Eat Out to Help Out and two other Covid schemes lost a whopping £4.5 billion in fraud, the head of HM Revenue and Customs (HMRC) has told MPs.
And the taxpayer is only set to get £1.1bn back. Speaking at the Treasury Committee, HMRC chief executive Jim Harra said the billions of pounds were lost to fraud via the furlough, self-employed support and the Eat Out to Help Out scheme. Eat Out to Help Out ran for one month, in August 2020, after being introduced by then Chancellor Rishi Sunak. It was one of the first government policies aimed to help businesses to reopen after the first Covid-19 lockdown.
The scheme saw the government discount 50% of the cost of food and non-alcoholic drinks at participating restaurants, cafes and pubs, with the intention to drive up custom on quieter days. It ran for a month, from 3 to 31 August 2020, applying all day and was UK wide.
Harra said the scheme had a fraud level of around 9%, which is "much higher" than would normally be expected in the tax regime generally. It worked on a self-assessment basis, relying on cafes and restaurants declaring the correct amounts to HMRC.
Efforts to clamp down on fraud have led to some arrests, which resulted in "quite a few voluntary disclosures" from restaurants who volunteered they’d made a mistake and repaid their claim. Harra said: "I’m aware of one case where a restaurant claimed to have a record month in sales at the same time as they were claiming to have furloughed all of their staff. You’d be surprised at what people think we won’t join up with.”
A paper from Thiemo Fetzer, an economist at the University of Warwick, found that Eat Out to Help Out was closely linked to an increase of Covid-19 cases in the summer of 2020. He found the virus spread more rapidly in areas with a lot of participating restaurants and infections slowed within two weeks of the scheme ending.