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LITRG reports on HMRC and DWP’s error and fraud joint policy document, which fails to recognise that these are quite different concepts and downplays the role of official error.

The policy document

A new policy document jointly issued by HM Revenue and Customs (HMRC) and the Department for Work and Pensions (DWP) is entitled ‘Tackling Fraud and Error in the benefits and tax credits systems’.

It attempts to send a strong message that fraud and error will no longer be tolerated where welfare benefits are concerned, whichever government department is involved in their administration.

But if error is to be dramatically reduced, government departments have to look in the mirror and acknowledge their own starring role in contributing massively to that error.

Mixing the messages; penalising the innocent

It is unhelpful to join together two concepts, fraud and error, in one document. Fraud, as a matter of law, requires a guilty intent; error, whether committed by claimant or government official, can be careless, or it can be wholly innocent. They are very different in origin and they need very different solutions; so to talk about them in tandem not only confuses the general audience, but potentially encourages staff in those government departments to conflate the two.

Simple, innocent error, as opposed to fraud, is a product of a highly complex system in which few are certain of the rules. UK tax credits and benefits with the multiplicity of interrelationships between them must together constitute one of the most complex systems ever devised. A claimant can make an innocent error to their detriment as easily as in their own favour. It would be wrong to penalise such innocent error and this is the danger of mixing together the notion of fraud with error.

We would recommend that, in future, the two issues are reported and dealt with quite separately.

Contributory error

It is not only the claimant who can err. We are strongly of the view that government departments are major contributors to error.

Mistaken advice by officers, when acted upon by claimants, leads to claimant error. To penalise a claimant for doing what they were wrongly advised to do by a Government employee would be harsh indeed.

Contributory error by government lies not only in the straightforward cases of officers making mistakes or giving misleading or incorrect answers on a helpline. The biggest contributory factor is making it difficult for the “customer” to understand what is required of them by, for example:

• Unintelligible forms
• Unnecessarily complex systems
• Computer generated “help”
• Inadequate or no explanation of difficult parts of the law
• Programming calculators incorrectly.

We find it incredible that on page 12 of the document HMRC assert that there is no official error in the tax credits system. What they mean is that the system they built is incapable of identifying it. To our certain knowledge, billions of pounds have been written off since the commencement of the tax credits regime solely because of acknowledged contributory HMRC error.

Unless this attitude is reversed and a proper analysis undertaken as to why the customer is misled we shall continue to employ more people in “compliance” chasing the error-maker rather than ensuring that error is designed out of the process from the beginning.

First things first

The measures announced to impose heavier penalties for benefit and tax credits fraud and error must be implemented with caution. While it is undoubtedly right to inflict strong penalties on fraudsters and cheats, this must not routinely happen in cases where government department failures caused the confusion in the first place.

HMRC and the DWP need to put their own houses in order before shouting about the deficiencies of those who need their help. What is required is a thorough review of all the major processes and one which approaches this task through the eyes of the “customer” rather than through the eyes of officials.

Useful links

The full policy document can be found on the DWP website.