Revealed on Byline Times: How Brexit planning boosted tax credit fraud

Whitehall Brexit redeployment boosts tax credit fraud at revenue and Customs. Pic credit: gov.uk

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.

The £5 billion pay out to people who shouldn’t have received it

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Department for Work and Pensions – £3.5 billion of overpayments detected by auditors

CROSS POSTED ON BYLINE.COM

Here is a strange paradox. The government has imposed a tough and to many people unfair benefits and  tax credits regime which has squeezed the poorest – both the unemployed and those in work.

Yet this summer accountants have revealed that HM Revenue and Customs and the Department for Work and Pensions has paid out £5 billion to people on benefits and low incomes who should not have received it. And they predict that even more will receive these payments next year. I have written about this in Tribune magazine this week.

The disclosure comes in the annual audit of both departments by Parliament’s financial watchdog, the National Audit Office, who have qualified the accounts of both departments – as not being a true and accurate description of public spending.

According to the NAO report: “HMRC estimates that the overall level of error and fraud that resulted in overpayments in Tax Credits in 2015-16 increased to 5.5% of Tax Credits expenditure (from 4.8% in 2014-15)

“HMRC estimates that the overall level of error and fraud resulting in underpayments in Tax Credits in 2015-16 remained at 0.7% of Tax Credits expenditure (0.7% in 2014-15). This equates to overpayments of £1.57 billion and underpayments of £210 million.

“HMRC has told us that it believes the level of error and fraud in Tax Credits will increase further when measured for 2016-17. Two main factors have been identified that will lead to this increase: the introduction of the ‘Commercial with a view to a profit’ self-employment test for those who are self-employed and the impact of the Concentrix contract. The impact of these factors on error and fraud levels will not be measured until June 2018, and so the estimate of error and fraud in 2015-16 remains the most up-to-date indication available of error and fraud in Tax Credits expenditure for 2016-17.”

Concentrix were sacked by the department after a privatisation programme went wrong – and they were not up to the job.

Worse are the figures for DWP.

The  NAO’s findings are: “Excluding State Pension, overpayments are at the highest levels since 2009-10, while underpayments are at the highest recorded levels.”

Overpayments amount to £3.4bn, excluding the state pension, an increase of £400 million while underpayments are £1.5bn In percentage terms this amount to an increase to 4.1 per cent of all overpayments and 1.9 per cent of all underpayments.

The report says: “Amongst benefits measured annually for fraud and error, Employment Support Allowance and Housing Benefit overpayments are at the highest recorded levels, and Jobseeker’s Allowance overpayments have returned to the highest levels since 2010-11.

The NAO questions some of the techniques used by the DWP to calculate fraud – saying it assumes that when people don’t get back to the department for a re-assessment that they have been fraudulently claiming. This may not be the case. Also, information is out of date.

“The absence of up-to-date information on error rates in large benefit streams creates a risk that the department is not targeting its fraud and error interventions effectively,” the report says. “For example, Disability Living Allowance, which accounted for £11.5 billion of expenditure in 2016-17, has not been measured for fraud and error since 2004-05.”

All this points to some serious mismanagement by the ministries – which have been squeezed by successive coalition and Tory governments. But it doesn’t mean that those at the top have suffered. I shall return to some interesting findings in their annual reports.