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UK Government has lost £21bn in pandemic fraud, but will the taxpayer ever get it back?

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The UK Government has lost £21bn worth of taxpayers money due to fraud since the start of the pandemic, that is “very unlikely” to be unrecovered, according to the National Audit Office (NAO).

The NAO said that many public bodies are unaware of the amount of fraud they face, as it revealed that levels of fraud almost quadrupled from £5.5bn in the two years before the pandemic to £21bn in the years 2020-22.

The NAO’s report notes HMRC only expects to recover £1.1 bn – out of an estimated £4.5 bn worth of losses – by the time its Taxpayer Protection Taskforce is wound down,

The report says Britain’s public bodies could have “better managed” fraud risks in responding to the pandemic without hindering their efforts to support the UK economy through Covid-19.

The NAO report says the UK’s public bodies lack a proper understanding of fraud risks, in pointing to Public Sector Fraud Authority (PSFA) research that shows just 14 per cent of 70 public bodies assessed currently measure the fraud and error risks they face.

It warns that “most departments have only limited counter-fraud and corruption capability and cannot demonstrate that it is proportionate to their risk”,

The vast majority of the UK government’s counter fraud capabilities sit within HM Revenues and Customs (HMRC) and the Department for Work and Pensions (DWP), which together employ 84 per cent of the government’s counter-fraud staff.

This has left a situation in which two-thirds of all government expenditure is not subject to any direct fraud or error measurement.

The PSFA’s own estimates show this lack of oversight saw the UK government lose between £33.2bn and £58.8bn through fraud and error throughout 2020-21, out of £1,106.1bn of spending and £608.8bn of tax income.

NAO chief Gareth Davies said: ”There has been a substantial increase in the level of fraud reported in the annual reports and accounts we audit.”

“In addition to the loss of taxpayer money, it creates the risk that people come to perceive fraud and corruption across government as normal and tolerated. If not tackled, this could affect public confidence in the integrity of public services.”

“Government has more to do to understand the scale of the problem it faces and cannot yet demonstrate that it is tackling fraud effectively.”

Labour’s deputy leader Angela Rayner said: “Fraud and corruption have run rife on the Tories’ watch but they are utterly failing to tackle it.

“This Government have completely abdicated their responsibility to crack down on this criminality, leaving public bodies without the resources to combat it effectively and protect the public’s money. It is a total dereliction of duty.

“While fraud spreads like wildfire with billions of taxpayers’ money going missing, ministers are incapable of getting a grip and undermining public confidence further still. While taxpayers are left counting the cost of the Conservatives, Labour has a plan to prevent fraud, punish the criminals and protect our communities.”

A Government spokesperson said: “We are overhauling how we tackle public sector fraud to ensure we chase down every pound stolen from British taxpayers.

“Since 2021, we have invested more than £900 million in taking action on fraud and, as the report acknowledges, we have made progress by establishing the Public Sector Fraud Authority which is stepping up the Government’s efforts to protect taxpayers’ money.

“The Government has recovered more than £3.1bn of fraud losses in the last two years, including within Covid-19 schemes, but we know there is more we can do.

“That is why we are expanding the Government’s Counter Fraud Profession, developing new technologies and boosting skills and training to further protect the public purse.”

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