The UK’s justice system is “ill-equipped” to tackle a spiralling fraud epidemic and needs a rapid overhaul, a cross-party committee of MPs has concluded. The justice select committee found that traditional crimes were being wrongly prioritised by police and prosecutors in a report released on Tuesday, and described Action Fraud, the UK’s centre for collating allegations of cybercrime, as “unfit for purpose”. MPs also found that policing was inadequate to deal with the scale, complexity and evolving nature of fraud. Only 2% of police funding was dedicated to combating fraud despite it accounting for 40% of reported crime, they noted. The Office for National Statistics disclosed last month that the number of people falling victim to fraud had risen by 25% in the past two years, with 4.5m offences in a 12-month period, figures suggested. Large increases were seen in the number of scams where money was paid upfront in return for the promise of goods or services that failed to materialise. There is growing disquiet in Whitehall that the government, under the new chancellor, Jeremy Hunt, will not ringfence the justice system’s funding in cuts to be announced over the coming weeks. The committee’s Conservative chair, Sir Bob Neill, said fraud was expected to increase, but that the justice system had not reacted to the change. “People are losing their life savings and suffering lasting emotional and psychological harm,” he said. “But the level of concern from law enforcement falls short of what is required. “Fraud prevention, investigation and prosecution too often has seemed like an afterthought, last in the queue for resources, monitoring and even court time. We need the criminal justice system to have the resources and focus to be able to adapt to new technologies and emerging trends.” The committee found that the responsibility for fraud in government was unclear. It usually sits within the purview of the security minister, who is currently Tom Tugendhat. But some elements of fraud crimes were the responsibility of the Treasury and some the Department for Work and Pensions, the report said. Action Fraud, which is due to be replaced in two years, was understaffed and not sufficiently resourced to deal with the growing and varied challenges it faced, MPs said. Responsibility for tackling fraud among police forces remained confused, the report said. It noted that local forces carry out investigations but other bodies, including the City of London police and the National Economic Crime Centre, set the overall approach to combating fraud. “The government must allocate adequate funding that will enable police forces to enable prevention and enforcement sufficient to match the scale of fraud taking place in England and Wales,” the report said. “There should be greater clarity on the areas of responsibility between national and local policing bodies, and greater awareness of the support available to local forces on fraud cases.” Civil servants are working on improvements to the Action Fraud website, which will be upgraded by 2024. A government spokesperson said it remained committed to cracking down on “shameless scammers” stealing cash from hard-working people, adding: “Our upcoming fraud strategy will consider all possible tools required to go after fraudsters and protect those who are most vulnerable to these crimes.”