18 October 2010

The UK will not be a soft touch for professional benefit and tax fraudsters the Minister for Welfare Reform Lord Freud vowed today as he published radical new proposals to reduce the billions lost to fraud and error every year.

A shocking £5.2 billion of taxpayers’ money is lost through fraud and error in benefits and tax credits each year. Given the pressure on the public purse, every penny counts and the Government will clamp down across the whole spectrum of fraud and error – from benefit fraud to systematic organised crime. Identifying errors and putting them right is fundamental to reducing costs.

The Fraud and Error Strategy, commissioned by the Prime Minister, is published today and sets out a wide range of options including setting up a new investigation service to catch benefit and tax credit cheats and the use of shared data to track the muddy footprints of professional fraudsters – and gives a strong signal that criminal gangs will no longer find the UK an easy target.

People who are repeatedly caught defrauding the system and organised criminal gangs can expect lengthy bans.

Minister for Welfare Reform Lord Freud said:

"Fraud and error is costing the Government and the taxpayer £5 billion a year – this is unfair and unacceptable.

"We are reforming the system and stepping up our efforts to catch the benefit and tax cheats who are stealing money which is meant for the most vulnerable people in our society.

"We will use credit reference agencies and data matching techniques to spot the tell-tale patterns of fraud. We will employ 200 more investigators and bring in a mobile taskforce to investigate each and every claim in high fraud areas. When people are convicted we will get back the money we are owed, introduce tough punishments and strip the assets of criminal gangs – my message to them is that benefit fraud is a crime that just doesn’t pay."

Although benefit claimants will find it harder to commit fraud under the new Universal Credit, which is a simpler system designed to reduce the scope for fraud and error, Ministers warn that no one will be let off under the new measures and that minor offenders will be issued with instant civil penalties of £50 or more.

The Exchequer Secretary, David Gauke, said:

“There has been too much error and too much fraud for too long in our benefits and tax credits systems. Today we are shining a light on the problem across the system and setting out a radical, cross-Government solution. We simply have to make every penny count – and that includes going after the cheats at every level. One of the ways we will do this is by modernising the Pay as You Earn tax system to link it to the benefits system for the first time.

"The strategy, alongside the proposals new welfare reforms, will ensure fraud and error is detected quickly and that the Government gets back money owed."

The key measures in the Fraud and Error Strategy published today are:

• Launching a single fraud investigation service
• Employing over 200 new anti-fraud officers to detect fraud
• Initiating a new mobile regional taskforce to investigate each and every claim in high fraud areas
• Abolishing cautions as a penalty for fraud
• Increase asset seizure
• A new tougher one-strike, two-strike and three-strike rules, including 3 years for people with multiple convictions
• Money owed deducted directly through PAYE
• Civil Penalties - £50 for more minor offences
• Closer working with Crimestoppers
• Case-cleaning over 1 million claims to remove official or customer error
• Naming and shaming fraudsters in local areas
• Stepping up the Check First, then Pay approach to prevent fraud and error from entering the system

The Fraud and Error Strategy published today will be followed by a wider cross-Government approach to tackle fraud, error and debt collection across the rest of the public sector, led by the Minister for the Cabinet Office.

Notes to Editors:

1. The Fraud and Error Strategy is published at: www.dwp.gov.uk/docs/tackling-fraud-and-error.pdf
2. Comments can be emailed direct to: frauderror.strategy@dwp.gsi.gov.uk
3. £5.2 billion of taxpayers’ money is lost through fraud and error in benefits and tax credits each year.
4. Of the £5.2 billion, fraud accounts for £1.5 billion (£1 billion benefits and £0.5 billion tax credits)
5. Benefit overpayments due to fraud and error in 2009/10 were £3.1billion or 2.1% of benefit expenditure, broken down as follows:
   • Fraud is currently £1 billion, or 0.7% of benefit spend
   • Official error is currently £1.1 billion or 0.7% of benefit spend
   • Customer error is currently £1.1 billion or 0.7% of benefit spend
   • In addition, the estimate for the number of underpayments is £1.3 billion or 0.9% of benefit spend.
6. In Tax Credits, £2.1 billion (8.9% of expenditure).

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