Benefit overpayments under Labour nearing Pounds 2.5bn

Thursday, 20 April, 2006

Benefit overpayments had reached almost Pounds 2.5bn during Labour's time in power, and an overcomplicated system had led to "shocking" levels of error, the Conservatives said yesterday.

The Department for Work and Pensions revealed in answers to parliamentary questions from David Ruffley, the Conservative spokesman for welfare reform, that overpayment of income support caused by officials' errors had reached Pounds 1.17bn since 1997 and pension credit overpayment Pounds 540m.

Income support overpayments were one and a half times higher than in 1997-98 and pensions credit overpayment had trebled in the past three years.

Together with Pounds 910m excess paid in jobseekers allowance, the overpayment was almost Pounds 2.5bn, said Mr Ruffley, blaming the problem on an overcomplicated system.

James Plaskitt, minister for benefits, said an error taskforce had been set up to look at how mistakes made by officials administering benefits could be reduced.

"Last year, DWP paid out Pounds 110bn in benefits and over 97 per cent of that was paid correctly and on-time," Mr Plaskitt said. "The fact is, we are the first government to report measures of official error which last year stood at 0.8 per cent. Whilst this is low, we are determined to reduce it further."

High levels of error plague the tax credits system ad-ministered by Revenue & Customs. Giving evidence to the Commons Treasury committee yesterday, Sir David Varney, Revenue & Customs chairman, said overpayment was "an inherently complex problem" because it was often caused by multiple factors that were difficult to identify and eliminate. For example, it was difficult to track recent changes in claimants' household in-come and estimates were often wrong.

Sir David could give MPs no definitive figures on the causes of overpayment, saying the department was running a sample study to assess the levels and causes of fraud and error. But he disclosed that errors were more significant than fraud, although an investigation was under way into organised fraud and two people had been charged with money laundering offences.

Changes to procedures and recently revised, simplified forms would start to have a positive effect to reduce mistakes, he hoped, and some people whose circumstances were likely to change were now being contacted by Revenue & Customs.

But MPs were concerned that the increase to Pounds 25,000 in the amount of household income that would be disregarded in calculations of tax credit could make the system open to abuse as income was manipulated to make people temporarily eligible for a year of tax credits.

Sir David faced tough questioning about the Revenue decision to settle a dispute with EDS about the botched introduction of tax credits by making half of the Pounds 71.25m compensation de-pendent on the US-based company winning future government contracts.