Public bodies ‘losing £27bn a year to fraud’

19 Nov 09
The UK public sector is being cheated out of an estimated £27bn a year, and must tackle the problem to safeguard jobs and services, a leading fraud expert has said
By David Williams

20 November 2009

The UK public sector is being cheated out of an estimated £27bn a year, and must tackle the problem to safeguard jobs and services, a leading fraud expert has said.

Jim Gee, director of counter-fraud services at consultancy Macintyre Hudson, said scams were the ‘least great unreduced business cost’, highlighting complex systems such as benefit payments and decentralised procurement as areas of risk for the public sector.

The former NHS counter-fraud chief published The financial cost of fraud on November 18. The report drew from rigorous assessments of the cost of fraud in public and private bodies from around the world and concluded that, on average, 4.57% of an organisation’s total spend is lost to such crimes.

Gee argued that fraud losses were measurable costs and organisations need to carry out strict assessments to find out how much they are losing. The research showed that organisations that fail to tackle fraud could lose as much as 10.6% of their total spend – more than twice the average.

Gee calculated that across the UK public sector, the expenditure lost to fraud would amount to around £27bn. ‘If we face public sector restrictions in the years to come, I would like those to be as painless as possible,’ he told Public Finance.

‘And if one of the ways we can reduce public expenditure is to cut fraud then that’s got to be good because we’re not cutting jobs and we’re not cutting services.’

Gee said the UK public sector was leading Europe in combating white-collar crime, but was still lagging behind the US, whose Improper Payments Information Act requires large public bodies to calculate and report fraud losses.

In September, the Audit Commission published a study, Protecting the public purse, which found that councils were losing £90m a year on fraudulent claims for single person council tax discount alone.

A National Audit Office spokesman would not comment on Gee’s findings because the NAO was not involved in the production of the report.

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