Lord Freud, Fraud and Figures: What the DWP numbers really mean…

kamsandhu —  May 22, 2013 — Leave a comment

by Kam Sandhu @KamBass

The Department for Work and Pensions released a press release this month on fraud and error, and declared that ‘hard work must continue to cut a £3.5bn loss’ which makes up 2.1% of benefit spending.

In the press release, the DWP say they have increased their ‘crackdown on benefit fraud’ over the last year, a huge focus made by government, says Lord Freud, Minister for Welfare Reform:

“Our fraud investigation teams are also continuing their hard work – targeting areas of high suspected fraud, using the latest technology to investigate these criminals and going back over old claims to uncover people trying to swindle the taxpayer.”

However, while £3.5bn is a lot of money, £3.5bn is not what is attributed to fraud alone.

‘Fraud and error’ includes fraudulent claims, overpayments made by claimant error and overpayments made by official error. When broken down like this, these are the figures released by DWP:

Fraud – £1.2bn

Claimant Error – £1.6bn

Official Error – £0.7bn

The fraud figure now equates to 0.7% of the overall benefit spending figure which stands at £166.8bn.

Overpayment by error adds up to £2.3bn (1.3% of overall spending), nearly double the fraud figure, and yet there seems to be no ‘crackdown’ by government on this.

Further, overpayment errors are not necessarily a loss of money. This money can be recovered, and the DWP got back around £890m of overpayments in the last year. Bringing down the error figure to £1.31bn.

These figures also do not include underpayments. In 2012/13 underpayments to claimants amounted to £1.4bn or 0.9% – higher than the fraud amount.

It is of course, important to combat lost or fraudulently claimed money. However, there needs to be perspective and context on these figures. Fraud and error are not the same. One is illegal and one is not. Putting the figure of error in with fraud and then announcing a crackdown on fraud alone, can skew the size of the problem.

There has been a lathering of media courage and fear placed on the idea that claimants are playing the system and making huge claims that they don’t deserve. Cue the recent rise in tabloid front pages with pixelated stills of incapacity cheats dancing around, or people claiming for more children than they have. The truth is the figure for fraud has hardly changed in the last few years. There has been no surge in the crime. It has just received more coverage by tabloids, and for a government that wants to introduce harsh reforms, it has favorably put in its elbow grease to the skiver vs. striver divide, that now works to punish and stigmatise 99.3% for the actions of 0.7%.

And of course, the figure for fraud is dwarfed by the figures for tax evasion and avoidance. The cost of tax evasion, which unlike tax avoidance – is a crime, is thought to be around £5bn a year. The same for tax avoidance. In fact, Oxfam said in an article today that ‘Britain was the centre of a tax system that was a ‘betrayal of people here and in the poorest countries”, with a claim that around a third of £12trillion of tax evasion from around the globe is held here. Far more taken out by far fewer, which begs the question, who is really ‘trying to swindle the taxpayer?’

Read the full DWP report here.

Image: www.mirror.co.uk

Lord Freud – Image: http://www.mirror.co.uk

KS

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