A regimental commanding officer is among dozens of military personnel under police investigation for allegedly stealing hundreds of thousands of pounds of taxpayers' money in a fraudulent scheme over the public school education of their children.
The inquiry is looking into claims that parents were charging for boarding fees for their children at more than 25 schools when they were actually day pupils at a far lower cost.
The highest ranking member of the forces who may face charges is a lieutenant-colonel. One parent, a member of the Royal Navy, has been arrested and bailed for alleged deception. At one school where the practice was said to be rife 16 service personnel including two officers are involved.
The scandal – which came to light as the military faces large cuts to its budget following the Strategic Defence and Security Review – centres on the Continuity of Education Allowance (CEA) which entitles military families to payments of up to £5,833 a term for each of their children to attend boarding schools or £4,482 a term for day schools.
The single arrest so far was one of 16 Navy personnel who have 50 children between them at the GEMS Bolitho school in Penzance where fees are £6,860 a term. It is alleged that up to £300,000 may have been fraudulently claimed for fees at this school.
Changes to the CEA system were introduced in December last year following suspicion of widespread malpractice. Among the new measures was the abolition of a public school allowance for personnel being moved to London and other locations.
Another rule, which allowed parents to claim day pupil rates for a second child as long as one child was eligible for boarding fees, was also scrapped. The MoD said: "CEA rates have not been cut, but rule tightening will reduce the spend. Any personnel found to be ineligible for CEA under the new rules will have a minimum of one full term's notice of withdrawal of entitlement."
The scheme was intended to enable children to remain in stable education while their parents were posted away at short notice. The continuous deployment of British forces abroad, as well as internal movement within the country partly due to overseas wars, have, say defence officials, offered greater scope for abuse.
One of the perceived weaknesses of the setup is that the fees are claimed by parents via the Service Personnel and Veterans Agency rather than being paid directly to schools.
The system has also faced criticism over the disparity between ranks receiving the allowance. More than £40m of the £180m a year went to lieutenant-colonels and higher ranks earning at least £81,000 a year. This included 44 per cent of brigadiers, 42 per cent of major-generals, 40 per cent of colonels and 32 per cent of lieutenant-colonels, while just 0.1 per cent of privates and 10 per cent of non-commissioned officers received the allowance.
Speaking about the alleged fraud, the MoD said: "This is subject to an ongoing investigation and it would be inappropriate to comment further."
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies