Central government departments reported a record £1.7bn of fraud and error in 2023-24, more than four times the amount found two years earlier in 2021-22.
Most of the increase is due to fraud associated with extraordinary events, including the Covid-19 pandemic.
The £1.7bn figure is revealed in the Public Sector Fraud Authority's latest Cross-Government Fraud Landscape report, published this week, which sets out the levels of fraud and error detected, recovered, and prevented in 2022-23 and 2023-24. It excludes tax and benefits-related fraud involving the Department for Work and Pensions and HM Revenue and Customs, which are subject to a different reporting regime.
The £1.7bn detected in 2023-24 was the highest value of detected fraud and error reported in a single year to date, with the figure in 2024-25 yet to be published. It represents an increase of 27% on 2022-23, when departments reported £1.3bn of detected fraud and error.
Most of this increase is due to detected error increasing by £327m, with fraud rising by a comparatively small £21m. The main driver of this was the Department for Energy Security and Net Zero reporting £411m of detected error through energy affordability support schemes, which are now closed, equivalent to less than 1% of the schemes’ total value. This accounted for 51% of total cross-government reporting of detected error.
The 2022-23 figure of £1.3bn is a huge 198% increase on the £438m detected in 2021-22. The main reason for this increase was Covid-related fraud, with the British Business Bank reporting £673m of suspected fraud in its Bounce Back Loan Scheme, accounting for 82% of the cross-government total.
Meanwhile, recovered fraud and error has more than doubled since 2021-22, rising from £311m to £486m in 2022-23 and then up to £770m in 2023-24. The increase in 2023-24 was largely due to DESNZ’s recovery of recovered £406m of error, mostly through the aforementioned energy affordability support schemes.
There is a slightly different picture when it comes to fraud prevention, which dropped from £334m in 2021-22 to to £201m in 2022-23 before rising to £413m in 2023-24.
The main reason for the dip in 2022-23 was a change to reporting guidance. From 2022-23, it became mandatory for departments to assure all estimated or modelled savings through the PSFA Prevention Panel. Departments could also only report prevented error if it resulted from proactive detection, such as fraud measurement or data matching, rather than as a result of business-as-usual activity.
The report says the PSFA has “more confidence in the prevention numbers from 2022-23 onwards and that they are being driven by counter fraud activity, as these are now externally assessed by a group of counter fraud experts, before they can be reported”.
Counter-fraud performance ‘improving’ but 'can go futher'
The report says the figures indicate that counter fraud performance is improving, with “positive trends in the detection of fraud and error, the achievement of financial targets and the prevention of further losses”.
When excluding extraordinary events, detection surpassed pre-Covid levels for the first time in 2023-24. The report says this indicates that "good work is being undertaken to understand and identify the problem".
Collectively, in-scope departments prevented and recovered £914m of fraud and error in 2023-24. When adjusted to exclude extraordinary events, their performance stands at £341m, exceeding the financial target of £331m set for the period. This compares to £202m prevented and recovered in 2022-23.
The report also says that encouraging results "are beginning to emerge from the preventative approach championed by the Government Counter Fraud Functional Strategy 2024-2027", with 60% of organisations reviewed against the Government Functional Standard (GovS 013: Counter Fraud) attaining a minimum rating of ‘Good’ in at least half of the sections in the standard.
It says public bodies may benefit from going further in two critical areas: identifying inherent fraud and error vulnerabilities and implementing more robust fraud risk assessments to address threats effectively
Fraud and error 'iceberg' growing
The report also sets out the fraud and error "iceberg" for 2022-23: an estimate of the fraud levels in the public sector including the tax and welfare system (DWP and HMRC), but excluding Covid schemes.
It says the total estimated fraud and error level per year is £51.3bn to £81.0bn (including tax and welfare but excluding Covid), compared to a detected amount of £9.7bn.
This is a significant increase on the "between £39.8bn and £58.5bn" estimated in 2021-22.
The report notes that in previous years the "ceiling" of the estimate has remained broadly flat, while the latest modelling shows this is no longer the case, with both the "floor" and "ceiling" of the estimate rising, while the estimated range has also widened.
"Higher government spending and estimates of fraud and error have contributed to this increase," the report says.
The report also notes that the estimated fraud and error sits in Covid schemes is £10.9bn, and that "updated evidence has significantly improved our understanding of the nature of error and fraud in the Covid-19 support schemes".