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UK government lacks ambition to fight tax fraud, says PAC

By Alex Scroxton

The UK’s Public Accounts Committee (PAC) has accused the government of lacking the “modernising ambition” to use technology to fight tax fraud and error, as taxpayers continue to lose anywhere between £55bn and £81bn per annum, the bulk of them in the tax and welfare systems.

In a report published today, the PAC said the use of legacy technology and a lack of leadership persisted, and public bodies were failing to embrace the opportunity to deploy new data analytics technology. The body declared itself sceptical of the government’s ability to make any form of improvement without a robust plan.

Though Westminster has said using data analytics to tackle the problem could save taxpayers up to £6bn every year, the PAC said it did not believe all public bodies were set up to achieve such savings, and there is not yet enough detail on how this will be achieved.

It pointed to the delayed roadmap for modern digital government – published earlier in 2026 – which said the government would embrace artificial intelligence (AI) and replace outdated technology, but did not go into detail about how, or address how this might tackle fraud and error.

“Our committee has long identified a failing in digital leadership and fragmented data across government as one of the main blockers in government’s ability to deliver,” said PAC chair Geoffrey Clifton-Brown. “Our evidence suggests that government has a lot of data, but no information. One of the most obvious areas in which new technology could protect the taxpayer’s pound is in error and fraud.

“But while this government has talked a big game on embracing new technology, its delayed roadmap on modern digital government fails to even mention how this will tackle fraud and error, and it continues to struggle with the dead weight of legacy technology,” he added.

“We are not convinced that the government is making best use of fast-moving technology such as AI to tackle the difficult subject of fraud.”

The PAC said the apparent lack of planning in government reflected a backdrop of longstanding issues with legacy technology – previous reports have highlighted a swathe of out-of-date systems across government, and noted that this has been the case for years.

An apparent lack of digital leadership is not helping matters, it added. In 2023, it recommended that all government departments have a digital expert on their boards, which has not come to pass, and the Department for Science, Innovation and Technology’s (DSIT’s) decision to not after all appoint a government-wide chief digital officer (CDO) represented a “serious shortcoming”, said the PAC, as it would have given the department more clout across government when it came to digital transformation.

Warnings and limitations

The latest PAC report also repeats a warning from March 2025 over the government’s apparent opacity regarding algorithmic decision-making. This time last year, just 33 records had been published on a special website set up to improve transparency in this area, and as of the time of writing, there are just 125, of which only 11 mention fraud, and of which only two were filed this year – both by the Information Commissioner’s Office (ICO).

The PAC said DSIT had admitted that not all the expected cases have been recorded and said it was clear departments were not doing enough to be transparent or build public trust in government’s use of data analytics to fight fraud, calling on DSIT to work to ensure all government bodies record their use of algorithms.

The PAC said it had further identified a legislative limitation in relation to the deployment of data analytics techniques against fraudsters, in that because the law does not allow for individual profiling, the government can’t flag known bad actors as an indicator for future work on fraud, while National Fraud Initiative data can only be retained for two years.

The report further identified a limitation in current legislation in how government can deploy modern data analytics techniques to fight fraud. The law does not allow for individual profiling, meaning that government is not allowed to flag known fraudsters as an indicator for future fraud detection work, while National Fraud Initiative data can only be retained for two years.

Next steps

The PAC report makes six recommendations for the government:

• The Treasury should require public bodies to include information on what they are doing to tackle fraud and error in their annual fraud, and set out the types of counter-fraud activity they are undertaking. This reporting should include information on targets agreed with the Public Sector Fraud Authority (PSFA) and steps to improve future performance;
• The Government Digital Service (GDS), PSFA, and Government Finance Function (GFA) should communicate a plan to cooperate on cutting fraud losses with the use of data analytics technology, which should include targets and milestones, and more clarity on how government means to move from a system that detects and recovers losses from fraud, to one that prevents it to begin with;
• Reflecting concerns that neither the digital capability nor the senior leadership capacity to achieve change exists, DSIT should mandate digitally skilled leaders at board level in all departments and any arms’ length bodies (ALBs) in which technology plays a key role. Moreover, DSIT should appoint a government CDO at permanent secretary level and equip this person with the necessary authority to effect change. DSIT should also better set out how it means to hit its target of having 10% of civil servants digitally trained;
• Within six months, the PSFA should report to the PAC on progress towards building a library of counter-fraud controls, and set out steps to address data sharing issues through the Digital Economy Act. DSIT should also set out further information on the single data platform, specifically a timetable for completion and expected benefits around tackling fraud and error. And together, the Treasury, DSIT and the PSFA should decide which elements of the National Fraud Initiative could be useful within central government, and apply them accordingly;
• DSIT should do more to ensure government bodies comply with the Algorithmic Transparency Reporting Standard to capture all relevant uses of AI and machine learning in a fashion that continually monitors, updates and ensures compliance around transparency to be as upfront as possible without accidentally creating a reference library for cyber criminals;
• Finally, the PSFA should review legislation that impacts its mission to implement fraud and error analytics, and work with DSIT on a review of the regulatory regime around fraud and error activities, and communicate to Parliament any areas in which additional powers or legislative changes might be helpful.

“There are specific actions which this committee will continue to raise which government could take to back up its loud ambitions,” said Clifton-Brown. “It could enable better information sharing across departments; DSIT could gain the heft a small department with such a big responsibility needs by appointing a government chief digital officer; and it could move with more speed to place digital experts at the top decision-making table of each department, a PAC recommendation government has already accepted.

“We hope to see a robust plan from government in this area. Without one, government will only be able to mouth its disapproval as billions in public money continue to roll out of the door into the hands of fraudsters.”