TENS of thousands of welfare claimants are suspected of having defrauded the taxpayer by up to £150 million by making false Universal Credit claims, the UK Government’s spending watchdog says today.

The National Audit Office says the Department for Work and Pensions has identified nearly 100,000 Universal Credit claimants that it suspects may have claimed an “advance1” payment fraudulently.

The advance payments are worth an estimated £100m to £150m. However, the NAO says its inquiries point to a further 50,000 potentially fraudulent cases that could push the estimated fraud up by a further £74m.

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In a report, the watchdog points out the DWP believes it will get back most of the estimated £100m to £150m but noted that the recovery could take “many years” and some of the debt may have to be written off.

The DWP detected increased levels of suspected fraud soon after it first allowed people to apply for advances online in July 2018; prior to this change, claimants could only apply for advances over the phone or in person.

The NAO explains that a number of suspected fraudulent cases peaked at over 15,000 a month in July 2019 but then dropped significantly from September 2019, down to just over 2,000 a month by December 2019.

The dramatic fall-off followed the introduction of a requirement to attend a face-to-face interview before receiving an advance, which the DWP believes has been highly effective in combating fraud.

The DWP told the NAO that the primary objective of enabling online-only applications for advances in the first place was to alleviate hardship faced by claimants during the first assessment period; the five-week wait for their first Universal Credit payment.

It also wanted to save an estimated £21 million a year by reducing the staff time involved in processing manual claims. The DWP told the NAO that it was aware of the risk of fraud when it decided to make advances available online. However, the watchdog says the department was unable to provide any evidence that it had considered the risk of fraud when deciding to do so.

By December 2019 fraud investigators had taken an initial look at around a third of the almost 100,000 suspected cases of advances fraud and concluded that, on this basis, it suspected nearly all the almost 100,000 cases identified were fraudulent.

By the end of December 2019, the DWP had imposed £1 million of administrative penalties to over 4,000 individuals; just six cases have resulted in a court sentence.

The NAO says the DWP continues to work through the remainder of the 100,000 the cases; however, work by the watchdog indicates there may well be nearly 50,000 additional suspicious cases, yet to be identified by DWP, worth up to an extra £74m.

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The report noted how the DWP believes it will get back most of the estimated £100-£150 million but this could take several years and some of it may have to be written off.

Labour’s Meg Hillier, who chairs the Commons Public Accounts Committee, said: “Universal Credit has been challenging from the beginning. Even when the Department tried to save face by making it easier to get an advance, the Department made a hash of it.

“The millions of honest claimants should not be tarnished or scapegoated. It is fraudsters who found it too easy to play the system,” she added.

Universal Credit claimants have to wait at least five weeks from making their claim to receiving their first payment while the DWP assesses their income and eligibility for the claim. The department acknowledges that waiting for the first payment "can be a challenge" for claimants, so it provides claimants with the option of an advance based on their estimated first payment.

This is designed to act as an "interest free advance to those who face immediate, short-term financial need”, to be paid back from deductions to subsequent welfare payments.