Just over a week ago in the United Kingdom, the Guardian ran an article entitled “Welfare fraud is a drop in the ocean compared to tax avoidance.” Pretty self explanatory title. The article points out that while people in the UK believe welfare fraud is a major problem, it isn’t – not compared to (a) tax avoidance (b) overpayment mistakes by the authorities and (c) underpayment mistakes by the authorities, whereby people do not receive their proper entitlements. The Guardian spelled it out:
A recent poll by the TUC showed 27% [of the British public] believe the welfare budget is fraudulently claimed. The reality is very different. Last year, 0.7% of total benefit expenditure was overpaid due to fraud, according to the DWP’s official estimates…even against a background of benefit cuts and long-term unemployment, fraud made up a smaller share of the welfare bill last year than it did in 2010/11 or 2009/10.
Indeed, welfare fraud is smaller than accidental overpayments due to error, which totalled £2.2bn (£1.4bn of which due to official error). It’s also smaller than the amount of money underpaid to those entitled to it: £1.3bn.
In other words, if we wiped out benefit fraud tomorrow – but also eliminated the errors that deprive people of money to which they are entitled – the welfare bill would grow, not shrink.
There’s no reason to think things are any different in New Zealand. In 2010, at the height of the global financial crisis, welfare fraud in New Zealand was costing a grand total of $16 million. This was.a miniscule 0.1% of the total moneys paid out, up from .06% the year before. Needless to say, the amounts involved are only a fraction of the amounts involved in tax avoidance. The infinitesimal rise in the proportion of fraud detected was the product of the department setting up a special fraud detection squad that checked 29 million records, as opposed to 12 million the year before. Despite the costly input of resources to combat what is a relatively tiny problem, the number of successful prosecutions fell, as the NZ Herald reported in the link above, from 937 to 789 over the same period. To put this in proportion – while $16 million a year may sound like a lot, New Zealanders have recently been spending $16.1 million a day on impulse purchases.
Other evidence confirms that tax avoidance and departmental error are far bigger problems. The Standard did the sums a year or two ago and came up with actual fraud of $22 million, overpayments by the department of $195 million, and white collar fraud of $172 million. That makes it pretty clear where the real problems lie. Rather than set up special units on welfare fraud, Work and Income would be far better advised to sort out their own overpayment issues, and begin to address the unknown extent of underpayment – where people do not know of their entitlements, are not advised of their entitlements by Work and Income, and are consequently being ripped off by the state.
None of this has stopped Work and Income from another round of beneficiary bashing, and some fresh, intrusive measures by the state:
Concerns have been raised about the plans to investigate people without their knowledge as the Government introduces measures to prosecute the partners of benefit fraudsters. Announcing the changes yesterday, Associate Social Development Minister Chester Borrows said a new offence would be created to allow the partner or spouse of a person wrongly collecting a benefit to be charged. It would mean partners could face a fine of up to $5000 or 12 months in jail, as well as their share of the repayments…”Prosecuting partners who profit from welfare fraud will ensure that both parties who profit from the crime are punished, and will help the taxpayer recover the lost money faster,” Mr Borrows said.
Riiiiiight. And are we going to ensure that the partners and the spouses of white collar fraudsters are similarly criminalized because they “profit from the crime” as well? Of course not. This process is about scapegoating a vulnerable part of society, not about going after people whose lifestyles resemble the lifestyles of the economic elite. The vindictiveness of this approach was illustrated on RNZ this morning. Kay Brereton, a spokesperson from the a beneficiaries group told RNZ the likely consequences once the Social Development started ringing up to tell a boss or bank manager that a fraud investigation was being secretly conducted on their employee or client. (In 84 % of cases last year these investigations failed to lead to a prosecution.) Imagine if this happened while the person was still on their 90 day trial period – would any employer continue to employ someone whom a government official is saying could be a possible fraudster?
The RNZ report also includes this incredible segment:
The Social Development Ministry says that in 95^% of benefit fraud investigations, the person involved does not provide the necessary data, delaying enquiries by “ at least” 25 days. It estimates this delay costs $3 million a year, and gives the person time to cover up the fraud and destroy any evidence.
One hardly knows where to start with this insanity. Safe to say, with no other social group would a department tot up its ordinary administrative costs and then – in paranoid fashion – blame them on a plot by the people it is supposed to be serving. Clearly, the Ministry expects all of the information it wants from the very moment it asks for it – because judging by the above, the meter is running from the very moment the Ministry mails out its letter or lodges a call.
Let’s look at that. Lets assume the Ministry has got the right address, can express its needs clearly and that the information it asks for can be readily obtained. All very big assumptions. Even so, people are getting back to the Ministry in 25 days. In just over three weeks. That sounds pretty good, right? But no, the Ministry doesn’t think so. Because from the moment they send out their request they assume the person is playing for time “to cover up the fraud and destroy any evidence.” Even though 84 % of the time, it is the department that has got the wrong end of the stick, and not the beneficiary.
Really, this is insane, utterly paranoid Big Brotherism – and it is being directed at people trying to get by on the small amounts provided to them by a state that seems unable to run an economy in a way that will generate enough jobs. There is no social contract here, no compact being observed by the government. Just vindictiveness, for political gain.