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Funding concerns over new Public Sector Fraud Authority

Author: ICAEW Insights

Published: 13 Apr 2022

A new Public Sector Fraud Authority was announced in the Spring Statement, but will the £24.7m funding increase over three years be enough to tackle the billions of pounds lost each year to fraud?

The Chancellor’s recent Spring Statement contained little in the way of new public spending announcements, instead choosing to focus on tax measures, including the increase in the national insurance threshold from July. However, the Statement did include the announcement of new funding of £48.8m over three years to “support the creation of a new Public Sector Fraud Authority and enhance counter-fraud work across the British Business Bank and the National Intelligence Service”. 

Further clarity was provided in a speech by the Chief Secretary to the Treasury to the Institute of Economic Affairs where it was confirmed that £24.7m of the £48.8m will go to turning the existing government counter-fraud function in the Cabinet Office into the Public Sector Fraud Authority. The Chief Secretary claimed this new body will “hold government departments to account for their counter-fraud performance, and help them identify fraud and seize fraudsters’ money”.

The government’s commitment follows the Comptroller and Auditor General’s qualification of his regularity opinion of the 2020/21 accounts of four government departments because of the level of fraud. These include the qualification of HMRC’s accounts because of the estimated £5.8bn of fraud and error in their COVID-19 support schemes.

The government has previously announced £100m funding for an HMRC-led ‘taxpayer protection taskforce’ to tackle fraud in HMRC’s schemes. As the Fraud Advisory Panel, an independent charity originally set up by ICAEW, noted in its submission to the House of Commons’ Public Accounts Committee inquiry into fraud and error during the pandemic, there has been limited investment in other risky areas. One of these areas is the Bounce Back Loan Scheme, for which the Department for Business, Energy and Industrial Strategy’s (BEIS) 2020-21 accounts report estimated levels of losses due to fraudulent claims of £4.9bn. 

Given the potential levels of fraud involved, some have questioned whether the funding announced is sufficient for the government to achieve its objectives. For example, Lord Browne of Ladyton, a Labour Party peer, asked in the House of Lords whether preventing fraud and error in business schemes was a priority. He contrasted the £48.8m with the £510m previously announced to increase the Department for Work and Pensions’ capacity to tackle fraud and error in benefits payments.

It is also currently unclear whether the government intends for the new Public Sector Fraud Authority to support local authorities to combat fraud. BEIS’s 2020-21 accounts report an estimated level of fraud of £1.038bn in COVID-19 business support schemes administered by local authorities on their behalf. The accounts, however, note that this estimate is highly uncertain as it does not include “more complex fraud” and the quality of counter fraud checks varied between local authorities.

Oliver Simms, Manager, Public Sector Audit and Assurance, at ICAEW commented: “We welcome the creation of the new Public Sector Fraud Authority, but we are concerned whether £24.7m over three years will be enough for it to have a substantive impact on tackling the billions of pounds of public money being lost every year to fraud across all levels of government. We believe that investing in fraud prevention and detection is likely to generate significant financial benefit for the exchequer and reinforce the message that the United Kingdom is a hostile place for economic crime.”

Spring Statement

On 23 March 2022, the Chancellor delivered his Spring Statement. Read ICAEW's analysis and reaction.

Read ICAEW's analysis and reaction on the 23 March 2022 Spring Statement.

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In these articles and videos we explore the latest trends and perspectives on economic crime from around the world, and look at how chartered accountants can help prevent it happening.

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