Reeves to appoint Covid corruption tsar to claw back billions of waste

Rachel Reeves will appoint a commissioner within weeks tasked with recouping billions from Covid contract fraud, in an initiative that will turn the spotlight on to government waste.

The chancellor is understood to believe the Treasury can recoup £2.6bn from waste, fraud and flawed contracts signed during the pandemic.

The process to recruit a Covid corruption tsar will begin this week, working with the Department of Health and Social Care, but is expected to deliver a report to Reeves so that government lawyers can begin to pursue the funds.

The commissioner will work with HMRC, the Serious Fraud Office and the National Crime Agency to examine an estimated £7.6bn worth of Covid-related fraud. This includes business loans and grants, incorrectly claimed furlough and abuse of Rishi Sunak’s flagship “eat out to help out” scheme.

Related: Labour is right: billions were lost to Covid fraud, and the public deserve a reckoning | Devi Sridhar

Reeves is expected to tell parliament that the commissioner will “get back what is owed to the British people” – saying the money has been “in the hands of fraudsters” when it belongs in public services.

“I will not tolerate waste. I will treat taxpayers’ money with respect and I will return stability to our public finances,” she will say.

She is also expected to point the finger for the flawed contracts directly at Sunak, particularly the billions wasted on useless personal protective equipment (PPE).

“The past government hiked taxes, while allowing waste and inefficiency to spiral out of control,” Reeves is expected to say.

“Nowhere was this more evident than during the pandemic, particularly when it came to PPE. Because the former prime minister when he was chancellor signed cheque after cheque after cheque for billions of pounds’ worth of contracts that did not deliver for the NHS when it needed it. That is unacceptable.”

Labour said during the election campaign that billions could be recovered from the fraudulent contracts, though costs of more than £4bn are believed to be irrecoverable.

Related: Half of UK company directors struck off linked to alleged Covid loan fraud

Plans in the Labour manifesto include a review of sentencing on fraud and corruption conducted against UK public services, as well as reforming public procurement rules to include a “debarment and exclusion” regime for those complicit in fraud against the state.

The previous government came in for widespread criticism of its practices during the pandemic, including suspending its usual procurement processes and introducing a “VIP lane” for PPE manufacturing, often involving those with close connections to government ministers.

Official figures revealed that the government wasted nearly £10bn in total on unusable PPE during the Covid crisis. Annual accounts for the DHSC in January showed that nearly three-quarters of the money it spent on PPE during the pandemic had been written off.

The previous government defended the spend, citing the unique circumstances during a pandemic when globally PPE was in extremely short supply, which drove up costs and led to a rush to secure protective equipment for frontline health and care workers.

Reeves has asked HMT for a new audit of the public finances, expected to be published within the next week. The chancellor will give a parliamentary statement before recess on the state of the public purse, when she is also expected to set out her response to the public sector pay review. That statement, likely to be next Monday, will also set the date of the next budget and is expected to formally begin the process for the Office of Budget Responsibility to produce its forecasts.