The benefits system is large and complex. There are around 30 different types of benefits and pensions, and £148 billion was paid out to 20 million people in 2009-10. The Department for Work and Pensions (the Department) estimates that £2.2 billion of overpayments and £1.3 billion of underpayments were made in 2009-10 as a result of administrative errors by its staff and mistakes by customers. Whilst the value of these errors as a proportion of total benefit expenditure is low, the amounts involved are still very significant sums of public money and have contributed to the Department's accounts being qualified for 22 consecutive years.
We took evidence on two reports from the Comptroller and Auditor General looking at administrative and customer error in the benefits system. We found that efforts to tackle error have had little success: despite the Department introducing a strategy to reduce errors in 2007, levels of error have remained constant since then.
We recognise the difficulty of reducing error, given the complexity of the benefits system and the volume of payments being processed. The publication of a joint HM Revenue and Customs and Department for Work and Pensions fraud and error strategy in October 2010, along with additional funding of £425 million over four years, is an opportunity to inject a new impetus. The joint target of a 25% reduction in the cost of overpayments from fraud and error by 2015 is challenging, and whilst the Committee acknowledges the efforts being made by the Department, there is still concern that there is not yet a clear plan of action to achieve it which sets out specific interventions and milestones to monitor progress. The target does not address underpayments, despite the hardship that benefit underpayments can create for people in need, and it is critical the Department does not neglect this important aspect of reducing error.
The Department must ensure that interventions to reduce error are targeted where they are most likely to get the greatest return. The Department has undertaken some work to understand the cost and impact of its measures to reduce error, but this has been neither comprehensive nor complete. In order for the Department to manage its programme of interventions cost-effectively, it must develop a rigorous approach to costing its interventions and assessing how each will contribute to the target.
Progress on reducing error requires a better understanding of where and why errors arise, and a greater focus on preventing errors occurring in the first place. The Department is not making use of all available sources of information, such as calls to advice lines or feedback from quality checking teams, to identify the reasons why staff make mistakes and where guidance and training efforts should be directed as a result. Greater use of risk profiling would help identify which customers are most likely to make mistakes on their benefit claims, allowing interventions to be targeted more effectively.
Wider welfare reforms have the potential to reduce errors in the long term by simplifying benefits administration, but waiting for the implementation of the Universal Credit is not an option. The reforms will not be implemented in time to contribute much towards the 2015 target, and it is therefore essential that the Department maintain its current focus on getting error levels down now.