‘Nudge’ techniques could reduce housing benefit fraud and error

27 Sep 16

Housing benefit overpayments are more likely to be identified when residents receive a separate communication written in clear language, a study conducted by five English councils and Capita suggests.

Capita Local Government shared with Public Finance the results of the trial in which it tested the impact of behavioural science, so-called ‘nudge’ techniques, to reduce fraud and error in housing benefit.

As part of the study, a total of 2,655 residents living across the five councils were contacted and reminded to report changes in status that could impact the level of benefit they receive. Each correspondence included one of four different ‘nudges’ or treatments.

Each of the four nudges included in the study was given to a group of 513 randomly selected recipients spread across all five councils in London and the south east. A control group was not contacted at all during the trial period.

Excluding the control group, the study resulted in 266 changes in status reported to the local authorities from 2,124 residents.

Overall, more than £52,000 in council overpayments and £11,000 in underpayments was identified. 

The most effective method in terms of generating the highest number of responses was to send a communication to a resident reminding them to report changes in benefit status. This resulted in 15% of the participants reporting changes.

Another treatment, which involved sending a letter with simplified language, outlining the legal responsibilities of the residents, resulted in 13% of residents reporting changes in circumstance. Since it generated many more reports of overpayments than underpayments, this latter technique produced a significantly higher return to the councils of £19,000, rather than £8,000 from a standard letter.

Meanwhile, a letter that included ‘social norm’ nudges designed to persuade the resident saw 9% of residents report changes. In the control group, which did not receive any communications, 7% of residents reported a change in circumstances.

As a consequence of the study, Capita said councils should introduce a dedicated letter to remind claimants to report changes in circumstance. Simplification techniques should be used to make the letter as effective as possible.

Fernando Silverio, head of collections and housing benefits at the London Borough of Harrow, commented: “This has been a great example of effective local authority collaboration to find more effective ways of tackling fraud and error.

“It has given us evidence-based guidance on how we can make enhancements to our housing benefit correspondence to support the reduction of housing benefit fraud and error.” 

The participating councils involved in the scheme were: London Borough of Harrow: London Borough of Southwark; Wycombe District Council; Vale of White Horse District; and South Oxfordshire District Council. The research was funded by the Department for Work and Pensions’ Fraud and Error Reduction Incentive Scheme, to which Capita applied for funding. 

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