Getting a grip on benefit fraud and error is one of the biggest challenges that the Department for Work & Pensions faces, as highlighted in numerous National Audit Office reports. Of the £291bn spent on benefits in 2024-25, an estimated £9.5bn was overpaid. Because of the material level of fraud and error, successive NAO comptroller and auditor generals have qualified their opinion on the regularity of DWP’s accounts (excluding state pension) for the past 37 years.
Lowering the level of fraud and error is critical to DWP meeting its requirement to pay claimants their benefits accurately. Reducing overpayments will also free up public money that could be spent elsewhere. As the independent public spending watchdog, our recent report examines DWP’s progress in tackling this important issue, as well as considering both the opportunities and the challenges that lie ahead.
DWP’s progress to date
In essence, our work shows that DWP has started to make headway by successfully rolling out a range of counter-fraud interventions in recent years. These interventions are generating savings and helping to detect and correct overpayments. While the proportion of benefit expenditure overpaid remains too high, the figures for 2024-25 suggest that overpayment levels are now going in the right direction. The estimated proportion of benefit expenditure overpaid fell from 3.6% (£9.7bn) in 2023-24 to 3.3% (£9.5bn) in 2024-25.
Universal Credit accounted for two-thirds of overpayments but there was a particularly welcome drop in its overpayment rate in the past year. The proportion of Universal Credit expenditure overpaid fell significantly, from 12.4% in 2023-24 to 9.7% in 2024-25.
However, overpayment rates have still not returned to pre-pandemic levels. This year, DWP set out its ambition to reduce the overall overpayment rate to the pre-pandemic cross-welfare level of 3.1% and it expects to achieve this by 2028-29. However, in our view, DWP will need to go further to demonstrate that it has cost-effective controls over benefit spending.
Over the nine years from 2020-21 to 2028-29, the government is giving DWP £6.7bn of dedicated counter-fraud funding. Up to now, DWP has mainly used this money to scale up its programme of Targeted Case Review, increase its counter-fraud staff and expand its use of data analytics to tackle fraud and error.
Our work highlights DWP’s success in ramping up the Targeted Case Review programme, which was introduced in 2022 to tackle the growth in fraud and error in Universal Credit claims that occurred during the Covid-19 pandemic. DWP started the programme on a small scale using its own staff and by March 2025 had around 6,000 staff (both in-house and outsourced) carrying out reviews. By March 2025, a total of 1.15 million claims had been reviewed, generating estimated total savings of £581m, more than DWP expected.
Our report also highlighted DWP’s innovative use of data analytics, such as machine learning, which are a valuable tool in making sure that benefit claimants receive the right amount of money and in finding potentially incorrect transactions. Since May 2022, DWP has deployed a machine learning model to flag potentially fraudulent claims for Universal Credit advances, saving an estimated £4.4m. It also has four other machine learning models in development and testing.
Looking ahead
Ultimately, improving processes and controls to stop overpayments before they occur, and before claimants build up debt, is the best way to secure value for money in this area. DWP’s new strategy wisely incorporates a greater focus on prevention, alongside continuing efforts to detect fraud and error. DWP is seeking to prevent inaccurate payments by addressing systemic challenges. It wants to make better use of customer data; make sure its decision-making considers how changes to policy, service design or delivery might affect payment accuracy; and ensure it has organisation-wide accountability for tackling fraud and error.
We have made a series of recommendations to support DWP to make further progress. These include encouraging DWP to press on with the work it has begun to assess the controls within the benefit system, with the aim of preventing overpayments in the most cost-effective way. We also recommend that DWP should build on its existing use of data analytics by exploring how emerging technologies may help to tackle fraud and error.
Looking forward, the next few years are key to DWP’s success. The extra funding for fraud and error activity, and lessons learned from its interventions to date, present DWP with opportunities to increase the scale and impact of its approach; now is the time for DWP to put its vision into practice.
Laura Brackwell is a director at the NAO, leading the watchdog's work on the Department for Work and Pensions, including the recent report Tackling benefit overpayments due to fraud and error