Benefit Payments (Hansard, 25 January 2005)

§ The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham)
My Lords, the noble Baroness was kind enough to indicate that her concerns lay with the departmental accounts. Broadly, the answer is a qualified "yes". We are improving our processes and payments systems in three ways: first, by continuing to press down on fraud and error, but obviously we are dealing with high-value benefits and complex lives; secondly, by successfully introducing direct payments, with over 90 per cent client satisfaction; and, thirdly, by strengthening our services to the public with our pension service and our reforms in Jobcentre Plus.

§ Baroness Noakes
My Lords, I thank the noble Baroness for that reply. I am sure that she will recall that in the 1997 Labour Party manifesto, the Government stated: We will maintain action against benefit fraud of all kinds". Can she therefore explain why the level of fraud and error in her department is at roughly £3 billion a year? Why has it stayed at that level for the past three years, and why it is three times the level that the Comptroller and Auditor-General regards as acceptable?

§ Baroness Hollis of Heigham
My Lords, the Auditor-General has qualified what was the DSS, now the DWP accounts since 1989. The noble Baroness will understand that this has been going on for some 15 years and over a number of governments. The previous government did not even begin to estimate fraud or tackle it seriously until 1995. We have worked hard, and we have virtually halved the level of fraud on the outstanding benefits, income support and JSA, since 1997. Then it was 10.4 per cent; now it is 6.4 per cent. We still have a long way to go, and I accept that. It is important that we do it, not only because the money wasted on fraud could have gone on 60,000 teachers or 60,000 nurses, but because fraud rots the welfare state.

§ Lord Marsh
My Lords, it is an extraordinary statement that accounts have been qualified with a problem of this size, I believe she said, since 1989. Are there any other departments with this problem? Any company would be out of business overnight.

§ Baroness Hollis of Heigham
My Lords, I do not think that other departments have this problem. They mostly collect payments. The problem here—which noble Lords will recognise, certainly if one reads Sir John Bourn's report—is because you are trying to calculate fraud. The DWP is the largest maker of payments anywhere in the world. There is a level of fraud where people work while claiming, or where lone parents have live-in boyfriends but claim as lone parents, or where there is fraud between landlord and tenant over housing benefit. Our problem is to calculate the amount that we think is being fraudulently extracted and then to press down on it. We have made huge headway; we have virtually halved it, and we should be given credit for that. We still have a long way to go, but I do not think that any other department is in the same situation of paying out some 150 million payments per year.

§ Lord Oakeshott of Seagrove Bay
My Lords, the noble Baroness claimed that the department was successfully introducing direct payments. Is she aware how hollow that claim will ring to 140,000 pensioners and incapacity benefit recipients who did not get their proper payments over the new year bank holiday weekend? They are from places as far apart as Merseyside and Swansea; and over 20,000 people in Northern Ireland were still waiting five days later. On 6 January, the DWP said that it was investigating this delay as a matter of urgency. What went wrong, and what action is her department taking to make sure that these vulnerable people do not get left high and dry again?

§ Baroness Hollis of Heigham
My Lords, there have been a few instances of the Post Office computers failing to deliver in August and December, and in the department, with a two-day delay over the bank holiday period. We have been investigating this, and the system was restored very quickly. I am not sure 1142 that the default rate in the computer systems either of the Post Office or of the department is out of line from all my experience and knowledge of what goes on in the private sector, which also has occasional periods when systems close down for two. three or four hours, as has been the case here.

§ Lord Skelmersdale
My Lords, the Comptroller and Auditor-General pointed out that the problem was not just fraud, it was also error. While noting that the overpayment of housing benefit has fallen from £750 million to £650 million over the past two years, can the noble Baroness tell me the administrative cost per pound paid to housing benefit claimants in 1996–97 compared with 2003–04?

§ Baroness Hollis of Heigham
No, My Lords, because housing benefit is paid out by local authorities, not by the DWP.

§ Baroness Gardner of Parkes
My Lords, is the noble Baroness aware that local authorities are paid by her department? There is extreme difficulty in local authorities, particularly where people come on and off benefit. If they go on receiving housing benefit smoothly for ever, that is no problem for the council. However, great difficulties are experienced by the council and even more so by the poor person who has perhaps been wise or foolish enough to take up employment on a short-term basis, and who then finds that it is almost impossible to get their benefit back. The council then blames them for not paying their rent. That is a major problem with a lot of local authorities.

§ Baroness Hollis of Heigham
My Lords, I accept that, and it is why we not only have the verification framework in place for local authorities to tackle the issue of fraud— which is important because there is probably twice as much fraud as error in the system— but we are seeking to disseminate best practice. In London, for example, Camden is regarded as implementing best practice in handling housing benefit. It is on top of it, and it works very fast. In other London boroughs in the East End, the wait has been something like 10 to 12 months before all of the complicated housing benefit claims have been processed.
Where you are dealing with, say, an authority in a rural county, where housing benefit is largely going to people in socially rented accommodation, who are pensioners whose circumstances do not change, it is fairly easy to handle housing benefit. If you are dealing with an inner-city borough, with young people in and out of the labour market and in and out of addresses, criss-crossing between boroughs and often staying at addresses for only six weeks at a time, it is difficult for anyone to produce an effective system.
The noble Baroness is right to push me on this. That is why we are introducing the housing benefit reform system on a pilot basis, in which there will be agreed housing benefit by income for size of family. You will know in advance what you will get, and it will be much 1143 easier to award and police. We hope that if this is successful, as it seems to be, we will be able to roll it out nationwide.