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13.01.15

DWP making ‘little progress’ in tackling housing benefit fraud

The Department for Work and Pensions (DWP) must do more to “get to grips” with housing benefit fraud and error, after more than £1.4bn in overpayments were made last year, the Public Accounts Committee (PAC) says.

The influential group of MPs added that in 2013-14, overpayments increased to 5.8% of housing benefit spending, the highest overpayment rate of any of the benefits that the department administers, and represented 42% of total overpayments across all benefits.

Even after recoveries by local authorities, “this is a huge cost to the taxpayer”, the MPs said.

PAC’s new report, ‘Housing benefit fraud and error’, says the DWP has made “little progress” in reducing fraud and error despite repeated calls by the Committee over the last 16 years for the department to improve its management of the problem.

DWP has now started to use HM Revenue & Customs’ real-time information on earnings, which it claims should “help it address the largest area of overpayments” when the department eventually rolls out Universal Credit – but the timeframe for that remains uncertain.

Margaret Hodge, chair of PAC, said: “Billions of pounds have been lost to the taxpayer as a result of the DWP’s failure to tackle housing benefit fraud and error effectively.

“Around £12.6bn has been spent on housing benefit overpayments since 2000-01 – money that could have been used to improve the system.”

She added that it is “completely nonsensical” that DWP spends just 8% of its fraud and error funding on housing benefit, even though housing benefit overpayments account for 42% of overpayments across all benefits.

“The Department has also reduced its funding to local authorities, which as a result have cut back on wider work to identify undetected fraud, claimant error and underpayment,” she said.

It has been recommended that DWP should review how it allocates money and resources to housing benefit fraud.

In addition, the department has been told it must report back to PAC within six months on what measures it has introduced, specifically, to target underpayments – which stood at £0.4bn in 2013-14 – and encourage legitimate take-up.

PAC added that DWP has provided weak incentives for local authorities to tackle fraud and claimant error, with the department now relying mainly on incentives in the subsidy regime to encourage local authorities to tackle this issue.

The MPs added that the weak incentives have been “exacerbated by constraints on local authority funding”, including a 17% fall since 2010-11 in the funding available for administering housing benefit. This has resulted in local authorities reducing the amount of work they undertake to detect overpayments after the initial assessment has been made, they claim.

It has been recommended that DWP needs to take action now to “strengthen incentives for local authorities to tackle claimant error and fraud, develop a clearer understanding of fraud and error at the local level and target major areas of loss”.

A DWP spokesman said the department was recovering more money than before 2010, with £1.3bn recouped last year. He added: “We want to do more to make sure this money goes to those who need it most, which is why we’re incentivising local authorities to identify overpayments and bring fraudsters to justice.

“At the end of last year we brought in a new detection system that will cross-check all housing benefit claims against up-to-the-minute information on earnings and pension income. And we expect the ongoing introduction of Universal Credit to cut fraud and error by a further £1.5bn.”

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