MPs demand action to halt £4bn welfare fraud

Social security fraud and errors are costing the Government £4bn a year and are a serious drain on public funds, a powerful committee of MPs says in a report today.

Social security fraud and errors are costing the Government £4bn a year and are a serious drain on public funds, a powerful committee of MPs says in a report today.

The Public Accounts Committee, the House of Commons' spending watchdog, is calling for a simpler benefits system, better technology and tougher sanctions against fraudsters.

However, the committee acknowledges the Department of Social Security (DSS) is taking steps to reduce the loss to the public purse and bring fraudsters to justice.

Among the measures already in place is a requirement for more evidence from claimants before benefits are paid, which resulted in an estimated £200m fall in income support payments last year, the report says. There was also more thorough checking of DSS computer records against those of other Whitehall departments and local councils, which saved another £150m.

The committee adds, however, that the Government is still using computer systems that cannot share information, and that some benefits will remain vulnerable to fraud unless backed up with some "very clever technology".

Although the DSS is hoping to reduce fraud further - by up to £200m - by making more payments directly into bank accounts, there are also risks in reducing face-to-face contact with claimants, the report says. The department had some success in tracing employers who connived in benefit fraud by their staff, with 362 prosecutions and savings of £26.6m.

But the committee has also found that the National Insurance Recording System, which fell victim to a disastrous computing project that caused delays for thousands of pensioners, will not reach "a steady state" until April 2001.

The watchdog is concerned that compensation for pension holders, designed to cover the investment income they lost due to the fiasco, may have been too low. The National Insurance fund appears to have gained £58m in extra interest but only paid out about £35m, it says.The report questions why Andersen Consulting, which won the contract to develop the system, was allowed to own the intellectual property rights, which could be worth £100m. David Davis, the chairman of the spending watchdog, said: "The National Insurance Fund impacts on the lives of almost every citizen. This committee has reported twice on the widespread suffering and hardship caused by the delays in implementing the system."

The committee has also welcomed progress in recovering money lost by the Robert Maxwell pension scandal. The Government had to pay £126m to reinstate 30,000 Maxwell pensioners into the State Earnings Related Pension Scheme after the newspaper tycoon's death, it said.

Although only £3.2m has been recovered by March 1999, the DSS believes it will recover some £90m. The Mirror Group pension scheme has agreed to phased repayments of £66m, the report says.