'Blatant and shocking' fraud cases help push losses to £140m

Benefit fraud has gone up sharply and is now at record levels, the Audit Commission has concluded.

In its biennial study of the subject, the commission said that £140m of fraud or overpayments has been detected in England during the past year. The figure has risen 26 per cent since the 2006 report.

The commission reported that some cases of fraud were "blatant and shocking", citing the example of a man saying he was disabled and his wife claiming carer's allowance. He was in fact running a market stall and had enough spare cash to own a fleet of luxury cars.

The study also estimated that £24m in housing benefit was overpaid or defrauded last year.

The commission did not include the tax credit system as part of its analysis. Last week, however, the Liberal Democrats said it estimated that almost £10bn has been overpaid in tax credits in the past four years.

Often these overpayments are reclaimed by HM Revenue & Customs, throwing thousands of families into financial difficulty.

"Far too many low-income families are still being put on a financial roller-coaster by the complexity of a system that too often gives with one hand and takes away with the other," said Danny Alexander, the Lib Dems' work and pensions spokesman.