Reducing errors in the benefits system - Public Accounts Committee Contents

Conclusions and Recommendations

1.  The cost of errors in the benefits system is considerable and has remained constant since 2006-07. Total overpayments in 2009-10 amounted to £3.1 billion. Of this total, staff and customer mistakes accounted for over £2 billion of overpaid benefits, while fraud accounted for another £1 billion of overpayments. The Department needs to step up its performance significantly if it is to meet its joint target to reduce the cost of overpayments due to fraud and error by 25% over the next four years. The Department and HM Revenue and Customs have an additional £425 million over this period to tackle the problem, but the Department has not clearly set out how it intends to spend and evaluate this extra funding. By May 2011, it should write to us with a clear delivery plan setting out the interventions it will implement to meet the target, how it will monitor progress and the corrective measures it will take if progress toward achieving the target is inadequate.

2.  The Department has focused on reducing overpayments and neglected underpayments, despite the hardship that underpayment of benefits can cause for claimants. The average weekly underpayment in Income Support for affected customers is £24, a considerable proportion (29%) of their weekly payment. There were an estimated £1.3 billion of underpayments due to customer and administrative error in 2009-10, but the Department does not have a target to reduce this total. The Department's drive to reduce overpayments must not be at the expense of reducing underpayments. It should set clear goals to reduce underpayments which are as challenging as its target on overpayments.

3.  The Department does not know which of its interventions have the biggest impact on reducing error because it has undertaken only a partial assessment of their costs and benefits. The Department has conducted cost-effectiveness assessments of some of its interventions, but these were incomplete and did not include all relevant costs. The failure to identify what works best undermines the ability of departments to manage programmes cost-effectively and is something we see repeatedly across government. We have made similar recommendations very recently in relation to both the work of youth offending teams and civil tax investigations. The Department should complete a full cost-benefit assessment of each intervention, and keep these up-to-date, so that resources can be targeted on the interventions that are most cost-effective at reducing error.

4.  The Department does not have a sound understanding of where and why errors arise and is not doing enough to prevent errors entering the system in the first place. The Department needs to improve its use of data to help it identify sources of error and prevent mistakes from occurring.

  • On administrative error, the Department should draw on available sources of information, such as staff feedback and calls to internal helplines, to detect where benefits processing staff are having problems. The Department should then use this information to revise guidance and training in order to help staff avoid making the most common mistakes.
  • On customer error, the Department should make greater use of risk profiling to identify those customers most likely to make mistakes on their benefit claims. The Department introduced risk assessments for Housing Benefit in 2003 and Income Support in 2010, but has yet to extend these to all benefits. The Department should then target appropriate actions, such as contacting customers to check if there have been changes in their circumstances which would affect their benefit entitlement, and evaluate such interventions.

5.  Quality checks are an important measure for detecting and preventing error, but Jobcentre Plus's quality assurance arrangements are not independent enough. The Pension, Disability and Carers Service has a national quality checking team independent from local offices to ensure the standard and consistency of checks, while Jobcentre Plus relies on checks carried out by staff working in local offices. The Department should make sure agencies learn from each other so that all agencies adopt best practice in their quality assurance arrangements. We expect Jobcentre Plus to fulfil its commitment to us to implement a system of independent checks by April 2011.

6.  Wider welfare reforms could reduce error in the long term by simplifying the benefits system, but could also distract the Department from its focus on getting error rates down now. The Department believes that the introduction of Universal Credit will minimise errors by simplifying benefits administration. However, Universal Credit will not start being phased in until 2013, and so will not be able to contribute much to the target 25% reduction in fraud and error over the next four years. The Department must ensure that its commitment to reduce error remains a priority and is sustained while preparations for Universal Credit go ahead.

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Prepared 10 March 2011