If the Government really wants to tackle fraud, it should take on banks

THE Government is engaged in a campaign of vilification against those claiming social protection benefits despite an Oireachtas report revealing the proportion of fraudulent overpayments actually decreased by more than half between 2007 and 2010.

Headlines across a variety of media screamed last week that the numbers of people reporting suspected cases of social welfare fraud skyrocketed from just 579 instances in 2006 to over 16,000 in 2011.

Minister for Social Protection Joan Burton suggested the “sharp increase” in the number of anonymous tips-offs was emblematic of a “cultural shift” in the traditional Irish aversion to snitching to authorities.

“At a time when resources are limited, many feel strongly that those limited resources should be used for the benefit of people who need them most,” she said.

Meanwhile, Minister of State for Finance Brian Hayes, insisted €625m will be saved in a clamp-down in social welfare fraud next year. “People aren’t putting up with it any more. They may have turned a blind eye in the good times but they are not prepared to see their neighbours scam the system as they did in the past and that’s a good thing for the country,” he said, having predicted that the large rise in tip-offs would lead to a commensurate increase in savings for the Government.

Of course, the only problem with Hayes’s thesis is that it totally ignores all the available evidence and jumps to a completely baseless, but entirely self-serving, conclusion. First of all, there is absolutely no data that suggest that any of these calls actually led to the Government saving a single penny — the bald figures were just reported, without any context, giving the impression that each and every call led to the apprehension of a fraudster.

So, to be clear, of the total 16,142 calls received by the department, just 12,304 were deemed worthy of follow up but there is no information to suggest how many, if any, of these reports actually saved the department any money.

While Ministers Bruton and Hayes were last week desperately relying on the figures to try to back up their assertions that social welfare fraud is rampant, a report by the Oireachtas Library and Research Service, which one hopes both ministers have actually read, published in October revealed that the proportion of fraudulent overpayments has actually decreased in recent years despite the vastly increased number of reviews now being conducted.

According to its figures, fraudulent overpayments increased from €21.4m in 2007 to €25.9m in 2010 but the proportion of total overpayments, which rose from €50.5m to €83.4m, attributable to fraud actually decreased from 42.4% in 2007 to just 21.1% over the period.

Despite the Government’s attempts to conjure up notions of vast swathes of evil families callously defrauding the Irish state to avoid working for a living, the rather more staid reality is that the vast majority of any overpayments made in the system are directly attributable to its unwieldy and complicated nature.

People filling out forms invariably make mistakes and sometimes these mistakes are not spotted by staff while staff members themselves, all of whom are under huge amounts of pressure dealing with vastly increased workloads when there is an embargo on hiring in the public sector, also get it wrong on occasion.

Minister Hayes’s confident assertion that an increase in the number of untested anonymous tip-offs will lead to significant savings for the Irish state makes absolutely no sense when the department’s own near doubling of reviews has lead to a negligible increase in savings — from an estimated €476m in 2008 to €483.2m in 2010, a decrease on the €484m that was estimated in 2009.

“These figures demonstrate that fraud and error is being detected through control mechanisms but also show that the rate of return in terms of estimated savings is declining. For instance, although the number of reviews increased by 65% from 2008 to 2010 the amount of savings achieved rose by only 1.5%,” said the Oireachtas report.

The demonisation of people in receipt of social welfare payments also flies in the face of research from the Economic and Social Research Institute (ESRI) which found that only 3% of unemployed people would be better off if they continued to claim social welfare rather than rejoining the workforce.

In fact, the report found that the vast majority of unemployed people would see their income at least double if they returned to work, and that only one in eight welfare recipients actually receives a rent or mortgage supplement, exploding the urban legend myth of millionaire dole claimants cheating the system.

Of course, this is totally divergent to the campaign of misinformation from the government that is increasingly resorting to employing lazy stereotypes about the unemployed, and those in receipt of social welfare payments, in order to justify the huge cutbacks that will be necessary in the Department of Social Protection to meet the terms of the bailout deal.

Two new reports by the EU Commission and the IMF have both cited the inevitable need for adjustments in tax bands and credit, coupled with cuts in social protection, to provide “the bulk of savings” necessary if fiscal targets laid down by the troika are to be met.

WITH successive budgets already having gouged over €20 billion from the domestic economy, the government is fast running out of options in how to continue to pare back spending on pesky things like support for disabled children and elderly people’s fuel allowance when it faces the prospect of spending up to €4.7bn for 10 years, from 2013, on the really important stuff — repaying monies that were used to bail out Anglo Irish and Irish Nationwide.

Its determination to continue to apply economic medicine that is demonstrably killing the patient was this week highlighted by Nobel Prize winning economist Paul Krugman who said that Ireland’s depressed economy was a poster child for the failed policy of austerity.

“The real test of Keynesian economics ... has come from European nations like Greece and Ireland that had to impose savage fiscal austerity as a condition for receiving emergency loans — and have suffered depression-level economic slumps, with real GDP in both countries down by double digits,” he wrote in a column in the New York Times.

Krugman was citing a new research document which compared the responses of Latvia, Iceland and Ireland to their respective banking crises and found that Iceland, which suffered the biggest collapse, fared the best because banks’ debts were not socialised by its government.

“The experience with the collapse of the gigantic Icelandic banking system suggests that letting banks fail when they had a faulty business model can be the right choice ... other countries have benefited from the Irish socialisation of a large share of bank losses, which has significantly contributed to the explosion of Irish public debt [estimated to reach 60% of GDP by 2013],” concluded the report.

If the Government is determined to tackle fraud then I would suggest it concentrate its efforts on the alleged fraud in the Irish banking sector that has cost the state over €63bn, and counting, to date.