UK’s Ministry of Defence urged to step up fraud fight
The UK’s Ministry of Defence (MoD) has been urged by MPs to step up its efforts to tackle fraud, including through use of technology and data analytics.
The House of Commons public accounts committee (PAC) issued the call in a report released as the MoD prepares to publish a long-awaited 10-year Defence Investment Plan. The strategy – which details how the MoD plans to fund equipment, infrastructure and operations to deliver the Strategic Defence Review – has been delayed since last year due to ongoing funding negotiations across government.
The PAC’s 30-page ‘The MoD’s tackling of economic crime and misconduct’ report was compiled following a National Audit Office (NAO) analysis and a committee evidence session featuring four MoD representatives.
The MPs warn that the £1.5bn (US$2bn) a year fraud risk the MoD is exposed to, mostly from procurement, has “not been addressed by the department with requisite focus or leadership”. The MoD spends about £40bn (US$53.7bn) a year on contracts and will be spending more than £70bn (US$94bn) a year by 2028–29.
“Over the past four years, the MoD has recovered only 48p for every £1 of the on-average £5.7m [$7.7m] per year it has spent tackling fraud and economic crime,” the PAC notes, adding that this is “well below government’s expectation of a £3 return for every pound spent on counter-fraud activity, which [our] inquiry heard the MoD does not expect to achieve until 2028”.
The committee makes seven recommendations, the first of which is for the MoD to write to the committee by November “setting out a clear plan” to achieve “at a minimum” the expected £3-for-every-£1-spent return.
Read more: UK government use of data analytics to tackle fraud ‘underdeveloped’, say MPs
NAO criticisms
The NAO highlighted that procurement, asset theft, personnel management issues and information exploitation constituted the MoD’s main areas of fraud risk.
“Ongoing challenges […] include a limited shared understanding of departmental objectives, a fragmented structure leading to inefficiencies in investigations, and a historic lack of trust between counter-fraud and police teams – although its return on counter-fraud spending is improving,” the NAO stated.
“But recent whistleblowing disclosures to the NAO indicate that individual allegations can take a long time to resolve or do not reach a satisfactory resolution and that overall, the MoD could manage fraud and economic crime far more effectively,” it continued.
Between 2021-22 and 2024-25, the MoD reported to the Cabinet Office that it spent an average of £5.7m a year on counter-fraud work, and prevented and recovered an average of £2.8m, of which half was fraud and half was error – a return of 48p for every £1 spent. In 2024-25, the MoD’s prevention and recovery improved to £6.4m – a return of £1.34 for every £1 spent – the NAO summarised.
“This is an increase on previous years largely due to a one-off recovery of £3.8m as a result of a commercial project completed in 2023 that identified £17.5m of potentially recoverable overpayments,” the NAO noted.
“The MoD […] has limited assurance that cases assigned outside of its counter-fraud and police teams are handled appropriately and it does not always know and centrally record how its police services investigate fraud against the department,” the NAO went on to state.
However, the NAO also pointed out that the MoD had strengthened its approach to fraud and economic crime by increasing and improving its use of fraud risk assessments; embedding police staff within counter-fraud teams; and working on a joint investigative model for criminal economic activity.
NAO recommendations included that the MoD should set a department-wide objective to cut the level of estimated financial loss due to fraud and economic crime; empower a senior official to act as the MoD’s representative in cases where the department is the victim of economic crime; improve the ‘triaging’ of cases; and “identify where analytics would be most helpful in tackling fraud and economic crime, and resource these in a way that maximises returns on investment”.
Read more: AI to ‘dominate next four to five years’ of fraud landscape: UK fraud minister
PAC chair: ‘radical’ culture change required
“Incremental change will not suffice. There must be a radical change of culture within the MoD if the flow of funds lost to fraudulent activity is to be stemmed,” said PAC chair Sir Geoffrey Clifton-Brown MP in a press notice published alongside the committee’s own assessment.
“The apparent normalisation of fraud in the procurement process is symptomatic of a wider issue; there is no overarching strategy within the MoD of how to tackle fraud and economic crime,” he continued. “The MoD must embrace the new technologies helping other departments to tackle fraud and error if it is to replicate the levels of success that a proper safeguarding of the public purse demands.”
The committee’s evidence session featured MoD permanent secretary Jeremy Pocklington; director-general finance Aneen Blackmore; director-general commercial Jim Carter; and Ministry of Defence Police acting chief constable Simon Dobinson.
“The department has not responded to the huge potential fraud risk it faces with the degree of focus and leadership we would expect,” the PAC states.
“The department recognises that it needs to improve its counter‑fraud strategy and culture, strengthen capability, clarify accountability and increase collaboration across the organisation. It has set out plans for the director-general finance to develop a stronger understanding of fraud risks and to hold parts of the organisation to account,” the PAC continues. “However, these steps do not amount to clear, sustained leadership of the counter‑fraud agenda, as the department still lacks a single senior individual with primary responsibility for bringing together the various functions involved in responding to fraud, with a clear mandate to reduce losses. Without strong, visible leadership at a senior level, the department is unlikely to deliver the cultural shift in counter‑fraud working that it acknowledges is required, or to make meaningful progress in addressing the significant fraud risks it faces.”
PAC’s recommendations
The PAC’s second recommendation – after developing a plan to achieve at least a £3-for-every-£1-spent return on its investment in counter-fraud – is for the MoD to appoint a “senior (two-star) individual who is predominantly focused on supporting the permanent secretary to tackle fraud and economic crime, improve the collaboration of those involved in investigating these issues, and change the culture of the whole department so that it treats preventing fraud and economic crime with the attention it requires”.
Its third and fourth recommendations are for the MoD to work with the Public Sector Fraud Authority (PSFA) and NHS Counter Fraud Authority to develop a “more robust” estimate of its fraud losses; and for the MoD to work with the PSFA to “develop a playbook for how it will apply its counter-fraud capabilities within its commercial activities”.
The fifth recommendation is for the MoD to set out how it will enable effective joint working between its counter-fraud and police teams. The committee makes reference to its ‘Government use of data analytics on error and fraud’ report, published on 27 March, which described the use of data analytics to tackle fraud and error as being “underdeveloped” across the UK public sector. An estimated £55bn to £81bn (US$73bn to US$108bn) is lost annually to fraud and error across UK government – mostly through the tax and welfare systems – but there has been a “lack of ambition and activity to deploy new technology widely”, the committee said at the time.
“The department has yet to capitalise on the use of new technologies and data analytics to detect and prevent more fraud,” the PAC states in the MoD’s context. “The department told us its use of analytics has been focused on finding fraud that has already happened and seeing if it can recover the money. This includes activities like retrospectively checking for duplicate invoices. The department intends to move these checks earlier in the process, so that incorrect payments are prevented in the first place.”
“It [MoD] also plans to use technology to strengthen its control environment as part of its Defence Reform programme,” the PAC continues. “But the department has provided very little detail on the specific data analytics techniques it will use to prevent fraud losses from happening, or on how and when these approaches will be embedded consistently across the department.”
Read more: ‘Fraudsters thrive in fragmentation’: how government agencies are tackling fraud in the digital age
MoD: ‘zero tolerance’ for fraud
The PAC’s sixth recommendation is for the MoD to write to the committee with an “assessment of areas of fraud risk where data analytics could be applied cost-effectively to detect and prevent fraud”; and for the MoD to “clearly set out its plan and timelines to exploit these opportunities, and the savings it expects to achieve from this”.
Its seventh recommendation is for the PSFA to circulate the committee’s report to “all counter-fraud teams and support them to reflect on how they too can improve the savings they achieve from counter-fraud work, and consider the learnings from this in the fraud savings targets they agree with public bodies”.
Responding to the report, a MoD spokesperson told Global Government Forum’s sister title Government Finance that the department expected the “£1.34 for every £1 spent on counter-fraud measures” figure to be “further improved this year”.
“The Defence Secretary [John Healey] is driving the biggest reforms to defence in over 50 years, fixing procurement, increasing accountability and tackling waste,” the spokesperson said, highlighting the appointment last October of the first-ever national armaments director “with a remit that includes driving improved value for money from defence contracts”.
“We have zero tolerance for fraud and corruption and we will continue to strengthen our controls, exploiting the latest technology to prevent and detect fraud and protecting taxpayers’ money as we help keep the UK secure at home and strong abroad,” the spokesperson added.
The MoD intends to refresh its counter-fraud strategy by September.
This article was first published by Global Government Forum’s sister title Global Government Finance: UK’s Ministry of Defence urged to step up fraud fight
About Ian Hall
Ian is Global Government Finance editor. He has formerly held roles including UK director of Euractiv (2011-2018), editor of Public Affairs News (2007-2011) and news editor of PR Week (2000-2007). He was shortlisted for ‘Editor of the Year’ at the British Society of Magazine Editors (BSME) Awards in 2010. He began his career in the Balkans at English-language weekly the Sofia Echo (Bulgaria: 1998-1999).
