The Ministry of Defence (MoD) is failing to adequately tackle what an influential parliamentary committee has branded the 'apparent normalisation of fraud' within its operations, with an estimated £1.5 billion lost annually.
Scathing Report from Public Accounts Committee
In a scathing report published on Friday, the Commons Public Accounts Committee (PAC) called for a 'change of culture' to address the MoD's significant fraud risk. The committee revealed the department recovers a mere 48p for every £1 spent on combating fraud and economic crime, falling far short of the government's target of £3 for every £1 recovered. The PAC also cast doubt on the MoD's own £1.5 billion annual fraud estimate, deeming it unreliable and suggesting the department lacks a 'credible understanding' of its potential losses.
Criticism from Committee Chairman
Sir Geoffrey Clifton-Brown, chairman of the PAC, criticised the department, stating it was 'far behind the curve in preventing the loss of precious public funds which could be spent on keeping our nation safe'. The committee specifically highlighted defence procurement as highly susceptible to fraud, noting 'little evidence' that the MoD's management of contractors effectively 'deters or penalises dishonest behaviour'.
Further evidence of this vulnerability came with the revelation that the MoD halted £400 million in invalid contract payments during 2024/25. These payments were submitted by contractors despite the MoD possessing their financial data, leading the PAC to conclude that suppliers 'may regularly and repeatedly claim more than they are entitled to' and that the MoD 'does not do enough to deter this behaviour'. Sir Geoffrey reiterated the need for a 'radical change of culture within the MoD if the flow of funds lost to fraudulent activity is to be stemmed,' adding that 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.'
MoD Response and Reforms
Responding to the report, an MoD spokesperson asserted that the figures cited 'primarily relate to a period under the previous government'. They claimed the department is 'turning that around', highlighting a significant improvement in recovery rates, with £1.34 saved for every £1 spent on counter-fraud measures last year, a substantial increase from 33p for every £1 spent in 2023/24. They anticipate further improvements this year.
The spokesperson added that the Defence Secretary is spearheading 'the biggest reforms to defence in over 50 years, fixing procurement, increasing accountability and tackling waste', including the appointment of the first-ever national armaments director to enhance value for money from defence contracts. The MoD maintains a 'zero tolerance for fraud and corruption' and pledged to 'continue to strengthen our controls, exploiting the latest technology to prevent and detect fraud and protecting taxpayers' money'. The department aims to achieve the government's target of a £3 return for every £1 spent on counter-fraud efforts by 2028.
Political Reaction
Shadow defence minister David Reed said the Government should 'show it has a credible plan not only to increase defence spending, but to ensure that money is safeguarded from fraud, waste and commercial abuse'. He said: 'At a time of war in Europe and instability across the Middle East, every pound spent on defence must be properly protected and targeted towards capability.'
