New watchdog in war on fraud

LARGE-SCALE frauds against councils are now so bad that the Audit Commission, the local- government financial watchdog, has appointed the first national co-ordinator to help fight them.

Derek Purdy, a 54-year-old accountant, newly appointed head of the commission's anti-fraud unit, will oversee efforts by local and national government bodies to combat organised fraud in housing benefit, income support and student grants.

This is thought to be costing astronomical sums, one estimate putting the cost of housing benefit fraud alone at more than pounds 1bn annually.

On behalf of the Department of Social Security, councils pay out housing benefit as a rent supplement at the rate of pounds 10.3bn a year. Jim Gee, of the London Boroughs' Fraud Investigation Group, calculates that between 10 and 20 per cent of this is fraudulently claimed by tenants and landlords, many of them in private flats in poorer areas.

Computer sweeps carried out in London have shown how large-scale syndicates have moved in, mounting extensive operations that involve simultaneous claims for benefits and grants, combined with attempted fraud on mortgage lenders and finance houses. At least two major investigations involving both the Metropolitan Police fraud squad and other forces are currently under way.

Although the syndicates were initially confined to the capital, Mr Purdy warned last week that gangs of fraudulent benefit and grants claimants are now targeting councils in Manchester, Birmingham and other cities. "Extremely well-prepared groups" were expanding operations, he said.

In a recent report the Audit Commission criticised local authorities for failing to establish an "anti-fraud culture", and one of Mr Purdy's tasks will be to try to instil it.

Few boroughs, Labour or Conservative, are immune from fraud. Last month Labour moved quickly to suspend Hettie Peters, chair of social services in Hackney, after her arrest for suspected housing benefit fraud against Tory-controlled Westminster.

The commission's new unit, however, looks to be only the first of several new initiatives. The DSS employs a team of specialist investigators to track fraudulent claims for income support and is now considering establishing a unit dedicated to eliminating the rich pickings from housing benefit. A spokeswoman said the Government was waiting until the Commons social security committee reported later this month before making a decision.

Mr Purdy's unit will also be tracking the other big money-spinner for council fraudsters: student grant claims. The Department for Education and Employment recently bought specialist "Hunter" software for the Universities and Colleges Admissions Service, based in Cheltenham, to help it track down fraudulent claims for maintenance payments.

Although these are officially estimated at only pounds 2m a year, there are now some 400,000 students in higher education and until recently some universities tended to be lax about checking identities and claims of A-level results.

Alan Bell, head of the verification unit at UCAS, said: "As recently as 1994 the problem was largely a London one. Now it has spread. The former polytechnics seem especially vulnerable."

Mr Purdy, who has 33 years' accountancy experience, says his main job is liaison between the police, the DSS, councils and fraud-busters on the ground. What he would like to see is a national scheme for checking claims building on the success of the London Team Against Fraud, which operates under the London boroughs. But investigators are sometimes hampered by the provisions of the Data Protection Act.