The Department for Work and Pensions (DWP) has identified nearly 100,000 Universal Credit claimants that it suspects may have claimed an advance1 fraudulently, according to the National Audit Office (NAO). In total, these advances are worth an estimated £100-£150 million.
The DWP detected increased levels of suspected fraud soon after it first allowed people to apply for advances online in July 2018. Prior to this change, claimants could only apply for advances over the phone or in person.
The number of suspected fraudulent cases peaked at over 15,000 a month in July 2019 but then dropped significantly from September 2019, down to just over 2,000 a month by December 2019. This reduction followed the introduction of a requirement to attend a face-to-face interview before receiving an advance, which the DWP believes has been highly effective in combating fraud.
The DWP told the NAO that the primary objective of enabling online-only applications for advances in the first place was to alleviate hardship faced by claimants during the first assessment period (the five-week wait for their first Universal Credit payment). It also wanted to save an estimated £21 million a year by reducing the staff time involved in processing manual claims. The DWP told the NAO that it was aware of the risk of fraud when it decided to make advances available online. However, it could not provide any evidence that it had considered the risk of fraud when deciding to do so.
By December 2019 fraud investigators had taken an initial look at around a third of the almost 100,000 suspected cases of advances fraud. On this basis, the DWP suspects nearly all the almost 100,000 cases identified to be fraudulent. By the end of December 2019, the DWP had imposed £1 million of administrative penalties to over 4,000 individuals and six cases have resulted in a court sentence. The DWP continues to work through the remainder of the 100,000 cases. However, work by the NAO indicates there may well be nearly 50,000 additional suspicious cases, yet to be identified by DWP, worth up to an extra £74 million.
The DWP believes it will get back most of the estimated £100-£150 million. However, this recovery may take years and some of the debt may have to be written off. The DWP could not tell the NAO how many fraudulent advances are already being repaid or how quickly it will reclaim all the fraudulent advances. The DWP has promised that any genuine victim, who was deceived into making a Universal Credit claim or had their identity stolen, can have their legacy benefits restored and has identified 189 cases to be returned so far.
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Notes for editors
- Universal Credit claimants have to wait at least five weeks from making their claim to receiving their first payment while the DWP assesses their income and eligibility for the claim. The DWP acknowledges that waiting for the first payment "can be a challenge" for claimants, so it provides claimants with the option of an advance based on their estimated first payment. This is designed to act as an "interest free advance to those who face immediate, short-term financial need”, to be paid back from deductions to subsequent UC payments.
- 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.
- 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.