The Department for Work and Pensions (the Department’s) accounts have been qualified every year since 1988–89 due to material levels of overpayments and underpayments in benefits expenditure. Benefit overpayments, excluding State Pension, continue to increase and reached their highest estimated rate even before COVID-19. The estimated overpayment rate, excluding State Pension, now stands at 4.8% (£4.5 billion) of benefit expenditure of £93.1 billion for 2019–20.
The Department has given us multiple reassurances that it will be able to reduce the rate of fraud and error in benefit expenditure and is committed to working towards removing the qualification of its accounts. It is good at understanding the types of fraud and error in the system, but it is currently unable to demonstrate the cost-effectiveness of its counter fraud and error controls. Improving its understanding of its control’s cost effectiveness is vital to ensure it is putting in place the best possible response to fraud and error. We welcome what seems to be a new, more confident and constructive attitude and will be holding the Department to account for improving its performance, aided by the fraud and error targets it has agreed to set.
Since March 2020, the Department has had to respond rapidly to the impact of the COVID-19 pandemic. As measures to address the virus affected people’s incomes, many turned to benefits for the first time. The number of people on Universal Credit rose from 2.9 million in February to 5.6 million in August, with a peak of over 100,000 new claims a day at the end of March. We recognise the hard work and commitment of the Department’s staff to rise to the challenge of processing these new claims; the Department’s preliminary statistics show that 89% of new claims were paid on time and in full from 1 March 2020 to 26 May 2020.
To manage increased demand as a result of COVID-19, and to support vulnerable people during lockdown, the Department made changes to benefit delivery, including turning off some controls (also referred to as control ‘easements’) that are ordinarily in place to mitigate the risk of fraud and error. The large increase in caseload and easement of certain controls mean that losses to the taxpayer through benefit fraud and error are expected to increase significantly in 2020–21.
Various mitigations, including additional verification by its newly established Enhanced Checking Service, were introduced to combat the increased fraud and error risk. Nonetheless, the Department will continue to face big challenges due to COVID-19. It will need to be able to quantify the fraud and error impact of the pandemic and the effectiveness of the countermeasures which it has introduced. As it steps up its recovery activities, the Department must also be sensitive to the circumstances and needs of vulnerable claimants when recovering overpayments.
Published: 18 November 2020