{"id":18773,"date":"2013-01-02T16:51:55","date_gmt":"2013-01-02T16:51:55","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=18773"},"modified":"2013-01-02T16:51:55","modified_gmt":"2013-01-02T16:51:55","slug":"more-on-idss-fraudulent-misuse-of-data-on-benefit-fraud","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2013\/01\/02\/more-on-idss-fraudulent-misuse-of-data-on-benefit-fraud\/","title":{"rendered":"More on IDS’s fraudulent misuse of data on benefit fraud"},"content":{"rendered":"

MSN have just published an opinion from me<\/a> on Iain Duncan Smith's claims on benefit fraud.\u00a0Since the version on line is less technically robust than the first draft let me offer that earlier version here, instead:<\/p>\n

It\u2019s been widely reported that Iain Duncan Smith, the Work and Pensions Secretary in the Coalition government, has claimed that \u00a310 billion has been lost in fraud<\/a> and error under the tax credit system put in place by Labour. The result is that je has claimed that the tax credit system is \"not fit for purpose\".<\/p>\n

It\u2019s an interesting claim for a number of reasons. First of all, to come up with his headline number Iain Duncan Smith had to spread his calculations over a period of seven years from 2003 to 2010.<\/p>\n

Second, he claims that the loss should be compared with total tax credit payments of \u00a3171 billion during that period. You would think as a result that the fraud and error rate was as a result about 5.8%.<\/p>\n

That, however, is completely misleading. From 2003 to 2010 total benefit payments in the UK came to \u00a31,089 billion according to HM Treasury Budget documentation for the years in question.<\/p>\n

And, according to latest data on the error rate in the benefits system as a whole the cost of fraud is no more than 0.7% a year<\/a>.\u00a0 \u00a0In 2011\/12 that meant \u00a31.2 billion was paid because of fraudulent claims. And given that this fraud rate has been remarkably consistent over time, it also implies that in total fraud might have cost over all benefits, including the old age pension, just \u00a37.6 billion during the Labour years Duncan Smith referred to when making his claim.<\/p>\n

Of course, error is an issue too, but it\u2019s also not as big as the claim made would suggest, especially when many errors result in underpayments. In fact net errors (that\u2019s over payments less underpayments due to error) amount to just 0.5% a year<\/a>. Over the Labour years that might, therefore, imply an overspend of \u00a35.4 billion. Put it together and over spending of \u00a31,089 million fraud and error cost a total of just \u00a313 billion in seven years under Labour, which is extraordinarily low. Most complex human systems would expect to see a much higher error rate than that. What is more, it means Duncan Smith\u2019s claim that \u00a310 billion was lost to just \u00a3171 billion of tax credit payments just does not stack.<\/p>\n

Making that claim does though draw attention away from a much bigger problem. H M Revenue & Customs admit that tax fraud and error costs at least \u00a323 billion a year<\/a>. \u00a0The FT did however, suggest in 2012 that this was \u201ccomplete guesswork<\/a>\u201d \u00a0suggesting the number may be much higher. I think it is. My estimate of tax fraud<\/a> in the UK is \u00a370 billion a year.<\/p>\n

Now we can disagree about whether the right number is \u00a323 billion of \u00a370 billion or somewhere in between, but however it is looked at the cost of tax fraud is many, many times bigger than the \u00a31.2 billion that benefit fraud will cost in total this year. And that then leads to the real question Iain Duncan Smith and the government need to answer, which is why are they tackling the wrong issue when it comes to fraud, because they very obviously are?<\/p>\n","protected":false},"excerpt":{"rendered":"

MSN have just published an opinion from me on Iain Duncan Smith’s claims on benefit fraud.\u00a0Since the version on line is less technically robust than
 Read the full article…<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35],"tags":[],"class_list":["post-18773","post","type-post","status-publish","format-standard","hentry","category-economics"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/18773","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=18773"}],"version-history":[{"count":0,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/18773\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=18773"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=18773"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=18773"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}