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DWP and HMRC: ‘RTI is already paying for itself’

March 27, 2015


In a corporate report published on the 26th of March, HMRC and DWP have said that changes to how the departments share information on taxpayers including the introduction of Real Time Information are resulting in significant savings to Government and the taxpayer.  In order to tackle the levels of fraud, debt and error in the benefits system a number of measures have been introduced since 2010 to facilitate better sharing of information between the departments.  The report states that Universal Credit is expected to save £2.6 billion a year through reduced error, overpayments and fraud once it is fully rolled out.

By providing HMRC and DWP with up to date earnings data, RTI enables the correct amount to be paid to existing tax credit recipients and benefit claimants, assisting in the reduction of overpayments to claimants.  Information on earnings from RTI for the 2.3 million people on PAYE who receive tax credits can now be cross-checked against new claims to ascertain whether the right amount of earnings have been reported on a claim, thus identifying fraud and error and enabling the correct amount to be paid to the claimant from the outset.

HMRC and DWP say that estimated savings from reduced fraud and error in the tax credits system due to the use of RTI data for 2014-15 are £210 million, with a further £410 million to be saved between 2015 and 2017.  RTI data can also be used to identify where pension payments or earnings have either not been declared or have been under-declared, which currently causes overpayments in the order of £1 billion a year. 

Additional sources of data such as credit reference agencies are also used to cross-reference information held by DWP and HMRC on benefit claimants’ income to identify claims which need to be more thoroughly scrutinised.  The report also states that DWP could divulge some information (for example on claimants’ digital skills and ability to budget) to other third parties, such as landlords, “where it will help to prevent them falling into debt or failing to tell [DWP] about important changes to their circumstances.”

Other measures to tackle fraud debt and error in the benefits system described in the report include the creation of the Single Fraud Investigation Service, the strengthening of sanctions for those who cheat the system and different methods to recover debt.  The new fraud investigation service will work in a collaborative way to pool information from DWP, HMRC and local authorities and manage investigations which had previously been managed separately.   Increased use of digital services which enable people to communicate with HMRC and repay debts to DWP are also highlighted as measures which will improve the operation of the welfare system.

Tougher punishments for those who defraud the system have also been introduced, with both DWP and HMRC imposing more penalties.  HMRC issued over 15,000 penalties in 2013-14, up from 2,769 in 2011-12, with the number of penalties for fraud imposed by DWP and HMRC since 2012 totalling almost 70,000.  DWP has also increased the amount it can take from benefits in order to recover overpayments and has begun to impose penalties for claimant error as well as fraud.  Overpaid benefits can now be recovered from earnings as well as benefit payments, and HMRC is also increasing its use of private sector debt collection agencies to collect tax and tax credit debts.

HMRC and DWP say that these reforms are “making the welfare system simpler, fairer and more transparent,” and that the measures they have taken will enable them to better identify fraud and error.  The report expresses their confidence that as Universal Credit becomes available in more areas they will see “further improvements in how welfare works, with less scope for fraud and error to enter the system”, supported by advances in technology such as the use of RTI.

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