The Committee of Public Accounts has agreed to the following Report:
FRAUD AND ERROR IN INCOME SUPPORT
INTRODUCTION AND LIST OF CONCLUSIONS AND RECOMMENDATIONS
- The Department for Work and Pensions pay some £100 billion a year in benefits. In broad terms across all benefits, there is likely to be fraud of around £2 billion and customer and official error of £1 billion. The Department have more reliable figures for some benefits, notably Income Support and Jobseeker's Allowance, where some £1.2 billion was lost through fraud and error in 2000-01.
- The Committee of Public Accounts have taken evidence on the scale of fraud and error in benefits and the scope to reduce it four times since 1995. On the basis of a further Report by the Comptroller and Auditor General, we looked again at this issue focusing on Income Support and Jobseeker's Allowance, and the action being taken to reduce the substantial loss to public funds.
- In the light of our examination, the Committee draws three overall conclusions:
- The Department have developed annual estimates of the level of fraud and error in Income Support and Jobseeker's Allowance, which underpin Government targets for a progressive reduction in fraud and error by 2006. The Department are undertaking work to develop robust estimates for Housing Benefit. On other benefits, their estimates are out of date. Until they have robust estimates for all benefits, it is difficult to measure their performance in reducing this substantial drain on public funds - in the order of £2 billion in fraud alone.
- The Department are making progress towards their targets for reducing the level of fraud and error in Income Support and Jobseeker's Allowance, from a baseline of 9 per cent of expenditure in these two benefits in 1997-98 (£1.38 billion). Their targets are to reduce fraud and error by 10 per cent by March 2002, 25 per cent by March 2004 and 50 per cent by March 2006. Even then, fraud and error will exceed £700 million.
- Until the Department are successful in achieving substantial reductions in fraud and error, they will remain unable to give Parliament assurance that money has been spent in accordance with Parliament's expectations. They should continue to work with the Comptroller and Auditor General to explore ways of removing the various qualifications on their accounts, including the scope for further reductions in fraud and error.
- Our more specific conclusions and recommendations are as follows.
On the scale of fraud and error in benefit payments, particularly Income Support and Jobseeker's Allowance
- The Department need to supplement their estimates of fraud and error on Income Support and Jobseeker's Allowance, and their work to develop robust estimates for Housing Benefit, with a planned programme of reviews of other benefits. This will allow targets to be set for reducing fraud and error in all benefits and their performance to be measured.
- There is a risk that the merger of the Employment Service and the Benefits Agency, to create Jobcentre Plus, might divert attention from tackling fraud and error in the short-term. While the Department are seeking to manage this risk by phasing the change, they should monitor the levels of fraud and error closely, and be prepared to refocus their efforts if there is evidence of an increase.
On reducing fraud and error in Income Support and Jobseeker's Allowance
- Many of those receiving benefits find it difficult to understand complex system and rules. Our predecessors have recommended simplification on a number of occasions, but limited progress has been made. The Department should undertake analytical work designed to identify options for change, based on the needs of specific client groups.
- Investment in new technology is crucial to reducing error in benefit payments and improving the scope to identify potential fraudsters across the 20 or so systems operated by the Department. It is disappointing that we will not see significant improvements in information technology systems until 2006. The scale of the Department's legacy systems and track record of IT failure, and the recent deferment of the new IT system for the Child Support Agency, do not augur well. The Department should reassess their plans for delivering new IT systems in the light of their review of the lessons learned on the Child Support Agency.
- The Department's strategy is to prevent fraud from happening in the first place, but where it does occur they apply a range of measures including cautions, administrative penalties and prosecutions depending on the scale and frequency of the offences. They have recently strengthened the administrative penalties available in the Social Security Fraud Act 2001, so that they can apply penalties of up to 13 weeks benefit to those who are convicted twice for benefit fraud. They need to establish a methodology for determining the effectiveness of these measures in deterring fraud.
- Our predecessor Committee's Report on the Department's 1998-99 Accounts called for a reduction in the significant and unacceptable variations in performance between offices. Since then, the Department have put in place Area Directorate improvement plans and local performance improvement targets, and measures to share good practice and support under-performing directorates. Variations between directorates have narrowed, but accuracy rates still range from 79 per cent to 97 per cent. The Department need to step up their actions to further reduce these variations, by implementing area performance improvement plans, and by drawing on good practice and the work done by the National Audit Office.
- Human resource problems, such management skills and expertise, staff recruitment and retaining sufficiently experienced staff are factors in the variations in performance across the country. The Department have taken action, for example transferring work between offices and supporting local recruitment initiatives, to help address them. They also need to tackle the lack of experienced staff working on Income Support, particularly in areas such as London, the South East and major cities.
- In our predecessor Committee's Report in March 1998, Measures to combat Housing Benefit fraud,  they pointed to the need to make the benefit simpler to understand and deliver, raise the standards of administration in local authorities and remove barriers to co-operation between local authorities and the Benefits Agency. The recent Report by the Audit Commission, Housing Benefit - the national perspective, points to the continuing need to tackle these issues. The Department publish an action plan addressing the Audit Commission's recommendations.
1 C&AG's Report, para 1.1; Ev 25-26 Back
2 C&AG's Report, para 1.4 Back
3 Committee of Public Accounts: 19th Report, Department of Social Security Appropriation Accounts 1994-95, Class XIII, Vote I, Errors in Income Support, Fraud and Security (HC 224, Session 1995-96); 58th Report, Department of Social Security Appropriation Accounts 1996-97: Class XII, Vote I, Administered Social Security Benefits and other Payments (HC 570, Session 1997-98); 3rd Report, Department of Social Security Appropriation Accounts 1997-98, Class XII, Vote I, Central Government Administered Social Security Benefits and other Payments (HC 103, Session 1999-2000); 32nd Report, Department of Social Security Appropriation Accounts 1998-99, Class XII, Vote I, Central Government Administered Social Security Benefits and other Payments (HC 521, Session 1999-2000). Back
4 C&AG's Report, Department of Social Security: Resource Accounts 2000-01 (HC 491, Session 2001-02) Back
5 27th Report from the Committee of Public Accounts, Measures to combat Housing Benefit fraud (HC 366, Session 1997-98) Back