Examination of Witnesses (Questions 120-139)
DEPARTMENT FOR
WORK AND
PENSIONS & JOBCENTRE
PLUS
MONDAY 4 FEBRUARY
2008
Q120 Mr Bacon: You could say the
same about local government reorganisation, could you not?
Sir Leigh Lewis: Secondly, perhaps
for another day, we are working with the LGA and a series of local
authorities piloting a series of pathfinders. We are now in six
local authorities where we are acting much more as the front end,
we in this case being Jobcentre Plus, to the Housing Benefit system
as a whole. Although it is very early days and evaluation is not
yet complete, it appears to be showing there can be real gains
for customers, benefits more quickly, and real gains for the taxpayer
in saving money.
Q121 Mr Bacon: I find this very interesting
and I am glad you are doing pathfinders. I hope you are not going
to use the notorious phrase in Tax Credits of "compress the
test timetable", you are going to test it thoroughly. It
sounds like there could eventually, if that works well, possibly
be a change.
Sir Leigh Lewis: Yes. It is early
days. We are not at a point where I can say to this Committee
we have found the answer but, nevertheless, we are being encouraged
by the results emerging from those six pathfinder authorities.
Q122 Mr Bacon: Can I ask you about
the inevitable relationship between complexity and error which
is something you said, and it is true, but surely there is an
inevitable relationship between complexity and having qualified
accounts.
Sir Leigh Lewis: Yes, there is.
Q123 Mr Bacon: Is that what you mean
when you say it is a sterile debate?
Sir Leigh Lewis: I do not want
to labour the point or weary the Committee, but what I mean is
this—
Q124 Mr Bacon: I am very interested
in qualified accounts, I will go on about them all night if you
want but I think the Chairman may have other ideas!
Sir Leigh Lewis: Me too, because
I came in and nailed my colours to the mast in the Department
in relation to seeking to remove the qualification of the accounts.
I just think for a Department to have had its accounts qualified
for 18 successive years is doing no favours to anybody. It is
doing no favours to the Department, it is doing no favours to
Parliament and it is doing no favours to the taxpayer. At this
moment my professional judgment is that if we continue the system
as we are now, even if we devoted every conceivable resource to
trying to reduce fraud and error, we would not be able to get
to a point where under the current rules that qualification would
be removed. I think that is a thoroughly bad state of affairs.
Q125 Mr Bacon: When you say "under
the current rules", you mean with current policies of successive
governments. Is that what you mean by "under current rules"?
Sir Leigh Lewis: No. I mean two
things there. I mean under current policies, but also at the moment
where there is a materiality threshold of 1% of expenditure there
is no evidence from this country or abroad that this Department
could ever get to a point where fraudulent and error expenditure
would drop below that point. That gives no motivation to my staff
to strive to reach unqualified accounts.
Q126 Mr Bacon: So you are saying
you would like to move the goalposts?
Sir Leigh Lewis: No, I am not,
because that is just simple, I could come and say, "Set it,
please, at 2%". The discussions we—
Q127 Mr Bacon: What are you saying
then?
Sir Leigh Lewis: What I am saying
is we need to find a different approach and with the National
Audit Office we have been discussing, for example, whether you
could look differently at different kinds of benefits, some of
which are inherently more difficult and more complex to deliver,
some of which are less complex to deliver. What I would say is,
and I do not think this is me in the dock, unless together we
can find a way of arriving at a point where this Department has
a realistic prospect of securing unqualified accounts we will
go round this forever and once a year we will arrive at a point
where our accounts are qualified, where the media says, "This
is a dreadful state of affairs", we say, "You have to
see it in context" and it just goes on year after year.
Q128 Mr Bacon: Do you think the media
even take any notice of it now? I was not aware that the media
took the slightest bit of interest. If you tell me the journalists
I will be straight on to them. Can I just ask one question of
the NAO? Are you aware of any social security administration in
a major developed country that has non-qualified, as it were,
clean accounts for its major benefits?
Mr Lonsdale: Going back to the
reference to the 2006 Benchmarking Report which we published,
which is very briefly summarised in here, my recollection is because
the accounting systems are very different there is not necessarily
such a thing as a qualification. What we did identify in the Benchmarking
Report, and I think we reflect that in here, is the level of fraud
and error in the system here is not inconsistent and broadly similar
with other countries.
Q129 Mr Bacon: You are saying there
are countries that have non-qualified accounts but it is because
they have goalposts in different places.
Mr Lonsdale: They just do not
have the system of qualification, but also they do not measure
the amount of fraud and error in either the same way or as accurately
as DWP.
Q130 Mr Bacon: Even in similar systems
like Canada, New Zealand and Australia?
Mr Lonsdale: As I say, broadly
they were in the same sort of area. DWP was not that much higher,
indeed they came out of the Report very positively.
Chairman: There are a couple of supplementaries
from Mr Touhig and Mr Davidson before we end. I am sorry, Sir
Leigh, you are almost there now.
Q131 Mr Touhig: I will be brief because
we have had a long session both for Members and witnesses. So
I can be clear about the overpayment, Sir Leigh, in 2001 it was
estimated that there was a £2 billion overpayment as a result
of fraud, et cetera. We are now told that there is an overpayment
of about £800 million. That is a reduction of £1.2 billion.
Sir Leigh Lewis: Yes.
Q132 Mr Touhig: But in that reduction
is £700 million which is neither classified as fraud nor
error because you have now got these definitional changes and
that is still being overpaid. Is the true level of overpayment
£1.5 billion?
Sir Leigh Lewis: No.
Q133 Mr Touhig: It is not?
Sir Leigh Lewis: In that figure,
just to be clear, there is £550 million of definitional change.
There was £700 million of expenditure on DLA previously classified
as fraud which, by agreement with the NAO, we both concluded should
be classified neither as fraud nor error. We believe that £550
million of that had previously been classified as fraud and £150
million of that as error. That is the degree of definitional change.
Q134 Mr Touhig: The point I am making
is the overpayment is now £1.5 billion and not £800
million because you are still paying the £700 million according
to the report.
Sir Leigh Lewis: We have concluded
that we are not paying improperly.
Q135 Mr Touhig: No, but you are still
overpaying. It says in the Report: "The Department conclude
that these overpayments of £700 million", so it is an
overpayment, and the overpayment is in fact £1.5 billion,
not £800 million, is that right?
Sir Leigh Lewis: No, because the
£800 million is a fraud figure. We could probably go on debating
this. Even if you wanted to apply your methodology—
Q136 Mr Touhig: Is it an overpayment,
Sir Leigh? The Report says it is an overpayment and you have agreed
the Report. What does the NAO say? It says here that the Department
concluded overpayments were £700 million.
Sir Leigh Lewis: They were regarded
as overpayments at the time.
Q137 Mr Touhig: And there is £800
million of fraud so, in fact, the overpayment is £1.5 billion
at the present time. Is that correct or not?
Mr Burr: It is in excess of the
underlying items, as it were, but it is not fraudulent.
Q138 Mr Touhig: No, but is it an
overpayment? For whatever reason it is an overpayment.
Mr Burr: As I understand it, if
the benefits were to be reassessed that payment would be found
not to any longer—
Q139 Mr Touhig: Is it accurate that,
in fact, overpayments are now running at £1.5 billion?
Mr Burr: The figures here are
talking about fraud.
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