Benefit fraud and overpayment costs £3.1bn

THE government wasted £3.1bn last year due to fraud and errors that caused it to overpay benefits, according to a report by the House of Commons’ Public Accounts Committee (PAC).

Most of the waste was caused by failures by the Department for Work and Pensions (DPW), with £1.1bn stemming from mistakes by officials and another £1.1bn from failing to catch claimant errors. The remaining £1bn in overpayments were due to fraud.

The committee called for urgent action to deal with the mistakes, the total cost of which is equivalent to 0.7 per cent of benefits spending and more than half of the budget cuts George Osborne made last year.

However, the wastage was to some degree offset by underpayments of £1.3bn, which the committee said were causing “significant financial hardship” for claimants.

Its report also shows that a crackdown on error launched by the department in 2007 was ineffective, with wastage having remained roughly constant since then.

The department, which never even drew up a plan for reducing errors, has now had an additional £425m earmarked to help it stamp out mistakes.

It said a major reason for errors is the complexity of the benefits system, which is due to be replaced by a simpler universal credit system from 2013.