Examination of Witnesses (Question Numbers
40-59)
DEPARTMENT FOR
WORK AND
PENSIONS
Q40 Mr Davidson: Okay. One of the
issues that has always concerned us in this Committee is that
the system is just too complicated. I am not clear from the figures
that we have here in terms of the mistakes made by individuals
first of all how many of the mistakes and what percentage of the
debt is simply because people do not understand it. I have lots
of my constituents who are in debt to yourselves. In some cases
they are perhaps not as numerate as the rest of us and they have
just got totally confused, they lead chaotic lives, and in other
cases there are people who are rascals and who are clearly robbing
the system blind at every opportunity. What is the balance between
these different categories?
Sir Leigh Lewis: I can answer
that I hope helpfully for you in figures that we have shared with
the Committee before. If you take our latest figures, about 2%
of the total amount that we pay in benefits is paid either fraudulently
or in error. That breaks down relatively evenly between those
three elements, so fraud, on the latest figures, is about 0.6%,
customer error is 0.7% and official error is 0.6%. If you ask
me why they do not sum to 2.0% rather than 1.9% it is in the rounding,
if you see what I mean.
Q41 Mr Davidson: Can I be clear about
this question of fraud then. How much of fraud is individual fraud
and individuals filling in things wrongly deliberately and so
on and how much of it is actually organised? If organised fraud
is clever and sophisticated you are not necessarily going to know
about it at the moment, are you?
Sir Leigh Lewis: I have not got
those figures in my head. We did respond to an earlier NAO Report
on fraud and I will certainly go back over that ground.
Q42 Mr Davidson: Maybe you could
just give us a note about that?[2]
Sir Leigh Lewis: I will. Just
to say, which may be helpful, we absolutely tackle both. We of
course tackle the individual—
Q43 Mr Davidson: I understand that.
Can I ask about organised fraud. I am led to believe that there
are organised gangs who are not British who have come in from
abroad and amongst a series of criminal activities are engaged
in robbing the benefits system blind. Is this correct? Can this
be identified? Are there any particular nationalities that seem
to succumb to this more than others?
Sir Leigh Lewis: I do not have
any information that would enable me to answer that. What is certainly
the case is that organised fraud against the benefits system is
real. That is why we have a specialist part of our fraud investigation
service which tackles organised fraud. It is absolutely dedicated
to that. It is actually why with HMRC as part of our joint working
we have established a joint unit.
Q44 Mr Davidson: Can I be clear then,
do you have risk profiles and are there particular nationalities
that are deemed to be a greater risk than any others?
Sir Leigh Lewis: I have not seen
any such risk profiles broken down by nationality.
Q45 Mr Davidson: So you do not have
risk profiles by nationality?
Sir Leigh Lewis: I do not want
to say absolutely.
Q46 Mr Davidson: Can you give us
a note then?[3]
Sir Leigh Lewis: I most certainly
will.
Q47 Mr Davidson: I would be astonished
actually if you were undertaking a risk profile structure that
you did not make some assessment of nationalities. Having travelled
in Africa, almost everybody in Africa will tell you which particular
nationalities are more prone to fraud. Indeed I get emails from
them all the time offering me opportunities to make huge amounts
of money.
Sir Leigh Lewis: Indeed, I do
not think anybody should let this Committee believe that only
people from abroad ever commit organised fraud.
Q48 Mr Davidson: I am aware of those.
Sir Leigh Lewis: I will drop you
a note[4]
most certainly. We do also work with the Serious and Organised
Crime Agency (SOCA) precisely to ensure that we share intelligence
on those kinds of organised frauds.
Q49 Mr Davidson: Can I ask about
the breakdown of why things are written off. I can understand
completely that if people die their debts are written off since
you do not have a method of collection, but in terms of disappearance
can I seek clarification about circumstances of disappearance
because again in my own constituency I am aware of people who
have disappeared back off to Eastern Europe and some other lands
who are owing debts to housing associations and others. I want
to clarify whether or not you monitor this in any way and whether
or not there is any particular pattern there that you can identify?
Sir Leigh Lewis: I have not got
that information. We certainly do write off debts where we think
there is no realistic prospect of recovering them but I wonder
if either John Codling or Carol Sheridan can help you further
in that.
Mrs Sheridan: No.
Mr Codling: No.
Sir Leigh Lewis: I think we had
better add that to the note we promised to send you.[5]
Q50 Mr Davidson: In terms of the
geographical distribution of debt across the UK, is there more
debt in Yorkshire than in Wales or in Cornwall than in Scotland?
Is there a pattern?
Sir Leigh Lewis: I do not know.
That is a really interesting question. That is not covered in
the NAO Report either. Carol, is there any geographical pattern
that you are aware of?
Mrs Sheridan: We have not done
any analysis around that. We just deal with debtors as individuals.
It is possible that we could.
Q51 Mr Davidson: Word about how to
work the system spreads in communities, as I am sure you are aware,
and therefore I would have thought that identifying patterns would
be part of your risk management strategy and therefore knowing
that one particular part of the country has a disproportionate
number of cases involving a particular type of fraud or a particular
type of error would be an essential management tool.[6]
Sir Leigh Lewis: I think it is
a very good question and as part of the work that I have already
said we are engaged on to see if we can improve risk profiling,
first of all I will go back and see whether we do have or can
manufacture and create any information that does give some kind
of geographical breakdown of debt. I just want to take notice
of the question because I think it is a good one and I think we
should follow it up.
Mr Davidson: You are here for your own
good! Thank you, Chairman.
Chairman: I am sure that any study will
show that the Scots, particularly Glaswegians, are much more honest
than everybody else. Is that not right, Mr Davidson?
Mr Davidson: Especially my voters.
Chairman: Dr Pugh?
Q52 Dr Pugh: Can I size up the problem
first. I understand that you have made progress. It is not altogether
an unfavourable Report. You have gone from £1.67 billion
of acknowledged debt and recovering £180 million of that
to a larger sum of acknowledged debt and you are recovering a
higher percentage of it. Mr Davidson has probed you sufficiently
about how reliable this acknowledged figure of debt is and how
it can be tested. None of us can be certain about that. Am I right
in thinking the bulk of the debt is related to income support.
Is that correct? Is it something like 70%? I have seen a figure
of 40% somewhere.
Sir Leigh Lewis: Yes, I think
that is right.
Q53 Dr Pugh: The bulk of your debt
is on income support and of that those people who come off income
support on to other benefits account for 40% of the debtors as
well. Is that right?
Sir Leigh Lewis: John and Carol,
I wonder if you can help on the exact distributions.
Mrs Sheridan: I think you are
right. The latest figure I have seen is that 70% of the debt stock
is income support related.
Q54 Dr Pugh: They are your big problem,
are they not? All the other forms of debt are relatively small
and in some cases quite insignificant. We must pre-suppose in
some cases, for example the pensioners' Christmas bonus, that
there is no element or possibility of very much fraud unless one
is claiming to be older than one actually is. The big problem
really is getting this figure of debt over income support down
to an even more acceptable level. The figures show that something
like 30% of all the people who are in that category and have come
off benefit—and I will just talk about the off benefit people
not the people who remain on benefit—are not paying anything
at all within any reasonable timescale. Am I right in thinking
that?
Sir Leigh Lewis: I think one of
the issues there is that often those people who are in that category
of debtors owe other debts to the system and there is, as the
Report makes clear, a priority order in which deductions are made
from those benefits, so for example housing costs, rent arrears,
fuel and water charges and so on are taken from any benefit before
there is a possibility of recovering debt. We are talking for
good reasons of levels which Parliament has laid down for recovery
of maximum amounts from benefit which are relatively low, so one
of the difficulties there for that group, and they typically in
many cases do exactly as you say, cycle on and off benefit, is
that even when they are on benefit there are other calls that
we have to allow to be made on their benefit before we can recover
any debt from them.
Q55 Dr Pugh: Are you stalled by the
category of what you might call benefit problems for you where
people are just essentially acknowledging they have the debt and
not denying they have got it, they are not in any sense trying
to defraud you but basically standing there and saying we are
not in a position to pay it.
Sir Leigh Lewis: It is not so
much that they are standing there saying that they are not in
a position to pay it but the rules by which we operate mean there
is a maximum amount which we are able to take from their benefit
of £9.75 per week so we are bounded by that amount. That
is where people are on income-related benefits. If they are on
contributory benefits we can recover up to a third. We cannot
take even that £9.75 if they are already having deductions
made from those benefits for other reasons which take precedence
over the debt recovery.
Q56 Dr Pugh: So if we look at this
30% of what you might regard as awkward customers of one form
or another you are giving the impression that they are going in
almost a revolving door of benefits and other forms of income,
coming off benefits and going back on them and so on. There must
be a percentage of them who go off to employment or self-employment.
Are they easier to track down and get money off?
Sir Leigh Lewis: Again I will
ask Carol to comment in a moment. In one sense there is an advantage
because if they are back in employment then, all other things
being equal, one might think they are in a better position to
pay debt and that there is no automatic limit which constrains
the amount which we can recover and many people do pay back their
debt in full. I think our largest single payment last year was
nearly £70,000 so in some cases we can recover rather large
sums. On the other side of that coin however, while they are in
the benefits system by definition we are in contact, we know where
they are. Once people leave the system they can move, we can lose
touch with them and then you are trying to trace someone before
you can try and recover.
Q57 Dr Pugh: So if we were to take
this 30% of incorrigible difficult customers, what percentage
of that 30% are what you might call "revolving door"
clients who are caught in benefit traps of all kinds and what
percentage are people who have simply gone through the system,
left with a debt and basically cleared off to other things?
Sir Leigh Lewis: I do not have
that figure but just to quote a slightly different figure that
helps and which I think is not irrelevant. If you take the rise
in the claimant count last month, which went up by around 20,000
more or less, the on-flow, and this is something that people often
do not appreciate more widely, of people coming on to jobseeker's
allowance in that month was somewhere around 350,000 and the number
of people flowing off jobseeker's allowance in that month was
330,000, net 20,000, and that becomes the increase in the claimant
count. Those figures give you some idea of the order of magnitude
of flows on and off the system; they are big.
Q58 Dr Pugh: Just picking up on the
order of magnitude and returning to this issue of the size of
the problem, can I ask you about the mechanics of it. In section
1.3 it explains that initially you are alerted to a problem of
overpayment by the paying agencies, which are scattered throughout
the country I would have thought, but then is it the case that
any case that is worth pursuing goes to a client referral centre
to be pursued?
Sir Leigh Lewis: Yes it does,
subject to the fact that if it is below the minimum threshold
which is £65 where I believe—and Carol will correct
me if I am wrong—the paying agency can write it off without
it having to go into the centre.
Q59 Dr Pugh: So is there an attrition
process whereby you get many more cases notified by the paying
agencies which are not pursued by the client referral centres?
Sir Leigh Lewis: We have had some
problem which we are absolutely addressing of the letter "not
arriving", if you see what I mean. I say that in inverted
commas because it is not actually done in that way, but the client
referral centre ought to be registering and making sure that every
one of those debts referred by one of our businesses—Jobcentre
Plus or the Pension, Disability and Carers Service—is on
the system and therefore we are going to attempt recovery. Carol?
Mrs Sheridan: That is absolutely
correct. Every referral is entered on our system.
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