Ignoring whistleblowers has cost the taxpayer hundreds of millions of pounds, new analysis has found, with the cost of three recent scandals alone pegged at £426m.
A report published today by the whistleblowing charity Protect has laid bare the cost of failing to act when whistleblowers speak up.
It looked at three major scandals in recent years: the Post Office IT Horizon scandal; the Lucy Letby scandal; and the 2018 collapse of the oursourcing giant Carillion.
It calculated the costs associated with the Carillion scandal – in which the UK’s second-largest construction company was plunged into compulsory liquidation in January 2018, despite the Cabinet Office having no indication it was not in sound financial health six months earlier – at £209m. Carillion held around 420 public sector contracts when it went under.
The report notes that warnings about improper accounting practices from a member of staff, Emma Mercer, had little effect. Her repeated warnings were ignored, except for the company’s auditors, KPMG, being told to re-audit its own work, “effectively marking [its] own homework”. And when Mercer became Carillion’s finance director in September 2017 – having raised concerns about its finances in spring that year – the company’s “fate as a soon-to-be ex-construction giant had already been sealed”, the report says.
A select committee report into the collapse found Carillion’s board and executive members were “uninterested in hearing inconvenient truths about the business model they were pursuing”, the report notes.
The scandal led to just over £192m in avoidable costs to government – £148m paid by the Cabinet Office to help finance the costs of liquidation, £42m spent on terminating PFI contracts, and just over £2m in unemployment benefits following job losses.
There was also a further £17m of what Protect calls “fallout costs” of rectifying failures that happened over the course of the scandal, including those that could have been avoided had whistleblowers’ warnings been heeded.
The bulk of this, £16m, was the cost of delays to public buildings, mostly hospitals. It also includes the 20% premium paid by public bodies – mainly for schools and local authorities – for the company’s services post-liquidation, which added up to £1.75m; just over £100,000 spent on a National Audit Office investigation; and £60,000 spent on the Brydon review into the quality and effectiveness of audit in the wake of the scandal.
The cost of ignoring whistleblowers in the Horizon scandal, meanwhile, added up to around £178m.
The report notes that precisely when the Post Office learned of errors with the Horizon software, which created accounting shortfalls that led to 736 sub-postmasters being prosecuted for theft, fraud and false accounting between 1999 and 2015. However, it adds that Fujitsu, which developed the software, knew of bugs in 1999 thanks to anonymous whistleblowers in its own development team; and the Post Office later ignored multiple warnings from sub-postmasters and others.
“Those who might have held either Fujitsu or the Post Office to account went unheard. Those with technical expertise at Fujitsu were ignored when speaking about risks when Horizon was built, and the Post Office was too busy prosecuting sub-postmasters to listen to their concerns about the system overall,” the report says.
The avoidable costs of the scandal included the the £4,362,814 it cost central government to imprison 236 sub-postmasters over the course of the scandal; and £7,634,044 spent by the the Post Office on prosecution, its internal working group dedicated to “managing” the concerns raised by sub-postmasters, and consultancy, including by forensic accountants Second Sight.
There were also massive “fallout costs” of £173,604,451 to central government, including £138m in compensation payments; the £21,939,014 it cost to run the public inquiry; and £11.6m in legal costs.
The fallout cost the Post Office nearly £257m in legal costs and £58m in compensation, the report adds.
The report also examines the case of Lucy Letby, who was convicted in August 2023 of murdering seven babies and attempting to murder six others while working as a nurse at the Countess of Chester Hospital.
This case incurred £2,725,533 in unavoidable costs spent by central government on the prosecution, defence and investigation, and in compensation; as well as the estimated £47,220 the hospital paid Letby in 2015.
The £9.4m in avoidable costs to government included more than £7m spent by the Home Office on Operation Hummingbird, the Cheshire Constabulary investigation into Letby; and prosecution costs. The fallout costs to government stood at £29.7m, two-thirds of which went on the Thirwell Inquiry into the scandal and the remainder on compensation and associated litigation.
“The whistleblowers in Letby’s case were persistent, yet the executive viewed the concerns as obstructive and personal towards Letby leading to an overly cautious approach to the concerns. Had they been listened to, a lot of fallout costs and the cost of a lengthy public inquiry could have been avoided but, most importantly, lives could have been saved,” the report says.
A 'compelling and urgent argument' for reform
The report calls for a series of major reforms to improve how whistleblowing is handled, beginning with a duty on employers to investigate whistleblowing concerns. “This is vital to closing the accountability gap,” the report says.
Secondly, Protect has called on the government to expand the range of people in the workplace who qualify for whistleblowing protection. “Anyone who may suffer retaliation for raising public interest concerns in the workplace should know that the law stands by them,” it says.
The report also says central government should “reframe” whistleblowing by giving the policy lead to the Cabinet Office rather than focusing solely on employment rights.
“Whistleblowing affects every sector and every government department and its value to upholding standards in public life, and holding the powerful to account should not be underestimated,” the report says.
Other recommendations include requiring all boards to appoint a whistlebowing champion; new standards, "backed by statute if necessary", that ensure that whistleblowers know what to expect when they go to regulators; and for government to implement the findings of public inquiries.
"We hope this paper provides a compelling and urgent argument to government for why things need to change," the report says.
Protect said it had focused on the three cases for its analysis “to illustrate the range and scale of costs that ignoring whistleblowing can give rise to”. The three cases focus on a public sector employer (NHS); a publicly owned but privately run employer (Post Office); and a private sector employer which contracted with the public sector.
But it said there were a number of other scandals it could have looked at to highlight the same issues, including the Grenfell Tower tragedy and the Infected Blood scandal.
“Indeed, there will be many other cases which have not received similar public attention and yet have caused significant costs to the taxpayer,” the report said.
Protect chief executive Elizabeth Gardiner said: “Whistleblowing failures come at a high price – to the whistleblower, to the employer and, too often to the taxpayer. It is central government that is left picking up the pieces of avoidable scandals.
"At a time when public finances are under pressure, the government cannot afford the cost of avoidable harm in the public sector. Yet employers are still not listening to and investigating whistleblower concerns and are failing to create cultures where whistleblowers can speak up safely and effectively.”