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The £1.5bn/year fraud risk the Ministry of Defence (MoD) is exposed to has not been addressed by the department with requisite focus or leadership.

• Read the report

In a new report on the MoD’s tackling of economic crime and misconduct, the Public Accounts Committee (PAC) warns that the government cannot demonstrate that it is doing enough to protect valuable public funds that should be available to bolster the UK’s defence capability in an uncertain world.

Over the last four years, the MoD has recovered only 48p for every pound of the on-average £5.7m/yr it has spent tackling fraud and economic crime. This is well below government’s expectation of a £3 return for every pound spent, which the PAC’s inquiry heard the MoD does not expect to achieve until 2028. The PAC is calling for a clear plan by November 2026 from the MoD on how it will achieve this level, at a minimum.

The MoD’s £1.5bn/year potential fraud risk is huge, and the steps the Department has taken to address this have not shown clear, sustained leadership. The report identifies historic issues which have been inconsistently addressed, such as siloed working, weak ownership and a lack of trust between the different parts of the MoD responsible for tackling fraud and economic crime.

This £1.5bn/yr figure is not even a reliable estimate, described to the PAC’s inquiry as an “academic construct” by the MoD. Without a credible understanding of the scale and nature of its potential losses, informed decisions cannot be made about where to focus counter-fraud work. The report calls for a more robust estimate to be published from next year, based on a growing understanding of potential fraud losses.

The PAC is calling for strong, visible counter-fraud leadership, and for a change of culture in the whole Department so that it treats preventing fraud and economic crime with the attention it requires.

The MoD should appoint a senior individual at two-star rank who is predominantly focused on supporting the Department’s Permanent Secretary in tackling fraud and economic crime.

One area in which the Department faces a particularly high risk of fraud is in procurement. Suppliers can overcharge for goods and services, or pre-contract fraud such as the rigging of bids for contracts can also take place. However, there is little evidence that its work to select and oversee contractors deters or penalises dishonest behaviour.

Around £400m of contract payments were stopped in 2024-25 by the MoD that it judged to be invalid. Suppliers had submitted these claims even though the MoD had open-book access to their financial data, suggesting that suppliers may regularly and repeatedly claim more than they are entitled to. The PAC’s report calls for a playbook on how to deter malicious actors who may abuse arrangements with the MoD for personal gain.

The report further notes that the MoD has yet to capitalise on the use of new technologies to help government tackle fraud and error. So far, the PAC heard that the use of data analytics has been focused on tackling fraud that has already happened, like retrospectively checking for duplicate invoices.

Very little detail was provided on how technology will be used to prevent fraud losses from happening at all, and the MoD should clearly set out a plan and timelines to exploit opportunities to detect and prevent fraud through the use of data analytics.

Chair comment

Sir Geoffrey Clifton-Brown MP, Chair of the Public Accounts Committee, said:

“The woes of the Ministry of Defence (MoD) and wider government in bringing forward a fully-costed Defence Investment Plan are well-known. We welcome the government’s aim to spend an increasing portion of GDP on defence, even as we are disappointed at the unacceptable and continuing delay in a plan laying out how they will do so.

"But in the midst of these issues, our report finds that the MoD is far behind the curve in preventing the loss of precious public funds which could be spent on keeping our nation safe. This is on top of the £1.6bn that our inquiry into financial audit found had been wasted by the MoD through cancelled projects.

“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. 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.

"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.”