Department for Work and Pensions Accounts 2019–20 Contents

1Background and the Department’s response to COVID-19

1.We took evidence from the Department for Work & Pensions (the Department) based on its 2019–20 Accounts, and the Comptroller and Auditor General’s audit certificate and report contained within that document.1

2.The Department is responsible for the delivery of work, welfare, pensions and child maintenance policy. As part of this, it is responsible for paying benefits to claimants on time, and in full, in accordance with legislation and the related regulations. The Department serves over 20 million claimants and customers. In 2019–20, it spent £191.8 billion on benefit payments to claimants. Of this, £173.5 billion was for benefits paid directly by the Department and £18.2 billion was for Housing Benefit paid on its behalf by Local Authorities.2

3.Benefit expenditure represents 97% of the Department’s total operating expenditure of £197.5 billion (the remaining expenditure relates to the Department’s running costs including staff remuneration and contracted-out programmes). Benefit payments are susceptible to both deliberate fraud by individuals, and unintended error by claimants and the Department.3

4.The C&AG has qualified the Department’s accounts every year since 1988–89 due to material levels of fraud and error in benefit expenditure. The 2019–20 accounts were qualified for fraud and error in all benefits except State Pension, because State Pension, having relatively simple conditions of entitlement, has very low fraud and error.4 The overpayment rate was 4.8% (£4.5 billion) and the underpayment rate was 2% (£1.9 billion) across all the other benefits. The Department expects that the significant increase in its benefits caseload as a consequence of COVID-19, alongside the fraud and error impact of relaxing some of its controls in response to the pandemic, will lead to a further increase in losses to the taxpayer from benefit fraud and error in 2020–21.5

Significant increase in benefits caseload as a result of COVID-19

5.As measures to address the COVID-19 pandemic affected people’s incomes, there was a large spike in the number of new claims for Universal Credit as the main working-age benefit.6 The Department told us that it received “six times as many claims as we might normally expect” over the course of the first six months of the pandemic.7 The Department reported that there was an increase in the number of people on Universal Credit from 2.9 million in February to 5.6 million in August, and a peak of over 100,000 new claims a day at the end of March. Other benefits, such as New Style Jobseeker’s Allowance and Employment Support Allowance also saw increases in claims over this period.8

6.In order to ensure that enough people were available to deal with the spike in new Universal Credit claims, the Department told us that it “took in something like 10,000 colleagues from other parts of the organisation to focus on Universal Credit claims” and brought additional staff into the organisation from other departments and external recruitment.9 The Department told us that in addition to the mobilisation of staff, it was through “new automation and new ways of working” that it was able to manage the surge in claims.10 For example, it informed us that it “started the period with a situation in which quite a number of folk had to be at home, but were unable to work” but that it managed to get out around 20,000 devices to staff at home to enable them to work.11

7.The Department also turned off some usual controls (also referred to as control ‘easements’) that are ordinarily in place to mitigate the risk of fraud and error to allow it to manage demand, and to support vulnerable people during lockdown. For example, claimants no longer had to attend a job centre for a face-to-face interview and the Department has reduced some of its checks on the information claimants provide.12

8.The Department’s figures show that payment timeliness was maintained at around pre-COVID-19 levels. Its preliminary statistics show that 89% of new claims were paid on time and in full from 1 March 2020 to 26 May 2020.13 This followed the Department’s efforts to improve the portion of new claims paid on time and in full from 55% in January 2017 to around 90% in February 2020.14

9.The Office for Budget Responsibility’s Fiscal Sustainability Report (July 2020) outlines that ‘unemployment is likely to be materially higher for several years’ and forecasts that unemployment will significantly increase from its current level (it assumes 15 per cent of people on the Coronavirus Job Retention Scheme will ‘move into unemployment’ in its central scenario).15 In response to questioning on how the Department is preparing for another possible increase in benefit claimants over the next few months, it told us “we are developing very robust business continuity programmes that build on what we have learnt”.16 The Department has been promised an additional £895 million of funding as part of the ‘plan for jobs’ (announced on 8 July) ‘to enhance work search support by doubling the number of work coaches in Jobcentre Plus before the end of the financial year across Great Britain’.17 The Department told us that it aims to increase the number of work coaches from 13,500 to 27,000 by the end of March 2021; it explained that it is currently in its second wave of recruiting and is hiring 8,000 staff (4,500 work coaches and 3,500 to work in service centres and back-office processes to help manage claims).18

1 Department for Work & Pensions, Annual Report and Accounts 2019–20, HC 401, 30 June 2020; and C&AG’s Certificate and Report on pages 180–195 of same. Abbreviated in subsequent footnotes to ‘DWP ARAC 2019–20’

2 DWP ARAC 2019–20, pages 12, 184

3 DWP ARAC 2019–20, page 184, 186

4 C&AG’s Report, Departmental Overview 2019–20: Department for Work & Pensions, 13 October 2020, page 12; DWP ARAC 2019–20, pages 184, 186

5 Q 20; DWP ARAC 2019–20, pages 185, 186

6 DWP ARAC 2019–20, page 193

7 Q 1

8 DWP ARAC 2019–20, page 193; Letter from DWP to Committee dated 22 September 2020, page 6

9 Q 5

10 Q 1

11 Q 5

12 DWP ARAC 2019–20, page 193

13 C&AG’s Report, Departmental Overview 2019–20: Department for Work & Pensions, 13 October 2020, page 18.

14 C&AG’s Report, Universal Credit: getting to first payment, Session 2019–21, HC 376, 10 July 2020, page 33, para 2.8

15 Office for Budget Responsibility, Fiscal Sustainability Report, July 2020, pages 38–39, 137

16 Q 5

17 HM Treasury, Plan for Jobs, CP 261, 8 July 2020, page 9, para 2.17.

18 Q 5

Published: 18 November 2020