Turf wars prevent Whitehall tackling Britain's fraudsters

Serious doubts have emerged over the future of a pledge by the Prime Minister, David Cameron, to create a new force of so-called economic "G-men" to crack down on financial and banking frauds, said to be costing the UK more than £30bn a year.

Turf battles and financial constraints are undermining efforts to create a new economic crime "super agency" to investigate white-collar crimes. Representatives from a string of departments, including the Treasury and the Ministry of Justice, will meet this week to try to thrash out a deal to secure the agency's future.

Mr Cameron raised the prospect of combining the powers of organisations such as the Serious Fraud Office (SFO) and the Financial Services Authority (FSA) before the election, amid frustration about the performance in tackling fraud of the "alphabet soup" of existing organisations.

The Tories issued warnings that foreigners have targeted Britain for many types of fraud, because there is less chance of being caught and the sentences that could be imposed upon them are relatively light.

The proposal was carried forward into the coalition agreement, with the programme for government declaring that: "We take white-collar crime as seriously as other crime, so we will create a single agency to take on the work of tackling serious economic crime."

It was proposed that the new Economic Crime Agency (ECA) take in the SFO, the criminal investigation arm of the FSA, the Crown Prosecution Service's fraud unit, and the City of London's Economic Crime Directorate, and possibly part of the Office of Fair Trading.

However, the proposal has already hit difficulties, with a number of agencies and departments reluctant to surrender any of their powers to a new organisation.

A senior official admitted last week that the Government had scaled down its ambitions and might have to settle for closer co-operation between existing organisations. "We still want an economic crime agency, because we believe this is a neglected area," the source said. "We are talking about coming down hard on fraudsters, particularly those who come to this country specifically to commit this type of crime.

"At the very least, we would like to see greater co-ordination of investigations and higher sentences for people who are caught. We need to send out a message that this type of behaviour is not acceptable and it will not be worth the risk any more."

The National Fraud Authority (NFA) has complained about "the myth that fraud is a victimless crime". It claims that fraud alone costs ordinary Britons £30bn a year.

The Tories ECA proposal followed growing frustration with the performance of the SFO and the FSA in particular. The aim of the ECA was to reduce overlap of responsibilities. Richard Alderman, director of the SFO, said the new organisation "would help simplify things".

It also followed warnings from the Serious Organised Crime Agency that criminals in the UK are increasingly involved in financial frauds, including insider share dealing, because they see it as lucrative and low-risk.

Turmoil and uncertainty over the future of both organisations has prompted a string of resignations from both the SFO and the FSA.

A spokesman for the NFA said: "Fraudsters damage lives, stealing from vulnerable people and extracting money from law-abiding citizens. Fraud efforts have been fragmented due to organisations working within the confines of commercial and departmental responsibilities."