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Fraud and error overpayments in the welfare system rose to record levels in 2020-21, according to the National Audit Office.
Of the £111.4 billion spent on benefits by the Department of Work and Pensions (DWP), it overpaid approximately £8.3 billion, an increase of £3.8 billion over the previous year, new data from the National Audit Office (NAO) has revealed.
The vast majority of the errors were made on Universal Credit payments, with the program accounting for £5.5 billion of the overspend. DWP estimates that it underpaid £540 million.
The dramatic increase in Universal Credit overpayments can be largely attributed to a surge in new claims brought on at the start of the COVID-19 pandemic, when the program saw applications double, from 3 million claimants to 6 million.
To add to the stress on the system, many of the new applications were more complex, with claimants seeking funding due to a loss of self-employed income, for example, which is more vulnerable to fraud.
In response to the influx, DWP relaxed certain controls and checks on those claiming Universal Credit in order to process the surge in claimants quickly. These factors accounted for roughly £3.8 billion of the Universal Credit overpayments, the department estimated in its recent financial statements.
The suspension of normal verification checks is also likely to blame for an increase in the rate of overpayment this year, almost doubling from 4.4 per cent in 2019-20 to 7.5 per cent in 2020-21.
“I am concerned that the level of fraud and error in the benefits system continues to increase year on year, now reaching its highest level since records began. This has a real impact on public funds and on those who face deductions to their income due to overpayments,” NAO comptroller and auditor general Gareth Davies said.
“I recognise that the pandemic and the resulting surge in the number of claimants has increased DWP’s exposure to fraud and error. It must now review all cases that could have been subject to fraud during this time, whilst continuing to progress our past recommendations on how to reduce fraud and error.”
In response to the rising rate of overpayments and fraud, DWP announced it had identified four key risks within Universal Credit that it intended to tackle, looking to change procedures in verifying self-employment earnings, savings, living arrangements and housing costs.
DWP declined, however, to set a target to decrease the rate of fraud and error, noting that with the COVID-19 pandemic still causing complications, it didn’t expect the rate to drop below 7.5 per cent over the next year.
The Department said it planned to set a target in autumn for fraud and error in 2022-23, when the baseline level post COVID-19 would be clearer.