DWP in meltdown | Pensions, Universal Credits, how bad is it?

Very bad. A total shambles.

The National Audit Office this month revealed the pensioners in the UK had been short changed by £1bn due to a series of errors by DWP. They think 134,000 pensioners are affected, with an average under payment of just under £9,000 each, although they’re not sure. Identifying which pensioners are affected will take at least another year, by which time some of them will have died. DWP believe that married women, widows and people aged 80 years and over are the worst affected, and by the time the review is completed the number underpaid could be as high as 400,000.

The cause of the underpayments were repeated human errors that were made inevitable by complex rules and outdated IT systems.

We think of pensions as being something very different to the rest of the benefits system, but that is a mistake -pensions are a non-means tested regular benefit paid by the Department for Work & Pensions. We may think of pensions as different to other benefits, but from a financial perspective that is all they are. 58% of benefit spend goes to OAPs, 25% to people with a disability.

The same problems that affected pensions affect the claimants of all benefits – rules that are too complicated, IT systems that don’t work, and junior staff asked to make rapid decisions under a lot of pressure.

For all their complexity pensions are actually one of the most straight forward benefits that DWP work with. That is because your eligibility for a pension doesn’t really change. You become eligible for it on a particular date, and that is it.

Other benefits, Universal Credits in particular, have an extra and massive problem. They rely upon real time information updated constantly to refresh eligibility.

The more frequently your information has to be updated, and the more often your eligibility changes, the less likely it is to be accurate. That’s why HMRC will only let you change your tax code once a year and why your insurance company charges you £25 every time you want to amend your policy details.

Universal Credits is based on the idea that these changes of circumstances can be managed in real time. This is almost impossible technically and leads to a massive error rate. If pensions are a billion out, then UC will be out by several times that.

There is a justified outrage at cancelling the £20 per week upgrade to UC, but the reality is that the benefit system is so complicated, and the deductions from the incomes of the poorest are so random, that we no longer are easily able to calculate how much the poorest have lost. There are currently 600,000 Incapacity Benefit cases awaiting review for under payment, 1.5m Mobility Benefit cases and 1.85m others.

Even I no longer know how much we have picked the pockets of the poorest, because the Government no longer sees it as being in their interests to measure these things.

During lockdown fraud and error in the benefit system rose to its highest ever level. DWP spend £212bn on benefits and £7.5bn on management and administration costs. Fraud and overpayments in 20-21 was 3.9% (£8.4 billion), compared with
2.4% (£4.6 billion) in 2019-20. The increase was due to criminal gangs targeting Universal Credits, often by stealing peoples identities on line, and using them to create fraudulent claims – 14% of Universal Credit spend was overpayments of which 12.8% was fraud. A further £2.5bn (1.25%) was wrongly underpaid to claimants, although this doesn’t include the 4.85m underpayment cases awaiting review.

4.85m cases awaiting review for underpayment. No matter how many times I type it – it is still shocking.

In addition to fraud there has been a massive increase in self employed people claiming Universal Credits – from 5% to 15% of claimants over the first 6 months of lockdown. Administering Universal Credits to millions of self employed people is a huge challenge, which the system was never designed for. The error rate and the potential for fraud are huge.

Clearly some of this is due to Covid, but the National Audit Office has qualified the Departmental Accounts for most of the last 30 years due to their inability to account effectively for the money they spend. Once Covid is over DWP will still be a mess and Universal Credits still won’t work properly.

Under pressure to address these problems DWP management are introducing increasingly ridiculous manual checks. Implementing manual workarounds to failed systems is endemic in DWP and a major source of mistakes.

This was received by the Public Interest Law Centre from a Universal Credits claimant:

Not only is this an insulting and demeaning way to treat a benefit claimant it is impossible to keep accurate records in these circumstances. Whatever your views on benefit claimants this is taxpayers money and there are 2 basic things that DWP need to get right:

  1. Getting money to people who are entitled to it
  2. Stopping fraud and error

Right now DWP aren’t getting delivering either of these things. And I don’t think that Ministers care.


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