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A report today from the National Audit Office concludes that the Department for Work and Pensions does not yet have enough evidence to demonstrate that its activities to reduce the cost of mistakes by customers have been value for money. Mistakes made by claimants in the information they provide to the Department, termed customer error, are difficult to detect, correct and prevent. However, the report concludes that the scale of overpayments and underpayments demonstrate a clear imperative for improvement.

Mistakes made by customers are difficult for the Department to tackle because they often arise from a change in customers' circumstances, which customers may not realise they have to tell the Department about. Overpayments due to customer error, which are estimated at £1.1 billion in 2009-10, represent a substantial loss to the taxpayer. And underpayments, which were approximately £800 million in 2009-10, can cause hardship for the families affected.

The establishment by the Department of the Fraud and Error Council and a previous similar committee shows a commitment to tackling fraud and error. However, the NAO found little evidence that there had yet been sufficient attention paid to reducing losses due to customer mistakes. The Department launched a five year strategy for tackling error in January 2007 but there has been no discernible decrease between 2006-07 and 2009-10 in underpayments and overpayments due to customer error as a percentage of total benefits expenditure.

The Department and its agencies have initiated measures to improve customer service and reduce customer errror, but it does not yet have enough information to target these initiatives effectively. The Department does not know, for example, whether there are any common patterns that would enable it to target interventions more effectively across all benefits. The Department also does not have enough consistently measured data on the costs and benefits of its interventions.

Amyas Morse, head of the National Audit Office, said today:

"The benefits system is complicated and it is inevitable that mistakes occur. The Department for Work and Pensions, therefore, faces a significant challenge in tackling error by claimants.

"The Department has demonstrated a firm commitment to tackling administrative error, while its resolve to tackle customer error has so far been less evident. It now needs to bring its focus on customer error to the same level. The key to success in each area is a coherent strategy supported by good information on what works to deliver the best results."

Notes for Editors

1. Fraud and error

   The Department for Work and Pensions estimates that it made £3.1 billion of overpayments (2.1 per cent of expenditure) and £1.3 billion of underpayments (0.9 per cent of expenditure) due to fraud and error in 2009-10.
   Customer error
   In total, an estimated £1.1 billion of overpayments and £0.8 billion of underpayments arose in 2009-10 because of mistakes or omissions in the information customers had provided to the Department.

2. The rate of error differs between benefits. Customer error has consistently been highest for Housing Benefit and which in 2009-10 saw £420 million overpayments and £220 million underpayments.
3. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
4. The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 900 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

• Full report - Reducing losses in the benefits system caused by customers' mistakes

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