Benefit fraud holes cost UK £4bn

Decrepit databases are costing the UK around £4bn each year in social security fraud and human error, the UK Department for Work and Pensions (DWP) has admitted.

Of the £13bn paid out in income support each year, the DWP said it loses 6.7 per cent - £900m - due to fraud and mistakes.

Fraud by dole-cheats costs £564m of the £900m total loss, yet currently the DWP only prosecutes 11,400 of the 150,000 known deception cases.

However, the DWP has proposed a £2bn spring clean of the government's ancient computing systems to lessen the financial blow.

The DWP will replace its 20 sprawling databases with a centralised system by 2006 and has already installed around 12,000 new desktop PCs.

Yet Nick Gibb, conservative member for Bognor Regis and Littlehampton and member of the House of Commons Public Accounts Committee, criticised the move.

"This investment won't prevent money loss. An IT system can't tackle the fundamental reason the DWP is losing money and that is fraud.

"IT systems will help with human error, but the DWP needs to make the penalties for fraud more severe to act as a deterrent," Gibb said.

As part of the tidy-up, the AdVal Group has brokered a three-year contract with the DWP and has signed its first deal worth £78,000 to develop an e-learning scheme for employees.