DWP suggests Osborne and others are exaggerating benefit fraud


11:24 am - October 23rd 2010

by Richard Exell    


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A couple of days ago I noted that the Chancellor’s statement on the Spending Review exagerated the amount of social security fraud that takes place.

Yesterday the DWP published Tackling fraud and error in the benefit and tax credits systems which suggests that other government ministers are prone to the same mistake.

One mystery is cleared up.

Over the summer, the DWP reported to the National Audit Office that their best estimate of the level of fraud and error in the social security system is £3.1 billion a year.

The Chancellor talked about “£5 billion” being lost to fraud.

Yesterday’s report makes it clearer – he must have been talking about the social security and tax credit systems together. Fraud and error in the tax credit system runs at £2.1 billion a year, so the total is £5.2 billion.

But another mystery is as perplexing as ever. Mr Osborne talked about £5 billion of fraud. The report confirms the DWP’s previous statement that the £3.1 billion figure is made up of:

  • £1.1 billion due to official error,
  • £1.1 billion due to customer error,
  • £1 billion due to fraud.

It provides new information to show that, in the tax credits and benefits administered by HMRC, fraud and overpayment breaks down as follows:

  • £1.5 billion due to customer error,
  • £0.6 bn due to fraud.

It seems that HMRC do not accept that any of their overpayments are due to official error. The new report also estimates that DWP underpayments total £1.3 billion.

Error is not the same as fraud, and the total fraud in both systems is £1.6 billion, not £5 billion. Mr Osborne got the level of fraud wrong by a factor of three – this is a bit worrying, one does hope that the Chancellor of the Exchequer will be good at sums.

But what is even more surprising is that the Chancellor isn’t alone in making this error. The new report includes a foreword by David Freud, Minister for Welfare Reform at the DWP and David Gauke, Exchequer Secretary to the Treasury. They write:

This document sets out a radical new approach for addressing welfare fraud, which now costs the taxpayer £5.2 billion pounds every year, or £165 every second.

This is a first. Most Ministers eventually say something their own Department’s information disproves – that is pretty much unavoidable.

But I’ve never seen one make a contentious claim that is disproved just nine pages later in the same document!

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About the author
Richard is an regular contributor. He is the TUC’s Senior Policy Officer covering social security, tax credits and labour market issues.
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Story Filed Under: Blog ,Economy ,Law ,Westminster

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Reader comments


Do DWP break down the causes of the £1 billion of fraud, or provide any breakdown of the average value of fraud?

I suspect most “fraud” is low-value and due to people delaying changes in
circumstances when they return to work (employment at the bottom end of the labour market is transitory and re-claiming benefits is a long process) or re-partner (there is a blurry line between single and living together with someone). But I have seen no figures to confirm or prove this wrong. Just lots of shouting about “scroungers”.

The benefit fraud debate is incredibly ill-informed. I completely agree that fraud should be eradicated, but I worry that the cost of further tightening of already strict enforcement will outweigh the benefits to the public purse, making announced action poor VFM.

Surely resources will be better used chasing tax cheats or giving
HMRC some balls so they can enforce tax due on large corportations

Good article. The DWP have got this right I suspect. Mr Osborne is ill advised – as usual !

@ 1. Sevillista – suspect you’ve covered it with overlaps in circumstances causing the main problem.

The advise I always give people in these circumstances is, tell the system what you’re going to do before hand if possible but always tell them within 24 hours of having done it. Leaving it longer can create an administrative nightmare that easily leads to hardship.

There was a time when it was perfectly acceptable to have public school morons as ministers, they knew the social graces, didn’t drink the finger bowl or wipe their arse on the curtains and had a professional, skilled civil service to prevent them making truly egregious cock-ups. Unfortunately the upper echelons of the civil service are now a revolving door to the industries and businesses from which the government procures services and (largely theoretically these days) regulates.

The result is that the lunatics are now in charge of the asylum. I don’t know what terrible psychological harm was wreaked upon Osborne at public school but he seems only able to assuage it by constantly villifying the poor. His every statement is one of blind prejudice unhampered by facts as the spurious figures with which he tries to justify his policies change every time he opens his mouth. While Cameron simpers along trying to at least look like a one nation Tory, Osborne has far more in common with the crackpot end of the American Republican Party. His performance last week was the worst I have seen in politics, his speech was chaotic and consisted more of verbal attacks on Labour than reasoned argument and the worst moments came as he announced the slashing of benefits to the poorest and half a million job losses with a tone of such joy that I would not have liked to have dry-cleaned his trousers afterward. These moments will live in infamy for many years as instead of sombre regret (however insincere) the Tory benches greeted them with the kind of pleasure that I’d only normally expect from them if a brothel had announced spankings were half price.

I’m dumber than a bag of hammers, I can barely run my own life so I wouldn’t presume to tell anyone else how to live theirs, much less an entire nation. But if paper qualifications count for anything, and if they don’t why spend so much getting them, then I am smarter than Osborne. Terrifying isn’t it?

@ 3

Brilliant – true and long overdue credibility goes to “Sir Humphrey, “Bernard” and “Jim” for knowing their place and sticking to it. You have touched on a much overlooked point though. I knew an MP about 20 years back who said “Yes Minister” was the only television programme that “united the house” in his opinion.

5. Boris Hobgoblin

What astounds me about this debate, is a figure I read yesterday that pales the stated benefit fraud. It is really noticeable that NOTHING is being mentioned about this on the news.

What I read was that currently the rich are succeeding in the avoidance of 13.1 billion tax. As far back as 2006 the BBC were reporting an estimated 10 billion. Apparently this is due to cross border exploits, and other such underhand tactics.

So exactly why are we allowing the Con Dems to demonise those who are struggling to make ends meet already? Is it because the vulnerable are by their very nature voiceless, or is it because the Conservatives pander to the whim of the upper echelons.

The only likeable thing about the Con Dem alliance is that they don’t really hide their selfish abuse of the very people that society is supposed to protect.

I can only speak from my personal experience. As volunteer amongst the Aspergers and Autistic community, and I know how much of a toll this news has taken on an already vulnerable, and genuinely disabled group of people. I’ve also seen some of the recommended changes to the mental health criteria for establishing DLA claims. The result is going to be that a lot of autistic spectrum people, who were clinging on to their incomes are going to end up destitute and yet totally unable to work.

This doesn’t even begin to touch upon the mental strain and anxiety that Autistic Spectrum community (as well as all those receiving DLA on mental health grounds) are suffering right now. This is just going to make a lot of people LESS able to work, especially since we are going to be losing some of the help to get into work in the first place.

This is not the behaviour of a civilised society. This is taking advantage of the fact that some disabilities are invisible, to those who are ignorant. It is the barbaric abuse of a vulnerable community by those who are privileged, as a means to cover up their own fraud.

I made the mistake of voting Lib Dem this year, and I am appalled at what I have voted for. Like many I won’t make the mistake twice.

@ 5 Boris Borishobgoblin

Written and expressed like a true old fashioned Liberal. My apologies if you choose not to identify with them politically.

7. Boris Hobgoblin

6. Ted.

Wow you are making a big assumption there, based on the only two pieces of information you know about me. Amusingly you choose to insult me based on the fact that I give a damn about a vulnerable community, and I think that there is a massive injustice happening.

I guess that just indicates the kind of ignorance I that does not deserve dialogue. Had you tried to change my mind with discussion I might have given a damn.

Two videos showing who the REAL benefit thieves are

http://www.abcofesa.co.uk/board/viewtopic.php?f=12&t=117&start=0&hilit=theives

@7 Boris

Ooooops sorry on the political colour but I – like all real Liberals – am very much in agreement with your pragmatic approach to care. Note not to be confused with Liberal Democrats under any circumstances.

I will be engaging in dialogue at a later stage in defense of Liberal values. These of course have been thrown to the dogs in the last few days by the ‘Democrat’ half of our disgraceful political marriage.

9
I would be very interested to hear a defence of ‘real Liberal’ values with regard to the welfare state. Beveridge was a Liberal, and the underpinning ethos of the welfare state was to discourage people from applying for welfare by making it less appealing than working and becoming self-sufficient.
This is, in effect, no different to the liberalized version of the Poor Law introduced in 1834, together with the introduction of the workhouse. However, our welfare state takes into account people who are truly unable to work through disability, therefore, a person with a recognized disability can and often does, receive benefits which are larger than any wage they may earn, even if they were able-bodied, and I have never heard anyone compalin that this is unfair or that it shouldn’t be the case.
Looking at the rate of proposed benefit cuts, it strikes me that we could be looking at something akin to the workhouse because so many people will be made homeless who are unable to work or, alternatively, are unable to get a job which pays for housing and other costs of daily living.

@ 10

Not quite sure what you’re asking me in relation to our present financial circumstances ?

Your historical record of Liberal policy is reasonably accurate but it should be viewed with suspicion as it only applied in that timeframe of history according to law, economics, social / class conditions and of course, an enduring belief that all governments are right because the people voted for them. Monarchs were of course above all this and never wrong !

If of course we’re looking for a definition of my interpretation of “old and original” Liberals, I suspect we judge things right/wrong/good/bad along moral lines first. Then we look at policy and application second.

That’s probably why we’ve never done particularly well in the political arena.

11
Quite, liberal theory has never reflected reality, but my question was based on your comment @9 in response to BorisH. What are real Liberal values with regard to our welfare state?, it’s not really a difficult question and you did say that you would be entering into a diaglogue in defense of Liberal values,

@ 12

Please try and remember, you did ask me !

I prefer the Canadian interpretation of Liberal Values as it’s fully explanatory and says it better than me. The only honest (Liberal) political ‘bible’ in existence as far as I’m aware ?

http://www.liberal.ca/pdf/docs/finalvalues_e.pdf

13
I don’t know why you think that I have memory problems but, for your information, I do not. And when you state that you are going to enter into a dialogue about (L)liberal values that’s what I expect, not being referred to the source of your belief system. Notwithstanding, I did look at the site you directed me to and I was prepared to wade through the document until I came to the sentence ‘It is the individual essence which distinguishes liberalism from conservatism and socialism’.
Why – because modern socialism embraces the individual, and clearly whoever wrote said document didn’t have a clue about mode

con’d from 14 (apologies for pressing wrong key)

modern models of socialism. That being so, I gave up reading, because if your liberal values are based on the inaccurate premise of this document, then there really is no point to reading it to the end.

16. Not a scrounger

@10

“a person with a recognized disability can and often does, receive benefits which are larger than any wage they may earn, even if they were able-bodied”

With respect, this just isn’t true. Suppose you are too sick or disabled to work. The maximum amount of disability benefit you can get per month, if you get the higher rates of both components of DLA, plus Incapacity Benefit (or the ‘support’ rate of ESA), is somewhere between £800 and £900. It is not possible to get more than this in disability benefits. Most chronically sick or disabled people don’t get this much, as they’re only awarded lower or middle rates of DLA, if they get DLA at all.*

Say for argument’s sake it’s £850. This equates to a net salary of £10,200 per year. So approximately a gross of £13k. Remember this is the maximum possible amount of disability benefit. It is not a wage that will increase over a person’s working life. It will only increase in line with inflation as the years go by (if that).

I’m sure you’ll agree that this is hardly the ideal amount of money to live on, and certainly not what an able bodied person would hope to achieve in their lifetime. Indeed the average wage in the UK is around £25k, £12k more per year than the maximum possible ‘salary’ available to a disabled person on benefits. A comparison of averages would make the gap even wider.

This is exacerbated by the fact that the cost of living is higher for disabled people (depending on the disability), sometimes markedly so, and consequently the amount of disposable income available to disabled people on benefits shrinks to a much lower amount than an able-bodied person could enjoy (if that’s the right word) on the same basic ‘salary’ of £13k.

So when you say that disabled people often get in benefits more than what they may earn if they were able-bodied, you are mistaken. Either you believe disability benefits are much higher than they are, or that disabled people have much less potential than they do.

I presume you are able bodied – ask yourself if you would be happy with £13k/year, if you would consider this the most you could earn.

*Housing benefit could be an add-on to this, but only if the claimant is eligible (i.e. they live on their own or with a partner who is also claiming benefits or on a low wage). The amount would depend on where the claimant lived, and would be reduced to take account of the fact they are on Incapacity Benefit (or ESA). Housing benefit is not a disability benefit.

16
TBH, I took my reference from BorisH and was really referring to young people with a learning disability living in residential care. I suppose I should have said earning equivalent.
I have several clients who I visit, who receive anything from £65 to £105 per week but this is just personal spending money, everything else is provided.. Believe me, in the area I live, £13k pa is above average for most young people.


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  88. Get Political Fund » Blog Archive » DWP suggests Osborne and others are exaggerating benefit fraud …

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  89. ally

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  92. Even Telegraph says Osborne should correct his false claim about benefit fraud | Liberal Conspiracy

    […] Last week we pointed out that even the Department for Work and Pensions (DWP) admitted that Osborne’s claim “£5 billion” was lost to fraud was untrue. […]

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