What is benefit fraud? How is it investigated, how to report it, how much did DWP overpay in 2021/22

With the worst cost of living crisis since the 1970s hitting the UK, people across the country are struggling to afford everything from higher food prices to pricier tanks of fuel.

The government has introduced some help in the form of subsidised energy bills and grants to benefits claimants. But, at times during 2022, it has been accused of being too reactive to the situation.

A major black hole in the country’s finances and Rishi Sunak’s apparent endorsement of austerity politics, has led to fears that those reliant on some forms of state handout - like the state pension - could face a major squeeze in the coming months.

But while many people are trying to keep their heads above water through legitimate means, there are some who are turning to illegal methods to bolster their incomes.

According to a new report on the Department for Work and Pensions (DWP) that was conducted by the Public Accounts Committee of MPs - a group that monitors public spending across central government - 7.5% of all the benefits paid out last year were either fraudulent or erroneous.

So, what exactly is benefits fraud - and how is it currently tackled? Here’s what you need to know.

What is benefit fraud?

Benefit fraud is when you claim benefits that you are not entitled to under government rules. There are many ways in which it can be committed, but the primary methods include:

• Not reporting a change in circumstances (for example, you get a better salary but don’t tell the DWP about it)
• Giving out false information (such as lying about how much you have in savings)

According to its accounts, the DWP saw an £8.5 billion overpayment in benefits in the 2021/22 financial year - i.e. the period covering Covid and the start of the cost of living crisis. This figure is 7.5% of the annual amount paid out in state benefits - excluding state pensions - that year (£113.1 billion) and the highest rate of fraud on record.

While the DWP says some of these payments may have been errors rather than fraud, it is believed fraud makes up a substantial amount of the figure. Criminal gangs and opportunistic individuals are said to be behind the issue.

It comes after the number of people on Universal Credit rose from 2.9 million before the pandemic in February 2020 to 5.6 million in August 2020 - a figure it has remained at ever since.

When it gave evidence to MPs, the DWP said it did not understand exactly why fraud was so high. But it pointed to the relaxation of enforcement action during Covid and a greater desire to commit fraud in society during the Covid pandemic as potential reasons.

Public Accounts Committee chair Meg Hillier did not accept these excuses, however, saying: “The truth is losses to the taxpayer to fraud and mistakes have been at record levels and rising for years.

“DWP didn’t have a plan to get a grip on the billions it was losing every year before the pandemic, and it doesn’t have one now.”

Can you report benefits fraud?

In a word, yes. If you think someone you know is committing benefits fraud, you can report them to the DWP using this website.

You will be required to submit the person’s full name, address and the type of fraud you suspect them of committing. Reporting fraud can be done anonymously.

The government also runs the National Benefit Fraud Hotline, which can be reached on: 0800 854 440.

How is benefit fraud investigated?

Benefits fraud investigations can be instigated if someone reports it to the DWP, or if suspicious activity is flagged by HMRC, or another government or local authority department.

If you’re suspected of fraud, your benefits may be stopped while you’re being investigated. You will be informed via letter if this happens.

You could also be visited by government investigators known as Fraud Investigation Officers, or asked to attend an interview to discuss the problem. These interviews are given ‘under caution’, meaning they could be used against you in later criminal proceedings.

What could happen if you’re found guilty of fraud?

If you’re found guilty of committing benefits fraud, at least one of the following could occur:

• You will have to pay back the money
• You could be taken to court
• You might face a penalty between £350 and £5,000
• Your benefits could be reduced or stopped entirely (could apply for up to three years)

However, the latter does not apply if you’re on certain types of ‘emergency’ benefit, like statutory sick pay, or receive other forms of state handout, such as the state pension or child benefit.