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Government lost £13bn to fraud and error, say MPs

image captionThe report outlines the combined financial activities of more than 3,000 public-sector organisations

MPs are demanding action after £13.2bn was written off the government balance sheet in 2011-12 due to fraud, financial error and legal claims.

The Public Accounts Committee describes the figure, in a list of public assets and liabilities published by the government, as staggering.

The Whole of Government Accounts predicted nuclear decommissioning costs alone could rise to £64.3bn.

Ministers said losses from fraud were "too high" despite a recent clampdown.

The figures are a set of financial records for the entire UK public sector, from April 2011 to March 2012, based on the accounts of 3,000 public-sector organisations.

They are intended to show what the government owns, owes, spends and receives and include estimates for costs decades into the future.

'Worrying' write-offs

Ministers said it was the world's most ambitious set of public accounts.

In its analysis of the figures, first published by the Treasury earlier this year, the cross-party committee said they were the most "comprehensive" to date and contained "vital data".

Yet the committee, while welcoming the report, said it did not give a complete picture since some major costs - such as the publicly owned banks and Network Rail, as well as academies and FE colleges - were omitted.

The committee said the Treasury had "departed from normal accounting standards" in leaving out this information.

The accounts showed net public liabilities - the difference between the government's assets and liabilities - rose from £1.19 trillion to £1.34 trillion over the period, it said.

The committee said the amount of money written off due to fraud, error and unrecoverable debts as well as pending legal proceedings against taxpayers - which totalled an estimated £13.2bn - was "worryingly high".

The figures do not include local government or public corporations, and the National Fraud Authority estimates the true cost of fraud to the public sector was £20.6bn.

And Revenue and Customs said in October that the so-called "tax gap" - the difference between what the authorities were owed and what they were collecting - now totalled £35bn.

The MPs acknowledged action was being taken over the government's exposure to potential liabilities from clinical negligence cases, which rose from £17.5bn to £19.4bn over the period.

They said the Treasury believed that changes to "no win, no fee" legal arrangements recently agreed by Parliament would reduce the amount of litigation and consequent payouts.

But it said other issues were being "seemingly ignored in long-term policy making and spending decisions."

'Nuclear slippage'

The cost of decommissioning the UK's nuclear power stations rose by a further £3.4bn over the period.

Labour MP Margaret Hodge, who chairs the committee, said this reflected the fact that "financial liabilities for dealing with nuclear waste keep growing, with timetables continually slipping".

The committee also raised concerns about the "poor" quality of data from some organisations, suggesting the financial information provided by schools, including academies, was either incomplete, inaccurate or out of date.

"This issue is likely to become more significant as the number of academies rises rapidly," Mrs Hodge added.

In response to the report, a government spokesman said it was "committed to clamping down on tax avoidance and evasion, and fraud, error and debt in the benefits system".

"Action taken by the government since 2010 has cut fraud and error against the public purse by £6.5bn last year but losses from fraud are still too high," he said.

Measures announced in last week's Autumn Statement would bring in £2.3bn over the next three years, he added.

But Labour said annual financial losses were "unacceptable".

"It's time David Cameron and George Osborne got a grip and tackled the billions being lost to the Exchequer each year," Treasury spokesman Chris Leslie said.

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