7.  The Department's ability to identify fraud and recover overpayments is constrained by the resources it has available. By March 2008, it must reduce its workforce by 30,000 as part of a headcount reduction strategy that aims to generate £960 million of annual savings. The Department considers that it is compensating for the loss of staff by making more effective use of its counter-fraud resources than ever before. For example, the introduction of Customer Compliance teams[14] enabled the Department to redeploy staff to benefit processing centres, reducing staff costs on direct counter-fraud activity by £20 million.

8.  The Department accepts that it needs to improve the proportion of known debt that it recovers from customers each year. Social Security regulations limit the speed at which the Department can recover overpayments from benefit recipients. While it can be hard to track debtors if they enter full-time work, the Department now makes more use of data-matching and attachment of earnings orders[15] to recover debt in such cases. In 2006-07, the Department recovered only £22 million of the £339 million of known debt it holds as a result of fraud. Overall, recovery of debt from both fraud and error increased by 30% between 2005-06 and 2006-07, with £233 million of public funds recovered. The Department expects the 2007-08 recovery rate of fraud and error debt to be even higher as it had collected £184 million between April and November 2007.[16]

9.  When the Department opts to prosecute fraudsters, it is usually successful. In 2006-07, the Prosecution Division cost around £9.5 million and secured a successful prosecution in 6,756 out of 7,483 cases where it took court action. The Department estimates that only 20% of defendants choose to contest their cases. When deciding whether to bring a case to court, the Prosecution Division applies an evidential test and considers whether prosecution would be in the public interest. Of the 7,483 cases where court action was taken in 2006-07, 373 were discontinued for reasons of public interest. The Department can opt to use cautions or administrative penalties rather than prosecutions for less serious cases, although it may choose to prosecute such cases if the individual has a history of defrauding the benefit system. The Department told us that the Prosecution Division is not cost-constrained, meaning that cases are not dropped due to a lack of resources. Nevertheless, Departmental efficiency targets have led to a 17% reduction in staff since 2003.[17]

10.  Our predecessors' 2003 report on tackling benefit fraud[18] found that the Department's inadequate information technology systems were constraining its performance. The Department has been slow to improve its management information systems, which are hampering its ability to measure the cost-effectiveness of counter-fraud activities. In February 2008, the Department introduced a new, nationwide fraud case management system called FRAIMS. Although this does not cover some important elements of the Department's counter fraud activity, most notably the Prosecutions Division, the Department expects the FRAIMS system to improve management information dramatically and to streamline the handling of fraud cases. FRAIMS is expected to cost £65 million, and the Department forecast that it will enable staff savings of some £10 million a year from 2008-09 to 2013-14.[19]

11.  Counter-fraud activity would be more effective if there was better communication between all the different teams that deliver the Department's counter-fraud strategy. Operational staff tend to be highly motivated by their own process-driven targets but are less clear on how their work contributes to the Department's strategic objective of reducing fraud by paying the right amount of benefit at the right time. The National Audit Office considered that fraud could be tackled more effectively if there was better dialogue between teams such as Customer Compliance, the Fraud Investigation Service and the National Benefit Fraud Hotline. The Department accepts that it needs to do more to translate its high-level targets into measurable action by operational teams, and expects that communication between teams will improve now that the new Customer Compliance approach has entered its second year of operation.[20]

12.  The public wants to be assured that the Department protects the benefit system from fraud. The Department uses advertising to reassure the public and to deter fraudsters. The twin messages of the recent £8 million 'No Ifs, No Buts' advertising campaign were that the Department does not tolerate fraud and that fraudsters face a high risk of prosecution. Evaluation of the campaign found that the proportion of people who believed that benefit fraud 'is easy to get away with' fell from 40% to 30% during the campaign. If members of the public suspect benefit fraud, they can report it to the National Benefit Fraud Hotline. Between April and December 2007, the Hotline received 171,000 calls. The Hotline expects that 70% of calls will lead to referrals to the Fraud Investigation Service or Customer Compliance teams for further investigation, although the Department acknowledges that success in reaching this target depends largely on the quality of information that it receives from callers. While callers may be frustrated that they receive no feedback on the outcome of investigations, it would be hard to comment on individual cases without breaching confidentiality.[21]

15   An attachment of earnings order is a court order that allows the Department to recover debts from a debtor's wages. Back

16   Qq 7-11, 97-98; C&AG's Report, paras 3.4, 3.20 Back

17   Qq 33-40; C&AG's Report, para 2.32; Figure 20 Back

18   HC (Session 2002-03) 488 Back

19   Qq 65, 67-69; C&AG's Report, para 2.13 Back

20   Qq 64, 84; C&AG's Report, paras 2.20, 2.25 Back

21   Qq 41-46, 70, 74, 141-145 Back