Public Sector Focus

Reducing fraud and error in housing benefit payments

The government has responded to the Public Accounts Committee’s report on housing benefit fraud, on which MPs said the Department for Work & Pensions was making “little progress”. Adam Hewitt reports.

The government has agreed with all of the recommendations of the Commons Public Accounts Committee (PAC) on tackling housing benefit fraud and error. 

The MPs’ original report said the Department for Work and Pensions (DWP) must do more to “get to grips” with the problem, after more than £1.4bn in overpayments were made in 2013-14, which represents 5.8% of all housing benefit spending. 

“This is a huge cost to the taxpayer,” the MPs said. They recommended a review of all spending on the DWP’s anti-fraud and error initiatives; a full update by summer 2015 on dealing with underpayments of benefit (a separate but still important problem); strengthened incentives for councils to tackle fraud and error themselves; a full analysis of options to identify whether there is a more cost-effective way of producing local estimates of the level of fraud and error; a “convincing response” on tackling these issues before universal credit is implemented and real-time information is automated; and an assessment of the costs to councils of the Single Fraud Investigation Service (SFIS) programme. 

The DWP said it will publish the next iteration of its strategic approach to tackling housing benefit fraud and error later this year, which will answer many of the committee’s concerns. 

Progress so far 

It said that real-time information, introduced last year, is already tackling fraud and error due to earnings, which is the highest area of loss. Since 2012, there has also been an automated system to notify local authorities of changes identified by the DWP and HMRC that may affect housing benefit entitlement.

The Fraud and Error Reduction Incentive Scheme, launched in 2014, financially rewards councils that manage to cut housing benefit entitlement as a result of claimant error or fraud. Virtually every council has opted into this, and the department has also launched a performance improvement fund “seeking innovative ideas from local authorities to reduce losses due to fraud and error”. It has already published a good practice guide on overpayment recovery. 

There are digital developments too. The DWP notes: “Real-time information (RTI) has already been introduced in housing benefit to identify cases where benefit claimants have failed to declare or under-declare earnings. Plans are underway to expand the use of RTI beyond the current bulk data match exercise to allow local authorities to have immediate access to RTI through digital web services with automated alerts when income from earnings and pensions changes. This will allow immediate verification of income at the new claim stage as well as through the life of the claim.” 

PAC, in its original January 2015 report, said the DWP “is not doing anything to specifically target underpayments or the take-up of housing benefit, despite their importance to those most in need”. The DWP said it “makes information available in many locations, including doctors’ surgeries, welfare rights premises and Jobcentre Plus offices”, as well as its website and information line. But it said it is reviewing initiatives to target underpayments and will update the committee by summer this year. 

The Single Fraud Investigation Service 

PSE has reported previously on the SFIS, and concerns that local knowledge will be lost as staff transfer from councils to central government. This concern was raised by PAC too, which recommended: “The department should provide a more complete assessment of the wider costs to local authorities of the SFIS programme, and consider how the benefits of local knowledge and data-sharing can be maintained in the longer term.” 

The DWP said it has “supported local authorities concerned about the loss of specialist fraud knowledge by paying £12.8m over two years, covering the life of the SFIS business case until 2021-22”. 

That figure was based on councils’ own estimates,  with a ‘Challenge Fund’ established, plus the use of the ‘new burdens assessment’ process to pay councils in 2014-15 for the costs of transferring staff to the department and for the ongoing cost of providing data. The 2015-16 payment should be happening soon. 

It added: “The [local authority] staff transferring into the department will ensure local knowledge is retained and processes are in place to share data.” 

PAC chair Margaret Hodge MP said at the time her committee’s report was released that it is “completely nonsensical” that the DWP spends only 8% of its ‘fraud and error’ budget tackling housing benefit, when overpayments in that category account for 42% of total benefits overpayments. 

A DWP spokesman said: “We expect the ongoing introduction of universal credit to cut fraud and error by a further £1.5bn.”

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