NAO report: analytics can unlock billions in government savings

A new report by the National Audit Office (NAO) says the UK government is missing a major opportunity to reduce fraud and error by not fully harnessing the power of data analytics.

According to the NAO, fraud and error cost taxpayers an estimated £55 billion to £81 billion in 2023–24, but government efforts to combat these losses using data tools remain fragmented and underdeveloped. The Government Digital Service estimates that up to £6 billion a year could be saved through data-driven fraud reduction - though this figure does not yet factor in implementation costs.

In its latest investigation, the NAO highlights that while some public bodies like the Department for Work & Pensions (DWP) and HM Revenue & Customs (HMRC) have long used data analytics - including AI, anomaly detection, and data-matching - many other departments are still at early experimental stages. So far, savings have been modest, falling short of what is possible if best practices were scaled across government.

“Government has the opportunity to make significantly more use of data analytics to tackle fraud and error, with potentially billions in savings available,” said Gareth Davies, head of the NAO. “It should learn from those who are doing this well, in both the private and the public sectors, to maximise the savings it can achieve.”

The report emphasises that while the Government Digital Service’s digital blueprint offers an ambitious vision, there is currently no clear cross-government plan to realise the full potential of data analytics specifically for tackling fraud and error.

To address this gap, the NAO has identified ten challenges the government must overcome:

1. Providing cross-government leadership
   
   
2. Scaling up and replicating projects to focus on fraud prevention
   
   
3. Making the investment case for data analytics
   
   
4. Making the most of central counter-fraud initiatives
   
   
5. Building controls into existing processes and new projects
   
   
6. Managing the key datasets
   
   
7. Managing the data-sharing process
   
   
8. Putting in place the right skills
   
   
9. Optimising staffing and algorithms to maximise return
   
   
10. Maintaining public trust while harnessing new capabilities
    
    

The report also makes several strategic recommendations. It calls for the Public Sector Fraud Authority (PSFA) and GDS to jointly publish a practical playbook for developing multidisciplinary counter-fraud data analytics teams. Additionally, the Treasury is urged to make the National Fraud Initiative mandatory and define when other central tools should be used.

The full report is available on the NAO website.