Covid and strikes to blame for drop in government fraud prosecutions, Chisholm says

Figures show marked falls in conviction rates for fraud cases referred by HMRC and DWP

By Jim Dunton

13 Jun 2023

More than 2,000 people have been prosecuted on suspicion of defrauding different parts of government over the past four years, but numbers are dropping at government's two biggest departments, according to the Cabinet Office.

A just-published letter from civil service chief operating officer Alex Chisholm gives members of the Public Accounts Committee a breakdown of prosecutions and convictions secured by HM Revenue and Customs and the Department for Work and Pensions over the past four years.

Between 2019-20 and 2021-22, HMRC prosecuted 1,090 people as a result of its compliance work related to error, fraud and “other behaviours”. Chisholm said 983 convictions had been secured over the period.

The Department for Work and Pensions meanwhile referred 1,213 cases to the Crown Prosecution Service or Scotland’s Procurator Fiscal Service between 2020-21 and 2022-23. Over the same period, 1,154 convictions had been secured as a result of cases referred by DWP, Chisholm's letter said.

DWP’s conviction figures show a marked stepping down in volume over the three-year period, from 531 in 2020-21 to 273 in 2022-23.

Chisholm blamed restrictions designed to stop the spread of Covid-19 and strikes by court staff and lawyers for the drop.

He told MPs: “A significant driver for the decrease in case numbers was social distancing measures put in place because of the pandemic and the closure (or reduced capacity) of courts, and the resultant backlogs, prompted by lockdowns during the pandemic period and, to a lesser extent, subsequent industrial action by legal professionals.”

Chisholm did not give year-by-year figures for HMRC’s convictions, but its figures for prosecutions dropped markedly from 691 in 2019-20 to 123 in 2020-21 and then 236 in 2021-22.

“Departments expect prosecution numbers to increase in future years,” he told MPs.

The letter follows up an evidence session on tackling fraud and corruption in government, at which Chisholm appeared alongside HM Treasury perm sec James Bowler and Public Sector Fraud Authority chief exec Mark Cheeseman. It is dated 25 May but was only shared by PAC yesterday.

May’s PAC session came on the heels of a National Audit Office report in March that said the government lost £21bn to fraud in 2020-22, almost four times the figure for 2018-20. It said £7.3bn of the latest figure related to temporary schemes created in response to the Covid-19 pandemic.

More than 100 arrests related to Covid schemes

Chisholm, who is Cabinet Office permanent secretary as well as civil service COO, also gave figures for the National Investigation Service’s work on detecting and prosecuting fraud in relation to Covid-19 support schemes overseen by the now-defunct Department for Business, Energy and Industrial Strategy.

NATIS, a joint initiative between government and law-enforcement agencies, focuses on serious and organised crime cases.

As of the end of April, there were 217 open investigations in relation to Bounce Back Loans and 16 open investigations in relation to Business Support Grants. Chisholm said that 119 arrests had been made as a result of those investigations.

By that date, just two prosecutions related to Bounce Back Loans and two related to Business Support Grants were at court, with a further 14 cases with the CPS for advice or pre-charge decision, Chisholm said.

The Bounce Back Loan Scheme was last year estimated to have lost £3.3bn to illegitimate claims. In March, the NAO reported that BEIS had recovered just 1% of the £1.1bn in suspected fraud related to business-support grants distributed via eight schemes handled by local authorities.

While councils were required by BEIS to pursue funds paid out through fraud or error in the schemes, the NAO said there was no financial incentive for them to identify losses beyond “BEIS-directed samples” used to estimate the level of wrong payments.

In a separate letter to the Public Accounts Committee published yesterday, Gareth Davies – perm sec of BEIS’s successor, the Department for Business and Trade – said he had commissioned an investigation to look at the potential to get back more of the funds wrongly paid out.

“I can confirm that I have requested one of the department’s non-executive directors, Karina McTeague, to undertake a review into what more could be done to recover the irregular payments associated with the various Covid-19 [local authority] grant schemes,” he said.

“This work will be undertaken over the next few months, and I will provide the committee with the conclusions of this review once complete.”

Read the most recent articles written by Jim Dunton - DWP: Return to pre-Covid fraud levels is 'unlikely'

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