MPs have expressed concerns that housing benefit issues are “seriously undermining” government attempts to reduce fraud with the Universal Credit (UC) programme.
Holes in the system could lead to a larger number of self-employed people working for “cash in hand,” according to the Work and Pensions Committee.
UC, a new IT-based system which merges six working benefits into one single payment, is a reform that Whitehall claims will cut fraud losses by £1bn over the next five years.
However, the current housing benefit system allows councils to cross-reference claims with other council services data – causing the Committee to worry that fraud and error could occur unless local authorities are able to double check UC claims in a similar manner.
The management of the housing benefit element of UC is particularly worrying say MPs, because it accounts for more than double the fraud losses of any other core benefit at £1.2bn.
The Department for Work and Pensions (DWP) has introduced a new real-time information (RTI) system developed by HM Revenue and Customs (HMRC) that collects PAYE income tax information to calculate monthly benefit entitlements.
Despite this, the Committee claims evidence received from the Local Authority Investigation Officers Group that RTI may actually increase the number of people who are paid by cash.
“It is vital that a full developed and tested IT system, which allows DWP to cross-check data, in in place before UC is implemented on a national scale,” claimed Anne Begg, Committee Chair.
“Worryingly, it appears that there is no automated system in use in the Pathfinders and is not clear when or how a system will be available,” Begg added.
The Chair also said that to tackle these potential issues, DWP and HMRC need to develop a system that flags up potentially incorrect benefit payments.