ANALYSIS OF THE ORIGINAL COSTINGS FOR THE BIP
Supplementary Memorandum submitted by Department of Social
Security (DLA 24A)
BENEFIT INTEGRITY PROJECT: BENEFIT SAVINGS
ASSUMPTIONS
INTRODUCTION
1. You asked for a breakdown of the savings assumptions made
in relation to the activity of the Benefit Integrity Project (BIP).
2. The Financial Statement and Budget Report for 1996 set
out the Government's financial plans over the following three
years, dealing with individual Department's expenditure plans
at quite a high level. Within the plans for the Department of
Social Security over this period is a specific spend-to-save package
funded through the Challenge Fund comprising a range of control
and security measures. One of these measures relates to activity
in Disability Living Allowance (DLA) against an investment of
£11.5 million in each of the three years 1997-98 to 1999-00.
3. Savings from the Benefit Integrity Project were originally
forecast at £20 million in 1997-98 and £30 million and
£28 million in the two subsequent years.
4. A savings line of £27 million/£40 million/£35
million was agreed as part of the 1996 public expenditure settlement,
including an assumed additional £7 million/£10 million/£7
million from enhanced fraud detection activity in DLA generally.
5. The most recent estimate of savings from BIP (which includes
any savings which might result from fraud detection) is £5
million for 1997-98 and £40 million in the two subsequent
years. An outline of the method to arrive at the two savings lines
for BIP is set out below.
The original estimate of savings
6. The original savings line assumed that 570 thousand cases
in receipt of Disability Living Allowance higher rate mobility
and higher rate care or higher rate mobility and middle rate care
would be targeted over a three year period, starting April 1997.
7. Average savings per case were assumed to be £24 per
week (in 1996-97 prices), with 20 per cent of cases being affected.
These assumptions were based on the results of the DLA Benefit
Review (published February 1997). This produced the following
savings line.
|
| 1997-98 | 1998-99
| 1999-00 |
|
| Total savings1, 2 |
£20 million | £30 million
| £28 million |
| | |
|
| Cases with changed award | 44,000
| 44,000 | 27,000 |
| | |
|
| Average reduction in DLA award before reviews and appeals3, 4
| £24 per wk | £25 per wk
| £25 per wk |
|
1 It was assumed that cases that have their award changed,
including renewals cases, would have remained on their original
award for 32 weeks. This assumption is common to all BA activity
costings. It is likely to be an overestimate for renewals, a proportion
of which would have had their award changed anyway, regardless
of BIP activity. But it is likely to be a significant underestimate
for non-renewal cases, with the average duration on the benefit
of higher rate mobility/higher rate care recipients estimated
to be around five years and higher rate mobility/middle rate care
recipients around nine years.
2 Savings have been allocated to year one (the year
in which the award was changed), year two and year three using
multipliers of 4/7, 2/7 and 1/7. This allocation, which originates
from calculations based on the research of benefit claim histories,
reflects the fact that the period for which original awards would
have remained in place in the absence of BIP activity will vary
from case to case (though it is assumed to average to 32 weeks),
to the extent that savings from some of the affected cases accrue
in year three. It also reflects the fact that the point in the
year when cases are examined will vary, so that the total savings
for individual cases will not always accrue to the current year.
The multipliers are also common to all BA activity costings.
3 A small additional saving was assumed to derive from
some individuals disallowed DLA losing their entitlement to income-related
benefit disability premiums.
4 No account was taken of the impact of reviews and
appeals following a change in award, nor of additional savings
from carers losing entitlement to ICA and former recipients of
higher rate mobility losing entitlement to free road tax.
The current estimate of savings
8. The most recent estimate of savings from BIP—included
in the Department's memorandum to the Social Security Select Committee—are
based on actual monitoring data to the end of December 1997.
9. The monitoring data shows, to that date, savings per case
at £39 per week, with 21 per cent of cases being affected.
But savings are significantly lower in the first year than forecast
as a result of a later than expected start and only (a projected)
60 thousand cases being looked at in the first year. The new savings
line is as follows:
| | |
|
| 1997-98 | 1998-99
| 1999-00 |
|
| Total savings1 2 |
£5 million | £40 million
| £40 million |
| Cases with changed award | 12,000
| 49,000 | 34,000 |
| Average reduction in DLA award before reviews and appeals3 4
| £39 per week | £41 per week
| £43 per week |
1 See footnote to above table.
2 See footnote to above table, except that a multiplier
of 3/7 rather than 4/7 has been used for the proportion of savings
from cases targeted in 1997-98 accruing to that year, and multipliers
of 3/3 and 1/7 have been used for savings accruing to subsequent
years. This reflects the fact that BIP started a part of the way
through 1997-98, and so a higher proportion of savings from cases
targeted in 1997-98 will feed into the following year than if
BIP had started in April 1997, as originally envisaged.
3 See footnote to above table.
4 No account has been taken as yet of the additional
savings from carers losing entitlement to ICA and former recipients
of higher rate mobility losing entitlement to free road tax. Nor
has any account been taken of the additional safeguard introduced
on 9 February on further evidence gathering, and the exclusion
of people over 65 from the project agreed in March. An assumption
has been included on the impact of subsequent reviews and appeals
on savings, based on earlier administrative work undertaken by
the BA looking at the end to end integrity of the administration
of DLA.
10. Estimated savings for the second and third years are
made on the assumption of anticipated BIP activity in year two
and that within the three year period the Project will have looked
at 410 thousand cases. This is well below the 570 thousand in
the original costing and now reflects the Benefit Agency's detailed
plans for the project drawn up last year—it now, for example,
excludes the review of recipients under the age of 16.
A further revision of the savings estimate for 1997-98 and
the two following years will be produced when all of the information
to the end of March has been received.
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