13. In recent years both HM Revenue & Customs (HMRC) and the Department for Work & Pensions (DWP) have concentrated on detecting and correcting fraud and error. DWP estimates that during the 2010 Spending Review period its projects aimed at correcting claims saved £1.5 billion (71% of its total fraud and error savings). And HMRC’s detection activities accounted for £370 million (79%) of its fraud and error savings in 2014–15. The departments agreed, however, that it would be better to get payments right to start with, not least because of the hardship claimants can face when having to repay overpayments. Furthermore, DWP told us that over £2 billion of overpaid benefit is not recovered each year.
14. Both departments have made limited progress in preventing fraud and error occurring. HMRC accepted that this was a fair criticism, but claimed that major legislative changes to redesign tax credits were not sensible in the time remaining before Universal Credit is rolled-out. Instead, it told us it has invested in digital technology to enable claimants to renew their claims online and report changes of circumstances, as a bridge between a complete redesign of the system and doing nothing.
15. DWP acknowledged that it could potentially do more on prevention. It had budgeted to spend £192 million on projects to prevent fraud and error during the 2010 Spending Review period, and expected these to save £1.1 billion. However, it spent just £27 million on these projects, which saved £258 million. DWP explained that a key factor was its decision to stop the IRIS programme, which it had planned to use to identify high risk claims, because the cost was too high. DWP agreed that had it spent more on prevention, it could have potentially made more savings, and that on a cost-benefit analysis such investment might have been a good thing to do.
24 , paragraphs 2.20, 2.23
27 ; , paragraphs 2.21-2.22
Prepared 26 October 2015