Tens of millions of pounds have reportedly been stolen by fraudsters as a result of a universal credit scam that has left affected claimants up to £1,500 out of pocket.
The Department for Work and Pensions (DWP) is under to pressure to explain what it intends to do to counter a scam in which criminals obtain claimants’ personal details, often by posing as DWP staff, to make bogus online applications for universal credit.
Once the claim is established the scammers can apply for, and take a cut of, an advance loan of hundreds of pounds routinely offered to new claimants to get them through the minimum five-week wait for a first payment.
In other cases in which claimants’ details are obtained without consent, the first the claimant becomes aware of the scam is when they receive a letter from the DWP telling them their existing benefits have been cancelled, their universal credit claim has opened and they must repay the advance loan.
According to a BBC report, contributors to an internal DWP staff forum estimate the losses so far could amount to as much as £20m, with hundreds of bogus claims every day for advance loans of up to £1,500. The DWP said it questioned the figures, but could not say if it had different estimates.
One forum message said: “To say there is a risk around UC [universal credit] advances is possibly the understatement of the year. Money is pouring out of the public purse like lottery jackpots.”
The report comes a fortnight after the National Audit Office (NAO) revealed that benefit fraud was at its highest level for a decade, driven mainly by universal credit. Although ministers hoped universal credit would reduce fraud by £1.3bn by 2025, the NAO found it would instead increase it by £1.3bn by the same date.
Frank Field, the chair of the work and pensions committee, has written to the DWP permanent secretary, Peter Schofield, demanding to know the extent of the scam, what plans the department has to tackle it, and what protections are in place for victims.
“Even when the department is informed that a claim for universal credit was fraudulent and made without the claimant’s knowledge or consent, it seems that claimants are being prevented from returning to their legacy benefits – even if they are worse off on universal credit,” the letter says.
Although the scam has been known about since at least last November, and ministers promised in May to “look into it as a matter of urgency”, it is not yet clear what changes the DWP has made to the universal credit system to counter it.
A statement by the DWP minister Peta Buscombe said fraud in the benefit system remained low and staff were working hard to identify and tackle any instances and to bring fraudsters to justice. So far one person has received a conviction for this type of fraud.
She added: “We’re encouraging people to listen to their instincts. If someone offers you a low-cost loan from the government they may be trying to steal your identity. Treat your personal information for benefits in the same way you would for your bank. And if you think you’ve been targeted, we urge you to report it urgently.”
Advance loans were introduced by the DWP after it emerged huge numbers of universal credit claimants were forced to use food banks and run up rent arrears because they did not have enough money to see them through the five-week wait for payment.
Margaret Greenwood, the shadow work and pensions secretary, said: “The government claimed that universal credit would reduce fraud and error. Now we know it is clearly failing in that, just as it is failing to protect people from poverty.
“Time and again the government has claimed that advances are the answer to the five-week wait. The reality is that they are loans that have to be paid off by claimants, often alongside debts built up during the five-week wait. Meanwhile, fraudsters and loan sharks prosper.”
Daphne Hall, the vice-chair of the National Association of Welfare Rights Advisers, said the system was too open to fraud. “Removing the facility to apply for advance loans online – they should have to be made in person with a jobcentre official – would give a substantial degree of protection.”
