Benefits system left open to fraud after pandemic, says architect of Universal Credit

Sir Iain Duncan Smith says criminal gangs and benefit cheats would take advantage of any gaps in the system – Kirsty Wigglesworth/AP

Britain’s benefits system has been left vulnerable to fraud because dozens of loopholes used to ease claims during the pandemic remain open, the architect of Universal Credit has warned.

Sir Iain Duncan Smith, who rolled out the benefit during his time as Work and Pensions Secretary, said pandemic changes that made it easier to apply needed to be closed, saying criminal gangs and benefit cheats would take advantage of any gaps in the system.

The chair of a government spending watchdog also called for the reimposition of restrictions, after a spike in fraud which has cost taxpayers billions.

The Telegraph understands that 31 rules used to vet claims for the benefit before the pandemic have been dropped by the Department for Work and Pensions (DWP), after ministers temporarily suspended hundreds more between 2020 and 2021.

These include claimants now being able to self declare they are too ill to work for the first seven days of an illness, whereas they previously needed a sick note from a doctor, as well as some relaxations to ID checks.

Sir Iain said: “There is no question that this needs to be tightened up, the Government has to do so because the one thing I learned was that if you leave a gap, fraudsters will get in.”

Last year, more than £5.5bn was lost to fraud and error in Universal Credit, down only 2pc on the record almost £6bn lost in 2022.

Dame Meg Hillier, the Labour chairman of the Public Accounts Committee, accused officials of being “complacent” and urged them to bring back full vetting checks for claimants on the benefit.

She said: “Of course they should be bringing them back in but they are taking this rather complacent attitude. There’s just been no reason not to. Indeed they had indicated they were temporary and they knew what the risks were.”

Sir Jacob Rees Mogg, a former cabinet minister, said the checks should be restored and encouraged people to return to work amid Britain’s ongoing worklessness crisis as the number of people neither in employment nor seeking it surpasses nine million.

He said: “The pre-Covid checks must be restored as they were successful in reducing fraud. It is also important that people are encouraged to go back to work which has also tailed off since the pandemic.”

It comes after a Romanian criminal gang were convicted this month of stealing more than £50m from taxpayers through thousands of bogus Universal Credit claims. The false claims were made between October 2016 and May 2021 in the largest benefit fraud in British history.

The DWP has so far refused to elaborate on the exact nature of the rules which have been relaxed since the pandemic, citing concerns the information could be used by fraudsters.

The Telegraph understands one is the requirement for claimants to provide a “fit note” from doctors to prove they are too unwell to work for the first seven days of an illness. Applicants are now asked simply to “declare” evidence of a medical condition.

The so-called “easements” to rules governing how taxpayer money is handed out date back to 2020 when roughly 200 checks on claimants were relaxed by ministers.

The move was intended to “get money as quickly as possible to those who needed it”, according to the DWP statement of accounts for 2021 to 2022. By March of 2021 there were still around 100 easements in place and most were reversed by 2022, the accounts show.

However it has since emerged that the system for checking claims is permanently weaker than it was before the pandemic. The level of fraud in Universal Credit compared with 2019 still remains considerably higher.

The DWP estimates that overpayments due to fraud and error in universal credit currently make up 3.6pc of all claims. A DWP spokesman said: ““We responded quickly and effectively to the challenges posed by the pandemic by introducing easements to ensure people were supported financially. This was the right thing to do.

“Controls are back in place and our counter fraud clampdown, together with wider benefit checks and controls, saved at least £18 billion in 2022-23 and saw fraud and error fall by 10pc.

“Our Fraud Plan sets out a long-term strategy to significantly reduce fraud and error – and includes the hiring of nearly 6000 trained specialists to review millions of Universal Credit claims.”

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