Reducing fraud and error?

In Parliament on Tuesday, Iain Duncan Smith claimed twice that the Universal Credit system would reduce fraud and error by up to £2.2 billion. He explains:

“Many people are receiving overpayments or underpayments when they should be receiving the correct amount. Too often with tax credits, people are chased at the end of the year, without their realising that they had received the wrong money in the first place. Universal credit will be kinder in the sense that it will be adjusted each month. It will help us save huge sums — some studies state £2.2 billion per year.”

That sum ought to be be compared to current estimates. Currently the total losses through error and fraud in DWP benefits are estimated at £3.4 billion, while for Tax Credits and Child Benefit the estimate is £2.3 billion. £460m of the first figure is down to Pension Credit, which is not part of the Universal Credit system, so the total comes to £5.2 billion – nearly half of that is down to mistakes made by claimants. But there are also mistakes made in favour of the government – estimated at £1.4 billion. That means that the difference between overpayment and underpayment is £4 billion, and Duncan Smith is claiming that well over half of that is going to be saved in the new system.

I’ve expressed doubts before as to whether the reformed system will save anything at all. Table 6.1 of the newly published statistics on fraud and error gives a long series of categories where errors have been generated: they include, among others

  • Capital
  • Conditions of Entitlement
  • Household Composition
  • Housing Costs
  • Passporting
  • Non-Dependant Deductions
  • Earnings/Employment
  • Income Other Benefits
  • Income – Occ & Pers Pensions
  • Income – Other
  • Control activities not being carried out
  • Living Together
  • Labour Market Issues

Three factors together – earnings and employment, income from occupational and personal pensions and living together – make up 44% of all the losses through fraud and error. However, most of the list will apply to Universal Credit with as much force as it does to benefits now.

Leave a Reply