Fraud is now big business across Britain. Billions of pounds are lost to it each year as it becomes one of the most frequent types of crime. From call centre scams to fake letting agents and dozens of other grifts, someone falls victim about every ten seconds. Complex international webs target us and launder the proceeds, often beyond the reach of UK laws, enabled by lax and corrupt regimes elsewhere. It's a drag on our economy and our well-being, a need to be constantly alert and suspicious. Yet there is another type of fraud less often talked about – where the government is the victim.
The state is an obvious target for fraudsters. It has large amounts of money to hand out under a variety of programmes and departments. Yet, it also seems bad at preventing and investigating fraud. Sometimes, it appears poor at even acknowledging it – with many departments not even declaring how much is lost to corruption and crime. While some incidents, particularly over COVID-19, captured the public attention, there is little scrutiny of the day-to-day deception of the government.
Though rarely discussed, the scale is staggering. The National Audit Office estimates it to be between £55 billion and £80 billion for the last financial year. That means, at best, we are losing the same amount to fraud as we spend on defence, intelligence and the FCDO combined. At worst, the Department for Being Defrauded is spending more than education and the Home Office combined. Looked at another way, it costs roughly as much as business rates and council taxes bring in. Only a fraction of that is actually detected and, therefore, even capable of recovery. With public finances in such a parlous state, preventing fraud should be a major government priority. Even partial success could outperform many potential tax rises or spending cuts.
The latest NAO report makes the scale of the problem clear and shows how much the government needs to do. It explains how last year, around £13 billion of fraud (more than enough to pay for the Ministry of Justice) was detected in public accounts, while a further £40 billion is estimated to have taken place. More shockingly, over £560 billion of public money is not subject to any sort of fraud or mistake measurement. The NAO believes up to 5% of that could be being misdirected, either innocently or by malice, with no real oversight. This starts to look like a negligent use of public funds.
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