factorfiction2 How much does benefit fraud cost?The claim
“Welfare and tax credit fraud and error costs the taxpayer £5.2bn a year.” David Cameron, article for the Manchester Evening News, 10 August 2010

Cathy Newman checks it out

The Sun’s dubbed David Cameron a “£5bn scambuster”. The PM has declared war on benefit fraudsters in a bid to cut billions from our soaring welfare bill. Today he won the approval of the tabloid headline-writers by calling in credit check companies to pursue benefit swindlers. But how much money can Cameron the Scambuster really save?

Over to the team for the analysis
£5.2bn is a big number – or as Cameron puts it in his article for the Manchester Evening News, the cost of more than 200 secondary schools or 150,000 nurses.

Department of Work and Pensions estimates benefit fraud costs £1bn a year (p11).

Putting that in some kind of perspective, the department expects to spend a total of £148bn on benefits, including income support, housing benefit, disability and unemployment payments and more. A billion pounds going AWOL isn’t to be sniffed at, but it’s worth pointing out that it’s just 0.7 per cent of total spending on these benefits.But where does the rest of Cameron’s £5.2bn come from?

Some of the missing billions can be attributed to tax credits. The taxman reckons fraudulent claims for child and working tax credits cost the public purse £460m in 2008-9.

So add this into the mix, and you get to a total fraud bill of £1.5bn, a figure which is lower than the headline-grabbing £5bn but, to be fair, one that Cameron also quoted in his article.

Errors, not fraud, account for the remainder of the £5.2bn.

Benefit and tax credit mistakes cost the taxpayer nearly £4bn, according to the most recent figures that we have. This could be down to a person filling out a form incorrectly, or a mistake in the computer system. The DWP says half of the £2.2bn benefit errors are made by claimants, and half are made by officials or the system.

Cathy Newman’s verdict
According to my pocket calculator, if you add welfare and tax credit fraud and error together, you get to £5.3bn. So David Cameron – and the Sun headline writers – have got a decimal point or two to play with. But while assessing the scale of the problem is one thing, sorting it out is quite another. Cutting the £5.3bn bill may well be easier said than done.

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