Up to £3.5 billion of furlough cash may have been paid out in wrong or fraudulent claims, according to official Government estimates.
HMRC has calculated that between five per cent and 10 per cent of payments may have been either stolen or paid out in error.
The total bill for the state subsidy scheme currently stands at more than £35 billion.
The job retention programme is now being wound down and will be scrapped entirely by Chancellor Rishi Sunak at the end of October.
Jim Harra, the top civil servant at HMRC, told MPs today that its working assumption is that up to 10 per cent of furlough claims may have been paid out in error or because of fraud
Jim Harra, the top civil servant at HMRC, told the Public Accounts Committee this afternoon that his staff believe between five per cent and 10 per cent of furlough cash might have gone to the wrong places.
‘We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between five per cent and 10 per cent,’ the permanent secretary said.
The Government has so far paid out £35.4 billion in furlough cash, according to the latest official figures.
If HMRC’s working assumption proves to be accurate it will mean that somewhere between £1.75 billion and £3.5 billion could have been paid out by mistake or as a result of fraud.
‘That will range from deliberate fraud through to error,’ Mr Harra said.
‘What we have said in our risk assessment is we are not going to set out to try to find employers who have made legitimate mistakes in compiling their claims, because this is obviously something new that everybody had to get to grips with in a very difficult time.
‘Although we will expect employers to check their claims and repay any excess amount, but what we will be focusing on is tackling abuse and fraud.’
It is the first time HMRC has spoken publicly about the level of potential fraud that could have been committed as part of the job retention scheme, which covered up to 80 per cent of an employee’s salary, up to £2,500 a month, while they were on furlough.
The Government rolled out the massive scheme at breakneck speed, causing many experts to warn that a certain amount of fraud was inevitable.
Chancellor Rishi Sunak is in the process of winding down the furlough scheme. It is due to be scrapped entirely at the end of October
Furlough is now winding down and will end for good next month.
However, businesses who bring staff back from furlough will receive another £1,000 if the employee is still in work by the end of January.
By August 16 this year, 9.6 million people had been put on Government-supported furlough, with 1.2 million employers claiming the support.
Meanwhile, around 2.7 million self-employed people have claimed around £7.8 billion in support from the Government.
Mr Harra said that an academic study has estimated that the level of fraud and error might be even higher than 10 per cent.