Fraud and error ‘cost the government up to £20bn in 2016-17’

28 Jan 19

Fraud and error loss from central government was estimated to have cost up to £20bn in 2016-17, a Cabinet Office report has found.

A government report estimated the cost of fraud and error loss - outside of the tax and welfare system - cost central government between £2.7bn and £20.3bn in 2016-17.

Actual detected fraud and error in 2016-17 stood at £191m – which was a rise of £86m or 82% from the year before.

The Cabinet Office said the detected loss and fraud was “the tip of the iceberg”, in its Cross-Government Fraud Landscape Annual Report 2018.

Chloe Smith, minister for the constitution, wrote in the report: “When fraudsters attack the public sector, they divert money away from critical public services and into their own pockets.

“We know that the public sector is a prime target for those who commit fraud – and we cannot mitigate every risk in this area – but we must do our best to ensure that every pound of taxpayers’ money is spent on delivering services.”

John Manzoni, chief executive of the civil service and cabinet office permanent secretary, also wrote: “We need to develop out counter fraud capability across the public sector, and with this year’s launch of the Government Counter Fraud Profession, we now have the keystone in place to do this.”

The department admitted in the report: “There is still more work to be done to reduce the gap between the level of fraud and error loss that is currently detected, and the level of loss that the estimates indicate.”

The total detected fraud rose by 61% (£45m) from 2015-16 to £119m and total detected error increased by 132% (£41m) to £72m between the same years, the report said.

In 2016-17 – the year covered in the report – government departments reported an increase in the total number of allegations of suspected fraud. There were a total of 11,530 allegations reported, representing a 32% increase on 2015-16.

The Cabinet Office also estimated the level of unknown loss, with help from the government’s Fraud Measurement and Assurance Programme, which it said ranged between 0.5% to 5.0% of public service expenditure - equates to £1.96bn and £19.6bn.

The figures in the report did not include loss and error in the tax and welfare system, on which HMRC and the Department for Work and Pensions reports separately.

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