MPs hit at efforts over benefit errors

The amount of benefit lost through overpayments by error has almost doubled to £2bn over the past five years, easily exceeding the amount saved from reducing benefit fraud over the same period, according to MPs.

A report published on Tuesday by the parliamentary public accounts committee criticises benefit recovery by the Department for Work and Pensions after frauds were uncovered. It warns government-imposed staff cuts will constrain the “ability to identify fraud and recover overpayments”. MPs call for more fraudsters to be prosecuted, better debt recovery and targeted training for benefit staff to cut errors.

The DWP was required by March this year to axe 30,000 jobs to save £960m a year as part of a broader efficiency drive by government. According to the committee, the department has lost 17 per cent of prosecution staff since 2003. The DWP, however, told MPs it was “compensating for the loss of staff by making more effective use of its counter-fraud resources than ever before”.

The committee welcomed the fall in reported annual levels of fraud from £2bn in 2001-02 to £800m in 2006-07, but said £700m of the reduction was due to a department decision that overpayments of disability living allowance and related benefits “should no longer be considered fraudulent”.

Edward Leigh, committee chairman, said: “Fraud is one thing, error another – although determining which is which in the case of claimants can be difficult. The estimated amount of benefit lost each year to error by customers and officials has nearly doubled over five years to almost £2bn a year. This is not acceptable.

“The DWP must direct its training and compliance checks on those local offices and benefits which prove to have the highest error rates.” The complexity of benefit schemes encourages errors, says the report.

Mr Leigh welcomed the fact that the department was “working more closely with the police and local authorities to frustrate fraudsters” but said there were areas for improvement. Only £22m out of £339m “known fraud debt” was recovered in 2006-07, and only 7,500 fraud cases went to court out of 200,000 “where the department considered there to be a high probability of prosecution”.

Mr Leigh said: “Where it [the DWP] detects attacks by organised crime it must take a firm and co-ordinated approach. It must get a lot better at tracking down and recovering fraud debt. It must get a firm understanding of the cost-effectiveness of its counter-fraud activities, otherwise it cannot know that it is targeting its resources to best effect. And it should increase the deterrent effect of its investigation work by taking a much higher proportion of cases of potential fraud to court.”