Recommendations & Conclusions
31 items
2
Recommendation
Twenty-Sixth Report - The Department fo…
Rejected
The Department risks allowing high levels of fraud and claimants disengaging with its compliance processes to become normal. The Department has repeatedly claimed that there is an increasing propensity to fraud in society in general since the pandemic. It believes that this is in part driving the record levels of …
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The Department risks allowing high levels of fraud and claimants disengaging with its compliance processes to become normal. The Department has repeatedly claimed that there is an increasing propensity to fraud in society in general since the pandemic. It believes that this is in part driving the record levels of fraud and error in the benefit system. However, it is unable to point to convincing evidence that increasing fraud in society must lead to increasing losses to the taxpayer. The Department does not fully understand the reasons why fraud and error in benefit payments remain at record levels. We are therefore concerned that the Department’s narrative about fraud in society could encourage a complacent attitude toward unprecedented and unacceptable levels of benefit fraud and that people come to see committing benefit fraud as normal. We are also concerned about the sharp increase in the number of claimants choosing not to engage with the Department’s sampling exercise to measure fraud and error. These claimants accounted for 14.4% (£852 million) of all Universal Credit overpayments in 2021–22, an increase of £328 million compared with 2020–21. The Department assumes that all such claims are fraudulent but admits that it has no statistically significant information to support this view. It is therefore unable to say whether claimants who fail to engage have done so because they are fraudsters or have been unwilling or unable to engage for other 6 The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system reasons. Given this uncertainty, the Department should do more to reassure itself that it has struck the right tone in its communications with claimants to encourage trust and engagement with its services. Recommendation: Before the end of January 2023, we expect the Department to write to us with a clear plan of how it intends to increase the number of claimants responding to its fraud and error sampling exercises. In doin
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Government response AI summary
The government disagrees, stating that there is a well-established methodology for dealing with customers who do not co-operate with the benefit review process and should not be receiving benefit. They also state that they continually review all of its customer letters to ensure they are …
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HM Treasury
3
Recommendation
Twenty-Sixth Report - The Department fo…
Rejected
The success of the Department’s strategy to bring down fraud and error is dependent on highly uncertain assumptions. The Department has set out its strategy to tackle fraud and error in Fighting Fraud in the Welfare System. This includes a £613 million investment in counter-fraud activities. The plan is dependent …
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The success of the Department’s strategy to bring down fraud and error is dependent on highly uncertain assumptions. The Department has set out its strategy to tackle fraud and error in Fighting Fraud in the Welfare System. This includes a £613 million investment in counter-fraud activities. The plan is dependent on the Department’s recruitment and training of enough people to implement its fraud counter-fraud activities in a difficult hiring environment, while simultaneously making headcount reductions in line with wider cuts to civil service staffing. The legislation needed to grant new powers the Department needs to deliver its counter- fraud strategy was not included in the Queen’s speech. Without new powers to access third-party data it will have limited ability to crack down on fraud driven by claimants misreporting the value of their savings or capital. The Department will be dependent on close cross-government working, including with the new Public Sector Fraud Authority, and is reliant on HM Revenue & Customs’ (HMRC’s) progress in collecting more timely information about self-employment earnings to address this driver of Universal Credit overpayments. Recommendation: As part of its Treasury Minute response, the Department should set out in detail how its counter-fraud plan would be impacted if it is not able to get the staff, powers or HMRC data that it needs, and what its contingency plans would be in these circumstances.
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Government response AI summary
The government disagrees with the recommendation, stating that setting out detailed contingency plans for various scenarios is unnecessary and could distract from the delivery of its existing plan to reduce fraud and error.
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HM Treasury
4
Recommendation
Twenty-Sixth Report - The Department fo…
Accepted
The Department has not set out in sufficient detail how it will assess whether it is achieving what it wants from its investment in fraud prevention measures. We have previously found that the Department lacks the ability to demonstrate that its counter-fraud activities are having the intended impact and are …
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The Department has not set out in sufficient detail how it will assess whether it is achieving what it wants from its investment in fraud prevention measures. We have previously found that the Department lacks the ability to demonstrate that its counter-fraud activities are having the intended impact and are cost-effective, and recommended that it work with the NAO to develop a consistent framework for reporting savings it generates for the taxpayer. The Department expects its £613 million investment in counter-fraud measures to generate £4 billion of savings over five years, but it has not set out in detail how the specific activities funded will produce this impact. In its 2021–22 Annual Report the Department reported a newly developed estimate that suggests its counter-fraud activities generated £2 billion of savings for 2021–22. However, this estimate requires further development before it can provide an appropriate reporting framework. The Department has committed to developing better, stronger metrics to demonstrate the impact and cost-effectiveness of its counter-fraud measures. Recommendation: We again recommend that the Department work with the NAO to ensure that by the time of its 2022–23 Annual Report and Accounts it has in place an agreed framework to report on the impact and cost-effectiveness of its counter-fraud activities. The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system 7
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Government response AI summary
The government agrees and reports savings of £2 billion achieved in 2021-22 through counter-fraud function. They acknowledge that the NAO has yet to endorse this framework but is committed to working together ahead of the 2022-23 ARA to ensure this agreement is in place.
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HM Treasury
5
Recommendation
Twenty-Sixth Report - The Department fo…
Rejected
The Department’s lack of transparency over its use of data analytics risks eroding public trust in the benefit system. The Department’s strategy to bring down fraud and error will depend increasingly on the use of data analytics and machine learning to identify potentially fraudulent claims. It has trialled a model …
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The Department’s lack of transparency over its use of data analytics risks eroding public trust in the benefit system. The Department’s strategy to bring down fraud and error will depend increasingly on the use of data analytics and machine learning to identify potentially fraudulent claims. It has trialled a model to detect fraud in Universal Credit advances. This uses historical fraudulent claim data to predict which claims are likely to be fraudulent in future and flag these to caseworkers for their review. The Department is aware of the potential for data analytics methods to generate outcomes that could have an adverse impact on certain claimants. For instance, some cases flagged as potentially fraudulent will turn out to be legitimate claims. If the model were to disproportionately identify a group with a protected characteristic as more likely to commit fraud, it could inadvertently obstruct fair access to benefits. The Department has taken steps to evaluate the potential impact of data analytics and machine learning on groups with protected characteristics, but the results are inconclusive and it has not made them public. The Department expects it will need to regularly update its assessment of the potential impact on vulnerable claimants as it develops its data analytics over time. Recommendations: The Department should report annually to Parliament on its assessment of the impact of data analytics on protected groups and vulnerable claimants. The Department should also consider what role the Social Security Advisory Committee can play in supporting public trust over the use of data analytics in the welfare system.
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Government response AI summary
The government disagrees with the recommendation, stating that the recommendation does not fall within the remit of the Social Security Advisory Committee.
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HM Treasury
6
Recommendation
Twenty-Sixth Report - The Department fo…
Accepted
The Department’s efforts to correct the systemic underpayment of State Pension are too slow to meaningfully put things right. The Department now estimates that 237,000 pensioners have been underpaid a total of £1.46 billion in their State Pension. Despite these underpayments going back as far as 1985, the Department’s overall …
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The Department’s efforts to correct the systemic underpayment of State Pension are too slow to meaningfully put things right. The Department now estimates that 237,000 pensioners have been underpaid a total of £1.46 billion in their State Pension. Despite these underpayments going back as far as 1985, the Department’s overall exercise to correct this issue is delayed from the end of 2023 to the end of 2024. The Department cannot be certain that its plan to deliver the exercise on schedule is achievable, as it is dependent on assumptions around recruitment, retraining, and automation. We are not convinced that the Department has done enough to ensure its communications to potentially affected pensioners are sufficiently clear. We are concerned that this may leave many pensioners lacking reassurance that they will receive meaningful and timely redress. The Department does not yet know the full extent of the underpayment relating to Home Responsibilities Protection, and it is dependent on HMRC to evaluate the impact of these underpayments on pensioners. The Department cannot be certain that it has identified all the underpayments implied by the results of its annual measurement exercise. Overall, we remain unconvinced that the Department’s control systems are adequate to detect further underpayments before they build up into major issues in future. Recommendations: As part of its Treasury Minute response, the Department should set out a credible plan to deliver the exercise to correct State Pension underpayments on schedule and explain how it will update its communications to reassure pensioners that they will be meaningfully compensated. In addition to this, the Department should: 8 The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system • as part of its Treasury Minute response, work with HMRC to fully evaluate the extent of the HRP underpayment as soon as possible and provide a timetable of when it expects each phase of this p
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Government response AI summary
The government agrees and states that work is underway in HMRC, supported by the department, to understand more about the scale, potential causes, and options to correct historical errors relating to Home Responsibilities Protection (HRP). They also mention a list of Treasury Minutes responses.
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HM Treasury
1
Conclusion
Twenty-Sixth Report - The Department fo…
Acknowledged
On the basis of a Report by the Comptroller and Auditor General (C&AG), we took evidence from the Department for Work & Pensions (the Department) on its 2021–22 Annual Report and Accounts and the level of fraud and error in the benefits it administers.1
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On the basis of a Report by the Comptroller and Auditor General (C&AG), we took evidence from the Department for Work & Pensions (the Department) on its 2021–22 Annual Report and Accounts and the level of fraud and error in the benefits it administers.1
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Government response AI summary
The government agrees and says it has committed to the target implementation date and will keep the Committee up to date on the progress of this via the existing TM25 recommendation.
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HM Treasury
7
Conclusion
Twenty-Sixth Report - The Department fo…
Rejected
We challenged the Department to explain why benefit fraud remained so high and had not yet returned to pre-pandemic levels. The Department could not tell us when it expected fraud and error to return to pre-pandemic levels, nor could it tell us when Universal Credit overpayments were likely to reach …
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We challenged the Department to explain why benefit fraud remained so high and had not yet returned to pre-pandemic levels. The Department could not tell us when it expected fraud and error to return to pre-pandemic levels, nor could it tell us when Universal Credit overpayments were likely to reach the 6.5% specified in the Business Case.8 It admitted that levels of fraud and errors within the benefits system were “massively too high”, but told us that it was not surprised at the extent of the increase.9 It told us that a large proportion of the increase in fraud and error was due to the higher number of Universal Credit claims during the pandemic. It explained that these claims were “inherently riskier, because there was a lot more self-employment” and that it lacked the timely data it needed to verify and assess these claims.10 It also told us that there had been an increase in the propensity to commit fraud across society in general. It explained that it considered fraud and error to have been high in 2021–22 as a result of: • A shift in the benefit claimant caseload toward riskier individuals, with more self-employment earnings and possession of savings or other types of capital; • The sampling exercise to measure rates of fraud and error took place between October 2020 and November 2021, a period affected by the pandemic during which key controls over fraud were significantly relaxed due to social distancing; and • The Department is still developing key tools to prevent fraud. These include controls over Universal Credit that are set out in the business case but are not yet fully operational, wider use of data analytics to identify fraudulent cases, and increased data sharing with HMRC that would enable it to tackle fraud relating to self-employment earnings.11 6 Committee of Public Accounts, Department for Work and Pensions Accounts 2020–21 – Fraud and error in the benefits system, Twenty-Fifth Report of Session 2021–22, HC 633, 17 November 2021 7 DWP ARA 202
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Government response AI summary
The government disagrees with the Committee’s recommendation and states that the OBR is the government’s independent forecaster, and the department is working with OBR to review its baseline assumptions, and to ensure fraud and error is more visible within the overall forecast, when revised at …
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HM Treasury
8
Conclusion
Twenty-Sixth Report - The Department fo…
Accepted
We have repeatedly recommended that the Department should set targets for fraud and error reduction across the benefits it administers, most recently as part of our examination of the Department’s 2021–22 Annual Report and Accounts.12 In its response the Department reconfirmed its intention to set an overall target for fraud …
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We have repeatedly recommended that the Department should set targets for fraud and error reduction across the benefits it administers, most recently as part of our examination of the Department’s 2021–22 Annual Report and Accounts.12 In its response the Department reconfirmed its intention to set an overall target for fraud and error reduction by Spring 2022, once it was clear on its funding in the Spending Review.13 However, in May 2022 the Department wrote to us explaining that it was not in a position to set a robust, meaningful target because of uncertainty about the baseline level of fraud for post-COVID benefit claims. It added that it believed the savings generated by its £613 million investment in counter-fraud measures would provide a framework against which its future fraud and error performance can be judged.14
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Government response AI summary
The government agrees with the Committee’s recommendation, previously given, to set a target and work with the National Audit Office (NAO) to develop commentary, with a target implementation date of Summer 2023, and will keep the Committee up to date on the progress of this …
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HM Treasury
9
Recommendation
Twenty-Sixth Report - The Department fo…
Accepted
We asked the Department when it expected to be able to set a target for reducing fraud and error. It referred to its letter to the Committee of May 2022 and reiterated it still did not believe that it was able to set a target because of the uncertainty in …
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We asked the Department when it expected to be able to set a target for reducing fraud and error. It referred to its letter to the Committee of May 2022 and reiterated it still did not believe that it was able to set a target because of the uncertainty in baseline levels of fraud and error in post-COVID.15 It added that it did not yet know when there would be sufficient clarity around the baseline to set a target. It further explained that while it agreed it needed to set a target, in the meantime it could work with the NAO on developing a reporting mechanism to demonstrate the effectiveness of its counter-fraud activities based on expected savings.16 The C&AG observed that there will always be a changing context around baseline levels of fraud and error, and that the Department should work on producing an agreed basis for reporting with commentary alongside to explain the context, rather than saying the context prevents it from reporting. The Department and this Committee agreed that this would be a positive step forward.17
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Government response AI summary
The government agrees to set a target for reducing fraud and error and will work with the National Audit Office (NAO) to develop commentary.
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HM Treasury
10
Conclusion
Twenty-Sixth Report - The Department fo…
Rejected
The Department has repeatedly linked the high level of benefit fraud since the pandemic to an increase in the propensity to commit fraud in society more generally. It told us “there is no doubt” that underlying fraud in society is going up, and that the fraud and error in the …
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The Department has repeatedly linked the high level of benefit fraud since the pandemic to an increase in the propensity to commit fraud in society more generally. It told us “there is no doubt” that underlying fraud in society is going up, and that the fraud and error in the benefit system remained at record levels in part because “the tide is rising” and it was battling against it.18 We challenged the Department on its evidence for this belief. It asserted that this view was based on what it has seen “across Government and indeed internationally”, and the British Social Attitudes Survey, but did not provide further detail and admitted it was “difficult not to be anecdotal”.19 Claimants’ engagement with the benefit system
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Government response AI summary
The government disagrees with the committee's recommendation and believes there is a well-established methodology for dealing with customers who do not co-operate with the benefit review process. They are seeking to understand better how it might change benefit policy, process, or service design to prevent …
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HM Treasury
11
Conclusion
Twenty-Sixth Report - The Department fo…
Rejected
The Department’s fraud and error statistics show that the biggest growth area for Universal Credit overpayments in 2021–22 was claimants ‘failing to provide evidence or engage with the process’. This category applies to cases where the claimant had given up their benefit entitlement rather than fully engage in the Department’s …
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The Department’s fraud and error statistics show that the biggest growth area for Universal Credit overpayments in 2021–22 was claimants ‘failing to provide evidence or engage with the process’. This category applies to cases where the claimant had given up their benefit entitlement rather than fully engage in the Department’s fraud and 12 Committee of Public Accounts, Department for Work and Pensions Accounts 2020–21 – Fraud and error in the benefits system, Twenty-Fifth Report of Session 2021–22, HC 633, 17 November 2021 13 HM Treasury, Treasury Minutes - Government response to the Committee of Public Accounts on the Twenty- Second to the Twenty-Sixth reports from Session 2021–22, CP 603, January 2022 14 Correspondence from Peter Schofield CB, Permanent Secretary, Department for Work and Pensions, Re: Fraud and Error Targets, 18 May 2022 15 Qq 41–42 16 Q 43 17 Qq 44–45 18 Q 18; DWP ARA 2021–22, pages 60, 76 19 Q 22 12 The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system error measurement exercise, and where the Department was unsure of the reason why. Claimants failing to engage or provide evidence accounted for 14.4% (£852 million) of all Universal Credit overpayments in 2021–22, an increase of £328 million compared with 2020–21. The Department assumes for statistical purposes that all claims in this category are fraudulent.20 We asked the Department whether it considered non-engagement as a red-flag for fraud, or as proof of fraudulent activity. It told us that the logic underlying was based on the principle that “non-engagement means that your money stops” and its assumption was that a legitimate claimant would need the money and be highly motivated to engage and keep their claim active.21
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Government response AI summary
The government disagrees with the committee's recommendation and believes there is a well-established methodology for dealing with customers who do not co-operate with the benefit review process. They are seeking to understand better how it might change benefit policy, process, or service design to prevent …
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HM Treasury
12
Conclusion
Twenty-Sixth Report - The Department fo…
Rejected
We asked the Department whether it had considered explanations for failure to engage other than deliberate dishonesty, such as concern about the impact on employment or housing if a claimant appeared to under investigation. It stressed that the labelling of claimants who fail to engage as fraudsters was only for …
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We asked the Department whether it had considered explanations for failure to engage other than deliberate dishonesty, such as concern about the impact on employment or housing if a claimant appeared to under investigation. It stressed that the labelling of claimants who fail to engage as fraudsters was only for the purposes of producing statistics. It told us that it has performed some limited work to understand the reasons for lack of engagement, but admitted it had no statistically significant data yet. It explained that it expected its planned ‘Targeted Case Review’ of two million open Universal Credit claims will provide further detail. We asked the Department whether there was anything attached to a claimant’s record showing that their claim was statistically being treated as fraudulent. It told us there was not, but added that claimants who do not engage with Targeted Case Review will be flagged on the Universal Credit system and be unable to get back on benefits without engaging with the Department’s enquiries.22
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Government response AI summary
The government disagrees with the Committee’s recommendation and asserts there is a well-established and accepted methodology for dealing with customers who do not co-operate with the benefit review process and should not be receiving benefit, classifying them as customer fraud, for fraud and error measurement …
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HM Treasury
13
Recommendation
Twenty-Sixth Report - The Department fo…
Accepted
We asked the Department how it ensured that vulnerable claimants were taken into account, in particular when it uses data analytics and machine learning. The Department told us that it was considering and testing for vulnerability “at every stage”.23 It acknowledged that that its data analytics tools focused on characteristics …
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We asked the Department how it ensured that vulnerable claimants were taken into account, in particular when it uses data analytics and machine learning. The Department told us that it was considering and testing for vulnerability “at every stage”.23 It acknowledged that that its data analytics tools focused on characteristics for fraud rather than vulnerability, but that it had other processes to identify and signpost support to claimants with complex needs before a claim would be suspended due to suspected fraud. It explained that this process started with the initial assessment of the claimant by a case worker, and that if evidence of vulnerability was suspected, there were markers within the Department’s systems that can be used to flag this in the claimant’s case. We asked whether this flagging process is automated, and the Department told us it was entirely manual and relied on the discretion of the case worker. It further explained that where there were suggestions of vulnerability, the next stage would be a ‘case conference’ in which a wider team, which it calls ‘Advanced Customer Support Leads’ would assess the case to help ensure the right decision was made about whether to suspend payment. In a case where the claimant had failed to engage with the Department’s processes, this wider team may contact people who might know the claimant—such as their landlord, Local Authority, or GP—to establish what is going on. The Department told us it has expanded the team that specialises in the assessment of these complex cases from 30 to 36. It added that it also had an automated ‘call listening’ service in place to detect key words and phrases associated with vulnerabilities, and that this covered 30% of claimant calls and was planned to expand to 100%.24 20 DWP ARA 2021–22, pages 64, 66, 223–224 21 Q 26 22 Qq 27–29, 78–80, 82–83 23 Q 61 24 Qq 61–65, 79–81 The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system 13
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Government response AI summary
The government is committed to ensuring that all the right assurances and governance is in place for its data and analytics functions, in relation to its fraud and error response and considering the best method on reporting this information to Parliament annually.
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HM Treasury
14
Conclusion
Twenty-Sixth Report - The Department fo…
Rejected
We observed that some claimants may struggle to understand the Department’s communications and use its services. We questioned the Department on how it might improve its customer service to make it easier for claimants to engage, especially where they have less experience of understanding of the benefits process. It acknowledged …
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We observed that some claimants may struggle to understand the Department’s communications and use its services. We questioned the Department on how it might improve its customer service to make it easier for claimants to engage, especially where they have less experience of understanding of the benefits process. It acknowledged that its services can be complicated for customers, and it committed to understanding this in more detail and to simplify some of its processes to make it easier for genuine claimants. It told us this may include mapping out its services from the customer point of view to understand where it can simplify the process and making greater use of digital solutions, but did not set out a timeframe for this work.25 25 Qq 30–33 14 The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system 2 Reducing fraud and error in the benefit system The Department’s strategy to tackle fraud and error
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Government response AI summary
The government disagrees with the committee's recommendation, stating that there is a well-established and accepted methodology for dealing with customers who do not co-operate with the benefit review process.
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HM Treasury
15
Conclusion
Twenty-Sixth Report - The Department fo…
Rejected
In May 2022 the Department published its strategy to reduce fraud and error following the pandemic, which is set out in Fighting Fraud in the Welfare System. The three main strands of this are:26 • £613 million investment in counter-fraud measures during the Spending Review period. Most of this will …
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In May 2022 the Department published its strategy to reduce fraud and error following the pandemic, which is set out in Fighting Fraud in the Welfare System. The three main strands of this are:26 • £613 million investment in counter-fraud measures during the Spending Review period. Most of this will fund an expansion of frontline staff headcount, and a ‘Targeted Case Review’ of around two million open Universal Credit claims. • New powers to access third-party data, seize evidence, and make arrests, which will require the passage of legislation. • Close working across the public and private sectors. Most significantly with HM Revenue & Customs, as the Department is dependent on information from its systems to tackle fraud relating to self-employment earnings.
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Government response AI summary
The government disagrees with the committee's recommendation and reiterates its existing plan to reduce fraud and error, focusing on frontline staff, legal powers, and public/private sector collaboration, funded by existing investments and seeking further opportunities to clamp down on fraud across government.
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HM Treasury
16
Conclusion
Twenty-Sixth Report - The Department fo…
Rejected
We questioned the Department on the challenges it may face in implementing its strategy. The Department told us that it will achieve the planned increase in frontline counter-fraud staff to 9,500 full-time equivalents by July 2022. It explained that its plan to review over two million Universal Credit cases will …
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We questioned the Department on the challenges it may face in implementing its strategy. The Department told us that it will achieve the planned increase in frontline counter-fraud staff to 9,500 full-time equivalents by July 2022. It explained that its plan to review over two million Universal Credit cases will require a further 2,000 staff, which it was “building up gradually” and it expected to take until April 2024 to be fully resourced.27 We asked the Department what steps it was taking to ensure that it could recruit the staff that it needed given the current employment market. The Department recognised that “it is a tight labour market” but that it expected its jobs to be “incredibly attractive … [and] … add huge value” as well as being interesting and of benefit to society.28 We asked the Department how the Government’s planned reduction of civil service headcount by 90,000 staff would impact its strategy. It told us it could not say more until the Government had made a decision about how it will distribute the planned reductions.29
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Government response AI summary
The government disagrees with the committee's recommendation and reiterates its existing plan to reduce fraud and error, focusing on frontline staff, legal powers, and public/private sector collaboration, funded by existing investments and seeking further opportunities to clamp down on fraud across government.
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HM Treasury
17
Conclusion
Twenty-Sixth Report - The Department fo…
Rejected
We have previously recommended that the Department should communicate to Parliament what additional powers or changes to legislation it needed to improve controls on specific fraud and error risks.30 The Department set out the new powers it believes it requires in Fighting Fraud in the Welfare System, which includes greater …
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We have previously recommended that the Department should communicate to Parliament what additional powers or changes to legislation it needed to improve controls on specific fraud and error risks.30 The Department set out the new powers it believes it requires in Fighting Fraud in the Welfare System, which includes greater access to third- party banking data which would enable it to crack down on fraud caused by claimants misreporting the value of their savings and capital.31 We noted that this legislation was not reflected in the most recent Queen’s speech and asked what impact this would have on the Department’s plan for reducing fraud and error. The Department told us that the legislation strand of its strategy was a longer-term goal that would take time to bring into 26 DWP ARA 2021–22, page 232 27 Qq 56, 59 28 Qq 57–59 29 Qq 7–8 30 Committee of Public Accounts, Department for Work and Pensions Accounts 2019–20, Twenty-Sixth Report of Session 2019–21, HC 681, 18 November 2020 31 Department for Work & Pensions, Fighting Fraud in the Welfare System, CP 679, May 2022 The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system 15 effect, even if the legislation were passed immediately. It added that it definitely needed the expanded powers in the longer-term to enable it to prevent fraud relating to the value of claimant savings and capital, but that its plan for this Spending Review period was focused on detection and removal of fraud and error already in the welfare system through its £613 million investment.32
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Government response AI summary
The government disagrees with the committee's recommendation and reiterates its existing plan to reduce fraud and error, focusing on frontline staff, legal powers, and public/private sector collaboration, funded by existing investments and seeking further opportunities to clamp down on fraud across government.
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HM Treasury
18
Recommendation
Twenty-Sixth Report - The Department fo…
Rejected
During our examination of the Department’s 2020–21 Annual Report and Accounts we concluded that the Department was taken by surprise by the significant increase in the levels of Universal Credit fraud attributed to misreporting of self-employment earnings during the pandemic.33 The Department accepted that it needed to more and claimed …
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During our examination of the Department’s 2020–21 Annual Report and Accounts we concluded that the Department was taken by surprise by the significant increase in the levels of Universal Credit fraud attributed to misreporting of self-employment earnings during the pandemic.33 The Department accepted that it needed to more and claimed that it would continue to work across government to improve access to data that would support its efforts to tackle these overpayments.34 We asked the Department why it thought levels of fraud and error remained so high in 2021–22. It explained that part of the reason was that the Universal Credit claims made during the pandemic were inherently riskier, with higher levels of self-employment, and that it lacked timely information to verify the earnings of these claimants. It acknowledged that there was more it needed to do on self- employment fraud by working to improve data sharing with HMRC, and in particular by improving access to information on self-employment earnings collected by HMRC as part of its Making Tax Digital programme.35 Assessment of the impact and cost-effectiveness of its activities
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Government response AI summary
The government disagrees, pointing to its existing plan to reduce fraud and error, the £613 million investment received through Spending Review 2021 and Spring Statement 2022, and the plan to legislate for additional powers. They also reference HMRC sharing information with them. The department doesn't …
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HM Treasury
19
Recommendation
Twenty-Sixth Report - The Department fo…
Accepted
We have previously found that the Department lacks the ability to demonstrate that its counter-fraud activities are having the intended impact and are cost-effective. As part of our inquiry into the Department’s 2019–20 Accounts, we recommended that the Department needed to be able to monitor and report on the impact …
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We have previously found that the Department lacks the ability to demonstrate that its counter-fraud activities are having the intended impact and are cost-effective. As part of our inquiry into the Department’s 2019–20 Accounts, we recommended that the Department needed to be able to monitor and report on the impact and cost effectiveness of each of its fraud and error initiatives, and in particular the impact of its investment in new technology.36 When we examined the Department’s 2020–21 Accounts, we concluded that while the Department claimed it was making savings across the benefit system, it was unable to explain how these would reduce the amount of fraud and error in its expenditure. We recommended that it work with the NAO to develop a framework, by the time of its 2021–22 Annual Report and Accounts, that allowed a consistent basis for reporting how much money has been lost or saved for the taxpayer as a result of action to prevent fraud and error.37 In its response to our report, the Department agreed with our recommendation and claimed it was already developing an internal measurement and reporting capability to provide estimates of the amount saved for the taxpayer from fraud and error activities.38
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Government response AI summary
The government published an estimate of £2 billion in savings from counter fraud efforts in the 2021-22 ARA and is committed to working with the NAO to ensure agreement on the framework for the 2022-23 ARA.
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HM Treasury
20
Conclusion
Twenty-Sixth Report - The Department fo…
Accepted
We asked the Department how long it would be before it could set a target for fraud and error reduction. It told us that it could not say when it would have enough clarity 32 Qq 70–72 33 Committee of Public Accounts, Department for Work and Pensions Accounts 2020–21 – …
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We asked the Department how long it would be before it could set a target for fraud and error reduction. It told us that it could not say when it would have enough clarity 32 Qq 70–72 33 Committee of Public Accounts, Department for Work and Pensions Accounts 2020–21 – Fraud and error in the benefits system, Twenty-Fifth Report of Session 2021–22, HC 633, 17 November 2021 34 HM Treasury, Treasury Minutes - Government response to the Committee of Public Accounts on the Twenty- Second to the Twenty-Sixth reports from Session 2021–22, CP 603, January 2022 35 Qq 18, 35 36 Committee of Public Accounts, Department for Work and Pensions Accounts 2019–20, Twenty-Sixth Report of Session 2019–21, HC 681, 18 November 2020 37 Committee of Public Accounts, Department for Work and Pensions Accounts 2020–21 – Fraud and error in the benefits system, Twenty-Fifth Report of Session 2021–22, HC 633, 17 November 2021 38 HM Treasury, Treasury Minutes - Government response to the Committee of Public Accounts on the Twenty- Second to the Twenty-Sixth reports from Session 2021–22, CP 603, January 2022 16 The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system about baseline levels of fraud and error to set a target, but that in the meantime a first step toward this would be to measure the savings that its counter-fraud and compliance teams are delivering and the effectiveness of its interventions. It explained that it expected its £613 million investment in counter-fraud activities to generate £2 billion in savings over the spending review period, of which £1.1 billion would be during the financial year 2022–23.39
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Government response AI summary
The government agrees with the Committee’s recommendation, previously given, to set a target and work with the National Audit Office (NAO) to develop commentary, with a target implementation date of Summer 2023, and will keep the Committee up to date on the progress of this …
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HM Treasury
21
Conclusion
Twenty-Sixth Report - The Department fo…
Acknowledged
The Department told us it had included numbers in its Annual Report and Accounts for the savings from its efforts to reduce fraud and error. The Department’s 2021–22 Annual Report included an estimate for the impact of its activities to reduce fraud and error of £2 billion for 2021–22, but …
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The Department told us it had included numbers in its Annual Report and Accounts for the savings from its efforts to reduce fraud and error. The Department’s 2021–22 Annual Report included an estimate for the impact of its activities to reduce fraud and error of £2 billion for 2021–22, but notes that this estimate is built up from a wide range of management information and modelling assumptions. The NAO reported that this savings estimate is experimental and requires further development before it can provide an appropriate framework for reporting the amount saved for the taxpayer and the cost- effectiveness of the Department’s activities. The Department told us that it will continue to develop “better, stronger metrics” to demonstrate the effectiveness of its counter-fraud activities.40 Transparency around the future use of data analytics in fraud prevention
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Government response AI summary
The government published an estimate of £2 billion in savings from counter fraud efforts in the 2021-22 ARA and is committed to working with the NAO to ensure agreement on the framework for the 2022-23 ARA.
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HM Treasury
22
Recommendation
Twenty-Sixth Report - The Department fo…
Acknowledged
As part of our previous examination of the Department’s 2019–20 Accounts, we recommended that the Department should monitor and report any discrimination or bias caused by using artificial intelligence and machine learning on different claimant groups.41 In its response to our report, the Department agreed with our recommendation and told …
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As part of our previous examination of the Department’s 2019–20 Accounts, we recommended that the Department should monitor and report any discrimination or bias caused by using artificial intelligence and machine learning on different claimant groups.41 In its response to our report, the Department agreed with our recommendation and told us that it had a Data Science Ethics Framework for machine learning that ensures it considers bias and discrimination in the design of predictive models. It also told us that it was working with legal experts to ensure that the ethical position of its products have been properly considered ahead of any wider automation, and committed to providing an update on how it is using data to tackle loss as part of its Annual Report and Accounts.42 The Department told us that wider use of data analytics methods such as machine learning will be a key part of its future efforts to prevent fraud from entering the benefit system. During 2021–22 the Department trialled a machine learning model that uses information from past fraud cases to build a prediction of which claims are likely to be fraudulent in the future.43
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Government response AI summary
The government is committed to ensuring assurances and governance for data and analytics functions and is considering the best method on reporting this information to Parliament annually.
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HM Treasury
23
Recommendation
Twenty-Sixth Report - The Department fo…
Acknowledged
We asked the Department about the degree of transparency that the public can expect to have about how its data analytics and machine learning tools will work. The Department told us that this was a “challenging balance”. It cautioned that it did not want to make public details about its …
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We asked the Department about the degree of transparency that the public can expect to have about how its data analytics and machine learning tools will work. The Department told us that this was a “challenging balance”. It cautioned that it did not want to make public details about its techniques or what characteristics or behaviours it was looking for that could tip off fraudsters about how the Department identifies fraud. But it agreed that it should look at publishing what it can to give the public confidence in the fairness of these methods in future.44 The Department has previously acknowledged the 39 Qq 41–43 40 Q 41; DWP ARA 2021–22, pages 70, 230 41 Committee of Public Accounts, Department for Work and Pensions Accounts 2019–20, Twenty-Sixth Report of Session 2019–21, HC 681, 18 November 2020 42 HM Treasury, Treasury Minutes – Government responses to the Committee of Public Accounts on the Twenty- Fifth to the Twenty-Ninth reports from Session 2019–21, CP 376, February 2021 43 Q 68; DWP ARA 2021–22, page 229 44 Q 60 The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system 17 potential for data analytics and machine learning to generate biased outcomes that could have an unfair impact on certain groups of claimants. For instance, if a machine learning model were to disproportionately identify a group with a protected characteristic as more likely to commit fraud, the model could inadvertently obstruct fair access to benefits.45
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Government response AI summary
The government is committed to ensuring assurances and governance for data and analytics functions and is considering the best method on reporting this information to Parliament annually.
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HM Treasury
24
Recommendation
Twenty-Sixth Report - The Department fo…
Accepted
The Department explained that, in order to manage the risk of unintended bias in the use of data analytics to identify fraud, it ensured that there was always meaningful human involvement in decision-making, and that it undertook ‘fairness analysis’ to identify any disproportionate impacts. We asked the Department which groups …
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The Department explained that, in order to manage the risk of unintended bias in the use of data analytics to identify fraud, it ensured that there was always meaningful human involvement in decision-making, and that it undertook ‘fairness analysis’ to identify any disproportionate impacts. We asked the Department which groups the fairness analysis had been conducted for. It explained it had undertaken the analysis for a number of protected characteristics but that this was “still very much in the test phase” and did not tell us which groups or the results of this analysis so far. It explained that its testing included identifying both fraudulent activities, but also any false positives where the model suggests activity might be fraudulent but on further investigation is not. It further explained that it will need to regularly review and improve its methods for as long as it uses them to ensure that they were being applied fairly and to stay ahead of fraudsters.46 Following our evidence session, the Department wrote to the Committee to explain than an Equality Analysis had been completed for the overall project which initially considered fairness metrics for age, gender and pregnancy. It told us that it continuously monitored for bias and accuracy, and will update the Equality Assessment to consider other protected characteristics following further testing.47 45 DWP ARA 2021–22, page 229 46 Qq 66–68; DWP ARA 2021–22, page 229 47 DWP Follow up Correspondence to the Public Accounts Committee Hearing on DWP Annual Report & Accounts 2021–22 on 20 July, 6 September 2022 18 The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system 3 The systemic underpayment of State Pension The Department’s progress in correcting the systemic underpayment of State Pension
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Government response AI summary
The government is committed to ensuring that all the right assurances and governance is in place for its data and analytics functions, in relation to its fraud and error response and considering the best method on reporting this information to Parliament annually.
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HM Treasury
25
Conclusion
Twenty-Sixth Report - The Department fo…
Not Addressed
We examined the Department’s systemic underpayment of State Pension in January
Government response AI summary
The government response only references the PAC conclusion.
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HM Treasury
26
Conclusion
Twenty-Sixth Report - The Department fo…
Not Addressed
By the publication of its Annual Report & Accounts in July 2022 the Department estimated that 237,000 pensioners had been underpaid around £1.46 billion. This is an increase of 105,000 pensioners and £429 million compared with its best estimate as at 31 March 2021, but remains within the range of …
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By the publication of its Annual Report & Accounts in July 2022 the Department estimated that 237,000 pensioners had been underpaid around £1.46 billion. This is an increase of 105,000 pensioners and £429 million compared with its best estimate as at 31 March 2021, but remains within the range of uncertainty the Department set out at the time.49 We asked the Department how it could now be confident that it had identified all those affected and that there would not be a further increase. It told us that the increase since our last report reflected that it had now performed scans of its computer systems that it was unable to during 2020–21, so was not an increase in the actual number of pensioners affected, but in the number of potential cases it had identified and can review. It further explained that it was now confident that the number of affected pensioners will remain stable, but that it needed to perform further sampling to accurately estimate the likely value of each underpayment.50 Following our evidence session, the Department wrote to the Committee to clarify that until the exercise is completed, it cannot say with complete certainty that the number of people underpaid, and therefore the cost, will not change. It told us that it aimed to provide updated numbers “as part of a future fiscal event”.51
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Government response AI summary
The government response only references the PAC conclusion.
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HM Treasury
27
Recommendation
Twenty-Sixth Report - The Department fo…
Accepted
In January 2021 the Department launched an exercise to review around 400,000 cases ‘at risk’ of underpayment to confirm the extent of the issue and reimburse affected pensioners. The Department wrote to us in May 2022 explaining that it was on track to conclude the review of the original 400,000 …
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In January 2021 the Department launched an exercise to review around 400,000 cases ‘at risk’ of underpayment to confirm the extent of the issue and reimburse affected pensioners. The Department wrote to us in May 2022 explaining that it was on track to conclude the review of the original 400,000 cases by the end of 2023.52 But it noted in its most recent Annual Report and Accounts that it was planning on the basis that completion would likely be delayed to the end of 2024 because of the potentially affected pensioners newly identified during 2021–22. The NAO reported that between January 2021 and March 2022, the Department reviewed an average of 4,000 cases per month, but 48 Committee of Public Accounts, Underpayments of the State Pension, Thirty-Third Report of Session 2021–22, HC 654, 12 January 2022 49 DWP ARA 2021–22, pages 234, 291 50 Qq 85, 91 51 DWP Follow up Correspondence to the Public Accounts Committee Hearing on DWP Annual Report & Accounts 2021–22 on 20 July, 6 September 2022 52 Correspondence from Peter Schofield CB, Permanent Secretary, Department for Work and Pensions, Re: State Pension Underpayments, 16 May 2022 The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system 19 it will need to review around 19,000 cases per month going forward to achieve its target deadline.53 We asked the Department whether it genuinely believed that a 400% increase in workload would be achievable. It told us it was confident it could achieve its 2024 deadline by boosting staffing from 500 to 1,500, increasing the speed at which cases were reviewed, and deploying automation tools, which were still under development. We questioned the Department on whether the additional 1,000 staff would need to be compensated for in the wider headcount reductions. It explained that it did not expect this would be an issue because these reductions were planned for March 2025, and therefore would not affect its 2024 target completion date. We observed
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Government response AI summary
The government agrees and states that it already provides a range of awareness materials to assist those who may fall into the cohorts affected by the State Pension LEAP exercise, including information on Gov.UK and leaflets with annual uprating letters. They have also provided a …
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HM Treasury
28
Recommendation
Twenty-Sixth Report - The Department fo…
Accepted
In our January 2022 report we were concerned that the Department had not given people who were worried that they had been underpaid enough information to find out what they should do, and that there was a risk that many would still miss out on money they should receive.55 In …
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In our January 2022 report we were concerned that the Department had not given people who were worried that they had been underpaid enough information to find out what they should do, and that there was a risk that many would still miss out on money they should receive.55 In May 2022, the Department wrote to us to say that it would consider the feasibility of doing more to understand the effectiveness of its communications to pensioners who are concerned they may have been underpaid.56 We asked the Department what steps it had taken toward this. It told us that it was reviewing and simplifying its communications with customers, but offered no specific details on the changes it had made as a result. It further explained that its generic message to pensioners who are concerned they may be affected was that “we will get to them” – and that it was being systematic and prioritising case review based on its assessment of claimants’ vulnerability. It said in practice this means it will contact the over-80s and widowed pensioners first.57 We responded that this messaging would not be reassuring to pensioners concerned about their entitlement. The Department reiterated that it encouraged people to wait to be contacted, unless they were in one of several groups: • someone already getting State Pension who got divorced or had their civil partnership dissolved; • a married woman whose husband reached State Pension age after them and who became entitled to his State Pension before 17 March 2008; • a husband, wife, or civil partner in a couple where both had reached State Pension age and the other person has died and not yet claimed their State Pension, or • Someone aged 80 and over who either has no State Pension or Graduated Retirement Benefit, as they need to make a claim to get any Category D State Pension.58 53 DWP ARA 2021–22, page 235 54 Qq 93–96 55 Committee of Public Accounts, Underpayments of the State Pension, Thirty-Third Report of Session 2021–22, HC 654, 12 January
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Government response AI summary
The government agrees to work with HMRC to fully evaluate the extent of the HRP underpayment as soon as possible and provide a timetable of when it expects each phase of this process will be completed.
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HM Treasury
29
Conclusion
Twenty-Sixth Report - The Department fo…
Acknowledged
In our January 2022 report, we warned that, given the nature of underpayments identified, there was a risk that similar, unidentified errors existed in the State Pension caseload.60 In 2021–22 the Department identified several new groups of pensioners potentially affected by underpayment, the most significant relating to Home Responsibilities Protection …
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In our January 2022 report, we warned that, given the nature of underpayments identified, there was a risk that similar, unidentified errors existed in the State Pension caseload.60 In 2021–22 the Department identified several new groups of pensioners potentially affected by underpayment, the most significant relating to Home Responsibilities Protection (HRP). For people reaching State Pension age before 6 April 2010, HRP reduced the number of qualifying years of National Insurance contributions needed for a basic State Pension where someone stayed at home to care for children for whom they received Child Benefit or a person who was sick or disabled. The Department identified that HRP was missing from the National Insurance records of claimants who should have been entitled to it. National Insurance records are held and maintained by HMRC, which was unaware of the issue until the Department flagged it.61 We asked the Department what was its best estimate of the scale of the underpayments as a result of HRP. The Department explained that it did not yet know the extent of the underpayment in relation to HRP because it was dependent on HMRC to help identify affected cases before it could estimate the total value of any underpayment and reimburse pensioners.62
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Government response AI summary
The government agrees with the recommendation to work with HMRC to evaluate the extent of the HRP underpayment and provide a timetable for completion. Investigation is underway, but estimates of affected people and costs are not yet available.
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HM Treasury
30
Recommendation
Twenty-Sixth Report - The Department fo…
Accepted
The NAO reported that the Department cannot rule out that there may be further groups of pensioners, as yet unidentified, that have been affected by a historic underpayment. It concluded that this was in large part because the Department had not set out plans to revise its control processes for …
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The NAO reported that the Department cannot rule out that there may be further groups of pensioners, as yet unidentified, that have been affected by a historic underpayment. It concluded that this was in large part because the Department had not set out plans to revise its control processes for State Pension cases to ensure that underpayments are detected and recorded at the point of payment.63 As part of our previous inquiry into the underpayment of State Pension we expressed concern that senior management was not focused on designing a data strategy that detects errors in a more systematic way. The Department previously acknowledged ”an inability to pick up patterns of underpayment, which had been going on for many years”, which caused detrimental impact on those underpaid.64 We therefore challenged the Department on why it seemed to keep finding more problems and more people affected who were not getting the money that they should have already received. It told us that it considered the fact it was continuing to identify issues such as HRP demonstrated that it was “looking hard enough” to find cases of underpayment.65
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Government response AI summary
The government agrees and plans to report the total value of arrears payments that arise due to underpayments in its next Annual Report & Accounts, and how it will review individual arrears payments to assess whether they are indicative of a systemic underpayment issue. They …
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HM Treasury
31
Conclusion
Twenty-Sixth Report - The Department fo…
Accepted
We have previously concluded that the Department had been relying on a State Pension payment system that is not fit for purpose for decades, and recommended that it consider ways to upgrade its IT systems as a matter of urgency.66 The Department accepted 59 Q 101 60 Committee of Public …
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We have previously concluded that the Department had been relying on a State Pension payment system that is not fit for purpose for decades, and recommended that it consider ways to upgrade its IT systems as a matter of urgency.66 The Department accepted 59 Q 101 60 Committee of Public Accounts, Underpayments of the State Pension, Thirty-Third Report of Session 2021–22, HC 654, 12 January 2022 61 DWP ARA 2021–22, pages 71, 225, 310 62 Qq 87–88 63 DWP ARA 2021–22, page 238 64 Committee of Public Accounts, Underpayments of the State Pension, Thirty-Third Report of Session 2021–22, HC 654, 12 January 2022 65 Q 89 66 Committee of Public Accounts, Underpayments of the State Pension, Thirty-Third Report of Session 2021–22, HC 654, 12 January 2022 The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system 21 this and told us that it considered the recommendation to have been implemented, largely because it had introduced a new service—‘Get your State Pension’—to replace its legacy pension system.67 We asked the Department to update us on when it expected to have a State Pension management system that is fit for purpose. It maintained that it did have a pension system that was fit for purpose, the ‘Get Your State Pension’ system, which was built for the New State Pension cases from 2016 onward. However, it acknowledged that around 11.5 million records were still held on the legacy pension system set up in 1989. It told us that the migration of records to its new system was a “painstakingly difficult task” but that it expected to complete this process within the current Spending Review period.68 67 HM Treasury, Treasury Minutes – Government responses to the Committee of Public Accounts on the Thirty- Second to the Thirty-Fifth reports from Session 2021–22, CP 649, April 2022 68 Qq 103–104 22 The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system
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Government response AI summary
The government agrees with the recommendation, but disagrees with the overall conclusion, given its previous detailed updates on the State Pensions Legal Entitlement and Administrative Practices exercise (the LEAP exercise) and provides details on the scope of the exercise, progress to date and plans to …
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HM Treasury