The Fraud, Error and Recovery bill – looking at the numbers
This is a follow-on article from the first Legislation Watch article, covering the Fraud Error and Recovery Bill, which is currently going through the parliamentary process. Today I am looking at the maths of this surveillance project, as I want everyone to understand what is at stake here, for a very pitiful ‘saving’.
I also mention in this article the expanded powers of the DWP in relation to investigating welfare fraud, as I am sure that many people are unaware that the DWP can run its own investigations, (i.e. has its own investigatory powers), much like the Post Office, (and look how that turned out in the Horizon scandal), and that this bill is proposing that the DWP get expanded powers for the same, which will of course COST MONEY.
Let’s do the numbers for the Fraud, Error and Recovery bill:
According to government statistics, there was £9.7 billion welfare fraud in the UK to end of 2024. According to the ONS, there were 33.86 million working people in the UK to end of 2024. I appreciate that not all working people will be paying income tax and likewise all people who do not work will not be free from paying income tax, due to receipt of high income. But it seemed fair to use the working people number as a base as colloquially they are thought of as ‘the taxpayer’ whenever anything such as this bill is talked about. Obviously if a bigger group of people were considered, the savings from this bill would be even less.
So, using the numbers mentioned above, how much did the benefit fraud of 2024 cost per working person?
9.700,000,000/33,860,000 =286.26
So, the fraud cost each working person approximately £286.26 for the year of 2024.
The government anticipates that it will save a measly 1.4% of the £9.7 billion fraud through the Fraud Error and Recovery bill. So, using the same working population figures, what will the saving per working person, per year, be as a result?
Savings=£9.7 billion×0.014=£135,800,000
To find the savings per working person:
Savings per person=£135,800,000/33,860,000 =£4.00 saving per working person in the UK, per year, (don’t spend it all at once).
Thinking about this issue, there will of course need to be systems that can capture the necessary data to deal with these ‘welfare fraud savings’. This will be systems at the DWP. So, who has the contract to build such systems and what are the costs of the same? Well, it turns out that the UK DWP has been actively enhancing its systems for the very purposes of this bill – how lucky!
In September 2024, the DWP awarded contracts valued at up to £7 million to modernize its anti-fraud big data platform and DWP has engaged R+ Analytics and bedigital for supporting and maintaining its Data Service Platform. A larger contract, valued at £5.08 million, was awarded to R+ Analytics, while the smaller £2 million contract went to bedigital. R+ Analytics contract commenced on September 30, 2024, with an initial term of one year, extendable for an additional 12 months.
Prior to this, in June 2024, the DWP awarded a contract to SAS UK & Ireland for Data Warehouse Remediation (DWH-R) Professional Services, valued between £399,330 and £799,000. This contract was scheduled from July 15, 2024, to October 31, 2024.
Investigative and Enforcement Powers
Pausing on the maths for a moment, I want to move on to investigative and enforcement powers in relation to this bill as they do factor into the overall ‘savings’ from welfare fraud – and not in a good way. The DWP currently already has investigatory powers specifically for detecting and preventing welfare fraud, and it can refer cases to the police or other authorities for criminal investigation when necessary. The DWP has specialised units such as the Fraud Investigation Service (FIS), tasked with investigating benefit fraud. FIS and its officers have powers to conduct interviews under caution and investigate fraud allegations.
The DWP carries out its current investigations using data matching, surveillance, and interviewing claimants under caution (i.e., making them aware that they may be prosecuted). The DWP's fraud investigation teams are authorised to use data matching across government databases, reviewing financial records, and interviewing suspects. They also collaborate with other agencies, such as HM Revenue and Customs (HMRC), to identify fraud patterns.
It is the Social Security Administration Act 1992 that provides the DWP with powers to investigate benefit fraud. And the Fraud Act 2006 specifically addresses criminal offences related to fraud, including making false statements or using false documents in relation to benefits.
The Fraud, Error, and Recovery bill seeks to expand the above powers through enhanced data-sharing capabilities, automated fraud detection, and more recovery and penalty mechanisms. But the bill goes one step further in proposing that the DWP acquire the ability to search residential and business premises and confiscate items related to fraudulent welfare claims.
The expansion of DWP powers, along with the development and expansion of AI technology to assist with trawling for welfare fraud is likely, of course, to create new jobs at the DWP, because the department will need additional resources to carry out the functions proposed under the bill effectively. The bill is therefore likely to lead to the creation of new jobs in areas such as fraud investigation, data analysis, legal compliance, and collaboration with other agencies. The DWP will therefore almost certainly need additional staff to manage their expanded powers under the bill to carry out detection, investigation, and recovery. This essentially means that the only area growing from this proposed legislation is the civil service, with their part time and work from home attitudes, along with their gold-plated pensions. More expanded state. Not less.
People should also be aware that under this bill banks will be able to charge for providing the information proposed to be gathered per the terms of the bill. Where will this charge be paid from? And how much can banks charge? Well, it’s an unknown, as although the bill proposes that banks and financial institutions can charge fees for providing information to the DWP when requested as part of a welfare fraud investigation, it doesn’t set a limit on how much this charge might be and neither does it say from where the charge will come. The DWP would be responsible for paying any charges levied by banks etc, so the costs might actually come from the welfare budget itself!! If not, charges may come from the budget allocated to support the operational costs of the DWP’s fraud investigations, system updates, and staffing.
Hence, the only two potential sources of funds for these payments are therefore:
Public funds (tax payer money), either paid for the DWP budget, or paid for the welfare budget
or
From recovery of fraudulently claimed benefits
The bottom line
Given all of the above, it doesn’t take a genius to work out that the costs of running this ‘fraud detection program’ are likely going to outweigh anything that is recovered – remember at the moment there will be a mere £4.00 saving per working person, per year - if this bill passes into law. It is therefore a total waste of time and tax payer money in reality. Ask yourself how much of the £4.00 saving will be eroded in fees for the surveillance state’s operational costs and fees in bank charges? Currently, there are no specific details available about this in the bill - likely on purpose - because in reality this is unlikely about recovering money for the taxpayer at all and is instead about mass surveillance with a sprinkoing of financial institutions making money from assisting with the same.
So, to spell it out, the 1.4% projected savings the UK government aims to recoup from tackling welfare fraud through this bill is not a net amount, as there are additional costs involved in investigating and addressing said fraud. The 1.4% figure refers to the potential savings in fraud recovery relative to the estimated amount of fraud in the welfare system, but it doesn't account for the costs of the investigation, data processing, or new personnel that will be needed to pursue these efforts. So, the government estimates that £9.7 billion was lost to welfare fraud by the end of 2024 and the 1.4% figure refers to the anticipated savings the government expects to recoup from efforts to tackle fraud, primarily through enhanced enforcement and AI surveillance. But, the 1.4% savings figure does not factor in increased operational costs, such as employment costs for additional fraud investigators, data analysts, and other DWP staff, training and support for existing personnel, further investments in technology and maintenance of the same (e.g., fraud detection software, data-sharing systems fees paid to banks for providing financial data and complying with requests, and operational costs for running investigations, including administrative work and case management.
If you include these costs, the actual net savings to the government will be much lower than the £135.8 million projected ‘savings’. The 1.4% savings is a target only and the net savings (after factoring in the above additional costs) will be lower, could be nothing at all, OR IT COULD ACTUALLY COST MORE THAN WHAT IS SAVED, depending on the scale of the investment required to implement the measures as set out in this bill.
Has anyone in government asked for an impact assessment on this or asked for a cost benefit analysis? It appears not……
Find out more about this bill from yesterday’s UK Column extra below, where I covered this issue, or the main episode of yesterday’s UK column news, which you can find here
Brilliant work, thank you.
I'd have thought if the purpose was to reduce welfare fraud, someone would have studied the problem and proposed a series of different options each with their cost-benefit analysis. In which case where is the report?
And the best they can do is suggest a way they hope leads to a possible 1.4% reduction gross, after constructing an AI system trampling over the privacy of the entire population, a new Act of Parliament, and consigning legal due process to the bin?
Thank you, Clare.