There are two tactics in the welfare reform debate that I’d like to call a moratorium on. One is invoking the spirit of Beveridge to talk about reforming the purpose of social security. Why hark back to a blueprint from 70 years ago? Social and economic conditions have changed enormously since then. The second is offering reassurances that fraud “only” represents a tiny amount of benefit expenditure.
The statistic that only two per cent of benefit expenditure is lost to fraud and error is regularly quoted to counter concerns that the system is rife with mistakes and exploitation. It’s true that in the grand scheme of things the proportion of fraud in the benefit system is tiny. Out of total spending of £166.6 billion in 2012/13, official government estimates show that just £1.2 billion was lost due to fraud. Errors, often arising due to the complexity of the system’s bureaucracy, are in fact more costly to the taxpayer, totalling £2.4 billion.
Despite this, many people’s perception is that fraud is rife. The public think £24 of every £100 spent on welfare is claimed fraudulently, as opposed to the actual figure of 70 pence. And if the public are not just wrongly doubling or tripling the amount lost to fraud but inflating the losses by 34 times, surely it is necessary to correct this misperception?
The problem is that myth-busting fails to address public concerns, and more crucially misunderstands what people mean when they talk about fraud.
Saying that “just” £1.2 billion is lost to fraud offers little reassurance to someone who thinks £1.2 billion still seems like a lot of money. Moreover, most people dislike fraud because it is intrinsically wrong, not just because it wastes money. Responding to core moral concerns with accountancy is to miss the point. If we want to correct mistakes with facts then it is crucial to also be explicit that fraud is wrong, even if it is rare.
Even this doesn’t get to the heart of the issue. DWP fraud figures measure money wrongly paid out because a person was receiving benefits that they were not entitled to, or because they failed to report a change in circumstances. On these terms, the level of fraudulent pay outs is very small.
But when the public express unease at “fraud” in the system they are actually talking about a more nebulous concern. Much of the behaviour the public see as fraudulent is within the letter (and sometimes the spirit) of the law. It just doesn’t reflect the behaviour that the public think the system should require.
A third of people class benefit fraud as someone claiming benefits if they haven’t paid any taxes or national insurance contributions. This is not fraud, and in fact only a small proportion of benefit spending is explicitly linked to past contributions.
A similar proportion of the public think that someone has committed benefit fraud if they have another child in order to claim more benefits. But in fact the system is intentionally responsive to changes in circumstances and (unless the overall benefit cap applies) benefits are generally meant to increase if someone has an additional child.
Neither of these examples will be picked up by statistics on official benefit fraud because they are not fraudulent within the current system. Attempting to appease these concerns by citing official figures for fraud misses the point. It’s like trying to respond to criticisms about a surge in apple prices by talking about the availability of orange juice.
Refashioning such behaviours as fraud would require radical reform, for example abolishing the means-tested safety net that prevents destitution or capping benefit payments for any additional children. Many would baulk at such prospects – and there are sound reasons for opposing both instincts. But the welfare defenders’ instinctive response to outrage at benefit fraud needs to acknowledge that the public is engaged in a moral debate about the purpose of welfare, not a narrow discussion of its administrative effectiveness.