If Rishi Sunak can write off Covid support fraud, his government can stop obsessing over ‘benefit cheats’

When we’re facing an economic crisis and we’re writing off missing money, we can afford to give the poorest households the support they deserve

Hannah Fearn
Wednesday 19 January 2022 15:49
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<p>It’s both surprising and disappointing to learn that £5.8bn paid out through Covid support programmes was falsely claimed</p>

It’s both surprising and disappointing to learn that £5.8bn paid out through Covid support programmes was falsely claimed

Rishi Sunak’s decision to write off a staggering loss to the Treasury in Covid support fraud might be a sensible one. We are entering a precarious era – unprecedented times, as the chancellor himself might put it – as the country attempts to finally pull itself out of social restrictions and rebuild its economy without the friendship of the European Union.

It’s both surprising and disappointing to learn that £5.8bn paid out through programmes such as the furlough scheme, pandemic support for freelance workers and Eat Out to Help Out was falsely claimed, and even more confronting to be told that the Treasury won’t be recovering at least £4.3bn of that sum. Only £1 in every £4 handed out to false claimants during a time of national crisis will ever be returned to the public purse. It’s a huge amount to let go.

Yet there’s little point allocating large sums of money, and an equal amount of human effort, to doing the right thing and chasing down Covid relief payments that were fraudulently claimed – whether by individuals or businesses – if there’s only the slimmest chance of actually clawing them back. The money would be more profitably spent on new projects, from infrastructure and housebuilding to small-business support, that can immediately boost our economic and social prospects during the tricky decade ahead. On this, I can agree with the chancellor.

What is staggering to witness, however, is the breezy acceptance of this state of affairs, in contrast to the Treasury’s usual attitude towards benefit fraud.

The government (this government along with its predecessors) is typically so aggressive in its approach to false claims for support, whether in the form of tax credits or unemployment benefits, that the population has an utterly misguided perspective on how much benefit fraud actually costs the taxpayer.

An opinion poll conducted by the Trades Union Congress in 2012, eight years before the outbreak of coronavirus, found that on average people thought that 27 per cent of the UK welfare budget was being fraudulently claimed. That tax year, the true figure for benefit fraud was estimated at 0.7 per cent, according to the Department for Work and Pensions’ (DWP) own reports.

Perhaps because of the tougher economic circumstances in the years that followed, in 2019-20, just as Covid was beginning to hit the UK economy, the DWP estimated that benefit fraud sat at around £3.2bn, which amounts to a higher 1.2 per cent of the pot. Contrast that with the amount lost to fraudsters on Covid support: 8.7 per cent of furlough payments were incorrect – the result of either fraud or human error – as well as 8.5 per cent of payments to restaurants and venues for the Eat Out to Help Out scheme, and 2.5 per cent of payments through the self-employed income support scheme. And yet this can seemingly be written off without concern.

By May last year, the DWP stated that benefit fraud was rising due to the strain of the pandemic, and estimated that it could hit 13 per cent of the department’s welfare budget this year. Such a vast increase seems unlikely; however, in an effort to prevent a huge cost to the public purse, just a matter of weeks ago the DWP announced it had allocated £510m to help fight benefit fraud. This pot of money would be spent on, among other things, 2,000 members of staff to scrutinise claims and carry out “property checks”.

How can the money be found for this recovery work, and yet not to tackle Covid fraud by businesses? The message this is sending out is clear: unemployed “benefit scroungers” don’t deserve the handouts they’re getting, but working people and businesses are allowed to let a little slip under the carpet, as overall, the economy benefits. No wonder the public is left with such a damaging view of ordinary people who need to claim universal credit in hard times. This attitude is the result of propaganda, not fact.

The government has already been pulled up by MPs on the outrageous duplicity of arguing, on the one hand, that writing off Covid support fraud is a necessary practicality, and on the other that the nation simply cannot find the funds to maintain the £20-a-week uplift that families in receipt of universal credit gained during the most challenging months of the pandemic. Both cannot be true.

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We learn today that the cost of living is now rising at the fastest pace for three decades. A large proportion of adults today will never have known financial pain like they are expected to feel this year, as utility and food costs rise at alarming rates while pay rates fail to keep up with household requirements. In fact, when adjusted for inflation, average pay actually fell by 1 per cent in November, and that trend is expected to continue.

Welfare benefits overwhelmingly reach the poorest families and serve to keep them out of the clutches of deep poverty: they clothe children, heat overcrowded, poor-quality housing, and, when the system is functioning, prevent families from having to rely on handouts at food banks. All this, and the fraud rate is still low.

If Sunak thinks the Treasury can afford to move on from chasing wrongly claimed Covid support payments, then he can move his government, the Treasury and the Department for Work and Pensions on from its obsession with welfare cheats as well. When we’re facing an economic crisis, and we’re writing off missing money, then we can afford to give the poorest households the support they deserve as our fellow citizens.

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