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Head of the National Audit Office Sir John Bourn has today reported to Parliament that he is qualifying his opinion on the accounts of the Department for Work and Pensions. This is because of substantial levels of estimated losses from fraud and error in benefit payments and material uncertainties about the level of debt resulting from the overpayment of customers.

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Sir John has reported that the amount lost from payments in all benefits in 2005-06 because of fraud and error is approximately £2.7 billion, representing 2.2 per cent of the DWP’s total expenditure in 2005-06 of £124.2 billion.

This is the seventeenth year in which the Department’s accounts were qualified. However, Sir John was pleased to report real progress towards removing or tackling the qualifications which have been made to the Department’s account in recent years. Two of the four qualifications which were reported last year have not been repeated as a result of improved focus and effort by the Department.

The establishment of the Official Error Taskforce by the Permanent Secretary, which is helping to drive down levels of fraud and error in the Department’s payment of benefits, and the real determination within the Department to tackle and seek to resolve the causes of the longstanding qualifications on the Department’s accounts, have also been welcomed.

Regarding fraud, the DWP estimates there was a £200 million reduction in losses in relation to Income Support, Jobseekers Allowance and Housing Benefit. In respect of error, initiatives are underway to target the most significant causes of officials’ mistakes regarding Income Support, Jobseekers allowance, Pension Credit and Disability Living Allowance, which are estimated to account for some 60 per cent of the total amount of loss caused by official error in these benefits.

The DWP is also working to strengthen controls on customer overpayments and to improve recoveries of the losses. New systems rolled out in 2005-06 will help the Department track and thereby recover identified customer overpayment debts. Currently, a significant number of potential overpayments are delayed in their recovery by a combination of system backlogs and poor debt referral processes. From 2007-08, chief executives from each departmental Agency will be responsible for ensuring timely referral of overpayments debtors to a centralised Debt Management function for action.

Although challenges remain, when compared to the government departments in other countries tackling this problem, the DWP is at the forefront. It has a good understanding of the scale of the problems faced and has focused activities to combat them.

“The Department for Work and Pensions has shown a clear determination to resolve these long standing problems and early signs suggest some real reductions in the volume of fraud and error can be expected. It is always encouraging to see such progress, but the scale of the challenge ahead remains considerable.

“The fact is that, in 2005-06, an estimated £2.7 billion was paid out to people who weren’t entitled to the money.”

Sir John Bourn


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