New data sharing powers save taxpayers £137 million since introduction

The government will today announce that it is retaining the Digital Economy Act (2017) following a statutory review of the legislation.

The statutory review finds the Act has enabled more than 100 data sharing pilots across 70 local authorities and 17 government departments or agencies.

Baroness Neville-Rolfe hailed the decision as “a vital step that will help to keep public money safe for years to come.”

The government will retain data sharing powers introduced in the Digital Economy Act (2017) after a statutory review published today finds they have saved taxpayers at least £137 million since coming into force. 

The Act was introduced to provide a permissive legal gateway for data sharing between public bodies in order to combat fraud against the public sector and reduce debt owed to the public sector. 

The statutory review shows the powers have enabled more than 100 data sharing pilots across 70 local authorities and 17 government departments or agencies since 2018. These pilots typically involve public bodies pooling and comparing datasets to identify anomalies that indicate suspicious activity. 

Savings of £137 million were identified through a number of pilots enabled by the Digital Economy Act, including:

• £99.5 million of fraud was identified in Covid-19 loan schemes through an ongoing pilot run by the Cabinet Office on behalf of HM Treasury, the Department for Business and Trade, and the British Business Bank – the Covid-19 Loan Schemes Fraud Analytics Programme – using HM Revenue and Customs data to identify companies who have misrepresented their trading status, such as annual turnover, to fraudulently receive loans; 
• £14.9 million of fraud was identified in council tax and housing benefit systems by the National Fraud Initiative, who compared 20 million local authority records with data from HM Revenue and Customs;
• £5.1 million of fraud was identified in shadow company accounts by using data from HM Revenue and Customs to identify companies fraudulently misstating their accounting and corporate practices to avoid paying tax; and
• £5 million of overdue council tax was recovered by 29 local authorities using data from HM Revenue and Customs to identify debt owed by those in employment.

The statutory review is based on a formal consultation into the effectiveness of the legislation and evidence from completed data sharing pilots. It was commissioned to fulfil a requirement to review sections of the Act to ensure it works effectively. The review had been due to take place in 2021 but was delayed by the Covid-19 Pandemic.

Based on the conclusions of the review, Baroness Neville-Rolfe has decided to retain the fraud and debt powers in the Digital Economy Act, rather than amend or repeal them. The government will today simultaneously lay a report summarising the conclusions of the statutory review in the UK Parliament, Scottish Parliament, Welsh Assembly, and Northern Ireland Assembly.

An overwhelming majority (95%) of consultation respondents who have used powers said they were useful to combat fraud. Already, four of the pilots have been converted to standard practice, with plans for further pilots to be converted, including onboarding over 300 local authorities to a scheme identifying overdue council tax. 

The consultation found respondents had no privacy concerns about the new powers. This finding backs up a recent report published by the Information Commissioner’s Office which concluded the Digital Economy Act has mechanisms in place to ensure robust scrutiny is applied to all data sharing agreements.  

Baroness Neville-Rolfe, Minister of State, Cabinet Office, said: 

Retaining the Digital Economy Act - rather than allowing it to sunset - is a vital step that will help to keep public money safe for years to come. The review we have conducted shows that data sharing between public bodies saves taxpayers millions, which is why increasing the integration of data across the public sector is a priority for this government.

Through the Public Sector Fraud Authority we are already stepping up our fight on fraudsters using these powers - and there is still more work to do as we take the long-term decisions to build a brighter future for Britain.

The statutory review into the Digital Economy Act was overseen by the Public Sector Fraud Authority, which was set up by Rishi Sunak in 2022 as part of a step change in the way the government fights fraud against the public sector. In its first year of operation, the Authority far surpassed its initial savings target of £180 million, delivering total savings of £311 million for taxpayers, according to figures released in its 2022-23 Annual Report.

Mark Cheeseman, Chief Executive, Public Sector Fraud Authority, said:

To fight fraud, we need to continually challenge ourselves to use data and technology to its fullest extent in an ethical manner. These powers, and their use, have delivered significant savings for the taxpayer by supporting public bodies to prevent, detect and recover money stolen by fraudsters.

The Public Sector Fraud Authority will continue to challenge itself, and the public sector to use the latest data and analytics tools to find and prevent fraud against the public sector.