MPs on the Public Accounts Committee (PAC) said the level of fraud and error in benefits expenditure was ‘unacceptably’ high, with the DWP overpaying an ‘eye-watering’ £6.5bn in fraud payments.
During the pandemic, fraud and error rose to 'historic levels' across the benefits system, reaching an estimated 7.6% (£8.5bn) overpayment rate across all benefits, excluding the state pension in 2021-22, compared with 4.7% (£4.4bn) in 2019-20.
The DWP acknowledged that fraud and error levels remained too high and maintained that current levels were still due to Covid-19 but was unable to say when levels would fall. This was not helped as the DWP stopped most of the controls to prevent fraud and error at the start of the pandemic.
The Department told MPs that it expects a £613m investment in counter-fraud measures to generate £4bn of savings over five years, but it has not set out in detail how the specific activities will produce this impact. It does plan to hire more front line staff and will launch a targeted case review of two million open Universal Credit claims although it will not have the additional 2,000 staff to deal with this before April 2024.
In 2021-22, the department spent £104.1bn on the state pension and £113.1bn on all other benefit payments.
The report criticised the DWP’s ability to ‘strike the right balance’ between being robust in tackling fraud and ensuring that claimants are treated fairly. It added that their narrative about fraud in society could ‘encourage a complacent attitude’ towards unprecedented levels of benefit fraud.
The Department’s counter-fraud strategy is increasingly reliant on data analytics and machine learning to flag potential fraud. It will be essential to ensure that this does not have a disproportionate and unfair impact on vulnerable claimants and protected groups.
Dame Meg Hillier MP, chair of the Public Accounts Committee, said: ‘The DWP is blaming everything from the pandemic to ills in wider society for unprecedented and wholly unacceptable levels of fraud in the benefits system. ‘But the truth is losses to the taxpayer to fraud and mistakes have been at record levels and rising for years. DWP didn’t have a plan to get a grip on the billions it was losing every year before the pandemic, and it doesn’t have one now.’
The Department estimated that 237,000 pensioners have been underpaid a total of £1.64bn in state pension, with underpayments going back as far as 1985.
PAC said that the DWP’s systems were not ‘adequate’ to detect further underpayments before they continue to build up into ‘major issues’ in the future.
The committee has recommended that DWP set out its forecasts of the future levels of fraud and error in benefits, including its assessment of the factors driving these trends.
In addition, the DWP should work with the National Audit Office (NAO) to ensure that, by the time of its 2022-23 annual report and accounts, it has an agreed framework to report on the impact and cost-effectiveness of its counter-fraud activities.
A DWP spokesperson said: ‘We are disappointed the committee did not recognise that we are already delivering on the bold and ambitious Fraud Plan, published in May this year, that sets out our next steps, including recruiting trained specialists and seeking new powers to help us tackle fraud.
‘This builds on the existing work DWP has done to address fraud and error, with savings from correction and prevention of fraud and error totalling £2bn last year.’
Source: extracts from various sources including HMRC and other professional accountancy journals