MPs told of pounds 2bn housing benefit fraud

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Up to pounds 2bn a year of housing benefit is being claimed fraudulently, MPs were told yesterday by the council officials who investigate benefit claims.

Official calculations that fraud and abuse may amount to 8 to 10 per cent of the pounds 12bn bill for housing and council tax benefit are serious under-estimates, Andrew Webster, co-ordinator of the Local Authority Investigation Officers Group, told the Commons Social Security Committee. "The real level could be double that," he told MPs as investigators said they believe housing benefit fraud was being used to fund drug operations and other criminal activities and as the committee was told that benefit cheques had been found redirected to Cyprus and other countries by organised gangs.

But mutual suspicion between local authorities and the Benefits Agency was hampering fraud investigation, and local authorities face serious legal and other difficulties in prosecuting the guilty, MPs were told.

"The myth that benefit fraudsters are those just trying to get a few extra pounds for a slightly higher standard of living to raise them off poverty is not, in general terms, accurate," the investigators told the committee. Though some fitted that description, most were "motivated by greed, not desperation.

"Some fraudsters are educated, middle-class and articulate, regarding benefit fraud as a victimless crime. These people use their knowledge and contacts to set up complex frauds, often difficult to detect and onerous to investigate. The cash is used to fund a more affluent lifestyle."

That was particularly true in the shire areas outside the big cities to which those running organised frauds were tending to move, regarding the smaller authorities as softer targets. "Organised fraud is milking the system of millions of pounds through fictitious claims and property rings."

The investigators listed 20 different forms of housing fraud, from claimants simply not living at the address for which they were claiming to collusion with landlords, claiming in three or four different local authority areas, or landlords moving sometimes fictitious tenants in and out so fast that keeping track of claims becomes impossible.

The current incentive scheme, which penalises local authorities that do not make minimum benefit savings is "simply scratching the surface," the MPs were told.

As Frank Field, the committee's chairman, said the committee aimed to put fraud "right at the top of the political agenda" in its report, Mr Webster called for minimum standards for fraud investigation across local authorities.