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“Minister of State Fergus O’Dowd has said that the Government believes it can save €600m by tackling social welfare fraud.” (RTÉ News)
THE CLAIM THAT the level of social welfare fraud is €600 million is, itself, a fraudulent claim. The level of social welfare fraud is €26 million. The level of fraud is not €600 million.
It suits a certain agenda which wants to soften up public opinion for social welfare cuts to claim that hundreds of millions are being lost to frauds and cheats. We have had television investigations, newspaper headlines, attention-seeking politicians all claiming massive fraud. But out of a budget of nearly €20 billion, the Department of Social Protection has found only €25 million in fraudulent payments – or about 0.1 percent of the entire budget. So where did this famous ‘€600 million’ in fraud come from? And why is the real level of fraud so much lower?
Control Savings
First, the €600 million figure is not the actual amount of fraud in the social protection system. It is what is known as a ‘control saving’. According to the Deputy Secretary General and the Minister of the Department:
‘Control savings are not actual moneys recovered by the Department…’ (Deputy Secretary-General)‘Control savings are not actual monies recovered by the Department…’ (Minister)
What are control savings?
‘This figure is the value of the control activity in the Department and if this work did not take place there would, over time, be a similar increase in total social welfare expenditure.’
In other words, if there were no controls or inspections, there would be over time an estimated €600 million in over-payments. This is like the gardaí estimating the number of murders that might take place over time if there were no police force. Or the Revenue claiming the estimated level of tax fraud if there were no audits and checks. To my knowledge (and I’m open to correction on this) the Social Protection Department is the only agency that uses this type of estimate publicly.
However, even this estimate is highly constructed and potentially flawed:
Control savings are calculated by applying validated multipliers to the difference in the rate of payment before and after the control activity. Multipliers used in assessing control savings estimate the total future savings to the Department of a revocation or reduction resulting from a control action. The multiplier used is based on the average amount of time the person who ceases to claim will remain off the books before returning. This time varies from scheme to scheme.
The important point is that the ‘control saving’ is not an actual record of fraudulent payments. It is based on assumptions and multipliers. It is not based on one year – but can be spread out over two to three years.
And here, the Comptroller and Auditor General (C&AG) found a number of problems with the amounts claimed to have been ‘saved’ in the control savings. For instance, an audit of Lone Parent cases found that nearly half of the cases claiming ‘savings’ were actually mistaken. The C&AG also felt that over-payments estimates in pensions were themselves over-estimates. The C&AG concluded:
. . . the Department’s current practice of including all of these over-payments arising from control activity as (bankable) savings is questionable.
All this suggests that the €600 million – even as a control saving – is not a reliable figure.
Second, the €600 million control saving does not refer specifically to fraud. It refers to ‘over-payments’. Over-payments occur when (a) there is a mistake by the applicant/recipient, (b) there is a mistake by the administration, or (c) if there is a fraud. Fraud makes upon only a minority of over-payments (see below).
In conclusion, when you hear the figure of €600 million fraud being used by a commentator or politician, remember: it does not refer to actual money the Department expects to find in any one year and only a minority of this highly constructed and, according to the C&AG, highly questionable figure has anything to do with fraud. To talk of €600 million in fraud is highly fraudulent.
Actual Fraud Levels
So if the €600 million is not a reliable figure on fraud, what is? The C&AG’s report provides the figures, which is used by the Oireachtas Library & Research Service.
The actual annual level of over-payments is far below the €600 million figure. They rose from €50 million to €83 million between 2007 and 2010. But this included all over-payments – including mistakes by recipients and administration. The figures for fraud are substantially less:
What a contrast to the nonsense debate we have over the misunderstood, faulty and highly constructed figure of €600 million. The actual level of fraud that has been identified and recovered is €26 million.
Surveys and Case Reviews
The Social Protection Department periodically conducts surveys of different social protection schemes to project the level of over-payments that might be in the system. The Department has surveyed eight schemes since 2004. The average level of over-payments in these surveys was 2.9 percent. The C&AG calculated that in 2010, this ‘potential’ overpayment would be worth €383 million. However, we should note two things which suggest this figure is on the high side:
First, the number of case reviews yielding savings has fallen over the last few years. In 2008, the number of cases yielding savings was 19 percent. This fell to 9 percent in 2010. Therefore, surveys going back to 2004 should be treated cautiously.
Second, the C&AG has identified with the process of case reviews:
However, in its present form, it is nonetheless a crude indicator, due to shortcomings in the savings calculation methodology and the fact that reviews of different type and intensity are aggregated.
But it is important to remember that fraud makes up only 31 percent of actual over-payments. So even if we accepted the €383 million as a ‘potential’ indicator, the fraud element of that potential is €119 million. The schemes not represented in these surveys – notably widow’s pensions, jobseekers’ benefit for example – are not likely to yield as much over-payments as they are insurance schemes which don’t have the complexities as means-tested schemes that lead to high levels of mistakes and, so, overpayments.
Does the Government Actually Believe Its Own Claims?
There is a doubt as to whether the Government actually believes its own claims. If I was Minister and believed there was serious dosh out there among the cheating community (more than the €26 million uncovered last year) I’d employ more inspectors. More inspectors mean more inspections, more cases covered and exposed. But there doesn’t appear to be much urgency on this matter. According to the Deputy Secretary General of the Department:
There are over 400 social welfare inspectors, but not all of them are dedicated to fraud and control work. Since the level of unemployment increased, many of them have been involved in the processing of claims from new applicants . . . Over 200 staff are dedicated to carrying out control work. The special investigations unit operates at the high end has approximately 89 staff . . . We are not looking for additional inspectors as such . . .
So 289 staff are involved. If another 100 inspectors could help double the level of fraud, they wouldn’t be costing the state money – they would be making the state money. So why aren’t the Department and the Government employing additional inspectors? Could it be they suspect that the gains wouldn’t be as high as the headline figure of €600 million suggests?
All this leads to a more mundane account of social protection fraud. Figures produced under ‘control savings’ are constructed, spread out over years, and, according to the C&AG, ‘highly questionable’. Departmental surveys show a reducing level of cases yielding savings which themselves are 'crude'.
But we do have a concrete number - the actual level of detected fraud. And it is far, far lower than the numbers being thrown about in the public debate: €26 million, or 0.1 percent of the entire Social Protection budget.
Unfortunately, this is not a ‘sexy’ figure. It doesn’t make for screaming headlines and even louder commentators shouting for a crackdown on cheats and layabouts. It doesn’t make for an anti-welfare agenda.
All it does is make for a more accurate debate. That should be good enough.
Michael Taft is Research Officer with UNITE the Union; author of the political economy blog Notes on the Front; and a member of the TASC Economists Network.
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Ahem…foreign nationals shouldn’t get welfare in Ireland. Another bill arising from ‘huffing and puffing without economic consequences’.
What about the foreign nationals that have been here 10, 15 years, have worked paid taxes, own a house, have their familes here, should they just be told even though you contributed…you dont get anything?
You’ll find that a lot of the right wingers will have a fake name Laura and worryingly they’ll get plenty of anonymous thumbs up too.
Quick question for Pen Name: what about Irish nationals getting welfare in other states when they have moved there in the hopes of making a better life but falling on hard times?
@cecily, it’s for each country to set its own policy.
There is so much failed groupthink around in Ireland and here’s this issue with a presumed consensus, yet it has never been discussed. Immigration or racism is the extent of the choice.
What exactly do Roma gypsies do for instance (beg)? Are they inherently good for Ireland just because Irish people emigrate? How much does welfare for immigrants cost? Are they really net contributors? No one talks about questions like this. The thinking is very shallow. Mass immigration is a another celtic tiger legacy that deserves fuller debate.
Might have taken seriously until I saw who Mr Taft represents. Given everyone knows someone claiming for example single mothers allowance while living with a partner who is working, I think we all know it is well more than 26 million Mr Taft!
They why doesn’t everyone who knows someone claiming OPFP inform the Department of this. We are all complaining about people doing it, but not doing anything about it! The point is is that it is not 600million that the Government claims it to be.
Surely the first things to state clearly are that fraud is wrong and fraud must be stamped out. The message I get from this almost apologetic piece is that if the fraud isn’t 600million, well it’s not too bad then. Fraud diluted is still fraud.
Adam you didnt read it properly if thats what you take from the article. The article points out the media & political witchhunt to demonise social welfare recipients by branding them as frauds in order to justify welfare cuts is based on a lie. The lie that widespread fraud is costing the state hundreds of millions of euros every year. Its not. Its not anywhere near that figure but it suits business interests and the politicians to pretend otherwise to divert attention away from the real causes of our economic crisis
Heres another article showing where the real fraud in welfare is committed. By the Department itself in refusing genuine claimants their entitlements
http://eirigisligeach.blogspot.com/2011/06/social-welfare-real-fraud.html
Then why are u not upset by the fraudulent stats?
“It suits a certain agenda which wants to soften up public opinion for social welfare cuts to claim that hundreds of millions are being lost to frauds and cheats. We have had television investigations, newspaper headlines, attention-seeking politicians all claiming massive fraud.”
Can’t argue with that. A few years ago, I used to work with an Ógra FF gombeenling who thought it was great craic to rip on “dole scroungers”, even as the banking fiasco was starting to amp up. Always had some “fact” or anecdote from the tabloids at the ready.
Interestingly, he wasn’t too shy about heading down the dole office himself when redundancy came his way.
600 million is just the tip of the Iceberg, I have seen couples living together with the mother claiming single parents, the father getting tax relief because he ‘doesn’t’ live with her yet when their youngest son turned 18 they got married the following week, this must me the only country in the world where land lords can claim a medical card and all the freebies that go with that. the list of fraud goes on and on.
Yeah you have a point, but when our elected representative’s lie and attempt to use the media to twist things that’s fraud on a whole new level, in other country’s they’d be made resign for that.
Fraud is fraud, a lie is a lie, theft is theft but when a Minister of State makes up a total line of bullshit in order to hoodwink an entire country , nah he should be called to account for that and loose well paid job.
Im sorry but that just doesent cut it with me, you hit the nail on the head with ELECTED REPRESENTATIVES therefore we have the choice. We need to lose the mentality that all polititians are liars and realise that the vast majority are there to fight for what they believe is right. Fraud is fraud no matter how you dress it up and at the end of the day, two wrongs don’t make a right!
Just curious Karl, would you have a similar problem when corporations and wealthy individuals arrange their affairs so as to pay minimal tax?
The truth of it Karl is that you only suspect, because you do not know the situations of the people you accuse of fraud! You see them on welfare and automatically see them getting freebies and are jealous and begrudging.
I am on jobseekers as a family with 2 children we get 370 plus 20 fuel allwance we live in social housing and get NO rent allowance, I would love to know who is getting these so called big payments, I was overpaid by FIS even though I rang them 3 times it took them 9mths after the payments stopped to send me a letter and they take 5 euro out of my jobseekers to pay it back ( I have no problems with that I know I was overpaid) but I would be included in the stats of fraud even though I tried to get the payments stopped but they have no record of my calls. not everyone on socail welfare is out to con the system, but the more honest you are the more you are made to feel you have done wrong.
That sounds grand if your not paying any rent, about the same as the average industrial wage of €36k less tax, €31k. Assuming estimated rent value @€200 per week, total earning equivalent is €390 x 52 = €20,280 plus rent value at €200 x 52 = €10,400. Total take-home €30,680 vs. €31,200.
Pretty wild assumption, there – afaik rent allowance covers a maximum of around €350 p/m … if you can get it.
@Niall that addition of estimate rent covers the value equivalent of what someone working would have to pay.
Still a pretty wild assumption, could probably knock €200 or more off that depending on the area or part of the country you’re talking about.
Let me understand this … you’re trying to tell the OP, bringing up two children on €390 per week, that she’s doing great, is that it?
Eoin you ignore the fact that briewee is in fact paying rent. Also similar family on the wages you say would get family income supplement weekly also. Fuel allowance is not paid all year round (32 weeks) so that figure you gave is wrong also. Short term unemployed and people on illness benefit do not get fuel allowance either.
A budget of 20 billion for less than 5 million people is fraud in itself. How do you join the party ?
I am far from convinced by this article. I would regard myself as left-leaning, but for the life if me I can’t understand why the far-left align themselves with cheats and fraudsters. It does their cause no good and futher entrenches and polarises their right-wing opponents. More Brendan Ogle realism, although short lived, is urgently required from our union comrades.
I do think that a certain level of fraud is inevitable, and to be honest I think those people who think the dole is a living are only fooling themselves – it’s not much of a life that they’re signing themselves on for, there’s more to going out working than just getting paid. Of course it does happen, and I wish it didn’t.
But, at least welfare money stays in circulation, so benefits all of us in a roundabout way. Rent allowance, not so much, granted.
My real problem is where politicians of a certain stripe start going on as if welfare fraud is the greatest fiscal scourge afflicting this country. Ignoring the multi-billion Anglo et al elephant in the balance sheet.
Tbh, right at the moment I think dole fraud is the least of our worries.
Social Welfare Budget = €20bn (€20,000,000,000)
Number on Welfare = 500,000 people
Average value per person = €40,000
Average industrial salary = €36,000
Either there is serious fraud or there is no point in working
Does seem like a very high budget alright … what percentage of the total department budget goes on payments, do you know? And what else is covered under Social Protection aside from the dole, children’s allowance and rent allowance?
i thought child benefit and old age pension came from it as well?
Who on earth gets €40,000 per year in welfare?? How the hell do they manage that?? Maybe with a few dependent children..
Anyone I know on disability or jobseekers who is getting rent allowance is getting max €230 per week, that’s less than €12,000 per year..
Something there doesn’t add up..
The Country’s population is 4.6 million people.
Welfare budget is €20,000,000,000
That is equivalent to a welfare payment of €4350 for every single person in the country including babies and old people.
The tax on an average industrial salary of €36,000 is €4,800. But if you don’t have babies or old people there should be credit reductions.
As Niall asked, what percentage of that is welfare payments, and what percentage is other costs, and what makes up these other costs? Because if you could make €40,000 on the scratcher I agree, it would be worth your while, but it’s not.. It’s a meagre existence with money worries daily. Anyone living comfortably on welfare is probably getting income from somewhere else or running up huge debt.
Niall, rent allowance is applied for at the HSE with the Community Welfare Officer.. As are emergency payments and family income supplement, a few others too, I can’t remember the whole list.
The HSE cover medical cards and the Fair Deal Scheme too, all of these things could be considered forms of social protection – I wonder how many of them fall into this budget?
I would imagine some fall under the healthcare budget, but who knows where they draw the line, I had always assumed it was the dole you went to about rent allowance..
Really, you raise a valid point, what exactly does the social protection budget encompass?
Damn double post, this app is buggy..
188 times 52 =9776
Much of the social welfare budget goes on payments to people who are working, children’s allowance, sick pay, family income supports ers and it also includes the salaries of all social protection department staff.
People who are not counted as unemployed but receive benefit, carers, sick, disability, widows, guardian, childbenefit etc etc etc. Not all the money goes to the people counted as unemployed.
Shanti, FIS payments are paid now by welfare and form part of their budget. Also all payments dealt with by the Community Welfare Officers come from the welfare budget also. Wages and the cost of running the department is also included in their budget
Actually, it’s:
Social Welfare Budget = €20.8bn
Number of beneficiaries* = 2.2m
Average value per person = €9,566
* Beneficiaries include social welfare recipients and their dependants. If you prefer to just include the recipients:
Number of recipients = 1.43m
Average value per person = €14,579
Of course, these figures include Child Benefit, old age pensions, widows and orphans payments and pensions, as well as unemployment payments, one parent family payments, wages to staff, etc., etc., etc.
And these figures are all openly available on the Department’s website, http://www.welfare.ie/EN/Policy/ResearchSurveysAndStatistics/Documents/2010stats.pdf so they can be verified. (this link is to a PDF of the department of social welfare’s statistical information report for 2010).
Cheers Dermot, was just to lazy to go digging.
the social welfare budget also includes Child Benefit which every child in the country gets. So anyone who has a child, should be included in the number of people on welfare.
Seriously overheard on a Dublin street this evening. Lovely looking pregnant girl caressing her belly, says to her friend (it’s as simple as this, get pregnant they will give you a house rental and you don’t have to work ever again) . We are being so abused with our easy t o access welfare.
Rent allowance is the biggest fraud of all, couples with one partner working and claiming single mothers can get up to €930 a month. The well is running dry, BTW when I phoned social to report a definite case of fraud I was told it was against the data protection act to discuss the case.
The single parent issue may be dealy with by reducing the child’s age from 13 to 7 and just so you know the department has logged your call and it will be fully investigated and benefits will be cut off if necessary or if there is any doubt about entitlement.
Seeing as this girl is pregnant, give her 6 months and lets see if she has the same thing to say! RA is the worst system I agree with you there. But it’s not because “Single mothers” get 930 a month for it, the Landlords get the money. So we are giving landlords all over the country money from the welfare system to pay for their mortgages. That is what is wrong with RA. If the Government gave all the NAMA property to people on the housing list then we wouldn’t need the RA system.
Dave, you are so right, I feel so helpless, on one hand not wanting to make life any harder for the real decent unemployed but seeing the amount of fraud by others using and abusing the system I think maybe it’s time to cut all welfare and start all over again with real means testing.
Maths have never been this governments strong point , remember that little matter of 3.6 billion ! As Michael noonan said anyone can make mistakes .
Would someone in the trade union movement ever state unequivocally that no one on welfare should be ‘earning’ more than the basic industrial wage? Not much to ask. There simply aren’t jobs for unskilled and semi-skilled men with three, four and more children that can compete with the whole welfare package.
No they would not. There are jobs that exist, and people may be competing with their kids for employment. What example does it set for them to have no job rather than having one. Sure some people may only get paid half what they used to get, but its better to work than go bankrupt. I’d like to say that there would be benefits such as increased social activity from doing so, but at least you would be kept busy.
Use fingerprint sign on! If you want “payment” use your print will stop all fraud! If someone has a problem ‘PC’ groups don’t expect being paid by state money!! Simple idea to an easy problem this will save a massive amount! If ppl can’t accept that build a tent and claim away!!
how will that solve anything, it wont stop people working while they claim
The truth about welfare it is regenerating monies. You will find that welfare people don’t save, the cash is pumped right back into the system, a lot of it on high tax products.
Unlike the irish economist (professors of hindsight) that can’t see past the next budget cuts, the demands from the small business man and the screams for social housing will far outweigh the 600m bandied about.
Well we should all be getting welfare monies then as it would benefit local economies. Dear ministers for finance and social protection, if you give me loads of benefits, I solemnly promise to spend it in local businesses and not multinationals, imports or the Internet, thereby preserving the multiplier effect.
Better than throwing it at the banks, Eoin.
Very good article. More of this please .
its catch 22 really, if you jail someone for fraud it ends up costing a lot more than paying them the dole plus the moneys not in circulation
Well said Dave totally agree
Who is trying to justify welfare cuts Gerry Sligo? It was this government’s explicit pledge NOT to cut headline welfare rates.
They have already cut welfare. Fuel allowances and other packages like the phone & electricity allowances. Further cuts will be in the budget.
Those cuts have hit OAP’s and people with disabilities
agree whole heartedly with that reada.all on welfare should be playing a vital role in society – if they physically can. in relation to your sexism remarks you’re the one being inflammatory-admittedly there was one sweeping statement about ‘women like this keeping legs closed’. but in the case being referred to there was no sign of any of the 6 different fathers.true they have a responsibility to their children-but men can walk away, women cannot. there is no sign of ‘lessons being learned’ by their mother either. and why should there be? taking into account all the benefits previously explained.read posts properly before jumping on your soap box.in no uncertain terms was i referring to single mothers countrywide
actually it wasn’t the comment wasn’t even ‘women like this’ it referred to ‘her’ the woman in question.
Regardless of whether the figure of €600 million is right or not the figure I am interested in is how much will it cost us to investigate the alleged fraud.
thats the way to go tearing one another up if you are unlucky to be on social welfare through job loss hold your head up you paid your bits & bobs through the years and what you paid will never be returned to you in your hour of need as long as its abused at the top. the lords of our manor spend more on bottled water then you get to feed your family.they will continue to cut for as long as you allow them.
reada that’s not nonsense. its fact in a lot of cases (see other previous posters)- admittedly the minority.
In your opinion taggers. In reality there are very few. This country has to create a fairer society where those on social welfare play a part in society too. It is a challenge to those on the left as well as those on the right but a challenge worthy of an attempt.
Whining about unmarried mothers and not mentioning unmarried fathers is inflammatory and sexist.
have your say