8 June 2011
Francis Maude has announced a set of pilots testing fresh and innovative approaches to tackling the £21 billion of annual fraud in the public sector and signalling the end of the ‘pay first, check later’ culture.
The pilots have already delivered immediate savings of £12million in their first few months.
The Cabinet Office Counter Fraud Taskforce has published its interim report today.
Since its first meeting in December 2010 the taskforce has overseen a series of eight pilots aimed at tackling the cost of fraud against the public sector.
The Taskforce’s zero-tolerance approach is driving a step change in how seriously the Government takes fraud. Today’s report includes a set of proposals which the Government will take forward immediately to develop the fight against fraud and build on the success of the pilots. The pilots included using data analytics to screen applications for tax credits before any money was paid and the innovative use of behavioural science’s ‘nudge theory’ to encourage late tax payers to pay on time by sending them text message reminders.
Francis Maude said:
Fraud is theft of taxpayers money. The National Fraud Authority estimates that fraud costs the public sector £21 billion a year. This is totally unacceptable which is why I’m really pleased to see our zero-tolerance approach to tackling fraud is working. We will no longer allow a culture of ignoring or accepting fraud.
“It is time to turn the tide on fraudsters and stop Government being seen as a soft touch by criminals. Every pound defrauded from the Government means that there is less to spend on frontline services like healthcare, education, policing and defence.
“The Taskforce has made a good start and has already demonstrated that immediate cashable savings can be made from doing fairly simple common sense checks. Going forward we must take this further and work together to combat fraud across all public sector organisations.
The Government will roll out the pilots, which are expected to lead to savings of £1.5 billion over the next 2 - 4 years, helping departments to deliver the savings set out in the Spending Review. The Taskforce will now expand its work across Government through the proposals laid out in today’s report to embed for the first time a coordinated approach to tackling fraud across Government.
The following pilots have made immediate savings:
£10.63 million of error and fraud savings from a pilot ran between September 2010 and March 2011 through HMRC using a new screening technique for tax applications. By analysing information provided by prospective claimants on their tax credit application forms, they assessed the likelihood of the application being fraudulent and better prioritised their counter fraud checks. HMRC expect to save £256m over the next four years by rolling this out across all new tax credit applications.
£1.5 million saved by HMRC and £0.5m to be saved by DWP by commissioning credit reference agencies to verify the circumstances of 20,000 benefit and tax credit claimants each, in order to identify those claimants making incorrect claims. HMRC expects to save £700 million over the next two years by undertaking the checks across tax credits and DWP expect to save £490m over the next four years.
£0.5 million saved by Department for Transport (DfT) by identifying losses from payments made to suprecopliers. DfT commissioned a data analytics company to undertake an audit on their group procure-to-pay systems, to detect and recover overpayments to suppliers. The Home Office undertook the same exercise and detected £4m in overpayments. Applying these techniques across all departments could identify and recover £264m on just one year of spending.
- HMRC prompted 1,575 people to pay their tax on time by sending text messages to 31,500 people who were late paying tax by more than £1,000 in 2009/10. The exercise prompted a 5% improvement in behaviour, increasing tax yield by £180,000. Currently around 1 million people are late paying their tax each year and HMRC estimate a 5% improvement would lead to £125m reaching public coffers earlier, with HMRC having to deal with 50,000 fewer debts.
There are four central priorities in the report:
Collaboration - silos must be removed; all parts of public sector must work together by: sharing intelligence on fraudsters; developing cross-cutting capabilities; joint projects using data analytics; and ensuring we jointly procure data analytics to drive down costs.
Assess risk and measure losses - fraud risk must be assessed before projects and programmes are underway. Losses should also be recorded and reported via the quarterly data summary.
- **Prevention **- a focus on upfront prevention and detection of fraud through the development and deployment of data analytics. Enabling departments to run preventative checks and data matching between departments and between central and local government.
Zero tolerance - there is no acceptable level of fraud. To aid this a cross-government programme to raise awareness of fraud will be established and a repository of fraud related information and supporting material made available to departments to help them tackle fraud.
Where the proposals in the report can be implemented immediately the Government will begin putting them into action. The Taskforce will now work towards final recommendations to deliver the above priorities by end year, as well as looking at the issues of error and uncollected debt.