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Universal Credit will reduce fraud and error in the benefits system, Ministers said yesterday, as new figures confirm the current system is too complex and still open to abuse and error.

Current benefit claims are in the process of being ‘case cleansed’ by over 1000 dedicated staff in preparation for Universal Credit. This will ensure that claims are accurate and free from fraud before they enter the Universal Credit system in 2013. This process has already made savings of £413million.

The latest fraud and error statistics released today show £3.2 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
• £0.8 billion has been lost to official error

Welfare Reform Minister Lord Freud said:

“Universal Credit will revolutionise the way we pay people benefits. The current system is made up of a complicated array of benefits, entitlements and add-ons, which can leave it susceptible to fraud.

“But Universal Credit will dramatically reduce the chances of fraud entering the system. It will cut down on error as it will be much easier to understand and administer. It will simplify and automate the benefits system to ensure taxpayer’s money is going to those who need it the most.

“Universal Credit will also reduce the incentive for fraud by making sure people are better off in work than on benefits.”

Universal Credit will make it much easier to catch fraudsters as it will calculate benefit levels using real-time information linked to the PAYE system. By picking up financial irregularities, such as earnings whilst claiming unemployment benefits, it will remove the main opportunities for fraud and error in the system.

Closer working across local and national Government will also see a reduction in fraud. A new IT system which automatically informs local authorities of new claims or changes in benefits and tax credits has been successfully tested and has already made savings of £11 million.

New powers in the Welfare Reform Bill will introduce tougher penalties to deter fraudsters:

• Abolishing the option of accepting a caution
• A minimum administrative penalty of £350, or 50% of the overpayment, whichever is higher, with four weeks loss of benefit, even for attempted fraud
• Extended loss of benefit for offences, which result in a conviction, of 13 weeks for a first offence, then 26 weeks for a second offence and 3 years for a third offence
• An immediate 3 year loss of benefit for serious or organised benefit fraud or identity fraud
• A new £50 civil penalty in cases of claimant error which results in an overpayment due to negligence or failure

Notes to Editors

• These estimates replace the preliminary 2010/11 estimates that were published on 12th July 2011. (Headline figures may not add due to rounding).
• The Fraud and Error in the Benefit System 2010/11 estimates are published here: http://statistics.dwp.gov.uk/asd/asd2/index.php?page=fraud_error
• In February 2012, the DWP published an updated strategy as part of the Cabinet Office’s cross-Government Fraud, Error and Debt Taskforce. ‘Tackling fraud and error in the benefit and tax credits systems’ is available here:

http://fed-conf.co.uk/documents/HMG%20Fraud%20and%20Error%20Report.pdf

• The National Benefit Fraud Hotline number is 0800 854 440 or you can report a cheat online via: www.dwp.gov.uk/benefit-thieves

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