66th Report - Tackling fraud and error in benefit expenditure 2024-25

Key findings

• The Department's accounts have been qualified for 37 consecutive years due to material fraud and error levels; overpayment rate fell to 3.3% (£9.5bn) in 2024–25 but remains too high, and the Department's 2.8% target by 2028–29 is insufficiently ambitious
• Official error (mistakes by DWP, local authorities, or HMRC) caused £1.0bn overpayments and £1.2bn underpayments in 2024–25, up from £0.8bn and £1.1bn respectively in 2023–24; the Department has not published root-cause analysis for official error despite its controllability
• Targeted Case Review of Universal Credit claims has generated £581m in savings since August 2022 from 1.15m reviews; the Department plans to spend £300–400m annually on this programme and extend it to Pension Credit (£60–70m per year) but has not clarified spending of the remaining £2bn from its £3.5bn dedicated funding allocation for 2026–29
• The Department lacks integrated data-sharing arrangements with other government departments (e.g., Department for Education) to verify household composition and other key loss areas; it cites real-time PAYE earnings data from HMRC as a 'gold standard' but has not replicated this success elsewhere
• The Independent Review of Carer's Allowance found that flawed Department guidance on earnings averaging (issued 2015) incorrectly recorded approximately 26,000 carers as overpaid over 10 years; the Department must review 200,000 cases over an estimated two years with £75m allocated to redress

Recommendations

• The Department should set out in its Treasury Minute response a more stretching ambition for reducing the overpayment rate, going beyond the 2.8% forecast to a level indicating cost-effective controls over benefit spending
• The Department should set out what action it will take to address the root causes of official error, with the aim of publishing a progress update in its 2025–26 annual report and accounts
• The Department should set out in the Treasury Minute how it plans to spend the £3.5bn of dedicated funding available from 2026–27, including how it will measure cost-effectiveness and return on investment of funded areas
• The Department should set out in the Treasury Minute how it plans to work directly with other departments on data sharing, including how it can work with the Department for Education to help verify household composition as part of its checks for Universal Credit
• The Department should report annually, in its annual reports and accounts, on how often it has used the powers in the Public Authorities (Fraud, Error and Recovery) Act 2025 and with what impact
• The Department should evaluate the impact of its 'Tell DWP' communications campaign (launching January 2026) to encourage claimants to report changes of circumstances and publish the results by the end of 2026
• In its Treasury Minute response the Department should update the Committee on how it plans to provide more information to people who raise concerns about cases of potential fraud
• Within six months, DWP should write to update the Committee on its progress with identifying and resolving the cases of carers affected by its inaccurate guidance on earnings averaging

Key actors

Department for Work and Pensions, Sir Peter Schofield (Permanent Secretary, DWP), Neil Couling (Director General, Fraud, Disability and Health, DWP), Vikki Knight (Director of Fraud, Error and Debt Strategy, DWP), Public Accounts Committee, Sir Geoffrey Clifton-Brown (Chair, PAC), Comptroller and Auditor General, HM Revenue & Customs