Source · Select Committees · Public Accounts Committee
Recommendation 6
6
Accepted
Work with departments to recover money paid to fraudsters and set out recovery expectations.
Conclusion
It is very unlikely that most of the losses due to fraud and corruption will ever be recovered. While fraud detection levels are rising, a large gap still remains between the estimated underlying levels of fraud and amounts detected. In 2020–21, while PSFA estimated fraud and error losses between £3.5 billion and £29.1 billion excluding tax and welfare fraud, government only detected £243 million of fraud. Government also only ever recovers a small minority of this detected fraud. For example, in 2020– 21, only £29 million of the £243 million detected fraud was recovered. Enforcement and recovery powers are also fragmented across government. The Cabinet Office and HM Treasury say they will continue to try to recover as much of the £21 billion lost during the pandemic as possible, and will not write off any amounts, but accept that it is unlikely they will be able to recover most of it. But while it is too late to prevent this fraud and most will never be recovered, government could do more to retrieve what it can. HM Treasury has committed an additional £900 million to 8 Tackling fraud and corruption against government the Department for Work & Pensions on which it expects a return of £9 billion by 2027–28 through improved general compliance. It has not invested similar amounts to tackle fraud in the other departments. Recommendation 6: HM Treasury should work with departments to help them recover as much of the money paid out to fraudsters as possible and set out in the Treasury Minute: • its expectation of the extent of departments’ recovery of losses due to fraud; • the return on investment it expects from money spent on recovery; and • why it is not investing more money to recover more.
Government Response Summary
The government agrees and is implementing, stating a clear policy to find, report, and recover fraud. HM Treasury will continue to invest in recovery initiatives, considering returns case-by-case, and will work with the PSFA to hold departments accountable for financial targets, also pursuing legislative options to strengthen future fraud loss recoveries.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Recommendation implemented The government holds an explicit policy to do more to find and report fraud, and, where possible, to recover fraud where we find it. Fraud Landscape publications provide detailed evidence that government performance detecting, recovering and preventing fraud have steadily increased since 2013. HMT will continue to invest in fraud recovery initiatives with reasonable levels of investment return. These need to be considered on a case-by-case basis, as rates of return can vary on many factors, most importantly: the scale of investment, the taxpayer group being targeted, and the statutory powers available within specific areas of investigation. For example with reference to the COVID pandemic: • Taxpayer Protection Taskforce: The government invested over £100 million to combat fraud in HMRC-administered COVID-19 schemes. So far, HMRC has recovered, or prevented from being paid out, more than £1.6 billion. • Bounce Back Loans: Responsibility for fraud recovery for bounce back loans (BBLs) first rests with commercial lenders. There are several interventions in response to fraud losses, and recovery. These include the National Investigation Service (NATIS), who lead enforcement for a small number of serious organised crime cases. NATIS intervention represents only a small proportion of the total funds recovered. The PSFA has also worked with the Department for Business and Trade and the British Business Bank (BBB) to deliver debt recovery pilots for BBL losses, as well as supporting BBB in developing bespoke recovery models with individual lenders. Work is ongoing to evaluate the impact and report on this and to build learnings into business-as-usual. • DWP: The government has provided £1.2 billion to DWP for their counter-fraud and error activities up to 2024-25. As a result of DWP’s efforts and proactive action through their planned initiatives to drive down fraud following the significant investment made, the government expects to stop over £9 billion loss by 2027-28. HMT will continue to engage in counter fraud and increase counter-fraud investment, considering each investment case on its own merits. Moreover, HMT will work with the PSFA to hold departments to account on their overall financial targets for returns on counter-fraud investment. Over the next three years, the government is investing more to strengthen support for departments and public bodies covering the entire fraud management life cycle, from Initial Fraud Impact Assessments to asset recovery. Furthermore, the government is pursuing legislative options to strengthen the public sector counter fraud response to improve future fraud loss recoveries. This will bolster, not replace, independent work across departments and public bodies.