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Large-scale errors and fraud in the benefits system cost the taxpayers an estimated £3bn in 2003-04, according to report from the Government's Public Accounts Committee (PAC).

Problems highlighted included customer and official errors, a complex benefits system and an ill judged IT re-organisation.

The recent move to form Jobcentre Plus and the Pension Service led to an increase in the level of errors by officials, says the report into the Department for Work and Pension (DWP) run system. Staff moving into unfamiliar roles and the introduction of new methods of working and IT systems led to a rise in mistakes, which could have been combated with a comprehensive programme of training and support for staff, says the report.

The DWP also needs to be able to retrieve customer records without "undue effort". The Department has taken steps to improve document storage and retrieval, but improvements are still needed to improve on the 1.3 per cent not being found. Computer logging of all new and existing files will help improve this figure, say the PAC.

Overpayments, which totalled £1.1bn by March 2004, are another stumbling block. With no satisfactory audit trail, not all benefit overpayments had been identified, some had been identified but not referred for recovery action, while others were awaiting input into the recovery systems.

Of the estimated £9bn overpaid on the last three years, only £550m has been recovered. The Department should give priority to increasing the rate at which debts are recognised and recorded, says the report, which calls on the DWP to tighten local office procedures so that all benefit overpayments are identified at source. New IT systems will also help, it adds. The DWP expect to complete the migration of existing data on debt to a new debt management system by September 2005, and believe in around two years' time it will have made substantial progress in improving the management of debt.

The PAC acknowledge that some progress has been made with fraud but it adds that there has been little change in levels of customer error, mainly because of the complexity of the benefits system. The report points out that the wholesale simplification of the benefits system would require major changes in policy, which could result in large increases in expenditure. Despite this, the Department has simplified the rules for some benefits such as Housing Benefit and Pension Credit, and should extend these efforts to other benefits. Rules, systems and processes should be made easier to understand for both staff and customers, say the PAC.

The report is here (403kb - PDF)

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