NAO discovers benefits overpayments

Written By: David Hencke
Published: July 29, 2017 Last modified: July 29, 2017

The government has overpaid people an estimated £5bn in benefits and tax credits despite initiating a harsh crackdown on benefit claimants and tough checks on tax credits, the National Audit Office, Parliament’s financial watchdog, has revealed in two reports.

Two of the most prominent government departments have had their accounts qualified by the National Audit Office because of rising fraud and error in tax credit and benefit payments. HM Revenue and Customs and the Department of Work and Pensions are performing worse than a year ago with billions of pounds of overpayments of benefits and tax credits paid to people.

Figures from two separate reports by the NAO show both departments have still failed to get a grip on a problem which goes back years.

On tax credits the report says: “HMRC’s central estimate of error and fraud resulting in overpayments in 2015-16 is 5.5% of Tax Credits expenditure (4.8% in 2014-15) and its estimate of error resulting in underpayments is 0.7% of Tax Credits expenditure. This equates to overpayments of £1.57 billion and underpayments of £0.21 billion.

“HMRC’s estimated increase in error and fraud within Tax Credits is contrary to the significant reductions achieved in previous years, and the rate is expected to increase further” said the NAO. “HMRC analysis shows that during 2015-16 the increase in estimated error and fraud was associated with the income, work and hours, childcare and undeclared partner risk categories.”

The department is also a year behind in estimating the results partly because of a failed privatisation contract with Concentrix which figures for the last financial year expected to be much higher.

A similar situation is reported in DWP with the situation reversing from previous improvements.
The report goes on: “Excluding State Pension, overpayments are at the highest levels since 2009-10, while underpayments are at the highest recorded levels.”

Overpayments amount to £3.4bn, excluding the state pension, an increase of £400 million while underpayments are £1.5bn In percentage terms this amount to an increase to 4.1 per cent of all overpayments and 1.9 per cent of all underpayments.

The report says: “Amongst benefits measured annually for fraud and error, Employment Support Allowance and Housing Benefit overpayments are at the highest recorded levels, and Jobseeker’s Allowance overpayments have returned to the highest levels since 2010-11.

The NAO questions some of the techniques used by the DWP to calculate fraud – saying it assumes that when people don’t get back to the department for a re-assessment that they have been fraudulently claiming. This may not be the case. Also, information is out of date.

“The absence of up-to-date information on error rates in large benefit streams creates a risk that the department is not targeting its fraud and error interventions effectively,” the report says. “For example, Disability Living Allowance, which accounted for £11.5 billion of expenditure in 2016-17, has not been measured for fraud and error since 2004-05.”

Given the benefit is facing a radical change this is already out of date.

About David Hencke

David Hencke is Tribune's Westminster Correspondent