Examination of Witnesses (Questions 1-19)
DEPARTMENT FOR
WORK AND
PENSIONS & JOBCENTRE
PLUS
MONDAY 4 FEBRUARY
2008
Q1 Chairman: Good afternoon. Today we
are considering the Comptroller and Auditor General's Report,
Progress in Tackling Benefit Fraud and we are joined once
again by Sir Leigh Lewis, who is Permanent Secretary at the Department
for Work and Pensions. Perhaps you could introduce your colleagues
and tell us what they do, please?
Sir Leigh Lewis: Surely. On my
left is Shirley Trundle, who is the Director of Benefit Strategy
in the Department. On my right is Neil Couling, who is the Director
of Benefits and Fraud in Jobcentre Plus.
Q2 Chairman: We are looking at the
progress your Department is making in tackling benefit fraud and
I have a bouquet for you to start the proceedings. If we look
at Figure Two, we will see that you have reduced benefit fraud
by £200 million since we last considered this. However, £800
million is still a lot of money to lose every year, is it not?
Sir Leigh Lewis: It certainly
is. The last thing that I or any of my colleagues want to do this
afternoon is suggest that somehow £800 million does not matter
because obviously it matters and it matters a great deal. I am
grateful to you for your comments because we have seen the level
of benefit fraud come down very substantially.
Q3 Chairman: £800 million, although
a relatively small part of the overall budget, if we look at Figure
Six, we will see that on some expenditures—for instance,
if you take out State Pension where there is apparently 0% fraud—you
still have Carers' Allowance, 3.9%, Income Support, 2.3% Job Seekers'
Allowance, 2.3% If you take away the very well performing benefits,
you do have serious problems in some areas, do you not?
Sir Leigh Lewis: We certainly
have some benefits self-evidently, as you say, where the levels
of fraud are higher. That of course inevitably relates to the
innate characteristics of some of those benefits which are ones
where fraud is higher, which tend inevitably to be ones which
are more susceptible to some people who may want to defraud the
benefits system. I have gone into this and there was a recent
survey on state retirement pension which did indeed produce evidence
of in effect very close to zero fraud. State retirement pension
is almost inevitably a different kind of benefit because entitlement
comes with contributions and age, so yes, it is absolutely the
case that some benefits are innately more susceptible to fraud.
That is why of course we have concentrated so much attention on
those benefits.
Q4 Chairman: I started by congratulating
you about the progress you have made in reducing benefit fraud
but now let us look at error. If we look at for instance paragraph
1.3, just to get the facts right, it tells us that while fraud
appears to have reduced by more than 50% the level of error has
actually risen from £1.1 billion in 1997 to £1.9 billion
in 2006-07. Does this focus on fraud mean that you have taken
your eye off the ball on error?
Sir Leigh Lewis: No, I do not
think it does, but you are absolutely right to say—I believe
that the National Audit Office intends to produce a separate value
for money report on error—that our performance on error,
both official error and customer error, is not as good as our
performance in relation to fraud. It is absolutely not the case
however that in working very hard indeed to reduce fraud we have
somehow taken our eye off error. Indeed, one of my first actions
on becoming Permanent Secretary a little over two years ago in
the Department was to establish an Official Error Reduction Task
Force, which I did at the beginning of January 2006. It is fair
to say that a lot of the measures that we have taken in the last
two years, by the nature of the recording systems and the lags
in the system, cannot yet have shown up in the figures. That is
not a promise that they will because until we have those figures
we will not know, but we have taken a very considerable number
of steps and actions over the last two years to bear down on error.
Q5 Chairman: Were we to look at this,
as I am sure we will, in four years' time, we would see considerable
progress. If you take error and fraud combined, the progress in
one is negated by the lack of progress in the other.
Sir Leigh Lewis: It is the case
if you take them all together of course that we still have seen
a very slow but nevertheless a decline in the overall levels of
fraud and error, taken together. I would not myself put it as,
if you will, one negates the other. I think it has been a very
substantial achievement to have brought fraud down to the level
we now have it but that does not mean for one moment that we can
somehow forget about fraud and concentrate only on error. My determination
is to concentrate on them both and what I would like to believe
is that, if I am invited back to the Committee as you say in the
future, there will be a story of fraud still at this level or
ideally even below it, but with error lower.
Q6 Chairman: Let us look at your
counter fraud strategy for one moment to see if it is cost effective.
If you look at the value for money statement that you can find
on page ten of this Report it says here that this suggests the
Department is currently spending £1.50 to identify every
£1 of overpayments. How can that be value for money?
Sir Leigh Lewis: Because, as the
Report itself says of course, that assessment does not take account
of the deterrent effect of our activities or the impact of stopping
the fraud continuing, both of which are likely to be quite substantial.
It is interesting that to prepare myself a little bit for this
hearing I went out and talked with Neil Couling to a group of
fraud investigators in West London last week. I sat them in front
of me and said, "Talk to me about what is good and what is
less good". They had seen this Report, knowing that I was
coming, and themselves thought that while overpayment was a necessary
measure it was far from telling the whole story. One said, "The
better we get, the less overpayment we record". In another
sense if you just focus on overpayment, it is a bit like looking
at, say, the figures that the police might recover in terms of
goods stolen as a result of burglaries. That figure could go down
but if what is happening is that the number of burglaries is going
down then, in a sense, that is good news. Overpayment is falling
and that may well mean that we are detecting frauds more quickly,
that the deterrent effect is increasing and, as we have seen from
the Report, the overall level of fraud is falling. It is an important
measure but I do not think, indeed as the Report acknowledges,
it is the test by which our efforts should be measured.
Q7 Chairman: You mention overpayments.
Why is it when we read this in paragraph 3.20 that in 50,000 cases
you did not seek to recover past overpayments? It is a lot of
cases, is it not? Some people looking at this might think that
your Department is being soft on fraudsters.
Sir Leigh Lewis: I do not think
anybody who looks either at this Report in the round or who went
out and talked to some of our fraud investigation service staff
or to our prosecutors would think that this Department is in any
way soft on fraud. I think we are very, very rigorous indeed on
fraud. When it comes to overpayment and recovery of overpayments,
we are doing better there than we have ever done before in recovering
overpayments as a whole from both error and fraud. We are constrained
inevitably and, in many cases, rightly by the levels of overpayment
we can recover. Until relatively recently, we had some lack of
capacity in recovering overpayments. The level of recovery of
overpayments this year will be the highest it has ever been in
the DWP's history and it will exceed the target which has been
set for this year almost certainly. That is a considerable increase
on last year's levels. We are trying to tackle this at every single
level from stopping fraud and error getting into the system from
the very outset right through to when overpayments are identified,
seeking to recover them.
Q8 Chairman: Just at the time that
we are asking you to do more on fraud and error, we read in paragraph
2.21 that you are being asked to reduce your workforce by 30,000.
As it reads here, "... with all parts of Jobcentre Plus,
there is localised pressure across all the anti-fraud interventions
to reduce staff numbers and cut costs". How are you making
progress if your staff numbers are being reduced by 30,000?
Sir Leigh Lewis: Because we are
in no different a position really from almost any other organisation
of any size in the public or private sectors which is asked repeatedly
to do more with less. The trick is genuinely to achieve more with
less. Yes, we have made efficiencies in Jobcentre Plus as we have
in other parts of the Department. We are on course to meet the
30,000 reduction target in manpower which will be a very considerable
achievement. I do not think we have ever been as effective as
we are now in terms of our overall fraud effort. I do not want
to pin too much on a dozen colleagues who I talked to in one office;
it could have been different if I had gone and talked to a different
group somewhere else, but they too shared that view. They believed
we were a more effective anti-fraud organisation now than we have
ever been.
Q9 Chairman: If you are so effective,
let us look at paragraph 3.4. It says here, "... the Department
recovered £22 million of £339 million known debt ...".
That is not a very good record, is it?
Sir Leigh Lewis: One of those
is a flow figure and the other is a stock figure because the £22
million is of new debt coming in as well as existing debt. We
want to be better at recovering debt. You are quite right. We
want to do better at recovering fraud debt. If I could just note
one or two numbers without taking the Committee's time in terms
of our overall debt performance, last year in 2006-07 we recovered
overall from fraud and error £233 million. That is 30% up
on 2005-06. This year as at November we have recovered £184
million and that is on course to meet our highest ever target.
Q10 Chairman: We can only work from
the report in front of us. It is absolutely explicit here. It
says, "In 2006-07, the Department recovered £22 million
of £339 million known debt it has as a result of fraud".
That is quite a clear statement.
Sir Leigh Lewis: It is.
Q11 Chairman: Is that inaccurate?
Sir Leigh Lewis: No, it is not
at all inaccurate. I was seeking to put it in context. Just taking
that specific figure which is not good enough, it was up from
£16 million the year before.
Q12 Mr Touhig: Sir Leigh, did you
know that ancient Athens had a disability living allowance in
the fifth century BC?
Sir Leigh Lewis: I was never a
classicist in my time as a student, so no, I did not know that.
Q13 Mr Touhig: The Athenian orator
Elysium tells the story of a man who found himself in front of
a tribunal for claiming Disability Living Allowance while running
a shop and riding around Athens on a horse. Tell me, Sir Leigh,
would the DWP call that fraud or customer error?
Sir Leigh Lewis: The very serious
point that lies behind your question is that in determining what
is a customer error and what is fraud you are inevitably forming
a judgment about intent because that is the distinction between
those two. Customer error is where a customer in good faith gives
us information which is wrong or does not in good faith tell us
something that they ought to have told us. Fraud is where they
do one or other of those things maliciously and deliberately.
There is, as the Report itself says, a grey area between those
two and in each individual case you have to form a judgment but
those we do audit very carefully and the NAO then audit our audit
of the classification that we make between those two types of
case.
Q14 Mr Touhig: Perhaps you would
not call it either fraud or customer error.
Sir Leigh Lewis: I would. In the
end you have to put it into one box or another. I think it is
right that we classify a case in the end as either fraud or customer
error. What I am seeking to say not very articulately is that
in the end it is a judgment call. Some of it is absolutely clear
cut; some of it is less clear cut.
Q15 Mr Touhig: The Chairman touched
on the fact that your Department's figures for fraud have fallen
and the figures for error have risen. You are simply repackaging
fraud for error, are you not?
Sir Leigh Lewis: No, absolutely
we are not. While we are not doing well enough on error, there
is no suggestion whatsoever that we are repackaging fraud as error.
Indeed, if the NAO who for this Report have sampled it and do
state very clearly that they believe the Department's estimates
to be accurate, had found any evidence of that they would rightly
hold us to account.
Q16 Mr Touhig: Perhaps we should
call it definitional change then?
Sir Leigh Lewis: I do not think
I am going to be tempted down this road at all.
Q17 Mr Touhig: I will not try and
tempt you. Do not worry.
Sir Leigh Lewis: I am going to
say absolutely that we need to do better on error but we are not
seeking to reclassify fraud as error.
Q18 Mr Touhig: We see from the C&AG's
Report that definitional change is one of your Department's most
effective weapons against fraud and error, is it not?
Sir Leigh Lewis: I think what
you are referring to there is the fact that, two or three years
back, very openly by agreement with the NAO as our auditors and
in our annual resource accounts, we recategorised an amount that,
in terms of previously being recorded as fraud, was around £550
million. This related to people who had been on primarily Disability
Living Allowance (DLA) and whose condition had imperceptibly changed
for the better over time. We came to the view, which our auditors
shared, that it was wrong to believe that that was a deliberate
fraud.
Q19 Mr Touhig: Your Department had
a PSA target to reduce Income Support and Jobseeker's Allowance
(JSA) fraud by 50% by 2005-06. In fact, you cut fraud from £2
billion in 2000-01 to £800 million in 2005-06, but you did
that by the fact that £700 million worth of overpayments
you reclassified as definitional error. It is neither fraud nor
error.
Sir Leigh Lewis: If you take the
target we had to reduce fraud and error by 50%, that was in Income
Support and Jobseeker's Allowance so it was not affected by the
definitional change and we met that target.
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