The Public Accounts Committee has called for “a change of culture” in the Ministry of Defence “so that it treats preventing fraud and economic crime with the attention it requires”.
In a new report, the committee says "strong, visible counter-fraud leadership” is needed at the MoD and calls on the department to appoint a senior individual at two-star rank who is predominantly focused on supporting the permanent secretary in tackling fraud and economic crime.
The report – on the MoD’s work to tackle economic crime and misconduct – says the government “cannot demonstrate that it is doing enough to protect valuable public funds that should be available to bolster the UK’s defence capability in an uncertain world”.
It notes that over the last four years, the MoD has recovered only 48p for every pound of the on-average £5.7m/yr it has spent tackling fraud and economic crime – well below government’s expectation of a £3 return for every pound spent, which the MoD does not expect to achieve until 2028. The report calls for a clear plan by November 2026 on how it will achieve this level, at a minimum.
In 2024-25, the MoD saved £1.34 for every £1 spent on counter-fraud measures, the highest return for the department since the 2021-22 financial year. The MoD expects this to be further improved in 2025/26.
The report also raises concerns over the department’s estimated £1.5bn/year potential fraud risk, saying “the steps the department has taken to address this have not shown clear, sustained leadership”. It identifies historic issues which it says have been inconsistently addressed, such as siloed working, weak ownership and a lack of trust between the different parts of the MoD responsible for tackling fraud and economic crime.
The £1.5bn/yr figure was described as an “academic construct” to the committee, and the MPs say a more robust estimate should be published from next year, based on a growing understanding of potential fraud losses.
“Without a credible understanding of the scale and nature of its potential losses, informed decisions cannot be made about where to focus counter-fraud work,” the report says.
The report warns that the department is “particularly exposed” to fraud in procurement and calls for a playbook on how to deter malicious actors who may abuse arrangements with the MoD for personal gain.
The committee also notes that the MoD has yet to capitalise on the use of new technologies to help government tackle fraud and error. During its inquiries, PAC heard that the use of data analytics has been focused on tackling fraud that has already happened, like retrospectively checking for duplicate invoices.
PAC chair Sir Geoffrey Clifton-Brown said the MoD is “far behind the curve in preventing the loss of precious public funds which could be spent on keeping our nation safe”.
“Incremental change will not suffice,” he said. “There must be a radical change of culture within the MoD if the flow of funds lost to fraudulent activity is to be stemmed. The apparent normalisation of fraud in the procurement process is symptomatic of a wider issue; there is no overarching strategy within the MoD of how to tackle fraud and economic crime.
"The MoD must embrace the new technologies helping other departments to tackle fraud and error if it is to replicate the levels of success that a proper safeguarding of the public purse demands.”
An MoD spokesperson said the figures cited in the report “primarily relate to a period under the previous government”.
“We are turning that around, and last year we saved £1.34 for every £1 spent on counter-fraud measures, significantly increased on 33p for every £1 spent in 2023/24 and we expect this to be further improved this year,” they said.
"The defence secretary is driving the biggest reforms to defence in over 50 years, fixing procurement, increasing accountability and tackling waste. As part of this, he has appointed the first ever national armaments director, with a remit that includes driving improved value for money from defence contracts.
"We have zero tolerance for fraud and corruption and we will continue to strengthen our controls, exploiting the latest technology to prevent and detect fraud and protecting taxpayer's money as we help keep the UK secure at home and strong abroad."