Examination of Witnesses (Questions 40-59)
MS RACHEL LOMAX, MR JOHN CODLING AND MS ALEXIS CLEVELAND
MONDAY 4 FEBRUARY 2002
40. In the 6.5 per cent of staff error, what are the biggest problems which result in underpayments?
(Ms Cleveland) Failing to take income fully into account, failing to take capital fully into account, overpayments of Income Support may occur because we have not made a correct assessment of Incapacity Benefit so there is an offsetting error of an equivalent amount on Incapacity Benefit.
41. What are the measures you are taking? You have alluded to broad brush measures. What are you doing particularly to make sure that your staff are aware of the specific issues?
(Ms Cleveland) We have set a series of performance improvement teams in each of the areas who actually go through on an office by office basis, because the errors do vary a bit between offices, and pick out the top five errors which have been observed in that office. Then the experts who come in to do the checking run courses and seminars with the people who are doing the work on the particular sections to point out where they are making errors. If it is because they have been failing to do checks on the system, that they have been failing to set indicators on the IT systems and such like, they go through it almost on a one-to-one basis with them.
42. Going back to the garbage-in, garbage-out problem, what have you done to identify the key problems of bad information being provided and to make sure that you are modifying the forms, the application forms themselves, to get the best information in?
(Ms Cleveland) The biggest modification has been for pensioners on minimum income guarantee. There has been a real simplification of the form which more than halved the size of the form which has come through, which is still a long form though because we have to gather such a lot of information. If we are talking about pensions, the introduction of the minimum income guarantee helpline, the tele claims service we have for pension claims and such like, being able to talk people through the applications helps improve the quality of the information no end. We have also played that into the model which has been designed for the Jobcentre Plus because there are far more interventions there face to face with customers so we can ask them. In the Jobcentre Plus model there will be a personal adviser dealing with labour market activity while a financial assessor is going through checking the forms, checking the quality of the information and able to go back and ask the customer about it there and then, either to tell them they have all the information and they can make an assessment, or extra information needs to be provided or documentary evidence. That model is yet to be proven but I think it is a very big step forward.
43. In looking at the 6.5 per cent error rate for staff error can you break that down into the percentage which is what one would call inconsequential error, where it is simply a wrong date which has been recorded or something like that, which does not actually make a difference either to the timing or the amount of the benefit received? Can you take that out of the equation to give us a more accurate assessment of the consequential error and can you break that down into that error which is under and that error which is overpayment of the 6.5 per cent?
(Ms Cleveland) The accuracy figure does not include very small errors in the amount of money paid out. Most of these will lead to an error of payment of more than 50 pence a week within the calculation. I do not have in front of me the breakdown of over and underpayments but we could certainly let you have a note if that would be helpful.
44. This figure of 6.7 per cent in the report talks about error and fraud. What proportion of that £900 million is fraud and what proportion is error?
(Ms Lomax) It is about 2:1, fraud to error, is it not?
(Ms Cleveland) Yes; something like that.
45. About 30 per cent is error, 70 per cent is fraud or the other way round. How much is fraud and how much error?
(Ms Lomax) Fraud on Income Support is £564 million, customer error is £153 million. I was not quite right; it is more fraud than customer error.
46. That does not quite add up to £900 million.
(Ms Lomax) There is total official error which is £172 million, which adds up to £889 million.
47. So £172 million is clerical error, £153 million is error by the customer and £564 million is deliberate fraud by the customer.
(Ms Lomax) In circumstances where they should have known better.
48. Of the £153 million, which is customer error, that is inadvertent, is it, because they did not realise they had to tell the office?
(Ms Lomax) There is an element of judgement in all this. What happens is that when the cases have been reviewed, the reviewing officer will interview the customer and we will see whether there is a case for prosecution. There is a grey area between fraud and customer error which has moved around a bit.
49. How do you know what the figure for fraud is?
(Ms Lomax) The process that we go through is area benefit reviews, which consist of a rolling programme of reviews of around 30,000 cases by experienced staff. We have 150 field staff and about 30 central staff who go round reviewing these cases. It is not just a desk exercise, they interview customers in their homes and where there is suspected fraud they pass cases on to experienced investigators. And where we think there is actual fraud we pursue them.
50. So that is a random sample of 30,000.
(Ms Lomax) It is a random sample of 30,000.
51. You extrapolate from that.
(Ms Lomax) We extrapolate from that.
52. So the £564 million is probably quite an accurate estimate of the fraud.
(Ms Lomax) We put a lot of effort into measuring total losses on Income Support and JSA and it is a very large, very serious exercise, where the methodology has been validated by the NAO and the Government Statistical Service.
53. Is there this level of fraud in all the other benefits?
(Ms Lomax) No.
54. Is it just these two, JSA and Income Support where it is the highest?
(Ms Lomax) The reason why we have put so much effort into these is because we think they are the most vulnerable to fraud and error. We think that on the basis of about 11 national benefit reviews, which are smaller samples but across a much wider range of benefits. The outcome of that was to confirm the view that IS and JSA were the most vulnerable areas. I have to say that the other area which is probably of the same order of vulnerability is Housing Benefit. These are probably the areas of maximum problems.
55. How do you tie in with the local authorities in terms of administering Housing Benefit? Can you issue the same kind of guidelines to them? Do you do these same sorts of checks?
(Ms Lomax) We are in the process of trying to get a comparably robust measure of fraud in Housing Benefit at the moment. We did do a national benefit review about three or four years ago but it was subject to a quite unacceptably large margin of error. At the moment we have a programme involving reviewing 10,000 cases. It involves working with local authorities and it has turned out to be rather more difficult and complicated than we expected when we started doing it. That should give us some baseline figures for this year and next year.
56. What checks are made on a routine basis to check facts which are submitted by claimants?
(Ms Cleveland) We employ a risk analysis to the individual claims. If it is somebody who has a repeat claim we would probably give different levels of check than if it were a new claim coming through. We check information at different times during the claims. We have tightened up quite a lot the checking which goes on at the gateway to the claims. We would check information, we would check identify, we would check who they say they are, we would seek information on previous earnings, we would look for details of bank accounts, savings accounts and such like and we would be looking at original documents.
57. Let us start with one of those: the routine checks on capital. How do you do that?
(Ms Cleveland) On a claim form people are asked to put down all the capital they have. What is meant by capital is an area we know people find quite difficult to understand. We give them examples on the forms about what might be involved and our staff are trained to go through all the different examples, particularly with our older customers about what might count as capital.
58. How do you check that somebody is not just deliberately hiding £0.5 million in a bank account somewhere?
(Ms Cleveland) That is very difficult for us to do at the moment and that is why part of the Fraud Act powers which we have sought is to exchange information with banks and building societies, though we have not brought those powers into effect yet.
59. Until those powers came in you had not reached a commercial agreement with the banks at all in any way.
(Ms Cleveland) No.
3 Note by witness: The error rates can be broken down into over and underpayments as follows: Back