300,000 could be cheating system

How much benefit fraud is there? The honest answer is that nobody knows.

Up to pounds 2bn - 20 per cent of the budget - on housing benefit alone, according to the select committee, and possibly more. About pounds 900m, or 8 per cent of the total benefit, involving 300,000 people a year, according to a Department of Social Security study of 5,000 sample cases. A mere pounds 40m from 110,000 cases in terms of money known to be lost in frauds detected in 1994-95, according to Audit Commission figures.

The big figures depend on multiples and some fairly heroic assumptions. In calculating benefit savings made from anti-fraud activities - pounds 220m in 1995-96 - the DSS multiplies the weekly benefit being paid out when a fraud is detected by week 32, a figure based on an estimate of how long it would have continued. Housing benefit is normally paid for six to twelve months, but can last for up to 60 weeks on a single claim.

For its study - and a similar exercise on income support and unemployment benefit which showed up to pounds 1.4bn or 10 per cent of the budget being lost - the DSS used 52 weeks as the multiplier: an approach which it says was approved by the National Audit Office, the Whitehall spending watchdog. Yesterday, Peter Lilley, the Secretary of State for Social Security, insisted his department's figures remain the best estimate.

The pounds 2bn-or-more figure comes from local authority investigation officers, who say that when they look for fraud - particularly multiple claims by landlords - they find 20, 30 or 40 per cent to be fraudulent: a figure the critics say reflects the type of sample examined.