Memorandum submitted by the DSS (PAC 00-01/70)
NOTE BY THE DEPARTMENT OF SOCIAL SECURITY
TO THE COMMITTEE OF PUBLIC ACCOUNTS CONCERNING THE COMPTROLLER
AND AUDITOR GENERAL'S REPORT OF 18 AUGUST 2000
1. The decision and reasons for not proceeding
with the Benefits Payment Card are examined in the Comptroller
and Auditor General's report of 18 August 2000. "The Cancellation
of the Benefits Payment Card project". The purpose of this
note is to provide an update on the Department's work to establish
payment by Automated Credit Transfer (ACT) as the "norm"
and the measures taken to combat the existing Instrument of Payment
(IOP) fraud ie, girocheques and orderbooks.
2. Following the cancellation of the Benefit
Payment Card the Government announced that ACT would become the
normal method of benefit payment from 2003. ACT provides a more
modern, efficient and secure method of paying benefits. It will
deliver administrative savings of some £500 million per year
and fraud savings of over £100 million per year.
3. The Department's plans to introduce payment
by ACT directly into bank accounts between 2003 and 2005 are on
schedule. At present, we make payment to claimants from 26.8 million
DSS benefit accounts in Great Britain (this represents approximately
22 million benefit recipients, some of whom receive more than
one benefit), 10 million of these benefit accounts are currently
paid by ACT. It has been estimated that between 80-90 per cent
of all benefit recipients have a bank account suitable for payment
of benefits by ACT.
4. Since the decision to move to ACT in
May 1999 there have been a number of developments in the banking
world. All high street banks have agreed to introduce basic no
fee accounts in line with the recommendations from Social Exclusion
Unit's Policy Action Team on Financial Exclusion (PAT14). In addition,
the banks have now agreed to allow free cash withdrawals at post
5. The Post Office, in response to the Performance
and Innovation Unit's report, Modernising the Post Office Network,
has announced its intention to offer Universal Banking Services.
We understand that this has two main strands. First, making arrangements
with the main high street banks to allow holders of basic bank
accounts access to services at the Post Office. And secondly,
the provision of a simple Post Office account. Six of the main
high street banks (Barclays, Lloyds TSB, RBS/NatWest, HSBC, Abbey
National and the Halifax) have agreed in priciple to provide a
financial contribution towards the cost of Universal Banking Services.
Discussions are continuing with the other banks and building societies
regarding the contribution they can make.
6. We are working closely with the Post
Office and others in developing our detailed plans for implementing
the move to ACT from 2003. The Department now has a Public Service
Agreement target that by 2005 85 per cent of our customers will
have their benefits paid into their bank accounts.
7. We have not identified any group of people
who would have fundamental religious or other objections to receiving
their benefit by ACT. However, our plans do take into account
the need to put in place suitable arrangements for certain limited
exceptions for example, urgent payments that cannot be made into
bank accounts. The move to ACT is being developed in cooperation
with the Post Office, in particular its proposals for an enhanced
range of banking services. This should ensure that people who
wish to access their cash at post offices can continue to do so
eg, pensioners can continue to be paid weekly at their local post
office. This will be via high street bank accounts accessible
at the post office or through the new Universal Banking Service.
8. Research has been conmmissioned to establish
people's attitudes to the methods of paying benefits, to help
us design the new service in a way that willl take account of
different people's needs and preferences. Amongst other things
this will inform an educational programme we are developing to
support the move to ACT from 2003 to ensure that customers have
all the information and advice they need.
9. The Benefit Payment Card (BPC) and ACT
would both virtually eliminate fraud associated with current paper
based methods of paying benefit. Following the cancellation of
the BPC we needed to take steps to make payments more secure pending
the move to ACT in 2003. The Department in collaboration with
the Post Office has put in place a range of measures around the
control and treatment of order books and girocheques, that have
given rise to about £68 million savings in 1999-2000.
Electronic Stop Notice System
(ESNS)this is a bar coding system for order books.
It has been installed in 1,462 Post Offices within the M25 area.
(Saved about £51 million in 1999-2000.)
Order Book Control Service (OBCS)
is a national version of ESNS. It is being rolled-out to all
post offices by July 2001. It will reduce order book fraud in
the period before the move to ACT in 2003. (Saved about £4
million in 1999-2000.) OBCS utilises the equipment being installed
in post offices as part of the Horizon project. The Horizon project
is on target to be fully rolled out by June this year.
Reward scheme for Post Office
staff and sub-postmastersIntroduced in October 1995.
Post Office staff can be paid a reward of £10 (£25 in
exceptional cases) for impounding order books and girocheques
under circumstances not covered by their normal contractual responsibilities
with BA. (Saved about £12.5 million in 1999-2000.)
The recently introduced Social
Security Fraud Bill seeks key powers for our fight against
fraud. It includes new powers to require information from private
and public sector organisations about suspected benefit cheats;
allows DSS to exchange information with social security administrations
in other countries in order to combat transnational benefit fraud;
and improves the speed and efficiency of the flow of information
between DSS and local authorities.
10 January 2001