Benefit fraud - the levels are very low

[ttosca]

Repost: Benefit fraud - the levels are very low

Earlier this year, we published this blog from Richard Exell which looked at the very low levels of benefit fraud.

We're reposting it today as an alternate view on campaigns against benefits that are running in various newspapers at the moment. The figures show that benefit fraud levels are actually very small.

At the end of Richard's post, there's also an extract and video from a post on disability hate crime that we ran in June, in which people with disabilities talk about their experiences of the repercussions of benefit fraud media campaigns. Their feeling was that these campaigns were directly influencing the way people on benefits were being perceived and that people with disabiltiies were being associated with benefit cheating.

From Richard Exell's original post:

"This DWP report on Fraud and Error in the Benefit System really ought to get more coverage.

With this publication we now have figures for the whole of the financial year 2010/11.

They show: 0.8% of benefit spending is overpaid due to fraud, amounting to £1.2 billion, and that this proportion is the same as in 2009/10.

If we look at the estimates for different benefits, they are:

Retirement Pension 0.0%;

Incapacity Benefit 0.3%;

Disability Living Allowance 0.5%;

Council Tax Benefit 1.3%;

Housing Benefit 1.4%;

Pension Credit 1.6%;

Income Support 2.8%;

Jobseeker?s Allowance 3.4%;

Carer?s Allowance 3.9%.

Look at the figures for disability benefits and see how low the figures are. Remember them next time the BBC is running one of its 30 minute hate programmes, pushing the idea that every disabled person on benefits is a fraudster."

There is an updated statistics document from the DWP here.

falseeconomy.org.uk/blog/repost-benefit-fraud-the-levels-are-very-low

ttosca

"Both countries are have shifted the tax burden away from corporations and on to individuals."

And as I've explained to you on other threads, this doesn't really matter. But back to the original point and Britain is Britain, the US is the US. The two countries have totally different economies - one is the global reserve currency for a start - and can't be directly compared as though they are one and the same which is what you constantly try to imply.

"You've painted yourself as a poltical ignoramus when you count New Labour as social-democratic."

Better get on to Wikipedia too then - this page here'List of social democratic parties' includes the Labour Party. I know (and care even less) about the factional splits amongst the various socialist movements - together they remind me of the independent Judea movement in Monty Python's Life of Brian - so I will bow to your superior knowledge on this point. However, whatever schism you want to attribute to New Labour, my point still stands that Brown used fiscal drag and a doubling of the basic rate of tax to knobble the poorest in our country. He robbed Peter to pay Paul.

^"ttosca Our debt didn't accumulate because our GDP grew greater than our deficit.

Me Nonsense ? your own graph shows this to be patently false. In any case, that GDP growth was built on false assumptions and credit.

ttosca You don't know how to read a graph, eh? This is getting ever more ridiculous."^

Look at the graph again. I'll remind you, it's the one which shows public debt as a proportion of GDP. Between 2002 and 2007 it went up. Ergo, public debt rose as a proportion of our GDP. Now, the thing which adds to our debt is running a deficit. That deficit MUST have been growing greater than GDP. If it wasn't, the graph would be flat or going down. I suspect it is you who needs the graph reading lesson. In any case, your graph doesn't include PFI or unfunded pension commitments, thus massively underestimating the real debt / GDP ratio, I can't see what point you can possibly derive, other than Labour pissed a lot of taxpayers? money up the wall.

As for the rest of your post it boils down to 'the current lot are cutting too much, too fast and we should borrow more while we can and use it to invest in stuff'. I believe that I'm better at investing in stuff that will boost my economic performance (a new car, laptop, a house closer to work, a better pension fund etc) than the government are by building a railway, a new runway or a new aircraft carrier (all of which, we don't really need).

I still fail to see any evidence that muddling on as we are (see more details below) with high borrowing will lead us to anywhere but penury. I also fail to see any big ideas on the horizon (with the possible exception of Irish Sea shale gas extraction and exploitation) which will drag this country back into the sort of growth we need to get us out of the hole we are in.

--

I've crunched some numbers for those that are interested about what the economy would be like if we scaled it down to numbers we are all familiar with by using figures from here, here and here.

Here's what I did. I took the total government revenue (£592Bn), predicted outgoings (£682Bn), predicted deficit (£90Bn) total declared debt (£1045Bn) and the chancellors planned cuts of £81Bn over 4 years (£20.25Bn per year). I also included the undeclared Taxpayers Alliance total debt figure of £7900Bn and, by using the same ratios, worked out how this would look for a family with a combined income of £35K.

It works out like this.

Family Income, £35,000
Family Outgoings, £40,321
Amount stuck on the credit card each year, £5321
Total amount owing on the families credit card (declared), £61,782
Total amount owing on the credit card (undeclared), £467,061
Amount the family are arguing about cutting their spending by, £1,197

To continue the family theme, the deficit deniers are looking at this information and deciding that the family can afford that holiday, the rest of us are saying that even cutting that £1,197 won't add up to a hill of beans in the grand scheme of things.

Like them, you are attempting to exploit the economic crisis, which was not the making of the public, in order to cut government spending and reduce the size of the state

In my case I do want to reduce government spending and reduce the size of the state. The reason isn't the economic crisis but the reason is because we cannot afford it and never could.

For me it's like saying your income used to be £4000 a month because you were paid £3000 and borrowed £1000. Now you are arguing that you shouldn't stop borrowing because it will hit the economy through stopping spending and hit your family members hard and the debt isn't their fault so why should they suffer. Besides which, you can't be in trouble cos look, the bank's still willing to lend to you at a very princely rate.

It neatly ignores the fact you've been borrowing for god knows how long and the reasons why don't really matter anymore. The fact is you did and still continue to do so.

I suppose no-one's interested that government spending hasn't actually been cut very much at all? Borrowing last month was higher than expected, for example. I think the argument now is that, if reduction is proving hard to achieve and borrowing is inevitable, what should governments be spending on. This is certainly where ideologies come into play. Gordon Brown originally believed in the Golden Rule where borrowing could only be justified for capital investment rather than current expenditure, but famously abandoned it for political reasons. Recent decisions on upgrading railway lines and so forth suggest capital investment is getting priority. A large house-building programme - the 'million new homes' that Prescott never succeeded in getting off the ground - would be the next obvious step.

CogitoErgoSometimes

I suppose no-one's interested that government spending hasn't actually been cut very much at all? Borrowing last month was higher than expected, for example.

I'm extremely interested. I'm sure I can see why that is. A lack of clear ideology from the top by Cameron and Osborne who, as far as I can tell, only wanted to be PM and Chancellor because it was a ripping wizzo thing to do, is the major problem.

I think the argument now is that, if reduction is proving hard to achieve and borrowing is inevitable, what should governments be spending on.

The reduction is easy to achieve if you're prepared to make hard decisions. The coalition isn't. Given the wailing and gnashing of teeth from the usual vested interests every time someone suggests spending be cut I say that the government should actually try some serious chainsaw work and suck up the complaints.

This is certainly where ideologies come into play. Gordon Brown originally believed in the Golden Rule where borrowing could only be justified for capital investment rather than current expenditure, but famously abandoned it for political reasons. Recent decisions on upgrading railway lines and so forth suggest capital investment is getting priority. A large house-building programme - the 'million new homes' that Prescott never succeeded in getting off the ground - would be the next obvious step.

Gordon Brown never believed in anything except How Amazing Gordon Brown is. If the government wants to save us some long-term misery it'll spend some money on some nuclear power stations, and fast.

I'm extremely interested. I'm sure I can see why that is. A lack of clear ideology from the top by Cameron and Osborne who, as far as I can tell, only wanted to be PM and Chancellor because it was a ripping wizzo thing to do, is the major problem.

I'm not sure it's a lack of ideology. I think that's there. What was missing was courage and the steel will to do the right thing even if it was going to be very unpopular. For me that's the mark of a good leader.

Back when the coalition came to power the electorate was braced for cuts. We were all aware they were needed and as always the new government had a honeymoon period. I remember reading somewhere that they'd looked at the Canadian example of cutting their debts which they'd done in the mid 90's after being branded as a economic basketcase by most analysts and being downgraded by the ratings agencies.

What the Canadian's did was cut deep and cut fast. A bit like pulling the plaster off quickly. It hurts like hell for a bit but then you forget about it and life continues. But in my opinion our leaders bottled it. Instead they've engaged on trying to find popular cuts (There are none!) then in the face of opposition they have tried to compromise. Not always necessarily a bad thing but if you keep doing it, you water down the desired results.

So what we have now 2.5 years into their term is a fraction of the cuts needed, more cuts on the horizon and a public weary of cuts who don't appreciate what's done so far barely touches the sides.

I think if they'd have cut deep and fast then we'd have taken a huge shock but be in a better place for a recovery by now.

New Zealand also offers a useful case study showing that when basket case socialist economies reform themselves by shrinking state interference, the standard of living for the average person shoots up, unemployment goes down and there is a virtuous circle of unforseen economic benefits.

basket case socialist economies like Iceland perchance? Refuse to pay back the fraudulent FIAT money, arrest the bankers in charge and get control back. Rather than bailing banks out with QE, which will cause inflation in years to come they removed the problem. Sure, it made the rich a little poorer, but their economy has recovered to almost what it was prior to the crash.

No, not like Iceland.

NicholasTeakozy I don't know where you are getting your figures from but Iceland's economy is still less than three quarters the size it was in 2007 as you can see in this graph of Iceland's GDP. To claim that "their economy has recovered to almost what it was prior to the crash" is wrong. Furthermore, given their lackadaisical view towards repayment, I can't see too many people queuing up to bank with them again in the future.

In New Zealand?s case the reforms, which were unpopular at the time, have led to sustainable growth for the country and an increase of wealth for the average person. Few Kiwis would vote to turn the clock back again. Incidentally, the liberalisation of the New Zealand economy started under one of their Labour governments.

As I can't be arsed to argue with right w(h)ingers again I'll just post this link.

Iceland was never a basket case economy. Nor was it a socialist economy. It's good news that Iceland did what it did, and Britain should never have gone down the QE/bank bailout route, as I argued loudly at the time.

But don't make the mistake of assuming that just because it did that, that it's proof that other countries who have an over-heavy welfare state don't need to cut back.

NicholasTeakozy That was a most interesting article, thanks for posting it. I think it needs to be pointed out but Mrs Sigurdardottir was overwhelmingly popular when she came to power - in stark contrast to the 'anyone but Brown' election that returned the current coalition - popularity always makes the option of taking difficult decisions easier to 'sell' to the public. The other thing that I'd take from that article is that she has done exactly what many other low taxers and I have been advocating all along.

"The cure that her government administered has hurt many of Iceland's 320,000 people and state spending has been cut sharply. However, there has been little backlash from voters who have largely accepted the need for limited austerity measures."

""Becoming more disciplined and lowering state expenses, while at the same time keeping the welfare system strong, is what needs to be done to have wide support from the public for such measures," said Sigurdardottir"

"We cut the budget but we preserved as much as possible in education, health, social security and infrastructure like law enforcement," Sigurdardottir said. "In the years leading up to the crisis, the gap between the richest and the poorest in society widened and our measures in the crisis focused on diminishing this gap, with more equality." The relief boosted consumption, lifting growth to 4.5 per cent year-on-year in the first quarter this year, in sharp contrast to stagnation or recession in much of the euro zone."

I was most interested by the line "In the years leading up to the crisis, the gap between the richest and the poorest in society widened". It is usually taken as fact that higher levels of government taxation leads to a 'fairer' redistribution of wealth, yet here is first hand evidence that this isn't necessarily so and that better redistribution can take place within a lower tax regime.

As I said, it was a most interesting article.

If anyone knows anyone (actually I'm thinking of old people no longer in work) who seems to be struggling - look at the DirectGov benefits adviser pages. You'll find there's an 'eligibility estimator' thing you can fill in with him/her in mind, after which you'll know whether you can get things moving for the person who isn't making ends meet.
I've just written to the local benefits and advice service for a good and decent old man (80) who worked hard on the trawlers all his life and is in utter penury now. Looking at the DirectGov benefits estimator, it seems he should be getting housing benefit, but isn't. So I really hope they'll be throwing a bit of money at him before the weather starts to get cold.
It wasn't his fault that in his long life of working often in terrible conditions, his employer never set up a pension scheme. TBH nor is it his fault that he wasn't financially sussed enough to set up some sort of future provision for himself and his (now late) wife. It's unkind and unfair to expect everybody to have the ability to plan and budget in advance (I suspect niceguy might think my admirable old ex trawlerman has brought his old age poverty upon himself).
We are not all equal. This old man is a better, kinder, more decent and more hard working person than at least 90 per cent of the politicians in the House of Commons, would be my guess. He is financially naive, but that's not a sin.
As I understand it, there are many many more people evading paying tax than there are people on the benefits fiddle.

It hurts like hell for a bit but then you forget about it and life continues

I am assuming that you have made this statement because you are, for instance, a disabled person who has your benefit cut so that are now housebound (thus making you unable to personally contribute to the growth of the economy), or you have had to move your children to bed and breakfast accommodation?

In which case my sympathies.

In any other case - WTF?

I think those of you who are comparing government expenditure to family expenditure would be better off making a comparison to business. You could still argue that the government has borrowed too much money. However to argue that any borrowing at all is wrong makes you sound a little backward.

And also...

We may not need a new aircraft carrier, but to generate growth, we do need a healthy, educated population.

Dotnet. It's difficult with the older generation who were brought up in the belief that the national insurance contributions they paid would be enough and that the government would in turn provide a decent pension for them upon retirement. That has turned out not to be the truth at all.

My question is if the govt website says he should be entitled to housing benefit then why is he not? We need to differentiate between when the system is getting it wrong under its own rules and the long term sustainability of the policy. In other words, is this a mistake? Or is there a reason he's being rejected?

MrJudgeyPants-

"Both countries are have shifted the tax burden away from corporations and on to individuals."

And as I've explained to you on other threads, this doesn't really matter.

It does really matter to anyone who isn't a multi-millionaire Capitalist. If we want the state to carried out certain services, which civilised people do, then it must be funded.

But back to the original point and Britain is Britain, the US is the US. The two countries have totally different economies - one is the global reserve currency for a start - and can't be directly compared as though they are one and the same which is what you constantly try to imply.

That's not an argument, but an assertion. The economies are similar enough to be comparable. They're both highly liberal Capitalist economies which have engaged in destructive neo-liberal policies for the past three decades. The Reagan/Thatcher era even occurred at the same time.

"You've painted yourself as a poltical ignoramus when you count New Labour as social-democratic."

Better get on to Wikipedia too then - this page here'List of social democratic parties' includes the Labour Party. I know (and care even less) about the factional splits amongst the various socialist movements - together they remind me of the independent Judea movement in Monty Python's Life of Brian - so I will bow to your superior knowledge on this point.

And.. The People's Republic of China is a Republic. The Democratic Republic of Congo is a democracy. I don't judge a party or state on their name, or how they are labeled, but by their actions. The Labour party used to be a somewhat social-democratic party which fought for the welfare and rights of working people. That is no longer the case. As with the US, the two dominant parties in politics are now both business parties.

However, whatever schism you want to attribute to New Labour, my point still stands that Brown used fiscal drag and a doubling of the basic rate of tax to knobble the poorest in our country. He robbed Peter to pay Paul.

That's nice, dear. I'm not hear to defend Gordon Brown or New Labour, as you may have noticed.

"ttosca Our debt didn't accumulate because our GDP grew greater than our deficit.

Me Nonsense ? your own graph shows this to be patently false. In any case, that GDP growth was built on false assumptions and credit.

No, you can't read a simple graph. Our debt didn't accummulate. Post WWII, all the way up to the mid 1980s, our GDP/debt ratio decreased. It then stayed roughly the same until around 2005, when it started to increase. It jumped sharply as a result of the crisis in 2008.

If you can't read a simple graph, there is no point arguing with you.

ttosca You don't know how to read a graph, eh? This is getting ever more ridiculous."^

Look at the graph again. I'll remind you, it's the one which shows public debt as a proportion of GDP. Between 2002 and 2007 it went up. Ergo, public debt rose as a proportion of our GDP.

Ergo, you're an idiot. You do know the point of a graph, don't you? The point of a graph is to provide the context for the data. That's why they are used. If you want to look at 5 years on it's own, you would just pull out the figures and quote them.

The history of the debt/GDP ratio for almost all of the second-half of the 20th Century has been of declining debt. I don't deny that it increased very slightly from 2002 to 2007. This is not an emergency or a crisis.

Now, the thing which adds to our debt is running a deficit. That deficit MUST have been growing greater than GDP. If it wasn't, the graph would be flat or going down. I suspect it is you who needs the graph reading lesson.

Here is a chart of the historical deficit since 1980. As you can see, both parties ran deficits most of the time. And yet our GDP/debt ration hasn't accumulated because we had growth. The deficit jumped in 2007 as a result of the financial crisis.

www.guardian.co.uk/news/datablog/2010/oct/18/deficit-debt-government-borrowing-data#zoomed-picture

In any case, your graph doesn't include PFI or unfunded pension commitments, thus massively underestimating the real debt / GDP ratio, I can't see what point you can possibly derive, other than Labour pissed a lot of taxpayers? money up the wall.

PFI costs will reach a maximum of 10 Billion per year:

www.hm-treasury.gov.uk/ppp_pfi_stats.htm

This is about 1/10th the cost of the financial crisis in lost revenue, if you compare the deficit prior and post crisis. I agree PFI schemes are a waste of money. The alternative is to actually pay for public services properly, but this goes against neo-liberal ideology of privatizing everything and allowing private companies to profit at public expense.

As for the rest of your post it boils down to 'the current lot are cutting too much, too fast and we should borrow more while we can and use it to invest in stuff'.

No, it doesn't boil down to that. It boils down to cuts are harming the economy and have caused a double-dip recession. The recession is reducing tax receipts, further increasing the deficit. Seeing this, the Tory scum see this as an opportunity to bleed the patient even more. Hoping that if we can just drive out the nasty public expenditure demons by bleeping the patient dry, then he will make a good recovery. Unfortunately, the patient needs blood.

I believe that I'm better at investing in stuff that will boost my economic performance (a new car, laptop, a house closer to work, a better pension fund etc) than the government are by building a railway, a new runway or a new aircraft carrier (all of which, we don't really need).

That's nice. Go invest in whatever you like with your money. Meanwhile, the public expect the government to pay for basic public services and welfare through taxation - like any civilised country does.

I still fail to see any evidence that muddling on as we are (see more details below) with high borrowing will lead us to anywhere but penury.

You just make stuff up as you go along, don't you? You just sit around twiddle your thumbs and whacky ideas comes up about what you can say next!

Britain's borrowing costs hit record low

The British Government's borrowing costs fell to a record low, reinforcing its safe-haven status amid an escalating crisis in the eurozone.

[[http://www.telegraph.co.uk/finance/economics/9288874/Britains-borrowing-costs-hit-record-low.html]

I also fail to see any big ideas on the horizon (with the possible exception of Irish Sea shale gas extraction and exploitation) which will drag this country back into the sort of growth we need to get us out of the hole we are in.

We won't return to growth until demand is stimulated, and this won't happen so long as we keep tying to run a low-wage economy with record profits for companies.

--

I've crunched some numbers for those that are interested about what the economy would be like if we scaled it down to numbers we are all familiar with by using figures from here, here and here.

A family budget isn't like a national budget, so your figures are not comparable. Hope this helps.

'nice'guy-

Back when the coalition came to power the electorate was braced for cuts. We were all aware they were needed and as always the new government had a honeymoon period. I remember reading somewhere that they'd looked at the Canadian example of cutting their debts which they'd done in the mid 90's after being branded as a economic basketcase by most analysts and being downgraded by the ratings agencies.

What the Canadian's did was cut deep and cut fast. A bit like pulling the plaster off quickly. It hurts like hell for a bit but then you forget about it and life continues. But in my opinion our leaders bottled it. Instead they've engaged on trying to find popular cuts (There are none!) then in the face of opposition they have tried to compromise. Not always necessarily a bad thing but if you keep doing it, you water down the desired results.

So what we have now 2.5 years into their term is a fraction of the cuts needed, more cuts on the horizon and a public weary of cuts who don't appreciate what's done so far barely touches the sides.

People are dying because of these cuts, 'niceguy'.

I think if they'd have cut deep and fast then we'd have taken a huge shock but be in a better place for a recovery by now.

Your thoughts have no basis in reality, as even most neo-liberal economists, including the IMF, agree that the cuts are harming the economy and any chance of recovery.

Cogito-

I suppose no-one's interested that government spending hasn't actually been cut very much at all? Borrowing last month was higher than expected, for example.

DOES. NOT. FOLLOW.

How many times does this need to be explained? Government spending can be simultaneously cut AND borrowing can increase at the same time. In fact, THIS IS LIKELY TO HAPPEN because cuts dampen the economy, suppress demand, and reduce tax intake revenue.

ttosca I'm not one for name calling (never having resorted to it before on these boards) but you are clearly economically illiterate. Firstly, whilst I agree that most of our deficit is cyclical and caused by the recession, there is a proportion of it which is structural and has been around since 2001. Even if we got back to the (artificially created) growth that we last saw on the eve of the crash we would still need to borrow money. If you think that, despite the low costs of borrowing, it is sensible to continue piling debt upon debt and let our children pay it all back I have to disagree.

As I've said to you before, I challenge you to estimate what percentage the government will be paying to borrow at in just five years time.

Quite frankly, I don't care what the historical debt has been at various points throughout the 20th century because, as I've already explained, that money was spent in the defence of our nation and to prevent us all being a dominion of Das Vaterland. The current debt - which you accept at face value despite the hidden costs of PFI and the huge costs of unfunded pension commitments - has shown comparatively little return for our money. In many areas of Britain, the state spends a higher proportion of our wealth than the East German state spent under communism! In spite of this, you insist that not a penny should be cut and that we should be throwing more money at the government so that they can build more of their white elephants / pet projects. I implore you to look at the example of the Spanish Casas and see how they have fared - these aren't basic public services that we are talking about, these are white elephants.

Finally, there are two major reasons that we are not spending money on the high street. The first is that the poorest are being taxed too much which, when combined with a high cost of living such as mortgages / rent, disproportionally penalises them. Secondly, household debt is being repaid. All those 0% credit cards, which seemed such a great idea in the boom years, are acting as a millstone around the neck of consumers. Growth won't and can't come back until we fix this problem. Carrying on as we are, or indeed were, will not get us out of this mess.