Source · Select Committees · Public Accounts Committee
Recommendation 8
8
Accepted
Government demonstrates commitment to tackling fraud with significant investment and new initiatives
Conclusion
We were interested to hear about how government was demonstrating leadership at the most senior levels on tackling fraud and corruption. HM Treasury explained the steps it is taking to change and embed the counter-fraud culture across the public sector. It has asked every major department to target a return on investment of at least £3 for every £1 spent on counter-fraud.16 It has committed to an investment of £1 billion since the pandemic on tackling fraud, including £900 million on DWP, over the period 2022–23 to 2024–25, from which it expects a return of £9 billion by 2028.17 Cabinet Office brought to our attention that as part of government’s wider investment in tackling fraud and corruption, the number of people working at the PSFA has increased from 60 to 150.18 HM Treasury has also implemented Initial Fraud Impact Assessments (IFIAs) with the intention of designing out fraud at the start of initiatives.19 IFIAs are rapid assessments of potential fraud and corruption risks in policies so that appropriate controls can be designed and put in place before implementation.20 In tandem with the creation of the PSFA, HM Treasury told us that these collective changes are testament to the resolve of government to tackle fraud and corruption.21 Gaps in government’s understanding of fraud and corruption risks
Government Response Summary
The government agrees with the recommendation and notes it is already implemented, detailing significant existing investments in counter-fraud, such as PSFA funding and DWP/HMRC recovery targets. It also reiterates encouraging all departments to set financial impact targets for their counter-fraud work to improve transparency and deter fraudsters.
Government Response
Accepted
HM Government
Accepted
1.1 The government agrees with the Committee’s recommendation. Recommendation implemented 1.2 Fraud against the public sector damages trust in government, increases the cost of public services and is recognised as a national security threat. The establishment of the Public Sector Fraud Authority (PSFA) and the broader investment in counter fraud gives an 7 opportunity to drive efficiency in government, to contribute to the wider effort on reducing economic crime in the UK and in doing so to raise public confidence. 1.3 The government created the PSFA with £24.7 million new funding in the 2022-2025 Spending Review period – double the funding of the previous Government Counter Fraud Function – to support public bodies and departments to tackle fraud and corruption. The PSFA had an initial target of £180 million in audited benefits and significantly surpassed this initial goal, saving taxpayers £311 million in its first year of operation. For 2023-24, the PSFA has a target of recognising £185 million in audited benefits and is one of the many steps the government is taking to find and tackle fraud. 1.4 The PSFA works with departments and public bodies to understand and reduce the impact of fraud. It is the UK government’s Centre of Expertise for the management of fraud and associated error against the public sector. It has published the PSFA Mandate, in addition to the Government Counter Fraud Function Profession standards (GCFP). These establish mandatory processes and guidance for government organisations to follow. To help restore public trust in the government response, the PSFA is agreeing financial impact targets with public bodies and monitoring performance against them. The government continues to publish information, case studies and press studies to demonstrate publicly how it is tackling fraud. 1.5 PSFA and HM Treasury (HMT) requires senior officials, including Accounting Officers, to demonstrate leadership in tackling fraud and corruption. The PSFA wrote to accounting officers to ensure they were aware of their requirements. The Functional Standard explicitly requires public bodies to have a board member accountable for counter fraud. The Permanent Secretary for the Cabinet Office and Director General for Public Spending for Her Majesty’s Treasury are writing to Heads of Departments encouraging them to up their collective ambition to counter fraud and reiterating the importance of setting counter fraud targets. 1.6 HMT has mandated fraud and corruption risk consideration in government spending decisions. Under Managing Public Money all HMT officials are required to consider fraud risk against any measure in scope of a fiscal event and to complete an Initial Fraud Impact Assessment (IFIA) where HMT has identified new spend. Moreover, under Managing Public Money, accounting officers must consider fraud risk in any decisions and ensure IFIA’s are completed if necessary. 1.7 The government has targeted activities to tackle fraud and corruption in areas exposed to risks during the COVID pandemic. By March 2025, the government will have invested around £4 billion in HM Revenue and Customs (HMRC) compliance activity including work to tackle fraud, avoidance and evasion across the tax system. The government has invested an extra £900 million in Department for Work and Pensions (DWP) in the 2022-23 to 2024-25 spending review period with an objective to stop £2 billion of fraud and error by 2024-25 and reduce overall losses by £9 billion by 2027-28. In 2022-23, strong compliance action from HMRC secured and protected £34.0 billion for public services that would otherwise have gone unpaid. In 2022-23, DWP recovered £1.1 billion of fraud within the benefits system. In July 2023, DWP set a new public target to save at least £1.3 billion in 2023-24 through its dedicated counter fraud and resource. 1.8 Lastly, all departments have been encouraged to set financial impact targets for their counter fraud work. The setting of targets not only improves the transparency of counter fraud spending, but also ensures that we deliver a serious message to fraudsters that the government is making a concerted effort to tackle their ever-evolving crimes. At present, sixteen departments have proposed a target providing a significant increase in return from their counter fraud investment.