DWP warns of uphill struggle to reduce fraud

Perm sec Peter Schofield tells MPs he doubts department can get back to pre-pandemic levels by 2027-28
Peter Schofield appears before MPs on 10 January Photo: Parliament TV

By Jim Dunton

16 Jan 2024

Senior officials at the Department for Work and Pensions have warned MPs the department faces an uphill struggle on fraud-reduction, with a return to pre-pandemic levels no longer expected within the next four years.

DWP’s latest annual report and accounts estimates it overpaid benefits excluding state pension to the tune of £8.2bn in 2022-23, down on the previous year’s figure of £8.6bn – but considerably up on the £4.4bn of fraud and error recorded in 2019-20. The bulk of the fraud related to Universal Credit.

A commentary from public-spending watchdog the National Audit Office said it would take “at least” until 2027-28 for Universal Credit overpayments to be reduced to below pre-pandemic levels. The projection required DWP to hit all of its fraud-reduction targets and for levels of fraud not to rise by more than an underlying rate of 5%.

But last week DWP, permanent secretary Peter Schofield told members of parliament’s Work and Pensions Committee that he now expects fraud to be above 2019-20 levels in 2027-28.

Schofield said a forecast in March had anticipated that Universal Credit overpayments would be 12.1%, but a final reckoning two months later had revealed a figure of 12.8%.

“We think that 0.7% difference is accounted for by the underlying growth of fraud in the economy,” he said. “If you take that difference in the outturn and compare it going forward with where we thought we would be when the March forecast was done, that means we then have to look again at the picture in those out-years.”

Committee chair Sir Stephen Timms asked Schofield directly whether he believed the department would get back to pre-pandemic levels of fraud by 2027-28.

“I don’t think we will,” the perm sec replied. “We want to see where we end up and we will look again with the May statistics, because we are seeing a lot of fluctuation.”

Schofield said DWP knew a lot of detail on fraud and error “in the here and now”, but could not second guess fraud trends in the wider economy.

“We do our sampling exercise with official statistics, which gets a good review by the National Audit Office as a robust process,” he said. “We know the effectiveness of the initiatives that we have under way, but the challenge is the impact of underlying fraud and error – the propensity for fraud and error – in the wider economy, which seems to be growing relentlessly and is very difficult to predict.”

Schofield said DWP’s target was for £1.3bn in savings through counter-fraud work in the current year. It is part of a longer-term initiative to stop £6.4bn in fraud by 2027-28 through “targeted case reviews” of Universal Credit claims, supported by the recruitment of nearly 6,000 officials and bankrolled with £443m of new funding.

“What I am not doing right now is setting myself a target that makes a robust assumption about what will happen in online fraud and error in the economy going forward,” he said.

Neil Couling, DWP’s director general for change and resilience – and senior responsible owner for Universal Credit – said he had previously overestimated the impact of Covid-19 on fraud, but now believed the pandemic had “masked” an underlying rise.

“You can see that in the British Social Attitudes Survey, where the public show an increased tolerance of fraud when questioned about it,” he said.

Couling said the survey question “Is it always wrong not to declare earnings?” was one example of the trend. He said responses had declined from 80% in agreement with the statement in 2016 to 66% in 2022.

“We are losing the battle a bit with public opinion,” he said. “There is greater acceptance of fraud and I think that is driving the numbers up. We, like many institutions, are having to try to combat that.”

NAO head Gareth Davies qualified his opinion on DWP’s annual report and accounts this year because of the level of fraud and error related to benefits expenditure. It is the 35th year that a qualified opinion on the accounts of the department – or one of its predecessors – has been issued because of benefits fraud.

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