Fraudsters are exploiting the universal credit benefits system, leaving vulnerable families penniless, police and local councils have warned.
Criminals posing as Jobcentre workers or helpful advisers are targeting people on low incomes and getting them to hand over their personal details by promising to help them apply for the interest-free loans offered by the government to cover the waiting period until their first UC payment comes through. The fraudsters then apply online for the benefit, take most or all of the loan and then disappear
Police forces, councils and charities across the country have issued public warnings about the scam in recent days but local authority workers say the fraud points to flaws in the online system that is used to apply for the new benefit.
Universal credit groups six existing benefits — including housing benefit and disability allowances — into a single payment. It has a cap of £1,666.67 a month for couples and lone parents outside London.
Proponents say it encourages people to work. However, it has been widely criticised for increasing poverty, partly because it forces recipients to wait an average of five weeks for their first payment. This and other issues prompted Amber Rudd, the work and pensions secretary, to pause UC’s rollout in January.
The delay is also being exploited by fraudsters. “If universal credit didn’t have a five- week wait for living money and money for housing costs, then arguably this exploitation window wouldn’t arise,” said a Salford council spokesman.
According to councils and the police, the fraudsters use fake ID cards and claim to be Jobcentre workers, or pose as intermediaries charging a fee. They approach vulnerable people by phone, on social media and even in person outside Jobcentres or in pubs. In Sunderland, a local housing association said they had been seen in the town centre talking to shoppers.
When the victims complain that their money has been taken, the Department for Work and Pensions instigates a fraud inquiry against them, stopping all benefits. It also requires them to pay back the “loan” in full from their future payments, leaving them without money for food, heating and rent.
Catherine Connors, a senior welfare advice officer in Salford, said she dealt with a case where a woman gave her details to a man who said he was a DWP worker. He claimed for six children, although the women did not have that many. Recipients can claim £231.67 per month for each child, and slightly more for their first.
The single parent wanted the advance payment to pay off £1,000 in rent arrears. The fraudster took a £500 “fee” from her £1,500 advance claim. When she went to her next meeting with a work coach at her local Jobcentre, the government office that assesses employment claims, he noticed she did not have six children. Her existing benefits were stopped and she has had to borrow money from her family.
Ms Conner said she had dealt with three cases of fraud in recent days. In an email received by Salford council, another victim wrote: “Hi I was misled and robbed of [sic] someone who got a universal credit loan with my details by falsely telling me it was a survey. I have six kids, one has special educational needs, one is newborn. I reported this but tax credits are not paying me. It’s been four weeks. I am totally penniless . . . I can’t take much more.”
Benefit fraud and error is at a record high in the UK. The government made £4.1bn in welfare overpayments in 2018/19. The total rate of overpayments, which includes fraud and error, was 2.2 per cent of the total, the same as the year before. Only £1.1bn was reclaimed, leaving a government loss of £3bn.
The DWP said it expected UC to reduce losses by £1bn when it was fully rolled out.
“We remain vigilant to all forms of fraud and investigate, and prosecute, where appropriate. We are constantly refining our processes to ensure universal credit remains both accessible and secure, with those who need support getting it,” it said.