Income support fraud reaches pounds 1.4bn a year

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Westminster Correspondent

Fraud by claimants of income support is running at pounds 1.4bn a year, the National Audit Office confirms today. The public spending watchdog found that almost 1 in 10 of income support recipients are estimated to be fiddling their claims. In all, 561,000 people, or 9.7 per cent of claimants, are committing fraud, the NAO reckons.

False information definitely lay behind payments of pounds 636m, said the NAO, and there is a "strong suspicion" of fraud in cases worth another pounds 773m.

So great is the problem that Sir John Bourn, the head of the NAO and the Comptroller and Auditor-General, refused to give the Benefits Agency, which administers Income Support, a clean bill of health. The agency's accounts were qualified, said the NAO, "because of the high level of expenditure arising from fraudulent claims".

Around 10 per cent of total Income Support payments of pounds 16.6bn is being claimed dishonestly - a proportion that will make grim reading for Peter Lilley, the Secretary of State for Spcial Security, and will fuel demands from Tory backbenchers for a renewed crackdown.

It comes after a recent study from his department found that fraud in housing benefit, which is dealt with by local councils, may be costing pounds 1bn a year.

In July Mr Lilley announced a new approach for the Benefits Agency - developed after concerns in 1994 - to combat cheats. The strategy puts new emphasis on trying to stop fraud occurring in the first place, while boosting detection and investigation.

Costing pounds 300m, Mr Lilley's onslaught is expected to yield savings of pounds 2bn over the next three years. This year, said the NAO, as part of a further tightening up, the Agency has promised to: simplify the rules on housing costs; improve its computer system; make extra checks before payments; bolster training and send hit squads into agency branches where fraud is especially prevalent.