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National Insurance Fund Account 1997-98

Sir John Bourn, head of the National Audit Office, today reported the results of his examination of the National Insurance Fund* account for 1997-98. He qualified his audit opinion on the account due to the level of benefit fraud and subsequent loss to the fund. He also reported on errors in jobseeker’s allowance, compliance with national insurance contribution legislation, management of contributions debt and the impact of delays in implementing the new national insurance recording system.

Sir John reports that the underlying level of confirmed or strongly suspected fraud in contribution-based jobseeker’s allowance was estimated to be some £46.9 million, and that fraudulent encashment of girocheques and order books could amount up to £64 million. Sir John also reports on the measures taken by the Benefits Agency to combat fraud. These included a special exercise to investigate employers colluding in benefit fraud, which resulted in savings of some £24.4 million in 1997-98.

Sir John’s records an improvement in errors in the payment of contributions-based jobseeker’s allowance, which were some £46 million (9.7 per cent) in 1997-98 compared with 10.2 per cent in 1996-97. Jobseeker’s allowance replaced unemployment benefit in October 1996 and is administered jointly by the Employment Service and the Benefits Agency.

Sir John also highlights the steps the Contribution Agency is taking to maximise the yield to the Fund by identifying underpayments, and notes that in 1997-98, the Agency identified £176 million in arrears of Class 1 national insurance contributions.

On Class 2 National Insurance contributions from the self-employed, Sir John reports that the Agency is continuing to experience difficulties in collecting debts. At 31 March 1998 contributors owed an estimated £513 million to the Fund and much of this had been outstanding for over a year. In addition, delays in implementing the new national insurance recording system increase the risk of incorrect payments; mean that the Agency will have to pay compensation to Personal Pension providers; and will require concerted action and increased costs to clear backlogs.

Notes for Editors

A full summary of the Report is attached to this press notice.

*The National Insurance Fund is financed by receipt of national insurance contributions and meets the cost of contributory benefit such as retirement pension, incapacity benefit and jobseeker’s allowance. The Department of Social Security have overall responsibility for the Fund. The Contributions Agency and the Inland Revenue are responsible for the collection of contributions and the Benefit Agency hold responsibility for the payment of most benefits.

The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office employing some 750 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.

PN: 3/99