DWP faces £1.4bn housing benefit fraud black hole

The Department for Work and Pensions (DWP) has come under fire for its failure to tackle housing benefit fraud and error in a report from the National Audit Office (NAO), which says the department needs to establish clearer responsibilities and act sooner in tackling an estimated £1.4bn in overpayments

The NAO’s report says the total level of housing benefit overpayment due to fraud and error has increased to an estimated £1.4bn in 2013-14 (5.8% of spending on this benefit) from £980m in 2010-11 (4.6%). Claimant error is the main cause of overpayments (£900m in 2013-14) while the estimated rate of fraud has remained the same at 1.4% (£340m).

The NAO calculates that housing benefit overpayments account for 42% of total overpayments of £3.3bn across all DWP’s welfare benefits. However, the department spent just £23m (8%) on tackling housing benefit fraud and error out of the £308m million made available to tackle fraud and error across all of its benefits.

The report says that the DWP has not established sufficiently clearly how the responsibilities for tackling fraud and error are divided between it and local authorities. The NAO criticises the DWP for relying too heavily on the incentives in the subsidy process for when local authorities reclaim payments.

It maintains that this process is not designed specifically to target fraud and claimant error and does not create strong incentives to detect overpayments after the claim has been awarded, which account for 90% of all housing benefit overpayments. Provisional subsidy returns show that local authorities reported overpayments of 2.8% of the value of housing benefit payments compared to the department’s central estimate of 5.8% in 2013-14.

Amyas Morse, NAO head, said: ‘The DWP is facing an escalating problem. The DWP has recognized the need to do more and has been developing a new strategy. As these initiatives are in the early stages, it is too early to know whether they are working. However, the department will need to show that it is tackling problems with local authority incentives and targeting major areas of loss.’

Margaret Hodge, chair of the Public Accounts Committee (PAC), said the DWP’s ‘out of sight, out of mind’ mentality towards housing benefit fraud and error needed to change

‘It has not incentivised local authorities to identify fraud and claimant error, which account for the majority of all overpayments. While it has shared data with local authorities to help crack down on fraud and error, these initiatives have fallen well short of expectations.

‘Taking on the role of inspecting Local Authority Housing Benefit Services from the Audit Commission, the Department failed to carry out its planned 15 inspections, inspecting just one since 2011-12,’ Hodge said. 

In its report, the NAO acknowledged that the DWP is making major changes to the administration of housing benefit, including the introduction of a single fraud investigation service, and intends in the longer term to centralise the administration of working age housing benefit claims as part of Universal Credit. However, it notes that ‘what effects the changes might have, and when, remain uncertain’.

Hodge said: ‘The department’s recent efforts to develop a new strategy are long overdue. With so much taxpayers’ money at stake, the department cannot afford to take such a hands-off approach to reducing housing benefit fraud and error.’

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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