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Both overpayments and underpayments by the Department for Work and Pensions have soared to unprecedented levels, according to the National Audit Office.
Benefit error and fraud has reached record levels at the Department for Work and Pensions (DWP) and it is going to get worse, according to its own figures released in its annual report for the last financial year.
For the 30th year running, the National Audit Office (NAO) has qualified the ministry’s £86.6 billion benefit accounts because it considers them to be inaccurate.
The estimated level of underpayments has increased to 2.2% (£1.9 billion) of estimated related benefit expenditure from 2.0% (£1.7 billion) in 2017-1.
The most damning section of the report is on the Universal Credit benefit – the current and previous directors of which have just received bonus payments of up to £15,000 each for their work.
The report discloses that, across all benefits, “the estimated level of overpayments has increased to 4.6% (£4.0 billion) of estimated related benefit expenditure from 4.4% (£3.7 billion) in 2017-18.”
“This is the highest rate since the Department introduced its current method for estimating fraud and error in 2005-06,” it states.
“Benefit underpayments, excluding State Pension, are also at their highest estimated rates. The estimated level of underpayments has increased to 2.2% (£1.9 billion) of estimated related benefit expenditure from 2.0% (£1.7 billion) in 2017-18.”
The Underpayments Fiasco
The worst example of underpayments are payments to disabled people through the Personal Independence Payment system.
According to the report, the DWP “has the highest recorded level of underpayments for any measured benefit, at 3.8% of expenditure”.
“The primary cause of both overpayments and underpayments in Personal Independence Payment remains claimants not reporting changes in functional need due to either deterioration or improvement in their medical condition,” it states.
The worst example of underpayments are payments to disabled people through the Personal Independence Payment system.
“Estimated overpayments of Universal Credit are the highest of currently measured benefits at 8.6%. This is the highest estimated overpayment rate since 2003-04 when overpayments of Tax Credits [under Gordon Brown], administered by HM Revenue & Customs were 9.7%.
The report also predicts that figures for benefit error and fraud will continue to soar for the next four years.
“The Department expects overpayments to increase from £4.1 billion in 2018-19 to £5.4 billion by 2024-25, an increase of £1.3 billion, mainly because of the expansion of Universal Credit.”
Bonus Time for Senior Civil Servants
According to the report, three of the most senior civil servants responsible for Universal Credit have all received bonuses – two of them two years running.
Neil Couling, change director and senior responsible owner for Universal Credit, has received a bonus of up to £10,000 on top of a £145-150,000 salary plus £44,000 into his pension pot. The previous year, as director general of Universal Credit, he received a £5000 bonus.
Susan Park, director general of operations at the DWP and previously director general of operations for Universal Credit, has received a £15,000 bonus on top of one last year. She has a package worth £285-290,000, including a £145-£150,000 salary and £124,000 paid into her pension pot.
John Paul Marks, director general, work and health services, who is in charge of the day-to-day running of Universal Credit and disability benefits, got a £15,000 bonus on top of a salary of £125-130,000 a year, plus £83,000 put into his pension pot.
Some £1.4 billion of the errors are caused by civil servants making mistakes with claims.
The department claims in its report: “UC [Universal Credit] is working for the majority of claimants and progress in delivery is good. We believe it will result in an extra 0.2 million people moving into work by 2023-24, and empower people to work an extra 113 million hours a year – lifting people out of poverty and generating £8 billion in economic benefits every year once everyone eligible is on UC.”
The NAO analysis in its annual report is different. It points out that errors in Universal Credit will continue to rise. At present, there is not a freeze in new people being put on Universal Credit because, when there is a change in a claimant’s circumstances, they are automatically put on the benefit. Some £1.4 billion of the errors are caused by civil servants making mistakes with claims.
This month, 10,000 people living in Harrogate will be moved from their existing benefits onto Universal Credit in a new pilot measure before the Government resumes transferring everybody else.
Other Problems and the Impact of Errors
The growth of the “gig economy” and self-employment is making policing Universal Credit payments to workers difficult. Income of employees in full-time work can be easily checked through HM Revenue and Customs, but the self-employed declare their own income and, short of the DWP visiting every claimant to examine the books, they don’t know whether it is accurate.
The ministry has written off £963,000 of child maintenance payments – because the money was sent to the wrong parent.
There are also problems with the replacement of housing benefit and tax credits by Universal Credit.
“The transfer of claimants from legacy benefits from July 2019 will lead to an increase in claims previously made to Housing Benefit and Tax Credits,” the report states. “Misreported income and earnings are the primary causes of fraud and error overpayments for Housing Benefit.”
The report also reveals a number of other extraordinary losses.
The ministry has written off £963,000 of child maintenance payments – because the money was sent to the wrong parent.
They have also had to write off nearly £6.4 million in £1,000 loans to people to start their own businesses – because their failure meant they never got the money back.
Meg Hillier, Labour chair of the Commons’ Public accounts Committee, said: “The Public Accounts Committee has long been warning that Universal Credit will be challenging to administer because of the many variables in life. A change of job, hours worked, childcare or housing costs can all have an impact on how much you’re owed.
“The fact that the error rate is so high underlines these concerns. The Government needs to recognise the impact on people and reduce the error rate.
“The impact of an error can be devastating for individuals and families on low incomes.”