MPs query benefit savings claims

Government claims that its new Universal Credit (UC) will save hundreds of millions of pounds of taxpayers' money lost in fraud and error, have been challenged by MPs.

The committee questioned the DWP's ability to deliver Iain Duncan Smith's flagship policy without increasing the losses from fraud and error
The committee questioned the DWP's ability to deliver Iain Duncan Smith's flagship policy without increasing the losses from fraud and error

The Commons Work and Pensions Committee has questioned the ability of the Department for Work and Pensions (DWP) to deliver Secretary of State Iain Duncan Smith's flagship policy without actually increasing the losses from fraud and error.

The committee expressed particular concern over the management of the £24 billion-a-year housing benefit element of UC - which brings together a raft of benefits in a single payment - which accounts for losses of £1.2 billion, more than double any other core benefit.

The DWP is relying on a new real-time information (RTI) system developed by HM Revenue and Customs to facilitate the collection of PAYE income tax in order to calculate claimants' monthly benefit entitlements.

But the committee warned there were important gaps in the system - including self-employed people who failed to declare their earnings correctly.

It also received evidence from the Local Authority Investigation Officers Group which voiced concern that RTI might even increase the number of people working for "cash in hand".

"RTI cannot provide the complete solution, as it will not apply to a significant proportion of claimants who are paid outside the PAYE system, including the self-employed," the committee said.

"Moreover, the full gains of RTI in relation to reducing benefit fraud and error are largely dependent on the successful national implementation of Universal Credit, which is at least three years away by the most optimistic schedule."

The committee chair Dame Anne Begg said: "Through the use of RTI, Universal Credit has the potential over the longer term to substantially reduce fraud and error in the benefits system.

" However, this could be seriously undermined because of the uncertainty about how DWP will administer the housing element of Universal Credit without increased risks of fraud and error."

A Department for Work and Pensions spokesman said: "Universal Credit is expected to reduce losses due to fraud and error by £1 billion in the next five years when it's fully in place.

"This modern, simpler and easier-to-administer benefit is running successfully and we are continuing to work closely with local authorities to ensure its continued safe and secure rollout.

"We are absolutely committed to doing all we can to reduce the level of fraud and error in the benefit system, which has fallen since 2010.

"We have created a joined up Fraud and Error Service, and will be bringing local authority and HMRC investigators into DWP, and have announced tougher new measures against those who cheat the system."