know reducing welfare fraud is a big concern across the sector. Following ambitious targets laid out by the government in the autumn statement, FFBS Director of Income and Engagement, Phil Henderson, looks at some of the strategies we use to make sure we are delivering welfare where it is needed.
Big targets in the autumn statement
In the autumn statement, Chancellor of the Exchequer Rachel Reeves made a government-wide commitment to fraud prevention across all public-spending decisions, with a specific focus on the welfare system. This is predicted to save £4.3bn of wasted spending each year. Fraud is a costly issue, but across our clients we see a spectrum of approaches to reducing fraud. For some partners, any indication of misuse or fraud could see funding withdrawn. For others, the dignity and autonomy of the end beneficiary is critical to how they want to deliver support, and there is a willingness to accept that an open and welcoming system which is inclusive and simple to use does run a greater risk of fraud than one which is more challenging in assessing beneficiary needs. Neither approach is right or wrong, and we work with all our partners to define their needs and build appropriate schemes to provide support in a way that works for their beneficiaries and other stakeholders.
The approach to alleviating poverty is a contentious issue. As economist Rutger Bregmann puts it “the solution to poverty is to give poor people money”, which is seductively simple. This is the theory behind, for example, Give Directly which has now distributed over $1 billion to the poorest people on the planet. Money transfers are, however, the most transferable asset and therefore the most open to fraud, indeed it was reported in 2023 that Give Directly had been defrauded of almost $1 million in one programme in the Democratic Republic of the Congo alone.1
This is one example of the cost of fraud impacting the delivery of welfare. In 2023/24, the Department of Work and Pensions in the UK estimated that 3.7% of benefits, almost £10 billion, was overpaid due to “fraud and error”.2 We know there are costs to delivering welfare, the challenge set to our whole value chain including beneficiaries, clients, suppliers, and FFBS ourselves, is to minimise those costs to ensure as much funding as possible reaches people who need help.
Strategies to reduce fraud
One route taken by some partners is to focus on the delivery of goods. Although this may give the ultimate beneficiary less choice, the benefit is ensuring that a tangible item is delivered. FFBS offer installation and removal of packaging for goods, providing a valuable service to genuine applicants, while simultaneously reducing the liquidity and transferability of the welfare delivered. This is seen by some of our clients as the best route to ensuring funds are translated into the help required, indeed one large partner delivers over 95% of their support in this way.
Some clients require different methods of support, and FFBS is always working to ensure that these are as secure as possible. After goods, the next least transferable form of support is vouchers, which can be structured to restrict spend to one sector, one retailer and even in some cases to certain departments in a store. Another benefit of vouchers is the speed of delivery, with our supermarket vouchers for vulnerable people generally being delivered next-day, and some orders being fulfilled on the day of request.
And finally, there is the issuance of cash. Whether this is via BACs transfer or cash-out payments, payments are fast, simple and can prove highly effective – although this is also the payment method most attractive to those looking to profit from welfare schemes. FFBS offer a number of ways in which to improve the security of cash payments, from ensuring that identification is required to allow pay-outs in shops through to developing new confirmation of payee technology in conjunction with our banking partner to ensure that every name, account number and sort code match prior to payments being made.
At FFBS we understand that giving support is complex. We know that every organisation has different beneficiaries, different funding rules, and different needs. That’s what makes us the experts in welfare.
Phil Henderson, Director of Income and Engagement
[1] Rory Stewart’s ‘GiveDirectly’ charity defrauded of almost $1m by its own workers (telegraph.co.uk)
[1] Fraud and error in the benefit system: financial year 2023 to 2024 estimates – GOV.UK (www.gov.uk)