Universal Credit fraud fears raised by MPs
Government attempts to cut fraud by introducing the Universal Credit risk being "seriously undermined" by issues with housing benefits, MPs say.
The Work and Pensions Committee warned that gaps in the system could also increase the number of self-employed people working for "cash in hand".
But the government said its reforms were expected to cut losses due to fraud by £1bn over the next five years.
Universal Credit merges six working-age benefits into a single payment.
These are jobseeker's allowance, income-related employment and support allowance, income support, child tax credit, working tax credit and housing benefit.
Universal Credit is gradually being rolled out, with completion expected by 2017.
Under the current housing benefit system, local authorities can cross-check claims across a range of data relating to other council services.
The committee said that, unless the Department for Work and Pensions (DWP) could cross-check Universal Credit claims in a similar way, it could be less effective in tackling fraud and error.
The MPs expressed particular concern over the management of the £24bn-a-year housing benefit element of Universal Credit, which accounts for fraud and error losses of £1.2 billion, more than double any other core benefit.
The Department for Work and Pensions is relying on a new real-time information (RTI) system developed by HM Revenue and Customs to facilitate the collection of PAYE income tax in order to calculate claimants' monthly benefit entitlements.
But the committee said it had received evidence from the Local Authority Investigation Officers Group which voiced concern that RTI might even increase the number of people working for "cash in hand".
"RTI cannot provide the complete solution, as it will not apply to a significant proportion of claimants who are paid outside the PAYE system, including the self-employed," the committee said.
"Moreover, the full gains of RTI in relation to reducing benefit fraud and error are largely dependent on the successful national implementation of Universal Credit, which is at least three years away by the most optimistic schedule."
The committee's chairman, Labour MP Dame Anne Begg, said: "Through the use of RTI, Universal Credit has the potential over the longer term to substantially reduce fraud and error in the benefits system.
"However, this could be seriously undermined because of the uncertainty about how DWP will administer the housing element of Universal Credit without increased risks of fraud and error."
But a DWP spokesman said: "Universal Credit is expected to reduce losses due to fraud and error by £1bn in the next five years when it's fully in place.
"This modern, simpler and easier-to-administer benefit is running successfully and we are continuing to work closely with local authorities to ensure its continued safe and secure rollout.
"We are absolutely committed to doing all we can to reduce the level of fraud and error in the benefit system, which has fallen since 2010."