The Sun's benefit fraud figures need context and clarification

The Sun this week launched a campaign to "Beat the Cheat" after reporting that the level of benefit fraud had cost taxpayers "a record £1.2 billion last year."

According to the paper, this amounts to a personal contribution of some £16.64 for someone with an average income.

Given that Work and Pensions Secretary Iain Duncan Smith was among those to lend his support to the Sun's campaign, we thought the latest figures deserved a closer inspection.

Initially, it might appear that the DWP's own take on the fraud and error estimates released this week is at odds with the Sun's claim that fraud had risen to 'record' levels. It notes that:

"The estimate for the percentage of total benefit expenditure overpaid due to fraud in 2010/11 has remained the same when compared to the 2009/10."

However this can in fact be explained by the fact that the DWP measures fraud in two ways: as a proportion of the total benefits bill, and by the actual sums lost to fraudsters.

Benefits payments are uprated each year by the government to keep pace with inflation, and the total cost of benefits usually grows too. For this reason, the scale of fraud as a proportion of the total benefits spend perhaps offers the better insight into the relative size of the problem over time.

Indeed a look at the historical estimates reveals that benefit fraud in cash terms has been at 'record' levels in every year since it was first measured in 2005/06 (although it remained static between 2006/07 and 2007/08).

So while the Sun isn't wrong in making the claim that it does, there is another side to this story.

£16.64 per person?

Full Fact did find it harder to trace the genesis of the claim that benefit fraud costs someone on the average salary £16.64 per year of their "income tax".

By Full Fact's calculations, someone earning £25,500 per year would contribute £3,605 per year in income tax once their tax-free allowance had been accounted for (2011/12 tax year).

The £153.4 billion spent on benefits represents about 22.2 per cent of the £691.7 billion spent by the Government in 2010/11 (the Sun notes that this is "almost a quarter").

Our hypothetical taxpayer would therefore be paying just over £800 per year towards benefits, rather than the £2,080 quoted in the Sun, or £6.40 per year for the fraudulent portion of this (0.8 per cent).

However after contacting the Sun it was explained that its calculations also include National Insurance contributions (although this wasn't mentioned in the article), which brings the total tax paid by the average earner to £5,797 (or £5980.80 for the 2010/11 tax year).

However 22.2 per cent of this sum is approximately £1,285, almost £800 short of the contribution the Sun says the average taxpayer makes towards benefits. So where has this figure come from?

After some more probing the Sun pointed us towards some figures put together by Conservative MP Ben Gummer. These show the contributions that someone on an average wage would have made towards various areas of government spending in 2009/10.

One of these areas was indeed 'benefits and pensions', and the total given is £2,080. However on closer inspection we can see that this sum includes some areas of spending - such as the provision of social care and tax credits - which are not covered by fraud and error estimates. The figures are therefore not directly comparable.

If we limit the analysis to those figures given in the fraud and error estimates (see table 2.1), the £1,285 estimate for the average taxpayer contributes towards the benefits system seems nearer the mark. Of this, approximately £10.28 could be identified as the portion lost to fraud (0.8 per cent), less than two thirds the size of the total given in the Sun.