A highly critical National Audit Office report today exposes major shortcomings in the running of the country’s state pension system.
With some 12 million people relying on the Department for Work and Pensions to calculate their pension accurately the auditors reveal a sorry picture of outdated IT systems, civil servants reduced to making manual calculations and mistakes galore with no proper system to identify the errors in the first place.
The NAO investigation was triggered when former pensions minister Liberal Democrat Sir Steve Webb and Tanya Jefferies of ThisIsMoney.co.uk, last year started to refer a number of cases to the Department of women who had been underpaid. On 26 May 2020 Sir Steve published an estimate of the level of underpayments using the
information obtained from the Department combined with public information from the Family Resource Survey that at least 220,000 women had been underpaid including 131,000 married women, 56,000 widows and 35,000 divorcees.
90 per cent of the losers are women
Now the department has admitted that 134,000 people have indeed been given underpaid pensions and it will cost £1.053 billion to compensate them. This figures excludes those who have already died because the department wipes them from its records after four years
Once again 90 per cent of them are women, and only 10 per cent men.
What is particularly alarming is the summary in the report about the whole pensions system.
It says: ” The errors occurred because State Pension rules are complex, IT systems are outdated and unautomated, and the administration of claims requires a high degree of manual review and understanding by case workers. This makes some level of error in the processing of State Pension claims almost inevitable.
“The Department’s caseworkers often failed to set (and later action) manual IT system prompts on pensioners’ files to review the payments at a later date, such as their spouse reaching State Pension Age or their 80th birthday. Caseworkers also often made errors when they did process prompts because frontline staff found instructions difficult to use and lacked training on complex cases.“
Worse the department seem to have a top down approach to find out about errors – rather than a bottom up from the pensioners themselves who might challenge their pension awards. Therefore it never picks up a large volume of similar complaints.
Wrong assumption that there are no errors
As a result there always been the assumption – and it was taken until now by the National Audit Office- that there was virtually no fraud or error in the payment of the £100 billion plus to pensioners every year. This has now been proved wrong.
The ministry is recruiting 544 people – at a cost of £24.3 million – to chase up and pay out the money to people who have lost out. But it is going to take some two years to do this with priority being given to the over 80s and widows. It has no plan on how to compensate relatives of dead pensioners owed money- and the NAO think it should create one.
Meg Hillier MP, Chair of the Committee of Public Accounts, said
“Many pensioners – most of whom are likely to be women – have been short-changed by thousands of pounds which they are still yet to receive many years later.
“DWP must provide urgent redress to those affected and take real action to prevent similar errors in future.”
A DWP spokesperson said:
“We are fully committed to ensuring the historical errors that have been made by successive Governments are corrected, and as this report acknowledges, we’re dedicating significant resource to doing so. Anyone impacted will be contacted by us to ensure they receive all that they are owed.
“Since we became aware of this issue, we have introduced new quality control processes and improved training to help ensure this does not happen again.”
Fourth pensions scandal to hit DWP
However one must comment that this is the fourth scandal to hit the DWP over the payment of pensions and women are by far the worst treated. First we had the 3.8 million 50swomen not being properly informed about the raising the pension age which the Ombudsman has found there was maladministration. Then we had the complicated story of people losing their guaranteed minimum pension uprating which could affect 11 million people, mainly women. Again the Ombudsman found maladministration but only two people have been compensated. And now we are also having delays for people claiming their pension for the first time in getting paid.
Cynics might conclude the ministry is almost misogynist in its approach – and also all these delays is ensuring more people -particularly in the age of Covid- will be dead before they get the money that is owed to them.
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The headline in this story is a paraphrase of an extraordinary letter to be sent out to 15,000 people randomly chosen by the Department for Work and Pensions. Some 180 pensioners are being contacted this month.
The ministry has mounted an exercise to check fraud and error in payments for the state pension alongside universal credit, attendance allowance, PIPs, carer’s allowance, pension credit, housing benefit, and the employment and support allowance. It is run by the Performance Measurement Team. The ministry are asking people on other benefits to send them original documents showing their savings, pay slips, rent books and tenancy agreements.
It comes as the ministry faces a potentially damning report from a National Audit Office inquiry into the underpayment of state pensions to tens of thousands of women under the old state pension system replaced in 2016.
The NAO want to know how these mistakes occurred , what is being done to put them right and what lessons have been learnt. The NAO made it clear yesterday it had nothing to do with this exercise mounted by the DWP.
This also comes on top of a finding of “maladministration” by the Parliamentary Ombudsman over the ministry’s failure to inform 3.8 million 50swomen adequately about the rise in the pension age from 60 to 66.
The letter reproduced above is pretty insensitive to say the least – since it will be going to elderly people aged anywhere from 66 to their 80s and 90s.
Onus put on pensioners not the DWP
As you can see it puts the onus on pensioners to answer questions correctly-with the threat of prosecution or fines if they don’t.
” You have a personal responsibility to make sure all the information you give during the call is correct and complete.
If it isn’t and we pay you too much money you may have to pay the money back. You also risk being prosecuted or having to pay a financial penalty.”
But it gets worse. Under the heading What will happen if I do not hear from you it says:
“If you fail to be available for this review and do not contact me, your entitlement to State Pension may be in doubt and your payments may be stopped. ( Bold type my emphasis).
This is “coercive and threatening language”- Rosie Brocklehurst
Rosie Brocklehurst from St Leonards, is one who got the letter and contacted me.
She saId: “There could be 15000 terrified pensioners receiving this letter all of whom are being threatened with having their state pension. stopped if they do not “make themselves available.” This is abusive coercive and threatening language in my lexicon.”
She is 71. She said: “The letter they send out is couched in language that is designed to frighten and certainly frightened me. I am not well and have had a chronic condition for 18 months. I have no other income but state pension and pension is not means tested. I am married and claim nothing else but my pension..”
Two points First you have to claim your pension but the calculations are done by the DWP. So if the figure is wrong it is not your responsibility, it is theirs and there is a history of the ministry getting things wrong.
The second is you are entitled to your pension. There is no way the DWP or anybody else can take it away from you. Whoever drafted that letter should have changed it for pensioners. I suspect that it may be illegal for the government to stop pension payments which they have already calculated. Certainly if the grounds are not agreeing to be interviewed.
I have contacted the DWP press office but they took over two days to reply. This is their reply;
“We urge people not to worry. We would only suspend payments in very specific circumstances such as where a pensioner has died and we are continuing payments.
“These reviews, introduced in 1997, take a sample of claims from across several benefits to help us identify cases where the department has paid the wrong amount.”
“The wording of our letters is kept under constant review.”
However what does it not say is that the state pension was exempt from all reviews since 1997. A decision to include it was taken in February this year. No explanation was given why the ministry suddenly decided to include it.
2020 was supposed to be the Year of the Bus. A newly elected Tory government promised £220m to improve services which had been in decline since 2010 when another newly elected Tory led government created the cuts.
The initiative ticked every election promise box. It was going to reverse service cuts – mainly in the shires as part of levelling up. It was going to produce a brilliant new demonstration package of co-ordinated bus and train services in Cornwall – one of the poorest areas of England. It was going to be green -promising the first total electric powered bus service in an English city. It was going to be faster with more dedicated bus lanes and expressways and it was going to be easily accessible by introducing a national data system for services and fares available on the internet.
Then came Covid 19. And as a new National Audit Office report revealed on Friday the bus plan crashed off the road.
Buses have never been a glamourous subject. As the NAO report shows they are mainly used by the poor, over 70s, the 17-21 age group before they get their own wheels and single women seeking a safe way home.
It also suffered huge service cuts and big fare rises for many of its passengers outside London. A useful map in the NAO report shows how passenger traffic has declined by an average of 10 per cent between 2010 and 2019 – falling highest in places like Tyne and Wear, Lancashire, Teesside, East Sussex and Lincolnshire but rising in Bristol and Brighton and Hove.
Some 3000 routes have disappeared with bus mileage down from 243 million to 112 million and the average local authority support for services dropping 38 per cent with 42 authorities slashing expenditure by over 50 per cent. Some of the worst examples are West Yorkshire, Surrey and Northamptonshire. Average fares went up 18 per cent between 2010 and 2019.
free bus pass
The biggest cost to local authorities has been the free bus pass – now estimated at £650m a year – a national service – but funded by the local authority where you live. Funding from central government to bus operators has dropped from 31 per cent to 24 per cent between 2010 and 2019.
One of the problems is that since the de-regulation of services the government has had little control – so it can make a lot of noise about improving services – but it can’t force private operators to do it. The plan for a national data system for bus timetables and fares – depends on whether individual operators want to spend the money.
When Covid 19 hit the government was faced with a dilemma – only key workers were encouraged to use public transport – slashing revenue. The government did provide extra cash in tranches to bus companies to keep them going. But it also raided its shiny new support budget to improve services.
The plan for a co-ordinated Cornwall transport service from Plymouth to Penzance was dumped.
So was the money put aside to restore cut services. And it looks like – despite interest from 50 different towns and cities – to be the first to run an all electric bus service – is being delayed by Whitehall inertia.
And other promises to improve express bus services = especially in the West Midlands – have been undermined by the operators themselves.
First Worcester cut service
One check I did on Google First Worcester company had created a furore by halving the number of express buses between Worcester and Birmingham north of Bromsgrove – forcing people to use more expensive services elsewhere. Yet this is an area given priority in the government’s new bus plan and it happened before the Covid 19 crisis hit.
There are some bright spots. Bristol has improved passenger use by 36 per cent. Nottingham has increased bus use and invested in clean bio gas buses and new trams by imposing a work car parking levy. And London, which was not examined in this report, has seen bus use up 89 per cent.
The lesson is clear to all. Grandiose plans to ” level up ” the poorest parts of the country are going to be very expensive if they are to work. And if they don’t deliver there will be a political price to pay for falsely raising people’s hopes. You have been warned.
Yesterday while all eyes were on Boris Johnson’s ” Build,Build, Build ” speech the Department for Work and Pensions slipped out their annual accounts for the last financial year.
In what looks like a classic “cover up ” job to bury bad news, the ministry probably did not want the world to know that their accounts had been censured for material inaccuracy for the 32nd year in a row.
The reason is the failure of the ministry to be able to account for unacceptable levels of fraud and error in the huge number of benefit payments. Billions of pounds have been overpaid to claimants through fraud and mistakes by claimants and errors by officials. And billions of pounds have been underpaid by officials to claimants because they have made mistakes in calculating people’s benefits.
The latest figures are a record for every year since John Moore, was social security secretary under Lady Thatcher in 1988.
It shows that ” Excluding State Pension, the estimated rate of overpayments has increased again to 4.8% (£4.5 billion) of estimated benefit expenditure, from a restated rate of 4.4% (£3.8 billion).
“The estimated rate of underpayments, excluding State Pension, has decreased to 2.0% (£1.9 billion), from its estimated rate of 2.2% (£1.9 billion) in 2018-19. The rate of overpayments in 2019-20 is the
highest estimate to date.”
The worst benefit is the new hated Universal Credit which has suffered from both overpayments and underpayments and claimants have to wait five weeks before they can get it. Since the payment depends on claimants’ monthly varying income the scope for inaccurate reporting of the money is large.
The report says: “For Universal Credit, the estimated rate of overpayments increased from 8.7% to 9.4%. This is the highest recorded overpayment rate for any benefit other than Tax Credits (administered by HMRC), which peaked at 9.7% in 2003-04.”
“Underpayments rates have fallen for Universal Credit, Employment and Support Allowance and Pension Credit, and the estimated rate for Housing Benefit has increased. Personal Independence Payment has the highest rate of underpayments at 3.8% of expenditure in 2019-20. This rate has not changed from 2018-19.”
But the small print of the report also reveals how the Department calculates this. It takes samples of benefit payments to arrive at these figures but the National Audit Office reveals that 61 per cent of the benefits paid out to claimants are based on recalculated estimates for the previous year.
Some other omissions are staggering. The Department has never checked whether payments are accurate for claimants on Disability Living Allowance for 16 years – last done in 2004-05.
More extraordinary the Department has never checked whether money paid out to 12 million pensioners is accurate or not since 2005 – that is 15 years ago.
Instead the department maintains there is no serious fraud or underpayments in pensions – calculating it as just £300 million out of an annual payment of £98.6 billion.
Given this year we had a case this year of a 94 year old pensioner being owed a staggering £117,000 because of 34 years of underpayments, I find this complacency mind blowing.
I also think the National Audit Office, as their auditors, is remiss in not asking for an update.
Next year’s estimate of benefit fraud and error is likely to even more out of kilter thanks to Covid 19 as the ministry have got rid of staff monitoring fraud to be able to pay out the 2.6 million claims for universal credit.
And although the department is said to be investigating 143,000 suspicious claims under Covid 19, it can’t follow them up because it can’t visit them at home.
Gareth Davies, the head of the NAO, said :
“I am concerned that fraud and error in benefit payments have risen again. Fraud and error have a real cost, both for those who face deductions from their income due to overpayments and because it reduces the public funds available for other purposes.
“As the Department takes on a set of unprecedented challenges arising from COVID-19 it is more important than ever that my qualification is not seen as business as usual and the Department responds in a cost-effective way to minimise risks of fraud and error.”
Next year I am certain will be the 33rd year the ministry accounts are questioned and found wanting.
I have today put out a story on Byline Times some damning findings by the National Audit Office on the refurbishment of the Elizabeth Tower and the Big Ben bell and clock face. You can read it in full here.
The report is important because the government is committed to spending billions of pounds – a £4 billion estimate will go nowhere near the real cost – -refurbishing the Palace of Westminster over a decade.
This project was a tiddler compared to that – originally thought to cost £29 million -now 80 million. And if Parliament’s managers can’t properly manage that – what great mess awaits us over the next decade.
The report also reveals one extraordinary fact which shows that the Victorians were as bad at controlling taxpayer’s money and managing big projects as we are today.
The present building built after fire destroyed most of the old Parliament in 1834 was completed 18 years behind schedule and at three times the original cost.
Effectively the governments of Robert Peel and Lord Palmerson were no better at controlling budgets than those of David Cameron and Boris Johnson today. Plus ca change etc.
Another day. Another taxpayer disaster for the Conservatives. This time it is the National Audit Office reporting on the full cost of Michael Gove’s failed vocational education initiative which cost taxpayers £800m and left a trail of brand new closed colleges. Read the horrendous details of this latest scandal on Byline Times here.
Very informative report from the National Audit Office out today on the state of fracking and how it is being held back by unprecedented numbers of protestors and objectors. Read the story here.
I have a full story on Byline Times here.
As a taster:
Parliament’s financial watchdog announced the “super investigation” a week after Parliament rose. It now includes the extra £2 billion Johnson earmarked this month for “turbo charging” the No deal process.
It follows a total of 24 reports by the NAO on Brexit since 2016 which highlighted scandals and public waste. This included the exposure of former transport secretary Chris Grayling’s mishandling of No Deal Brexit freight contracts which cost the country over £50m including paying Eurotunnel £33m in an out of court settlement.
The Revenue and Customs agency has sacrificed the monitoring of fraud and error in paying out £22.9 billion a year in tax credits to millions of people so it can meet deadlines for Brexit.
The switching of 270 civil servants to prepare for Brexit from checking error and fraud among people claiming tax credits has cost Revenue and Customs up to £1.46 billion in overpayments, the National Audit Office has revealed.
The losses are the highest since 2011 and has led to the NAO qualifying the accounts of Revenue and Customs as inaccurate for the 15th year running since former Labour chancellor Gordon Brown first introduced tax credits in 2003.
The losses come on top of figures from the Department for Work and Pensions which disclosed that in the last financial year benefit error and fraud is running at record levels. Altogether the level of known error and fraud in both departments has now been revealed to total a record £7.5 billion.
The full report is on Byline Times here.
Benefit error and fraud has reached record levels at the Department for Work and Pensions and it is going to get worse, according to its own figures released in its annual report for the last financial year.
For the 30th year running the National Audit Office has qualified the ministry’s £86.6 billion benefit accounts because it considers them to be inaccurate
The most damning section of the report is on Universal Credit – whose current and previous directors – have just received bonus payments up to £15,000 each for their work.
The full story is on byline here.