Billions Lost To Fraud And Error During UK's Pandemic Spending Spree

UK government must figure out how to share spending data across departments after up to £59 billion ($74.4 billion) in expenditure was lost to fraud and error early in the pandemic.

This is according to a report from the National Audit Office (NAO), which found levels of fraud in UK public spending grew sharply during the pandemic. The fraud reported in accounts the watchdog audits rose from £5.5 billion in the two years before the pandemic to £21.0 billion in the two years after.

Estimates from the Public Sector Fraud Authority (PSFA), the NAO pointed out, suggest fraud in UK public spending could have reached £58.8 billion during the 2020-2021 financial year, covering the height of the COVID-19 outbreak.

The NAO said lack of access to data was part of the reason authorities struggled to keep up with the explosion in fraud.

"Officials told us that they struggled to access the data that they needed that existed elsewhere in government to support emergency responses. The recent pandemic demonstrated that agreeing data sharing under the Digital Economy Act 2017 can be cumbersome and take too much time to be practical in an emergency," the report published this week said.

"Improving data and interoperability is a systemic challenge for government. Public bodies have different approaches to data governance and data is dispersed across central and local government bodies. Different software and hardware may be used, and the same information recorded in different ways," the report [PDF] added.

The NAO recommends that the Cabinet Office's Central Digital and Data Office work with central government departments and the PSFA to figure out what existing data sets might be needed to make payments and fight fraud in the next emergency, and figure out whether they can be easily shared.

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An NAO report from last year found that the government was only at an early stage of using intelligence, data-matching, and data analytics to prevent fraud and corruption.

"Officials working in counter-fraud told us that the processes in place for sharing data, both between and within departmental groups, are often slow and burdensome, often resulting in incomplete or time-lagged data being shared," the NAO said [PDF].

An earlier publication from 2022 pointed out that legacy systems and aging data "create complex practical issues for data-sharing."

A report by the Modernisation and Reform group published in the summer of 2021 indicated £2.3 billion of the £4.7 billion government spent on technology in 2019 was dedicated to "keeping the lights on" activity on "outdated legacy systems."

In the US, the Government Accountability Office estimated that the total amount of fraud in the Unemployment Insurance program alone during the COVID-19 pandemic was probably $100 billion to $135 billion, or between 11 and 15 of the total benefits paid out during the period. ®