Danger: Overload

David – not his real name – says piles of outstanding fraud investigations exist in many councils. "We just don't have the manpower or time to look into all the cases," he says. "It's ridiculous. It seems every new initiative involves the best and most effective data collection techniques, but most authorities either cannot afford it or can't afford to train staff to use it. We've read about fraud initiatives like cross-matching, and how fantastic they are," he goes on, talking about the government's latest edict on using other organisations' databases to check the legitimacy of claims, "but I'd be really interested to know how we can ever implement them on the equipment we have."

Benefit fraud is a well-documented council headache. The government estimates that housing benefit fraud costs the UK £900m a year – that's equivalent to 8% of the £11bn paid out in housing benefit every year. Local authority fraud teams range from two to 15 people, either working as a dedicated unit or within a general housing benefit department, and councils spend tens of thousands of pounds on IT equipment, training, and complex and rigorous data-matching exercises under a verification framework that has been in place since 1998 (see "Verification Nation", page 18).

But officers' work is bogged down in red tape. In 1999 alone there were 85 benefit administration changes, mostly to do with fraud, and now concern is mounting that the situation is going to get worse.

Alarm bells first rang in August when Malcolm Wicks, junior minister for work and pensions, ordered councils to reduce benefit fraud by a quarter by 2006. He demanded more "intelligence-based" techniques, including the use of sophisticated electronic surveillance equipment to infiltrate databases. To encourage this, councils that successfully prosecute fraudsters will get a £3000 award.

Now, the government has announced that a new way of paying benefit will be given a trial run in 10 councils from October, and it wants housing associations to do more fraud detection work. On top of all that, new tax and pension credits will come onstream later this year. The strain is beginning to show.

Fraud officers are unwilling to admit openly that they cannot cope – that would be giving the fraudsters an open invite to con their authorities. But there are widespread fears that the workload will be beyond them.

Fraudsters con the system in a bewildering number of ways. Tenants claim while they work, do not declare savings or the fact they own a home, or claim for multiple addresses; organised fraudsters will target various organisations using a number of different aliases. Fraud investigators handle anything from 30 to more than 100 cases at any one time. The painstaking legwork includes comparing information on tenancy agreements, wage slips and claim forms, investigating tips from council fraud hotlines, using computers to cross-check different council databases, share information with bodies such as the NHS or Inland Revenue and visit addresses several times to check if claimants actually exist.

I’m just very, very tired all the time, and so are all of my colleagues. I face a weekly battle to stop management allocating me even more cases 

Council benefit fraud officer

No two cases are the same – it can take days, weeks or months to investigate a single claim. "Most of the time is spent sending letters back to people asking them to send more information. Sometimes they try to be very slippery," explains one London fraud officer.

The first reason officers' workload will worsen is because of impending government changes to how benefit is paid. A £20m pilot scheme to pay benefit direct to claimants will be run in 10 councils (HT 24 October, page 11). In the scheme, a flat rate will be paid to private tenants, set at the level the local rent officer believes is medium for that area. Many housing benefit officers fear the change will create further upheaval while simultaneously creating another system open to fraud.

"It's very frustrating when new pilots are imposed on us," says an officer in one of the pilot authorities. "I'm just very, very tired all of the time – and the same applies to all of my colleagues. I face a weekly battle with management to stop them allocating new cases to me, because I haven't had the time to deal with all of my existing ones."

In addition to the pilots, the government's National Fraud Initiative plans to extend fraud detection to housing associations later this year to encourage councils and RSLs to compare information on tenants. It is unclear what effect this will have, but some fear that it may mean more work, not less. Although the government will make more money available – £200m over three years – this is intended to go into general benefit processing and is not ringfenced for fighting fraud. In addition, as one housing association source points out, the fraud measures may lead to a catch-22 scenario in which housing association staff are reluctant to blow the whistle on fraudsters because doing so will remove the rental income they would have got from that housing benefit.

As if the extra work created by benefit pilots and liaising with housing associations wasn't enough, this year benefit officers will also have to cope with the new tax and pension regimes set to come into force in April and October (see "Credit where it's due", right). Like the direct benefits payment pilots, it is feared this will provide more opportunities for fraud as well as increase the workload for council departments processing the credits.

"Housing officers can expect a significant increase in workload once the tax and pension credits are implemented," says Local Government Association head of housing Gwyneth Taylor. The LGA warns an estimated million extra people will be identified as eligible for affordable housing when the government's tax and pension credits are introduced.

Taylor says that that the arduous system of checks and cross-checks will be put under further strain. "Implementing the verification process left a huge paper trail, departments were bogged down in massive amounts of bureaucracy. Then there is the IT factor, there are the costs, but also the disruptions of upgrading systems to handle new developments and initiatives."

Housing officers can expect a significant workload increase once the tax and pension credits are implemented 

Gwyneth Taylor, LGA

Philip Sapey, a fraud detection manager at Kingston council in south London, is fearful that his system will fail to cope with the combined extra work of pilots, housing association cross matching and tax and pension credits. The launch of the verification framework meant that one council claims form grew from four pages to 20. "I can't say exactly how much more work it will create; if data from housing associations is analysed, for example, I'm sure it would be a lot. We're going to have to be prepared." Here, Whitehall could clearly help: council officers are crying out for clearer government guidance on coping with the new regulations.

But is the government really to be blamed for its intention to claw back millions of taxpayers' pounds? After all, some councils are incredibly successful in uncovering fraud – Newcastle council's 14-strong fraud team won government praise last June when it tracked down £240,000 thanks to follow-up work from a fraud hotline. Is it simply a case of inefficiency on the part of other councils?

No, says the Institute of Revenues, Ratings and Valuation, the professional body for tax and benefits officers. A spokesman places the blame firmly on the shoulders of Whitehall, saying it imposes a bewildering number of changes on councils. The institute's 2001 Benefits Committee Inquiry report demanded the government "consolidate the rapidly-evolving shanty town of regulations".

Another mitigating factor is the simple issue of money. It costs between £15,000 to £20,000 a year to employ a "visiting officer" – someone dedicated to checking up on addresses. Also, smaller authorities in particular find it hard to create specialist benefit fraud investigation units. According to the most recent information from the DWP, there were just 1900 full-time staff designated as fraud officers in 1997.

Staff training varies widely: a report from the select committee on public accounts in July last year found that "management skills and expertise, staff recruitment and retaining sufficiently experienced staff" were partly to blame for variations in departments' performance. Plus, many councils could do more to push fraud detection higher up their overall agenda.

Some authorities are better at cracking down on fraud than others because their benefits department is quick at processing claims. "If you are generally behind in benefit processing, you're simply less likely to be able to pick up repeat claims," explains Martin Cheeseman, housing director at Brent council in north-west London.

However, "there is light at the end of the tunnel", says Lorraine Burns, benefits manager at Newcastle. She believes that while the extra work is difficult in the short term, it will reap longer-term benefits. "The government has said the tax credits will simplify the system and reduce our workload in the long term," she says.