Work and Pensions Committee
Oral evidence: Fraud and error in the benefits system, HC 1082
Monday 17 March 2014
Ordered by the House of Commons to be published on 17 March 2014.
Written evidence from witnesses:
– Local Authority Investigation Officers Group
– Local Government Association
Questions 1 - 81
Members present: Dame Anne Begg (Chair); Glenda Jackson; Kwasi Kwarteng; Nigel Mills; Teresa Pearce; Mr Mike Thornton; Dame Angela Watkinson
Witnesses: Debbie Gibbons, National Chair, and Mick Hopkins, Midlands Regional Chair, Local Authority Investigation Officers Group; Councillor Sharon Taylor, Deputy Chair, and Chair of the Finance Panel, Local Government Association (and Labour Leader of Stevenage Borough Council); and Kevin Williamson, Head of Policy, National Housing Federation, gave evidence.
Q1 Chair: Can I begin by welcoming you to this afternoon’s session? This is our first oral evidence session on our very short inquiry into fraud and error in the benefits system. I thank you very much for coming along this afternoon. Can I ask you to introduce yourselves for the record, please?
Mick Hopkins: My name is Mick Hopkins. I am a national executive officer with the Local Authority Investigation Officers Group.
Debbie Gibbons: Hello, I am Debbie Gibbons. I am the Chair of the Local Authority Investigation Officers Group.
Cllr Taylor: I am Councillor Sharon Taylor. I am the Chair of the Finance Panel at the Local Government Association and Leader of Stevenage Borough Council.
Kevin Williamson: I am Kevin Williamson. I am Head of Policy at the National Housing Federation.
Chair: Thank you for coming. It might be that there is a division called imminently, and we will just have to suspend until we all go off to vote. Hopefully we will get through some questions before then. We know through the official statistics that the incorrect reporting of claimants’ income is the biggest—
Hold it there and we will suspend the meeting for 15 minutes but, if we are all back before then, we will start again.
Sitting suspended for a Division in the House.
On resuming—
Q2 Chair: I think we will resume the meeting and I will try to pick up where I was so rudely interrupted by the bells. Hopefully we will get through the session without any more interruptions, but thanks for your patience. What I was attempting to say was that official statistics show that it is the incorrect reporting of income that is, by far, the largest housing benefit fraud and error risk. What do you do in order to verify housing benefit claimants’ income? Have you got any particular things that are more effective than others or what is it that you do, Debbie?
Debbie Gibbons: The verification will vary depending upon the type of income that the customer has. As you can imagine, there are so many complexities to claimants’ income. It could be as simple as somebody working full‑time for a longstanding employer to somebody who is being paid cash in hand for a couple of hours’ work, so it is very much dependent upon the individual’s needs. We depend on the customer coming in and informing us of the type of income that they are on, providing verification of that and then making background checks as to the type of income that they reported. It is all very much dependent on the individual. Then it is about verifying that information at a said time during the life of their claim, and that is down to the local authority’s choice as to when we choose to do that, but also educating the customer that they need to inform us of changes as they go along.
Q3 Chair: Would it be the case that possibly when it is a new claim and they are opening a claim, they are more likely to be accurate? It is as time goes on that their circumstances might change and it is that that they do not report.
Debbie Gibbons: Yes, that is more likely.
Q4 Chair: How often do local authorities chase up once a claim is in payment?
Debbie Gibbons: That is up to the individual local authority’s choice. There is no set target laid down for us anymore. One LA may check six monthly; another may check annually, but it is dependent upon the local authority’s own local agreement.
Q5 Chair: What is the average? What would be normal?
Mick Hopkins: Could I come in on that point? There is not necessarily an average or a normal. What we try to do is base it around risk. Some of the income we would be able to verify very easily and we will know when those types of income are increasing, for example the minimum wage or, in the area where I work, there is a large amount of customers who get a mine worker’s pension and we know when that is going to increase. We will set a review of the claim around that income, so that we make sure that we capture that information.
The major issue here is the risk posed by the different types of income, the different types of person and the in‑claim activity, so we would try to set a review on the claim based around that activity. We will also try to predict future changes of circumstances, so that we are working to manage the claim and the customer or the claimant is aware of their responsibilities to report those changes promptly.
Q6 Chair: What is the determining factor for a local authority—and maybe this is one for you, Sharon—as to how often they check the veracity of the income of the people who are claiming housing benefit?
Cllr Taylor: Colleagues have highlighted that that can very much depend on local circumstances. One of the important things in this is that, if we are going to go to the Single Fraud Investigation system, we must have some kind of partnership working that helps the Single Fraud hub understand what those local circumstances might be. At the moment, a local authority can look at it. We do a lot of cross‑matching of data against the other data we have about our clients, so that we are looking at other things where their income might impact and seeing what information they have put in about those as well. It is one of the areas where the local service can meet local needs.
A mine worker’s pension is actually a really good example of that, because that would not apply at all in my local district, but there may be other local factors. We have a very high night‑time economy, where people are generally paid on zero‑hour contracts and may change their income very regularly. That would be a factor in my area.
Q7 Chair: How complicated is it for people to know exactly which income and when to report it? If they have got a change of circumstances, they generally want to not be fraudulent, but they have a zero‑hour contract and their income varies so much, week-to-week. How easy is it for them to find their way around the housing benefit system and make sure that they are keeping on the right side of the law when it comes to fraud?
Debbie Gibbons: Again, that is about the risk area. What we would tend to do is set a review maybe every month or four-weekly. Certainly that is what we do with our customers: they will come in to see us; we will calculate the claim face-to-face with them at our front desk, on a four-weekly basis, if their income does differ that greatly. That is not just for somebody in that instance; that could be for anybody who may be working overtime or may have their chance to do more hours.
Q8 Mr Thornton: On that, I could imagine it would be quite difficult for some people to be able to work it out as they go, so I could imagine circumstances where they come to you, they do the face‑to‑face and you say, “Ah, your income from us is going down because you did these extra hours.” They do not realise, because they are not able or find it difficult to calculate these things. Suddenly, they have spent that extra money because they thought, “Great, I can buy my daughter another pair of shoes.” Suddenly, you are saying, “Ah, you have earned that extra money so we are taking this amount of benefit away from you,” so they do not have money they thought they had. How easy is it for you to help people to say, each month, “Be very careful because, if your income goes up this month, we will take it down. If you get any extra income, do not spend it”? Can you remind people to wait until they have found out if they can buy their daughter that pair of shoes or allow their son to go on the trip to the zoo with the school?
Debbie Gibbons: Yes, a huge area of welfare is about educating the customer and helping the customer to get the right benefit at the right time. That is what local authorities do the minute a customer comes in and asks us a question. We will spend time with them explaining that. It is about the changes they need to report, how quickly they need to report them and also how that can affect their benefit going up or down.
Q9 Mr Thornton: I was thinking less when they ask a question, but just a regular basis each time you see them, just to remind someone whose lifestyle might be fairly chaotic with other things on their mind. They do not remember exactly what they should do and they have suddenly been caught with no money, because they thought they could have bought that sweater for their son. This is what worries me, because it is always afterwards, is it not? It is always afterwards that you find out that they have had the extra money; therefore, you are cutting their benefits.
Debbie Gibbons: Actually, no. It is not always after; it is the minority of people.
Mr Thornton: It is the minority. Sorry; when I said “always”, that is where the difficulty is.
Debbie Gibbons: Yes, it is.
Q10 Mr Thornton: With a zero‑hours contract and people having 10 hours one week and two hours the next, I can see someone whose lifestyle is fairly chaotic anyway just not knowing what to do.
Debbie Gibbons: We tend to work on an average. We would not just use that individual week. Certainly for us, we work on a four-weekly average to calculate their benefits so that it aggregates it out.
Mr Thornton: I am sure you would, but they probably are not working on an average.
Cllr Taylor: Keeping documentation is really important. We keep advising our customers all the time that they must keep the documentation. If you are in the middle of a chaotic lifestyle that sometimes is more difficult for people to organise than others. We do all we can to get those messages out to people: you must tell us when your circumstances change; you must keep the documentation that you are given by your employer saying exactly what you have been paid.
Q11 Mr Thornton: Is there a phone line they could phone up to say, “I have earned an extra £10 this week. Will that affect by benefits next month?” Can they just phone up and ask that and get an answer quickly?
Cllr Taylor: Yes.
Debbie Gibbons: Yes.
Q12 Chair: Apart from the benefit type, which obviously if they have an eligibility or an underlying eligibility for a benefit then you will know, is the main source of evidence wage slips or is there other evidence of income that you look for?
Debbie Gibbons: There are all sorts. There are so many anomalies depending on how they are paid, because not everybody gets a pay slip. Sometimes it is weekly; sometimes it is written on the back of a cigarette packet. It could literally be that simple. Right across the spectrum, it just depends upon the individual. It is so complex.
Q13 Glenda Jackson: I am asking essentially about self‑employed claimants, because we have taken evidence, not hard evidence, that people are being encouraged to go into self‑employment. I just wondered how it works for them when they claim housing benefit when they, in effect, have absolutely no proof, I would have thought, of earnings at all.
Debbie Gibbons: It is difficult. We ask them to provide the best evidence that they can. Obviously we ask them to keep receipts and income details—start off with a book. Again, we will work through it with the customer. The thing with our customers and being local is that most of our customers come in to the council offices regularly anyway and they like that one-to-one basis of actually being able to speak to an advisor and say, “Help, I am going to do this,” or “Can you advise me how I do this?” and then we will talk it through with them. It is about keeping the best evidence they can and giving us as much information as they can.
Q14 Glenda Jackson: I was very interested in that reply. You do not know everybody, but such evidence as you have, do people now realise that it is the local authority that is processing their housing benefit claims? There is no question about that now, as far as the individual is concerned.
Debbie Gibbons: No.
Q15 Chair: There are obviously issues about Universal Credit, which we have already alluded to, but we will come back to them. The second‑most prevalent housing benefit risk factor is people saying they live alone when actually they live with a partner. What do you do to prevent and detect that kind of fraud?
Debbie Gibbons: We use data sharing, really. The biggest key in this area is compiling your data to get a financial footprint of where this person is, where they have been, who they live with and coming up again with the best evidence of the background of that individual.
Cllr Taylor: We have some very good examples of this. Ealing Council has realised nearly £7 million of savings from taking action on fraudulent claims for single person’s discount; and West Berkshire, £4 million in three years. Councils are taking significant action on this and it is largely by cross‑matching data that we are getting those kinds of results.
Q16 Chair: Do you think that everybody knows that housing benefit is a household benefit rather than an individual benefit?
Debbie Gibbons: Absolutely. The first criterion for housing benefit is if you have a rental liability, so you will not get housing benefit if you do not have to pay rent. Yes, they do know that it is therefore built on the basis of who is in the household, because it is apparent with the house. The majority of claimants realise that it is about the make‑up and it is a different benefit from an individual.
Mick Hopkins: In certain circumstances where there is a risk that has been identified—that may be someone who has previously committed an act of fraud against a local authority based on non‑residency, or something to do with the address or make‑up of the family—then the authority has the choice to visit that address prior to payment being made to make sure that the correct entitlement is being given.
Q17 Chair: How often do you visit properties then?
Mick Hopkins: The three main ways of reviewing claims are actually over the telephone, by sending out a form and by visiting. Visiting is the most effective method, because you are face-to-face with—
Chair: It is presumably the most expensive though.
Mick Hopkins: It is the most expensive. It is getting the correct balance there. This again is where the risk factors come in. If you have high risk, so someone who has previously committed fraud, then the chances are you will send someone to visit them, whereas if someone has always reported their changes of circumstances and always complied with the rules and the regulations, you may send them a review form on an annual basis or even on a three‑year basis.
What the authorities do—and this is probably covering one of your previous points on income—is try to give the claimant the longest period of uninterrupted benefit, so that they can get used to that payment being paid. The issue of changes of circumstances, the money going up and zero hours have an effect and we have to take those into account. It is giving them the longest period of uninterrupted benefit, but also educating them to the changes that they need to report and the fact that they need to be reported promptly.
Q18 Chair: Do you use any of the software on the telephone calls that might pick up if somebody is telling the truth or not?
Mick Hopkins: My local authority has in the past. We were one of the pilot sites and it does make the press. It made the local press.
Q19 Chair: I presume from what you said you are not using it anymore?
Mick Hopkins: We do not use it now, but we use the techniques. I was just going on to explain that the technology, the piece of kit, the Voice Risk Analysis that analyses the stresses in the voice, is only part of it. The key to me is the other side of it, which is the Narrative Integrity Analysis. That is where you train your staff to ask appropriate questions and to recognise certain answers that are given that may indicate that you need to probe further. It is actually a staff training issue rather than the kit. The VRA kit and the questioning techniques work well together. We use the questioning techniques now and our staff are trained in those questioning techniques.
Q20 Chair: Did you think that the actual technological effects were not as effective as they might have been or was it just the fact that using it on its own would never has been as effective anyway?
Mick Hopkins: It is proven to work in the insurance industry and it is used regularly in the insurance industry. It is twofold: the results from the pilot did not prove that it worked significantly well enough at that time. There are three bandings: it does not work, it has partially worked, or it has worked and been successful. We were in the middle banding. We have to take a choice then whether we outlay significant money to carry on with licence agreements on that piece of kit, and our choice at the time was not to continue with that, but to continue to use the questioning techniques.
Q21 Chair: Was there a policy directive from the LGA about this kind of thing?
Cllr Taylor: No, it is up to councils’ individual discretion. I do not use it in my council.
Q22 Glenda Jackson: I was just wondering how much you follow up the neighbour who says, “There is somebody living next door and there shouldn’t be somebody living next door.”
Mick Hopkins: It is a difficult one in that there may be many reasons why a neighbour gives information. When something is reported to a council, we will follow it up in some manner. The majority of councils, and there are 380, set their own policies, but the majority would follow a zero‑tolerance policy to fraud. Where someone takes the time to give you some information, then we will do something. Something may be a visit to the property to just ask questions if a neighbour gives information to say that there is someone in the household who should not be there, but a visit to the property may show that that person does have another address and that clears everything up.
We have to be careful because there are neighbourhood disputes and various things, so what we do is we look at the whole range. As investigators, you gather intelligence and you gather evidence. Evidence proves something; intelligence points to something. We try to turn the intelligence into evidence, but also we have to balance that. Carrying out an investigation is quite an expensive process, so it may be that just going and visiting someone and asking them a set of questions may either answer your questions or it may cause you to probe further. In some instances, it actually obtains an admission that something is happening.
Q23 Glenda Jackson: The reason I ask it—and this is entirely anecdotal and limited to my own constituency—is that I do get complaints from constituents who say, “We make a complaint. We know something is not right and nobody ever does anything.” I try to point out that no one is going to come back to them directly and give them any communication, because you are not allowed to.
Mick Hopkins: No, we cannot tell them.
Glenda Jackson: I am just trying to clarify that you do actually.
Debbie Gibbons: Yes, and again that is built in around risk too. Obviously, if you have half a dozen neighbours telling you the same thing about one person, it is pointing out that they have either really upset everybody in their street or something is actually going on.
Mick Hopkins: If you get a neighbour reporting and that person has a previous history of committing fraud or similar fraud against an authority, then that would flag up a much higher risk and you would treat it in a different way.
Q24 Glenda Jackson: You must have the odd repeat offender who does not like anybody.
Debbie Gibbons: We do.
Cllr Taylor: Having those kinds of whistleblowing channels open is really important for local authorities, I think. I am interested to see whether, when we go to the Single Fraud Investigation Service, that would be as effective. People want to call somebody locally to report this. We would need evidence to say whether that did work differently under a Single Fraud Investigation Service, but my experience is people like to talk to someone local, because they feel there is more chance that something will get done about it.
Chair: We have got a whole section on Single Fraud Investigation coming up.
Q25 Glenda Jackson: How do local authorities guard against the possibility of claimants making a number of separate housing benefit claims in different local authority areas? Are there linkages between the local authorities to pick up this kind of thing?
Debbie Gibbons: We do work closely together. There is not one national computer system that could pick it up for us, but what we do is have a number of checks. We obviously ask where people have come from and when they came into our area and, again, it is dependent upon the local authority how far they would take those checks, but also the risk. Again, our scheme is all built around the risk of this individual and what we know about this individual.
Q26 Glenda Jackson: Does the alert signal go off for you because it is a new claimant? You said somebody coming into your area.
Debbie Gibbons: A new claimant is always verified much more vigorously than any claim change. Somebody can just come in and tell us of an increase in their income and it is quite a simple process, but a new claim starts off a completely new process, yes.
Q27 Glenda Jackson: How do you take that suspicion further? Is it just ringing up and saying to the nearest local authority, “Do you know this individual?”
Debbie Gibbons: It could be a number of things. Certainly, our organisation is all built around working as a network group and that is why we started it originally, so that all investigators had someone to speak to. Of course there is now all the data matching and intelligence that we share on a much wider scale, which can lead to so much more and will mean that, in an investigator’s time, a much shorter amount of time has to be spent actually doing work on that particular case, because the background checks have already been done.
Mick Hopkins: Anecdotally, it has been shown that people move, on average, less than 10 kilometres from where they previously lived. What is happening in local authorities is that regional hubs are being set up and, in the LGA evidence, there was some allusion to this. In Huntingdonshire in Cambridge, they have actually set up a hub that is very effective. Basically what the hub does is take in data from various sources and throw out anomalies. That would be one such anomaly that would be thrown out. If there are multiple claims, then those anomalies would be thrown out in a certain way and then they would have to be dealt with in a certain way. That might be with a full investigation; it may be with some form of compliance, going out and visiting the person.
Q28 Glenda Jackson: Would these claims in the main be in the private sector as opposed to local authority or social landlords, or is it across the board?
Mick Hopkins: It is across the board. The key thing is that fraudsters do not recognise boundaries. Where there is money to be had, they will go and get it.
Glenda Jackson: Is there anything you want to add, Sharon?
Cllr Taylor: We do cross‑check against National Insurance data and looking for duplication in National Insurance number matches is a good way of checking whether there are claims being made in more than one area, for example. There are things that we can do like that. There are some issues in this around UC, which I do not know if you are coming on to later.
Chair: We are, yes.
Cllr Taylor: There are some issues that we are flagging up around how Universal Credit might change this situation. That data-matching, the setting‑up of local hubs—and we have one in Hertfordshire that we use as well—so that you get local knowledge of where people have previously committed fraud, for example, if they are moving between districts in an area, then you will be able to pick that up.
Q29 Glenda Jackson: You mentioned the National Insurance numbers. Can you cross‑refer with Jobcentre Plus on this?
Debbie Gibbons: Yes.
Glenda Jackson: Is there is a bar on you saying, “Listen, I have this number, but I have a different name,” or something like that?
Debbie Gibbons: No.
Mick Hopkins: No. We work very closely with Jobcentre Plus and the Department for Work and Pensions. In fact, there are regular monthly data matches through their housing benefit matching service, which is where local authorities give data to the Department for Work and Pensions. It is then matched against a whole set of rules and sets of data, and again any anomalies are sent back to the local authority to have a look at. That might be as simple as a mismatch on a date of birth because the information has been collected incorrectly, but it may be that someone has told you that they have one bank account and, in actual fact, they have 10 with lots of money in them.
Q30 Glenda Jackson: Who actually, if the evidence is there, pursues the case? Is it you or the individual local authority who actually takes the fraudster to a court?
Mick Hopkins: It depends what is actually involved in this. If there are national benefits paid by Jobcentre Plus or the Department for Work and Pensions, and local benefits paid by the local authority, then generally they would work together; the two organisations would work together. It may be that they would decide on the lead, because one of them may be the primary or there may be more money being paid by one organisation. Obviously that would cut down on duplication of work. The idea when you are working in partnership is that one organisation would lead and gather as much evidence as possible, but the other would support. Local authorities have a vast array of data available to them, mainly based around the address rather than the person. In the Department for Work and Pensions and Jobcentre Plus, information tends to be based around the person rather than the address. Working together, you get a much fuller picture.
Q31 Glenda Jackson: Is it always worth your while to pursue?
Mick Hopkins: Again, you have to decide on what intervention to make. Going to a full criminal investigation is an expensive thing to do. It may be that stopping the fraud or the financial irregularity now is the best way of dealing with it, so you actually stop it and accept that there may have been a small loss to the organisation. If you can prove that there was that loss, you can get that money back through civil means. We do have other options available to us as well. We can apply civil penalties, a £50 civil penalty, if someone has not reported a change of circumstances and that has created a small over‑payment in benefit. The over‑payment would be recovered and a civil penalty could be applied on top of that.
Q32 Glenda Jackson: That is more a mistake, is it not, rather than deliberate fraud? We are asking questions about people who deliberately try to get as much as they can. You said there is no limit to what fraudsters will do.
Debbie Gibbons: Yes.
Mick Hopkins: Each case is taken on its own merits and, generally, if it is a genuine mistake, then you would recover the money that the person has had that they should not have had, but then the next role is educating them so that it does not happen again, working with them. Perhaps it is setting a future date on the system diary for the council to chase that person up for a future change, along with explaining to the customer where they made the mistake so that they do not do it again. We are helping them to manage their claim, as well as educating them so that they can manage it themselves.
Cllr Taylor: I agree with that about mistakes but, with deliberate fraud, there is something about this depriving other people of money that they may need. You may need to make an example of people. I appreciate that investigations are expensive and we do have to be careful about how we use our resources but, if we are sure there is deliberate fraud, we would want to see that there was an investigation and that person was brought to justice, because that is what the general public wants to see.
Mick Hopkins: There does not necessarily have to be any financial gain in that, because the best way of dealing with fraud is to stop it at the outset, so that you do not lose any money.
Q33 Glenda Jackson: This is again an anecdotal one for me. I mentioned this to the Committee before you came in. I have noticed a spike—I do not mean a great Shard type of spike—but I have noticed a spike in cases of people subletting their local authority housing. Are you seeing this kind of spike? We are seeing adverts on the back of London buses saying, essentially, “Don’t cheat”.
Cllr Taylor: I have just launched a project on it in my area, because I am concerned about it. One of the things we do is go and knock on a lot of people’s doors, and sometimes the information that you have about that household is nothing like what you see when the person opens the door. I am concerned about it enough to have started a project in my own authority on that.
Q34 Glenda Jackson: As I have said, there has always been this, but they have been very few and far between, and I have seen an increase. I have seen also the changes that, not infrequently, the tenancy holder purports to the owner of the property, so the individual who is renting it believes that it is absolutely kosher. It is not always that the rent is being claimed on housing benefit, but increasingly it is and I just wondered how serious it is becoming.
Debbie Gibbons: As our Chair said earlier, we talk about verification of income and major risks. Major risks now are about the actual property and the tenancy, and the amount of rent we are paying in housing benefit for that tenancy and the make‑up of it. Certainly now with the Prevention of Social Housing Fraud Act, we are now looking into this more and more. It has been recognised that it is growing. I think it is not growing; it has always been there and we have never looked at it before.
Glenda Jackson: Really?
Debbie Gibbons: Yes.
Mick Hopkins: The issue is, potentially from a landlord point of view and a local authority point of view, where there is an illegal sublet, the rent will be paid on time and the person who is the illegal subletter will not create many problems, because they do not want the council or the housing association knocking on their door and finding out that there is a problem. You get other associated problems with that, such as antisocial behaviour and you can get other associated criminality when there is an illegal sublet. The council does not know who is in their property and they need to know. Obviously there is the housing need. If someone has sublet a property, did they need that property in the first place? There are a lot of people homeless who are waiting for those properties to come on to be let.
As Debbie said, the problem has always been there. It has certainly been highlighted as a major problem in London. It was raised as an emerging risk in ‘Protecting the Public Purse 2011’ and ‘2012’, which is the Audit Commission report, but it often goes hand in hand with housing benefit fraud. It is not unheard of that the illegal sublet will actually make money for the tenant. The council tenant will sublet it for more money than they actually have to pay.
Glenda Jackson: I have got one where it is perfectly clear that they have been charging rent, pocketing the rent and claiming housing benefit while they are living somewhere else. They have sent a threatening third party around to collect the rent.
Mick Hopkins: If you take that even further the tenant, after living in the property for so long, then has the ability to buy that property under the Right to Buy scheme at a very reduced rate. That property could be lost from the council’s stock to a fraudster and they will make a significant saving on the cost of the property.
Q35 Glenda Jackson: That would be very though unusual, would it not?
Mick Hopkins: It is not as unusual as you would think. It does happen; I have seen a number of cases where there has been an illegal sublet and a Right to Buy. It is sublet and the person who has bought it illegally then puts a tenant in who actually claims housing benefit. The council has lost a property and then the cost of that person’s mortgage is being met from the council again, from the public purse.
Cllr Taylor: We need to be better at using data-matching to identify this. We can do it now we have better access to the data and I think we should, because that is depriving people of council housing. The people who are in there are jumping the queue effectively, and the people who are not living there obviously did not need the house in the first place.
Q36 Glenda Jackson: Another way people get under these kinds of barriers is because of the Right to Buy, where the tenant has moved out and handed that flat quite legally over to a tenant. There is a constant churn. People no longer recognise the people who live on their estates. Before this had happened, they would be the first to have said, “There is something not right going on in number 10.” Now they have no way to know whether it is right or whether it is wrong.
Debbie Gibbons: Our population is so transient now that this neighbourhood of knowing who is next door or who is talking two doors down has completely gone.
Q37 Chair: Kevin, obviously your members must be faced with all of this too. Do you do anything differently or do they do anything differently from the local councils, or is it the same techniques that you use?
Kevin Williamson: I think so. Broadly speaking our experience, certainly on the last point in terms of social housing fraud, is that it is an area that we are increasingly focusing on. In terms of the raft of other questions from the Committee, our focus at the moment under the existing system would be the transfer and the exchange of data between ourselves and local authorities. Some of that is very basic, around what sort of stock we have, rent levels, addresses and that sort of stuff that does not really concern us in terms of disclosure, but we can have deeper relationships and more data going across. One of our concerns that no doubt we will get on to is—
Chair: Universal Credit.
Kevin Williamson: We are outside the loop for Universal Credit, but that raises concerns.
Chair: We will come on to that. Data-sharing—lead the way, please, Teresa.
Q38 Teresa Pearce: Before I move on to that, Councillor Taylor, you have mentioned a couple of times about data-matching. What sort of data would that be generally?
Cllr Taylor: It can go across the whole raft of council activities, so everything from Blue Badge car parking, Council Tax support or tenancy.
Q39 Teresa Pearce: It would just be within the council.
Cllr Taylor: Yes, but we also work very closely with Jobcentre Plus and partners like that.
Q40 Teresa Pearce: The reason I ask is that my constituency is in two boroughs and, at the moment, they are both being rolled out with compulsory water meters by Thames Water. They are having to go and find out who lives where, so that would be really useful information for local authorities, would it not?
Cllr Taylor: Of course electoral registration data is very helpful to us, when we do our electoral registration.
Teresa Pearce: That depends on how accurate it is and who fills it in, but they are happy to identify where there is multiple occupancy and who the occupant is. It might be useful to see if they could share that with the local authority.
Cllr Taylor: It would, yes.
Mick Hopkins: Just to comment on the electoral roll, it is moving towards individual electoral registration, which means that we will have more data on people who are in the household and more accurate data. Each individual over 18 would need to fill in their own form, rather than one person completing and signing for the whole.
Q41 Teresa Pearce: What about doctors’ registers?
Mick Hopkins: Doctors tend to be very precious about their data, understandably.
Teresa Pearce: That would be really useful information though, would it not?
Cllr Taylor: We have moved some way forward with the Health Service in relation to things like complex families work, domestic abuse and those sorts of things, where they will share data. As colleagues have said, the Health Service, for very good reasons, is very protective of the data they hold.
Teresa Pearce: It is probably more accurate than the electoral register.
Mick Hopkins: However, they do share the data when we point out to them that we have a significant problem when we are looking at a criminal investigation, and we have certain powers to demand information as well.
Q42 Teresa Pearce: To move on to what I was supposed to be asking questions about, the National Audit Office found that common errors in housing benefit arose due to poor, late or untimely exchange of information between the DWP and the local authority as to whether the claimant was in receipt of a benefit or not. ATLAS, the Automated Transfer to Local Authority Systems, has been in place since February 2012. I was going to ask Councillor Taylor what information local authorities actually receive via that.
Cllr Taylor: As you will be aware, it represents a significant change in how those information flows work between DWP and local authorities. There have been three stages to it; each stage has been a significant risk for our operations, as any change. It requires additional resource to counter the risk. The view from councils generally is that ATLAS is effective and they are happy with it.
There are challenges in the volume of information on changes, which currently has a very heavy focus on tax credits, because there are lots going on there. Councils have to wade through a lot of data to find the right information that they need, so that is causing some problems. They are developing their own local IT solutions to automate some of that, but there are also plans, as part of the work on data sharing and Universal Credit, to improve what we do in terms of the quality of real‑time information around earnings and so on, so hopefully that might improve things. At the moment, the costs of refining the data largely fall on councils, which is another pressure in an already‑pressured financial environment.
Q43 Teresa Pearce: You are getting the data and then you are having to do all the filtering.
Cllr Taylor: Yes.
Teresa Pearce: If you got the data in a different way, would that—?
Cllr Taylor: Of course, the benefit then goes to the Treasury, because they get the benefit of the work that we do in terms of refining that data. We need some recognition of that additional burden that we are having to take, in terms of looking at that data, and yet all the benefit of it goes to the Treasury. We do have to watch that and make sure that councils are not being hit with yet another burden from which there is no financial advantage.
Q44 Teresa Pearce: Do you know if this is common across all councils or if some councils are doing it differently? It is a common gripe, is it?
Cllr Taylor: Yes, it is a common gripe.
Mick Hopkins: The issue is whether you go fully-integrated and it creates the problems a little further along the line, or whether you go partially-integrated and you actually deal with some of the issues further up the chain, but those issues still exist.
Q45 Teresa Pearce: Is what you are saying that you want information, but you are getting too much information? Is that what you are saying?
Cllr Taylor: Yes, at the moment. It is our job to sift it and find out what we need. It is not filtered enough for us to do the job that we need to do. That is not to say it is not useful information, but we are having to develop our own systems in order to filter it.
Q46 Teresa Pearce: I was going to ask you why it has not been more successful, but that would be why; it is because it is not useful information in a way.
Cllr Taylor: It is just the quantity. There is useful information in there, but it is finding it.
Teresa Pearce: Has anybody else got anything to add on that particular point?
Mick Hopkins: There also still has to be some user intervention on this, and that obviously leaves the issue of human error. That is still a factor within this system.
Q47 Teresa Pearce: The National Audit Office did say that processing the information was resource‑intensive, but they pointed out that maybe, given the benefits in reducing fraud and error, it might be worth it. What you are saying is the benefit does not come to you.
Cllr Taylor: We appreciate the greater benefit. It benefits the greater good.
Q48 Teresa Pearce: You are using up your resource for a cut that might end up being a cut in the benefits bill, which you do not—
Cllr Taylor: —Which we do not see, yes.
Q49 Teresa Pearce: Do you get any reward?
Cllr Taylor: No, not at the moment. We would like some recognition for doing that.
Q50 Teresa Pearce: It seemed like this was going to be a wonderful idea if they shared things quicker with you, but it seems that you are just drowning under it. Have you had to train up?
Mick Hopkins: Yes.
Q51 Teresa Pearce: What about in your case, Councillor Taylor? Your housing benefit is in house, is it?
Cllr Taylor: Yes.
Q52 Teresa Pearce: What about local authorities where they outsource it? Have they had to flex their contract in some way, do you know? That would be quite difficult if you outsourced it to Capita or someone. You would then have to pay them extra—oh, no; this is not very good at all.
Mick Hopkins: Or you could use your own staff and pay them extra.
Teresa Pearce: You probably would not have staff with the expertise who would understand what they are looking at. If you have outsourced all your housing benefit, then the housing benefit staff will sit somewhere else, at arm’s length.
Q53 Chair: Is there an IT solution to this?
Cllr Taylor: Councils are developing their own IT solutions to it.
Q54 Chair: Was not the problem before that the council IT did not speak to the DWP IT?
Cllr Taylor: Yes. What we are doing is being developed piecemeal and people are doing their own IT fixes to sort through the data more quickly, but that is not really very satisfactory.
Q55 Teresa Pearce: We are going to come on to Universal Credit in a moment but with Universal Credit, housing benefit will disappear from local authorities in a way, and you are having to put investment in now to something that might not—
Cllr Taylor: That is right, yes.
Teresa Pearce: Marvellous. That is my lot.
Chair: On to Universal Credit, Kwasi.
Q56 Kwasi Kwarteng: Thank you very much. The DCLG Committee expressed a view that, with Universal Credit, it would be less likely or less possible for you to detect multiple claims on one property. It has been suggested that the Integrated Risk Intelligence Service would somehow mitigate that. I just wondered if you could tell the Committee how that would work and to what extent you feel that the risk of having multiple claims on a property would be diminished.
Debbie Gibbons: I do not think IRIS will diminish that risk and I cannot tell you the details of IRIS, because I am not aware of them.
Chair: We were hoping you would be able to tell us, because we do not think we know either.
Debbie Gibbons: All I can say is, as far as the risk is concerned for multiple claims at a property, if we go back to prior to 1984 when the DWP was administering a rental payment of sorts within the benefit as it was then, history will repeat itself, I fear, in that you will see multiple claims increase, because the DWP’s information is not about the property; it is about the person. They deal with the individual. It is the local authorities that have the detail of the property and how it is made up. It is all about localism and local knowledge. We have that data; we know what size band tax category this property is.
If there were 24 single people renting this property when we knew it was a three‑bedroom semi‑detached house, we would be round there knocking on the door and finding out what was going on. Unfortunately, that is not the data that the DWP will have, because that is the local authority’s data; that is our data; that is what we work on. Universal Credit will be based on the individual. This is one of the key risk areas for Universal Credit. How IRIS will detect that I cannot answer for you. What I can say, from what I understand, is that IRIS is not being used in the pilot of the UC claims at the moment. If they are not piloting it—
Q57 Chair: Is it being used anywhere?
Debbie Gibbons: I cannot answer that.
Mick Hopkins: It certainly was not used in pilots for the Single Fraud Investigation Service.
Q58 Kwasi Kwarteng: This is just a question to Kevin: obviously the DWP will need to establish relationships with landlords in order to administer the housing element of Universal Credit. How closely are you developing those relationships, particularly with the DWP? How closely do you work with them to make sure that this rollout actually works?
Kevin Williamson: I think we have really excellent relationships with DWP people in the Pathfinder projects, but that is something very different from saying that the fundamental design of the Universal Credit, which obviously we are very respectful of, which is about personal responsibility, means that the data that we do have as social landlords and the data that we share on a regular basis with local authorities at the moment—for example, the number of bedrooms that a property might have is quite topical at the moment, or whether the property is exempt accommodation and therefore should be outside of housing benefit—all of that rich data that we have does not really come into the equation, because the focus is on the individual claimant. In terms of matching data and trying to make sure there are no errors in that system, the design really causes us difficulty.
Now, as I say, our relationship with DWP and the Pathfinders is very good with officials. As well as the submission we have put in and the reference to our early learning from the North West Pathfinders, we have also put a submission to the DWP about data‑sharing specifically and some of the issues. We shared that with the DWP in December and we would be very happy to make that available to the Committee, if that was helpful. In there it has a number of proposals about better sharing of information and protocols.
Debbie Gibbons: Can I just add that I think this is a real key area where we will see Universal Credit is vulnerable, in that you could see landlords becoming collusive? Basically, Universal Credit will ask them to provide digital confirmation of the rent figure. We deal with so many individual landlords; it is not all about social housing, unfortunately. This is where UC would be really vulnerable, because what rental agreement will you be looking for? What proof of rent will they ask a person to supply, in order to confirm that they are living and paying rent at that property?
Q59 Chair: I might be being particularly thick here but, if the local authorities and the housing association have the information about the property, and the DWP is doing the calculation on Universal Credit, how are they going to be able to work out things like the bedroom tax or social sector size criteria, as we tactfully call it, if they do not know?
Debbie Gibbons: That is the entire point: how?
Chair: We are just completing an inquiry into housing costs and this is something that I do not think even we realised.
Cllr Taylor: The access to property databases and property information are absolutely key.
Q60 Chair: How is that to be solved?
Cllr Taylor: We think this needs to be taken into account. The lack of access in the Universal Credit system to that data is a really big issue for us.
Q61 Chair: Is there any work being done to give you that access?
Kevin Williamson: We continue, as part of the Pathfinder process, to try to engage constructively with officials in DWP as they roll the system out. One of the frustrations of some of our members has been that issues are flagged and there is not yet real evidence of the learning actually finding traction as the Pathfinder rolls out. You will be aware that we are now into Hammersmith, Bath and certain other areas.
Q62 Chair: Is the difficulty that many of the people in the Pathfinder or the claimants in the Pathfinder who are in UC are people who do not have tenancies, because they have the simplest housing need? That is why they are single and simple. There is no learning going on with regard to that or they are still living at home.
Cllr Taylor: We are looking to the Local Support Services Framework to try to work through some of these issues, before we get to the mass rollout of UC, but this is a really key issue that the Local Support Services Framework will have to address.
Debbie Gibbons: Another key is that Universal Credit will be digital by default, and that is what we have been told. Will it be able to deal with the variety of people and lifestyles within the welfare system, because their lifestyles are complex and their tenancies are complex?
Chair: We think it may not be digital by default. That may have been an over‑promise, from everything we have heard.
Cllr Taylor: If it is though, we are going to have to try to design out some of these things. That would be vital to whether it is successful or not, not just in terms of the public purse, but in terms of the individuals. People will, no doubt unintentionally, end up committing fraud if the system that they are using does not meet their particular circumstances. These are people who are very fragile financially anyway and, if they go for several months claiming something that they are not entitled to, even if it is unintentional and it is not fraudulent, getting that money back from them makes their lives extraordinarily difficult. We all have to think about how we are going to design out some of those issues that will arise for people, if they do not do that.
Q63 Chair: Universal Credit was meant to be simpler. It was meant to have the potential to cut down the error and fraud, because it was simpler. You are shaking your head there, Debbie.
Debbie Gibbons: What we have found with the LA delivery model, where our staff meet the people who are in need, is these people who genuinely want help come to us and ask for help. We give that to them because we are able to talk to them on a daily basis, but a computer does not do that. Would a computer be able to absorb those complexities and the changes in there? No, I do not think so either. We base our service on the customers’ needs, how complex and unpredictable they are. I do not believe that a computer will be able to do that.
Cllr Taylor: Essentially local knowledge always comes into this picture as well.
Kevin Williamson: It is not a minor point really, but it is a nice example of what we are talking about here. Every year social landlords, who have 2.5 million homes in England, will be sending letters to their tenants saying, “This year your rent is going to increase by X%,” or “Your service charges will be adjusted.” Those letters go to the individuals and then the individuals, under Universal Credit, will need to notify that as a change of circumstance. Would it not be very much easier for the DWP if they also had notification from the just 1,000 social housing providers about when rents are going to go up and by how much, so they could do a very quick cross‑check? Even if you base it on that approach, it raises questions about those tenants who do not then inform.
Q64 Glenda Jackson: Equally, it does not touch on the increasing—well, actually it is decreasing, because they would not accept them—private landlords where the tenant is on housing benefit. It does not touch there, even though, as we are seeing, there is an increase in private landlords saying, “If you are paying rent by housing benefit, we are not taking you on”. How is that going to work?
Debbie Gibbons: The idea of Universal Credit being a simpler one‑payment is idealistic, and I think it is fantastic. The bit that muddies the water is the housing costs issue. Everything else is information within the DWP’s environment as we stand now. This is a completely different set of rules, a different type of benefit and our customers have different needs. This is the bit that does not quite fit.
Q65 Chair: This is going beyond the remit of this, but I am going to ask you anyway: do you think, therefore, there is a case to be made for taking housing benefit out of UC?
Debbie Gibbons: I think there is a whole case for that as well as a whole case for the local authorities working in partnership to deliver UC within their local authorities.
Chair: That may be something for another day.
Q66 Glenda Jackson: One of the other areas that makes it complex is because the maximum amount of money that can be claimed has been set. We all saw the disasters when landlords were told what the maximum was, and we were all urged to tell our constituents to argue to reduce the rent down, because they could keep what they get. There is no chance in a million years that that was going to happen.
Mick Hopkins: Obviously rent levels in London are much greater than anywhere else.
Q67 Kwasi Kwarteng: In terms of the types of earnings, what methods are available to verify these different types of earnings that people might have?
Debbie Gibbons: It is dependent on the type of earning the person has. If somebody is getting a regular wage slip, then we will see wage slips. If somebody is receiving cash in hand, we will ask for the details of that, whether it be a letter from the employer, whether it be the small slip that they get paid on or a transfer into their bank account. It will just depend on the individual circumstances. There is no set way our customers receive wages.
Q68 Kwasi Kwarteng: There is quite an element of risk there, because a lot of people would be receiving undeclared cash earnings. Obviously there is no foolproof way, but there is no really robust way of being able to detect that.
Debbie Gibbons: No. Again, that is about when you identify that a customer could be a risk to the public purse. It is then about verifying that information on a more regular basis then you would with someone who is not at risk.
Q69 Chair: Is RTI a positive thing about Universal Credit? Is RTI going to help with this?
Debbie Gibbons: RTI will certainly help with those of us who get paid monthly, regularly, and our employers sign up. To anybody else, it will be no help whatsoever.
Q70 Chair: That is the zero‑hour contracts, the cash-in-hand and the free economy perhaps.
Debbie Gibbons: Absolutely. Is it pushing people down to the cash economy route? I think it could. We could see more people being paid cash in hand. It could make people more vulnerable and people being paid less than the minimum wage, because employers will not want to sign up. We have already seen an increase in self‑employed people.
Mick Hopkins: If you link that to Universal Credit and, for the first six months, it is proposed that someone finding employment will keep a certain amount of their benefits on a tapering basis, then as well as the alternative economy increasing, the cash-in-hand, what we think will happen is that you will see short‑term contracts. Someone will maximise their benefits through having a short‑term contract, a period of unemployment and then a period of short‑term contract. That may be with the same employer.
Chair: Or they will be working 9 hours a week, or maybe a half-hour just under the 10 hours.
Mick Hopkins: We see that with tax credits. We saw it when it was Family Income Supplement when it was first brought in.
Chair: People work to the cliff edge.
Mick Hopkins: People very quickly get to know the wrinkles in the system and how to maximise their income through the system.
Chair: The Single Fraud Investigation Service, you are desperate to talk about that, Councillor Taylor. Nigel is going to take the questions.
Q71 Nigel Mills: If we just start with the principle, it strikes me from the layman’s perspective that having one fraud investigation team rather than HMRC doing a bit, DWP doing a bit and local councils doing a bit, sounds like a more efficient and effective way. Is that perhaps not quite how you see it?
Debbie Gibbons: No, that is absolutely how I see it. I think the Single Fraud Investigation Service is a great idea.
Mick Hopkins: We are not against a more joined‑up approach. We are definitely not against a more joined‑up approach. We have some issues with how it is being implemented.
Cllr Taylor: The Local Government Association robustly challenged the setting‑up of the Single Fraud Investigation Service, because we are concerned that our capacity to prevent, detect and catch fraud would be much reduced as a result of that, because of staff transferring and because it would be much harder to catch multiple fraud in a system where benefit fraud is being investigated nationally and in isolation from all the other types of fraud that we see—I have referred to this earlier in the session—like Council Tax, tenancy, parking fraud and so on.
We just had concerns, both around the timetabling of this change, the way it is being done and the way that it might undermine those links at local level. We have heard from colleagues in a number of areas that tackling fraud in all its forms requires central government and local government to work together, so we just feel that there needs to be a very strong partnership. We accept that the Single Fraud Investigation Service is going ahead, but we challenged it because we feel that there needs to be this very close working between the local level and the national level to get the best for the public purse out of this.
It is out commitment that we cannot afford for public funding to be fraudulently siphoned off that makes us think that there is a role for both local and national government in getting the best result that we can out of fraud investigation. That is why we put in a very robust challenge. As we have been working through the implementation of SFIS, we are flagging up some other issues around the timetabling of it and we are looking at starting this in October 2014.
Chair: I am sorry, but again we thought we would get through this. The meeting is now adjourned for 15 minutes or until we are all back. Sorry about this again; I hope you are alright to stay for another half‑hour or so.
Sitting suspended for a Division in the House.
On resuming—
Chair: We will resume the meeting. I was just saying that other parliaments have votes when nothing else is happening, but it is a busy afternoon and there are votes as well. Anyway, Nigel, I think you were halfway through a question.
Q72 Nigel Mills: We were somewhere along the SFIS, were we not? I was going to ask Councillor Taylor; I think your written evidence suggested you thought the evidence on which the system is based has been flawed. I know you were telling us about how you disputed some of the basis of it, but what was the evidence you thought was flawed?
Cllr Taylor: The first principle is that we do not really understand why it was necessary to fix a system that we did not see as broken. If you look at the record of local government in terms of delivering in fraud in housing benefit, we think that about 1.3% of housing benefit claims are subject to fraud, whereas in JSA you are talking more than double that. About 2.9% of JSA claims are subject to fraud. We did not see that the system was broken. There are some real big issues around how local authorities’ benefit fraud teams work alongside teams dealing with other types of fraud. Therefore, the same people may be investigating multiple types of fraud, so we can conduct joint investigations, we can question people suspected of fraud on more than one matter at a time and mount prosecutions, for example, that cover multiple allegations of fraud. It is not uncommon that people who are committing fraud in one area of public funding will be committing it in another area of public funding, so that reduces the cost of investigation and prosecution.
Local authorities work very well with local fraud teams in benefit offices, so we have a good working relationship with our local benefit offices anyway. We were a bit baffled about what problem we were trying to fix here, when there is so much else that needs doing, and we feel that we can see, for some high‑level transactional stuff, a single service at high level, but you are going to lose all that local connection that we have been talking about today and some of the local knowledge that our staff have in dealing with some of the people that we deal with and some of the property issues that we have been discussing earlier on. If you think that the front line in delivering a fraud service is the system that delivers it, any change to that creates a whole set of loopholes, so you might end up actually creating new problems for ourselves here. That is where we felt the whole thing should have been looked at more closely with the evidence that local government can provide before we went for this very big change.
Q73 Nigel Mills: I assume, once Universal Credit is in and fully rolled out—this may be a little way into the future—presumably you would just defraud Universal Credit once, so you would not be defrauding the housing bit and get charged with five different offences, because you have effectively defrauded the housing, earning and whatever‑else bit. Presumably, by the time that happens, there would not be as much need for fraud investigators in local authorities. Is that right?
Cllr Taylor: We think the Universal Credit rollout is being taken into account in the SFIS rollout. DWP is certainly working with the Universal Credit pilot sites under phase one of SFIS, but the stages for SFIS rollout do not necessarily run parallel with the Universal Credit rollout. The more the Universal Credit rollout changes, the more that is likely to be the case. That does not take into account that there will still be parts of council activity where people are trying to commit fraud as well. We need to have very close working relationships.
I know that the Ministers have taken a very close interest in these working arrangements and how we develop these in the best way possible, and there is indeed a working group between DWP, DCLG and ourselves in local government, trying to work through what some of the issues might be. We really appreciate that that is going forward, but the timetable for SFIS is very ambitious and does not necessarily coincide with Universal Credit rollout.
Mick Hopkins: The point you are making about there being one offence against Universal Credit is correct, but there is a multitude of other frauds that are perpetrated against local authorities. The National Fraud Authority Annual Fraud Indicator actually shows that there is more of other types of fraud perpetrated against local authorities, £2.1 billion against £1.9 billion of benefit and tax credit fraud, so there is a significant problem within local authorities. There is housing tenancy, Blue Badge, Council Tax, business rates and grant fraud all associated often with financial linkage into the benefits system.
The problem is—and this is to clarify LAIOG’s position on what Debbie said earlier about being for a Single Fraud Investigation Service—we are not against a more joined‑up approach. However, one of the biggest single risks that we see is that SFIS is proposing to take approximately 800 local authority investigators into the Single Fraud Investigation Service. LAIOG as an organisation has approximately 1,500 members. Local authorities will then have to decide what to do with the staff who are left, whether they investigate other types of fraud or they choose not to investigate those types of fraud and let those officers go, which will incur a cost to the local authority. What we actually see is, potentially, fraud may increase, but it will be hidden; it may not be recorded, because if it is not investigated then it will not appear to be there. This is probably the most significant risk that we see of the Single Fraud Investigation Service against local authorities. Our preferred option is, as the Councillor said before, we work well together in partnership.
Debbie Gibbons: The timescales do not stack up. Why are we creating the Single Fraud Investigation Service now when housing costs will not be part of Universal Credit until who knows when? That just does not make sense. My best‑guess answer for that would just be financial because, if they can reduce the admin grant to local authorities in the year after next, then that is a financial saving for the DWP, but you could then be seeing fraud increase in local authorities, certainly in the housing benefit side of it that remains with local authorities. If you look at what we used to call the old standard housing benefit cases, where it is not linked to a national benefit, who is going to investigate that? That would still be paid by the local authority, but the local authority will have no say over who investigates that fraud case. That goes completely against localism. It takes all the control away from the local authority.
Q74 Nigel Mills: What proportion of your 1,500 members do you think work on housing benefit or what proportion of their time is housing benefit fraud, rather than the other types of fraud you mentioned?
Mick Hopkins: That is difficult to answer, because obviously having 90% of 380 local authorities as members, what we are seeing emerging is, as a result of the original announcement of the Single Fraud Investigation Service, more of the teams are diversifying and are dealing with different types of fraud. It is not uncommon, as the Councillor said, that you would get linked types of fraud. It may start off as a benefit fraud, but it may then link into tenancy, Right to Buy, Blue Badge and various other areas. All of those can link together so, at the moment, I would say, approximately one-third deal with fraud across the board and that is increasing. Local authorities are going to be put in a position where they make a choice: do they keep those staff or do they let those staff go?
Debbie Gibbons: The big thing is about the money. At the moment, in these austere times, local authorities are saving, saving, saving. At the moment, the majority of your fraud work is funded through the admin grant from the DWP so, when that money is taken away, suddenly there is this cost for the local authority. Again, if housing benefit has not completely gone into UC—as I say, we still do not have a date for when it will—will the local authority have to fund a fraud officer to look at these other housing benefit cases? A driver of the single team was that it would be one prosecution and one investigation. That falls down at the first hurdle, because they will not be looking at the Council Tax Support Scheme; that would be left with local authorities. For every case you could have two prosecutions and two frauds.
Cllr Taylor: We have never been fully-funded through the administration grant. That has never fully funded the work we do. We were encouraged to have an announcement of £16.6 million to do some of this work to boost corporate fraud capacity, but we think the loss of capacity that has been taken out of local authorities is somewhere in the region of about £40 million, so it is not meeting that cost. You would not expect it to totally meet it, but Debbie is right to flag up the issue that we may be taking out capacity to deal with fraud here, not increasing it. We all have to be concerned about that, because it will still go on; it just will not be investigated.
Q75 Nigel Mills: Can you just talk us through how the pilots last year worked? I think perhaps you felt that the joint fraud investigation was the most effective, but we have chosen to go for the single one in the Department. Can you just talk us through that a little bit more?
Debbie Gibbons: Certainly from the information that we have been given through the pilots—let us take a step back, first off. The Single Fraud Investigation Service is announced. From a local authority’s point of view, the first thing you would do is look at a proper business case. You would say, “Why do I need this service?” and then you would cost out what you needed and what you wanted it to do. There was never a proper business case that was shared and that has been admitted throughout. First off, we have not had a business case.
Secondly, we have gone down the route of pilots. The timescale for the pilots has been so tight and so short. What analysis has really come out of it? What lessons have been learnt? From our point of view, the feedback that we have been given from the pilot sites is that the pilot site that really worked was the pilot site that was in a local authority, which was managed by the local authority, where the DWP staff were in that local authority. Have we gone for that route? No, we have not. The likelihood is that it is actually going to be centralised; it will be run centrally. It just does not stack up. As people who work on an evidence base, I cannot see the evidence that tells me that this set‑up will work for this organisation. I think it is going to create a silo that will actually increase fraud in the public purse.
Mick Hopkins: We moved away from partnership working and it was clearly a partnership. I know a lot of local authority colleagues thought that it would be a DWP takeover of local authority function and staff. We were working in partnership and then that suddenly changed to DWP‑led, ‑owned and –managed, and we still have to see the statistics that back up that decision through the pilots. We have not seen the statistics through the reporting mechanism as yet. The reporting mechanism that we have seen is through the Knowledge Hub.
Q76 Dame Watkinson: I apologise for my late arrival and I hope this is not something that you have already covered but, at a previous meeting, we heard that the lion’s share of fraud is associated with housing benefit in the system. I just wonder what requirements there are on a new claimant in support of how they describe their circumstances—the number of children they have; they might have a member of the family who has a disability and so they are requiring a particular type of accommodation—on the grounds that prevention is better than cure. Is there consistency over authorities or does it vary a lot as to how circumstances are verified, or is there an assumption that people are giving accurate information, unless there comes a point when you have cause to believe that they are not?
Debbie Gibbons: Yes, I genuinely believe that that is the case. The majority of people give you their true circumstances. You have to remember that we are talking about the minority of people who are fraudulent and particularly fraudulent at the outset. Somebody who comes in and produces false documents to you at the outset—it is premeditated; they thought it through; they know what they are going to do, the whole works. Genuine people will come in and will give you their details. They may fall into the trap of becoming a fraudster, if that is how you would want to word it, by just being a little opportunistic and trying to get some extra money. Again, that is always about the balance.
You must remember—and this is our biggest problem, certainly for local authorities—that because we deal with our customers on a daily basis, face-to-face, we know their vulnerability and the support that they need. We are frightened that Universal Credit and all those other things will take away that support service that these individuals need. They are claiming welfare benefits for a reason.
Q77 Dame Watkinson: Is it simply the volume of claims that make it impossible to investigate beyond a point what people are telling you? You rely on instinct a lot.
Mick Hopkins: It is always a balance.
Debbie Gibbons: It is a balance.
Mick Hopkins: Realistically, fraud could be managed out of every system. There would be so many hurdles to jump over and whatever, there would be so many things put in the way of that person getting their benefit, so you have to strike the balance.
Chair: That could mean that the genuine claimant does not get the benefit.
Mick Hopkins: You have to remember that landlords do like their rent on time, and there is a requirement to balance the risk of that claimant giving us information that is incorrect or fraudulent against paying their benefit as quickly as possible. That is why we apply certain risk criteria to our customers. Claiming housing benefit is always based on honesty, and the vast majority of claimants are honest and honest throughout. As Debbie said, we are dealing with a minority. It is how you identify that minority and then intervene to minimise the loss to the public purse.
Q78 Dame Watkinson: Is it the case that the more experienced staff are, the more likely they are to detect a fraudulent claim at the outset?
Debbie Gibbons: Experience and training are vital. The major key for us is the fact that we have actual benefit assessment staff at the counter dealing with our customers. They know how to ask questions. They are trained. It is about you investing in your staff to make sure that the system is secure. That is the best way to do it. Again with a computerised system, how will that identify the person who is going to come in and chance their arm?
Mick Hopkins: What we also do is try to link that to technology. One of the main aims of LAIOG at the moment is that we are, through European funding, attempting to purchase smart scanners for every local authority. These are scanners that are used by UKBA, the Border Agency. If you put the right technology with the right experience and the right training, then you are securing the gateway in the best possible way. These smart scanners would identify, from a passport or from an ID card, whether that person is genuinely who they say they are. It would only need to be done once, because that information can be shared throughout the authority or throughout the organisation and can be viewed on a screen so that, once you do it, it is done once. This fits with the Government’s Tell Us Once methodology. The concern is that those methodologies, those smart scanners, are not included in the proposals for Universal Credit going forward. We have not seen any evidence that they are, at the moment.
Q79 Chair: I have to say that is why I support ID cards, but that is another thing. If there are local authority staff being transferred to the Single Fraud Investigation Service, will they be TUPE’d over?
Cllr Taylor: We understand not at the moment. The Government are looking at a legislative process to do this, because of the variation in the terms and conditions on which staff and employed. The Government are looking at a legislative process to deal with this, rather than a straightforward TUPE.
Mick Hopkins: Using COSOP as the methodology.
Q80 Chair: By its very nature, we have probably concentrated more on the fraud side of things. Our inquiry is fraud and error, and yet we know that, if you put official error and claimant error together, it is probably twice what the fraud element is. From what you are saying as well, with things like Universal Credit coming in, which I think had been promised might help squeeze out both official error and claimant error because it would be more simple, what you have said this afternoon suggests that is not the case. In fact, there might be even more scope for these kinds of errors coming into the system. Is that a fair reflection of your views?
Debbie Gibbons: Yes.
Chair: Does everybody feel that? There is a lot of nodding heads.
Cllr Taylor: There is the potential to work on that, but we are concerned. We are not clear yet how Universal Credit is to be rolled out. There are still different bits of the system that are not operating under Universal Credit, and that does have the potential for making the complexities in it. I always look at it from the customer’s point of view, because they are the people who end up in my surgery with all the complexities of what has happened to them. You get long stories about how things have gone wrong and the difficulty of putting it right. The more things that are rolled into something, the more complicated it is to sort it out afterwards.
If you look at the experience that some of our residents have had in relation to now changing between JSA and ESA, because of the changes to the benefit system, they are taking months and months and months to resolve. As I say, people in fragile financial circumstances already are then left with no income at all. It might be simpler in concept, but it has a lot of elements to it that have the potential to go wrong.
Chair: The ESA is our other inquiry we are just about to launch.
Mick Hopkins: We mentioned IRIS earlier, the Integrated Risk Intelligence Service. That has not been tested through the pilots. The concern is that we are not sure how far that is going to be developed. Obviously this is the part of the system that deals with the risking of the claims and the securing of the gateway, so we are unsure as to how well and how far that will be developed.
Kevin Williamson: Can I just add very quickly that we are seeing evidence from the Pathfinders that, because of the reliance on claimants providing the information—so we have claimants giving rent statements that are 10 years old or claiming that they are hit by the spare room subsidy or whatever we want to call it, but actually living in a one‑bedroom flat—there are lots of examples of these sorts of cases coming forward. This would indicate, perhaps understandably in a new system, that there is a significant error rate coming through and yet we seem to be deliberately tying our hands behind our back, because we do not want to develop these data‑sharing protocols.
Q81 Chair: Does it ever happen that you start off investigating what you think is a fraud, but it actually turns out to be official error?
Mick Hopkins: Yes.
Chair: I think my colleagues have run out of questions as well. Can I thank you very much for your forbearance this afternoon? It is unusual for us to have two votes in one session, but thanks for all the evidence you have given and your knowledge. We will find it very useful when we come to write our report, so thank you very much.
Oral evidence: Fraud and error in the benefits system, HC 1082 23