Government ‘not tackling fraud effectively’ as £21 billion lost since the start of the pandemic

Experts have warned people are turning to fraud due to the long-term effect of Covid and the cost of living crisis

The independent spending watchdog has criticised the government over its failures to effectively tackle fraud, as a new report shows around £21 billion has been lost since the start of the pandemic.

The report from the National Audit Office (NAO) warns it is very unlikely that the majority of the money will be recovered, with just £1.1 billion expected to be scraped back, prompting Labour to accuse the government of “utterly failing” to tackle fraud and corruption.

Experts have warned people are turning to fraud due to the long-term effect of Covid and the cost of living crisis, and that the perception the government is not doing enough to tackle fraud could result in more economic crime.

Fraud losses almost qaudruple in two years

Around £21 billion has been lost by the Government due to fraud since the start of the pandemic and it is “very unlikely” that most of the taxpayers’ money will be recovered, the NAO has warned.

The auditing body revealed that levels rose from a total of £5.5 billion in the two years before the pandemic to £21 billion in total in the following two years, of which just over £7 billion relates to some of the schemes introduced by the Government during the pandemic.

It is not the first time that concerns about fraud and error in Covid-19 employment support schemes have been raised, with HMRC working to pursue fraudulent claims. But the NAO said that HMRC expects to have recovered only £1.1 billion by the time its taxpayer protection taskforce is wound down, out of an estimated £4.5 billion.

The report also says: “The Department for Work & Pensions generated fraud and error savings of £500 million through its retrospective review of Universal Credit claims made over the height of the pandemic, but at least £1.5 billion of fraudulent claims that started during that period were still being paid in 2021-22. DWP is now planning targeted case reviews to detect and recover as much of the rest as it can.”

The NAO said that the creation of the Public Sector Fraud Authority (PSFA) – which was established last year in response to concerns about fraud during the pandemic – represents a chance for a “renewed focus on fraud and corruption”.

But the watchdog warned the authority needs to be “influential across government if it is to achieve the required changes in culture, preventive approach and robust assessment of risks”.

Gareth Davies, the head of the NAO, said: ”There has been a substantial increase in the level of fraud reported in the annual reports and accounts we audit. In addition to the loss of taxpayer money, it creates the risk that people come to perceive fraud and corruption across government as normal and tolerated. If not tackled, this could affect public confidence in the integrity of public services.

“Government has more to do to understand the scale of the problem it faces and cannot yet demonstrate that it is tackling fraud effectively. The creation of the Public Sector Fraud Authority creates a real opportunity to address this.”

Jon Radford, head of intelligence, investigations and data services at the Insurance Fraud Bureau, said: “There is a danger that if the act of fraud is seen as a low priority for the authorities to tackle, this could result in more economic crime impacting the private sector.

“Sadly, we are seeing more people and businesses turn to fraud because of the long-lasting economic impact of covid and the cost-of-living crisis.”

‘Dereliction of duty’

The report found that “most departments have only limited counter-fraud and corruption capability and cannot demonstrate that it is proportionate to their risk”, with the NAO calling on departments and public bodies to act as “one government” when tackling fraud.

Labour’s deputy leader Angela Rayner said: “Fraud and corruption have run rife on the Tories’ watch but they are utterly failing to tackle it.

“This Government have completely abdicated their responsibility to crack down on this criminality, leaving public bodies without the resources to combat it effectively and protect the public’s money. It is a total dereliction of duty.

“While fraud spreads like wildfire with billions of taxpayers’ money going missing, ministers are incapable of getting a grip and undermining public confidence further still. While taxpayers are left counting the cost of the Conservatives, Labour has a plan to prevent fraud, punish the criminals and protect our communities.”

A Government spokesperson said: “We are overhauling how we tackle public sector fraud to ensure we chase down every pound stolen from British taxpayers.

“Since 2021, we have invested more than £900 million in taking action on fraud and, as the report acknowledges, we have made progress by establishing the Public Sector Fraud Authority which is stepping up the Government’s efforts to protect taxpayers’ money.

“The Government has recovered more than £3.1bn of fraud losses in the last two years, including within Covid-19 schemes, but we know there is more we can do.

“That is why we are expanding the Government’s Counter Fraud Profession, developing new technologies and boosting skills and training to further protect the public purse.”