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Unacceptably high levels of fraud and error in benefits spending, says watchdog

Fraud and error levels in benefits spending are unacceptably high, according to a watchdog, which said more must be done to get a grip on the billions of pounds being lost every year.

The Department for Work and Pensions (DWP) overpaid an “eye-watering” £8.6 billion across benefits in 2021-22, with £6.5 billion of that figure due to fraud, according to the Public Accounts Committee (PAC).

“The department’s continued delay in establishing transparent forecasts and targets for reducing fraud and error is hindering Parliament and the public from being able to effectively monitor its progress or hold it to account for its performance,” the PAC said in a report.

It recommended that the DWP sets out forecasts for future levels of fraud and error in benefits, including its assessment of the factors driving these trends, by the publication of its next annual report and accounts. It should also set targets for fraud and error, the PAC said.

The department 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, the committee said.

The PAC said the DWP maintains that current fraud levels are due to Covid-19 but it is unable to say when levels of fraud and error will fall.

It has repeatedly claimed there is an increasing propensity for fraud in society in general since the pandemic, but is unable to point to convincing evidence why this should lead to increasing losses to the taxpayer, the committee said.

PAC chairwoman Dame Meg Hillier said: “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 committee suggested the DWP’s narrative about fraud in society “could encourage a complacent attitude toward unprecedented and unacceptable levels of benefit fraud” and mean that people “come to see committing benefit fraud as normal”.

The PAC said that, by the end of January 2023, it expects the DWP to write to it with a clear plan of how it intends to increase the number of claimants responding to its fraud and error sampling exercises.

In doing so, the DWP should consider reviewing the tone and content of its communications with claimants, to both encourage compliance and catch fraudsters, it said.

Meanwhile, problems with benefit underpayments can lead to severe hardship.

The DWP estimates that 237,000 pensioners have been underpaid a total of £1.46 billion in state pension, with underpayments going back as far as 1985.

Efforts to correct the systemic underpayment of the state pension are too slow to meaningfully put things right and will be too little, too late for many affected pensioners, the PAC said.

It added that it is not convinced the DWP has done enough to ensure its communications to potentially affected pensioners are sufficiently clear.

The committee said it remains unconvinced that DWP’s systems are adequate to detect further underpayments before they build up into major issues in future.

The department should set out a credible plan to deliver the exercise to correct state pension underpayments on schedule and explain how it will update its communications to reassure pensioners that they will be meaningfully compensated, the PAC said.

By the publication of its next annual report and accounts, the DWP should have a plan and timetable for introducing a measure to report the total value of arrears payments arising due to underpayments, and how it will review individual arrears payments to assess whether they indicate wider underpayment issues, the committee added.

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 £2 billion last year.”