Welfare reforms could leave system more vulnerable to fraud, say MPs

Changes to IT system for universal credit may make it harder to distinguish fraudulent claims, according to report

MPs have raised fears that the government’s huge welfare shakeup will leave the benefits system more vulnerable to fraud.

A report by the communities and local government committee highlighted concerns about universal credit, which will be implemented nationally from October and replaces a string of benefits such as housing benefit and child tax credits.

The committee highlighted concerns raised during an inquiry into the changes that the IT system under universal credit will have trouble distinguishing between genuine and fraudulent claims.

One council told the committee its understanding was that the system would not work from local authority property databases so it would not be able to detect automatically, as local systems did now, when several people made a housing benefit claim for the same property.

A new fraud detection service, called Iris, is being built into universal credit, which, the committee was told, does have a similar database to that used by local authorities for detecting housing benefit fraud.

But the committee’s report said it was “worrying that the system still seems to be at the development stage”.

The committee also raised concerns that during a transition period, as the scheme got under way, there would be an exodus of experienced local authority housing department staff, who would quit because of uncertainty over their future prospects, which would “leave the system more open to fraud”.

The committee said the government must make sure that local authorities had the admin funding they needed to manage the transition to universal credit and stop staff leaving prematurely.

Universal credit is being introduced in gradual stages over several years, with the national rollout following several “pathfinder” pilot projects taking place from this month.

Clive Betts, chair of the committee, said evidence heard by the committee that systems for fraud detection were still in their early stages was “extremely concerning given the advanced state of implementation”.

He said: “The government must act to provide assurance that the benefit system will not be left vulnerable to fraud either during or after the transition. And it must do so urgently.”

The committee said the landmark changes mark the “most significant reforms to the welfare system for 60 years”.

The government wants to simplify the existing benefits system, so that it is easier for claimants to manage their own finances and make the transition into work.

Under universal credit, a single unified benefit payment will take in income-based jobseeker’s allowance, income-related employment and support allowance, income support, child tax credits, working tax credits and housing benefit.

But the committee also highlighted concerns that the new universal credit scheme could result in increased rent arrears as housing support will be paid directly to tenants instead of landlords.

It urged the government to give a clear definition of the circumstances under which a tenant would be considered “vulnerable”, and would therefore have their rent paid directly to the landlord.

The committee also said the government should be doing more to raise awareness about the changes and advising claimants to contact their local authority to find out more through advertising.

A Department for Work and Pensions spokesman said: “Universal credit will cut benefit fraud by £200m a year and we are confident that our IT systems will be strong enough to protect us from the threat of fraud.

“We have been running pilot projects with local authorities to ensure that those people who can’t manage with monthly or direct payments get the support they need.”