Reducing Fraud and Error in the UK David Barr Head of Fraud and Error Strategy WORLD BANK November 2008
UK Context Benefit Policy responsibility of Department for Work and Pensions (DWP) 27 Different benefits - Contributory (e.g. Unemployment/sickness) - Non Contributory (e.g. Disability) - Means tested (e.g. Lone parent/pensioner) Administered by 3 different organisations 2
What do we mean by Fraud and Error Fraud Falsifying claim from the outset Deliberately failing to notify changes on circumstance. - Organised criminals targeting the benefit system - Occasionally staff who administer benefits Error - Mistakes made by both customer and staff - Computer systems 3
Economic Fraud and Error Implications Every 1 billion in benefit fraud and error equivalent to 35 (56 US $) per UK taxpayer: Equivalent to cost of providing extra: 4 1 (1.59 US $) per week in child benefit for every child, or 1.40 (2.22 US $) per week for every pensioner, or 12,500 doctors, or 32,300 nurses, or 28,800 teachers, or 25,000 police officers Current expenditure due to fraud and error 2.6bn
Expenditure, fraud and error in DWP benefits Expenditure Housing Benefit State Pension 58bn spend 0.2% ( 90m) OP 0.3% ( 150m) UP Disability Living Allowance 10bn spend 1.9% ( 190m) OP 2.5% ( 250m) UP 16bn spend 4.6% ( 730m) OP 1.2% ( 190m) UP Income Support 9bn spend 5.0% ( 450m) OP 1.3% ( 120m) UP Key: Size of circle represents expenditure, red sector size represents the proportion or fraud and error overpayments (OP), the blue sector represents underpayments (UP) Incapacity Benefit 7bn spend 2.1% ( 140m) OP 0.7% ( 50m) UP Carers Allowance 1bn spend 5.5%( 70m) OP 0.1% UP Council Tax benefit Fraud and error (OP) Pension Credit 7bn spend 5.3% ( 390m) OP 1.7% ( 120m) UP Benefit expenditure (bn) % Overpaid % Underpaid 4 bn spend 4.1% ( 160m) OP 1.1% ( 40m) UP Jobseeker s Allowance 2bn spend 4.2%( 90m) OP 0.3% ( 10m) UP 5
State Pension What is it? Risks to Fraud and Error A set payment to individuals or couples when they reach a certain age. Unreported death Retirement Pension is paid to those who have met a level of contributions throughout their working life Unreported separation or divorce So low risk 6
Scale of State Pension Total Number of Recipients = 12million Number of new claims per month = 55,000 Weekly monetary entitlement = between 90.70 single($144)/ 145.05 ($231) couple 7
Disability Living Allowance (DLA) What it is Risks to Fraud and Error A benefit which contributes towards the extra costs faced by severely disabled people who claim help with those costs before the age of 65. Extra help for those disabled relatively early in life who have lost the opportunity to earn and save. Exaggerating or falsifying a health condition. Links to other benefits such as Incapacity benefits and Income Support Entitlement based on effect of disability So medium risk 8
Scale of DLA Number of recipients = 2.9 million Number of new claims per month = 46,000 Weekly monetary entitlement ranges between 17.75 ($28) to 67.00 ($107) 9
Income Support (IS) What it is Benefit which provides financial help for working-age people who are not required to be available for work, whose income is below a prescribed level, and who work less than 16 hours a week.. Must be aged over 16 and not have Capital exceeding 16,000. Non-contributory. Income-related. Tax-free. Risks to Fraud and Error Falsifying Circumstances. Working and claiming. Not declaring or under declaring capital amount. Customer misunderstanding of when to tell of a change in circumstances. Complexity staff getting it wrong. So high risk 10
Scale of Income Support (IS) Number of recipients = 2.1 million Number of new claims per month = 44,000 Weekly monetary entitlement ranges between 47.00 ($75) to 94.00 ($149) 11
How we have tackled Fraud and Error? Fraud Error Prevention Prevention Detecting Correction Deterring Compliance Measurement 12
Fraud Prevention Key Actions Tighter checks at outset of claim - On Identity - On Circumstances Successes During 2007/08: - 417 ID prosecutions - 362 ID prosecutions resulting in prison sentence - 7576 false identities established Payments direct to bank accounts instead of by cheque Cheque fraud reduced by over two-third since 2003/04 Fraud proofing new policy and operational developments 13
Fraud Detection Data matching Key Actions Data matching Successes - over 700,000 data matches in 07/08 Investigation Professionalism Prosecution/sanctions - over 10,000 prosecution as a result of Fraud Investigation service action07/08 Telephone hotline for reporting fraud National Benefit Fraud Hotline - Over 600 calls received daily 14
Deterring Fraud Since 2001Annual Anti Fraud messages have been appearing in national and local media. This years message comprises: TV commercials shown during popular evening programmes Hard hitting poster campaigns and imaginative advertising in popular magazines (Fraud issues disguised as a puzzle page) Percentage of public who view benefit fraud as serious up by 48% since 97/98. Amongst those surveyed only climes of violence deemed more serious. 15
Poster Campaign 16
Classified Adverts for Local Press 17
Puzzles Page for targeted magazine campaign 18
Keith the benefit thief 19
Fraud Our successes Press reporting of Court cases 20
Error Prevention Key Actions Large ongoing data matching exercise. Successes Over 80,000 data matches undertaken in the last 3 months Robust case checking regime both pre and post application. Over 105,000 case checks carried out and reported against. 21
Error Corrections and Compliance Error Task Force Key Actions Set up Action Teams Simplifications to the benefits system. Successes The error task force came into effect from April 2006 and up to May 08 has corrected weekly errors totalling over 3.7m. Action teams are dealing with high risk cases and these are expected to save 45m by 2012. 22
What has been the impact on Fraud and Error 3.5% Proportion of total benefit expenditure overpaid due to fraud and error: 2000/01-2007/08 3.0% 0.4bn 0.4bn Fraud Customer Error Official Error % of benefit expenditure 2.5% 2.0% 1.5% 1.0% 0.7bn 2.2bn 0.7bn 2.2bn 0.6bn 0.6bn 1.8bn 0.8bn 0.7bn 0.9bn 0.9bn 0.9bn 1.0bn 0.9bn 1.0bn 0.9bn 0.8bn 0.5% 0.0% 1.0bn 0.8bn 0.6bn 0.8bn 0.8bn 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 23
What does this mean? What we have achieved: Fraud and error now down to lowest ever level Now 2% compared to 3.2% in 2000-01, and 2.1% six months ago Fraud across all benefits held at lowest ever level reduced by twothirds since 2000-01 Reductions in both customer and official error of 100m in each and official error down to 0.7% - was 0.8% in last published figures Error reduction strategy is working 24
What does this mean? Official error in Income Support and Job Seekers Allowance - down 150m from 2003/2004, and down 190m since 1998/1999 Official error down to 1.3% of expenditure in Income Support - lowest ever level Customer error in Housing Benefit down 100m since 2005/2006 25
Relevance for you? Key principles to adopt to reduce Fraud and Error Be clear about your risks, know what they are and where they can occur. Apply the appropriate mitigations. Be clear what constitutes fraud and have effective prevention, detection and deterrent mechanisms in place. 26
27 Questions