Skip to main content

Universal Credit Fraud

Volume 663: debated on Wednesday 10 July 2019

(Urgent Question): To ask the Secretary of State for Work and Pensions to make a statement on the universal credit fraud that has been uncovered by the BBC.

Universal credit is now in all jobcentres, with around 2 million people claiming this benefit. In accordance with our approach to test and learn while rolling out universal credit, we have made several changes to the advances claimants may receive while they wait for their first payment. If they need it, people can now claim an advance from day one of their claim. They can apply in person, by phone or online—a facility we introduced in July 2018. On Monday, the BBC published an article that described cases where fraudulent applications had been made to acquire advance payments. The figures quoted are unverified.

Those who defraud the benefits system take taxpayers’ money from the poorest people in society. We have a dedicated team of investigators working on this issue, and are working with the Crown Prosecution Service to ensure that, where appropriate, perpetrators will be prosecuted: we have in fact already secured our first successful prosecution. We frequently raise awareness among frontline staff to be vigilant to fraud risks, and raise concerns where appropriate.

I remind hon. Members, and their constituents, that DWP staff will never approach a claimant on social media, or in the street, to discuss their benefit claim. Claimants should never give out personal or financial information to a third party unless they are certain they work for DWP, and have followed a password or security protocol. Anyone with concerns about their benefit claim should contact their local jobcentre directly.

I am grateful to you, Madam Deputy Speaker, and to Mr Speaker for granting the urgent question. I am also grateful to the BBC whose investigative journalism uncovered this scandalous situation. The cases we have seen in the news are truly alarming and heart-breaking. The Minister says that the figures are unverified, but according to the BBC the figures come from a member of his jobcentre team, who released them to the BBC. One jobcentre reported that a third of all claims are the result of such scams by criminals operating on behalf of claimants, while at another £100,000 a month is being lost to criminals and not going to claimants who actually need it.

Those people already desperately need help. They have been pushed into serious debt by the actions of those appalling scammers and it is clear from the leaked communications that staff, and perhaps Ministers, in the Department for Work and Pensions were aware that the scams were happening. It is also worth pointing out that, from the cases that we have heard about, claimants have been doubly hit by their money being stolen by the scammers and then having to pay back the advance payment, which— as we all know—is in fact a loan. The SNP has consistently condemned the system of advance payments and feels that it is counterintuitive. The advance payment needs to stop being a loan.

The BBC has uncovered what we have been talking about for years—people being left in desperate straits by cuts to universal credit, which have seen increased food bank use and, now, people being driven unwittingly to criminals to help them to get the money they need to survive. The cases highlight the failure of universal credit to protect those who most desperately need the support that it is supposed to offer. Can the Minister not see that until universal credit is properly fixed, such desperation will continue?

The DWP says that it has already secured its first conviction, so it already knew about this situation. The Minister was quoted in a BBC article on 20 May about another heart-breaking individual case. Why did the Department not identify the loophole and attempt to correct it sooner? Why was a statement not made to the House so that we could have helped to advise our constituents? What is the scale of the fraud? When were Ministers informed? Has this activity gone unnoticed or unchecked because of the 21% cut in staff numbers reported by The Independent? Of course, Social Security Scotland has a clear commitment that when an error or fraud occurs that is not the fault of a claimant, they will not be penalised or out of pocket. Will the Minister follow that lead for the people who have been affected?

The Government’s initial response, and the Minister’s response today, has put the onus on the claimants, and that is wrong. They cannot wash their hands of this responsibility. What will the Minister now do to ensure that those affected are not left out of pocket, those who have ripped them off are brought to justice and practices are put in place to ensure that it cannot happen again?

I thank the hon. Gentleman, who has taken a proactive approach to this important issue. I share his comment that it is alarming. These are criminal actions by what are, frankly speaking, parasites who target some of the most vulnerable people in society. I give the House an assurance that the Department will do everything in its power to protect those vulnerable people, and I am sure that all hon. Members would support that.

There have been 4.4 million universal credit claims and, as it stands, 42,000 staff referrals for fraud have been made, which is less than 1% of all universal credit claims. That said, each and every one of those has the potential to be a serious case. We take them seriously, they are all fully investigated and, where appropriate, we will take action. We are in talks with the CPS on several cases and, as I have said, we have already had a successful prosecution. We will look at each of the cases raised and, where it is clear that the claimant is an innocent victim who has been targeted, there would be an expectation that they would not pay the money back.

I refute, however, the broader point about universal credit. We will spend £2 billion more than the legacy system, and I very much welcome the introduction of the help to claim scheme to provide an independent additional tier of support across the jobcentre network, provided by Citizens Advice.

We are actively making improvements to the system. We are using more real time information. We are working with data suppliers. We are doing more data matching. We are using the DWP landlord portal to verify housing costs and we are developing risk models to help to assess confidence in information that is provided. There is a balance, however. In debates we have had in recent years, hon. Members have rightly pushed to make advance payments available as quickly as possible. It is the balance between being able to support people who need funding—under current rules, a vulnerable claimant in need of financial assistance can access that funding on the first day of their claim—while ensuring that we have 100% confidence that the money goes to the right person.

We are not complacent. We take this matter very seriously. We have a team of 120 staff dedicated to working on advanced payments. As I said, every case referred to us is taken very seriously and we will use the full force of the law where appropriate.

There are people offering help to those applying for benefits in exchange for a cut of what they subsequently receive—sometimes a very big cut. Will my hon. Friend consider outlawing that activity, and consider a public awareness campaign to warn people against this harmful exploitation and to signpost people to free, qualified benefits advisers such as Citizens Advice?

I thank my hon. Friend, who works tirelessly in this area. This is yet another example of a really helpful, constructive and proactive suggestion. I know the Secretary of State is very keen to see that brought forward, so that is a big yes from us. In terms of raising awareness, we are increasing training and guidance for frontline staff. Working in partnership with Action Fraud, we will be doing further national and regional press releases, social media and stakeholder engagement to raise awareness of the potential risk of fraud and of how to report it as quickly as possible.

The Government claimed that universal credit would reduce social security fraud and error by £1.3 billion. Now we know that they are clearly failing to do that, just as they are failing to protect people from poverty. The Government’s own figures show that the rate of fraud in universal credit is far higher than the rate of fraud in the benefits it is replacing. According to the BBC, fraudulent applications for advances are leaving claimants scammed and at risk of destitution, costing millions of pounds of public money.

Labour Members have repeatedly highlighted the hardship that the five-week wait for an initial payment causes, pushing many people into debt and rent arrears or forcing them to turn to food banks to survive. The Government’s stock answer is that people can apply for advances—indeed, on 28 March, the Secretary of State said that he felt the system of advances was working well. What does she think of it now?

When the National Audit Office highlighted delays in paying people last year, the right hon. Lady’s predecessor claimed that they were largely due to the need to verify identity. In June 2018, she said:

“Verification is a necessary part of any benefits system…We need to make sure we are paying the right people the right amount of money.”

How is it, then, that advances have been made to claimants with names such as Lisa Simpson, Bart Simpson and Homer Simpson?

Will the Minister tell the House how much the Government estimate this fraudulent activity is costing the taxpayer? How does that cost compare with the cost of abolishing the five-week wait? What action are the Government now taking to make sure they verify correctly the identity of people who request an advance? What action are the Government taking to support claimants in financial hardship who have clearly been the victim of a scam?

It is clear from this report that advances are not the answer to the five-week wait; they are loans that have to be paid off by claimants—in this case, the victims of scams. The Government must finally listen to the evidence and stop the roll-out of universal credit.

I am afraid there was a bit of a muddle, mixing the difference between the verification process with advance payments and the main claims for universal credit. As a Government, we take the issue of fraud, error and overpayments seriously. We anticipate that by the time we have full roll-out of universal credit, there will be a reduction of over £1 billion.

Be patient. I am answering the questions. I can only address one point at a time.

The legacy benefits system was complex. Claimants had to deal with local authorities, HMRC and the DWP. The majority of welfare issues that led to fraud, error or overpayment related to failing to provide information on changes of circumstances. Under the legacy benefits, there was an increased likelihood that people would fail to report changes of circumstances. Universal credit, however, with a single point of contact on a digital interface, makes it easier for claimants to report changes once, and it is easier for us to proactively identify when there are changes. The Government are still on target to see, with the full roll-out of universal credit, a reduction of £1 billion.

We talk about the principle of advance payments, but remember that under legacy benefits at the end of the claim the payment came too soon. We saw that claimants would in many cases be going into work, having spent a long time out of work, being anxious. They were often paid in arrears at work, so would not have access to funding. People who were desperate to work and do the right thing were financially unable to do so. Under universal credit the wait for the money is at the beginning, but with advance payments to bridge that wait. That is vital to ensuring that claimants can transition into work. As I said in my earlier response, it is the need to balance making advances available to claimants quickly and ensuring that payments are paid based on the correct circumstances.

The shadow Secretary of State raised a point about children. When verifying advance payments, we will verify identity, bank accounts, national insurance and, where they are declared a non-UK national, nationality. However, to make sure we can provide support to those who are often the most vulnerable people in society, there is manual checking of housing and children. That is the bit that can take time beyond when we have issued the advance payment, although it would be checked before the actual main claim. As I have said, by using greater access to real-time information and data matching, we will be able to speed up that process to improve confidence that all claimants for advanced payments are valid.

It is vital that we crack down on fraud, but will the Minister reassure us that he will protect the vital advance system, which provides a vital financial lifeline for many, many of my constituents?

My hon. Friend is absolutely spot on. It is absolutely vital that we strike the balance between having absolute confidence that money is being correctly paid out and ensuring that we do not leave vulnerable claimants without access to money. Rightly, the Government have listened to the constructive work with stakeholders to ensure that on the first day of a claim people who need financial support can get it. That is the right thing to do.

The Department has a risk register to safeguard taxpayers’ money. Is this fraud listed on the risk register?

I will have to write to the right hon. Gentleman to give him a specific answer. Any case that is referred is treated seriously. We have a dedicated team—[Interruption.]

Order. Do not shout at the Minister. Members are supposed to ask questions and get answers. Shouting at the Minister is not a part of that, and certainly not while I am sitting here.

Thank you, Madam Deputy Speaker. We treat every case seriously and we encourage claimants who feel they may be a victim of fraud to report it immediately either directly to jobcentre staff or to Action Fraud, with which we work very closely. I will write to the right hon. Gentleman with a full response.

It is obviously really important that people who need benefits should not have to wait for long periods with no money in their pocket. Will my hon. Friend confirm that any new measures to prevent fraud will not prevent our constituents receiving the advance payments they desperately need?

My hon. Friend makes a really important point. We must not forget the need to balance making advances available quickly to claimants with ensuring that payments are paid based on current circumstances. We must not lose sight of that.

I think the general public will be incredulous at the level of incompetence around the universal credit system. How can it be possible that, as has been revealed this week, a brand new system is open to grotesque fraud at these levels? Does the Minister seriously expect us to accept that it is somehow acceptable for the universal credit system to recognise the “Bank of Springfield” and allow payments to be made into it?

I understand the hon. Lady’s passion on this subject. She is right that we should be doing everything we can to protect vulnerable claimants, but I remind her that there have been 4.4 million universal credit claims, that as it stands today there have been 42,000 referrals, each of them very important, and that to put it in context, since January, every month we have had more than 110,000 requests for advance payments.

We will continue to tighten up the procedures, using real-time information, data matching and the digital platforms, so that we are as robust as we can be, but we must not lose sight of ensuring that vulnerable claimants have access to funding as quickly as possible. Nobody in this House would want people not to be able to access vital financial support.

I have been raising this matter with the Minister for some time, and I welcome the fact that he says that claimants who have made a claim in error, or not made one to their knowledge, will not have to repay the advance. Will he also confirm that those claimants will be allowed to return to their legacy benefits, since they have not made a valid claim for universal credit that they are aware of, and that he will deal with these cases much more quickly than the eight weeks that my very vulnerable constituent has been waiting since I first raised this with him?

I pay tribute to the hon. Lady, who raised this case with the Minister for Employment, who is responsible for this area. It helped to focus our minds on what more could be done. Every individual will be treated individually, and we will look at the unique circumstances. Where it is clear that they have been a victim of fraud through no fault of their own, no, we would not expect them to pay it back, and yes, we would consider putting them back on to the legacy benefits if they were better off under those.

There is huge potential for fraud in Northern Ireland, especially around the border areas; in fact, traditionally there has been a lot of social security fraud in those areas. Given that the Northern Ireland Assembly is not meeting at present and therefore the opportunities for scrutiny are limited, what contact has the Minister had with the Department for Communities and the Social Security Agency of Northern Ireland, first to identify whether fraud has been taking place, and secondly to share the methods being used and indicate the steps that the Department is taking, so that those can be used in Northern Ireland?

On the specifics of the meetings, I will have to write to provide a full answer. However, we are seeing that the cases that are being reported are clustered around particular areas, so there is a real focus in those areas on raising awareness and on targeting often very sophisticated criminal activity. As we bring forward prosecutions, we are finding that that is making a significant difference as a proactive deterrent, and rightly so.

Ministers have made one monumental misjudgment after another with universal credit. The five-week delay is forcing people into debt and dependency on food banks, and now we learn that it has opened up a bonanza for crooks and fraudsters. Will the Minister now urgently review the catastrophic five-week delay policy?

As is very clear, any claimant can access financial support from day one where it is needed. We will continue to do all that we can to ensure that everybody benefits from the personal, tailored approach that universal credit offers, which is an integral part of how we are helping to deliver record employment across all regions of this country.

I am grateful to the Minister for saying that, where there has been fraudulent activity and claimants have been transferred on to UC, he will consider revoking that. Can he explain and enlighten us all on the testimony of the DWP officials at the most recent Select Committee hearing, who said exactly the opposite?

This is in relation specifically to the cases of fraud relating to advance payments. I understand the point that the hon. Lady raises, and as ever we will continue to consider all our operational activities to ensure that we continue to deliver much-needed improvements.

The bit about this that I find most difficult is that the whistleblowers were themselves jobcentre staff. What does it say about the culture in the DWP that they felt that they could not come to the Department and had to go to the BBC? My question is simple: did the Department know about any of this or any of these cases before the BBC revealed them, and if so, what did it do about it?

Yes, of course we did. That is why we have created a team of 120 dedicated members of staff specifically looking at the area of advance payments, why we have been improving training and awareness for both claimants and our frontline staff, why we are working with Action Fraud on our communications strategy and why, rightly, we are using the full force of the law to undertake prosecutions against the parasites who are targeting some of the most vulnerable people in society.

The advance payment fraud was reported in the media as long ago as last November, so whatever has been happening over the past eight months, as the Minister has set out, has simply not been good enough. What would it take for him to conclude that, rather than having this advance payment system, we should take away the five-week wait altogether?

But the hon. Gentleman would then have the problem of the legacy benefits: at the end of the claim, as someone moved into work, they would not have the run-on of financial support, which would leave a gap, since the majority of people who go into work are paid in arrears. With legacy benefits, we saw that people who were desperate to do the right thing and to unlock their own talent were left with a financial gap at a point when they could not get financial support. It is not a good thing to advocate going back to a legacy system that trapped people in generations of unemployment.

In responding to the urgent question from my hon. Friend the Member for Airdrie and Shotts (Neil Gray) on this shocking and disgraceful criminal activity, the Minister said that he would do everything he could to “protect vulnerable people in society”. If that is the case, he will be aware that the all-party parliamentary group for terminal illness published its report last week on his Government’s six-month rule, which is causing harm and heartbreak for the dying and their families. Has he read the report’s damning evidence? If so, how can he justify his Government’s continuing with this policy?

I pay tribute to the work of the APPG and in particular the hon. Member for Bridgend (Mrs Moon), who has campaigned tirelessly with organisations such as the Motor Neurone Disease Association, Marie Curie, Parkinson’s UK and a number of others. As the Minister for Disabled People, I have had a number of meetings on this matter, particularly on the process as somebody claims through the special rules. We are aware of it, and the Secretary of State is personally passionate that we should do everything we can. This is an area in which we will be making significant improvements in the very near future.

The Minister’s defence of this system increasingly sounds absurd. The reason so many advance payments are necessary is the five-week wait introduced by his Government, which has left people in Wigan completely destitute. It is humiliating to have to beg for money at a time when they most need help, in one of the wealthiest countries in the world. Why does he not just give up on this defence, do the right thing and get rid of this degrading five-week wait?

The hon. Lady simply does not understand what has happened. Under the legacy benefits, people at the end of their claim as they moved into employment would lose the financial support while they waited to be paid, as more often than not people in work are paid in arrears. That left people without financial support. Under universal credit, while there is a five-week wait for the full payments, people can access advance payments.

Those moving from legacy benefits can also benefit from two weeks’ run-on, no-strings-attached additional money from housing benefit. Since the announcement in the Budget, that will also be extended to an additional two weeks of jobseeker’s allowance, income support and employment and support allowance funding. Again, there will be no strings attached to that, so potentially, combined, that means four weeks of additional funding.

The people who have suffered in this, the claimants themselves, had no part in the design of the system, and feel increasingly disempowered by the whole system. The system fraud that is being applied was originally targeted against the banks. The banks have been criticised across this House for their slowness in protecting individual customers, but they are now moving to a stage where they reimburse immediately and then look into any fraud. Why cannot the DWP do the same for each and every claimant, to take the stress of debt away from them?

I know that the hon. Gentleman is being constructive with his two suggestions. I recognise the point about people engaging with the formal process, which is one reason why I was so passionately supportive of the roll-out of the Help to Claim scheme, putting in a level of independent support across the jobcentre network, particularly for vulnerable claimants, delivered by Citizens Advice. I think that will make a significant difference.

On the broader point about learning lessons within the banking sector—at times, I am afraid, the banking sector had to be dragged and cajoled into doing the right thing —we continue to look at what more can be done. If there are vital lessons that can be taken from that, those are things that we should give serious consideration to.

This whole situation is immensely concerning. Can the Minister tell us the average and maximum amounts that victims of these scams have lost?

I cannot at this stage, but we are looking at this as we work through the cases referred. Regardless of the amounts, for each and every victim it is incredibly serious, which is why I reiterate our commitment to do everything in our power to use the full force of the law to target the criminal gangs targeting some of the most vulnerable people in society.

I recently spoke to somebody who works for Jobcentre Plus, who said they felt that universal credit was not designed to support people and that the five-week delay was an example of that. She said that people were turning instead to prostitution and crime to top up their money. In the light of this recent fraud, it is time the Government abolished the five-week wait.

When we talk to work coaches up and down the country, they tell us that for the first time in generations they feel empowered to deliver a personalised and tailored level of support that treats everybody as an individual. It is an integral part of how we are delivering record employment and doing everything possible to reduce the amount of unclaimed benefits. Under legacy benefits, £2.4 billion a year was being left unclaimed, which for 700,000 of the most vulnerable—[Interruption.] Some hon. Members are laughing, but this £2.4 billion amounts to £280 per month on average for some of the most vulnerable in society. By delivering through universal credit we can get support to the people who need it.

This latest problem exposes the need for greater safeguards for anyone moving on to universal credit, be it through natural or managed migration. The Secretary of State told the Work and Pensions Committee that we would have a vote on those safeguards this month. When will that vote take place?

We are still considering how we can do this correctly. We are still on track to do the planned managed migration from the summer. We are aware that it needs to come back to the House and will be reporting to the House on it shortly.