Holding Up a Mirror on the Cost of Benefits Fraud

On Sunday, the Observer published statistics which suggested over 85 per cent of the calls to the Government’s benefits fraud hotline between 2010 and 2015 had no case to answer. At around 890,000 false allegations, that’s nearly 500 per day, every day for the last five years.

Critics and political opponents have suggested this is another example of the Government’s attempts to vilify ‘benefits scroungers’. Through TV and radio ads, twitter campaigns and liberally distributed posters, the DWP is accused of nothing short of encouraging a “McCarthy style” witch hunt of fraudulent claimers among an ill-informed (and often misinformed) public. The Government have responded by saying that, as £180 million a year has been clawed back in fraudulent claims, the hotline and media campaign around it are clearly working.

But putting aside the politics of the Government’s often controversial approach to welfare reform, questions ought to be asked regarding the efficiency of this approach. A £180 million saving isn’t to be sniffed at. Benefit fraud is (in fact) mercifully rare, and the Government needs to have a tough line on it. Nonetheless, the amount clawed back thanks to public reporting is dwarfed by the £1.3bn lost to fraud in total last year. That, in turn, is smaller than the £1.8bn lost in error (claimant and official).

Moreover, this £180 million saving isn’t net of the costs of the reporting system. How much does an advertising campaign cost, which encouraged more than a million (primarily false) cases to be reported? And what about the administration associated with sorting through those 500 false allegations per day – checking each case manually – in order to root out the real ones?

Without any analysis of the cost-effectiveness of the reporting regime, it is impossible to know whether it costs more than it saves. But it doesn’t take a spreadsheet ‎to know that asking the public to report en masse on suspected benefit fraud is not an efficient method of detection. Few of us will know enough about our neighbour’s income and benefits status‎, not to mention the complexities of the benefits system, to be able to correctly identify fraud. It is a resource-intensive and untargeted approach, and one might argue that the public reports that were founded (likely to be people reporting relatives or those who flaunt their activities) would be captured without the advertising blitz – something more likely to encourage vengeful responses to neighbourhood disputes.

We must be wary of politicising what should be an issue of cost-effectiveness. Maintaining open communication between the DWP and the public is vital, but investments in the social media and advertising campaigns encouraging hundreds of thousands of unfounded allegations (and administration to sort through them) might not be the best use of limited funds. Perhaps more should be directed instead at stripping errors from the system and better internal (and intelligence-led) fraud detection. Whatever is currently being done on these fronts doesn’t seem to be making a large dent in the fraud and error statistics and could well do with a boost of resources.

These low profile, back room activities might not make good sinister looking posters and snappy radio ads – but are likely to reap greater savings at less expense. Surely that ought to be the bottom line for ‎welfare reform?