Billions in benefits paid out by mistake

A record £1 million in overpaid benefits has been clawed back over the last year - but more than £2 billion remains unrecovered.

According to Department for Work and Pensions figures, overall fraud and error stands at 1.9%, compared with 2.1% in 2010. Overpayments due to official errors are down to just 0.3%, and those due to mistakes by the claimant are down to 0.5%.

Last year, around 5,000 people were prosecuted for benefit fraud, with another 6,000 administrative penalties handed down.

"We will not tolerate fraud and will pursue those who try to cheat the system," says minister for welfare reform David Freud.

"We have strengthened penalties and powers to combat fraud and error in the benefit system and are introducing reforms, such as Universal Credit, which will reduce fraud and error and is expected to save £1 billion when fully rolled out."

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Over the last six years, the government has toughened up on fraudsters, increasing loss-of-benefit penalties and financial penalties up to a maximum of £5,000.

It's also improved its detection methods, cross-checking data from the Real Time Information system to unearth undeclared income.

Despite this, though, around £2.2 billion was wrongly paid out and not recovered during the year.

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Of the total wrongful payments, £1.3 billion related to housing benefit, mostly because claimants had failed to declare their earnings correctly.

Meanwhile, around £450 million was overpaid in employment and support allowance (ESA), along with £330 million in pension credit, £100 million in jobseeker's allowance and £19 million in universal credit.

In many cases, the cash was paid out despite the fact that the claimant had moved abroad. In one headline-making example, housing benefit wrongly paid to a man who had long left the country was handed to Mohamed Abrini, the Brussels and Paris attacks suspect nicknamed 'the man in the hat'.

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However, error works both ways. This year, a record amount of benefits - £1.7 billion - was wrongly withheld from claimants, with people on Employment and Support Allowance underpaid the most.

The biggest rise in benefit underpayment was in Pension Credit, mostly thanks to official errors.

We need tougher penalties on those who abuse the system," says Baroness Cathy Bakewell, the Lib Dem spokesman on work and pensions. "But we also need action against administrators who are failing in their basic duty of care."