Fraudsters could steal billions of pounds by targeting the government’s Covid-19 financial rescue schemes, a report has warned.

The Policy Exchange think tank said measures were rushed through to save people and businesses from economic ruin but were vulnerable to scams.

The government said it was using every tool to prevent and detect fraud, and would pursue those who commit it.

Former home secretaries Lord Blunkett and Sajid Javid have backed the report.

Fraud and error could cost the government between £1.3bn and £7.9bn, the report from the centre-right organisation says.

The report said this was because of the size of the packages and the speed at which they were introduced.

The calculation is based on expected fraud rates for government expenditure from the Cabinet Office and the Department for Work and Pensions.

The report said the true value lost to fraud may be closer to the higher end of the estimate “due to the higher than usual levels of fraud that accompany disaster management”.

It said: “This is a serious squandering of public finances and properly resourced post event assurance will be required to reassure the public that every possible step has been taken to reduce this level of fraud.”

The paper says that despite attempts to tackle the problem, HMRC had already received 1,868 claims of furlough fraud by the end of May, with the Coronavirus Job Retention Scheme (CJRS) singled out as the most susceptible to fraud.

In a foreword to the report, former Labour Home Secretary Lord Blunkett said criminals have used the Covid-19 crisis to “dip below the radar” and take advantage of unusual circumstances.

His warning comes after a 57-year-old man became the first person to be arrested in connection with an alleged fraud of the government furlough scheme.

The report urges the prime minister to create a new minister for fraud and forum to oversee the prevention, detection, investigation and prosecution of coronavirus-related scams.

Lead author Richard Walton, former head of counter-terrorism at the Metropolitan Police, said: “The government’s economic response has been entirely justified but it has had the unintended consequence of opening up opportunities for fraud on a significant scale.

“A new minister for fraud and economic crime and a forum in the National Economic Crime Centre to co-ordinate the government’s response to this fraud would help to address the scale of the problem.”

Former Chancellor Sajid Javid said the sums involved were likely to be significant and said it was “a good time to join up counter fraud measures”.

A government spokesman said: “In Covid-19, we are using every tool and piece of intelligence to prevent, detect and disrupt fraud. Where it still gets through, we are finding and pursuing those who commit it.”

He added the government had committed to “extensive post payment reviews of stimulus and support payments, to find fraud and recover money for the taxpayer”.

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