Fraud in UK public spending soars under poor oversight - watchdog

A view of the British capital's twin financial powerhouse

LONDON (Reuters) - Britain's government has lost tens of billions of pounds to fraud in recent years, with most public bodies unable to grasp the scale of the problem, the independent public spending watchdog said on Thursday.

The National Audit Office (NAO) said government accounts pointed to fraud worth a total of 21 billion pounds ($25.87 billion) in the 2020/21 and 2021/22 financial years - up from 5.5 billion pounds in the previous two years.

Of that, 7.3 billion pounds related to temporary COVID-19 schemes, much of which comprised loans to businesses.

The cost of fraud may be much higher still, the NAO said, pointing to figures from the Public Sector Fraud Authority which estimated fraud and error across government at between 33.2 billion pounds and 58.8 billion pounds for the 2020/21 year alone, excluding pandemic-related spending.

The NAO said most government departments had little ability to counter fraud or even understand how big the risk was.

"There has been a substantial increase in the level of fraud reported in the annual reports and accounts we audit," said NAO head Gareth Davies.

"In addition to the loss of taxpayer money, it creates the risk that people come to perceive fraud and corruption across government as normal and tolerated. If not tackled, this could affect public confidence in the integrity of public services."

Britain's standing in Transparency International's Corruption Perceptions Index fell sharply last year, which it ascribed to "recent decline in standards in government and controls over the use of taxpayer money".

It highlighted the government's "VIP lane" for fast-tracking personal protective equipment contracts at the height of the pandemic, which it said systematically favoured companies with connections to the governing Conservative Party.

Finance minister Jeremy Hunt said on Wednesday that tackling both tax and state benefit fraud were priorities for the government.

The opposition Labour Party's deputy leader Angela Rayner said the report showed a "dereliction of duty".

"This government have completely abdicated their responsibility to crackdown on this criminality, leaving public bodies without the resources to combat it effectively and protect the public's money," she said.

($1 = 0.8118 pounds)

(Reporting by Andy Bruce, Editing by Kylie MacLellan)