£21bn of public money lost in fraud since pandemic began and most will never be recovered

Tens of billions of pounds have been lost to fraud since the start of the COVID pandemic, according to the National Audit Office (NAO), with little chance of the majority being reclaimed.

Of the £21bn identified by the NAO to have been lost by the government, more than £7bn is linked to schemes introduced during the pandemic

And it says it is “very unlikely” that the bulk of the taxpayers’ money will be recovered.

Levels of fraud rose almost fourfold from £5.5bn two years before the pandemic to £21bn in the following two years.

The NAO said many public bodies are unaware of the amount of fraud they face, with a host of COVID employment scheme fraudulent claims being chased up by the HMRC.

The NAO said that HMRC expects to have recovered £1.1bn out of an estimated £4.5bn by the time its taxpayer protection taskforce – a body of more than 1,200 tax specialists that responds to error and fraud – is scaled down.

The report says: “The Department for Work & Pensions generated fraud and error savings of £500 million through its retrospective review of Universal Credit claims made over the height of the pandemic, but at least £1.5bn of fraudulent claims that started during that period were still being paid in 2021-22.

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“DWP is now planning targeted case reviews to detect and recover as much of the rest as it can.”

Head of the NAO, 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.”

He said the creation of the Public Sector Fraud Authority (PSFA) last year in response to fraud over the pandemic represented a “real opportunity” to tackle fraud effectively.

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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.”

They added that the Government Counter Fraud Profession is “expanding” with more technology and training offered to “further protect the public purse”.

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