Fraud and mistakes in housing benefit costs £1.4bn – NAO

Fraud and mistakes in housing benefit have led to overpayments costing £1.4bn, a jump of 40% in the last three years, according to the National Audit Office (NAO). 

In its report the NAO strongly criticises the Department for Work and Pensions (DWP) for failing to tackle the problem earlier by cracking down on councils who process the payments.

According to report, the DWP has relied too heavily on the incentives in the subsidy process (when local authorities reclaim payments) and the data sharing and matching it provides. As a result, the department’s management of housing benefit fraud and error has not provided value for money over the last few years.

The report shows that the fraud and error was mainly due to those in work filling in claims with false information. However, auditors said that it was often impossible to tell whether people had deliberately falsified information or made an error on their forms.

Amyas Morse, head of the NAO, said: “Housing benefit is a difficult benefit to administer and, against a background of unclear responsibilities and limited investment, it is unsurprising that total overpayments have increased.

The DWP is facing an escalating problem. The DWP has recognised the need to do more and has been developing a new strategy. As these initiatives are in the early stages, it is too early to know whether they are working. However, the Department will need to show that it is tackling problems with local authority incentives and targeting major areas of loss.”

Margaret Hodge MP, chair of the Commons Public Accounts Committee, was highly critical of the DWP in responding to the report.

“The Department’s ‘out of sight, out of mind’ mentality means it has not set performance targets and has limited oversight of local authorities’ performance in tackling Housing Benefit fraud and error,” she said.

“It has not incentivised local authorities to identify fraud and claimant error, which account for the majority of all overpayments. While it has shared data with local authorities to help crack down on fraud and error, these initiatives have fallen well short of expectations.”

She added that the Department’s recent efforts to develop a new strategy are long overdue. “With so much taxpayer money at stake, the Department cannot afford to take such a hands-off approach to reducing Housing Benefit fraud and error,” Hodge stated.

The DWP said that it has introduced a system to allow it to access “real-time information” from the Treasury about people’s earnings and pensions, allowing it to perform immediate and up-to-date checks on whether people are eligible for housing benefit.

Work and pensions minister Mark Harper said: "People cheating the system are fast discovering that they have nowhere to hide. We know it's a small minority who commit fraud but we will use everything in our power to stop and punish those who steal from hard-working taxpayers."

‪He added: "Money lost through fraud and error is falling overall and we are recovering more of it than before 2010 - recouping £1.3bn last year.

‪"But we know there is more to do to crack down on benefit fraud; this month we have 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."

Claire Kober, chairwoman of the Local Government Association’s resources board, defended the role of local authorities in processing the benefit payments.

“Local government continues to outperform central government at processing claims accurately and successfully recovering overpayments,” she said.

“It is testament to the efficiency and innovation of councils that the NAO has found benefit claims continue to be processed accurately, despite councils only receiving half the money they need from government to administer the scheme. Government’s method of funding councils’ work in this area is too bureaucratic and can be counterproductive to our efforts to identify fraud and error.”

(Image: Margaret Hodge c. Yui Mok/PA Archive)

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