Ministers have been warned that fraud prevention efforts are falling short across government, as a major Covid report found that fraud and errors had resulted in a £10.9bn loss to UK taxpayers during the pandemic.
The report, by the independent Covid counter-fraud commissioner Tom Hayhoe, found that government schemes designed to support struggling businesses and their staff were rolled out at speed with no early safeguards, resulting in huge fraud risks that cost the public purse.
Weak accountability, bad quality data and poor contracting were the main failures behind the £10.9bn loss, but Hayhoe also concluded that fraud prevention was “insufficiently embedded in thinking and practice across government”.
The losses mounted on a series of schemes launched by the previous, Conservative government during the pandemic, including bounceback loans, small business grants, furlough payments and the eat out to help out programme.
Some of the problems stemmed from the fact that government departments generally worked independently to design their own schemes from scratch.
Many public bodies also never made payments on this scale before, meaning that counter fraud capabilities “varied significantly”, the report said. Hayhoe found that most schemes prioritised speed when designing and delivering support, resulting in a “high level of fraud risk”.
The report acknowledged that the government had “improved its counter-fraud capability” and“made steps” towards public sector fraud reforms, though new legislation and establishing the Public Sector Fraud Authority (PSFA), working within the Cabinet Office and Treasury.
However, it warned that fraud control “is still not embedded within resilience thinking”, and called for better preparation and robust controls that would ensure the best value for taxpayers.
“Organisations told me they lacked the capability, capacity and legal powers to deal with Covid-19 fraud yet have generally not sought innovative approaches or to use outside expertise,” Hayhoe said.
The commissioner called on the Treasury and PSFA to work across government departments to design a series of economic stimulus schemes that could be rolled out in future crises, adding that they should incorporate plans to prevent and mitigate fraud. “These scheme designs should then be tested in crisis preparedness exercises,” the report said.
The PSFA was also urged to set out an action plan for how it will work with other government departments and public bodies to make full use of its new powers to tackle fraud.
The government said it would consider the report in full and respond early in the new year.
The chancellor, Rachel Reeves, said: “Leaving the front door wide open to fraud has cost the British taxpayer £10.9bn — money that should have been funding our public services, supporting families and strengthening our economy.
“We have started returning this money to the British people and we will leave no stone unturned in rooting out the fraudsters who profited from pandemic negligence.”
The report said that, while £1.8bn worth of losses had been clawed back to date “much of the shortfall is now beyond recovery”.
“But areas remain where investing in recovering money paid out incorrectly is worthwhile and work should continue,” Hayhoe added. The commissioner said his report did not criticise the aims of the pandemic support schemes or minimise their benefits in protecting lives, businesses and public services.
Hayhoe, a former Conservative cabinet adviser and health service and regulatory veteran, was appointed to the role in December 2024 with a remit of clawing back billions in fraudulent contracts.
Labour had promised in its manifesto to appoint a fixed-term commissioner to recoup public money lost in pandemic-related fraud and from contracts that have not been delivered.
Hayhoe’s report did not address allegations of corruption or cronyism in personal protective equipment (PPE) procurement, which the commissioner acknowledged had led to “high levels of public interest”.
There has been intense criticism of Boris Johnson’s government’s use of a “VIP lane” that treated as more credible and gave high priority to offers of PPE from companies with political connections. A company linked to the former Conservative peer Michelle Mone, which was ordered to pay £122m by the high court in October for supplying unusable personal protective equipment during the Covid pandemic, was was awarded two contracts via the VIP lane.
Hayhoe produced an interim report on PPE in June which found that £1.4bn worth of contracts failed to deliver.
