by Danny LaManna, intern
The TaxPayers’ Alliance has long called for fraud to be a priority of ministers. Waste is bad enough, but precious resources being misdirected through criminal means makes a mockery of the record-high tax burden households are currently paying. And too little is being done about the dramatic rise since the pandemic. A recent hearing of the Public Accounts Committee (PAC) took a closer look under the bonnet. The findings weren’t pretty. The government’s annual reports estimate that fraud against the taxpayer rose from £5.5 billion to £21 billion over the two years since the start of the pandemic as compared to the two years leading up to it. Covid led to erratic and expensive action being taken without allowing for the proper safeguards to be put in place. Since then, government looks to be falling behind. A recent report by the National Audit Office (NAO) on progress in combating fraud found that “fraud made up 41 per cent of all recorded crime, but less than 1 per cent of police resources were devoted to tackling it”. Crime has shifted into the digital world, it is time for our government and law enforcement to do the same.
Figure 1, Estimated fraud reported (£m)
The Department for Work and Pensions (DWP) made it much easier to claim benefits during the pandemic and fraud surged as a result. Of the increase throughout 2020-2022, £7.3 billion has been identified as covid related. Repealing safeguards in the name of expediency likely played a significant role in the overall rise, especially regarding benefits overpayments. The worry is that while these pandemic-related benefits are no longer needed, these policies aimed at speed over safety may be staying for good.
Figure 2, amount lost to fraud and overpayments recovered (£bn)
In an emergency, a lack of foresight can be excused. The failure to properly pursue lost funds after the fact can’t be. Figure 2 shows fraud rapidly increased throughout covid, rising by nearly 200 per cent. Yet the amount recovered has remained the same, hovering around £1 to £1.1 billion. Both the total loss as well as the proportion lost relative to spending portray a crystal clear picture; the government did not adequately safeguard taxpayers’ money in these desperate circumstances. Significant relief was needed, but there was little caution about ensuring that the people who received relief were the ones who really needed it. Having made these errors, little has been done to remedy them. At the PAC hearing this cavalier attitude was on display as the CEO of the Public Sector Fraud Authority (PSFA) commented on the government's ability to innovate in the online protection sector. In response to a question regarding the disbenefits of digitalization, he said the very “tools that we can use to prevent fraud could be used by fraudsters to attack us”. The implication that the protection of our money is failing to innovate is frightening. As the online world continues encroaching on our daily lives, our government can not take a backseat in protecting its citizens.
The PSFA was established in 2022, a new agency charged with advising government departments on combating fraud. The National Audit Office’s report, Tackling Fraud and Corruption Against Government, offers disturbing insight into their findings. The PSFA has identified 51 per cent of the public bodies under their domain classified as red on a traffic-light system in counter fraud outcomes. 27 per cent were classified as red on counter-fraud resourcing and 24 per cent red on understanding of fraud risk. The numbers given the all-clear were concerningly low, at 6, 13 and 14 per cent respectively.
Despite the recent funding of £25 million thrown at PFSA, CEO Mark Cheeseman offered a bleak assessment of the government's ability to tackle fraud. He pointed out that, “the tools that we can use to prevent fraud could be used by fraudsters to attack us”. He also shared the misleading statistic that the fraud detection level has increased in recent years, which does not provide any evidence of progress as the inflated numbers were driven by additional levels of fraud and error found as part of pandemic-related spending.
The covid pandemic is behind us, and with it goes many of our problems, but fraud is not one of them. Fraud spiked in part due to the massive amount of money being transferred to people in need, but it is also due to the new technological systems that are being introduced each and every day. Digital crime is an expansive and evolving frontier, and similar to criminals, civil servants must evolve as well to defend the public purse against novel threats like cyber fraud. Only time will tell if the PSFA and DWP can manage that, as the NAO report leaves little cause for celebration.