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DWP has “lost grip” on fraud and mistakes in benefit system

17 November 2021

  • Levels almost doubled in pandemic from already record highs
  • Mistaken overpayments now account for 7.5% of Department’s benefit expenditure
  • Failure of even ambition to recover overpayments means ‘billions of taxpayers’ money is almost certainly lost’

The level of fraud and error in the benefit system almost doubled during the pandemic from what was already the highest rate since records began. Overpayments of benefits now stand at £8.3 billion, 7.5% of the DWP’s overall benefit expenditure (excluding State Pension) of £111.4 billion.  

Fraud and error were rising year-on-year before COVID-19 (and the NAO has qualified DWP’s accounts every year since 1988–89) but the Department’s response to the pandemic opened-up new weaknesses in its systems, which the Committee says “both organised criminals and dishonest opportunistic individuals have used to steal from the taxpayer”, billions of whose money “is almost certainly lost”.

At the start of the pandemic, DWP introduced a number of ‘easements’ - relaxing or adapting usual fraud and error controls - to enable it to manage unprecedented new numbers of claims, alongside implementing public health measures. DWP warned the Committee in evidence in September 2020 that responding to the spike in demand for benefits during the pandemic would increase fraud and error, but the Committee says today that the amount of taxpayers’ money being lost is “simply unacceptable”. 

DWP has been investing in data and intelligence systems and in 3,000 new staff, to - among other tasks - begin to tackle years of payment errors that had been uncovered even before the pandemic began.  But the PAC “remains sceptical about whether its approach will result in a real and sustained reduction in the levels of fraud and error”, and DWP admitted in evidence that it will be unable to demonstrate any such improvements in 2021-22.

Chair's comments   

Dame Meg Hillier MP, Chair of the Public Accounts Committee said:

“Mistaken overpayments now account for 7.5% of DWP’s benefit expenditure. Add to this the huge task of correcting years of underpayment of State Pension, and the Department’s resources are stretched. This is a real-life waking nightmare for the huge numbers of people affected, from the most vulnerable in our society to the full-time working families who still struggle daily to make ends meet. The Department appears unequipped either to properly administer our labyrinthine benefits system or detect and correct years of mistakes across too many of our basic state welfare entitlements, far pre-dating its current woes.

This situation is untenable and taxpayers – who also include benefit claimants - are losing billions because of it. There needs to be a step change in understanding the impact of benefit errors on people’s lives and restoring trust, because as we’ve seen recently with pension underpayments, once a mistake in the system materialises it can take years to resolve.”

Further information

Image: PA