INTRODUCTION
AND SUMMARY
OF CONCLUSIONS
AND RECOMMENDATIONS
1. Housing Benefit provides financial help
to tenants with the costs of their rent, and to boarders and those
in hostels with their accommodation charges. Some 4.7 million
people in Great Britain receive Housing Benefit and in 1996-97
the cost was £11.5 billion, an increase of over 50 per cent
in real terms since 1991-92.[1]
2. The Department of Social Security (the
Department) are responsible for policy, and for setting the regulations
and rates of benefit. The Benefits Agency administer and pay Income
Support and Jobseeker's Allowance which are closely linked to
Housing Benefit. Local authorities administer Housing Benefit,
handling and paying claims and responding to the Department's
anti-fraud measures.[2]
The Department estimated in 1996 that £905 million each year
might be lost in Housing Benefit fraud; others, for example the
Social Security Committee have estimated that it could be substantially
higher, perhaps as much as £2 billion.[3]
3. Against this background, the Committee
considered a report by the Comptroller and Auditor General[4]
on the Department's measures to combat Housing Benefit fraud and
a memorandum from the Department[5]
which updated some of the information, for example on the amounts
of benefit and numbers receiving it. The Committee examined the
scale and nature of Housing Benefit fraud, what the Department
are doing to tackle it, and the level of cooperation between the
Benefits Agency and local authorities in combating fraud.
4. The waste of public money on Housing
Benefit fraud is massive and inexcusable, and it has gone on for
far too long. At more than £900 million each year it represents
a twelfth of all the Housing Benefit paid out each year. It is
now seven years since the Department gave undertakings to the
Committee of Public Accounts to tackle fraud and abuse in this
benefit. On the evidence of our examination, we have serious doubts
about the strength of the leadership displayed by the Department
over this period, and their commitment to reduce this enormous
drain on taxpayers' money.
5. It is not good enough that they should
seek to excuse their lack of progress by referring to all the
difficulties they face, by pointing to the responsibilities and
performance of local authorities, or by resting on the improvements
made in fraud detection. In our view, the Department are too much
caught up with the complexities of the current arrangements: they
need urgently to develop a determination to meet the housing costs
of those in need without such massive losses to the taxpayer.
We expect the Department to take a much stronger lead in addressing
the key messages which emerged from the Comptroller and Auditor
General's report. They need to:
- make the benefit simpler to understand and administer;
- take steps to raise the standards of administration
by local authorities;
- remove barriers to co-operation between the Benefits
Agency and local authorities; and
- reward effective fraud prevention systems in
local authorities.
6. In addition, the Department and the Benefits
Agency need to take urgent action to reduce the substantial levels
of fraud and error in Housing Benefit which arise because of their
failure properly to administer Income Support and Jobseeker's
Allowance. We have recently examined the Agency's control of these
benefits and will be reporting separately on what needs to be
done.
7. Our more specific conclusions and recommendations
which underpin these overall conclusions are as follows:
on the scale and nature of Housing Benefit fraud
(i) It is totally unacceptable that seven years
after we last looked at this issue, Housing Benefit fraud should
exceed £900 million, and the Department still do not have
information to show whether fraud is increasing, or all the information
they need on the types of fraud, including landlord fraud, and
variations at regional and local level. The absence of reliable
information must cast doubt over the decisions the Department
have taken to invest in anti-fraud work and over the achievements
they have claimed (paragraph 21).
(ii) The Department expect to have better information
once the second Benefit Review is completed shortly, and they
are also looking at the feasibility of measuring changes in the
levels of fraud at local level over time, with a view to setting
targets for reductions and providing incentives to deter and prevent
fraud. We are concerned that this essential work is so late, and
that the final results of the local reviews will not be known
until March 2000. In our view, the Department must make faster
progress on this important issue (paragraph 22).
on what the Department are doing to tackle fraud
(iii) We are worried at the Department's uncertainty
about whether the new powers contained in the Social Security
Administration (Fraud) Act 1997 will be enough to enable them
to deal effectively with Housing Benefit fraud. This uncertainty
reinforces our concern that the Department do not have sufficient
grip of what is needed. We expect them to monitor closely the
impact of these new measures, and to take decisive action should
further action be necessary (paragraph 64).
(iv) Those designing benefit systems have to
strike a balance between addressing different needs equitably
and fairly on the one hand and simplicity and security on the
other. However the present system does not find the right balance.
There are 500 pages of guidelines as well as over 60 assorted
deductions to understand. This complexity exposes genuine claimants
to confusion, inadvertent error by omission, and the risk of investigation;
confuses administrators leading to high levels of errors in payment;
and provides a breeding ground for fraud. In these circumstances,
the system can be neither fair nor secure, and the Department
need to take a fundamental look at the scheme during their current
spending review (paragraph 65).
(v) A significant level of fraud in Housing
Benefit arises because of the failure by the Department and the
Benefits Agency properly to control claims for Income Support
and Jobseeker's Allowance. In effect, this failure provides a
gateway to fraud in Housing Benefit. The Committee of Public Accounts
have previously expressed serious concerns about fraud and error
on Income Support, and we have recently examined this issue again
and will report separately on what more needs to be done (paragraph
66).
(vi) The Department's main measure for increasing
fraud detection is an incentives and penalties scheme which cost
£43.6 million in subsidies to local authorities in 1996-97.
This scheme has increased the resources devoted to fraud detection,
but contains perverse incentives which encourage inflated claims
of savings achieved by authorities and do little to encourage
authorities to prevent or deter fraud (paragraph 67).
(vii) There has also been overstatement of savings
achieved by the Benefits Agency. The Department are looking at
how the system could be improved, and are searching for a more
accurate way of assessing savings from anti-fraud work on Housing
Benefit. It is worrying to note their lack of confidence that
they will find a solution (paragraph 67).
(viii) Accurate reporting of savings achieved
is essential in assessing the success of, and returns on investment
in, anti-fraud work, and the rewards to be paid to local authorities
and to individuals in the Benefits Agency. We therefore look to
the Department to secure more robust measurement, and independent
validation, of savings reported (paragraph 68).
(ix) Investment in anti-fraud work can be very
cost effective, and the Department have secured extra funding
for specific initiatives on a `spend to save' basis. In our view,
increased investment may be justified, but there must be greater
assurance over the accuracy of savings achieved (paragraph 68).
(x) It is disturbing that innocent people may
be suffering as a result of over-zealous anti-fraud stategies.
Those who commit fraud should be dealt with effectively, but the
conduct of fraud investigations should also be properly controlled
to inspire public confidence that suspects are treated fairly
and that innocent people do not suffer. We expect the Department
to take the lead in drawing up a code of conduct for fraud investigations
(paragraph 69).
(xi) The measures introduced by the Department
have been effective in increasing the amount of fraud detected.
But they have not helped to prevent fraud getting into the system
in the first place. Poor administration in many local authorities
is a contributory factor in the amount of fraud, and the Department
must bear a large share of the responsibility for letting this
happen. The Department are now seeking to improve Housing Benefit
administration by introducing the verification framework, which
will give authorities guidance on the checks needed to ensure
that claims are correct. This is a step in the right direction
(paragraph 70).
(xii) We are surprised, however, that implementation
of the framework is to be on a voluntary basis. If this remains
the case, the Department will have lost the opportunity to drive
up standards and ensure consistency across the country. In our
view, compliance with the new framework should be mandatory (paragraph
70).
(xiii) The Department are placing considerable
emphasis on the newly established Benefits Fraud Inspectorate
to drive up standards of administration and anti-fraud work. Inspections
of individual local authorities' performance will also cover,
for example, authorities' targeting of anti-fraud work, prosecution
policies and weekly benefit savings claimed. The Inspectorate's
reports to the Secretary of State will also be published. We welcome
this initiative (paragraph 71).
(xiv) Fear of detection can be an effective
deterrent against committing fraud, but only if it is backed up
by sufficient prosecutions and effective penalties. Yet the level
of prosecutions by local authorities is incredibly low, at under
one per cent of detected frauds, and suspected fraudsters have
a 99 per cent chance of getting off `scot-free'. The Department
need to provide a stronger lead in identifying and resolving the
obstacles faced by local authorities, in helping them to implement
cost- effective prosecution policies, and by looking at regional
variations in prosecution policy (paragraph 72).
(xv) It is unacceptable that authorities often
do not seek repayments from people who have obtained benefit fraudulently.
We remain unconvinced that local authority performance in recovering
overpayments is as good as it should be. The Department have introduced
administrative penalties as an alternative to prosecution. But
the effectiveness of the new penalties as a deterrent will be
diminished unless authorities make more concerted and consistent
efforts to recover overpayments. The Department should examine
ways of making this happen (paragraph 73).
(xvi) The Department have introduced a number
of new measures to combat organised and landlord fraud, including
the London Organised Fraud Investigation Team. We expect them
to review the success of these initiatives to ensure they are
securing the desired impact, and to assess the benefits of extending
the specialist investigation of landlord and organised fraud to
other parts of the country (paragraph 74).
on co-operation between the Benefits Agency and
Local Authorities
(xvii) Close liaison between the Benefits Agency
and local authorities is essential if Housing Benefit fraud is
to be tackled effectively. Service level agreements between the
Benefits Agency and local authorities are in principle a good
idea but we consider it extremely unsatisfactory that those agreements
have not been monitored and enforced. If the current arrangements
for administering Housing Benefit are to continue, it is essential
that the service level agreements are updated and then made to
work (paragraph 84).
(xviii) There has also been insufficient involvement
of local authorities in the Benefits Agency's local "Spotlight
on Benefit Cheats" anti-fraud drives despite the substantial
returns they offer. The Benefits Agency must take primary responsibility
for these failures, and we expect to see the current initiatives
to improve co-operation bear fruit quickly (paragraph 85).
(xix) The "finders keepers" system
requires the Benefits Agency to inform local authorities of related
Income Support fraud in cases where the authority has detected
Housing Benefit fraud, so that the authority may claim savings
in respect of both benefits. This arrangement encourages competition
not co-operation. We await with interest the results of the Benefits
Agency's pilots of alternatives (paragraph 86).
(xx) The effective delivery of Housing Benefit
currently depends on the exchange of over 20 million pieces of
paper between local authorities and the Benefits Agency. This
is incredible in this computer age. While we recognise the complexity
of the Department's computer systems, we view with despair their
view of the state of their own systems and that close integration
with those of local authorities is a distant prospect. This makes
it even more important that other solutions to help the electronic
exchange of data are successful (paragraph 87).
(xxi) One of these solutions is the installation
of Remote Access Terminals in each local authority. It is unacceptable
that more than four years since first piloting these terminals,
further piloting is only now underway with the aim of making terminals
available nationally from April 1998. On the presumption that
these terminals are operating satisfactorily, we expect the Department
to roll them out to all authorities without further delay (paragraph
88).
8. We intend to track closely the progress
made by the Department, the Benefits Agency and local authorities,
and to take further evidence if progress remains slow or inadequate.
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