Once again, ministers ignore evidence of low benefit fraud


9:02 am - June 23rd 2011

by Richard Exell    


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How much Tax Credit fraud takes place? As of yesterday, we know the answer to this question.

In 2009/10 no more than 1.9% of tax credit entitlement was accounted for by fraud. 1.4% was a more likely figure. What is more, this figure was down from 2.3% in 2008/9.

Once again the government is nowhere to be seen in appreciating how low this figure is.

HM Customs and Revenue have just published the Child and Working Tax Credits Error and Fraud Statistics 2009-10, which presents the new figures, based on an investigation of over 2,500 random cases that were investigated by “claimant compliance officers who worked the cases as they would for any other enquiry”.

The total for fraud and error favouring the claimant is 7.4%, down from 8.9% in 2008-9.

Remember that HMRC data shows that 6.25 million families benefitted from tax credits in 2009-10 and total awards amounted to more than £26.6 billion.

The report includes a breakdown of “fraud and error” by type of award, value of award and reasons for error or fraud, but doesn’t provide figures for fraud by itself because of

the small number of sample cases in the Error and Fraud Analytical Programme classified as ‘fraud’.

I’m waiting for the speech from George Osborne or Iain Duncan Smith giving the news as big a welcome as they did for the figures on social security benefit fraud.

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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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Reader comments


You would expect much cheering of this data from the likes of Philip Davies and proponents of scrapping the nmw, given that Tax credits are what will be needed to bear the human cost of them getting their way.

Stop trying to make political capital from phony statistics.

When Claimant Compliance Officers identified non-compliance, they were required
to indicate whether they believed it was due to genuine error or fraud. To be
classified as fraud, a caseworker needs to have found evidence that the claimant
deliberately set out to misrepresent their circumstances to get money to which they
are not entitled (e.g. claiming for a child that does not exist). Error covers instances
where there is no evidence of the claimant deliberately trying to deceive HMRC. It
covers a range of situations, including cases where a claimant inadvertently overclaims because they simply provided HMRC with the wrong information.

So whether the claim was fraudulent depends on whether the person making the “error” is assessed as having a good excuse or not. The system is so complex that “I didn’t understand” would usually be enough. The total bill for over claiming in the year was of the order of £2bn.

A simpler system of negative income tax or CBI would solve all these issues.

3. Daz Pearce

Taking the low paid out of tax completely would surely get around a lot of these issues?

http://outspokenrabbit.blogspot.com/

You consider a 7.4% fraud and error rate low?? I agree that taking the low paid out of income tax altogether would be a more sensible approach and stop child tax credits altogether.

@4 It’s more complicated than that though, as HMRC also remove tax credits from people retrospectively if they forget to send an annual declaration, even if they were otherwise entitled to them. This alone could account for the higher percentage compared with DWP benefits. Another scenario is where a couple separate, but fail to notify this, they are liable to pay back all the money paid even though they would have been entitled to it had they notified HMRC of the split. There is no real loss to the public purse in these cases, it’s purely a technical overpayment. Paragraph 9 of the report reads to me as if it includes these cases as the claimant strictly speaking had no legal entitlement to the money, even though they would have been entitled but for the technical omission.

I have also seen HMRC has remove entitlement retrospectively in other cases without any legal basis to do so, and when I have written on people’s behalf to appeal they have blatantly misstated the relevant law governing both entitlement and appeal rights. The figures presumably include this too.

Fungus @ 4

You consider a 7.4% fraud and error rate low??

When you consider how much is written and spoken about the amount of fraud and error there is supposed to be. People bandy terms like ‘most of this is claimed falsely’. Less than ten per cent is hardly most or even many, is it?

In 2009/10 no more than 1.9% of tax credit entitlement was accounted for by fraud. 1.4% was a more likely figure. What is more, this figure was down from 2.3% in 2008/9.

I wonder how much of the 0.4% fall was actually a reflection of the rise on the number of people entitled to tax credit due to rising unemployment etc (I assume, 1.9% is the figure comparable to 2.3% here)? The number of fradulant cases may not have fallen…

But anyway, if you regard 19 in 1000 claims being fradualent as low levels, I think you are setting your standards a bit low. If almost one claimant in 50 is deliberately ripping off a system designed to help those in need, surely there is a need for action there?

Jim @6,

When you consider how much is written and spoken about the amount of fraud and error there is supposed to be. People bandy terms like ‘most of this is claimed falsely’. Less than ten per cent is hardly most or even many, is it?

I think we’d need a link for that statement – I’ve never heard anyone claim most benefits are fraudulant or erroneous – and I had actually always assumed the system was far more efficient than way over one in twenty claims being wrong. Seems a pretty clear case for reform right there.

Watchman @ 8

You have read that? Never looked at the Daily Hate? Every day they have a story of how benefit fraud is rife.

Just as a matter of interest, it would be interesting how much insurance, credit card, cheque banking fraud there is every year?

10. blackwillow1

How many rich folks have been prosecuted in the same period, for the sickeningly high level of unpaid tax? I’m not supporting benefit fraud in any way, but should we really be that shocked when it happens, often a case of genuine poverty, more frequently I suspect, a case of somebody being greedy, or lazy, or both. They look at their standard of living, look at the rich and think,”Fuck it! they rip off the system, so can I.” Some see it as a victimless crime, like a car thief who feels the only victim is the insurance company, therefore, not really stealing. Others regard the system as unsecure, so robbing it is like a punishment, for not looking after the taxpayers cash. By all means pursue the benefit thieves, but make the same efforts to target and punish the wealthy tax villains, they cost us a lot more.

@10

How much of tax evasion is caused by rich folks and how much by non declaration of income by small business owners and the self employed?

Watchman: “I think we’d need a link for that statement – I’ve never heard anyone claim most benefits are fraudulant or erroneous”

But I think there’s little doubt that huge numbers of people believe most benefits are fraudulent or subsidising laziness.

That’s why they’re prepared to believe vast amounts of them can be cut without creating any real hardship for deserving people.

13. Robin Levett

@pagar #2:

“Stop trying to make political capital from phony statistics.”

Tell you what; let’s make a deal. When policitians and newspapers stop bleating about the “massive” cost of fraud as a reason for cutting back benefits (ie trying to make political capital from phoney statistics), we’ll stop pointing out that their own figures show that cutting out fraud entirely won’t make a significant dent in costs.

7% fraud. that is actually made up of over 6% mistakes on form, many directly atrributed to DHS error and claimant mistakes and just actual fraud!

I meant just 1% actual fraud!


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    Once again, ministers ignore evidence of low benefit fraud http://bit.ly/lmR4Wb

  2. mark a williams

    Once again, ministers ignore evidence of low benefit fraud http://bit.ly/lmR4Wb

  3. Robert Thompson

    “@libcon: Once again, ministers ignore evidence of low benefit fraud http://t.co/OSgSjjY

  4. Mr Creek

    Once again, ministers ignore evidence of low benefit fraud http://bit.ly/lmR4Wb

  5. richardbrennan

    Once again, ministers ignore evidence of low benefit #fraud | Liberal Conspiracy http://t.co/rkYs2BH via @libcon #benefits #tories #hmrc

  6. Craig Shaw

    Once again, ministers ignore evidence of low benefit fraud http://bit.ly/lmR4Wb

  7. Angela

    RT @BendyGirl: Once again, ministers ignore evidence of low benefit fraud | Liberal Conspiracy http://t.co/PfPLrRL via @libcon

  8. Margo Milne

    Once again, ministers ignore evidence of low benefit fraud | Liberal Conspiracy http://t.co/ULHA7JL via @libcon

  9. paulstpancras

    Once again, ministers ignore evidence of low benefit fraud | Liberal Conspiracy http://t.co/ULHA7JL via @libcon

  10. Altany

    http://t.co/QUhyOLC extremely low rate of tax credit fraud goes unannounced. funny that.

  11. Sue Marsh

    Once again, ministers ignore evidence of low benefit fraud | Liberal Conspiracy http://t.co/y5jFUV9 via @libcon

  12. Sue Marsh

    Once again, ministers ignore evidence of low benefit fraud | Liberal Conspiracy http://t.co/y5jFUV9 via @libcon

  13. Andy Bean

    Once again, ministers ignore evidence of low benefit fraud | Liberal Conspiracy http://t.co/qBTSWvO via @libcon

  14. J P

    RT @suey2y: Once again, ministers ignore evidence of low benefit fraud | Liberal Conspiracy http://t.co/y5jFUV9 via @libcon

  15. steve turner

    Once again, ministers ignore evidence of low benefit fraud | Liberal Conspiracy http://t.co/y5jFUV9 via @libcon

  16. Daniel Pitt

    Once again, ministers ignore evidence of low benefit fraud http://t.co/9n8wAD7 #ConDemNation





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