HM Revenue & Customs (HMRC) manages tax credits and paid out £29 billion to 4.7 million claimants in 2013-14. The Department for Work & Pensions (DWP) manages most remaining benefits and the state pension, paying out £164 billion in 2013-14 to 18 million people. Benefits and tax credits fraud and error is a significant and long-standing problem. Since 2010 both departments have made progress in reducing headline rates of fraud and error, particularly HMRC in tax credits. However, in 2013–14, DWP and HMRC still overpaid claimants by £4.6 billion because of fraud and error, and underpaid claimants by £1.6 billion. Overpayments increase costs to taxpayers and reduce public resources available for other purposes. Underpayments mean households do not get the support they are entitled to. The Comptroller and Auditor General has given qualified opinions on DWP’s accounts since 1988–89, and on HMRC’s accounts since 2003–04, because of the levels of fraud and error in benefits and tax credits.
Prepared 26 October 2015