Source · Select Committees · Public Accounts Committee
Recommendation 21
21
Accepted
Departments recover a minority of detected fraud, hindered by fragmented enforcement powers.
Conclusion
Departments also only recover a minority of the fraud they detect. In 2020–21, departments had recovered £29 million out of the £243 million of detected fraud. Enforcement and recovery powers are also fragmented across government, which exacerbates the challenge government faces to recover fraud losses.69 We asked HM Treasury how much of the £21 billion estimated fraud over the pandemic it expected to recover. HM Treasury told us that DWP and HMRC will have their own specific targets, and the returns on their spending are scrutinised by the Office for Budget Responsibility at fiscal events. HM Treasury and Cabinet Office confirmed that government was not writing off any of the losses associated with fraud during the COVID-19 pandemic period. It was actually increasing its efforts to recover those losses, for example, through its £1 billion investment in counter-fraud capability, but it would not be reasonable to expect government to recover all of the losses.70 Local government
Government Response Summary
The government commits to continue investing in fraud recovery initiatives and pursuing legislative options to strengthen the public sector's counter-fraud response. It will also work with the PSFA to hold departments accountable for financial targets on counter-fraud investment, building on existing efforts that have already seen significant 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.