A National Audit Office investigation of housing benefit fraud and error has shown that the government’s method of funding councils for this work is bureaucratic and counterproductive, the LGA has said.
The NAO, parliament’s spending watchdog, said in its report Housing Benefit Fraud and Error that the Department for Work & Pensions lacked focus on tackling these losses.
Benefit overpayment due to fraud and error increased to £1.4bn in 2013-14 – equivalent to 5.8% of spending on this benefit – from £980m in 2010-11, the report said.
Fraud accounted for 24% of this total, claimant error for 65% and official error for 11%. Some £900m was not recovered.
Auditors said the DWP had failed to establish sufficiently clearly how responsibilities for tackling fraud and error were divided between it and local authorities and relied too heavily on incentives paid to councils.
This system “encourages local authorities to process claims accurately and recover overpayments that are identified”, the report said.
“It is not designed specifically to target fraud and claimant error and does not create strong incentives to detect overpayments after the claim has been awarded.”
Funding for local authorities’ administration of housing benefit claims fell by 17% between 2010-11 and 2013-14, but they had to deal with a 5% increase in claimant numbers during that period, the report noted.
NAO head Amyas Morse said: “Housing benefit is a difficult benefit to administer and, against a background of unclear responsibilities and limited investment, it is unsurprising that total overpayments have increased.”
An LGA statement said councils’ housing benefit caseload had risen while the money they received to administer it “has been significantly reduced”.
“It is testament to the efficiency and innovation of councils that the NAO has found benefit claims continue to be processed accurately, despite councils only receiving half the money they need from government to administer the scheme, “ it said.
“Government’s method of funding councils work in this area is too bureaucratic and can be counterproductive to our efforts to identify fraud and error.
“Councils want to work with the DWP to simplify and improve the rules.”
A statement from the Chartered Institute of Public Finance and Accountancy blamed the increase in the fraud and error rate on “a combination of the hollowing out of local authority’s anti-fraud capacity as they shift staff to central government, alongside the doubling of people in employment relying upon housing benefit over the past few years and a corresponding increase in incorrect claims”.
It pointed to “a much larger strategic question about the long term viability of housing system where so many working families need state support to afford a place to live”.
Public Accounts Committee chair Margaret Hodge said the report showed the DWP “has not incentivised local authorities to identify fraud and claimant error, which account for the majority of all overpayments.
“While it has shared data with local authorities to help crack down on fraud and error, these initiatives have fallen well short of expectations.”
She noted that only one of 15 inspections of council housing benefit services planned by the DWP had been carried out since it took over this role from the Audit Commission in 2011-12.
Work and pensions minister Mark Harper (pictured) said in a statement that a new anti-fraud system would cross-check all housing benefit claims “against up-to-the-minute information on earnings and pension income”.
This innovation, known as ‘real time information’ (RTI), will check claims against data from HM Revenue and Customs’ pay-as-you-earn system, he said.
Housing benefit will cease to be paid for working-age claimants once support for housing costs is absorbed into the new Universal Credit.
Local authorities will continue to administer housing benefit claims from retired people until at least 2017-18.