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Head of the National Audit Office Sir John Bourn has qualified his audit opinion on the Department for Work and Pensions’ Resource Accounts for 2001-2002 because of significant levels of estimated fraud and error in welfare benefits.

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As much as £3 billion may have been lost from benefit payments in 2001-2002, according to the Department’s estimates. Some £2 billion of this is the result of fraud while error, both by customers and officials, accounts for a further £1 billion. The total of £3 billion constitutes some 2.8 per cent of the gross expenditure recorded in the Department’s resource accounts. Sir John has indicated to the Department that, to avoid qualification in future, it would have to reduce the level of estimated fraud and error to below one per cent of gross expenditure (equivalent to just over £1 billion in 2001-2002).

Losses from the two benefits most vulnerable to fraud and error, Income Support and Jobseeker’s Allowance, were an estimated £1.15 billion in 2001-2002 (6.8 per cent of expenditure on the two benefits), compared with £1.38 billion (9 per cent of expenditure) in 1997-98 when the Department started to measure losses on a continuous basis. This reduction exceeds the Department’s target of reducing the percentage loss to 8.1 per cent by March 2002.

A new target set in the 2002 spending review is to reduce the level of loss in Income Support and Jobseeker’s Allowance to 5.2 per cent of expenditure on the two benefits, by March 2006. To meet this target the Department would have to reduce estimated losses from fraud and error to around £640 million (at 2001-2002 levels of expenditure).

Sir John has also qualified the accounts on the grounds that there are limitations in the evidence available to him to support certain significant debtor and creditor balances.

"It is of the highest importance that money which Parliament has made available for welfare benefits is paid accurately only to those people who have proper entitlement and are in real need. Although the Department has taken significant steps to reduce the level of estimated fraud and error in recent years, the scale of losses remains substantial at £3 billion each year. The Department face a considerable challenge in reducing these losses further to an acceptable level."

Sir John


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