Hefty Fines for Incorrect UK Benefit Claims and Fraud

New figures released show customer error is now costing the taxpayer more than fraud or official error. The penalty will encourage people to be more responsible in keeping their claims correct.

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Lord Freud, the Minister for Welfare Reform, has announced that people who negligently give incorrect information on their claim or who don't tell the Department quickly about a change in their circumstances will face a new civil penalty. The latest fraud and error statistics show £3.4 billion was lost to fraud and error in the benefits system between April 2010 - March 2011.

• £1.2 billion has been lost to fraud.
• £1.3 billion has been lost to customer error.
• £0.9 billion has been lost to official error.

The penalty will encourage people to be more responsible in keeping their claims correct. In the future, claimants on out of work benefits will also have to sign a commitment which will set out their obligations and responsibilities. Lord Freud, Welfare Reform Minister said:

"It is not acceptable for people to negligently give us incorrect information or have no reasonable excuse for not telling us when their circumstances change."

"In addition to the new penalty, Universal Credit will simplify and automate the benefits system to make it less open to abuse and ensure money is going to those who need it the most."

This new measure is set out alongside the fraud and error strategy announced at the end of last year by DWP and HMRC that will reduce annual welfare fraud and error over-payments by one quarter (£1.4 billion) by March 2015 through:

• Increased asset seizure.
• Money owed deducted directly through PAYE.
• Launching a single fraud investigation service.
• Accessing more data and using private sector analytical techniques.
• Case-cleaning over 1 million claims to remove official or customer error.
• New tougher one-strike, two-strike and three-strike rules, including three years for people with multiple convictions.
• Universal Credit, which will replace income-related support from 2013, will simplify the benefit system making it even harder for fraud and error to enter and making the benefit system far easier to administer.

The Counter Fraud Taskforce was established in October 2010 and is chaired by Francis Maude, Minister for the Cabinet Office. It is made up of senior officials from government and private sector with expertise in tackling fraud, error and debt. Officials from the National Fraud Authority (an Executive Agency of the Home Office) provide the secretariat to the Taskforce.

The Taskforce has overseen eight pilots in different Government departments using the latest technology to tackle fraud in the public sector. Some of these have made immediate savings of £12m and will save £1.5 billion over the next 2-4 years:

• DWP: £490 million over 4 years using credit reference agency data to detect undisclosed partners.
• HMRC: £700 million over 2 years using credit reference agency data to detect undisclosed partners.
• HMRC: £256 million over 4 years by using data analytical techniques to screen tax credit applications before payments are made.
• HMG: £264 million on payments to suppliers made in 2009/10, using analytical techniques to detect over-payments through fraud or error. DfT pilot saved £0.5m and the Home office saved £4m using these techniques.

The Taskforce completed the first phase of its work and published its interim report on 8 June 2011.

Attribution/Source(s): This quality-reviewed publication was selected for publishing by the editors of Disabled World (DW) due to its relevance to the disability community. Originally authored by Department for Work and Pensions and published on 2011/06/17, this content may have been edited for style, clarity, or brevity.