The Audit Commission says it is confident that last year's total of pounds 76.3m detected fraud will be exceeded. "We expect detection rates to continue upwards and we see that as a success story," said Derek Purdy, head of the Audit Commission's anti-fraud investigation unit.
The lucrative nature of welfare fraud was highlighted last week, with the disclosure of the biggest housing benefit fraud for decades, involving pounds 1.8m.
Frank Field, the minister for welfare reform, disclosed that members of an extended family were alleged to have falsely claimed pounds 600,000 in housing benefit and income support involving mortgages over which they had also defrauded building societies to the tune of pounds 1.2m.
It also emerged that some of those arrested, following raids on four north London homes last month, held social security ID documents for both London and New York and may have been defrauding authorities in the United States.
Welfare fraud in the UK is estimated to amount to around pounds 4bn, out of a welfare budget of around pounds 83bn. Last year 208,000 cases of benefit fraud were detected in England and Wales, an increase of 25 per cent on the previous year. There were 13,000 prosecutions.
The Government pays out pounds 11bn in housing benefit to 4.7 million people each year, of which 40 per cent are pensioners. Housing benefit fraud amounts annually to pounds 1bn; one in 12 claims is fraudulent but only one in a hundred fraudsters is caught.
London remains the capital for welfare fraud with pounds 18.6m of detected fraud in inner London last year. Outer London had the second highest amount of detected fraud with pounds 9.8m.
Many hopes are pinned on the work of the pounds 3m London Organised Fraud Investigation Team (Lofit), which was involved in exposing the pounds 1.8m north London scam. Comprising 20 specialist investigators funded by the DSS, Lofit is expected to become a model for nationwide initiatives against fraud.
"It is targeting organised gangs," said a DSS spokesman. "Their remit is not to chase the bloke claiming pounds 10 he's not entitled to."
Mr Field hailed the work of Lofit, saying: "We're going for the big boys. This is often dangerous work and you should not underestimate the risk the staff have to take. They have to deal with some pretty nasty people."
Organised criminal fraud forms only a small part of the picture. The majority of benefit fraud involves individuals misrepresenting their circumstances, for example, claiming to live alone when they are co- habiting.
"People see the big cases and think the benefits system is rife with organised gangs. In our experience the majority of fraud is small scale," said a DSS spokeswoman.
The Audit Commission, conscious that councils have been targeted for housing benefit fraud is carrying out an intensive review of councils' arrangements for preventing benefit fraud.
Chancellor Gordon Brown is keen to switch benefit for those in low-paid work into a pay cheque tax credit. Until recently, criminal prosecution has been the only option for those fighting fraud but the DSS has announced new civil penalties for welfare cheats, forcing those caught to pay a 30 per cent administrative fee on top of the repayment of the stolen money.