Online UC advance scheme could have cost DWP £200m in fraudulent claims

Written by Richard Johnstone on 25 March 2020 in News
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NAO publishes critical report as committee chair says five-week delay in payment remains a ‘fundamental flaw’ with benefits programme

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A Department for Work and Pensions drive allowing people to request advances for their Universal Credit entitlements online could have led to up to £221m in fraudulent claims, a report from the National Audit Office has found.
 
The public spending watchdog said DWP’s decision to allow new claimants of the six-into-one benefit to seek advances based on their expected entitlements to tide them through the five week waiting period had resulted in almost 100,000 fraudulent claims since the online route had opened. A further 50,000 claims are currently considered “suspicious” and are due to be investigated.
 
According to the NAO, the value of the cases suspected to be fraudulent is estimated at £98m to £147m, while the additional 50,000 claims could add a further £74m to the total.


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It said the claims stemmed from the July 2018 introduction of online applications for advances for new Universal Credit claimants. At the time face-to-face interviews with benefits advisers were not required but applicants needed to use the government’s online Verify service.

 
The NAO said that prior to the change, new claimants had only been able to ask for advances in person or over the phone.
 
The watchdog said DWP reported that fraudulent claims for advances peaked in July 2019, when around 15,000 dubious claims a month were being made. But they “dropped significantly” when a requirement to attend a face-to-face interview before advances were paid came into effect in September of that year.
 
According to the NAO, the “primary objective” of enabling online-only applications for advances had been to alleviate hardship faced by Universal Credit claimants during the five-week “first assessment” period. However, the NAO noted that DWP had also wanted to save an estimated £21m a year by reducing the staff time in processing manual claims.
 
The NAO said DWP insisted it had been aware of the potential for fraud when it decided to make advances available to online applicants.
 
“However, it could not provide any evidence that it had considered the risk of fraud when deciding to do so,” the NAO said.
 
Stephen Timms, who chairs parliament’s Work and Pensions Select Committee, said DWP’s haste to deal with the “widely foreseen hardship” created by the five-week delay for payments built into Universal Credit had opened up new opportunities for abuse of the system.
 
“DWP rushed to plug the gaps with advance loans,” he said. “But it failed properly to look at the risks it was running. Fraudsters creamed of as much as £221m before the department cracked down.
 
“This episode highlights a fundamental flaw in Universal Credit.”
 
Timms called on work and pensions secretary Thérèse Coffey to “look urgently” at the calls from across the political spectrum to end the five-week delay.
 
The NAO said that between July 2018 and December 2019 there were nearly 4 million claims for Universal Credit and 2.5 million advances paid out to nearly 2 million claimants; claimants can make more than one request for an advance if they need additional funds.
 
It said that by the middle of 2019 a number of illegal practices had been identified, including providing false information to boost the value of the advance and fraudulently using the personal identification details of others, with or without their consent.
 
According to the National Audit Office, DWP said it believed it would get the majority of the fraudulent advances back and detailed several cases where prosecutions had resulted.
 
But the watchdog noted: “This recovery may take years and some of the debt may have to be written off. The DWP could not tell the NAO how many fraudulent advances are already being repaid or how quickly it will reclaim all the fraudulent advances.”
 
It said DWP had promised that any genuine victim, who was deceived into making a Universal Credit claim or had their identity stolen, could have their legacy benefits restored. It said there had been 189 such cases so far.

 

 

About the author

Richard Johnstone is deputy and online editor of PublicTechnology sister publication Civil Service World, where a version of this story first appeared. He tweets as @CSW_DepEd.

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