The problem with the focus on ‘benefit fraud’

The proposed cracked down on so-called benefit fraud seems like an no brainer. In fact, it’s amazing that more people don’t try to claim more than they are entitled to.

If you’re trying to live as a single person with no children on Universal Credit then you have under £100 a week to cover every single aspect of your life: your heating, electricity, clothes, food, phone, toiletries, everything. How many of us could do that under £100 a week?

Joseph Rowntree Foundation and Trussell’s Essentials Guarantee campaign found that around five in six low-income households on Universal Credit are currently going without essentials. Most people – two out of three of the public – think the basic rate of Universal Credit is too low. To make matters worse, almost half of households see their payments reduced by deductions and benefit caps.

The reality is that far more money goes unclaimed then is defrauded. One in five people who are entitled to Universal Credit, which is now the main benefit that people can apply for, do not claim it. Why? The main reasons are fear and stigma. There is a real fear of accidentally ending up being accused of fraud and/ or of being seen as one of those “benefit scroungers”.

A quick look through the “naming and shaming” that has been highlighted in the media as people have been dragged through the courts for the last year shows that one of the biggest causes of “fraud” is what they call “undisclosed capital”. This means savings. Anybody with savings over £16,000 cannot claim Universal Credit. You might say that that’s fair enough, but it’s all too easy to fall foul of that rule by mistake.

Perhaps your Granny has just died. She has left her house to you and your siblings and your share of the inheritance, say £20 grand, is deposited in your account. If you are not super aware of the UC rules and you think that’s going to help my child go to university or that’s money that’s going to help fix my car, or we can go on a holiday next year – you are now committing benefit fraud.

And when you are caught – because UC can look at your bank accounts any time they want, you will eventually be caught. Over 18 months, that could amount to £45,000 if you have children. So now you are in court, with your name in the papers as someone who defrauded the benefit system to the tune of £45,000. You then have to repay every penny you received in UC while that money was in your account.

The minister says this is you “misrepresenting your circumstances“, but it may simply be ignorance. If you were well off and defrauding the taxpayer of millions rather than tens of thousands, you won’t be named and shamed because the tax authorities HMRC are likely to say that your non-compliance with tax is due to “error and carelessness“. You may remember Liz Truss’s Chancellor of the Exchequer owed the tax man over £5 million but this was not considered fraud. It was said to be due to “error and carelessness“, so he didn’t end up in court.

HMRC (the tax authorities) estimates that £35 .8 billion was lost to the UK economy in 2021-22 through tax evasion. This was an increase from £30.8 billion in the previous year 2020-21. The Tax Justice Network says this is a huge underestimate and that the true amount of tax evasion costs the UK economy over £100 billion every year. By contrast, the amount lost through “fraud and error” in the benefits system is about £6 billion a year.

Department for Communities plans to spend £10 million over the next year to focus on ‘uncovering benefit fraud’. The fear is that this will mean more people being afraid to claim benefits to which they are entitled. It will certainly mean more people feeling embarrassed to be associated with laziness, “scroungers” and other nasty stereotypes – while the media and politicians ignore the fact that 6 out of 10 households receiving Universal Credit are actually working, but for low wages.

Goretti Horgan is a retired Lecturer in social policy at Ulster University and former Director of ARK’s Policy Unit. She is the chair of the Northern Ireland Anti-Poverty Network,