Old government IT is costing UK taxpayers billions

Outdated government IT is holding back efforts to stop up to £81 billion a year in fraud and error, MPs have warned.

The Committee of Public Accounts made the finding in the annual report of its chair, Geoffrey Clifton-Brown, published on Wednesday (14 October).

Fraud and error cost taxpayers between £55 billion and £81 billion every year, the committee said.

It named legacy IT systems, weak digital capability and leadership, and difficulty sharing data between government bodies as barriers to tackling the losses.

The Department for Work and Pensions estimated that it overpaid £9.9 billion through fraud and error in 2025–26. That amounts to 3.2% of its benefit spending.

The department aims to cut this to 2.8% by 2028–29, a target Clifton-Brown said would still mean billions lost.

The committee accused government of a worrying lack of urgency over legacy IT. It said these systems create cyber security risks and stop departments benefiting from new technology.

Around 6% of civil servants work in digital and data roles, below the level in many high-performing organisations. Government wants to raise this share to 10% across the civil service.

Central government departments spent around £450 billion on the day-to-day running of public services in 2024–25, about 35% of total public spending. Most departments lack a detailed understanding of these costs, the committee said.

NS&I’s £3 billion overhaul

National Savings & Investments, the state-owned savings bank behind Premium Bonds, launched a digital Business Transformation Programme in 2020. It aimed to modernise its operations and cut running costs.

NS&I estimated the programme’s total cost at £3 billion in December 2024, an increase of £1.3 billion since 2020.

The government’s major projects authority has rated the programme red since 2022–23, meaning successful delivery appears unachievable.

NS&I could not tell MPs how much it had spent on the programme so far. It also could not give a realistic estimate of the final cost or delivery date.

The Bank of England launched its renewed Real-Time Gross Settlement system in April 2025, at a cost of £431 million over nine years.

The system handles sterling payments worth around £790 billion a day in the UK.

The committee directed its recommendations at government rather than the Bank so that departments could learn from the programme. These included:

• Strong leadership
• Clear objectives
• A flexible approach
• Modernising early

“I applaud the Bank of England for its successful digital transformation programme that is the RTGS, and for setting a high benchmark which government must now strive towards,” said Clifton-Brown.

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