Benefits fraud and error cost taxpayer £2.7bn

23 Jul 09
The National Audit Office has issued a health warning about the Department for Work and Pensions’ accounts, citing fraud and error that has cost the taxpayer an estimated £2.7bn.
By Alex Klaushofer

23 July 2009

The National Audit Office has issued a health warning about the Department for Work and Pensions’ accounts, citing fraud and error that has cost the taxpayer an estimated £2.7bn.

The audit found that, of the £135.9bn in benefits administered by the DWP in 2008/09, £900m was lost in fraud, £900m to official error and £900m to mistakes by claimants.

The total sum lost represents 2% of the department’s overall benefit expenditure. Departmental budgets had underpayments estimated at £1.2bn, the audit also found.

The NAO’s comptroller and auditor general Amyas Morse said: ‘While it is promising that the total proportion of fraud and error continues to fall and the department has put in place measures to try to reduce this still further, the department should be aware of the risks of further fraud and error due to the pressure on the benefits system because of the current economic downturn.’

Public Accounts Committee chair Edward Leigh said: ‘This is the same old story with the Department for Work and Pensions. For the twentieth year in a row, the National Audit Office has had to qualify the department’s accounts due to fraud and error.

‘It may only be 2% of the total benefits bill, but by anyone’s reckoning it still represents an enormous amount of public money, which would have been better spent elsewhere.’

A spokesman for the DWP said the department had made ‘considerable progress’ in reducing fraud and error. ‘We have reduced fraud by over two thirds since 2001 – from 2.1% to 0.6%. It is now at its lowest ever level, saving £1.95bn a year. We have important work under way to cut fraud and error further over the next few years.’

The publication of the accounts follows a damning report on overpayments of public service pensions.

The NAO published its review of government errors in administering guaranteed minimum pension payments on July 16. It found that overpayments of £90m had affected more than 85,000 retired civil servants, teachers, doctors, nurses and soldiers.

Morse dubbed the maladministration – which involved five pension schemes, Revenue & Customs and the Pension, Disability and Carers Service – as a ‘sad case of public administration failure’.

‘Warnings were first sounded years ago that there were problems but no-one took responsibility for resolving them,’ he said.

More than 26,000 cases have yet to be resolved by the pension schemes.

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