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The Department for Work and Pensions have made good progress in tackling benefit fraud and estimating the level of fraud and error in key benefits, according to the National Audit Office. By March 2002 the Department had cut the estimated level of fraud and error in Income Support and Jobseeker’s Allowance by 24 per cent over their 1997-98 baseline, outperforming their target of a 10 per cent reduction. More needs to be done however, as the rate at which the level of loss is reduced slowed in 2001-02, and current performance suggests that meeting future fraud reduction targets remains challenging.

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Head of the NAO, Sir John Bourn today reported to Parliament that benefit fraud costs an estimated £2 billion a year. In 1999, the Department developed a strategy to tackle benefit fraud with the aim of getting benefit payments correct from the start, ensure they are adjusted as customers’ circumstances change, detect when payments go wrong and take prompt action to correct them, with appropriate penalties to prevent a recurrence.

The Department carry out checks on all new benefit claims before they are approved for payment and make additional checks on higher risk Income Support and Jobseeker’s Allowance benefit claims. In 2001-02, 1.1 million of such claims were subject to additional checks, a reduction of 20 per cent from the year before. The Department have gradually improved the targeting of these checks. Around one in six checks resulted in error being identified. Performance varies significantly between regions. Bringing the performance of all regions up to those with the higher returns in 2001-02 might have increased the total weekly reduction in wrongly paid benefit identified by such checks by up to a further 22 per cent.

In 2001-02, the Department accepted 390,000 cases of suspected fraud for investigation, with around 161,000 investigations resulting in an adjustment to benefit and/or identification of overpayment. The aggregate weekly reduction in benefits paid, as a result, was around £5.5 million. But there was a reduction of around 12 per cent in the number of cases accepted for investigation from 2001 to 2002, partly because of a desire by regions to investigate only those cases based on better quality intelligence. This has led to a reduction in the overall value of fraud detected. The reduction in checks and investigations may jeopardise further progress towards the Department’s target to reduce losses from fraud and error.

High standards of investigation are necessary to ensure that people suspected of fraud are treated fairly and that the evidence found is enough to caution, penalise or prosecute fraudsters and to stop the fraud. The Department are working to achieve consistent high standards across regions and to tackle the highly variable quality across local authorities. They have also set performance standards and allocated additional funding for local authorities to help improve administration of Housing Benefit and reduce losses.

The Department also have a target, from April 2003, to cut losses on Housing Benefit by 25 per cent by 2006. However they will not have an accurate estimate of the level of Housing Benefit fraud and error until late 2003 owing to problems and delays in measuring the loss. This leaves uncertainty over the Department’s ability to meet the target.

The NAO and the Department agree the need for good practices to be shared. This includes fraud investigators in the Department and in local authorities working effectively together and sharing data; and the need to develop specialist staff skills and use local knowledge and experience in selecting benefit claims for further checks. Since 2001 the Department have worked jointly with Inland Revenue and HM Customs and Excise to pursue fraud in the shadow economy, with encouraging results.

Where a fraud is detected, the Department and local authorities seek to recover the full amount claimed fraudulently and to stop or reduce the benefit paid. One in seven frauds detected by the Department also leads to a caution, fine or prosecution of the benefit customer. The Department should carry out further research into the deterrent effects of these different types of sanction. Almost all cases brought to prosecution by the Department lead to a conviction for fraud. In 2001-02, over 11,000 people were convicted and around 650 fraudsters were imprisoned.

In 2001-02, when the Department introduced an incentive payment of £2,000 for each successful prosecution and made professional training available, local authorities brought around 1,700 prosecutions for Housing Benefit fraud, treble the number in 1998-99.

The Department have embarked on a long term publicity campaign to change people’s attitudes to benefit fraud, by stressing to potential fraudsters the likelihood of being caught. An independent evaluation of the campaign, commissioned by the Department, found that the results were encouraging.

"The Department have a set of programmes that are designed to make fraud more difficult to commit, increase deterrence, increase the probability of frauds being detected and have increased the penalties for committing fraud. These programmes have produced some good results but more needs to be done to maintain progress. Amongst other actions the Department should continue to concentrate on areas of higher risk, address the decline in the fraud prevention and investigative activity, and evaluate the deterrent effect of the different sanctions available."

Sir John

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