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National Insurance Fund Account 1999-2000

The National Audit Office report that there were losses amounting to around £400 million in the benefits paid from the National Insurance Fund in 1999-2000, by the Department of Social Security through the Benefits Agency. This has arisen from errors by officials in making benefit awards, fraudulent benefit claims and the fraudulent encashment of order books and girocheques. As a result, the head of the National Audit Office Sir John Bourn has qualified his audit opinion on the National Insurance Fund account, for the 13th consecutive year.

According to estimates produced by the Department of Social Security, which are comparable with the National Audit Office’s own findings, most of the losses can be attributed to.

  • Errors by officials in assessing Incapacity Benefit amounting to £252 million, 3.6 per cent of expenditure on this benefit. Of this, £189 million is estimated to have arisen from underpayments. In July 2001 the Department expect to publish their first ever estimate of losses in this benefit from fraud and error by claimants.
  • Losses from the fraudulent encashment of order books and girocheques which could be as much as £59 million.
  • Losses from Jobseeker’s Allowance (contribution based) from errors by officials, customers and fraud amounting to £54 million, 12 per cent of the expenditure on this benefit (compared to £73 million, 16 per cent of expenditure, in 1998-99).
  • Losses of Retirement Pensions and Widows’ Benefit from errors by officials amounting to £32 million.

In his report, Sir John notes the significant progress made by the Inland Revenue with the new National Insurance Recording System (NIRS2) but notes the backlog of work that has arisen from previous delays and phased implementation. The Inland Revenue have introduced a number of initiatives to support recovery, including a fundamental review of the way that arrears of work are prioritised and dealt with, focusing more attention on current work to prevent new arrears from building up. The Inland Revenue expect to clear the backlog of National Insurance work and to return to normal working in most areas by October 2001.

" The scale of fraud and error in benefits paid out of the National Insurance Fund is substantial and I have therefore qualified my audit opinion. However I note the significant progress made with the new National Insurance Recording System. I look forward to the Inland Revenue clearing the backlog of work that has built up and returning to normal working in most areas by October 2001, as expected."

Sir John

Notes for Editors

 

In 1999-2000, £50,025 million was paid out of the National Insurance Fund. This included £37,705 million on Retirement Pension and Widow’s Benefit, £6,894 million on Incapacity Benefit and £462 million on contribution based Jobseeker’s Allowance. Receipts included £50,592 million from National Insurance contributions.

 

On April 1999, the Inland Revenue assumed responsibility from the Department of Social Security for managing the Fund, including the new National Insurance Recording System, known as NIRS2. This system records details of individuals’ National Insurance contributions, calculates contributory benefits, provides data to other Government Agencies and pays age related contribution rebates to occupational and personal pension holders. The Inland Revenue are responsible for collecting National Insurance contributions; the Department of Social Security retain responsibility for benefit payments through the Benefits Agency.

 

Press notices and reports are available from the date of publication on the NAO website at https://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 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: 33/01