I thank the Chairman and members for the opportunity to address the committee. Members will have received a copy of my opening statement so I will go through it briefly. They also received a copy of the fraud initiative, which was launched recently by the Minister for Social Protection. This document sets out the Department's plans to address fraud and abuse in the system for the next two years. It also addresses issues that were raised in the 2009 report undertaken by the Joint Committee of Social and Family Affairs. My colleagues and I are happy to discuss this initiative and get members' views on a plan which as we regard as a work in progress. We need to be agile and responsive in this area of fraud control and, as such, we would welcome the committee's input.
Before discussing the control strategy in specific terms, I would like to set it in an overall context to provide the balance that I think we all agree is important in this discussion. Social welfare income and support services impact on the lives of almost every person in the State. Some 1.4 million people each week receive a social welfare payment and when qualified adults and children are included a total of almost 2.1 million people benefit from weekly payments. Over 600,000 families receive child benefit payments in respect of over 1.2 million children each month. The majority of people receiving social welfare payments are entitled to them. Total social welfare expenditure in 2011 will be €21 billion. This equates to 40% of gross current Government expenditure.
There are essentially three elements to the work of the Department. The first is income support payments, as I have just outlined, which are crucial in addressing poverty. The second is activation support and services. Following the reorganisation of departmental responsibilities, the Department now has a much wider role in the provision of activation, employment, community services and income support. Almost 2,000 community welfare service, CWS, have joined the Department since 1 October and FÁS employment services staff, who are due to join us from 1 January, together with responsibility for a wide range of activation programmes at local level, will enhance our ability to interact directly with all our customers of working age in more effective ways. The third element is control of fraud and abuse. It is essential that the Oireachtas, clients, stakeholders and taxpayers have confidence and trust in the social welfare system. Essentially, the objective is to pay the right person the right amount of money at the right time, as it says on the cover of the fraud initiative. Social welfare fraud undermines public confidence in the entire system as well as being unfair to other recipients of social welfare payments, taxpayers and businesses run on a legitimate basis. Therefore, in combating fraud and abuse it is important, first, to keep a balance between the three elements of the system and, second, to keep the interests of all stakeholders in mind. Also, the Department would always say that good customer service is one that encompasses efficient and fair delivery with good controls. Our discussions with the EU, IMF and ECB very much focus on the three elements of the social welfare system and in particular on the need for strong, activation measures and robust controls as a contribution to the overall savings requirement.
There is a lot of detail on the current activities and future plans in the fraud initiative document, which members have, so I will just highlight certain areas. I also wish to dovetail with some of the concerns of the former committee as set out in the 2009 report, which included fraud and error surveys, the level of fraud in particular areas, cross-Border fraud and a public service card. We can go into as much detail as members wish in the discussion.
There are a number of themes and approaches in the new plan, including greater inter-agency co-operation among public bodies at national and local level to combat fraud and abuse. This is helped by the integration with the community welfare service, CWS, and FÁS. Arising from that, a more integrated approach to fraud control can now be realised. A single customer view for control purposes will be created. There will be greater liaison at national level and, in particular, at local level with employers, their representative organisations and businesses generally to ensure good information exchange on emerging fraudulent trends in the labour market, and also to maintain a fair and level playing pitch for all enterprises. We have in mind that employers and businesses would discuss their concerns and issues with our local managers. We want greater visibility of social welfare inspectors on the ground. We are going to examine new ways to recover overpayments and also to examine increased penalties for those operating in the hidden economy.
It is considered that the combination of these elements of the plan will lead to more focused and efficient activity and better deployment of resources. The initiative covers the period 2011 to 2013 and will be reviewed periodically and updated, as required, given emerging trends. Clearly, any new initiatives will have to be examined from a legal, including data protection, perspective.
Over the years there has been and continues to be much discussion on the level of fraud and abuse in the system, including in the earlier work done by the former committee. All stakeholders quite rightly want to eliminate any abuses and, as already said, that is a key objective of the Department. There are a number of different, and possibly confusing, ways of discussing the issue. They include the following. The first is people's own general perceptions of abuse from what they observe around them. In that regard, I should say that approximately 190,000 people work and legitimately claim a social welfare payment. That is due to the deliberate flexibility in the system that encourages people to undertake some form of work. Second is the level of overpayment and recovery – the total level of overpayments raised in 2010 was €83.4 million or 0.34% of total expenditure. A key aspect of control policy is to ensure that appropriate sanctions are applied in instances where social welfare fraud has been detected. Effective debt recovery is seen as an integral part of the deterrent approach. It creates a climate where people who have been overpaid know that they have a responsibility to repay and that the Department will take appropriate steps to effect recovery. Under section 4 of the plan a number of initiatives are set out that will be examined. Third, is the value of control activity. Control savings measure the value of the various activities and are a good indication of how much social welfare expenditure would increase over time if this investigative and control work did not take place. Control savings are not actual moneys recovered by the Department but are an estimate of future expenditure that is avoided. The value of the work, some €540 million in 2011 terms, is already built into the estimates and is seen as core control work. This target is monitored on a monthly basis at scheme and regional level. The provisional target for control savings for 2012 is in the region of €625 million. The targets for control savings, reviews and employer inspections will be finalised later in 2011 and will be influenced by a range of factors, including the prioritisation of high risk sectors.
The Department undertakes fraud and error surveys based on large-scale random samples of clients. Based on these surveys, schemes for people of working age have been found to exhibit higher levels of fraud than other contingencies. In particular, the jobseeker's allowance, one-parent family allowance and disability allowance have shown more pronounced incidences of fraud risks compared to other schemes. Conversely, in schemes such as the State contributory pension fraud and error surveys have shown low rates of fraud or exposure to fraud risks.
In the past five years, the surveys found that the fraud and error rates among various schemes ranged from 1% in the case of the State contributory pension to 1.9% on non-contributory State pension and to 3.1% of expenditure on jobseeker's allowance. Surveys on disability allowance and on one-parent family allowance are currently nearing completion. Details of the programme of surveys planned for the Department in the medium term are set out in section 9.2 of the initiative.
Current measures to control fraud and abuse include desk reviews of claim papers, home visits, the issue of mail-shots, database checking, and medical reviews in the case of illness payments. Controls are exercised at both the initial claim stage and at subsequent stages during the claim life cycle. The target for reviews in 2011 is approximately 780,000. The target for future years under the plan will be set later this year in the context of the outturn for 2011. The provisional target for the number of employer inspections in 2012 and 2013 is in the region of 2,500 to 3,500 each year. These inspections have a good demonstration effect and are broadly welcomed by the business community.
The Department will hold a seminar in the next month or two with all stakeholders on this fraud initiative including representatives of social welfare recipients and business to get their view. As part of the drafting of this plan consultations took place with staff of the Department through eight regional seminars which were held in August. In addition, over the lifetime of this initiative the Department plans a targeted advertising campaign to take place at local level and through the website. That will highlight the negative effects of social welfare abuse on all of us.
As part of its fraud investigation and control activities, the Department works with a range of enforcement and compliance agencies. In particular, investigators work closely and collaboratively with other agencies to ensure that social welfare abuses are comprehensively deterred and detected. For example, we work with the Revenue Commissioners, the National Employment Rights Authority, NERA, the Garda Síochána, the Criminal Assets Bureau, CAB, the Garda National Immigration Bureau, GNIB, FÁS, the HSE, local authorities, An Post and the Taxi Regulator. In the context of cross-Border co-operation, the Department has established both strategic and operational structures to combat cross-jurisdictional social security fraud. That is both North-South and east-west.
The Department has, with the Revenue Commissioners, through the operation of joint investigation units, identified the risk inherent in the shadow economy as being a key corporate priority to be tackled. A sectoral approach is being taken with projects and control operations under this initiative focussed on the following - the construction sector; trade suppliers; streetscape projects in individual towns and cities; the taxi sector; white collar sectors which have the potential to engage in cash transactions; and other sectors including markets, casual trading, couriers, clothes recycling, car valeting, security sector, and haulage. The required joint approach here comprises agility and early response where new fraud or abuse trends are detected. Details of work in this regard are set out in sections 6 and 7 of the initiative.
Identity fraud and identity theft are issues with which public bodies are rightly concerned, both in terms of prevention and detection. The personal public service number, PPS number, is an individual's unique reference number for dealing with Departments and public bodies. It is necessary to have effective controls around the number registration process to guard against fraud and to protect the integrity of both the Department's and an individual's data. Evidence of identity is a vital element of the allocation of numbers process.
The Department will begin the phased introduction of the new card this week. The introduction of the card and the registration process is currently being piloted in a number of local offices in the Department, including Tullamore, Sligo and King's Inn in Dublin. It is anticipated that some 4,000 people will be issued with cards by end of year. Under this plan, roll-out of the card will commence this month and while it will be done as securely and speedily as possible, it will take a number of years to complete. The initial focus will be on roll-out to persons of working age.
The specification for the card provides for one which is a standard credit-card size with multiple protection mechanisms to prevent and-or detect tampering with the physical card and its contents. The card also incorporates identification features, including a biometric photograph and signature, thus making it harder for people to use false identities. It contains personal information, inscribed on the face of the card for visual inspection and also electronically encoded on the card for access by a secure card reader. This card will act as a key for access to public services in general, identifying and authenticating individuals as appropriate and where required. Further details are given in section 8 of the initiative.
I should say, because we have started roll-out or production this week, my colleague, Mr. Niall Barry, has brought along samples of the card so that the committee may see it. If members of the committee are interested, we can arrange in due course to issue anybody who is interested with a card in our King's Inn office in Parnell Street. We can do that, possibly during November.
I hope I have given the committee a flavour of the work in progress and I very much welcome its comments and views.