Supplementary memorandum submitted by
the Department for Work and Pensions (DWP)
Question 21: Royal
Mail "DO NOT REDIRECT"
I can confirm that 90% of local authorities
(366) currently use the "do not redirect" scheme run
by Royal Mail. Of those who do not, some have their own, similar
arrangements to identify or prevent redirection. We are currently
conducting an evaluation of the scheme, which will address its
benefits alongside the security risks in putting a marking on
an envelope which identifies it as containing a cheque. In the
light of that, we will be considering our approach to those authorities
that are not currently participating.
Question 29: Local Authority Performance
Housing and Council Tax Benefit administration
is a component of the Comprehensive Performance Assessment. Local
Authorities are judged against the performance standards which
encapsulate best practice in Housing Benefit management, including
fraud and error. A CPA of each single tier authority was undertaken
during the period MayOctober 2002 (115 LAs). A similar
exercise for all English District authorities will be carried
out between February 2003 and October 2004. The best and worst
performers in the Housing and Council Tax Benefit element are
North East Lincolnshire
City of London
Kensington & Chelsea
Newcastle upon Tyne
Redcar & Cleveland
Richmond upon Thames
Questions 36 and 37: costs arising under the Early Office Infrastructure
By November 2002 the Department for Work and Pensions had
installed 100,120 workstations (desktops and laptops) into the
ex-DSS estate along with the associated software, smart card readers,
printers, servers and switches.
The £156.7 million capital expenditure up to 30 November
2002 is broken down as follows:
|Network Switches||£10.7 million
These figures do not include installation costs.
Phase 2 of the EOI Programme began in January 2003 and will
be completed by 30 June 2004. This phase of the Programme includes
the rollout of EOI into the remaining areas of DWP, and upgrading
existing MES users.
Question 75: Benefit Fraud hotline figures
The following table provides information on the number of
successful prosecutions that result from hotline referrals.
|Year||Apr 2000-Mar 2001
||Apr 2001-Mar 2002|
|Number of referrals||145,488
|% of referrals investigated||22.8%
|Number of investigations||33,134
|% of investigations resulting in prosecution
|Other outcomes (additional to prosecution) *
|% of investigations resulting in other outcomes
* Other outcomes include cautions, penalties imposed
administratively and adjustments to benefit paid or payable.
Investigators receive leads to possible fraud ("fraud
referrals") from three main sources including the public,
some of whom use the hotline while others write or otherwise contact
us. The other two sources are data matching and from DWP frontline
staff. All are assessed against criteria that include the quality
of the referrals. Of all these sources the Hotline includes a
greater percentage of less credible allegations, indeed some allegations
relate to people who are not on in receipt of welfare benefits.
The number of prosecutions that result from allegations should
be seen against the background that in 2001-02 we investigated
61% of all fraud referrals and prosecuted 2.4% of those investigated.
Question 82: SAFE performance
The information requested is set out below.
1. Subsidy claimed by local authorities under the SAFE
scheme is shown for the first six months of the 2002-03 (April
to October 2002).
2. Subsidy claimed in quarters 3 and 4 will be likely
to be higher for a number of authorities. This is because some
authorities may wait until later quarters until claiming for all
their detected overpayments on their subsidy claim forms. The
estimated value of rewarded overpayments detected by local authorities
may therefore also be an underestimate for some LAs.
3. The value of overpayments rewarded under the scheme
will be less than the total value of fraud and error overpayments
detected by LAs. This is because overpayments with a weekly value
of less than £5 are not offered a reward under SAFE.
4. 44 authorities have claimed no rewards so far in 2002-03,
and are therefore recorded as finding no overpayments. These authorities
may, however, go on to claim subsidy under the scheme in later
quarters, once their detected overpayments are recorded on their
SAFE scheme data, Quarters 1 and 2 2002-03.
|Local Authority||Total subsidy claimed
||Estimated value of overpayments rewarded under SAFE
|BARROW IN FURNESS||£32,021
|BATH & NE SOMERSET||£0
|BRIGHTON & HOVE||£0
|CHESTER LE STREET||£14,879
|CITY OF LONDON||£0
|COMHAIRLE NAN EILEAN SIAR||£6,611
|CREWE AND NANTWICH||£30,833
|DUMFRIES & GALLOWAY||£71,092
|EPSOM AND EWELL||£3,598
|FOREST OF DEAN||£17,633
|HINCKLEY & BOSWORTH||£6,907
|ISLE OF ANGLESEY||£0
|ISLE OF WIGHT||£19,355
|ISLES OF SCILLY||£0
|KENSINGTON & CHELSEA||£0
|KINGS LYNN & WEST NORFOLK||£21,275
|NEATH PORT TALBOT||£21,484
|NEWCASTLE UNDER LYME||£0
|NORTH EAST DERBY||£0
|NORTH EAST LINCOLN||£0
|NORTH WEST LEICESTER||£5,504
|OADBY AND WIGSTON||£6,335
|PERTH & KINROSS||£28,970
|REDCAR & CLEVELAND||£110,983
|REIGATE AND BANSTEAD||£14,745
|RHONDDA CYNON TAFF||£47,230
|SEDGEFIELD BOROUGH COUNCIL ||£39,480
|SHREWSBURY & ATCHAM||£0
|SOUTHEND ON SEA||£71,018
|STOCKTON ON TEES||£0
|STOKE ON TRENT||£0
|TELFORD AND WREKIN||£45,573
|TONBRIDGE & MALLING||£11,969
|VALE OF GLAMORGAN||£1,130
|VALE OF WHITE HORSE||£0
|WEYMOUTH & PORTLAND||£0
|WINDSOR & MAIDENHEAD||£9,784
As suggested at the hearing the costs of increasing the allowance
in income related benefits for couples to twice the allowance
for single people would be very significant indeed which DWP estimate
as £2.2 billion in 2003-04 rising to £3 billion in 2005-06.
The sorts of increases in benefit levels for couples proposed
here could have a detrimental effect on work incentives.
Such a change would not, of course, remove all financial
incentive to disguise a living together relationship. For example
there would still be an incentive to do this where one member
works full time or has an alternative source of significant income,
and consequently disbars both from benefit because they are treated
as a couple. This would clearly not be a cost effective approach
to tackling fraud in this area.
Question 109: Levels of activityshadow economy
Lord Grabiner reported on the Shadow Economy in his report
titled "The Informal Economy" published in February
2000. DWP has worked closely with the Inland Revenue, with HM
Customs and Excise and with other Departments to implement his
recommendations. Every one of our Regions has investigators supporting
this initiative in specialist teams:
There are 20 JoSET sites. Each has co-located investigators
from HM Customs and Excise (HMCE), Inland Revenue (IR) and DWP.
At the present time there is a total of 199 staff working in the
JoSETs comprising 87 from HMCE, 59 from IR and 53 from DWP.
The JoSETs investigate traders that are suspected of tax
evasion or of employing people who are in receipt of benefit.
The teams also look for any evidence the employer has colluded
in fraudulent benefit claims by, for example, suppressing from
their accounts wages paid "off record". DWP has been
a full partner in the JoSETs since May 2002. Prior to that DWP
involvement was piloted in five of the 20 teams.
As at end of February 2003 we have recorded 93 sanctions
(including prosecutions), 335 adjustments to benefit payable,
246 overpayments and five collusive employers. The total value
of overpayments is nearly £681,000.
There are two JoFIT sitesLeicester and London. These
teams focus specifically on the fashion industry.
The co-located teams comprises officers from C&E, IR
and DWP and became operational in August 2000. Following on from
the original pilot, the aim is to:
Improve overall understanding of legal requirements
Raise compliance within the industry through:
Educating and working with traders
Tackling fraud, including benefit fraud
The Multi Agency Team (MAT) project is an experimental team
based at Wolverhampton which was set up in October 2000. The Team
is staffed from Customs & Excise (C&E) Inland Revenue
(IR), Jobcentre Plus and Child Support Agency (CSA). DWP has two
staff detached to the MAT.
MAT aims to improve tax, benefits and employer compliance
across a wide range of businesses and customers to:
Increase direct and indirect tax yield
Reduce benefits abuse against central and local
The results for JoFITs and MAT are combined for stats purposes.
As at the end of February 2003 we have recorded 34 sanctions,
78 adjustments to benefit, 47 overpayments and two collusive employers
prosecuted. The total value of adjustments to benefit and overpayments
is nearly £80,000.
Gangmasters are organisers for the supply of labour to employers
who require short term (often seasonal) staffing. Examples include
crop pickers. There is a core organising team liaising with other
Government Departments (including Immigration, the inland Revenue
and the Customs) to identify gangmaster activity and deploy multi-agency
project teams of investigators on specific operations. Investigators
are provided from existing field resources as and when required,
resourced from project funding. We are currently seeking to expand
the core Gangmaster organising team and building on existing cross-government
initiatives to increase activity levels, including widening the
remit from agricultural to non-agricultural activity.
As at end of February we have recorded 110 sanctions, 857
adjustments to benefit, 166 overpayments and one collusive employer
prosecuted. Total value of MVAs and overpayments is nearly £346,000.
Our most recent exercise (Operation "Shark") produced
18 prosecution cases, 33 adjustments to benefit and 41 overpayments.
The combined value of adjustments to benefit and overpayments
will be in excess of £17,000.
Operation "Shark" has also led to tax liabilities
being assessed on two of the gangmasters amounting to £363,000
plus £40,000 penalties.
Questions 134; 198; 214; 221 and 249 on Data protection constraints,
Frequency of Data-Matching and Data-Matching of DWP and other
Government Department data
Legal authority is needed before other Government Departments
and agencies are able to share their data with DWP (and vice versa).
In addition, any legally authorised exchange of data must be in
accordance with the principles of the Data Protection Act 1998
and use of the data must not breach the requirements of the Human
Rights Act 1998.
In practice, the Data Protection Act 1998 does not constrain
the Department in pursuing benefit abuse. The Human Rights Act
1998 does (rightly) set limits on the use of powers to intrude
into personal privacy. Parliament has also made clear that a balance
must be struck between the reduction in benefit abuse and the
protection of privacy. For example, it was unwilling to include
in the Social Security Fraud Act 2001 a provision for DWP to obtain
information from banks and other financial institutions on benefit
claimants judged to be at high risk of committing fraud. The power
is limited to cases where reasonable grounds for suspicion of
The legal gateways to enable data-sharing between Departments
have expanded considerably as a result of recent legislation,
to the DWP's advantage. Certain pieces of legislation authorise
the passing of data from individual departments to DWP in terms
broad enough to meet the needs of fraud prevention and detection.
In addition section 122B of the Social Security Administration
Act 1992 includes a general provision for DWP to acquire new sources
of data for other government Departments where authorised by secondary
In practice, and bearing in mind that a balance has to be
struck with protection of privacy, DWP now has broad access to
the most important data it needs, in particular from the Inland
Revenue, HM Customs & Excise and the Home Office. The exchange
with Inland Revenue is especially productive, extending beyond
tax information to cover data on National Insurance contributions
and, more recently, tax credits. There is an active programme
to identify new ways of exploiting the available access. For example,
we are now beginning to make use of IR data to identify hidden
capital that may affect entitlement to benefits. A number of incorrect
claims have been identified as a result.
In respect of private sector information, the provision in
the Social Security Fraud Act 2001 giving DWP access to data held
by banks and other financial institutions marks a significant
There are practical constraints. Differing IT systems and
standards may mean that exchange of data between Departments,
and actually matching the data, may be resource-intensive. Some
data sources may require considerable work in order to make them
useful. Judgements have to be made about the relative cost-effectiveness
of data-matching against other forms of preventive and detection
activity. Moreover some of the fraud the DWP encounters in the
most vulnerable benefits involves cash transactions in the shadow
economy, which do not leave traces in departmental or other records.
An extensive programme of data matching on benefit claimants
is in place both within the Department and between the DWP and
other Government Departments, most notably Inland Revenue, to
identify potentially fraudulent activity. Some 72 different runs
take place with intervals varying from weekly to six monthly.
Thirty-four are run weekly to identify anomalies including, for
example, a customer claiming Income Support whilst his or her
partner is working, children being claimed for by more than one
customer and a customer claiming Jobseeker's Allowance whist in
employment. The frequency of each run is dependent on a number
of factors including the refresh rate of the data and the capability
of the data provider to supply data strips. All runs are reviewed
regularly to ensure that they continue to be effective in detecting
incorrectness and to consider whether new data matching rules
would increase effectiveness. We also continue to pursue new sources
of data and new matches.
OF DWP AND
The issues surrounding the data-matching of staff records
are complex. A data matching exercise was carried out in the 1990s
to match the then DSS staff database against claimant data for
Disability Living Allowance. The exercise has not been repeated
although, in 1994-95, we trialled a match of staff data against
the Income Support system. The early indications (and the previous
DLA exercise) suggested that the full run would not be worthwhile
and it was abandoned. We have not undertaken any further exercises
targeted specifically at DWP staff who are benefit claimants.
The Department has explored the possibility of further exercises
using the departmental payroll in accordance with legislation
and the guidance of the Information Commissioner. Our current
understanding is that, to undertake an exercise of this nature,
the Department must inform staff in advance and give them the
opportunity to opt in. In practice, these constraints are likely
to reduce the effectiveness of such an exercise. In practice the
need to check whether recipients of relevant benefits are also
in employment is already met across the whole of the public and
private sectors by our access to Inland Revenue information. Action
is in hand to improve the exploitation of that access.
Question 190: LA use of prosecution services
The Department's prosecutions solicitors have made provision
for six casual lawyers and six administrative officers (one each
per Area Legal Office). So far 111 local authorities have signed
service level agreements and propose to send us work. We plan
to review the provision of services when the demand becomes clearer.
DWP has made available £50,000 during 2002-03 with a
further £1million for 2003-04 for England and Wales to cover
the cost of the Local Authority cases put forward for prosecution.
We have also given £150,000 to the DWP Fraud Prosecutions
Unit in Scotland to improve the quality of the cases that are
put forward to the Procurator Fiscal.
Questions 229-236: Targeting Fraud advertising campaign
Which papers were used for the advertising campaign in March
A full list of all papers used in the March 2001 campaign
is set out below:
|Publication||No of insertions
|News of the World||3|
|Mail on Sunday||2|
|Independent on Sunday||2
|Wales on Sunday||2|
This summary of research conducted for the Targeting Fraud
national advertising campaign in March 2001 indicates that:
The campaign succeeded in its objectives of increasing
awareness of benefit fraud generally and communicating key messages;
The general public believe that fraud is widespread
and agree that fraud is unacceptable They agree that the Government
is tackling benefit fraud;
There was an upward movement across all the key
messages with Benefit Claimants particularly noting the ".
. . you will get caught" message;
Reaction to the tone of the ads was typically
positive, being described as realistic and believable.
Both GB (nationally representative sample of the general
population) and GBBC (GB benefit claimants) at the post wave considered
benefit fraud equally serious and widespread with significant
amounts of money stolen. GBBC were more likely to think it was
difficult to commit fraud compared to the GB sample, possibly
due to their greater experience of the benefit system.
The objectives of the campaign were:
to reinforce positively honest behaviour;
create a climate of intolerance to fraud;
and to undermine its social acceptability.
This phase of the campaign was designed to work on two levels
referred to as Level 1 and Level 2.
Level 1: The objectives of the level 1 campaign were to make
"fiddling" harder to justify by showing that fraud is
unfair. This was communicated through television and press advertisements
to a wide audience; general public, opinion formers and the claimant
community. For this reason the range of media used targeted all
social groups (including readers of broadsheet newspapers).
Level 2: The level 2 campaign aimed at creating a climate
of unease and building a fear of detection amongst those committing
or likely to commit benefit fraud. The media employed was posters
and radio as well as television and newspapers and was aimed specifically
at the core benefit claimant community.
Both levels of the campaign ran simultaneously and used the
branding "Targeting Fraud".
The continuation of the campaign throughout 2001-02 revised
this strategy to target fraudsters more directly with messages
about deterrence and detection (featuring the fraudsters being
caught). The press coverage included national tabloids and regional
papers but not national broadsheets.
Question 255: Automatic cross-checking of benefit information
Creating a single data store of customer information is a
complex task. The size of the Department's legacy systems for
handling benefit information means that achieving better integration
of data is a real challenge. For that reason, we are currently
focusing on key business areas that would most benefit from automatic
cross-checking. Steady progress is already being made in a number
We have already shared information on all customer identities
through common access to our Personal Details computer system
and the Departmental Central Index system.
An integrated electronic information gathering system will
begin to roll out to Jobcentre Plus offices this year. It will
deliver a front-end information gathering process for new and
repeat claims to key working age benefits of Income Support, Jobseeker's
Allowance, and Incapacity Benefit. It will also gather information
on associated claims for Housing Benefit, Council Tax Benefit,
Child Support, Social Fund Crisis Alignment to Benefit Payments
and New Tax Credits. The system will automatically signal any
relevant information already held on departmental systems, helping
to reduce fraud and error.
In addition we expect in 2004 to have electronic linkage
of Disability Living Allowance and Incapacity Benefit information
with that of Income Support and Job Seekers Allowance, so that
appropriate adjustments can be made to Income Support assessments
for the relevant customers. This should enable us to eliminate
the two highest value areas of current error.
The possibility of establishing further linkage is under
active consideration as part of a wider update of our IS/IT strategy.
Further integration of a range of information relating to benefits
is being examined. Current plans include the introduction of a
departmental-wide view of customers in 2004, focusing initially
on benefit awards and payments.
This facility is likely to expand over time to enable us
to tackle other key business problems. For example, better access
to data on household composition (ie detailing people who live
and claim benefits from the same address) would improve our ability
to tackle frauds associated with those living together as husband
and wifea major source of loss.
We are also planning a new system to enable the collection
of financial data (eg details of a customers benefit payments)
to be held in one place. Rolling out from 2004, this system will
initially link into one legacy system, followed by the remaining
legacy systems, including CSA, later on in the programme.
Question 272: Effectiveness of sentences on benefit fraud
DWP has not historically kept records of the numbers of convicted
benefit fraudsters who re-offend, but a broad estimate was made
in connection with the "two strikes" provision in the
2001 Social Security Fraud Act that it might be around 5%. We
have kept careful records since "two strikes" came into
force and these show that so far two people have been convicted
of benefit fraud on two separate occasions since April 2002 and
have therefore received "two strikes" penalties. (It
will be appreciated that the new sanction applies only where both
of the penalties have been imposed since the Social Security Fraud
Act 2001 came into effect). The effectiveness of "two strikes"
will become clearer as more data becomes available over a longer
DWP does not have information on the extent to which non-custodial
sentences imposed in connection with benefit fraud are actually
enforced, but is seeking to obtain this in connection with its
present review of sanctions policy (undertaken in accordance with
the recent NAO recommendation). We are consulting Home Office
and LCD to find what information they may have. The monitoring
of effectiveness of community based penalties falls to the Probation
Service and the Home Office, who retain data relating to community
penalties imposed across the board and not just in relation to
benefit fraud offences.
Question 276: Returns on Investment in Anti-fraud measures
Currently, conservative estimates put the total value of
overpayments rewarded under SAFE over the course of 2002-03 at
approximately £250 million. The latest annual expenditure
forecast for SAFE subsidy is around £25 million (local authorities
have until summer to submit their claims for 2002-03).
Of course, there are "unseen" savings from SAFE,
in the form of the deterrent effect of sanctions and prosecutions
that are incentivised as part of the scheme. We cannot easily
place a value on the effect of these.
Sir Richard Mottram KCB
25 March 2003