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Today the National Audit Office has reported that the Department for Work and Pensions increased recoveries of benefit overpayments from £180 million in 2005-06 to £272 million in 2007-08, and preliminary results suggest that the Department has achieved its recovery target of £279 million for 2008-09. But recoveries are not keeping pace with the rate of increase in identified overpayments.

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In 2007-08, £106 billion of benefit payments were made directly by the Department to customers. In the same period 1.3 million overpayments were identified totalling £558 million, exceeding recoveries made of £272 million. The stock of debt therefore increased by some seven per cent from £1.67 billion to £1.8 billion.

The NAO report also found that the Department recovers about £3 for every £1 spent on debt recovery operations, though recoveries in 2007-08 represent only some 15 per cent of the identified debt outstanding by the end of the year. The Department’s ability to accelerate recovery is restricted by a number of factors, including limitations on the amount which can be deducted weekly from customers’ benefits payments under Social Security legislation, and difficulties in tracing some customers who are no longer on benefits.

The NAO recommends that the Department pilot increased use of customer contact methods, such as texting, to encourage prompter notification of changes in circumstances which affect benefit entitlement; and that it use risk profiles for customer groups to better target debt collection activities. It should seek more information, for example proof of earnings, when negotiating repayment plans with ‘off benefit’ debtors; and should enhance performance indicators to monitor the performance of debt collection operations.

"The Department has improved the effectiveness of its debt management operations. More benefit overpayments are being identified and referred for recovery action. The amount of cash recovered is increasing, but so is the amount tied up in debt, as recoveries are not keeping pace with the growth in identified overpayments. Helping more customers stay out of debt will need to be an important part of the answer."

Tim Burr, Head of the National Audit Office

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