Fraud and error statistics: the biggest problems relate to employment, defining households and capital

The statistics for fraud and error in the benefits system were released last month, and I’ve just caught up with them.  The summary emphasises that ‘fraud is the largest cause of overpayments’, but that’s only because error is split into two categories – the official estimate is that out of £3 bn overpaid, £1.3 bn is down to fraud and £1.7 bn is down to error.

The accompanying tables raise some interesting questions.   The reasons for overpayment that feature most strongly are employment and earnings, household composition and living together, and capital (Table 3).   The main reasons for underpayments  are employment and earnings, household composition and confusion about the relationship with other benefits.  This shouldn’t be any great surprise.  Despite assumptions to the contrary, people don’t necessarily know whether they’re working, whether they’re in a relationship,  whether they’re disabled and so on, and the more sensitive the system is to these issues, the more likely there are to be mistakes.

Drilling down a little further, the benefit where there is most confusion about employment and earnings is Housing Benefit for people of working age – this category alone accounts for £315m of overpayments and £131m of underpayments.  Wherever problems emerge repeatedly at particular points, there’s an argument to review the process, and this is no exception.  Unfortunately, with the transition to Universal Credit there’s not much likelihood that this will get any attention at all, and we should be wary of the assumption that Universal Credit will clear all this up.

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