Benefit overpayments and underpayments are at their highest levels since 2005-6, when the Department for Work and Pensions (the Department) introduced its current method for estimating these payments.1
Excluding State Pension, where the level of fraud and error is very low, the estimated level of overpayments has increased to 4.6% (£4.0 billion) of related benefit spending (£86.6 billion), from 4.4% (£3.7 billion) in 2017-18. Underpayments have increased to an estimated 2.2% (£1.9 billion) of benefit spending, from 2.0% (£1.7 billion) in 2017-18. The Department expects the value of overpayments to continue to rise over the next six years, mainly due to the roll-out of Universal Credit.
The Comptroller and Auditor General of the National Audit Office, Gareth Davies, has therefore qualified his opinion on the regularity of the Department for Work and Pensions’ 2018-19 financial statements. This is the 31st year that the Department’s accounts have received a qualified opinion.2
Benefit payments are susceptible to both deliberate fraud and unintended error by claimants and the Department. When overpayments are recovered by the Department, this can lead to problems for claimants who face deductions from their income. Underpayments can mean households do not get the support they are entitled to.
The estimated overpayment rate for Universal Credit is 8.6%, which is the highest for any continuously measured benefit since Tax Credits in 2003-04. Claimants failing to declare their income and earnings correctly was the largest cause of overpayments across the Department’s benefits, including for Universal Credit where it accounts for 30% of overpayments.
Personal Independence Payment (PIP) has the highest level of underpayments, at 3.8% of expenditure. The primary cause of both overpayments and underpayments in PIP is claimants not reporting changes in functional need due to either deterioration or improvement in their medical condition.