The Department for Work and Pensions and HM Revenue of Customs have been allocated nearly £400m in the Budget for more staff to target fraud and error in the benefits system and help close the tax gap.
The Budget increased counter-fraud and error funding by £110m in 2025-26, which will be used to hire extra staff and used to enforce new legislative powers to recover debt.
DWP will get an additional 3,000 staff, while HMRC will get 180 more officials who will focus on fraud and error in welfare payments. A separate funding package will enable HMRC to hire an extra debt-management 600 staff.
DWP's recruitment drive, which will begin next April, will save a net £665m a year by 2029-30 by "correcting past and future payments that would otherwise have been incorrect without DWP’s intervention", according to the Budget Red Book; while HMRC's counter-fraud push will net the exchequer £90m a year by the same date.
The staffing boost will come alongside a series of measures to beef up the two departments’ powers to tackle fraud and error. DWP will use part of the £110m funding package to carry out extra checks on Universal Credit claimants who have changes in their circumstances, which is projected to save £250m a year by 2029-30.
The government has also extended DWP’s Universal Credit fraud and error taskforce, which was introduced under the previous Conservative government, to 2029-30, for two years beyond its original end date. Last year, DWP announced it was setting up a new base in Swindon for the Targeted Case Review team, which reviews existing Universal Credit claims and uses "enhanced data analytics to develop new ways to prevent and detect fraud". The two-year extension is expected to save £2.5bn a year by 2029-30.
The upcoming fraud, error and debt bill will meanwhile give the department more powers to recover debt, to save an estimated £260m in 2029-30. The bill will also include new benefit eligibility verification powers – replacing a similar measure that was scored at Autumn Statement 2023 but with a revised scope and delivery plan.
Together, the measures – described in the Red Book as the “biggest package of measures in recent history to reduce welfare fraud and error” – will save £4.3bn in 2029-30, according to the Treasury.
'Most ambitious ever tax-gap package'
HMRC's counter-fraud funding will be used to hire 180 extra staff from April onwards to work on addressing fraud and error in child benefit and tax-free childcare.
The tax agency's Budget settlement also includes what the Red Book calls the “most ambitious ever package of measures to close the tax gap”, which it says will raise £6.5bn in extra revenue a year by 2029-30.
The settlement includes £262m over the next five years to hire an extra 600 debt-management staff, as well as paying for 1,200 officials already working for the department in the same area to stay on. The staffing boost, which will begin in February, will increase the department’s capacity to collect outstanding tax debts, according to the Red Book.
The Red Book noted that the tax gap, which stood at around £40bn in 2022-23 has been "broadly stable" since 2017-18, and the tax-debt balance is twice pre-pandemic levels. In January 2023, the Public Accounts Committee criticised HMRC for lacking “ambition” to tackle fraud and error and said it was “still not deploying the resources required to maximise the tax revenues it collects or provide an acceptable level of customer service”.
The new hires will come on top of plans to hire 5,000 more compliance staff, which the Labour Party committed to in its general election manifesto. The Red Book confirms the first 200 of those recruits will start training in November.
The Budget also included a series of measures to modernise HMRC’s IT and data systems to improve productivity and “taxpayers’ experience of dealing with the tax system, delivering the modern and digital service businesses and individuals expect”.
Funding unveiled in the Budget includes £154m to modernise HMRC’s debt-management case system; £16m for changes to HMRC’s app to allow income tax Self Assessment taxpayers to make voluntary advance payments in instalments; £52m to digitalise the inheritance tax service from 2027-28; and £4m to enable the tax agency to pre-populate Self Assessment tax returns with Child Benefit data to ensure the High Income Child Benefit Charge is accurately calculated and reported.
HMRC will also get £12m to acquire further credit reference agency data to aid its debt-collection efforts.
The Red Book also affirms the government's commitment to delivering the existing Making Tax Digital programme for income tax Self Assessment, and to expand the rollout of the flagship programme to people with incomes over £20,000 by the end of this parliament. The timeline for these developments will be confirmed at a future fiscal event, it says.
The Red Book says the extra funding, along with the appointment of a minister as chair of the HMRC board for the first time, “marks a step change in the government’s efforts to close the tax gap, improve customer service, and modernise and reform HMRC”. It adds that the board has been “refocused” to deliver the tax-gap measures “and wider reform”.