Update: Sunak launches £25m ‘fraud squad’ to retrieve lost Covid support billions

Update: Sunak launches £25m ‘fraud squad’ to retrieve lost Covid support

Sunak is set to launch a £25m “fraud squad” after MPs criticised the government’s failure to crack down on criminals who stole billions of pounds of taxpayers’ cash through Covid support schemes.

The Treasury announced the creation of the Public Sector Fraud Authority on Wednesday, stated that it would double the government’s counter-fraud efforts, adding to work of the £100m taxpayer protection taskforce launched more than a year ago.

The PSFA, which is to start operating by July, will be run through the Cabinet Office and given the £25m budget to “crack down on criminal gangs who rip off the taxpayer”.

It is believed that about £4.9bn was lost to fraud through the bounceback loan scheme, while another £5.7bn is estimated to have been lost from fraud and error within the furlough and self-employment programmes.

The Treasury could not immediately confirm how many people would be recruited to the PSFA but said it would be staffed by an “elite team” of data experts and economic crime investigators tasked with recovering public funds.

They will also be in charge of spotting “suspicious companies and people” trying to gain access to government contracts, and review existing Whitehall programmes to try to detect any vulnerabilities to fraud.

The announcement came hours after parliament’s public accounts committee called for more resources to counter fraud efforts, after criticising the government for its “unacceptable” failure to recover taxpayer cash.

MPs on the committee said the government was “complacent in preventing fraud”, in particular through bounceback loans, which were distributed by high street lenders but 100% guaranteed by the state, leaving taxpayers to foot the bill.

The chancellor, Rishi Sunak, said on Wednesday: “People are rightly furious that fraudsters took advantage of our vital Covid support schemes, and we are acting to make sure they pay the price.”

The Treasury said further details about the PSFA would be released after the new efficiencies and value for money committee, which is chaired by the chancellor, meets for the first time on Wednesday afternoon.

The Labour MP and shadow chancellor, Rachel Reeves, said the need for a new authority was a consequence of the chancellor “repeatedly ignoring warnings about a lack of anti-fraud measures in his support schemes”.

She said: “It is unforgivable that £11.8bn of taxpayer money has been handed to fraudsters and criminals, and particularly painful when the government is piling new taxes on working people and businesses.

“That’s why, as part of Labour’s demand for an emergency budget from the government, we are calling on them to let the National Crime Agency investigate Covid fraud from top to bottom. Any embarrassment stemming from the chancellor’s criminal incompetence must not get in the way of getting taxpayer money back.”

The PSFA is part of the government’s latest efforts to show it is cracking down on fraud, and comes more than a year after it committed £100m to setting up the taxpayer protection taskforce, which is run by 1,200 HMRC staff and has a target to recover up to £1.5bn by the end of this financial year.

The government says it has also tapped the Cabinet Office counter-fraud function for support and given another £6m in funds to the national investigation service (Natis) to tackle fraud and crime related to Covid support schemes. As of early March, Natis and the National Crime Agency had together made about 66 arrests in relation to bounceback loan scheme fraud.