Fining benefit cheats saves the Treasury a pittance, so how about real welfare reform?

By
Steve Doughty

09:35 EST, 8 May 2012

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04:23 EST, 9 May 2012

However hard-boiled they may be, politicians still tend to arrive in government with fine dreams of the difference they are going to make to the world. There are various ways to tell when the dreams are dying.

A classic is the sudden invention of an on-the-spot fine that is going to punish wrongdoers and put things to right at a stroke. Tony Blair had one of these in July 2000, when he had been in power for just over three years.

There were going to be £100 on-the-spot fines for drunken louts. Police officers were to be given powers to march anti-social youths to the nearest cashpoint and force them to cough up the money.

Getting tough? The Government is trying to introduce 'on-the-spot' fines for benefit cheats

Getting tough? The Government is trying to introduce ‘on-the-spot’ fines for benefit cheats

Cynics thought there might be a flaw or two in this plan.

For some reason I was spending the day chasing Mr Blair around a small town in Germany, where he was giving a speech of extraordinary vapidity about religion. I had the opportunity to ask Alastair Campbell about the cashpoint scheme, but I can’t tell you how he explained it, because all I got was a few minutes of sweary abuse.

Sadly for Mr Blair, this tactic failed to work on police chiefs, who killed the idea off in a hurry, to the accompaniment of mockery on all sides.

It is not necessarily good news for Mr Cameron’s Coalition that a similar plan is now being brought in to deal with benefit cheats.

There will be on-the-spot fines of up to £2,000, according to the version ladled out in one popular newspaper today. There will be ‘tough new fines’ even for those who steal only small amounts, and welfare reform minister Lord Freud added: ‘No one will escape justice with a mere slap on the wrists.’

Some will think Lord Freud optimistic, but, in fairness, his fines are not a matter of Blairite smoke and mirrors. They have actually reached the statute book, in the new Welfare Reform Act. As you would expect from anything connected with the benefits system, they are not quite as simple as they have been sold.

For a start, these are not on-the-spot fines. They are ‘administrative penalties’, which, in the case of benefit dependent cheats, will amount to the Department of Work and Pensions claiming back some of its own money. Or, more accurately, our own money.

There are a range of new punishments, which include a £350 fine for benefit fraud, or, if it comes to more, half of the amount stolen up to £2,000. Some offenders will be banned from receiving benefits, for up to three years in the case of gang members engaged in organised fraud.

A new ‘civil penalty’ of £50 will be introduced to deal with cases in which claimants accidentally on purpose fail to tell their benefit office that their boyfriend has moved in, or that they have got a new better paid job, and so on.  

All very laudable. Trouble is, it won’t make much difference, and the Department of Work and Pensions knows it.

I know they know because these days when ministries bring in new legislation they pump out documents called ‘impact assessments’.

The cost of cheating: Those who earn undeclared income, or whose partner moves in on the sly may face an on-the-spot fine of up to £2,000

The cost of cheating: Those who earn undeclared income, or whose partner moves in on the sly may face an on-the-spot fine of up to £2,000

Ministers do not do much to encourage you to read these. This is because more often than not, the impact assessment will tell you far more about some politician’s grand scheme than his speeches, his press releases, his interactive DVDs, his specially-launched website, and all the briefings Whitehall can muster.

In this case the impact assessment on fraud penalties and sanctions from the DWP and Revenue and Customs announces that ‘the annual cost of welfare benefit fraud and error, including tax credits, is assessed to be £5.3 billion’.

It goes on to estimate that the grand savings total achieved by the new penalties over the next three years will amount to £73 million. Net savings will be £45 million, presumably because of the cost of running the tough new system.

So, by the end of March 2015 the not quite on-the-spot fines will have saved us £15 million a year from £5.3 billion. I get nervous with big numbers, so I could be wrong, but I make this just over a quarter of one per cent.

It is safe to say that Lord Freud’s worthy efforts won’t be reducing our taxes by much.

The supposedly tough fines are no more than tinkering, and the Coalition is fighting shy of reforms that would really make a difference to the benefits system and make a serious dent in benefit fraud.

Let’s take an example: how about the couple penalty, the notorious benefit bias in favour of single people and single parent families? This can mean a single mother loses £200 a week if her partner moves in with her. We have a million couples thought to be ‘living apart together’ because it would cost them too much to live as a proper family.

A couple of months ago Lord Freud was lecturing people who fail to tell the DWP they are shacked up with someone. ‘Pretending you a single parent to get benefits when you are actually living with a partner is stealing money from the people who genuinely need help,’ he announced.

Well, how about changing the welfare system so that benefit-dependent single parents are no longer much better off than couples who try to raise their children together? Or would that be too much like a real welfare reform?

Here’s what other readers have said. Why not add your thoughts,
or debate this issue live on our message boards.

The comments below have been moderated in advance.

Fines of up to half of the amount stolen? Did I read that right? Benefits are too high in comparison with earnings through work. Everybody knows it but directly an attempt is made to address the balance then anguished cries go up from the bleeding-heart liberals and the retreat is hastily sounded.

One word only, if they are caught: JAIL!

Benefits should be given in the form of vouchers,for housing, food and transport all at a uniform rate per person for a set period. This is the only way to control the dependency that has developed on cash handouts and prevent fraud.
– Barry, Cumbria
Spot on Barry, however sounds too good, too simple and too much like common sense for the government to implement.

I’m a great believe in the welfare system; it is what sets us apart from the dregs of civilisation, such as the USA. However, i also believe in “forced servitude” (or slavery if you prefer that word) as a genuine form of punishment for benefit cheats (among other crimes). Surely, if you are a benefit thief, you should be charged with stealing from 60million people, to be served consecutively (i also do not believe in concurrent sentencing). Simply send benefit thieves to specially built gulags in the islands of the west coast of Scotland, where they work off their debt to the people. I’m sure that 60 hours severe labour per week would be some sort of a deterrent. Of course, this doesn’t change the the crux of the issue- the unfairness of the monetary system as a whole.

I suffered this in spain a few years back , pulled over breathalised and was told I was drunk in charge of a pushbike lol frogmarched to a bank where the copper had the decency to have a look at my balance and fine me the available maximum allowed withdrawel 400 euros. no ticket no paperwork no nastyness just a smile and a be careful signor , I asked him what about if I get pulled again he said just tell them that Juan has fined you already it will be ok. A cheery goodnight bye bye.

Lord Freud was lecturing people who fail to tell the DWP they are shacked up with someone. ‘Pretending you a single parent to get benefits when you are actually living with a partner is stealing money from the people who genuinely need help,’ he announced.
That this is wrong goes without saying – however consider the following situation.
I have a relative who works as a self employed IT contractor on over £1,000 per day. He pays c15% tax on over £250k pa. He also ‘claims’ to employ his wife. The wife is low skilled and has not worked for over 15 years and never in an admin role. The work this contractor does is all on client site, (obviously she is not present) and very highly complex. Other than posting a few letters there is NO work the spouse could do. For posting 2 letters she is paid over the £100 per week threshold reducing his tax bill and allowing her to claim NI contributions.
Both situations are fraud but the latter is due to greed not need

– Barry, Cumbria, 8/5/2012 18:11 – “Benefits should be given in the form of vouchers,for housing, food and transport” Nice theory. What about the broken alarm clock/watch, getting your suit cleaned for interviews, stationery/stamps/ink for job applications, replacement light bulbs/fuses/batteries, phone so you can request job application forms and make dentist/doctor/hospital appointments?

When is a politician going to stand up and clearly state “You do not DESERVE a life for free”. Everyone has this sense of entitlement, despite not paying tax etc into the system they expect to give them an existence. There has to be a massive cut on benefits so only people genuinely needing them (e.g. disabled) can actually have them, not people wanting them and an easy life. No council houses for teenage mothers, no runaway child benefits, no paid being because you just don’t feel like working. People who get benefits must be made to earn them by serving the community. There has to be a sea change in the attitude to benefits, so it IS a hard life and you do still have to work, so nobody gets things for free, and what you do get doesn’t make you better off than people with jobs.

Yet there are reams of fines for people who pay tax (actually work). These days we all have to complete tax returns and are fined instantly when these are late. These fines are followed by more threatening letters and more penalties. Again the liberal left want even higher taxes and refuses to acknowledge that housing two parent families enables them access to low paid jobs via lower rent. Ignoring this obvious fact exasperates the situation. Businesses are strangled by red tape and the never ending rights of flexitime and parent centred choice. Why not have tax system similar to Asia, fixed at 15-20%. A rate that people will not even try to avoid and gives the earner money to spend.

@ Posh Bigot 08/05/16.19. You make some good points. However, benefit fraud does not cost us £5.2 bn pa. Benefit fraud is actually £1.2 bn pa. I am highly suspicious of why politicians link fraud and error as they are not the same thing and all that some people hear is £5.2 bn lost to benefit fraud, when that is not the case. It should also be noted that as well as the £3.2 bn pa that is overpaid in DWP benefits, £1.2 bn pa is underpaid, which i something that the politicians also conveniently forget. DLA, for example is overpaid by £220 m pa, but underpaid by £300 m pa. Also, around £750 m pa that has been overpaid in error is repaid, meaning that the net overpayment of DWP benefits is around £1.25 bn pa (ie less than 1% of the overall bill)….a figure which is never mentioned by politicians!

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