Until the DWP develops an ‘early warning system’ to pick up systemic underpayment issues, large scale corrective exercises will continue to be a common feature of the benefit system

NAO Auditor General also repeats call for the Department to put in place a measurement for detected underpayments across all benefits, in light of a record £3.3 billion of underpayments in 2022/2023

Until the DWP develops an early warning system to pick up systemic underpayment issues, large scale corrective exercises will continue to be a common feature of the benefit system, the National Audit Officer (NAO) Comptroller and Auditor General Gareth Davies has said.

In his report on the DWP’s Report and Accounts 2022/2023, published with the Accounts yesterday, the Auditor General highlights (in Part Three of his report) that the estimated amount of benefits underpaid by the DWP increased to 1.4 per cent (3.3 billion) of the £234.8 billion spent on benefits and state pension payments in 2022/2023, increasing from 1.2 per cent (£2.6 billion) in 2021/2022, representing the highest level on record.

While the increase in underpayments was mostly due to claimant error in personal independence payment (estimated at £900 million), the Auditor General reports on billions of pounds worth of underpayments as a result of a number of historical issues in state pension over a period of more than 30 years –

• an estimated £1.17 billion owed to 165,000 pensioners relating to official error in cases of married pensioners, widows, and people aged over 80;
• underpayments relating to missing periods of Home Responsibilities Protection are estimated to total around £1.3 billion of state pension owed to 210,000 people (of these 60,000 have died since they were underpaid); and
• an as yet unknown amount of underpayment resulting from missing national insurance credits information relating to around 137,000 universal credit claimants who have reached pension age – due to a six-year suspension of an automated transfer of DWP data to HMRC.

In relation to the systemic issues behind these errors, the Auditor General says –

'DWP’s quality control mechanisms rely on what the sample tested picks up. For many years these mechanisms did not pick up these errors. I have previously recommended that DWP develop an 'early warning system' using root cause analysis of individual detected errors to help without needing a critical mass of detected errors to direct its efforts. DWP is still developing this process. Until DWP develops such an early warning system then large-scale underpayments and corrective exercises will continue to be a common feature of the benefit system.'

In addition, providing further recommendations on an early warning system, the Auditor General says that when setting up such a system, the DWP should –

• encourage frontline staff to refer large or unusual underpayments for analysis;
• perform more in-depth analysis to determine the root cause of a greater number of detected underpayments; and
• develop the capability to record detected underpayments across all benefits as part of any planned updates to its IT systems.

Concluding his analysis of the current state of DWP underpayments (at paragraph 3.25 of his report), the Auditor General highlights that he is still waiting for the Department to fully comply with a further recommendation, originally made in his 2020/2021 Report on Accounts, to –

'… put in place a measurement for detected underpayments across all benefits. DWP has accepted this recommendation but has only committed to regularly monitoring the types and levels of underpayments in universal credit and not across its other benefits. The purpose of my recommendation was for DWP to have management information on the level of underpayments that it is correcting (to complement its estimates of the amount it underpays). However, it would also aid the creation of an early warning system.'

For more information, see Report by the Comptroller and Auditor General from gov.uk