Lord FreudDavid Jones/PA Wire

The Department of Work and Pensions has revealed the shocking level of housing benefit fraud in the UK: last year £1.27 billion was lost in housing benefit fraud and errors. This is an increase of 30% in two years - at a time when the government has been promising to tackle fraud as a matter of urgency.

So what has gone so wrong?

Overpayments

The figures, reported by the Daily Mail, show that one pound in every 20 paid out in housing benefit is now either a mistake, or fraud. This compares to benefits overall where 2.1% is overspent because of fraud and error - and makes housing benefit the area where fraud and overpayment is most likely to happen.

There are a number of reasons for overpayments. Some £790 million is lost because of honest mistakes made by people trying to claim, £130 million lost because of mistakes by people in government, and £350 million because of fraud.

It reveals two clear problems: the system is patently too complicated for people to get right, and it is open to abuse.

Getting tough

The government has been making an effort to 'get tough'. It has increased the level of penalties, so you can now be fined up to £2,000 without going to court, or £50 if you are negligent when completing a form. Fraudsters can also lose their benefits for three years.

However, it's pointless making a show of getting tough, if the system is still too complex for honest people to understand, and too disparate to police.

It's worth highlighting that housing benefit mistakes also include a huge number of underpayments. According to the TUC, one in ten housing benefit claimants are underpaid.


The solution?

The government is hoping that the solution will come with the introduction of the Universal Credit. At that point housing benefit will come under the control of central government rather than councils - which will make fraud easier to spot. At the same time, it says that reducing six benefits to one payment should simplify the system and cut down on mistakes.

Minister for Welfare Reform Lord Freud (pictured) said in a statement: "Universal Credit will revolutionise the welfare state and ensure that the unacceptable levels of fraud in the benefit system are reduced considerably. The Universal Credit system will be much easier for individuals to understand, less vulnerable to human error and more difficult for people to play the system."

But what do you think? Is this the solution? Let us know in the comments.