More money should be set aside for tackling fraud in the NHS, a leading figure has said, as new figures showed that scams are costing the health service an estimated £5bn a year.

Jim Gee, former director of NHS Counter Fraud Services, said cutting the cost of fraud should be made a priority in the health service.

His remarks, in a Panorama programme broadcast on BBC One, come ahead of the publication of a study co-authored by Mr Gee claiming fraud is costing the NHS £5bn a year, with a further £2bn lost to errors.

The amount lost to fraud alone could pay for nearly 250,000 new nurses, the BBC reported.

Mr Gee, who led the NHS anti-fraud section for eight years, said his estimates for fraud in the NHS were 20 times than those recorded in the Government’s annual fraud indicator report.

He told Panorama: “We need to not be embarrassed, or in denial, about the possibility of fraud taking place in the NHS.

“We need to get on with tackling the problem, minimising its cost, maximising resources available for proper patient care.”

The report, by the University of Portsmouth and accountancy firm BDO, found that the biggest areas of fraud were in payroll and procurement budgets.

The £2bn cost of errors relate to when the NHS makes overpayments by mistake to suppliers or staff.

Although the NHS has a budget of about £100bn, it is having to make significant savings and should prioritise fighting fraud, said Mr Gee.

“I think fraud is one of the last great unreduced healthcare costs. And, to me, putting money into it makes absolute sense,” he said.

“It’s one of the least painful ways of cutting costs. It makes absolute sense to cut the cost of fraud before you cut the quality or extent of patient services.”

Mr Gee told the BBC that his figure was higher than the government estimate because its annual fraud indicator report only relates to pharmaceutical and dental services, and does not include losses taking place in payroll and procurement expenditure, for example.

Panorama also found that NHS Protect, the national body which investigates fraud in England for the Department of Health, has had its budget cut by around 30 per cent since 2006.

A Freedom of Information request by the BBC showed that NHS Protect employs 27 counter-fraud specialists, with a further 294 investigators working at a local level.

By contrast, the Department for Work and Pensions employs six times the number of investigators, according to Panorama - but if Mr Gee’s figures are accurate, they face less than half the amount of fraud.

The Department of Health said it did not “recognise” the figures for fraud in the report and was not aware of any published research showing how the figures were calculated. It said it did not speculate on levels of losses.

A DH spokeswoman said: “Fraud against the NHS is a crime that can have a serious impact on our ability to deliver high-quality health services.

“Any allegation or suspicion of fraud should be referred to NHS Protect, who are required to take appropriate action. When fraud is proven, we expect all appropriate sanctions and recovery action to take place.”