Tourism chiefs write off millions: Biggest errors found in social security budget

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The Independent Online
MILLIONS of pounds in grants to hotels which then went bankrupt are being written off by the English Tourist Board.

Disclosing further details of governmental waste, Sir John Bourn, the Comptroller and Auditor General, said that in the last three years there had been a rapid rise in the numbers of grant recipients becoming insolvent or bankrupt, which had led to a higher number of debts being written off.

Sir John, a public spending watchdog, said there were 70 cases being studied by the English Tourist Board and 364 cases awaiting appraisal. A total of pounds 4.87m was expected to be written off in grants for projects to enhance tourism.

The losses included pounds 200,000 in grants to Unicorn Heritage plc towards creation of a permanent exhibition on the history and lives of the Royal Family, which flopped.

A further pounds 100,170 was lost on the landscaping and extension of the Grosvenor Arms Hotel at Pulford, Cheshire, and pounds 152,000 on the construction of a country house hotel by Ashbourne Lodge plc, which went into receivership.

Sir John also discovered the Foreign Office reported a loss of pounds 237,000 in cash which was looted in the war in Somalia.

But the biggest errors he found were in the social security budget. As well as overpayments of pounds 465m on income support, there were underpayments of pounds 136m. During 1992-93, the number of claimants receiving mortgage interest as part of their income support rose to more than 500,000.

In some cases, the Benefits Agency paid the interest twice, to the claimant in benefit and direct to the bank or building society which advanced the mortgage. 'In some cases, the agency failed to take into account all qualifying loans, and in others used incorrect mortgage balances or incorrect interest rates in their calculations,' Sir John said.

He estimated the errors resulted in overpayments of pounds 134m and underpayments of pounds 17m in mortgage interest.

Sir John and the National Audit Office uncovered overpayments on family credit of pounds 12.7m. Because this was an improvement on previous years, he did not qualify his approval of the accounts.

Many local authorities, who act as agents for the Government, had paid housing benefit totalling pounds 144m beyond the statutory time limit.

During 1992-93, there were cash losses totalling pounds 51m in irrecoverable overpayments of pensions, income support and family benefits.