MPs say 'cracks are showing' at Brexit-hit HMRC as benefits fraud and error rise

Benefit overpayments are set to soar over the next two years as HMRC feels the strain of a "daunting" Brexit workload, MPs have warned.



A new report by the Public Accounts Committee says HM Revenue & Customs has "de-prioritised" a clampdown on fraud and error in the benefits system under a mounting list of demands.

The MPs say "cracks are showing" at the "under pressure" tax authority.

HMRC aims to keep the level of error and fraud in the tax credits system down to no more than 5% of overall spending.

But the group of MPs says HMRC now expects overpayments "to rise and exceed its target", with the error rate set to soar to 5.5% in 2017–18, and to 6% in 2018–19.

The Committee finds that the taxman has "cancelled its plans to improve its systems and thus help people make and change" tax credit claims because the welfare payments are due to be replaced by Universal Credit.

And it says there is little "appetite within government" to tackle the problem.

Committee chair Meg Hillier said: "HM Revenue & Customs is under pressure and in some areas the cracks are showing.

"The authority expects fraud and errors in tax credits to exceed its target in successive years, driven in part by policy changes that have effectively removed HMRC's incentive to bring fraud and errors under control.

"It lacks understanding of the costs of a vast swathe of tax reliefs, which means it cannot take an informed view on their value for money."

The report also warns that the tax authority faces a "daunting task" in preparing for Britain's exit from the European Union "whilst reprioritising its ongoing projects and day to day services".

It adds: "The recently announced further delay to HMRC’s new Customs Declaration Service, which means that it is very unlikely to be ready for exporters by the time of Brexit, and the need for further development of HMRC’s systems so that by March 2019 they can handle postponed accounting for import VAT in the event of no deal, underline the risks."

Responding to the committee's findings, an HMRC spokesperson said: "In the face of unprecedented challenges we have secured a record £605bn to pay for our hospitals, schools and other vital public services.

"That includes £30.3bn from enforcing the rules against the minority of firms and individuals who try to get round them - this could fund the NHS across the whole of England for three months."