A £1.6bn problem for the government

Overpayments of benefits due to fraudulent claims amounted to an estimated £1.5bn in the 2015/16 financial year.

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As a percentage of the Department of Work and Pensions’ (DWP’s) total expenditure (0.9 percent of £172bn), it’s the highest proportion for a decade.


The figures were published in May in a DWP report – Fraud and Error in the Benefits System; preliminary data for 2015/16.


As is often the case with central government, the report hides overpayments behind percentages – we’ve worked them out as actual figures.


Such reports are heavy weather but they do reveal top-line information on potential losses that ministers are facing in their respective departments.


They also give an indication of how fraud is being tackled. In the DWP’s case, not all of the £1.5bn overpayments are lost because the department can recover them.


In 2015/16, aided by the private sector, the department recovered £980m of overpayments, an increase of £50m since 2014/15.


Another area, where there have been improvements in slashing both the system’s complexity and ease with which fraudsters can attack the system, is tax credits.


In this regard, fraud and error, are often grouped together.


In 2014-15, the latest year for which statistics are available, error and fraud losses reached £1.37bn. This is effectively the total overpaid due to genuine mistakes or where the system has been played.


So how is central government tackling the issues above?


A National Audit Office (NAO) report put out earlier this year gives some indication. It focuses on aspects of fraud associated with central government expenditure including HMRC and the DWP.


Tellingly, the report says the exact scale of fraud within the government is unknown, but added that detected fraud across the government was equivalent to only 0.02 percent of total expenditure.


See Credit Strategy’s November issue for the full article on p25.

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