEISS 1 by 31 July.

     Customers paid within six working days.                   97.5% of SEISS payments were made within
                                                               six working days.3
     Notes
     1   A ‘risking window’ is the period allowed for HMRC to assess the risk of fraud attached to a claim and decide
         whether to investigate the claim further.
     2   HMRC permits agents to manage tax affairs on behalf of an individual or employer. An agent can be a
         professional accountant or tax adviser, a friend or relative, or someone from a voluntary organisation.
     3   Payments made by bank transfer (BACS) have a 72-hour processing window which meant that most claimants
         would have received their payment up to six working days from application.
     4   Performance data is for the period from scheme launch to August 2020.

     Source: National Audit Office analysis of HM Revenue & Customs information
20 Part One Implementing employment support schemes in response to the COVID-19 pandemic




                        1.16 HMRC carried out surveys of employers, employees and self-employed
                        people to understand levels of scheme awareness and understanding, and
                        customer experience. Most (94%) respondents to HMRC’s survey of just over
                        2,000 employers who had applied to the scheme said they were very or fairly
                        satisfied with the time taken to receive their money and only 1% described their
                        experience of applying for CJRS funds as very poor. HMRC’s weekly customer
                        satisfaction data for SEISS up to August 2020 found that 95% of claimants
                        were satisfied or very satisfied with their experience, with only 2% being
                        very dissatisfied.


                        Lessons learned
                        1.17 HMRC undertook lessons learned exercises for both schemes in late spring
                        and used findings to inform its ongoing delivery. Figure 3 uses our own analysis
                        of learning from previous crisis responses to assess the Departments’ approach
                        to designing and implementing these schemes. We saw particular strengths in the
                        following areas:

                        •    close working between policy development and operational experts, enabling
                             better understanding of design parameters and inclusion of operational
                             aspects of policy in plans from the outset;

                        •    clear governance structures, drawing on proven models;

                        •    detailed control frameworks, used to assess and prioritise controls through
                             the design and implementation of the schemes (albeit with some gaps);

                        •    detailed project management plans, which had milestones specified to the
                             hour at critical points; and

                        •    early mapping of customer journeys and testing of the approach through
                             process walkthroughs and beta-testing with customers.

                        1.18 HMRC is commissioning further research on its delivery of the
                        schemes and expects to use these results to inform its design of future services.
                        The Departments have not said whether they will commission an economic
                        evaluation of the additional impact of the schemes. HM Treasury told us that it
                        is conducting its own lessons learned exercises to identify how such employment
                        support schemes could be delivered at speed in the future.
Implementing employment support schemes in response to the COVID-19 pandemic Part One 21




     Figure 3
     Assessing the Departments’ implementation of the schemes using our core
     management cycle, adapted for a crisis scenario
     The Departments achieved a lot in a short time, but lessons can still be learnt

     Stage                            Factors indicating an effective response in a crisis2         NAO assessment

     Strategy                         Contingency plans in place before crisis.                               

                                      Clear objectives and success criteria.                                 

                                      Use evidence and work with others.                                     

                                      Develop exit strategy early.                                           

     Planning and governance          Assure business plans where possible.                                 

                                      Establish clear ownership and governance.                             

                                      Promote stability in, and manage demands on,                           
                                      the core response team.

                                      Clear and consistent communications.                                  


     Implementation                   Robust project management.                                            

                                      Effective controls and risk management,                                
                                      document decisions.

                                      Robust guidance for frontline staff and resources                      
                                      deployed responsively.

     Measurement                      Appropriate indicators of performance.                                 

                                      Collect data, improve arrangements over time and                       
                                      use several sources.

                                      Use data continuously in a crisis.                                    

     Evaluation and feedback          Evaluate during and after the crisis, identify                         
                                      lessons learnt and use these to modify crisis
                                      intervention and planning for next time.

     Notes
     1   Our classification of the Departments’ performance uses a three-point scale: Two ticks = good evidence,
         one tick = partial evidence. A cross indicates that we have not seen clear evidence or have seen evidence
         of poor performance in relation to the evaluative criteria.
     2   We have used the NAO’s core management cycle to organise our evaluative criteria drawing from our past
         reviews of government responses to humanitarian and financial crises. The management cycle sets out the
         main stages that departments should consider in designing and implementing programmes and highlights
         the importance of using evaluation and feedback.

     Source: National Audit Office analysis of HM Revenue & Customs information
22 Part One Implementing employment support schemes in response to the COVID-19 pandemic




                        Most other countries had existing employment support schemes,
                        and were able to implement support more quickly
                        1.19 The Departments looked at the experience in other countries to inform the
                        design of the schemes. The experience of other countries can also be used to
                        assess how the schemes could have been implemented more quickly, and the
                        types of support arrangements that enable a more rapid response.

                        1.20 In developing CJRS, the Departments referred to responses in other
                        countries in their discussions with ministers. They looked at several schemes
                        including Germany’s short-time work scheme, schemes in France, Canada,
                        Denmark, Sweden, New Zealand and Ireland but noted their direct application
                        to the UK might be limited given the different labour market and welfare contexts.

                        1.21 Many countries including Germany and France already had short-time
                        work schemes in place that could be built on in response to the pandemic.
                        These schemes allowed firms to temporarily furlough or reduce the hours of staff
                        at times of economic difficulty, with governments providing income support for
                        employees when not working. Based on correspondence with 20 international
                        audit institutions and other supporting evidence, we looked at how quickly a
                        sample of nine OECD countries with economies of comparable size to the UK
                        had implemented their job retention schemes (Figure 4). We found that other
                        countries implemented employment support schemes more quickly, but most
                        of these already had an existing scheme in place. Eight of the nine had schemes
                        they could adapt, while six reported setting up new schemes.

                        1.22 Our analysis suggested that the UK had relatively few eligibility criteria
                        for CJRS compared with other countries. Most countries required employers to
                        demonstrate a specified fall in turnover, and many required employers to top-up
                        wages or prohibited redundancies while the scheme was active. The Netherlands
                        prohibited executive bonuses, payment of dividends and repurchase of
                        own shares. The UK CJRS scheme did not make any such requirements of
                        employers (Appendix Three).

                        1.23 On 24 September 2020 the Chancellor announced a Winter Economy Plan
                        which included a six-month Jobs Support Scheme (JSS), starting in November, to
                        replace the CJRS scheme. The JSS scheme aims to provide help for short-time
                        working to support ‘viable jobs’. To qualify, employees must be working at least
                        one-third of their usual hours. The government will pay one-third of hours not
                        worked up to a cap, with the employer also contributing one-third. This will mean
                        employees earn a minimum of 77% of their normal wages, where the government
                        contribution has not been capped. The level of grant will be calculated based
                        on employee’s contracted salary, capped at £697.92 per month. The JSS will
                        be open to businesses across the UK even if they have not previously used the
                        furlough scheme.
Figure 4
International comparison: time to implement job retention schemes
Other countries implemented support more quickly, but most already had pre-existing schemes they could adapt

Country                                                                                                                                                                Scheme details

UK                                                                                                                                                                     New short-time
                                           UK                 UK                                                                       UK
                                                                                                                                                                       work scheme

Australia                                                                                                                                                              New wage
                                                                               AU                 AU                                   AU
                                                                                                                                                                       subsidy scheme

Canada                                                                                                                                                                 New wage subsidy
                                                              CA                                  CA                                                      CA           scheme (pre-existing
                                                                                                                                                                       short-time work scheme)
Denmark                                                                                                                                                                New short-time work
                       DK                                  DK DK                                                                                                       scheme (pre-existing
                                                                                                                                                                       short-time work scheme)
Ireland                                                                                                                                                                New wage subsidy
                                                         IE   IE     IE                                                                                                scheme (pre-existing
                                                                                                                                                                       short-time work scheme)
Netherlands                                                                                                                                                            New wage subsidy
                                          NL NL                                                   NL                                                                   scheme (pre-existing
                                                                                                                                                                       short-time work scheme)
US                                                                                                                                                                     New wage subsidy
                                           US                 US               US                                                                                      scheme (pre-existing
                                                                                                                                                                       short-time work scheme)
France                                                                                                                                                                 Pre-existing short-time
                        FR                                 FR FR
                                                                                                                                                                       work scheme

Germany                                                                                                                                                                Pre-existing short-time
                   DE DE DE
                                                                                                                                                                       work scheme

Sweden
                                                                                                                                                                       Pre-existing short-time
                                          SE SE                                                   SE
                                                                                                                                                                       work scheme

                   w/c 9 March       w/c 16 March       w/c 23 March      w/c 30 March        w/c 6 April        w/c 13 April      w/c 20 April       w/c 27 April


     Announced          Passed into law         Open to applicants

Notes
1   ‘Short-time work schemes’ and ‘wage subsidy schemes’ are different types of job retention scheme, designed to mitigate unemployment increases. Short-time work schemes subsidise employers
    for hours not worked by employees, while wage subsidy schemes subsidise employers for hours that are worked by employees or top-up the earnings of employees on reduced hours.
2    Where a country has both new and existing schemes, the dates relate to the implementation speed of the new scheme.
3    For the UK, the Coronavirus Act 2020 was passed into law on 25 March 2020, which empowered the Chancellor to issue a Direction on 15 April 2020 from
     HM Treasury to HM Revenue & Customs to develop and implement the Coronavirus Job Retention Scheme.

Source: National Audit Office analysis of data provided by the Supreme Audit Institutions contacted. OECD (2020) report: Job retention schemes during the COVID-19 lockdown and beyond.
Institute for Government report (2020): Coronavirus and unemployment: a five nation comparison. Government websites
                                                                                                                                                                                                 Implementing employment support schemes in response to the COVID-19 pandemic Part One 23
24 Part One Implementing employment support schemes in response to the COVID-19 pandemic




                        1.24 On 9 October 2020, the government announced an expansion to the
                        JSS to provide extra support to businesses legally required to close as a direct
                        result of coronavirus restrictions set by one or more of the governments in
                        the UK. Expanded JSS is broadly akin to the original CJRS with employers
                        expected to fully furlough employees. Employers are not required to contribute
                        to their employees’ wages apart from national insurance and minimum pension
                        contributions, where applicable. The government will pay up to two-thirds of
                        employee wages, capped at £2,100 per month.

                        1.25 In September, the government also announced that it would provide a further
                        taxable grant to self-employed people currently eligible for SEISS who continue
                        to actively trade and face reduced demand due to coronavirus. The initial lump
                        sum will cover three months’ worth of profits for the period from November to the
                        end of January 2021. The grant is worth 20% of average monthly profits, up to a
                        total of £1,875. An additional second grant, which may be adjusted to respond to
                        changing circumstances, will be available for self-employed individuals to cover
                        the period from February 2021 to the end of April 2021. Appendix Four sets out
                        the different levels of support for these schemes.
Implementing employment support schemes in response to the COVID-19 pandemic Part Two 25




     Part Two



     Beneficiaries of the employment support schemes
     2.1 This part considers how far the employment support schemes have
     supported businesses and people. It examines:

     •    how the schemes aimed to support business and individual taxpayers;

     •    why some existing taxpayers were ineligible for the schemes;

     •    the cost and impact of the schemes thus far;

     •    the extent to which the schemes have supported different demographic
          groups, regions and sectors; and

     •    the number remaining furloughed as the current schemes wind-down.


     How the schemes aimed to support business and individual taxpayers
     2.2 On 20 March, the Chancellor announced a package of economic
     support aimed at protecting jobs through the lockdown period, including the
     Coronavirus Job Retention Scheme (CJRS). This was followed on 26 March by
     his announcement of the Self-Employment Income Support Scheme (SEISS).
     The broad aim of the employment support schemes was to provide security for
     employers to retain employees and to protect the self-employed so that there
     would not be a large spike in unemployment and to give the UK the best chance
     of a rapid economic recovery.

     2.3 Figure 5 overleaf summarises the scope of the schemes. For the first phase
     of CJRS (CJRS 1), furloughed employees were not allowed to work, to avoid
     government supporting those employers not adversely affected by COVID-19.
     For CJRS 2, from July 2020, these aims shifted to allow furloughed workers
     back on a part‑time basis, encouraging firms to increase production and, where
     necessary, make redundancies if jobs had become unsustainable. Employers not
     already in the CJRS 1 scheme were not allowed to claim CJRS grants during this
     second phase.
26 Part Two Implementing employment support schemes in response to the COVID-19 pandemic




Figure 5
Policy objectives for CJRS and SEISS and their key eligibility criteria
Eligibility rules vary across the HM Revenue & Customs’ (HMRC’s) schemes

                         Coronavirus Job Retention Scheme (CJRS)                               Self-Employment Income Support Scheme (SEISS)

    Policy objective
                          CJRS 1: Provide rapid financial support to help firms                 Income support for self-employed people adversely
                          continue to keep people in employment.                                affected by the pandemic.
                          CJRS 2: Give firms flexibility to support the recovery and
                          from August, introduce an employer contribution.
                          Target private sector employers.



    Cut-off date to be
    registered in HMRC    19 March 2020                                                         23 April 2020
    tax records to        Real Time Information employer return including                       Extended deadline for 2018-19 Self Assessment tax
    be eligible           furloughed employees.                                                 return. Original deadline was 31 January 2020.



    Permitted working
                          CJRS 1 to 30 June 2020: Furloughed employees should                   Self-employed people can continue to work and claim a
                          not work.                                                             SEISS grant as long as their trade is adversely affected.
                          CJRS 2 from 1 July 2020: Furloughed employees can work
                          for any amount of time or shift pattern, with employers
                          claiming CJRS grant for employee hours not worked.
                          Employers only claim under CJRS 2 if there was a valid
                          claim under CJRS 1.



    Income or
                          No limit on employee earnings but maximum employer                    Trading profits of up to £50,000 and maximum
    trading profit
                          grant is capped.                                                      grant capped.
                          Employee can receive multiple support across
                          several employments.



    Excluded income
                          Discretionary elements of pay such as tips, bonuses                   Trading profits only – excludes other income from
                          and commission.                                                       earnings, property, dividends, savings, pension etc.
                          Non-monetary benefits like benefits in kind or benefits               Trading profits at least 50% of non-trading income.
                          received under salary sacrifice schemes that reduce
                          taxable pay.



    Extensions
    to eligibility        Employee must have been furloughed under CJRS 1 to be                 Can claim the second SEISS grant even if did not claim
                          furloughed under CJRS 2 from 1 July 2020.                             the first.
                          Deadline extended for employees to be registered on HMRC              Parents whose trading profits were affected in 2018-19
                          records from 28 February to 19 March 2020.                            following recent birth or adoption.
                          Parents returning to work after extended leave and military           Military reservists carrying out reservist activities for at
                          reservists returning to their employment after 10 June 2020           least 90 days in 2018-19 tax year.
                          (usual deadline for CJRS 1) allowed to be furloughed for first        Individuals subject to the loan charge arrangement.
                          time under CJRS 2.



Notes
1   Example eligibility criteria shown only. Other eligibility rules apply for both schemes.
2     Taxpayers previously subject to the loan charge arrangement and who had been granted until 30 September to submit their
      2018-19 tax return were allowed to apply for SEISS. Also see Gov.uk, Update on the implementation of the loan charge, August 2020 at:
      www.gov.uk/government/news/update-on-the-implementation-of-the-loan-charge

Source: National Audit Office analysis of HM Revenue & Customs’ and other government departmental information
Implementing employment support schemes in response to the COVID-19 pandemic Part Two 27




     2.4 The SEISS scheme was open to the self-employed and members of a
     partnership who claimed to have been ‘adversely affected’ by coronavirus and:

     •     had submitted their Self Assessment tax return on or before
           31 January 2020 for the 2018-19 tax year;5

     •     continued to trade in 2019-20; and

     •     intended to trade in 2020-21.

     2.5 Those claiming the second grant had to confirm that their business had
     been adversely affected on or after 14 July 2020. Unlike the first phase of CJRS,
     SEISS recipients were allowed to continue working.


     A combination of constraints in the tax system and policy decisions
     restricted eligibility for the schemes
     2.6 Combined, the employment support schemes had supported at least
     12.2 million jobs by 20 September 2020. HM Revenue & Customs’ (HMRC’s) data
     show that 1.2 million employers – 61% of those eligible – claimed a grant under
     CJRS. By 20 September 2020, CJRS had supported 9.6 million jobs. Of 3.4 million
     people potentially eligible for the SEISS scheme, 2.6 million (77%) claimed the
     first grant and 2.2 million had applied for the second grant by 20 September on the
     basis that the pandemic adversely affected their self-employed incomes.

     2.7 HMRC has estimated that 1.6 million people were ineligible for SEISS
     because of the decisions ministers took to restrict support to people whose
     main income came from self-employment and who earned up to £50,000.6
     However, other groups of people were rendered ineligible for support because
     the way the tax system has been set up limited the data HMRC could use to help
     it guard against fraud (Figure 6 overleaf). Third-party estimates suggest a further
     1.3 million people were excluded, although some may not have been adversely
     affected by the pandemic.

     2.8 To manage the risk of fraud, access to both schemes was restricted to
     taxpayers with current tax records, which meant that people who were between
     jobs or had recently become self-employed were not eligible. HMRC extended the
     cut-off date for CJRS to people being on an employer’s payroll from 28 February
     to 19 March 2020 – the day before the details of the scheme were publicly
     announced. HMRC estimates this benefitted at least 0.2 million extra employees.




     5   A self-employed person or partnership could be adversely affected by coronavirus for a variety of reasons such
         as illness or suspended trading, but no minimum level was specified. HMRC later extended the Self Assessment
         tax return deadline to 23 April 2020 – see paragraph 2.9.
     6   £50,000 is the Higher rate income tax threshold and the threshold at which Child Benefit tapers take effect.
28 Part Two Implementing employment support schemes in response to the COVID-19 pandemic




Figure 6
Groups excluded from the schemes
Significant numbers of people were potentially not able to access the schemes, many because of tax system constraints

Scheme                   Ineligible - Policy1                                           Ineligible - tax system constraints2        Total
Self-Employment          1.4 million                                                    0.2 million
Income Support           (less than 50% income from self-employment)                    (newly self-employed)
Scheme
(SEISS)                  0.5 million
                         (self-employment was loss making)
                         0.2 million
                         (income more than £50,000)

                         1.6 million3                                                   0.2 million                                 1.8 million

Coronavirus Job                                                                         0.7 million
Retention Scheme                                                                        (limited company directors paid
(CJRS)                                                                                  by dividend)
                                                                                        0.4 million
                                                                                        (short-term or freelancer workers
                                                                                        missing payroll)

                                                                                        1.1 million                                 1.1 million

Total                    1.6 million                                                    1.3 million                                 2.9 million


Notes
1   Policy decisions are those taken by the Departments to meet scheme objectives, including to target those people most likely to have
    been adversely affected by the pandemic. For example, for SEISS the decision that eligible people should earn 50% or more of
    their income from self-employment.
2   The principle that HMRC should use existing data on taxpayers for administrative ease and to help manage fraud risk also meant
    that some people were not eligible for support because HMRC did not hold sufficient tax records to support a claim.
3   For SEISS: The 1.6 million customers ineligible for SEISS on policy grounds is an HMRC estimate. A self-employed person could have multiple
    reasons for not being eligible for SEISS and could be in more than one of the three categories identified by HMRC. The 0.2 million newly
    self-employed ineligible is based on Office for National Statistics (ONS) data on the number of individuals becoming self-employed in 2019-20.
4   For CJRS: The 0.7 million limited company directors is an estimate provided in evidence to the June 2020 Treasury Select Committee and
    incorporated into its report. However, company directors could still claim for Pay-As-You-Earn registered earnings and apply for bounce back loans.
    Meanwhile, in its June 2020 report the Treasury Select Committee estimated the population of short-term or freelancer workers to be 0.8 million.
    ExcludedUK estimated 0.4 million of these were excluded.
5   A proportion of the groups listed here would not have claimed because they were able to continue to work.

Source: National Audit Office analysis of HM Revenue & Customs, Office for National Statistics, Treasury Select Committee and
ExcludedUK information
Implementing employment support schemes in response to the COVID-19 pandemic Part Two 29




     2.9 For SEISS, HMRC used self-assessment records up to and including
     the 2018-19 tax year, which meant that claims from around 0.2 million newly
     self‑employed people were not allowed. Around 47,000 self-employed people who
     had not submitted their 2018-19 Self Assessment tax return on time were allowed
     to claim provided they submitted their return by 23 April 2020. However, people
     who had already submitted their Self Assessment returns were not allowed to
     amend them in order to increase their SEISS payment.7 In addition, a significant
     number of limited company directors who were mainly remunerated through
     company dividends were excluded because this is not treated as earnings by
     the tax system and tax returns do not disaggregate these data from investment
     dividends. Very small (micro) businesses and private limited companies have
     taken up the majority of business bounce back loans, suggesting many company
     directors have been able to access alternative government support on behalf of
     their companies, albeit in the form of repayable loans rather than income.8

     2.10 The number of self-employed people excluded could have been greater
     had lockdown occurred further from the annual tax return deadline. Lockdown
     occurred just two months after the deadline to submit a Self Assessment return,
     which meant the time period affecting the newly self-employed was relatively
     small. HMRC’s Making Tax Digital programme should enable more frequent
     (quarterly) reporting of income and expenditure. However, modernising the
     tax system is an extremely complex undertaking. HMRC was originally due to
     implement the programme by April 2019 but it is now scheduled to be in place
     from April 2023 for the self-employed.

     2.11 Given the speed of their initial response to the crisis, the Departments
     were not able to fully work through the implications of their design decisions on
     different groups of taxpayers. Subsequently, the Departments adjusted processes
     and eligibility criteria, including:

     •     updating the online ‘eligibility checker’ – used by the self-employed to
           determine whether they would be eligible for SEISS. The details of some
           people who were late in filing tax returns were not available when the
           tool went live, and the checker concluded, wrongly, that some people
           were ineligible;

     •     allowing people on parental leave and around 200 military reservists to
           apply for both SEISS grants, even if they had not submitted a tax return
           in 2018-19. HMRC estimated that 10,000 people on parental leave may
           potentially be newly entitled by this adjustment but by late September only
           around 500 had applied; and

     •     HMRC manually entered the trading profits of 800 self-employed people
           to avoid a known technical issue preventing submission of their tax returns.


     7   Taxpayers could amend their returns for the calculation of tax due but amendments were disregarded for grant
         calculations to counter the risk of fraud.
     8   Comptroller and Auditor General, Investigation into the Bounce Back Loan Scheme, Session 2019-2021,
         HC 860, National Audit Office, October 2020.
30 Part Two Implementing employment support schemes in response to the COVID-19 pandemic




                        The cost and impact of the schemes
                        2.12 HMRC forecasts total grant spending for the CJRS and SEISS
                        schemes to reach £69.7 billion by the end of October 2020. It paid a total of
                        £39.3 billion in CJRS grants to 20 September 2020 and the Office for Budget
                        Responsibility (OBR) expects this to reach £54.5 billion by the end of the
                        scheme.9 By 20 September 2020, SEISS claims had reached £13.4 billion.
                        OBR forecasts total claims for the first two SEISS grants will reach £15.2 billion.

                        2.13 HMRC expects to spend around £98 million administering the schemes up
                        to March 2021. The CJRS scheme will cost around £53 million to administer, and
                        the SEISS scheme £45 million.

                        2.14 Data suggest the CJRS scheme has been successful in helping to protect
                        jobs in the short term:

                        •      The number of people in employment was broadly stable between April and
                               August 2020 (Figure 7).

                        •      The number of redundancies between April and June 2020 was far lower
                               than in the last global financial crisis: around 134,000 people were made
                               redundant between April and June 2020 compared with 311,000 people
                               made redundant between February and April 2009.

                        •      The number of furloughed jobs under the scheme has fallen steadily from
                               a peak of 8.9 million in May 2020 to around five million by the end of July,
                               while unemployment levels remained broadly stable at around 4% of the
                               workforce. The absence of a significant deterioration in employment up
                               to the end of July suggests that many furloughed employees returned to
                               work (Figures 7 and Figure 8 on page 32). The Office for National Statistics
                               (ONS) data also show that the furlough rate had fallen from around 30% of
                               the workforce of UK businesses in May 2020 to 9%, or around two million
                               employees, by mid‑September.10




                        9  Grants paid under CJRS and SEISS are taxable so the net cost to the Exchequer will be lower. Table 3.4 in
                           OBR’s July 2020 central estimate shows tax receipts of £5.2 billion for CJRS: Office for Budget Responsibility,
                           Fiscal sustainability report, July 2020, p58, available at: https://obr.uk/fsr/fiscal-sustainability-report-july-2020
                        10 Office for National Statistics, Business impact of Coronavirus (COVID-19) Survey, Waves 6 and 14, June and
                           October 2020, available at: www.ons.gov.uk/economy/economicoutputandproductivity/output/datasets/
                           businessimpactofcovid19surveybicsresults. Based on businesses that had not permanently stopped trading.
                           This survey source is different from HMRC’s own data on CJRS scheme take-up.
                             Implementing employment support schemes in response to the COVID-19 pandemic Part Two 31




Figure 7
People in employment and employments furloughed under the Coronavirus Job Retention
Scheme (CJRS), January to August 2020
Following a drop early on, the number of people in employment was stable during lockdown while the number of furloughed
jobs (employments) has since reduced from the April/May peak

Employees/employments (m)
35


30

          29.0              29.0               29.0              28.5               28.4               28.4              28.3               28.3
25


20


15


10

                                                                        8.7                8.7
                                                                                                              7.5
    5                                                 6.2                                                                       5.6


    0
          January           February            March               April              May               June               July             August


                                                                            2020

        UK Pay-As-You-Earn (PAYE) employees
        Average employments furloughed under CJRS

Notes
1   The number of PAYE employees is based on experimental data from the Office for National Statistics (ONS), and HM Revenue & Customs (HMRC),
    using HMRC’s Real Time Information (RTI). This shows the number of employees on employer payrolls in the UK.
2       The number of employees furloughed is based on publicly available HMRC CJRS statistics. We have calculated a monthly average of daily
        CJRS data for this figure between March and July 2020. Our average figure for March 2020 is only based on figures from 23 March 2020
        (the first working day after the announcement of CJRS) to 31 March 2020. The July 2020 figure of 5.6 million is an estimate based on
        HMRC’s latest published data which recorded an average 5.1 million cases across July but also estimated an uplift of around 10% in the final
        number for figures at 31 July.
3       There is a distinction between the number of employees outlined in the PAYE data, and the number of employments furloughed under CJRS;
        an individual is counted once as a PAYE employee, but may work in two roles furloughed under CJRS.
4       Figures for the number of employees furloughed under CJRS in August 2020 were not available at the time of publication.

Source: National Audit Office analysis of Office for National Statistics’ records of HM Revenue & Customs’ Real Time Information employment data and
HM Revenue & Customs’ CJRS data
32 Part Two Implementing employment support schemes in response to the COVID-19 pandemic




Figure 8
Employments placed on furlough during the Coronavirus Job Retention Scheme (CJRS)
The number of furloughed employments peaked at 8.9 million on 8 May 2020

Employments furloughed (m)
10

                                                                    8.9
9
                                      8.4

8

                                                                                                  7.7
7

                                                                                                                                  5.9
6

                                                                                                                            5.3
5


4


3


2


    1


0
        1 Mar                        1 Apr                        1 May                          1 Jun                        1 Jul
        2020                         2020                         2020                           2020                         2020

        Recorded employments furloughed
        HM Revenue & Customs estimate ofJuly employments furloughed

Notes
1   This figure shows the number of employments or jobs placed on furlough each day during CJRS. In total 9.6 million individual employments were
    placed on furlough during CJRS 1, but the highest amount of employments or jobs on furlough on a single day was 8.9 million on 8 May 2020.
2        HM Revenue & Customs’ (HMRC’s) data for July 2020 are incomplete as not all claims and revisions have been submitted. HMRC estimates that
         the final level of claims for 31 July will be 10% higher than its current figure. Figures for the rest of July may also be incomplete. The secondary
         line in our chart inflates July’s current HMRC figures by 10% to give an indicative upper estimate of the level of claims for that month.
3        CJRS was announced on 20 March 2020 and the first claims could be made on 20 April 2020. Claims could be backdated to 1 March 2020.

Source: National Audit Office analysis of HM Revenue & Customs’ CJRS statistics, August 2020
Implementing employment support schemes in response to the COVID-19 pandemic Part Two 33




     2.15 However, a 0.5 million reduction in the number of people on employer
     payrolls in HMRC’s Real Time Information tax reporting system between
     March and April 2020 does suggest that some people were not covered by the
     support provided by these schemes at the outset. Between March and May 2020,
     the number of people not in employment on Universal Credit also increased by
     nearly 1.5 million. We surveyed employees to better understand their experiences
     during the first months of the CJRS scheme (see Appendix Two on the limits
     on the quota sampling methodology). More than half of respondents to our
     questions said that their main job had been impacted by COVID-19, with more
     than one‑quarter saying they had been placed on the furlough scheme and 4%
     saying that they had been made redundant between March and June (Figure 9
     overleaf).11 Our survey also suggests that the initial requirement that furloughed
     employees should not work did help to keep costs down – around one-fifth of
     respondents were not placed on the furlough scheme, despite their hours of work
     or pay being reduced, presumably so they could keep working.

     2.16 It is likely that the schemes will have supported some firms which would
     have otherwise failed, even without the pandemic. Data from the Insolvency
     Service shows that company insolvencies fell by around one-third between
     April and June 2020, compared with the previous year.12 The long-term impact
     of the schemes to protect jobs is unlikely to be known for some time, as firms
     struggle with the ongoing impact from the COVID-19 pandemic.


     HMRC is commissioning further research to better understand
     take‑up of the schemes by different groups
     2.17 HM Treasury considered the equality implications of the schemes as part
     of early work on their development. For CJRS, it noted that employers could
     discriminate between workers but concluded that furloughed workers would
     retain their employment rights. It also highlighted a risk that some women moving
     on to maternity leave could be affected if their reduced furloughed earnings were
     used in the calculation of maternity pay.

     2.18 For SEISS, HM Treasury recognised that some young people might be
     disadvantaged by the requirement for self-employed people to have traded in the
     2018-19 tax year. It also noted that people of Pakistani or Bangladeshi heritage
     are more likely to be self-employed than the general population.




     11 Based on 4,498 responses. We asked our survey questions as part of Ipsos MORI’s telephone and online
        omnibus surveys. The quota sampling methodology used and the limits of the approach in terms of how
        generalisable the results are to the wider population are set out in Appendix Two.
     12 Some of this reduction will likely be because of reduced operational running of courts, temporary restrictions
        placed on the use of statutory demands and certain winding-up petitions during this time.
Figure 9
The impact of COVID-19 on employees
Just over one-quarter of people responding to our survey said they were placed on furlough

             Weighted proportion (%)
             50

             45

             40

             35

             30

             25

             20

             15

             10

              5

              0
                      No impact       I was put        I was working,     I was working      I was still     I was asked/       I was made          My other       Don’t know            Refused
                                     on furlough       but the hours I      my typical        working,        told to take       redundant          company
                                      under the        was expected       hours, but my        but the           unpaid                          benefits were
                                     government         to work were        rate of pay     hours I was         holiday/                            reduced
                                       scheme            reduced to        was reduced      expected to          annual                          (eg pensions,
                                                       between 50%                           work were         leave (not                           medical,
                                                          and 99%                           reduced to        furloughed)                          insurance
                                                         of the hours                        less than                                                etc)
                                                          I typically                         50% of
                                                            worked                           the hours
                                                                                             I typically
                                                                                                work

    Proportion           47               27                 9                  8                8                 5                 4                4                 1                   1
    (weighted (%))
                                                                                                                                                                                                   34 Part Two Implementing employment support schemes in response to the COVID-19 pandemic




Notes
1   We commissioned Ipsos MORI to ask survey questions on our behalf as part of its telephone omnibus and an online survey. Graph based on 4,498 survey respondents who reported
    being in some form of paid employment (full or part-time) on 19 March 2020. The quota sampling methodology used and the limits of the approach in terms of how generalisable the
    results are to the wider population, together with the approach taken to weight results to ensure they are representative of the population is set out in Appendix Two.
2    Respondents were able to give multiple responses where, for example, their circumstances changed over time. The sum of the percentages shown is therefore greater than 100%.
3    Survey question: Thinking specifically about the period between 19th March – 30th June 2020, in your main job, which, if any, of the following happened as a result of the impact
     of the coronavirus? Please say yes or no to each one as I go through them.

Source: Data from omnibus survey questions commissioned by the National Audit Office and undertaken by Ipsos MORI
Implementing employment support schemes in response to the COVID-19 pandemic Part Two 35




     2.19 HMRC’s further analysis to support its communication strategy showed that
     12% of self-employed workers had a Black, Asian or minority ethnic background,
     with almost half based in London. HMRC developed a range of communication
     and engagement plans for the schemes and worked with ethnic minority and
     faith-based organisations to publicise the schemes.

     2.20 For SEISS, HMRC has no data to monitor rates of take-up among different
     ethnic groups. Other than age and gender, protected characteristics’ data
     are not needed to calculate income tax. HMRC has also monitored take-up of
     SEISS for “customers who may need extra support to claim” who it identified
     from people using its ‘extra support’ service over the past 18 months. It also
     monitored potential claim rates among the ‘digitally excluded’ using data
     on Self Assessment ‘paper filers’.

     2.21 HMRC is planning further survey work to understand customer experience
     of the schemes across different claimant groups but most results from this
     work will not be available until after the current schemes are closed. HMRC
     also intends to survey employers eligible for CJRS who did not use the scheme.
     No equivalent work is planned for those who did not claim SEISS.

     2.22 HMRC has published extensive data on take-up for both schemes
     (Figure 10 overleaf). This data shows that a greater proportion of younger
     workers were furloughed compared with older workers, and that a greater
     proportion of men were furloughed overall, but this has reduced over time and
     by September there was little difference between men and women. For SEISS,
     a greater proportion of potentially eligible men took up the grant than did women.
     ONS data show that younger people were also far more likely to lose their jobs;
     there was a 5.9% decrease in employment levels of people aged 16–24 in June
     to August 2020 against the previous quarter, compared with a 0.5% decrease
     in overall employment levels.

     2.23 HMRC’s data also include sectoral and regional information which enables
     an understanding of who has been using the schemes and in which locations.
     These data show that a greater proportion of employees from smaller employers
     were furloughed. Business sectors in retail, construction, accommodation and
     food services, manufacturing and transportation drew the largest amounts of
     financial support. There is close alignment between the sectors making greatest
     use of CJRS, SEISS and the Bounce Back Loan Scheme (Figure 11 on page 37).




     Post publication this page was found to contain an error which has been corrected (Please find Published Correction Slip)
36 Part Two Implementing employment support schemes in response to the COVID-19 pandemic




Figure 10
CJRS and SEISS: HM Revenue & Customs’ (HMRC’s) data on take-up of schemes, end July 2020
An uneven picture across industries, employers, individuals and geographies

                        Coronavirus Job Retention Scheme (CJRS)                       Self-Employment Income Support Scheme (SEISS)

    Overall take-up
                          Some 1.2 million employers (61%) received a grant             Some 2.6 million self-employed claimed (77% of HMRC’s
                          covering 9.6 million employments (32%).                       estimate of the potentially eligible population of 3.4 million,
                                                                                        and around half the self-employed population).




    Employers
    and sectors           Employees of small- and micro-sized employers more            Construction workers made 0.9 million claims for SEISS,
                          than twice as likely to be furloughed as those working        one-third of all claims.
                          for large employers.

                          Employer take-up rates highest in Accommodation and
                          Food Services; Arts Entertainment and Recreation;
                          Construction and Manufacturing sectors.




    Employees
    and individuals       Looking across age categories, a higher percentage of         Similar claim rates across age groups (though lower
                          young workers under 25, were furloughed.                      among 16–24 year olds and people over 65).

                          Overall, a greater proportion of employed men were            Higher percentage of potentially eligible men claimed a
                          furloughed than employed women.                               SEISS grant, compared with the proportion of eligible
                                                                                        women who claimed.
                          Around 20% of furloughed employments at the end of
                          July 2020 were partially furloughed under CJRS 2.




    Geography
                          Highest furlough rates in parliamentary constituencies in     Highest take-up rates in parliamentary constituencies
                          North West Wales, Cornwall, the Lake District, North and      in Northern Ireland, the Welsh Valleys and North West
                          West London and West Sussex.                                  Wales, the Glasgow City Region in Scotland and in parts
                                                                                        of Northern England and North and East London




    Value of claims
                          £39.3 billion claims paid to 20 September 2020.               £13.4 billion of claims paid to 20 September 2020.
                          Estimated value of claims to scheme end is £54.5 billion.     Estimated value of claims to end of SEISS 2 is £15.2 billion.
                          Estimated average subsidy per job per month around            Estimated average value of claim per month around £970
                          £1,200.                                                       (SEISS 1).




Notes
1   Taken from HMRC management information and published statistics on CJRS and SEISS. Estimates of value of claims to scheme end and
    average subsidy and grant values are taken from the Office for Budget Responsibility’s (OBR’s) Fiscal Sustainability Report (July 2020).
    Claims paid data is to 20 September 2020.
2     Average subsidy and grant values are based on CJRS 1 rules and SEISS 1 rules. Changes to CJRS from 1 July 2020 and amended terms for
      the SEISS 2 will likely reduce these values.
3     Take-up data for employers and sectors, employees and individuals, and geography is based on CJRS 1 and SEISS 1.
      Figure 11 presents sector take-up by value of claims.

Source: National Audit Office analysis of HM Revenue & Customs’ and Office for Budget Responsibility information
Implementing employment support schemes in response to the COVID-19 pandemic Part Two 37




     Figure 11
     Sectors accessing the most financial support from the CJRS, SEISS
     and Bounce Back Loans
     There is overlap between the employment support schemes and the Bounce Back loans

     Rank        Coronavirus Job Retention             Self-Employment Income             Bounce Back Loan
                 Scheme (CJRS) take-up                 Support Scheme (SEISS)             market share
                 by value                              take-up by value


      1          Wholesale and retail,                 Construction                       Real estate, professional
                 repair of motor vehicles                                                 services and
                                                                                          support activities

      2          Accommodation and                     Unknown and other                  Wholesale and retail trade
                 food services

      3          Manufacturing                         Transportation and storage         Construction


     Notes
     1   Bounce Back Loans support small businesses with loans of up to £50,000 or a maximum of 25% of turnover.
         The scheme was developed by HM Treasury, the Department for Business, Energy and Industrial Strategy,
         and the British Business Bank. It launched on 4 May 2020 and was expected to last for six months.
     2    Office for National Statistics Standard Industrial Classification (SIC) 2007.

     Source: National Audit office analysis of HM Revenue & Customs’ data on CJRS and SEISS and National Audit Office
     analysis of British Business Bank and Bank of England data from our Investigation into the Bounce Back Loan
     Scheme report.



     2.24 Figure 12 and 13 on pages 38 and 39 show the rates at which grants have
     been claimed, by parliamentary constituency. CJRS take-up has been high in
     areas popular with tourists and communities close to major south-east airports.
     SEISS take-up has been highest in Northern Ireland, parts of Wales, areas
     around Glasgow, parts of northern England and the West Midlands, and North
     and East London. We found that areas that had periods of local restrictions since
     the lifting of the national lockdown had only a marginally greater proportion of
     self‑employed people making claims under the first phase of the scheme.
38 Part Two Implementing employment support schemes in response to the COVID-19 pandemic




Figure 12
Furloughing rates under the Coronavirus Job Retention Scheme (CJRS), CJRS 1
Furlough rates vary by parliamentary constituency with some of the highest in areas popular with tourists and those close
to major south-east airports

Employment furlough take-up by
Parliamentary Constituency (650)
    41%–45% (7)
    36%–40% (52)
    31%–35% (349)
    26%–30% (231)
    21%–25% (11)




                                                                                                      London




Notes
1   Take-up rates were based on an employee’s last known home address.
2   HM Revenue & Customs was unable to match the data (and so assign a location) for 104,100 furloughed employments and 201,200
    eligible employments.
3   Map based on take-up data rounded to the nearest whole percent, using December 2019 parliamentary constituencies.

Source: National Audit Office analysis of HM Revenue & Customs’ data
                          Implementing employment support schemes in response to the COVID-19 pandemic Part Two 39




Figure 13
Self-Employment Income Support Scheme (SEISS) claims as a proportion of potentially eligible
population, SEISS 1
Take-up rates of the first SEISS grant vary by parliamentary constituency with some of the highest rates in Northern Ireland,
parts of Wales, areas around Glasgow in Scotland, parts of northern England and the West Midlands, and North and East London


SEISS claims as a proportion of the potentially eligible
population by Parliamentary Constituency (650)
    81%–85% (61)
    76%–80% (374)
    71%–75% (200)
    66%–70% (11)
    61%–65% (4)




                                                                                                            London




Notes
1   Take-up rates show the proportion of the potentially eligible population (when the scheme opened) that have applied and been paid
    or are awaiting payment.
2   Take-up rates may have been higher than shown here since the potentially eligible population includes error and rejected cases,
    and some individuals whose businesses have not been adversely affected by Coronavirus.
3   We have excluded 7,000 claimants and 12,000 potentially eligible individuals where addresses are listed in the Channel Islands,
    Isle of Man, foreign addresses or missing and eligible Loan Charge cases who are yet to file their 2018-19 Self Assessment tax return.
4   Map based on take-up data rounded to the nearest whole percent, using December 2019 parliamentary constituencies.

Source: National Audit Office analysis of HM Revenue & Customs’ data
40 Part Two Implementing employment support schemes in response to the COVID-19 pandemic




                        Many people remain furloughed as the Departments’ support moves
                        to a new phase
                        2.25 Both schemes are due to end in their current form in October 2020.
                        CJRS will be replaced by the Job Support Scheme (JSS). For the self-employed
                        there is a modified SEISS scheme (see paragraphs 1.23 to 1.25 and Appendix
                        Four). It is not yet certain how employers will respond to the JSS. The JSS
                        scheme is intended to provide help for short-time working with government
                        providing less support and employers expected to pay more. The expanded
                        JSS is available for firms legally required to close. This will cover two-thirds of
                        the wages of furloughed employees, without requiring an employer contribution.

                        2.26 With around two million people still furloughed at September 2020, there
                        is a significant possibility of large-scale redundancies. Before the government’s
                        recent announcement of its Winter Economy Plan and the JSS,13 HM Treasury
                        published a summary of independent UK economy forecasts in September14
                        which showed unemployment ranging from 6.2% to 12.7% (average 8.3%,
                        around three million) by the final quarter of 2020. Analysis by the Institute for
                        Employment Studies – published after the government’s Winter Economy Plan
                        and expanded JSS – estimated around 600,000 redundancies in the final two
                        quarters of 2020, based on employer redundancy notifications to employees.
                        The latest unemployment data, published on 13 October, reported unemployment
                        had reached 4.5% of the labour force in the three months to August 2020, an
                        increase from 4.1% in the previous three months.

                        2.27 The Departments will need to consider how the current schemes have
                        operated to date, who has benefited and what this implies for the modified
                        schemes going forward. For example, it is not yet clear how the government’s
                        revised schemes will address the issue that some people will continue to be
                        excluded from support based on the tax information held by HMRC. The expanded
                        JSS scheme adds further administrative complexity with eligibility criteria based on
                        location and lockdown restrictions in place at particular points in time.




                        13 HM Treasury, Policy Paper – Winter Economy Plan 2020, CP 297, September 2020, available at: www.gov.uk/
                           government/publications/winter-economy-plan/winter-economy-plan
                        14 HM Treasury, Forecasts for the UK Economy: September, September 2020, available at: www.gov.uk/
                           government/statistics/forecasts-for-the-uk-economy-september-2020
Implementing employment support schemes in response to the COVID-19 pandemic Part Two 41




     2.28 It will be difficult to disentangle the specific impact of the existing schemes
     from other forms of government support (including the JSS and Bounce Back
     loans), as well as the ongoing impact of COVID-19. Recent analysis gives more
     insights into the range of effects of the schemes, finding that the average SEISS
     grant came close to fully compensating recipients for the effects of the crisis.
     However, furloughed employees under CJRS saw an average 13% decline in net
     income and new claimants of Universal Credit a 40% decline.15 Stakeholders,
     including the Treasury Select Committee, have suggested careful consideration
     should be given to extending employment support on a targeted basis,
     recognising that some sectors and regions may have been more acutely affected
     by COVID-19 than others. The Confederation of British Industry and the Trades
     Union Congress have both supported the measures announced in the Winter
     Economy Plan and believe the JSS will help to support some people to stay in
     work. The Resolution Foundation and Institute for Employment Studies have,
     however, questioned the extent to which the original JSS will prevent significant
     job losses over the coming months.




     15 I Delestre et al, Income protection policy during COVID-19: evidence from bank account data, Briefing Note,
        10 September 2020, available at: www.ifs.org.uk/publications/15002
42 Part Three Implementing employment support schemes in response to the COVID-19 pandemic




                        Part Three



                        Fraud and error affecting the employment
                        support schemes
                        3.1 The Coronavirus Job Retention Scheme (CJRS) and the Self-Employment
                        Income Support Scheme (SEISS) are both grant schemes administered by
                        HM Revenue & Customs (HMRC). Inevitably grant schemes are at risk of
                        fraud and error:

                        •    Fraud occurs where the claimant (the employer for CJRS, the
                             self‑employed individual for SEISS) deliberately sets out to misrepresent
                             their circumstances to get money to which they are not entitled.

                        •    Error occurs where the claimant inadvertently receives the wrong amount
                             due to incorrect information being provided, but with no deliberate intent
                             to mislead, or incorrectly calculate the award.

                        3.2 This part of the report considers HMRC’s:

                        •    overall approach to compliance, including the control environment and
                             its tolerance of risk;

                        •    management of the fraud and error risks;

                        •    understanding of the scale of fraud and error; and

                        •    plans for recovering grant overpayments.
Implementing employment support schemes in response to the COVID-19 pandemic Part Three 43




       HMRC’s compliance approach

       The control environment
       3.3 HMRC has a long-standing approach to tackling non-compliance.
       In administering the tax system and paying out tax credits, HMRC considers
       “the best way to tackle non-compliance is to prevent it happening in the first
       place, while cracking down on the minority who do break the rules”.

       3.4 In designing the schemes, HMRC recognised that it would need to make
       certain trade-offs in its normal approach of preventing as much fraud and error as
       possible and the need to ensure grants reached claimants quickly. HMRC drew up
       longlists of potential controls for both schemes. In total it identified 42 potential
       controls for CJRS, of which 24 were implemented by the go-live date and 57 for
       SEISS, of which 38 were delivered by the end of April. HMRC identified certain
       controls as critical to delivery and implemented all of these. It did not implement
       all possible controls because it viewed them either as unfeasible to deliver within
       the time available or not sufficiently effective. This was particularly the case for
       CJRS, which had to be implemented more quickly than SEISS (Figure 14 overleaf).
       HMRC’s COVID-19 compliance approach prioritised developing pre‑payment
       checks to prevent risk of organised criminal attacks on the schemes over other
       types of risk such as opportunistic fraud, where there is a greater likelihood it can
       recover overpayments retrospectively.

       3.5 HMRC has maintained strong oversight of its control framework for both
       schemes, which sets out in detail what all the controls do, the stage of the claims
       process they operate in and the risks they were seeking to mitigate against
       (Figure 15 on page 45).
44 Part Three Implementing employment support schemes in response to the COVID-19 pandemic




Figure 14
Examples of key controls for Coronavirus Job Retention Scheme (CJRS) and Self-Employment
Income Support Scheme (SEISS)
HM Revenue & Customs (HMRC) had less time to develop controls for CJRS than for SEISS
                                                                                CJRS       SEISS       Why was control not implemented?


Promote        Honesty declaration                                                           

               Online fraud reporting form                                                   

               Promote threat of future compliance action                                    

               Public listing of claimants                                                  N/A       HMRC not convinced measure would
                                                                                                       be effective.

               Online guidance and calculator                                                

               HMRC invitation to apply                                                              Up to employer to assess need for the scheme.


Prevent        Checking work status with furloughed employees                               N/A       Insufficient time/resources.

               Automated calculation of award                                    N/A          

               Full verification of all input data and amounts claimed                      N/A       Insufficient time/resources.
               per employee

               Payments capped at maximum grant award value                                  

               Employee/self-employed person must already be in                              
               HMRC’s tax systems to be eligible

               Agents prevented from claiming                                                        HMRC viewed CJRS risk as acceptable.

               Transaction monitoring                                                        

               Bank account checks                                                           

Respond        Data matching to detect potential non-compliance                              

               Voluntary disclosure window                                                   

               One-to-one enquiries                                                          

 means that the control was implemented.        indicates that the control was not implemented.

Notes
1   The controls listed above are not exhaustive lists.
2   An online fraud reporting form was in place for both schemes. The telephone hotline was not available until August 2020 due to
    home-working restrictions during the pandemic.
3   Online guidance was available for the SEISS as well as information about how the calculation was made. The calculation itself, however,
    was automated by HMRC.
4   HMRC sent out communications to registered Self Assessment taxpayers notifying them that they may be eligible to apply for the SEISS.
    For CJRS, no such communication was made but HMRC did contact some of the largest companies to check whether they intended to apply.
5   Furloughed employees were not able to do any work under the original rules of the CJRS. From 1 July 2020, however, they could work part-time.
6   An employee had to be registered on the employer’s Pay-As-You-Earn scheme by 19 March and included on a Real Time Information submission
    made by the same date to be eligible for CJRS. Self-employed individuals had to be already registered on HMRC’s Self Assessment system to be
    eligible for the SEISS.

Source: National Audit Office analysis of HM Revenue & Customs’ control frameworks
                       Implementing employment support schemes in response to the COVID-19 pandemic Part Three 45




Figure 15
HM Revenue & Customs’ (HMRC’s) control framework for the employment support schemes
HMRC’s control framework enabled it to effectively document risks and the controls in place to tackle them



  HMRC used its control framework for Coronavirus Job Retention Scheme and Self-Employment Income Support Scheme.
  Through using it, HMRC aimed to properly understand and own the scheme risks across the organisation. The framework
  is influenced by the principles of the government’s Orange Book guidance, designed to support departments to better
  manage risk.



  A control listing sheet was used for each scheme to document controls around different phases of customer claims.
  Each control had a named owner responsible for monitoring it.




  Pre-claim:                            In-claim:                            Between claims:            Post-claim:
  For example, controls                 For example, controls                For example, some          For example,
  around eligibility issues.            around monetary limits.              applicants needed          controls to recover
                                                                             to be excluded.            inappropriate payments.




  Control sheets are used to show progress and to ensure that the control environment is operating as expected. The sheets
  were updated regularly as new controls were brought in and existing ones updated, thus ensuring HMRC had a comprehensive
  overview of the overall controls regime.



  Control owners reported on progress weekly. A Control Board produced a weekly update on controls that was submitted
  to HMRC’s Executive and Audit Committees.


Note
1   HMRC documented controls for manual claims using the same approach.

Source: National Audit Office analysis of HM Revenue & Customs’ control framework
46 Part Three Implementing employment support schemes in response to the COVID-19 pandemic




                        HMRC’s assessment of risk
                        3.6 HMRC conducted a detailed initial risk assessment on both schemes to
                        establish the key fraud and error risks. For example, HMRC was almost certain
                        that organised criminals would target the system for weaknesses and viewed
                        the likelihood of opportunistic fraud, where claimants exploit the rules of the
                        scheme to their own advantage, as being very likely (Figure 16). As such,
                        HMRC recommended limiting the schemes only to taxpayers with current
                        records, a move that reduced the risk of fraud considerably because applicants
                        had to be known to HMRC at the time the schemes were announced.

                        3.7 HMRC has assessed that the risk of fraud and error is greater for the CJRS
                        scheme than for SEISS as it was able to put in place more preventative controls
                        for SEISS (Figure 14). For SEISS, Self Assessment taxpayers were invited to
                        apply, rather than for CJRS where taxpayers could make applications themselves.
                        It also calculated the SEISS grant using existing tax return data. This reduced the
                        scope for individuals to either erroneously or deliberately misstate their incomes
                        to increase their claim award.

                        3.8 Under the CJRS scheme, employers were responsible for informing
                        employees about whether they were being furloughed under the government
                        scheme and for making payments to them. Employers retained the responsibility
                        for calculating claims. The scheme allowed a degree of tolerance around
                        the amounts employers applied for, up to a maximum of £2,500 a month per
                        employee. HMRC did not ask small employers to state how much was being
                        claimed for each employee because it concluded it was not feasible to build this
                        into the new system in the time available. HMRC considered validating claim
                        amounts for employees but rejected this because the range of variations seen
                        in people’s pay (for example, from promotions or performance-related pay) would
                        have introduced too much complexity. HMRC’s internal audit team warned before
                        the scheme went live that checks on amounts claimed per employee were critical
                        to effective and efficient compliance.
                        Implementing employment support schemes in response to the COVID-19 pandemic Part Three 47




Figure 16
HM Revenue & Customs’ (HMRC’s) early assessment of the key fraud and error risks
HMRC identified the same key risks for both schemes but assessed the impacts to be potentially greater for the
Coronavirus Job Retention Scheme (CJRS)


                                                                                                               Assessment of Risk

Key risks                   Examples                                                            Likelihood           Impact after mitigation (% of
                                                                                                                       total grant expenditure)

CJRS

Organised crime             Pay-As-You-Earn schemes hijacked by organised                     Almost certain                  2.5% to 5%
                            criminal gangs.

Opportunistic fraud         Employer gets furloughed employee to                               Highly likely                   2% to 3%
                            continue working.
                            Employer doesn’t pass on furlough payments
                            to employee.
                            Employer inflates claim for employee.

Internal fraud              HMRC staff member colludes with employer.                               Low                            Low

Error                       Employer claims incorrect amount per employee or                        Low                        1% to 2%
                            HMRC processes award incorrectly.

                                                                                                   Total                      5% to 10%

Self-Employment
Income Support
Scheme

Organised crime             Hijacking of claimant details by organised                        Almost certain                 0.3% to 1.5%
                            criminal gangs.

Opportunistic fraud         Claimant makes a late filing that deliberately inflates            Highly likely                 0.3% to 0.7%
                            their profits.

Internal fraud              HMRC staff member falsifies details to claim                            Low                            Low
                            grant money.

Error                       Wrong amount is awarded based on incorrect data.                        Low                      0.2% to 0.5%

                                                                                                   Total                       1% to 2%


Notes
1   The likelihood assessments use a probability yardstick. An assessment of ‘almost certain’ indicates a probability in excess of 95%.
    A ‘highly likely’ assessment has a probability of 80% to 90%.
2   The estimates above were provisional as they were based on an early assessment of the risks and carried significant levels of uncertainty.
    HMRC has committed to further updates on the likely levels of fraud and error by the end of 2020.
3   The totals do not exactly match the sum of the individual components. This is because the total are calculated using Monte Carlo modelling.
    This is a good-practice approach that varies key inputs and risk factors to produce a range of estimated scenarios. This means, however,
    that the most likely values of total fraud and error are expected to sit within a much narrower range than is implied by simply aggregating
    the most extreme values from each scenario.

Source: National Audit Office analysis of HM Revenue & Customs’ risk assessments of the schemes
48 Part Three Implementing employment support schemes in response to the COVID-19 pandemic




                        Tolerance of risk
                        3.9 In order to get money to claimants quickly HMRC accepted some factors
                        would contribute to significant fraud and error risks. These factors included:

                        •    reducing the scope for preventative controls. HMRC gave itself a maximum
                             of three days to validate CJRS and SEISS claims so it could make payments
                             as quickly as possible. This is much faster than for Tax Credits and Child
                             Benefit, where the target for both is 22 days;

                        •    HMRC not initially having the powers to undertake compliance work for the
                             grant schemes, as with tax investigations, and it could only investigate cases
                             where it suspected criminal intent. This delayed its ability to commence
                             compliance work until the 2020 Finance Act passed into law in July;

                        •    processing large volumes of claims quickly, HMRC needed to prioritise
                             preventative checks for the most high-risk cases. This meant concentrating
                             on suspected cases of organised crime, where the potential to recover money
                             is normally much more difficult than for opportunistic fraud committed by
                             known taxpayers. HMRC’s decision to send out invitations for SEISS over a
                             four-day period further narrowed its window to perform preventative checks.
                             The invitations to apply over a four-day period resulted in four times as many
                             SEISS claims in the first week compared with CJRS; and

                        •    HMRC concluding that it had limited control of the relationship between
                             employers and employees. It recognised there were risks that employers claim
                             furlough money while continuing to get their employees to work but decided
                             that it would need to tackle this risk in post-payment checks. We consider
                             HMRC’s management of furlough fraud in paragraphs 3.11 to 3.19.


                        How HMRC has managed risks
                        3.10 We looked in more detail at three key risks which HMRC viewed as
                        almost certain or highly likely. We considered: how HMRC assessed the risk;
                        the mitigation controls it put in place; and the extent to which these controls
                        operated effectively:

                        1    Employers claiming money while their furloughed employees
                             continue to work.

                        2    Self-employed individuals inflating their claims in late Self
                             Assessment returns.

                        3    Organised criminals hijacking agents’ details to submit fraudulent claims.
Implementing employment support schemes in response to the COVID-19 pandemic Part Three 49




       1. Working while furloughed
       3.11 Under CJRS an employer commits ‘furlough fraud’ if they claim furlough
       payments for an employee but continued to require them to work (in any capacity
       under the first phase of the scheme (CJRS 1), or on a full-time basis under the
       second phase of the scheme (CJRS 2)). Other forms of furlough fraud include
       employers falsely inflating the amount of grants they claim or failing to pass on
       the full amount of furlough payments due to their employees.16

       3.12 HMRC recognised that there was a high risk that employers would exploit
       the initial CJRS rules and continue to get their employees to work for them
       while claiming support. It informed the Chancellor it could not establish strong
       preventative controls. The only specific controls in place for the risk were an
       honesty declaration in the online form, whistleblowing routes, other forms
       of intelligence and retrospective investigation. HMRC set up an online fraud
       reporting form in addition to its telephone hotline. The telephone hotline was not
       available for the duration of CJRS 1 because home-working restrictions meant
       staff could not take calls in a secure environment.

       3.13 HMRC ruled out further checks which could have helped to mitigate the
       specific risk of furlough fraud. It considered that pre-payment checks were
       impractical in the timeframe. The potential to contact furloughed employees
       retrospectively to check whether they were working was considered but ruled
       out on the basis it would be too resource-intensive and require resources to be
       diverted away from helping employers make claims.

       3.14 Employees did not know if their employer was part of the government furlough
       scheme unless their employer informed them. HMRC ruled out publishing the
       details of every company claiming furlough payments, which might have alerted
       some employees that their employer was acting fraudulently. HMRC concluded
       it would have been unrealistic to contact employees given the large numbers of
       recipients of the furlough scheme. It was also concerned that naming companies
       could deter too many legitimate claimants and be detrimental to the primary
       policy objective to get support to those who needed it. HMRC believed it had
       comprehensive and robust controls to mitigate the risk of fraud.

       3.15 HMRC has announced additional controls for the Job Support Scheme (JSS)
       to deter fraud and to prompt employees to disclose fraud. It intends to publish
       the names of employers who have used the scheme and it will use personal tax
       accounts to inform employees that their employer has claimed JSS.




       16 Under SEISS, self-employed individuals were free to continue trading while claiming the grant providing that they
          stated that their business had been ‘adversely affected’ by COVID-19.
50 Part Three Implementing employment support schemes in response to the COVID-19 pandemic




                        3.16 Up to 14 August, employees reported 8,600 potential fraud abuses through
                        the online form, with 8,100 of these relating to CJRS. The telephone hotline
                        received a further 1,600 reports, bringing total reported cases to more than
                        10,000.17 The Department’s experience, however, is that whistleblowing is only
                        likely to identify 1% to 3% of fraud cases.

                        3.17 HMRC has investigated around one-quarter of CJRS fraud allegations
                        reported online. Of those investigated, the majority of allegations relate to
                        employers asking employees to work while furloughed (Figure 17). In around 8%
                        of cases, the employer has admitted some form of error. Only one employer has
                        accepted that they deliberately falsified their claim. In the remaining 92% of
                        cases, the employer has either refused to engage with HMRC to date or denied
                        any wrongdoing. HMRC continues to pursue these cases. HMRC has considered
                        naming employers who are subsequently found to have committed fraud. Under
                        its compliance powers received in July 2020 it can now do so but is yet to
                        exercise these powers.


                        Figure 17
                        Allegations of Coronavirus Job Retention Scheme fraud received
                        through online form
                        The majority (62%) of allegations of fraud concern employees being asked to work by their employer
                        while furloughed

                        Percentage (%)
                        70


                        60                                         62

                        50


                        40


                        30


                        20

                                        15                                                    17
                        10

                                                                                                                          6
                         0
                                Furloughed but              Furloughed but              Employer claim                   Other
                                    not paid                asked to work             fraudulent/inflated

                        Note
                        1   Data are based off 2,205 calls made up to 7 August 2020. In some instances, multiple allegations are made in
                            one call, so the total number of allegations (2,453) exceeds the number of calls.

                        Source: HM Revenue & Customs’ analysis of post-payment calls




                        17 A very small number of these relate to potential fraud in the Statutory Sick Pay Rebate (SSPR) that HMRC
                           administers. SSPR was the reason for 15 online notifications.
Implementing employment support schemes in response to the COVID-19 pandemic Part Three 51




       3.18 Our survey looked at the possible extent of employees working while on
       furlough (for full details of the survey see Appendix Two). This found that 9% of
       survey respondents who reported being furloughed had done some work at the
       request of their employer.18 An additional 6% reported that they had chosen to
       do some work despite not being asked to by their employer.19 In addition, we also
       found that a further 4% of respondents to our survey who had not worked while
       furloughed said that their employer had paid them less than 80% of their pay, the
       minimum amount under CJRS.20

       3.19 Surveys by other organisations have different results, with the
       overall percentage of furloughed employees working at the request of their
       employer ranging from 7% to 34% (see Figure 18 overleaf). Different sampling
       methodologies, question framings and time periods surveyed are likely to
       account for some of this variation. The survey commissioned by the National
       Audit Office covers CJRS 1 while the other surveys covered narrower periods
       in time. HMRC has not carried out its own survey of furlough fraud but it was
       considering this option in September 2020, when we were finalising our fieldwork.




       18 Based on 1,178 survey responses. We asked our survey questions as part of Ipsos MORI’s telephone omnibus
          and online surveys. The quota sampling methodology used and the limits of the approach in terms of how
          generalisable the results are to the population of furloughed workers are set out in Appendix Two.
       19 Based on 1,178 survey responses.
       20 Based on a sample of 503 computer-assisted telephone interviews. Due to an error in the online survey routing,
          the base size for this particular question is smaller than for our other survey questions.
52 Part Three Implementing employment support schemes in response to the COVID-19 pandemic




                        Figure 18
                        Surveys looking at percentage of furloughed employees working
                        Furlough fraud could be in the range of 7% to 34% according to surveys

                        Organisation                 Percentage of furloughed              Percentage of            Period of lockdown
                                                      employees working at            furloughed employees          covered by survey
                                                        employer direction              voluntarily working
                                                              (%)                              (%)

                         Academics at Oxford,                     19                             44                      April 2020
                         Cambridge and
                         Zurich universities

                         Crossland                                34                            N/A                       March to
                         Employment Solicitors                                                                         11 June 2020

                         National Audit Office                     9                              6                March to June 2020
                         (NAO)

                         Resolution Foundation                     7                            N/A                      May 2020

                        Notes

                        1   The NAO survey was conducted by Ipsos MORI on our behalf. In our survey, 12% of employees who had been
                            furloughed responded that their employer had asked them to work, 9% had done so and 3% had not done so.
                        2   The survey we commissioned from Ipsos MORI combined online and telephone surveying (weighted 50:50).
                            While showing survey results for each method should be treated with caution because it results in smaller
                            response samples, we found different results across the two methods: 4% of furloughed respondents who
                            were contacted by telephone said that their employer had asked them to work and they had done so; 14%
                            of furloughed respondents who were contacted online said that their employer had asked them to work and
                            they had done so. These differences reflect variations between the populations from which the samples
                            were drawn; as well as nuances in job sector, type of employment and the mode of interview (self-completion
                            versus interview-led telephone interviewing).
                        3   Crossland Employment Solicitors, Resolution Foundation and the Academics at Oxford, Cambridge and Zurich
                            universities all used online panels for their surveys.
                        4   The Resolution Foundation’s survey, conducted by YouGov, found that 7% of employees had been asked
                            to work by their employer. It did not ask whether these employees complied with the request.
                        5   The surveys by Crossland Employment Solicitors and Resolution Foundation did not ask employees whether
                            they had voluntarily worked while placed on furlough.
                        6   Information about the polling methodologies used by other organisations can be seen in the source links below.
                            For further information on the survey methodology adopted by Ipsos MORI on our behalf see Appendix Two.
                            We did not directly validate the results of any of the other surveys listed here.

                        Sources: Crossland Employment Solicitors survey results are available at: www.crosslandsolicitors.com/site/media/
                        coronavirus-hub/furlough-fraud-coronavirus-lockdown; The Resolution Foundation survey results are available
                        at: www.resolutionfoundation.org/publications/the-effects-of-the-coronavirus-crisis-on-workers/; The Oxford,
                        Cambridge and Zurich University paper is available at: www.econ.cam.ac.uk/research-files/repec/cam/pdf/
                        cwpe2079.pdf
Implementing employment support schemes in response to the COVID-19 pandemic Part Three 53




       2. Late Self Assessment returns
       3.20 SEISS was announced less than two months after the Self Assessment
       deadline meaning that many taxpayers had not yet filed their returns or still
       intended to submit amendments. HMRC identified significant risks for taxpayers
       to inflate the value of their returns in order to obtain larger grants under the
       SEISS scheme, although this would also have increased their future tax liability.
       To mitigate this risk it:

       •    did not allow amendments to already-filed returns to be included in
            calculating the grant because it assessed the fraud risk was too high.
            Any amendments to filed Self Assessment tax returns after SEISS was
            announced on 26 March 2020 were disregarded in calculating an individual’s
            award. An individual may have had a legitimate reason for making such an
            amendment but HMRC was concerned about the potential for manipulation.
            Subsequent analysis of amended returns suggests HMRC’s concerns were
            well founded; taxpayers filed 7,000 amendments the day after the policy was
            announced with 1,200 of these seeking to increase their trading income by
            an average of £7,000; and

       •    permitted late returns but sought to perform additional ID verification
            checks on these before receiving the SEISS claims. Between 26 March and
            23 April 2020, 64,000 late returns were filed by self-employed individuals,
            with 47,000 of these deemed potentially eligible for the SEISS grant.
            HMRC performed ID verification checks on around 15% (7,000) of these
            high-risk late returns. Of those 7,000 returns, just over 40% failed these
            verification checks. Of those that passed the verification checks, 11% were
            flagged for post-payment compliance checks. While HMRC detected high
            levels of risk in the sample it checked, it did not carry out additional checks
            on the other 85% of late returns, instead relying on its standard risk rules
            applied to all SEISS claims. HMRC told us those standard risk rules were
            updated to recognise the fact that SEISS claims based on late returns
            should be viewed as high risk. However, this only allowed HMRC 72 hours
            to decide whether to accept or reject the claim.
54 Part Three Implementing employment support schemes in response to the COVID-19 pandemic




                        3. Hijacked claims by organised crime
                        3.21 Organised criminals could exploit the schemes by stealing the identities of
                        legitimate taxpayers or coercing them to make fraudulent claims. HMRC identified
                        a risk that if agent details were stolen, fraudsters would potentially be able to
                        make fraudulent claims on behalf of large numbers of employers or individuals.
                        Agents or third parties submitted more than half (56%) of Self Assessment
                        returns in 2018-19. HMRC research suggests around 50% of CJRS claims
                        were made through agents.

                        3.22 Given the timescales for implementing SEISS, HMRC concluded it
                        could not develop a claims service for agents that would also mitigate the
                        risk of exploitation by organised crime. It therefore focused on developing
                        a system that would be easy for customers to use directly and said it would
                        not accept applications for SEISS from agents. It did not operate the same
                        restriction for CJRS.

                        •    For SEISS, HMRC stipulated that self-employed people must make an
                             application themselves. It monitored activity and prevented some large-scale
                             attempts to attack the system. Over a single weekend in May 2020, HMRC
                             blocked around 87,000 claims worth £242 million due to suspicious activity.
                             It did not have the capacity to assess all these claims within the three-day
                             period and acted prudently to halt the applications. It recognised it could
                             have denied some legitimate claims and subsequently contacted nearly
                             all of these claimants to encourage them to claim themselves rather than
                             through agents.

                        •    HMRC did not take the same approach on the CJRS, allowing agents to
                             continue to make applications on behalf of employers, even where the
                             employer had not explicitly consented to this. It did alert businesses through
                             their online business tax accounts that claims had been made in their name,
                             but not until August 2020. This meant businesses may not have been
                             aware that their details had been hijacked and used to make a claim during
                             the first months of the scheme. HMRC also worked proactively to shut
                             down a number of online scams that had been circulating that seek to trick
                             individuals into passing on personal details.

                        •    HMRC has detected relatively few CJRS claims where credentials may have
                             been hijacked. It has rejected 224 CJRS claims to date worth £10 million.
                             However, hijacked cases may have gone undetected. Until HMRC has
                             carried out enquires into cases it cannot be sure it has not failed to prevent
                             more attacks. HMRC continues to monitor organised criminal attacks but
                             has yet to assess its effectiveness in mitigating the risk.
Implementing employment support schemes in response to the COVID-19 pandemic Part Three 55




       Understanding the scale of fraud and error
       3.23 HMRC is unlikely to know the total level of fraud and error in each of the
       schemes for some time. Its planning assumptions were based on comparisons to
       Tax Credits, Universal Credit and Income Tax Self Assessment repayment fraud.
       Based on these it initially estimated potential fraud and error levels of 5% to
       9% in CJRS and 1% in SEISS. At the time the assessments were made, HMRC’s
       internal audit function concluded that the comparators were not sufficiently
       reliable to make conclusive assessments about the scale of the risk.

       3.24 HMRC’s most recent analysis predicts similar rates of 5% to 10% for
       CJRS and 1% to 2% for SEISS (see Figure 16). This would equate to around
       £2.0 billion to £3.9 billion on the CJRS and £130 million to £270 million on
       the SEISS based on spend to date. HMRC told us that while these estimates
       remained assumption-based, they were informed by expert opinion and it
       was continuing to update the estimates with information collected during the
       schemes. HMRC believes that the CJRS was less susceptible to organised crime
       than it initially forecast but also acknowledges that the greater flexibility in the
       rules that allowed part-time working from 1 July increased the risk of genuine
       error and more opportunistic fraud.

       3.25 Survey data (see Figure 18) indicates that the true level of fraud and error
       in the CJRS could be considerable. Surveys suggest that furlough fraud due
       to employees working at the request of their employer could be in the range
       of 7% to 34%. We also found 4% of respondents to our survey who had not
       worked while furloughed said that their employer had paid them less than 80%
       of their pay, the minimum amount under CJRS (see paragraph 3.18).21 Making a
       precise estimate is complicated because part-time working was allowed in CJRS
       2, and the work employees carried out in CJRS 1 may have been on a part-time
       basis.22 HMRC will need to consider whether the spirit of the rules have been
       broken and weigh this against the need to treat those who followed the rules
       fairly. Of those respondents to our survey who had said that they had worked
       while furloughed at the employer’s request, almost two-thirds said they did so
       for less than half of their usual hours.23




       21 Based on a sample of 503 computer-assisted telephone interviews. Due to an error in the online survey routing,
          the base size for this particular question is smaller than for our other survey questions.
       22 There were some very limited circumstances in CJRS 1 where working while furloughed was allowed, such as a
          director carrying out director’s duties.
       23 Based on 1,178 survey responses, of which 117 indicated that they had worked while furloughed at the
          employer’s request. These are raw respondent counts rather than the weighted ones used for calculation of
          proportions elsewhere in this report. See Appendix 2 for further detail.
56 Part Three Implementing employment support schemes in response to the COVID-19 pandemic




                        3.26 HMRC intends to produce a final statistical estimate on both schemes for
                        total levels of error and fraud. It aims to refine its provisional estimates again
                        by the end of 2020 and in spring 2021 as it undertakes more compliance work
                        and receives more operational intelligence. HMRC is monitoring the level of
                        organised criminal attack. It does not expect to produce final estimates until the
                        end of 2021 at the earliest. It intends to use similar methodologies to those used
                        in estimating the tax gap. We recently reported on HMRC’s assessment of the
                        tax gap, noting that it is a comprehensive assessment but with some inevitable
                        uncertainty attached.24 There will also be parallels with the work that HMRC does
                        in measuring error and fraud in Tax Credits and Child Benefit, as well as the work
                        the Department for Work & Pensions does in measuring fraud and error in the
                        benefits system.

                        3.27 HMRC has made some errors resulting in overpayments of grants worth
                        £14 million. In the first tranche of SEISS payments, 26,000 were miscalculated
                        due to not all tax return data being considered. Around 13,000 of these led to
                        overpayments worth £12 million, equivalent to less than 1% of all SEISS grants.
                        On CJRS, around £3 million was overpaid on 330 cases that were manually
                        processed by HMRC staff. There are also likely to be cases where employers
                        overclaimed CJRS because the HMRC online calculation tool was not accurate.
                        HMRC made changes to the tool in May to rectify identified problems. HMRC does
                        not intend to recover these overpayments despite having the legal powers to do so.

                        3.28 Up to 13 October, companies had paid back £278 million in grant money
                        claimed under the CJRS. The amounts were claimed in error or were amounts
                        that the company subsequently decided they did not need as they adapted to
                        the pandemic.




                        24 Comptroller and Auditor General, Tackling the tax gap, Session 2019–2021, HC 372, National Audit Office,
                           July 2020.
                       Implementing employment support schemes in response to the COVID-19 pandemic Part Three 57




                                 Post-payment compliance
                                 3.29 HMRC has set out how it intends to deal with potential non-compliance
                                 post-payment. For CJRS, it has set up an approach which gives it multiple
                                 opportunities to recover overpayments (Figure 19). HMRC has already made
                                 three arrests in relation to suspected CJRS fraud. For SEISS, work commenced in
                                 October 2020 targeting the highest risk areas using a similar campaign approach
                                 to CJRS. Further SEISS risks will be considered as part of the compliance checks
                                 on the 2020-21 Self Assessment tax returns that will be due by January 2022.


Figure 19
HM Revenue & Customs’ (HMRC’s) post-payment compliance regime for Coronavirus Job
Retention Scheme (CJRS)
HMRC’s post-payment compliance regime has yet to produce tangible results in terms of recovery of overpayments


CJRS compliance                    What is it?                                             Results to date
campaign

Claims assurance checks            2,800 calls to employers during the scheme              18% of calls have identified errors resulting
                                   to understand more about their claims.                  in overpayments.
                                                                                           20% of calls have identified errors but with
                                                                                           no net overpayment.
                                                                                           63% of calls either not answered, customer
                                                                                           unable/unwilling to speak or no error identified.

90-day disclosure window           Amnesty period for employers to encourage               27,000 letters sent out.
to 20 October 2020                 them to disclose any overclaims during the
                                                                                           136 notifications of overpayments received
                                   disclosure window.
                                                                                           but too early to evaluate response rates.

One-to-one enquiries               For remaining high-risk claimants who have              10,000 enquiries anticipated, subject to
                                   not corrected their claims.                             the number of voluntary disclosures.

Protection against                 To protect taxpayer money where companies
deliberate insolvency              look to deliberately enter insolvency.

Notes
1   Percentages for claims assurance checks calls do not sum due to rounding.
2   Total number of claims assurance checks based on data as at 7 August 2020. HMRC made the decision to discontinue these calls from
    August onwards instead shifting its focus into other post-payment compliance activity.

Source: National Audit Office analysis of HM Revenue & Customs’ documentation
58 Part Three Implementing employment support schemes in response to the COVID-19 pandemic




                        3.30 HMRC plans to redeploy 500 full-time equivalent (FTE) staff to enable
                        post-payment compliance work. Its assessment in June 2020 suggested that
                        this work would bring in around £275 million. The work offers a positive return
                        on investment (we estimate around 9:1) but HMRC estimates it would come
                        with an opportunity cost to tax revenue of £100 million to £200 million as it
                        would need to redeploy staff from tax compliance. HMRC does not believe it
                        can recruit additional staff because there is an 18-month time-lag between
                        starting recruitment and getting staff fully trained to start work. In June 2020 it
                        considered outsourcing but concluded at that stage that there were no existing
                        commercial mechanisms to recruit at the speed it needed. It was also concerned
                        about the challenges experienced through outsourcing HMRC functions in the
                        past (such as using Concentrix to administer Tax Credits’ claims) and that this
                        would not be worthwhile given furlough arrangements may not be extended,
                        making this a one-off. In October 2020 HMRC informed us that with the
                        announcement of new employment support schemes, and informed by learning
                        from the operation of SEISS and CJRS, it was now planning to use private
                        contractors to supplement its compliance capacity where necessary.

                        3.31 Until it has a robust estimate of the total levels of error and fraud, HMRC
                        cannot reasonably know how much resource it should commit to recovery.
                        Its provisional assessment of £275 million is based on investigating around
                        30% (10,000 claims) of the highest-risk CJRS cases. If total levels of error and
                        fraud prove to be higher than initially forecast the work may take some time to
                        complete. HMRC will also need to consider the long-term impact of the pandemic
                        and the risks this poses to tax revenue and the ability of taxpayers to repay
                        grants in the short-term.
Implementing employment support schemes in response to the COVID-19 pandemic Appendix One 59




          Appendix One



          Our audit approach
          1     This report examines the role of HM Treasury and HM Revenue & Customs
          (HMRC) in implementing the Coronavirus Job Retention Scheme (CJRS) and the
          Self-Employment Income Support Scheme (SEISS). The report considers how
          well the schemes were implemented, recognising the need to deliver at speed in
          response to the COVID-19 pandemic. Our key audit questions were:

          •    Did HMRC and HM Treasury manage design and delivery risks effectively
               in implementing the schemes?

          •    Do HMRC and HM Treasury understand whether the schemes reached the
               people intended?

          •    Are HMRC and HM Treasury managing fraud and error risks effectively
               thus far?

          2    This report does not consider HMRC’s other COVID-19 interventions
          designed to support businesses, including the Coronavirus Job Retention Bonus
          and Eat Out to Help Out, or the relationship between the schemes and wider
          government support such as business loans and benefits. We have previously
          reported on the Bounce Back Loans Scheme.

          3    Our audit approach is summarised in Figure 20 overleaf.
60 Appendix One Implementing employment support schemes in response to the COVID-19 pandemic




Figure 20
Our audit approach
The objective of
government          To provide support for businesses affected by the COVID-19 pandemic to enable them to retain
                    employees and to provide support to self-employed individuals whose businesses were adversely affected
                    by the pandemic.



How this will
be achieved         HM Revenue & Customs (HMRC) and HM Treasury together designed two grant schemes: the Coronavirus
                    Job Retention Scheme (CJRS) to support businesses; and, for self-employed individuals, the Self-Employment
                    Income Support Scheme (SEISS).



Our study
                    We examined how HMRC and HM Treasury designed and delivered these two support schemes, recognising
                    the need to deliver at speed in response to the COVID-19 pandemic.



Our evaluative
criteria            Did HMRC and HM Treasury               Do HMRC and HM Treasury                 Have HMRC and HM Treasury
                    manage design and                      understand whether the                  managed fraud and error risk
                    delivery risks effectively in          schemes reached the                     effectively thus far?
                    implementing the schemes?              people intended?



Our evidence
                    Interviews with key HMRC and           Interviews with key HMRC and            Review of key documents,
(see Appendix Two
                    HM Treasury staff.                     HM Treasury staff.                      including control frameworks.
for details)
                    Document review, including             Document review, including              Review and analysis of any
                    ministerial submissions on             ministerial submissions.                emerging evidence on fraud
                    scheme design.                                                                 and error levels.
                                                           Interviews with
                    International comparisons              relevant stakeholders.                  Interviews with key HMRC and
                    using data from other                                                          HM Treasury staff.
                                                           Analysis of our survey data.
                    audit institutions.
                                                                                                   Analysis of our survey data.



Our conclusions
                    HM Treasury and HMRC met their objective to rapidly implement the schemes and the Departments should
                    be commended for making these available ahead of schedule. The schemes were relatively straightforward to
                    apply for, and payments quickly reached those who applied. Indications are that this has helped to protect jobs
                    in the short-term and the numbers of people moving from furlough arrangements back to work are encouraging.
                    However, many other people have lost earnings and have not been able to access support. The long-term
                    impact of the schemes will also depend on wider financial support and the ongoing impact of COVID-19.
                    A key value-for-money test for these schemes will be how far the Departments can mitigate fraud and error.
                    The pace at which the schemes were designed and implemented meant the Departments had to accept a
                    greater risk than normal. As such, there are likely to be considerable amounts of fraud and error, particularly
                    on the furlough scheme. Limiting applications to existing taxpayers should have reduced the fraud risk, but
                    HMRC could have done more to make clear to employees whether their employer was part of the furlough
                    scheme. In future, the Departments should do more while employment support schemes are running to
                    protect employees and counter acts of fraud. The Departments will need to ensure sufficient resources are
                    committed to recover money where it is cost-effective to do so.
Implementing employment support schemes in response to the COVID-19 pandemic Appendix Two 61




          Appendix Two



          Our evidence base
          1   Our conclusions on the two employment support schemes were reached
          based on our analysis of evidence collected between June and October 2020.
          Our overall audit approach is outlined in Appendix One.


          Using our back catalogue
          2     In designing and carrying out our work we took account of previous National
          Audit Office (NAO) analysis examining the Departments’ responses to financial
          and humanitarian crises using the learning from this work to inform our evaluative
          criteria. We also deployed our framework for assessing the Departments’
          approaches to managing fraud and error, an audit method that builds on
          significant past experience of government interventions.


          Departmental meetings and information
          3   We met with key officials from both HM Treasury and HM Revenue &
          Customs (HMRC) involved in the design and delivery of the schemes. Specifically:

          •    the senior responsible owners for both the Coronavirus Job Retention
               Scheme (CJRS) and the Self-Employment Income Support Scheme (SEISS),
               and the key staff members supporting them;

          •    staff from HMRC’s Customer Compliance Directorate who led on the
               compliance regime for both;

          •    HMRC’s internal audit team, who offered initial advice to their Departmental
               colleagues on the appropriateness of the schemes’ control environments;

          •    staff from HMRC’s Knowledge, Analysis and Innovation Team to discuss the
               monitoring and evaluation of the schemes; and

          •    staff from HMRC’s Behavioural Insights and Trials Team.

          4    We reviewed relevant documents, including: options papers, ministerial
          submissions and strategy documents, accounting officer advice, controls
          frameworks, risk and decision logs, scheme overviews and customer journey maps,
          lessons-learned documents, performance dashboards and internal audit papers.
62 Appendix Two Implementing employment support schemes in response to the COVID-19 pandemic




                        Stakeholders and experts
                        5    We reviewed key external reports and data sources including those
                        published by the Office for National Statistics (ONS), the Organisation
                        for Economic Co-operation and Development (OECD), and the Treasury
                        Select Committee.

                        6     We engaged with experts from the Institute for Government, National
                        Institute for Economic and Social Research, and the Resolution Foundation.
                        We also discussed with the authors the results of findings from a survey
                        conducted by Dr Abigail Adams-Prassl and colleagues from Oxford, Cambridge
                        and Zurich universities. We corresponded with Crossland Employment Solicitors
                        in relation to their survey work. For the surveys featured in Figure 18 in the
                        report, we asked: who conducted the survey; what questions were asked
                        about furloughed working; and over what time period the survey was carried
                        out. We have not audited the underlying data.


                        Survey research
                        7    To gain feedback from employees furloughed as part of CJRS, we
                        commissioned Ipsos MORI to carry out primary survey research on our behalf.
                        Ipsos MORI interviewed a sample of 8,445 adults aged 18+ in the UK using a
                        quota sampling method. Research was conducted using its telephone omnibus
                        and online interviews. For both methodologies, quotas were set on age, gender,
                        working status, education level, ethnicity and government office region to
                        reflect the general population. The quotas were set based on the 2020 mid‑year
                        population estimates for UK adults 18+ published by the ONS. Quota sampling
                        techniques provide accurate information about the responding sample, but
                        findings derived from this approach cannot generally be used to make inferences
                        about a wider population in the same way as having taken an entirely random
                        sample of respondents from a defined population, where each potential
                        participant has a known probability of being selected.

                        8    A total of 4,367 interviews were conducted via the telephone (CATI)
                        omnibus between 14 August and 2 October 2020. The CATI omnibus is a
                        nationally representative sample of adults (18+) using standard landline Random
                        Digit Dialling (RDD), mobile RDD and targeted mobile samples. Interviewing took
                        place over a four-week period, from a Friday to the following Wednesday and
                        interviewing was conducted between 9am and 9pm on weekdays and 10am
                        to 7pm on weekends.
Implementing employment support schemes in response to the COVID-19 pandemic Appendix Two 63




          9    A total of 4,078 interviews were conducted online between 26 August and
          8 September 2020. For the online survey, a nationally representative sample
          of adults aged 18+ were interviewed online. The research was conducted by
          contacting respondents through Ipsos Interactive Services. The panel consists
          of individuals who have volunteered to take part in market research surveys.
          The respondent panel is continuously maintained and monitored on response
          rates, attrition, data quality and respondent engagement, as well as on
          demographic composition to ensure gender, age, regional and socio‑economic
          representation. Panellists receive appropriate incentives to participate in
          surveys. Email invitations were sent out to the selected respondents, with a
          unique survey link for each respondent. Respondents participating in the study
          were actively monitored during fieldwork across a number of criteria, such as
          response time, multiple participation, and so forth, and this process was repeated
          at the end of fieldwork. Of the sample, 47 cases were removed as a result of
          noticeable primacy effect, speeding or odd answer profiles and are not included
          in the totals above.

          10 Telephone and online data were weighted separately to the known offline
          population proportions for age within gender, social grade within gender, region
          within gender, working status within gender, ethnicity and education using rim
          weighting. The weight targets were based on the 2020 mid-year population
          estimates for UK adults aged 18+ published by ONS. An additional second stage
          rim weight was applied to both data sets to yield an even blend within the final
          combined weighted data.

          11 We observed some variation in response between online and telephone
          survey methods on the key question “Still thinking specifically about the period
          between 19 March – 30 June 2020, did your employer of your main job ask you
          to work while you were furloughed, or not?” The figure of 9% of furloughed
          employees who worked following a request from their employer is an aggregated
          result; separate figures for respondents interviewed by telephone and for those
          undertaking the survey online were 4% and 14% respectively.


          International comparison
          12 We also engaged with our national audit counterparts in other countries to
          better understand the different ways in which their respective governments were
          implementing short-time working or wage subsidy schemes in response to the
          pandemic. See Appendix Three for more details.
64 Appendix Two Implementing employment support schemes in response to the COVID-19 pandemic




                        Limitations
                        13 In reaching our independent views, we are aware of the following limitations
                        to our review of HMRC’s employment schemes and the value for money
                        conclusion we draw:

                        •    We conducted our audit at a relatively early stage and the full impact of the
                             schemes is not yet clear.

                        •    We conducted all our feedback remotely and, in the context of the
                             pandemic, could not supplement our fieldwork with site visits.

                        •    Survey research draws on quota sampling techniques which cannot
                             generally be used to make inferences about a wider population (see above).

                        •    The absence of a clear estimate of the nature and extent of fraud and error
                             meant we were unable to definitively conclude on how well risks have been
                             managed. HMRC expects to produce a more certain estimate, but not before
                             the end of 2021, and we will need to consider that as part of any future work.
Implementing employment support schemes in response to the COVID-19 pandemic Appendix Three 65




            Appendix Three



            International comparisons
66 Appendix Three Implementing employment support schemes in response to the COVID-19 pandemic




Figure 21
International Comparison
Most countries we reviewed had pre-existing schemes

Country                Short-time           Wage subsidy         Maximum monthly             Estimated total cost               Initial period
                      work scheme?           scheme?                 benefit1                   to date given                    of support2
UK                          Yes                   No                   £2,500                   £39.3 billion                    1 March to
                           (New)                                                            (20 September 2020)                 31 May 2020

Australia                   No                   Yes                    £1,791                   £33.1 billion                  30 March to
                                                (New)                                         (6 October 2020)              27 September 2020

Canada                     Yes                   Yes                    £2,144                   £24.0 billion                  15 March to
                      (Pre-existing)            (New)                                         (4 October 2020)                  6 June 2020

Denmark                     Yes                   No                   £3,637                     £1.5 billion                   9 March to
                       (Pre-existing                                                          (12 October 2020)                 9 June 2020
                         and new)

France                     Yes                    No                   £6,249                      No data3                     1 March to
                      (Pre-existing)                                                                                        31 December 2020

Germany                    Yes                    No                   £3,385                    £27.0 billion4                 1 March to
                      (Pre-existing)                                                                                        31 December 2020

Ireland5                   Yes                   Yes                    £1,603                   £2.6 billion                   26 March to
                      (Pre-existing)            (New)                                         (8 October 2020)                 17 June 2020

Netherlands5               Yes                   Yes                   £8,603                    £17.9 billion                   1 March to
                      (Pre-existing)            (New)                                         (6 October 2020)                  31 May 2020

Sweden                     Yes                    No                   £3,827                     £2.5 billion                  16 March to
                      (Pre-existing)                                                          (14 October 2020)             31 December 2020

USA6                       Yes                   Yes            Employee Retention              ERC: No data                 ERC: 12 March to
                      (Pre-existing)            (New)             Credit (ERC):                                             31 December 2020
                                                                                             PPP: £402.0 billion
                                                                 £3,831 (one-off)
                                                                                              (8 August 2020)                  PPP: 3 April to
                                                                Paycheck Protection                                            30 June 2020
                                                                  Program (PPP):
                                                                 £6,385 (benefit for
                                                               four weeks, maximum
                                                                    eight weeks)

Notes
1   All maximum monthly benefits and estimated total costs have been converted to pound sterling based on the exchange rates as at
    14 October 2020. Monthly benefit figures have been converted to the per-month equivalent where necessary.
2    Some countries have subsequently extended their support schemes beyond the initial period. For example, the UK Coronavirus Job Retention
     Scheme was initially due to run only to 31 May but was subsequently extended to 31 October 2020.
3    Total spend figures have not been confirmed for France.
4    The German Supreme Audit Institution told us in August that the Federal Employment Agency estimated €30 billion in spending would be
     attributable to increasing numbers of workers using the Kurzarbeit short-time work scheme throughout 2020.
5    In Ireland and the Netherlands, existing short-time work schemes were replaced by new wage subsidy schemes.
6    The ERC and PPP provide a benefit to employers with the intention of mitigating layoffs. The PPP scheme provides a loan which may convert into
     a grant if employee retention conditions are met. The CARES Act 2020 also provided funding for states to establish short-time work programmes,
     however the US Government Accountability Office told us that at 30 June 2020 no federal funding had been obligated for spending.

Sources: National Audit Office analysis of data from the Supreme Audit Institutions contacted; Institute for Government report (2020): Coronavirus and
unemployment: a five-nation comparison; Organisation for Economic Co-operation and Development (OECD) report (2020): Job retention schemes
during the COVID-19 lockdown and beyond; Governmental websites.
                Implementing employment support schemes in response to the COVID-19 pandemic Appendix Three 67




                                  Appendix Four



                                  Evolution of HM Revenue & Customs’ employment
                                  support schemes

Figure 22
Comparison of Coronavirus Job Retention Scheme (CJRS) and Job Support Scheme (JSS)
Government support has changed over time


                                                                                                                                   Employee pay
                                                                           Government pays
                     CJRS 1 June                                                 80
                                                                                                                                    reduction
                                                                                                                                       20




                                                                                                                                   Employee pay
                                          Employer pays                               Government pays
                 CJRS 2 October                                                             60
                                                                                                                                     reduction
                                               20
                                                                                                                                        20




                                          Employee must work at least                                    Government pays          Employee pay
                                                                                Employer pays
                               JSS                   33                                                        22                   reduction
                                                                                     22
                                                                                                                                       22




                                                                   Government pays                                     Employee pay reduction
                   Expanded JSS                                          67                                                     33


                                     0          10         20         30         40          50          60       70         80         90        100

                                                                                      Percentage (%)

Notes
1   From August 2020, the employer has paid National Insurance Contributions and minimum pension contributions. Employers can top up
    employee salaries if they want. For all schemes, the government has capped the maximum level of support it provides.
2   For CJRS 2 and JSS, government support is based on the hours not worked by the employee. For CJRS 2, the level of support reduced
    over time to 60% in October, the final month of that scheme.
3   Percentages may not sum to 100 due to rounding.
4   The Expanded JSS is for businesses legally required to close as a result of lockdown restrictions.

Source: National Audit Office analysis of government information
68 Appendix Four Implementing employment support schemes in response to the COVID-19 pandemic




                        Figure 23
                        Comparison of Self-Employment Income Support Scheme (SEISS)
                        and SEISS Extension
                        Government support has changed over time


                            Self-Employment Income Support
                                                                                                             80
                                  Scheme 1st Grant (SEISS 1)

                            Self-Employment Income Support
                                                                                                       70
                                 Scheme 2nd Grant (SEISS 2)

                           Self-Employment Income Support
                        Scheme Extension (SEISS Extension)                    20
                                            from November
                                                                   0     10        20   30   40   50    60    70   80   90   100
                                                                         Percentage of average monthly trading profits (%)

                        Note
                        1   The maximum level of government support is also capped.
                        Source: National Audit Office analysis of government information
CORRECTION SLIP
Title: Implementing employment support schemes in response to the
COVID-19 pandemic
Session: 2019–2021
HC 862
ISBN: 978-1-78604-339-9
Ordered by the House of Commons to be printed on 21 October 2020

Correction One:
Paragraph 15 (page 9) of the report was produced in error, the second sentence
referred to a ‘high proportion’, it should have been 12%.

The paragraph currently reads:
15 The Departments considered the equality implications of their design
decisions. The Departments carried out equality impact assessments for both
schemes. They identified that a high proportion of Black, Asian and minority
ethnic people were self-employed and undertook additional work to raise
awareness of SEISS with stakeholder groups. HMRC’s monitoring data provide
information on the age and gender profiles of people covered by the schemes but
do not report on other protected characteristics, such as ethnicity, as these data
are not necessary for the administration of taxes. The data show that a greater
proportion of younger workers were furloughed. A greater proportion of men were
furloughed initially, but this reduced over time and by September there was little
difference between men and women. In August 2020 HMRC began tendering
for survey and qualitative research to gain additional feedback on the schemes
(paragraphs 2.17 to 2.22 and Figure 10).

The paragraph should read:
15 The Departments considered the equality implications of their design
decisions. The Departments carried out equality impact assessments for both
schemes. They identified that 12% of self-employed workers had a Black,
Asian or minority ethnic background and undertook work to raise awareness of
the SEISS scheme with stakeholder groups. HMRC’s monitoring data provide
information on the age and gender profiles of people covered by the schemes but
do not report on other protected characteristics, such as ethnicity, as these data
are not necessary for the administration of taxes. The data show that a greater
proportion of younger workers were furloughed. A greater proportion of men were
furloughed initially, but this reduced over time and by September there was little
difference between men and women. In August 2020 HMRC began tendering
for survey and qualitative research to gain additional feedback on the schemes
(paragraphs 2.17 to 2.22 and Figure 10).




                                                                        BACK
Correction Two:
Paragraph 2.19 (page 35) of the report was produced in error, ‘one-third’ should
have been 12%.

The paragraph currently reads:
2.19 HMRC’s further analysis to support its communication strategy showed
that one-third of self-employed workers had a Black, Asian or minority ethnic
background, with almost half based in London. HMRC developed a range of
communication and engagement plans for the schemes and worked with ethnic
minority and faith-based organisations to publicise the schemes.

The paragraph should read:
2.19 HMRC’s further analysis to support its communication strategy showed that
12% of self-employed workers had a Black, Asian or minority ethnic background,
with almost half based in London. HMRC developed a range of communication
and engagement plans for the schemes and worked with ethnic minority and
faith-based organisations to publicise the schemes.




                                                                        BACK




Date of correction: 12 October 2020
This report has been printed on Pro Digital
Silk and contains material sourced from
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FSC (Forest Stewardship Council).

The wood pulp is totally recyclable and
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that they have effective procedures in place to
manage waste and practices that may affect
the environment.
                                                                     £10.00
                                                        ISBN 978-1-78604-339-9




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