The National Audit Office has reported on the dog's breakfast that is tax credits. For 2007-8, HMRC estimated fraud and error overpayments as between £1.58bn and £1.84bn (7.9% to 9.2% of the final award by value). After all these years, that is a clear sign of a system which is expensively unworkable.
Since 2006-07, we are told, increases in error and fraud have been primarily in the categories of ineligible children, overstated work and hours and ineligible disability claims. HMRC estimates that fraud accounted for £150m (8.8%) of total error and fraud in 2007-08. This is higher than the estimated £40m (2.8%) of fraud identified in 2006-07, "but is partly explained by a change in approach to the classification of fraud cases in its Error and Fraud Analysis Programme".
In other words, they haven't got a firm handle on it. So we're talking £150m+. If HMRC asks a taxpayer questions, they may say that an attempt at a fraud was just a mistake.
HMRC are belatedly making more use of other data to corroborate information provided by claimants, for example by matching tax credits data against child benefit records to identify young people who are no longer in full-time non-advanced education but still included in a tax credits award.
These estimates do not include figures for organised fraud. We are told blandly that in 2008-09 losses from organised fraud were £31.9m. Presumably that's identified losses. How much more did organised crime get away with? A total of £50m seems a modest guess.
And do we believe that individuals' fraud was only three times that figure? Tax credits were paid to 5.9m families in 2008-9, at an administrative cost of £584m.
HMRC's numbers put tax credit fraud at £181.9m. I'd suggest £250m looks like a conservative estimate.
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"HMRC are belatedly making more use of other data to corroborate information provided by claimants,"
But they are indifferent to changes of circumstances that do effect entitlement and which, if followed up, would prevent further overpayments of credits. We tell them that such-and-such has had a pay rise or that such-and-such has moved out of the family home, but it's almost impossible to get their front-line staff to even note it; let alone send it to their investigators.
The DWP or local authorities would at least look at such information, but in five years of talking to HMRC, I've only ever once heard about a telephone operative saying ' Gosh, I'd better let the fraud people know about that.'
I suspect that data matching will catch some fraudsters and those with erroneous credit assessments as data matching does work elsewhere, but they sur eneed to perk up their change of circumstances procedures - maybe by obtaining some in the first place.
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