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.

“The value of fraud and error in benefit spending is a longstanding and costly issue for the Department. I am concerned that this has reached its highest rate since the current estimation method was introduced, and that the Department expects overpayments to rise even further.

“I would like to see the Department make better use of its data to identify misreporting of benefit income and eradicate this cause of overpayments and underpayments. It should also work to understand the reasons for high fraud and error rates for Universal Credit, and explore how it can help PIP claimants provide accurate and timely information so that they are not underpaid their benefits.”

Gareth Davies, the Comptroller and Auditor General

Read the full report

Department for Work and Pensions annual report and accounts 2018-19

Notes for editors

  1. The Department estimates the level of fraud and error overpayments and underpayments in benefits by reviewing a sample of claimants’ cases. For some benefits it does this every year, other benefits are only considered periodically and earlier estimates of fraud and error in those benefits are rolled forward.
  2. The Department’s accounts have been qualified every year since 1988-89, due to a material level of irregular expenditure where fraud and error leads to overpayments and underpayments of benefits.
  3. Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
  4. The National Audit Office (NAO) helps Parliament hold government to account for the way it spends public money. It is independent of government and the civil service. The Comptroller and Auditor General (C&AG), Gareth Davies, is an Officer of the House of Commons and leads the NAO. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether government is delivering value for money on behalf of the public, concluding on whether resources have been used efficiently, effectively and with economy. The NAO identifies ways that government can make better use of public money to improve people's lives. It measures this impact annually. In 2018 the NAO's work led to a positive financial impact through reduced costs, improved service delivery, or other benefits to citizens, of £539 million.

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