Press Release - Department for Work and Pensions Resource
Accounts 2003-2004
18 January 2005
Head of the NAO Sir John Bourn reported to Parliament today that
he has qualified his opinion on the accounts of the Department for
Work and Pensions. This is because of substantial levels of
estimated losses from fraud and error in benefit expenditure, a
significant limitation in the evidence made available to the NAO
during the audit of expenditure on Incapacity Benefit, and material
uncertainties over the completeness, existence and accuracy of
amounts recorded in the accounts for benefit overpayment
debtors.
However, as a result of work carried out by the Department to
improve the accuracy of certain creditor balances, Sir John has
been able to lift one long-standing qualification on this aspect of
the accounts.
Sir John reports that, according to the Department’s own
estimate, the amount lost from payments in all benefits in 2003-04
because of fraud and error is approximately £3 billion. This is the
same estimate as reported in 2002-03 and 2001-02 and represents
some 2.8 per cent of the £109 billion of gross expenditure by the
Department on a wide range of benefits, employment programmes and
associated administration costs.
Sir John has qualified the Department’s accounts and those of
the former Department of Social Security for 15 years running
because of the level of estimated fraud and error in expenditure on
welfare benefits.
The two benefits with the highest risk of fraud and error are
Income Support and Jobseeker’s Allowance. The Department estimates
that overpayments to customers of working age in the year to 31
March 2004 from fraud and error amounted to £610 million (5.8 per
cent of expenditure on that benefit) for Income Support and £230
million for Jobseeker’s Allowance (9.0 per cent of expenditure).
This makes a total loss of £840 million in these two benefits in
2003-2004, compared to £1220 million in the year to September 1998
and £920 million in the year to 31 March 2003.
These figures show a combined loss in 2003-2004 of 6.4 per cent
from the expenditure on these two benefits, which is a 38 per cent
reduction from a baseline of 10.4 per cent of losses in 2002. This
betters the target that the Government had set the Department of a
reduction of 33 per cent by 31 March 2004. (One percentage point of
the reduction results from a change in the methodology for
recording fraud an error.)
Levels of fraud and error in Housing Benefit are also a concern.
The results of a new continuous Housing Benefit review indicate
that an estimated £650 million (5.3 per cent) of Housing Benefit
expenditure was overpaid by local authorities on behalf of the
Department in the twelve months to September 2003 owing to fraud
and error.
The significant limitation on the evidence made available to the
NAO during their audit of Incapacity Benefit arose because the
Department was unable to locate the supporting papers in 106 of the
800 cases that the NAO had sought to examine to check that
eligibility conditions were met and accurate payments had been
made.
Sir John Bourn said today:
"I welcome the Department’s achievement in meeting the
Government’s target to reduce fraud and error in Income Support and
Jobseeker’s Allowance. However, in 2003-2004, as a result of fraud
and error, an estimated £3 billion of welfare benefit was paid to
people who were not properly entitled to the money. Therefore the
challenges the Department faces in reducing the scale of fraud and
error across the benefit system to an acceptable level still remain
very large indeed."
Notes for Editors:
- In 2003-04, the Department for Work and Pensions was
responsible for gross expenditure amounting to £109 billion. Of
this total Income Support represents £10.3 billion, Jobseeker’s
Allowance £2.6 billion and Incapacity Benefit £6.7 billion. Housing
and Council Tax Benefit expenditure paid by local authorities on
behalf of the Department amounts to £9.7 billion.
- The estimated £3 billion of benefit payments lost in 2003-2004
through fraud and error includes not only the losses in the
benefits mentioned in the report, but also losses in other benefits
such as Retirement Pension (expenditure £46.5 billion) , Attendance
Allowance (expenditure £3.4 billion) and Disability Living
Allowance (expenditure £7.5 billion). Because of the nature of the
Department’s estimates, based on rolling programmes that produce
estimates subject to statistical uncertainties and snapshot reviews
that are up to six years old, the £3 billion is not a precise
figure but is the best estimate available at present.
- 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.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 800 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 05/05
All enquiries to Barry Lester, NAO Press Office:
Tel: 020 7798 7937
Mobile: 07748 181692