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28 Oct 2015

MPs skim the surface on benefit fraud

This report makes little sense even if you believe the government's fictitious figures for benefit fraud.

Ministers have made progress in reducing benefit fraud and error but their efforts reveal a "paucity of ambition", a committee of MPs has said.

Despite fraud and error in tax credit payments falling from 8.1% of total spend in 2010-11 to 4.4% in 2013-4, the Public Accounts Committee said £4.6bn was still overpaid to claimants.

Labour MP Meg Hillier said "too much money had gone where it shouldn't". But the government said levels of overpayment were at record lows. The last government raised the maximum penalty for benefit fraud from £2,500 to £5,000.

While fraud and error has been reduced, the cross-party committee said HMRC, which is responsible for paying tax credits and the Department for Work and Pensions, which pays out other benefits including pensions, did not know how this had been achieved or how much further it could go.

The MPs, who scrutinise spending by central government, said preliminary figures for 2014-5 suggested fraud and error accounted for 1.9% of total welfare spending by DWP, above the department's 1.7% target for the year but down from 2.1% in 2010-11. As well as £4.5bn in overpayments in 2013-14, £1.5bn was under-paid.

Ms Hillier, who chairs the committee, said "far too much taxpayers' money has gone where it shouldn't and too little where it should. Legitimate claimants have missed out on vital support running into thousands of million of pounds. At the same time, overpayments cost every UK household about £200 a year."

She told BBC Radio 5 Live it "beggars belief" that the DWP had cut its planned spending on preventative initiatives from £192m in 2010 to £27m now.

The committee also expressed "surprise" that the gross figure for fraud and error was expected to rise from £4.6bn in 2014-14 to £5.8bn in 2020-21.

The cross-party committee said the roll out of Universal Credit, a single monthly payment consolidating six existing benefits, created scope for considerable fraud savings but projections of a £500m annual yields were disappointing. It called on government departments to set "firm targets" for minimising fraud and error.

The DWP said there had been significant strides made to reduce fraud and error in the benefit system, which was now at its lowest level in a decade.

Reforms to the benefit system, including the introduction of Universal Credit, would better guard against fraudsters and were expected to save the public purse a further £3.2bn a year, a spokeswoman said. "We will continue to tirelessly pursue and recover payments from the minority who do try to abuse the system."

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