Billions lost to fraud since start of pandemic, watchdog reveals

Around £21bn has been lost by the government due to fraud since the start of the pandemic, according to the National Audit Office (NAO).

The spending watchdog also warned that it was “very unlikely” that most of the taxpayers’ money will be recovered.

The NAO said that many public bodies are unaware of the amount of fraud they face, as it revealed that levels rose from a total of £5.5bn in the two years before the pandemic to £21 bn in total in the following two years.

The auditing body said that of the £21bn, just over £7 bn 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 bn by the time its taxpayer protection taskforce is wound down, out of an estimated £4.5bn.

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 £1.5bn 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.”

Meg Hillier, chairwoman of the Public Accounts Committee, said: “At least £21bn of taxpayer money was lost to fraud since the start of the pandemic – four times as much as the two years before that.

But most of the government still does not know how much fraud and corruption it faces and cannot show that it is tackling it effectively, according to NAO officials.

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.”