Forget the headlines. The government’s own figures just revealed benefit fraud is a fairy tale.

Benefit fraud has been revealed as a Channel 5 fairy tale
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If you watch enough Channel 5 programmes, you may think that vast swathes of the country are ‘scrounging’ off the state and committing benefit fraud. But the government’s latest figures show that this is not exactly the case.

Jackanory

HMRC has released its revised estimates of benefit fraud and error for child and working tax credits for 2015/16. It found that it paid out [pdf, p3] a total of £28.3bn in tax credits in that financial year. But the figures on benefit fraud and error are somewhat small.

HMRC said the total “level of error and fraud favouring the claimant” was £1.35bn; just 4.8% of the total tax credits bill. In detail, it found that [pdf, p4]:

  • Error favouring the claimant was £1.03bn; 3.7% of the total tax credits bill.
  • Fraud favouring the claimant was £320m; 1.1% of the total tax credits bill.

These were HMRC’s “central” estimates. It produced [pdf, p4] higher and lower ones, to allow for error:

HMRC revealed the amount of fraud and error relating to tax credits

HMRC showed how much money it paid out in tax credits fraud and error cases

HMRC says [pdf, p5] the majority of money paid out in error was due to mistakes by claimants. The majority [pdf, p5] of these were claims where the claimant was in work, with children. The reasons for errors favouring the claimant were [pdf, p7]:

Read on...

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The reasons why HMRC paid out money in error to claimants

Benefit fraud vs tax evasion: you decide

Originally, in June 2017, HMRC said [pdf, p2] that error and fraud cases amounted to £1.57bn, or 5.5% of the total tax credits bill. But it revised this figure down because of “new information received”.

But it’s not just tax credit error and fraud levels that are lower than you may think.

Like HMRC, the Department for Work and Pensions (DWP) also estimates fraud and error for its benefit payments. Its most recent estimate shows [pdf, p3] that overpayments to claimants in 2015/16 were £3.3bn, or 1.9% of its total bill.

Meanwhile, HMRC estimated the amount of tax avoided, evaded and unpaid by people and companies in 2015/16 was £34bn – more than the whole tax credits bill. Maybe Channel 5 would like to bear this in mind when it’s deciding on what programmes to do about ‘benefit cheats’.

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