Sunday, 21 October 2012

Benefit cheats debate, by Jon Danzig

• The government should cut less, spend more, according to the Scottish National Party
Facebook friend:   People should understand that governments don't have a big switch that's marked 'growth'. The economy drives growth, not government.   

Jon Danzig:  The government can either assist in that growth or put obstacles in the way.  In modern societies, governments provide the infrastructure for companies to start, grow and be successful: education systems, transport, enterprise zones, fair taxation and laws, etc. Entrepreneurs are not successful in isolation, they need a good nation in which to thrive.  Otherwise most companies would set up in Jamaica where tax is only 5%.  They don't because the infrastructure isn't there. UK needs to make it much easier for businesses to be successful, and that requires investment in growth, including investment in huge capital projects to get the economy climbing again.

Facebook friend:  Agreed but if a small business wants to grow, employ more people and get new premises but can't because customers aren't buying its product, no government can help there.  I personally think that there are too many unions, work shy, benefit cheats and economic migrants in the UK that are a drag on the economy.  Examples: benefit cheat doesn't have to work so is drain on resources, and probably got a nice house too.  Economic migrants work hard but use our local council, NHS without having spent years of national insurance. They also probably send some of their earnings back home so is another net drain on the economy.  It also doesn't help when Starbucks avoids tax through complicated brand royalty schemes!

Jon Danzig:  Benefit fraud accounts for only around 1% of total benefits paid, and most of the problems relate to error rather than fraud. In proportion, this is tiny compared to the billions lost through tax evasion and avoidance by huge corporations.  Most people on benefits are desperate to get back to work. The government can assist with shopping, but instead the government's decision to increase VAT has deterred shoppers.  The government can help to instill confidence in the economy and our future, which is reflected in people shopping more.  Regarding migrants there are strong arguments that they have helped to boost our economy.  It also works both ways: hundreds of thousands of Brits work in Germany, Italy, France, Spain, Poland, etc.  If they all had to come back home, we would then be in trouble!
Facebook friend:   £1.2 billion is the number related to fraud they know about.  What about the fraud they don't know about? 

Agreed, they should close complicated tax loopholes and schemes, whilst making sure these companies don't go elsewhere with less onerous tax regimes.

Jon Danzig:  Well if you know about fraud that the authorities don't know about, please report it.  If you have better sources of statistics, please provide. The officially compiled statistics are the only ones we have.  Everything else is either conjecture, anecdote or, sadly, prejudice.

Facebook friend:  Unfortunately, the ever relentless upward pressure on prices stems from increasing populations globally, the rise of China and India (they're eating more meat) and they're consuming more energy. Simple elasticity of demand - that's why food, gas, electricity is all more expensive.

Jon Danzig:  I think if you dig deeper you'll find that China and India are not the source of our high prices; in fact the opposite is true. Without a flow of cheap goods from these countries we would find shopping prohibitively more expensive.  It's shocking that many of the clothes and foods we buy are produced by people, including children, living in, or on the edge of, poverty.  We need to consider a new world economic order if we have to rely on those supplying us with food not having enough to eat for themselves.

Facebook friend:  It's not prejudice Jon.  I can give you an example.  Couple of builders my girlfriend knows go to Germany to work on contracts cash in hand. They also claim housing benefit and employment benefit in the UK.  I know you like proof, statistics but I can have an opinion based on what I hear anecdotally.  And to base debate on statistics because they're the only ones we have is missing the whole picture.  Either the statistics need revisiting, the definition is wrong or there aren't enough fraud investigators (only four thousands vs millions of benefit claims).  I mean 400,000 claiming disability allowance?  Please don't label it prejudiced Jon, it's simply an opinion which isn't yours.

Jon Danzig:  I prefer evidence to opinions, or conjecture. The example you have quoted is anecdotal and there is no way to independently verify it.  I could also provide many anecdotal stories of those on benefits struggling and desperate to get back to work.  If we ignore evidence and rely only on anecdotes and prejudice, we will surely be in a much bigger mess. 

Please answer me this: have you or your girlfriend reported those builders to the authorities?  If not, doesn't that make you both complicit in fraud?

Facebook friend:  OK well you don't understand how statistics (not evidence) are compiled. Please tell me the definition of £1.2 billion in fraud?  How collated?  Based on what? Per year?  Is that just the claims or the cost of chasing fraud?  Are they estimates or fact?  Please explain.

Jon Danzig:  The definition is explained in the annual statistics on benefit fraud compiled by the Department of Work and Pensions. This is a 79 page document, and open to the public to scrutinise. If you have better statistics, I am keen to see them.  My opinions are subject to change on receipt of new or better evidence. 

I am sure there are those who cheat, that is not in doubt. The question is: what proportion cheat? From the evidence I have read, I believe the proportion is very low, but it’s still important to stop all fraud.

You mentioned that you knew of people who are cheating the benefits system, and I was interested to know if you had reported them?

Facebook friend: I think people need a bit of real world bias to their debates. I personally didn't report them because I heard it third hand. I have no reason to doubt the source. She didn't report it due to patient confidentiality in the NHS.  I hope that answers your question Jon.  Have a great day!

Jon Danzig: The real world isn't just that which we can see within our horizons; that's why we need massive number crunchers to give us the full real world picture.  If your girlfriend has genuine evidence of fraud, I believe she has a public duty to report it.  My understanding is that laws regarding confidentiality are voided in cases of criminality. 

Have a great day too. I hope our online debate has given readers pause for thought.

Facebook friend:  Article from four days ago in Telegraph: "New figures show the level of fraud convictions have risen by more than 40 per cent amid a new crackdown on benefit cheats."

The statistics document on fraud [from Department of Works and Pensions]: section 1.17 - a list of caveats and explanations about why those statistics do not give a full picture.

Jon Danzig: Yes, in all life we never get the full picture; we try to get the best picture we can. That's why it's vital we welcome all debates that challenge ‘evidence’ so that we can reach wider understanding and consensus. The statistics provided by the Department of Work and Pensions are, I believe, the best we have.   I welcome, and challenge, anyone with a different view to provide better, fuller, more empirical statistics and evidence.  Based on the known evidence, I believe it is shameful to stigmatise poor people on benefits when the vast majority of them are not cheats; they cannot work for genuine reasons. 

I also dislike the term 'benefits'.  Unemployed and ill people have mostly paid National Insurance Contributions and are entitled to receive help in times of need.  If you have house insurance and your house burns down, do you call it a 'benefit' if you receive insurance money to replace what you lost?

Facebook friend:  And foreign nationals that haven't paid NI? They get NHS care - I ask why?

Jon Danzig:  You need to define foreign nationals. Those who are legally resident here are entitled to NHS care.  Non-EU visitors are not entitled to free NHS care, except in the case of accidents and communicable diseases.  National Insurance contributions are paid to build up your entitlement to certain state benefits.

Government statistics state that 371,000 migrants made benefit claims last year, representing 6% of all claimants, most of them legitimate.  The research suggests workers born abroad are less likely to claim benefits than UK nationals.  Last year there were 5.5 million people claiming benefits.  Maybe some more cheats could be found, but I believe it’s unlikely that such an exercise would make any noticeable improvement to the country’s economy. To boost the economy, we need a government policy of promoting growth and entrepreneurs, and to be much tougher on corporate crime, which completely dwarfs that of benefit fraud.
PS Some of our most successful entrepreneurs have been migrants. We need to encourage more of them to come here - a policy that fortunately our government is promoting. 
PPS  Regarding the Daily Telegraph reporting a 40% rise in benefit fraud convictions, this was a rise from 7,040 convictions in 2010, to 10,000 convictions last year.  I support such initiatives to crack down on genuine crime.  However, the proportion of benefit claimants who have been found to be fraudulent is still tiny.

Facebook friend:  Ok John. It's Sunday. You've worn me out!!!!

Jon Danzig:  It was a good debate, and I feel we both had important points that deserve greater exposure. Thanks for participating and let's meet for lunch soon.  

*This debate genuinely occurred on a public discussion on Facebook, but my friend has chosen to remain anonymous.

See also:


  1. I am the facebook friend. I am not happy about Jon posting this 'private conversation' here. I doubt whether he will allow this comment to be published on this article, but we shall see.

    1. I’m not sure I understand this comment, but at least it demonstrates the discussion above was genuine. The original discussion that I initiated on my Facebook page was set to ‘public’ for the world to see, so it was never private. Anyone could have copied it or referred to it, and still can. The ‘public’ discussion is still on Facebook, but the discussion here has always been anonymised.

      I have apologised to my friend for any misunderstanding. I have left the discussion here as it raises many important points and the ‘friend’ has not been identified. I believe that to be fair, and I understood from my friend that he thought that was fair too.

      -Jon Danzig


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