Lord Freud – 2010 Speech to Institute of Revenues Rating and Valuation

Below is the text of the speech made by Lord Freud to the Institute of Revenues Rating and Valuation in London on 28th September 2010.

Introduction

Thank you for inviting me along to talk to you today.

And I must say – your timing is excellent.

The Government is currently putting a great deal of effort into initiatives that should have a positive impact on the kind of work that IRRV members do every day.

Specifically – our new ideas about how we tackle fraud and error across the benefits system.

But before I get into the detail, I just wanted to put some of our thinking in this area into context.

Creaking system

The Coalition was founded on the fundamental principles of freedom, fairness and responsibility.

Those principles have prompted some really radical thinking right across government – and nowhere more so than on welfare.

The 21st Century Welfare Paper we published in July sets out a whole new approach to welfare.

The reforms will:

– help people who could work to make the journey back into employment through the new Work Programme

– make sure work pays – even for the poorest – with our options for Universal Credit and a simple taper system for withdrawing benefits

– move us toward a far less complex, more dynamic benefit system will make it easier for people to calculate how much better off they will be in work

– and just as importantly, the welfare reforms will create a simpler system that will slash administration costs, as well as reducing the opportunities for fraud and error.

Complexity

Running this creaking system currently costs the taxpayer about £3.5 billion per year across DWP, while fraud and error costs another £5 billion, including the tax credits system.

Moving toward a simpler welfare system will help us deliver support far more efficiently.

And with HMRC making progress on their consultation to use real-time data under PAYE II, we have a tremendous opportunity to really attack the numbers on fraud and error.

Differentiate

Some of you may be sitting there thinking, “I have heard all this before”. But this is a real step-change in our whole approach to welfare and it is crucial that we make the most of this opportunity – especially at a time when the Government is facing up to the challenge of a massive fiscal deficit.

However, I also think it is important to differentiate exactly who we – as a government – have in our sights.

First off, this is certainly not about targeting the poor.

Quite the contrary.

As this Government recently made clear, we are determined to clamp down across the whole spectrum of fraud – whether that is tax evasion at the top end, VAT fraud, benefit fraud or anything else.

Given the pressure on the public purse, we simply have to make every penny count – and that includes going after the cheats at every level.

For DWP, it means targeting the criminals and gangs who actively set out to defraud the system, as well as the individuals who deliberately deceive us to get money they are not entitled to.

It is not about punishing those who are simply baffled by the vast complexity of the system and get it wrong.

This is an important distinction, because through our plans for Universal Credits, we are doing our utmost to create a simpler, fairer welfare system that is easier for people to use.

And the really good news is that a system that is easier to navigate will not only save time and administration costs – it will also make it far easier to differentiate error from fraud.

Today, this is often a grey area, given the genuine complexity that exists in the system.

But as our welfare reforms take hold, this grey area will shrink dramatically.

Through a simpler Universal Credit system, the gap between fraud and error becomes very sharply defined indeed.

At that point, if it is not a clear error, it will be classified as fraud. It is that simple.

We will clamp down hard on anyone who makes an active choice to defraud the system:

– criminal gangs

– identity fraudsters

– or people who make a conscious choice not to alert us to a change of circumstances for extended periods, because under a simpler system we will have far higher expectations that people tell us the truth.

Strategy

For anyone in these groups, we simply must have effective enforcement, because benefit fraud is not a victimless crime – in effect, they are stealing money from the poor and vulnerable who need it most.

Which brings me to the next part of my speech today – how we are setting out a wider strategy to tackle benefit fraud.

From my visits around DWP, I have witnessed first-hand the dedication and professionalism of our staff – from those who process benefits right through to the investigators chasing down the fraudsters.

I know these same high standards are shared by our local authority colleagues. But one thing we know for sure is that criminals are always testing the system for weaknesses and coming up with new scams.

That means that we have a responsibility to keep stepping up our game too.

That is why we are working with partners inside and outside government to make sure we stay one step ahead of the criminals.

In DWP, we have split the challenge across 5 fronts:

– prevention

– detection

– correction

– punishment

– and deterrence

There are specific plans being developed to tackle each of these areas and I’ll touch on a few of these today.

Five Strategic Areas

On Prevention, for example, I want to see closer cooperation with the private sector and credit reference agencies to harness the best data analysis possible.

I also want us to take advantage of new technology to get accurate, real-time data analysis at the point of claim. This will make it far easier to spot the tell-tale patterns of fraud.

Or as one expert recently referred to it – tracking the “muddy footprints” of the professional fraudster.

I believe it is only a matter of time before we get really effective at targeting the criminals and gangs who perpetrate major scams.

Making better use of tools and techniques such as these will also help us tackle identity fraud – something that I have a close personal interest in, having been targeted myself recently.

On the second strategic priority – Detection- I want to make sure that Government bodies such as DWP, HMRC, and Local Authorities maintain their long track record of effective cooperation.

Not just sharing data more effectively, but reinforcing our joint investigative capabilities as well.

On Correction, I want to make sure that we get back what we’re owed – in particular by making sure we’re making full use of all the tools available so that we can target the assets of the criminal gangs.

That brings me on to the subject of Punishment. This is another area where we are planning to pile on the pressure:

– by introducing wide-ranging penalties for low-value fraud

– by securing swifter and tougher punishments so that cheating is just not worth the risk

– and setting out strong, punitive sanctions for organised criminals – and that includes:

– wholesale asset stripping under the Proceeds of Crime Act

– banning these people from accessing any benefits at all for as long as we can

– and in the case of international gangs, making sure that we use our full powers to deport the guilty parties.

Finally, Deterrence. Here, I want to make sure that criminals get the message that Benefit Fraud is a crime that just doesn’t pay.

We will advertise that fact with a clear message that says:

– we will find you

– we will seize criminal assets

– we will make sure that there is no place to hide.

International

That message extends to international gangs as well.

Other countries face the same scams targeting their welfare systems, so we will work closely with our international partners to develop practical counter-measures and effective cross-border enforcement.

In the meantime, I am determined that we continue to reinforce our defences against fraud so that the UK comes a long, long way down the list of countries targeted by organised gangs.

Conclusion

You can expect to hear more about some of plans to boost our defences in the very near future when our new Fraud Strategy is published.

In the meantime, I hope that I have made the point loud and clear that we are absolutely determined to clamp down on the fraudsters, the serial cheats and the criminal gangs.

No-one should underestimate our determination to take on the criminals.

And no-one should think for a moment it is going to get any easier to get away with it:

– with a simpler welfare system, we will drive better value for the taxpayer

– with less complexity, we will be able to find the fraudsters far more easily

– and with a comprehensive and coherent fraud and error strategy in place, we have all the tools we need to make sure that we keep the criminals on the back foot.

It’s an exciting time for us.

And as we develop these ideas in the future, I hope that you will work with central government and other agencies to make sure that we keep making life a lot less comfortable for the cheats in future.

Thank you.