Sunday, September 17, 2006
Soaring Fraud Losses
Not before time, the government has sharply revised up its estimate of Britain's losses to fraud. Officially they now reckon it's costing us £40 bn pa, more than double the figure they gave only two months ago. But the Attorney General’s deputy accepts even that is probably an understatement: one leading law firm reckons that it could easily be over £70 bn, or nearly £3,000 pa for every household.
£70bn is One Very Big Pile of Cash Indeed to be losing. So big that it makes a nonsense of the last Home Office estimate of our total losses to all crimes, at "only" £60bn pa. The total figure must now be well in excess of £100bn pa, or £4,000 pa for every household.
So what gives? Back in July, when they estimated the cost of fraud at £16 billion a year, the government reckoned "credit card fraud cost £439 million a year, cheque fraud £40 million, insurance embezzlement £1.5 billion and telecom fraud £866 million. Economic crime cost Revenue & Customs a further £11.5 billion a year. Trading and marketing scams account for £1 billion, and the public sector loses up to £14 billion".
Did you get that? Out of the £16bn estimated loss then, £14bn was lost by the public sector, mainly through fraud against HM Revenue & Customs. Implying of course that losses by the private sector were a mere £2bn- including identity fraud (cf the government's disgraceful attempt to persuade us we need those pricey ID cards to stop massive ID fraud- eg see this blog).
Since then, while private sector fraud losses may have edged up, the Big Trumpeting Elephant rampaging through the Accounts Department has been the explosion in VAT Carousel fraud (see previous blogs here and here). We estimated that alone could now be running at £30bn pa, which accounts for most of the government's new official fraud total.
So what to do? Ideally of course, the government would be capable of running efficient tax and benefit systems, thereby at a stroke eliminating 90% plus of all fraud. But pigs might fly out of Gordon Brown's butt, so what can we do in the real world?
Cost effective justice, that's what.
Consider the recent case of John Kaduwanema, 27, an illegal immigrant from Uganda (photo above). He somehow (duh?!?) got a job as a finance manager for Birmingham City Council's social care and health finance department. From there he proceded to defraud the Council of more than £1 million in public funds. Just like that.
He was then extremely unlucky because he got caught in the 20% of crimes actually detected. And what did he get? Seven and a half years. Which given automatic and completely bonkers 50% remission means just over three years inside. So that's £300 grand pa- nice work if you can get it, even if not quite in Dido's league.
According to research by Stoy Hayward, the average sentence for fraud in 2004 was just 2.4 years. Which means the actual prison term averages a derisory 14 months. And that's despite the fact, as Stoy Hayward note, that "greed, not hardship is driving fraud in the UK - our statistics show that wherever a motive was reported, an overwhelming 60 per cent of cases were motivated by the desire for a more lavish lifestyle."
Cost effective criminal justice demands much, much harsher sentences - say 20 years for Mr Kaduwanema, with no remission. And until we get that, fraud will go on bleeding us dry.
Must stop now- the Major's nodding his head so vigorously I fear it may work loose again.
Posted by Mike D at 7:08 pm