Benefit overpayments are at their highest ever estimated rate, and the quick response and focus on ensuring prompt payments for new benefit claimants during the COVID-19 pandemic means fraud and error are likely to further increase.1
Excluding State Pension, where the level of fraud and error is very low, the estimated level of benefit overpayments increased to 4.8% (£4.5 billion) from 4.4% (£3.7 billion) in 2018-19. For Universal Credit, the estimated rate of overpayments increased from 8.7% to 9.4%, which is the highest recorded rate for any benefit other than Tax Credits.
The Comptroller and Auditor General of the National Audit Office, Gareth Davies, has qualified his opinion on the regularity of the Department for Work and Pensions’ 2019-20 financial statements due to this level of fraud and error. This is the 32nd year that the DWP’s accounts have received a qualified regularity opinion on this basis.
Benefit payments are susceptible to both deliberate fraud and unintended error by claimants and the DWP. Overpayments increase costs for taxpayers, and when the DWP recovers overpayments, this can lead to problems for claimants who face deductions from their income. Underpayments can mean that households do not get the support they are entitled to.
The most common cause of fraud and error is incorrectly reported income, which led to £1.4 billion of overpayments and £350 million of underpayments in 2019-20. People incorrectly reporting their savings is now the second most common cause of fraud and error, at a value of £910 million.
The DWP responded quickly to the large increase in new benefit claims during the COVID-19 pandemic,2 redeploying staff and relaxing controls to allow it to focus on ensuring that claimants got the money to which they are entitled.3 The DWP recognises that these actions are likely to increase fraud and error in 2020-21; staff referred 143,000 suspicious cases for investigation between 16 March and 5 June. The impact of these changes to controls will provide DWP with valuable insight to support future decision making on tackling fraud and error.
Due to COVID-19, the DWP anticipates that it will not be able to review cases to produce an estimate of fraud and error in 2020-21 in the usual way. Visits cannot take place to support reviews and staff have been temporarily allocated to higher priority work. The DWP will need to determine how else it can assess fraud and error to ensure it remains accountable to Parliament for its performance.
As a priority, the DWP should set out its plans to reverse the temporary changes made to the administration of benefits in response to COVID-19, and provide an assessment of the impact of these changes on the level of fraud and error. It should also clarify how it will measure fraud and error for 2020-21 and in the longer term. Looking further ahead, it should set annual fraud and error targets by individual benefit so that it can demonstrate the progress of its initiatives.