Record levels of benefit fraud in first year of pandemic in Britain

About a million people claiming universal credit potentially face a “tap on the shoulder” from investigators after official figures revealed record levels of benefit fraud during the first year of the pandemic.

Universal credit accounted for £6bn of the estimated £8.5bn of “overpaid” benefits in 2020-21, the figures show. Fraud levels soared as normal verification checks were suspended in order to process the new benefit claims last spring.

Fraud levels in England, Wales and Scotland reached a historic high, with universal credit fraud up five percentage points to nearly 13%, denting ministerial expectations that the scheme would deliver an annual £1.3bn reduction in benefit fraud by 2025.

The Department for Work and Pensions (DWP) said benefits fraud remained relatively low, and blamed the increase on a tiny minority of claimants. It said 95% of the annual £200bn pensions and benefits bill was going to people genuinely in need.

The department had “flagged” up about one in six claims approved over the past year which it considered suspicious and was now retrospectively checking them.

Some claimants were likely to get a “tap on the shoulder,” according to Neil Couling, the DWP director general of universal credit.

A DWP spokesperson said: “We take any abuse of taxpayers’ money very seriously and those who claim benefits they are not entitled to will face criminal prosecution. We also have robust plans in place to recover fraudulent claims and drive fraud and error down to the lowest feasible level.”

The DWP said it had thwarted a targeted attack on the benefits system by organised criminals at the height of the coronavirus pandemic. It also claimed to have prevented £1.7bn from being paid to people trying to scam the system.

Will Quince, the welfare delivery minister, said in a parliamentary statement: “We have recently identified another organised attempt to fraudulently claim universal credit at scale and have worked in conjunction with the police to arrest suspects involved, seizing evidence which will enable us to pursue the perpetrators.”

There are 6 million people on universal credit, half of whom started claiming after March 2020, when the first lockdown was announced. About £38bn was paid to low-paid and unemployed households last year, up from £18bn in 2019-20. An estimated 300,000 universal credit applications were rejected last year.

The main areas of universal credit fraud were misstatements of household savings or income, overstating the amount paid in rent or numbers of children in a family, and couples cohabiting while maintaining individual claims for separate addresses.

The figures did not include fraud linked to benefit cash advances, introduced to help people survive the minimum five-week wait for a first universal credit payment. Advances fraud, often the result of identity theft, amounted to £150m in 2019-20. The DWP said this form of fraud was now back to pre-Covid levels.

However, because of DWP underpayments claimants missed out as a whole on £2.5bn of entitlements. Much of this was believed linked to housing support claims understating the amount of rent paid, possibly because claimants provided a weekly rather than monthly rental figure.

The DWP said it had expected a rise in fraud when it adopted a pay-first-check-later approach so as to quickly process payments for millions of new claimants who signed on in a matter of weeks last spring as the pandemic started and the economy nose-dived.

Couling said he expected the public would understand the DWP’s decision to drop some normal verification checks, such as face-to-face interviews at job centres, to enable officials to prioritise getting money to claimants as quickly as possible while maintaining social distancing measures.

Although the pandemic had an unprecedented impact on the benefits system last year, fraud levels have been rising for some time, despite government crackdowns. In 2019-20, the National Audit Office noted that universal credit overpayments had reached a level not seen since 2004 with tax credits.

Couling said the DWP “clearly had work to do” to achieve the £1.3bn-a-year savings in fraud and error by 2025 that ministers had claimed would be one of the key benefits of adopting the universal credit system.

Thomas Lawson, chief executive at the debt charity Turn2us, said: “While there is a minority of people who abuse systems like this, as many do with their taxes, it is vital we don’t let these reports perpetuate stigma around claiming welfare.”