Chris Grayling defends plan to use credit rating agencies to help catch benefit cheats

[Hopeless Romantic]

Chris Grayling, the welfare minister, today defended plans to use credit ratings agencies to help the government catch people cheating the benefit system.

He said the government should be free to use information that is publicly available and that is already used by commercial organisations to identify those claiming benefits fraudulently.

In an interview on BBC Radio 4's Today programme, Grayling also defended the decision to pay what have been described as "bounties" to agencies that help the government cut the cost of welfare fraud.

One company, Experian, already has a contract to scrutinise new housing benefit claims and it has said that it is in talks with ministers about extending its work, which involves checking whether people's household spending is consistent with the information they are providing to justify their benefit claims.

In an article written for the Manchester Evening News that was released to the media overnight, David Cameron said that he wanted to see this approach extended.

"We are looking urgently at different options for reform. Tougher penalties for fraud, more prosecutions, encouraging those who know fraud is taking place to come forward, and making greater efforts to reclaim money that's wrongly paid," the prime minister wrote.

"We will look at all these things and more. Including, for example, using more information from third parties such as credit referencing agencies to identify circumstances which are incompatible with the benefit claim. I have asked Iain Duncan Smith to draw up an uncompromising strategy for tackling fraud and error which we will publish in the autumn."

Speaking on the Today programme this morning, Grayling said there was no reason why the government should not use credit rating agencies for this purpose.

"Why should the government not use the same tools available to independent organisations?" he said.

"This is data that is publicly available, that is publicly on sale, that is available to set out spending patterns – what loans you have taken out, what your overall patterns of spending in your life are.

"If there is a huge mismatch between the way you are living your life and the amount of money you are supposed to be receiving from the state in benefits, surely it is right and proper that we should be saying, 'How is that happening?' Where it is legitimate and legal to use data, I see no reason why government shouldn't do so."

Grayling said that "pretty tough data-protection laws" were in place in Britain to prevent personal information being misused.

He also defended the payment of "bounties" to credit rating agencies that help to identify benefit cheats.

"We are introducing across a number of government activities payments by result. Government should pay outside organisations when they get the job done and not simply for being there," Grayling said.

Duncan Smith shares the prime minister's desire for a clampdown, but central government and the DWP have different aspirations for what to do with the money saved.

Ministers are engaged in a negotiation to keep savings, despite the coalition telling their departmental ministers they will be judged on what funds they save, not what they protect. The department is thought to want to establish a universal credit system intended to curtail all administrative errors from costly inefficiencies to other outgoings such as over-generous payments to the middle classes.

Since the new government was formed, the Treasury has maintained that the scale of cuts to other departments could be ameliorated by the savings that can be made in the large welfare budget. The government believes welfare and tax credit fraud and error cost the exchequer £5.2bn a year – a figure that Cameron claims is equivalent to "200 secondary schools or over 150,000 nurses". Statistics from the last year for which figures are available suggest that £3.1bn was lost in the benefit system to fraud and error.

In his article Cameron broke this down, saying: "We need to do more to stop fraud – £1.5bn of hard-earned taxpayers' money is being stolen from the taxpayer. This is simply not acceptable. Nor is it right that only £20m of benefit fraud-related debts are recovered each year. Or that three in four of those caught don't get prosecuted."

He went on: "It's quite wrong that there are people in our society who will behave like this. But we will not shrug our shoulders and let them get away with it any longer. We will take the necessary measures to stop fraud happening in the first place; root out and take tough action against those found committing fraud; and make sure the stolen money is paid back."

Alongside more punitive measures for fraudsters, Cameron also rounded on administrative incompetence, which, he says cost £1.6bn a year.


http://www.guardian.co.uk/politics/2010/aug/10/chris-grayling-defends-plan-credit-rating-agencies-benefits

[TheBigotBasher]

1. Much of this has been done for a while and it is effectively a re-announcement of

existing projects within the DWP. Social Security Benefits are already data matched against bank records, pay records, other social security records and NI records.

I have had major concern with the data protection elements of this and in some previous contracts I have in the past stood up to the HMRC who have demanded data extracts from LAs for having no lawful basis for the information requested. It isn't as though they had a good record of securing their own data.

The other problem is the reporting of finding fraud. Within the subsidy scheme paid to Local Authorities for administering
Housing Benefit there were financial incentives for finding fraud. Local Authorities hired lots of fraud officers on the back of this. The newspapers reported the success of finding billions of fraud as an example of incompetence. Even today they are. So it makes Councils and indeed Ministers look like incompetent doofs for letting the fraud through. This meant the financial incentives went, to be replaced by penalties (LAs are now penalised for finding fraud). So Fraud officers were made redundant or relocated. Figures for fraud found fell. The Daily Hate and indeed the pretty useless Parliamentary Select Committee cheered.

So the coalition can expect Equifax etc to find lots of claimant fraud but they need to realise that they way this will be reported will make them look like incompetent doofs (again). They will also need to understand that this will be yet another data match project for Fraud Officers, who are already working on crap results obtained already from the DWP, HMRC and the Audit Commission datamatches. Despite the advertising because of all the crap datamatching there is very little real investigative work going on, so the landlord frauds, the organised frauds from abroad and the multiple id frauds are not being investigated as there is no time.

More annoying for those in Benefits is that HMRC are especially bad at investigations. They do not work with the DWP or with Councils. In part because tax credits are seen as a tax credit

As for punitive measures, that is really laughable. Even if big frauds are found, the sentences tend to be suspended sentences at best.

[ikri]

2. Low-hanging fruit

They'll find plenty of errors quickly enough which will end up classified as fraud and they'll probably find the people trying to make incompetent fraudulent claims pretty fast (even though they'll be a very small number and would probably have been spotted without the help of the ratings agencies) and they'll hail it as a great success and proof as to how great the private sector is at finding benefit fraud. Then they'll start to sell off parts of the benefits system bit by bit because they now have proof that the public sector is too big and incompetent to find fraud. The real fraud, as you say, will go undetected.

Meanwhile, tax fraud costs the country somewhere between £15 billion and £60 billion.

[TheBigotBasher]

3. Low hanging frui that keeps getting politicos in to trouble.

Maybe Grayling may be different to all of the others. LOL.

[fedsron2us]

4. The most common class of benefit fraud

is claiming while doing casual work on the side. As most of this Black Economy activity is cash based and never shows up in the conventional accounts I am not sure that the credit agencies are going to be able to provide much in the way of useful data. Of course, they might conceivably be able to show that certain people were living a lifestyle that would be difficult to explain out of their known income but then this tactic would work just as well with tax dodgers. Needless, to say that no suggestion has been made that the credit agencies be given any sort of bounty for tracking down the latter group,