The Department for Work and Pensions no longer expects fraud and error rates to return to pre-pandemic levels over the next four years, figures in its latest annual report and accounts reveal.
Rule relaxations in the early weeks of the Covid-19 crisis saw overpayments of the flagship Universal Credit benefit rocket from 9% to 14.5% between 2019-20 and 2020-21.
While overpayment rates have dipped since then, DWP's annual report said the value of benefit overpayments increased from £8.3bn in 2022-23 to £9.7bn in 2023-24. Most of the rise was due to Universal Credit.
The rate for Universal Credit overpayments was 12.4% in 2023-24, down from the previous year's 12.8%. The 2023-24 figure came with a fraud-and-error price tag of £6.46bn, DWP said.
According to projections in the just-published annual report and accounts, the Universal Credit overpayment rate is only expected to drop to 11.7% by 2028-29.
DWP permanent secretary Peter Schofield warned members of parliament's Public Accounts Committee earlier this year that he was was not confident the department could return to pre-pandemic fraud-and-error rates by 2027-28.
At the time, he blamed the "underlying growth of fraud in the economy" for a projected 5% year-on-year increase. DWP's annual report and accounts repeats the figure and uses it as the basis for its "central bound" projection that fraud-and-error rates with Universal Credit will still be 11.7% in 2028-29.
Only the department's most optimistic "lower bound" projection shows Universal Credit overpayments returning to pre-covid levels by 2028-29. This is based on there being no underlying growth in fraud. The more pessimistic "upper bound" extrapolation shows overpayments continuing to rise year on year, hitting 15.1% by 2028-29, based on a 10% year-on-year growth in fraud.
National Audit Office head Gareth Davies said in his commentary on the accounts that DWP's forecasts show it "no longer expects Universal Credit fraud and error to return to the levels seen before the significant increase during the Covid-19 pandemic".
Davies noted that PAC members had said they were "not convinced" that any increasing propensity for fraud in the economy should inevitably lead to taxpayers footing the bill for increasing losses.
He said DWP should use its forecasts to demonstrate that its plans to tackle fraud are "sufficiently ambitious" to reduce overpayments regardless of the level of fraud entering the system.
"It should present its efforts in the context of changes in the wider economy, demonstrating where overall fraud and error movements are attributable to the savings achieved as a result of its actions or whether they are influenced by external factors," he said.
"As DWP’s confidence in its ability to accurately forecast fraud and error grows, it should look to develop this forecast into a target against which its performance can be assessed."
Davies issued a qualified judgment on the annual report and accounts because of the level of fraud and error related to benefits expenditure. It is the 36th year running that the department and its successor bodies have been given such an opinion.
DWP's annual report and accounts also confirmed that the department did not make all of the savings that had been anticipated from its targeted case review initiative last year.
The programme, which requires Universal Credit recipients to provide evidence of the basis for their benefits – and suspends or cancels payments to those who fail to do so – delivered savings of £90m in 2023-24, short of an expected £115m.
The NAO's Davies said the department blamed the decision to partially outsource the programme for delays in scaling up work.