DWP chief says it will be ‘difficult’ to return fraud losses to pre-pandemic levels

Department is investing in hiring thousands of new investigative staff and is spending tens of millions of pounds on automation and analytics – but still faces ‘strong headwinds’, according to leader

Department for Work and Pensions permanent secretary Peter Schofield has warned MPs that a huge push to reduce the level of benefit fraud will be offset by a projected 5%-a-year growth in illegitimate claims.

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 is related to Universal Credit.

The department is already making use of technology tools to tackle fraud, including an algorithm that has been deployed to detect suspected fraudulent claims for Universal Credit advances. The use of such systems is set to ramp up significantly in the coming months, with the accounts revealing plans to invest plans to invest £70m between now and 2025 in expanding the use of algorithms and analytics to help tackle benefit fraud – despite criticisms about a lack of “transparency and accountability”.

At a Public Accounts Committee hearing last week perm sec Schofield said data appeared to be showing a “falling away over time” of the spike in fraud during the pandemic.

However, he told MPs: “There is also something going on that is driving up the propensity to fraud and error, which I think will mean it will be difficult to get back to where we were pre-pandemic.”

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DWP is currently standing up its “targeted case reviews” programme to review Universal Credit claims, backed by the planned recruitment of nearly 6,000 officials. MPs were told that more than 1,700 investigators had now been hired as part of the drive, which is funded by £443m over the spending review period and aims to stop £6.4bn in fraud by 2027-28.

Schofield described the programme as a “huge, huge intervention” and the recruitment process as “massive”. However, he added: “The headwinds are strong”.

The perm sec said DWP’s work – including information-sharing and working with data and analytics experts from the specially created Public Sector Fraud Authority – would be conducted against a projected 5% growth in “underlying propensity to commit benefit fraud”. The National Audit Office’s commentary on DWP’s annual report and accounts described the figure as a “new assumption”.

“We looked at a number of different elements that we could learn from,” he said. “To give you a couple of examples, we work closely with CIFAS, which is the fraud-sharing database. It found that over the last year there has been an 11% increase in fraud against organisations. We have talked a lot about our work with the Public Sector Fraud Authority. It does a report each year on the cross-government fraud landscape. It found an increase of 7% in fraud outside of tax and welfare. You have seen a number of areas elsewhere where there is this relentless rise. More broadly, if you look at the ONS crime survey, 41% of all crimes are related to fraud, so we are seeing this type of crime going up and being an increasing element.”

Schofield told MPs that he had “looked particularly” at CIFAS’ 11% figure and the PSFA’s 7% figure for the DWP projection.

“I felt that we needed to take account of the fact that, more broadly, fraud is being better detected than before,” he said. “That might give you a case for going down a little bit from that, so 5% seemed like an appropriate number to base our forecast on. We then worked with the OBR, because this is taken into account in its twice-yearly forecast, and that was a figure that it felt comfortable with.”

The NAO’s commentary on DWP’s annual report and accounts and fraud-reduction projections from March was that it would take “at least” until 2027-28 for Universal Credit overpayments to be reduced to below pre-pandemic levels. The figures factored in the 5% growth in propensity to commit benefit but also required DWP’s counter-fraud initiatives to hit their targets.

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.

Also at this week’s hearing, Neil Couling, DWP’s director general for change and resilience – and Universal Credit senior responsible owner – told MPs that the targeted case reviews programme was expected to have increased its headcount to 2,000 by the end of this month.

He added that the department was currently “talking to the market” about the potential for up to 2,400 of the new investigators needed to hit DWP’s recruitment target to be provided by the private sector.

Last month PCS, the civil service’s biggest union, urged the department not to rely on outsourcing to fill the vacancies. It said better pay and conditions would make the roles more attractive to direct applicants.

Jim Dunton

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