There’s been even more hot air from our government this past day or two about benefit fraud. It’s been claimed by the Department for Work and Pensions—and ably regurgitated with little analysis by our
state propaganda machine mainstream media—that benefit fraudsters should face tougher prison sentences.
Step forward Channel 4 News, and their FactCheck blog.
So if we combine the central estimates from both departments, the total amount of money lost to fraud across the benefits system was a little over £2bn in 2011/12.
To put that into perspective:
Fraud accounts for about one per cent of the total annual benefits and tax credits spend, which ran at £194.3bn in 2011/12.
Fraud isn’t getting worse
DWP says 0.7 per cent of its benefits were overpaid this year due to fraud. The percentage was exactly the same last year, and it was a fraction higher in 2010/11 – 0.8 per cent.
“Error” costs more than fraud.
Across the whole system, fraud cost us £2bn and error – in the form of honest mistakes made by claimants or official cock-ups – cost £3.4bn last year.
This is only a fraction of the money lost from tax evasion and avoidance.
HMRC puts this figure at £32bn but tax campaigners say the real “tax gap” is much higher.
Richard Murphy from the Tax Justice Network thinks tax fraud could be 50 times bigger than benefit fraud.
The cost of fraud is dwarfed by the surplus from unclaimed benefits
The figures are a bit shady but DWP say between £7.5bn and £12.3bn of the six main benefits it administers were left unclaimed in 2009/10.
To this figure of around £10bn we can add several billion more in unclaimed tax credits, although HMRC is reluctant to tell us the real figure.
Huh. So, the actual amount of fraud in the system is smaller relative to the amount of errors made on benefit payments, and absolutely minuscule when compared to the total benefits paid out each year—and the albeit completely legitimate tax evasion and avoidance going on.
If we could get everyone to pay the right amounts of tax, this country wouldn’t be in the shit it’s in. Or is that too simplistic?