Tuesday, December 13, 2005

Tax Credit Fraud Fiasco

Further confirmation today that Labour's horrifyingly complex benefit system is an open invitation to fraud:

"The identities of up to 10,000 civil servants have been stolen by criminals to make thousands of fraudulent claims for family tax credit in one of the biggest benefit scams seen in Britain.

Ministers have previously played down the extent of the breakdown in security of the Treasury's flagship tax credit payment system and the computerised payroll files of thousands of civil servants employed in jobcentres, which appear to have been targeted by criminal gangs."

The government cannot claim it hasn't been warned. Just a glance at the 60 page instruction book for claiming tax credit should be enough (page 19 reproduced above). But in its excellent recent report Dealing With The Complexity Of The Benefits System, the National Audit Office says:

"Complexity has often been linked with fraud, which is estimated at £900 million in overpayments of benefit in 2004-05... Complexity may be associated with fraud because
complex regulations and separate administrative systems for different benefits reduce the Department’s ability to detect and prevent abuse of the system. Differing qualifying criteria and the need to report changes of circumstance for each benefit received may also contribute."

£900m is an official estimate from the Department of Work and Pensions, and is almost certainly a gross understatement. In any case, we also have to add in "the additional work required to detect and address fraud and error, estimated at £2.6 billion in 2004-05". So even on the DWP's own estimates, we're looking at a bill of £3.5 billion pa.

£3.5 billion pa is the equivalent of 1p off the standard rate of income tax.

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