Fraud is costing the UK £20 billion a year – £330 for every person in the country – a police report reveals today.

The money could pay for 200,000 extra police officers or fund the national policing bill for two years and equals the Department of Health's figure for the cost of alcohol abuse.

The report comes a week after Mike Bowron, head of the City of London Police, who oversees the country’s biggest fraud unit, told The Times that fewer than half of the 43 forces in England and Wales now had specialist squads. He said: “Fraud is not a policing priority. It is low priority because it is low visibility.”

Estimated losses from tax evasion, underreporting and fraudulent applications for European Union grants boost a “conservative” baseline fraud figure of £13.9 billion.

The report, presented to MPs today, was commissioned by the Association of Chief Police Officers (Acpo). It represents the first major official attempt to put a figure on the total cost of fraud to the UK economy and took a year to produce.

The biggest losses – some £6.4 billion a year – are borne by the public sector. The report states that tax fraud is “and probably always will be” the most significant area of both public and private sector fraud.

Fraud costs the financial services industry – banks and insurance companies – £1 billion, while the cost to business overall is almost £4 billion. The report lists dozens of common types of fraud, including embezzlement and insider dealing.

Benefit fraud totals £0.7 billion, a sharp fall on £1.8 billion in 2003/2004, thanks to “anti fraud activities” and “improved accuracy” of estimates.

Individuals are losing out to the tune of £2.75 million a year. It costs another £1 billion to combat fraud and deal with the consequences of it.

Mr Bowron, who is Acpo’s lead on economic crime, said: “Lying to secure financial benefit is fast becoming endemic in British life. The layperson’s description of fraud – ‘I tell you a lie, you give me the money’ – has never had so much resonance.”

He added: “It used to be said ‘No one walks down the street in fear of being embezzled.’ Well increasingly they do.

“Whereas once the average Briton dreaded being burgled or having their car broken into, they are now worried about identity fraud, mass marketing scams and other forms of financial crime that have a serious impact on our lives. Long gone is the notion that fraud is a victimless crime.”

The report was compiled by fraud expert and criminologist Professor Michael Levi of Cardiff University. He analysed key data drawn from global reports and national surveys to assess, as accurately as possible, the true economic cost of fraud in the UK.

Professor Levi called for improved data collection at the national and international levels to boost Government understanding of the trends. The report states: “Most of the data available have to be viewed as highly deficient.”

Results of the Government’s own review of fraud in the UK will be unveiled next Thursday. They are likely to contain plans for reform of the criminal justice system to deal with complex fraud cases and for a National Fraud Reporting Centre.

Increasing numbers of people are falling victim to internet fraud – with 150 million e-mails “phishing” for bank details sent per month – and identity theft.

The latest internet scam is “lonely hearts fraud”, where people using internet chatrooms or dating websites are duped into starting online relationships with people who turn out to be confidence tricksters. By the time they realise, they have often parted with large amounts of money as a result of “sob stories” from their supposed partner.

The report concludes: “This study shows that fraud is currently a very significant crime problem, and there is no reason whatever to suppose its costs, level or significance will diminish naturally over time.”

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