Benefit fraud: Cameron defends use of credit rate firms

David Cameron: "I want to cut benefit fraud"

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David Cameron has defended plans to use credit rating firms to "go after" people fraudulently claiming benefits.

He said the firms, which check spending on things like bills and credit cards, would help cut fraud of £1.5bn a year.

One firm, Experian, said it was in talks over a deal which could see it get a "bounty" for cheats it uncovers.

"Private companies use all sorts of different means to make sure they are not defrauded, why should the state be any different," Mr Cameron said.

Addressing an audience in Manchester, he said: "We've got to reduce the budget deficit. We've also got to fund welfare for those people who really need it.

"There are some people who are claiming welfare who are not entitled to it and that is just wrong and that should stop. Both things, fraud and error, go together and I want to cut them both."

Graphic: Breakdown of benefit fraud and error costs

He said the £1.5bn a year fraud - £460m from child and working tax credits, £1bn from benefits - was enough to pay for 40,000 NHS nurses, and cutting fraud, error and waste in the benefits system was the "first thing" the government ought to do as it cuts spending.

Asked about civil liberty fears about the government using firms to look into benefit claimants' spending, he said: "I do not think people should be concerned.

"If you are entitled to welfare and can claim it then you should claim it but if you are not entitled to it you should not get and should not claim it."

A spokeswoman for the Department for Work and Pensions said more details about how credit reference agencies could be used would be in a review by Work and Pensions Secretary Iain Duncan Smith - who will report to the PM in the autumn about the best ways to reduce fraud and errors.

But Work and Pensions Minister Chris Grayling told the BBC: "This is data that is publicly available, that is publicly on sale, that's available to - not go into the fine detail of what you spend - but overall to set out spending patterns, what loans you have taken out, your overall patterns of spending in your life.

"And if there's a huge mismatch between the way you are living your life and the amount of money you are supposed to be receiving from the state on benefits, surely it is right and proper that we should be saying: 'How is that happening?'"

He added that only credit rating firms which worked "within the rules" would be considered for contracts.

Experian said it already had a contract to look into new housing benefit claimants, in a deal agreed by the previous government. It expects the annual saving to be £17m.

The company says it could save £1bn if "simple cost-effective and proven fraud prevention techniques" were used across the public sector.

Analysis

Cracking down on benefit cheats is one of the hardy perennials of modern politics. Almost all governments promise to do it - and earn themselves glowing headlines in the process.

But actually recouping money fraudulently claimed is much harder than simply talking tough about it.

In part this is because of the sheer complexity of the system; in part because there are so many claimants. Nearly 5m people are on out of work benefits.

Critics also point out that the actual level of fraud is comparatively small. Only about 1% of all benefits are fraudulently claimed. Indeed more money is lost through administrative error than benefit fraud.

The only real way to significantly reduce the benefits bill is to get people back into work.

The difficulty, as most experts in this field agree, is that in the short term this actually costs money rather than saves it.

HM Revenue and Customs, which administers tax credits and child benefits, says £2.1bn was lost to fraud or error - either by claimants or officials - in 2008-9.

The National Audit Office says that, of benefits administered by the Department for Work and Pensions, £3.2bn was overpaid as a result of fraud or errors - although it also says a further £1.3bn was underpaid.

Mr Cameron has said errors will be reduced by a simplified benefits system being developed by Iain Duncan Smith.

Lord Knight, shadow minister for welfare reform, said Labour had outlined plans for wider sharing of data and fraud prevention earlier this year, saying his party's government "halved welfare fraud over the past decade and it's right that this should remain a priority".

He said coalition policies would lead to higher unemployment, pushing up benefit bills by more than the hoped for savings from the anti-fraud push.

Max Wind-Cowie, of the think-tank Demos, said the government should focus more on preventing mistakes in benefit payments than in correcting errors: "It is expensive for individuals and families living in poverty who, through no fault of their own, are asked to pay back large sums of money."

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