Spring Statement 2022: Fighting fraud in the public sector to deliver £3.15 billion in savings and recover millions more

The war in Ukraine, the job market in the economic recovery post Covid-19, the rise in the cost of living, changes to Universal Credit; the Spring Statement had a lot to contend with.

One of the lesser vaunted aspects of the statement, however, was the government's drive to crack down on fraud in the public sector and the impact that is anticipated to have on the public purse, particularly at the local authority level. The word "fraud" appears in the statement 17 times, with the word "efficiency" appearing 18 times. 

The government has clearly identified that greater efficiency in detecting and preventing fraud will drive significant savings. Under the heading "Public Spending", the statement records that:  

"The government is taking action to tackle waste and inefficiency across the public sector through a comprehensive efficiency agenda, including: putting counter-fraud at the heart of decision-making..."

But there is also an acceptance that the enforcement authorities require more resources to pursue and recover sums that have already been obtained by fraudulent means. 

The government's proposals are these:

• DWP: Investment in compliance – As announced in December 2021, the government is investing an additional £510 million to increase DWP’s capacity and capability to prevent and detect fraud and error, and collect more debt. This is forecast to deliver savings of £3.15 billion by 2026-27.

• Tax credits: Addressing error and fraud – The government is investing £12 million to help claimants keep their tax credits claims accurate through regular health-check calls, compliance activity, and the use of SMS nudges. This will help prevent or correct error and fraud, and in turn support a smooth transition to Universal Credit.

• Tackling Fraud: The government is providing £48.8 million of funding over 3 years to support the creation of a new Public Sector Fraud Authority and enhance counter-fraud work across the British Business Bank and the National Intelligence Service. The investment enables government and enforcement agencies to step up their efforts to reduce fraud and error, bring fraudsters to justice, and will recover millions of pounds.

Some observers may see the creation of the Public Sector Fraud Authority as a tacit acceptance by the government that the pandemic generated new opportunities for fraudsters that the local authorities in particular could be expected to respond to without additional resources. 

In that sense, the situation in the public sector mirrors the concerns of many in the private sector. Rhys Novak and I previously discussed the potential for increased risk to the private sector (and to High Net Worth individuals in particular) following the National Crime Agency's National Strategic Assessment of Serious and Organised Crime for 2021. You can read our thoughts here. 

All of these developments should also be placed in the context of the recent Court of Appeal decision in Philipp v Barclays Bank UK PLC. The judgment creates the possibility that, in certain circumstances, banks could owe a duty of care to non-corporate customers not to execute payment instructions where they have reasonable grounds to suspect that there is an attempt to defraud the customer.

In short, whether it is in the private or public sector, the crack-down on fraud post-Covid is on, and it will affect all of us in one way or another. Hopefully, for the better.