Dynamic Benefits

Strange as it seems, if David Cameron succeeds in eliminating benefit fraud, it will probably end up costing the Treasury money. It is one more potential pitfall with the Iain Duncan Smith benefit reforms.

A proper crackdown on benefit cheats is only possible by dramatically simplifying the welfare system — and that will probably lead to an increase in the take-up of benefits.

Here’s the rub. Error and fraud in the welfare system costs about £5bn. It’s a big number. But it is nothing compared to the £16bn worth of benefits and tax credits that are unclaimed each year.

The sad truth is that the complexity of the benefits system actually saves the Treasury money, at least in the short term. Government studies show that convoluted rules and impenetrable forms put people off claiming a benefit, even though they are entitled to it. Up to a quarter of people eligible for housing benefit, for instance, don’t submit an application. Read more