Press Release - Department For Work and Pensions: Progress in
tackling benefit fraud
23 January 2008
The Department for Work and Pensions has made good progress in
tackling benefit fraud, which is estimated to have fallen from an
estimated £2 billion in 2000-01 to £800 million in 2006-07, a
substantial achievement by its staff, although definitional changes
have helped. Tackling benefit fraud is inherently difficult as it
is in the nature of welfare systems that some people will seek to
defraud them and that some will succeed.
However, losses due to fraud are still a significant drain on
the public purse and the high levels of fraud and error are one
reason for the qualification of the Department’s accounts over the
last 18 years.
The National Audit Office found that the Department has a well
defined strategy for tackling benefit fraud which includes
continual efforts to improve the accuracy of its estimates of fraud
and error. Our benchmarking of social security systems in a range
of countries considered the Department to be at the forefront of
measuring welfare loss and understanding the problems. Measurement
has also improved and estimates are now measured to the nearest
£0.1 billion.
Protecting the integrity of the benefits system is at the heart
of many of the Department’s activities such as regular interviews
with jobseekers, medical examinations of people claiming disability
and incapacity benefits and checks at the outset of a benefit
claim. These activities are part of a range of initiatives to
eradicate all types of irregularity, including customer and
official error.
More specifically, the Department has developed a series of
initiatives to tackle benefit fraud. The National Audit Office
examined six of the most important counter-fraud activities to
examine their cost effectiveness. In total, in 2006-07, we estimate
these specific initiatives cost the Department £154 million to
operate and identified an estimated £106 million of benefits which
had been overpaid as a result of fraud.
These calculations do not take account of the deterrent or
benefit of stopping the fraud continuing, both of which could be
substantial but which are very difficult to quantify. This
suggests, using this particular measure, that the Department is
currently spending £1.50 to identify £1 of overpayments. This does
not mean that these activities are not worth continuing with but
does provide the Department with a baseline by which further
improvements can be measured.
Despite the good progress made in recent years, the National
Audit Office makes a number of recommendations to the Department to
enhance its efforts to tackle fraud. Management information needs
improving to enable the Department to assess the cost effectiveness
of different counter fraud approaches. Despite the progress made
since we last reported, the Department is still unable to assess
fully the costs and benefits of its different counter-fraud
initiatives.
By comparing known costs and benefits, the National Audit Office
has found that some are more cost effective than others. For
example, based on the value of overpayments identified, cases of
suspected fraud identified through the Department’s data matching
service are more cost effective than those generated by the
hotline, identifying on average £24 per £1 spent compared with £16
overpayments identified per £1 spent on the hotline.
In April 2006, the Department introduced a new approach,
Customer Compliance, to investigate low level frauds, enabling the
existing fraud investigation service to focus on higher value,
criminal fraud cases. Whilst early indications suggest that
Customer Compliance – a relatively new intervention - is not yet
cost effective and recovered only £0.62 for every £1 spent in its
first year, stopping further incorrect benefit payments as a result
of this activity saves £5.25 million per week. Recent evidence
suggests that performance with this approach is improving.
In 2006-07, the Department recovered £22 million of fraudulent
overpayments. The Department is subject to regulations that
prescribe the amount of money and the circumstances in which it can
be recovered from customers still in receipt of benefit. However,
the National Audit Office recommend the Department should consider
setting appropriate targets for overpayment recovery from fraud
cases where customers are no longer on benefit.
Different parts of the Department deliver different stages of
counter-fraud work, such as referrals, investigations and
prosecutions. Although one stage of the process leads to the next,
the different parts of the Department do not operate in a fully
streamlined way. This can cause delays in investigating a case. The
Department hopes to improve case management with its new IT system,
FRAIMS, but this has been delayed and full roll out is now not
expected until March 2008.
Preventing fraud from entering the benefits system in the first
place is a key element of the Department’s counter-fraud strategy.
It is piloting new technologies such as IT-enabled data matching
and voice risk analysis to help prevent fraud at the outset of a
claim.
Sir John Bourn, head of the National Audit Office, said
today:
“The Department for Work and Pensions has made tackling
benefit fraud a priority and has made good progress in reducing
fraud, which represents a substantial achievement by its staff. It
is also ahead of other comparable countries in its measurement and
understanding of benefit fraud.
“The Department’s specific counter-fraud activities cost
£154 million during 2006-07 and identified £106 million of overpaid
benefits. Although some of the Department’s initiatives lead to
earlier interception of overpayments and may deter potential
fraudsters, I believe the Department could do more to determine
whether its activities are cost effective.”
Notes for Editors:
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Press notices and reports are available from
the date of publication on the NAO website, which is at
www.nao.org.uk. Hard copies can be obtained from The Stationery
Office on 0845 702 3474.
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The Comptroller and Auditor General, Sir
John Bourn, is the head of the National Audit Office which employs
some 850 staff. He and the NAO are totally independent of
Government. He certifies the accounts of all Government departments
and a wide range of other public sector bodies; and he has
statutory authority to report to Parliament on the economy,
efficiency and effectiveness with which departments and other
bodies have used their resources.
Press Notice 03/08
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