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Pensioners left short while benefit fraud still unacceptably high – report

Estimates suggest some 210,000 pensioners might have been left out of pocket by a total of £1.3 billion, a report said (Joe Giddens/PA)
Estimates suggest some 210,000 pensioners might have been left out of pocket by a total of £1.3 billion, a report said (Joe Giddens/PA)

More than 200,000 pensioners have been left out of pocket by a total of £1.3 billion and some £8.2 billion has been overpaid in benefits in the past financial year, according to a watchdog’s annual report.

The level of fraud and error in benefit spending “remains unacceptably high”, the Public Accounts Committee (PAC) said, as it raised its concerns that the Department for Work and Pensions (DWP) does not expect this to return to pre-pandemic levels until 2027–28.

On pension underpayments, PAC chair Dame Meg Hillier accused the Government department of being “asleep at the switch”, with people being left short of what they are owed.

The level of fraud and error in benefits in 2022-23 is down on the previous year’s “eye-watering £8.6 billion”, the committee said, but it described this as only a slight fall and compared it with the much lower figure of £4.4 billion in 2019–20 before the pandemic.

Of the £8.2 billion overpaid in the latest financial year, £6.4 billion was due to benefit fraud, the PAC said.

It added that the DWP now expects the propensity of people attempting to commit fraud in society to increase by 5% each year and that the department had said it cannot reduce Universal Credit overpayments to the 6.5% of expenditure that it previously committed to.

The majority of fraud and error continues to be driven by Universal Credit, the report said, which was “overpaid by a staggering 12.8% (£5.5 billion) in 2022–23”.

DWP estimates that 18% of Universal Credit claims, relating to more than 800,000 people, already contains an element of fraud, the PAC said.

The committee acknowledged the department’s plan to tackle such fraud and error, commending the DWP for being more transparent on the issue, including investing a further £895 million in counter-fraud and setting an annual savings target.

Dame Meg Hillier, chair of the Public Accounts committee (Richard Townshend/UK Parliament/PA)
Dame Meg Hillier, chair of the Public Accounts Committee (Richard Townshend/UK Parliament/PA)

But the committee added: “Now DWP needs to implement its plan and demonstrate a meaningful reduction in the levels of fraud and error.

“DWP expects most of the savings to come from a £443 million project to cleanse the benefit system of incorrect payments by reviewing some eight million live Universal Credit cases over the next five years.

“The success of this project is dependent on DWP’s ambitious plans to scale up recruitment and productivity of the team reviewing the claims.

Dame Meg said there were yet to be any “significant post-pandemic strides made in addressing” benefit fraud and error.

“The DWP’s future strategy relies on assessing many millions of claims over the next few years, and contracting out this work brings its own risks,” she said.

“We will be continuing to scrutinise this work closely, as it is essential for public confidence in the system that the Government fights fraud with unswerving determination, while ensuring legitimate claims remain undisrupted.”

Meanwhile, the committee said it was “very concerned that DWP reports yet another historic underpayment of state pension, which it estimates may have left some 210,000 pensioners out of pocket by a total of £1.3 billion”, going back decades.

It said this estimate is in addition to the underpayment of £1.2 billion affecting 165,000 pensioners due to historical errors by DWP that it reported on last year.

The department said it expects to pay back an average of £5,000 to each affected pensioner, the committee noted.

The report stated that the department must “do more to detect underpayments before they build up and have a significant impact on pensioners and other claimants”.

Dame Meg said: “Many pensioners have been left significantly out of pocket by up to thousands, while DWP has been asleep at the switch.

“These are injustices that may never be corrected for some. We are now in a place where Parliament needs assurance that the state pension is being paid accurately.

“We expect DWP to respond to our report in a timely fashion but, frankly, paying pension accurately is a basic that we expect from DWP and not recommendations that our committee ought to be having to make.”

The report noted that the department is investing in “advanced analytics” to tackle fraud and error by using machine learning to identify potentially fraudulent claims, but the committee said DWP needs to do more “to provide public confidence in the fairness of these tools”.

The report stated: “It (DWP) has not yet made it clear to the public what proportion of benefit claims have been subject to machine learning analysis nor published any assessment of the impact on customers.”

A DWP spokesperson said: “Our priority is ensuring everyone receives the financial support they are entitled to, and State Pension underpayment rates due to Official Error remain low at 0.5% of expenditure. Where errors do occur, we are committed to fixing them as quickly as possible.

“At the same time, we are cracking down on fraud with new powers which will root out those who try to steal from the most vulnerable while saving the taxpayer £600 million over the next five years. This comes on top of the billions being saved through our counter-fraud plan and will be targeted at areas where fraud and error is higher such as Universal Credit.

“We are now carefully considering the committee’s report and will respond to its recommendations in due course.”