Lottery firm may help in fraud battle

GTech is offering its technology to aid the Government war on benefit cheats

The Government has been offered the opportunity to adopt technology based on that used to run the National Lottery to help it fight social security fraud and reduce the cost of maintaining the benefits payment system.

GTech, the lottery computer systems group at the heart of the Camelot consortium that runs the National Lottery, has offered to adapt the electronic welfare distribution system it developed in the US for use in Britain.

The system has been devised by Transactive Corporation, a wholly owned GTech subsidiary that was set up to adapt the technology used to run lotteries to support automated transaction processing services for government.

Transactive has already successfully established a statewide electronic benefit transfer system in Texas which has replaced food coupons with debit cards. The company is now implementing a similar system in Illinois.

Marc Palazzo, of Transactive, believes the system could be adapted for use in Britain.

"We are utilising our transaction processing expertise to switch a paper- based benefits system to one which is computerised," he said.

"We are talking to the British government about our system, which we believe will cut fraud and costs, but it has made no decision."

The evidence from Texas suggests that the Transactive system is capable of delivering the promises the company makes. In the year since it was introduced it has made significant inroads into the cost of the benefit system and has reduced fraud. The Texan authorities estimate that savings are running at $37m (pounds 22m) a year and that the number of claimants has fallen by more than 250,000.

Instead of receiving food coupons, claimants are given electronic debit cards that can be used at 15,000 grocers and other retailers to purchase goods approved by the state authorities.

The use of debit cards has put a stop to a black market in the food coupons. Under the old system these would often be purchased for a fraction of their value, allowing the claimant to spend the cash on alcohol, tobacco or drugs.

Since the introduction of the debit cards, sales of alcohol and tobacco in large Texan cities have dropped - and at the same time food sales have risen sharply.

An undercover investigation of food-stamp fraud in Virginia, Florida and Washington earlier this year highlighted the extent of the problem. More than 40 per cent of 800 businesses targeted were found to be in violation of food-coupon regulations.

Offences ranged from buying coupons at around 50 cents in the dollar to selling goods that are not allowed under the voucher scheme.

Only months after it was launched, the Transactive "Lone Star Card" system was instrumental in identifying a sophisticated $1m fraud that had been in operation for a considerable time.

Its introduction has helped Texas to reduce the number of claimants for two successive years. With 250,000 fewer claimants, the scheme is saving the state around $15m a month.

Mr Palazzo says that this is one of the benefits that would be secured in Britain.

"The very process of automating the system identifies illegal claims," he said. "We can identify double claims and claims made on behalf of people who have died some time ago. It is a rigorous exercise, which in the case of Texas has cut claimants by 10 per cent."

The electronic benefits system also has appeal to legitimate claimants.

"We have found that the use of a debit card gives them greater dignity," Mr Palazzo said. "Swiping the card at a supermarket checkout is less degrading than having to hand over food coupons."

Under the contract with Texas, Transactive installed the computerised system at its own expense. It is recouping its investment by charging $2 for each claimant processed.

The company is also involved in providing benefits normally paid in cash, such as the aid to families with dependent children in Texas. Under this scheme, cash is provided through a network of automated teller machines, again using debit-card technology.