The cost of fraud

Fraud adversely affects taxpayers, whatever sector it occurs in. The money lost in the public sector will be passed on to taxpayers in the form of higher taxes and rising costs of bought services. Charges on punitive fines may also rise. The costs of fraud in the private sector are passed on to tax-paying consumers too; the price of services and products will increase to those who use them. It’s a huge and often ignored problem. The main reason is that it’s just too difficult to accurately cost. We all know that it happens, but we’re unaware of its extent, and therefore of how much it hits us in the pocket. Today, we’ve seen that the National Fraud Authority have estimated that fraud cost £30bn last year. 58 per cent of this, or £17bn, was in the public sector.

There is other great work being done to expose just how a big a problem fraud is to the taxpayer. Back in November, a study was carried out by the Centre for Counter Fraud Studies and MacIntyre Hudson LLP, which analysed global data. Focussing on the public sector, they aim to measure fraud and error as accurately as other business costs, which will give organisations, departments and quangos the tools and information to tackle it. This paper revealed that bodies potentially lose up to 9 per cent of their budget through fraud or loss. Just as importantly, it concluded that fraud can indeed be measured, meaning genuine steps can be taken to plug the holes.

A second report soon followed this, focusing on the cost of fraud to healthcare. Again a pan-national exercise, it found that around 180 billion Euros (£160 billion) was lost globally to fraud and error, in this one area alone. The average loss found, across a wide range of healthcare expenditure, was 5.59 per cent. Applied to the entire UK health budget, this equates to over £5.5bn: a frightening prospect.

Robust information from studies like these is beginning to unveil the true costs of fraud; the lessons learnt from them can help to save taxpayers a fortune.

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