Government must improve fraud prevention before the next crisis

An estimated £10.9bn was lost to fraud and error from government Covid spending. This sum is huge, more than the Defra and DBT budgets combined. Less than a fifth – £1.8bn, or 17% – has been recovered so far, including money from those who fraudulently claimed bounce back loans or lied to get government contracts, although government recently announced further efforts to pursue pandemic losses. ¹³ https://www.gov.uk/government/news/government-fraud-squad-hunts-down-covid-loan-scams?utm_medium=email&utm_campaign=govuk-notifications-topic&utm_sou…

But more important than further efforts to recover money lost from the last crisis is that government is ready to prevent fraud in the next one. This was the focus of an Institute for Government event in June with former Covid counter-fraud commissioner Tom Hayhoe and a panel of other experts, and was also a key theme of module five of the Covid-19 inquiry, which published its report this week. ¹⁴ https://covid19.public-inquiry.uk/wp-content/uploads/2026/07/09094028/E03444965_Covid-Inquiry-M5-Inquiry_Web-Accessible.pdf

In the pandemic, there was a fundamental trade-off to be made between speed and risk mitigation, including on fraud and corruption. Navigating this trade-off was difficult, but government’s ability to do this well was hampered by a lack of preparation. It is vital that it learns the lessons of the pandemic if it is to avoid making the same costly mistakes again.

Data is vital to fraud prevention

Preventing fraud before it happens is far better than trying to recoup losses later. But doing this well requires good data analytics. Government needs stronger real-time data that is shared across organisations to help spot when a transaction looks dodgy, and take preventative action to stop it. The Covid Inquiry found that outdated data systems contributed to pandemic fraud, and Joshua Reddaway, director at the NAO, highlighted how improving sharing of data between public organisations was key to this.

Steps have already been taken in central government to improve use of data, though some departments – such as HMRC – are further ahead than others. ¹⁵ https://committees.parliament.uk/oralevidence/17902/pdf/  But good use of data can be a particular problem in local government. A council is more likely to buy from small suppliers than central government but has less organisational capacity to spot potential fraudsters. Rachael Tiffen, director of public sector and learning at Cifas, highlighted her experience of councils being ill-equipped to identify the small minority of companies, out of the many who emerged offering to support the pandemic response, that were looking to fraudulently profit from them in the heat of the crisis. Central government needs to support local government in using data analytics to prevent fraud, including during the ongoing process of local government reorganisation.

Fraud prevention must be embedded in policy to enhance crisis preparedness

A key finding of the Covid counter-fraud commissioner’s report was that for public sector organisations to respond rapidly to crises while minimising exposure to fraud, prevention must be embedded in culture and practice. DWP and HMRC have long led the pack on this, but the pandemic showed improvements must be broader. The inquiry’s module five report highlighted how DHSC did not sufficiently prioritise fraud prevention, pointing to the small size and ad-hoc role of department’s anti-fraud unit. ¹⁶ https://covid19.public-inquiry.uk/wp-content/uploads/2026/07/09094028/E03444965_Covid-Inquiry-M5-Inquiry_Web-Accessible.pdf

The counter-fraud profession has an important role to play in embedding fraud prevention in policy design. However, as a new and relatively small profession it does not have the status or degree of integration of more long-standing professions. The Public Sector Fraud Authority was established after the pandemic as a joint Cabinet Office and Treasury unit to coordinate fraud management across the public sector. This unit has grown in prominence, and will be key to strengthening the voice of the profession across government, and ensuring efforts to tackle fraud are coordinated.

Senior officials need to embed counter-fraud measures in peacetime and also prioritise understanding these will need to be adapted in a crisis. The publication of ‘Spending in a Crisis’ and contingency planning exercises that are ongoing are positive signs that this is being taken forward.

Ministers and senior officials must set the tone

A weakness of government can be its failure to learn lessons from past mistakes, as Tom Hayhoe highlighted. A lack of time and space to learn is one reason for this – which is why asking an independent commissioner to review lessons for the future can be valuable. But another cause is the churn in personnel. The ministers, and prime ministers, who face one crisis are unlikely to be in post to face the next one.

Indeed, the Starmer government’s recent attempts to tackle rising energy costs were hindered by a lack of data to enable targeting of support – the same problem which made the 2022 energy support package so expensive for the Conservatives. Next week it will become the Burnham government, as he becomes the fifth prime minister since the pandemic. Under Starmer, the government has agreed with many of the Covid counter-fraud commissioner’s recommendations, and the Covid-19 inquiry provides several more. The new prime minister – and the ministers and senior officials around him – would do well to ensure these lessons, and those from other crises, are learnt to ensure government is better prepared for future crises when these, inevitably, come.