Control Measures that do not Penalise all the Unemployed

At any time, the management of social welfare expenditure requires striking a balance between ensuring people know their entitlements and receive them (promoting take-up) and guarding against overpayments (be they due to claimant error, administrative error, or fraud). In particular, an appropriate level of resources has to be devoted to detecting overpayments, clawing them back where possible and implementing appropriate sanctions where fraud is established. Ireland entered the current crisis with a social welfare system in which overpayments due to error or fraud were a significant and persistent problem, amounting to some 3 per cent of total annual social welfare expenditure (Comptroller and Auditor General [C&AG], 2010116_).

Before concluding, however, that savings of a high order (e.g., €600m+) can be

reaped from tighter control measures, careful reading of reports from the C&AG and the Department of Social Protection (DSP) suggest caution. Error not fraud is the principal reason why overpayments are made, error that is sometimes on the part of claimants (e.g., not reporting a change in circumstances in time but without fraudulent intent) and sometimes on the part of the DSP itself. In a random sample of payments made to recipients of the JA in October 2009, for example, 11 per cent were found to be overpayments, 4 per cent underpayments117 _{and 84 per cent were}

correct. Suspected fraud was identified in 3 per cent of the cases examined, error on the part of claimants in 8.6 per cent and error on the part of the DSP in 1.2 per cent. In a tentative comparison with the comparable UK scheme, the C&AG notes that overpayments of entitlements are estimated to account for 5.4 per cent of total expenditure in the UK as against 4.1 per cent in Ireland (or 5 per cent and 3.3 per cent respectively, net of underpayments118_{). The most striking difference between}

the two jurisdictions was the much smaller proportion of overpayments due to official error in Ireland (0.6 per cent versus 2.4 per cent) (C&AG, 2010: 426).

It is inaccurate and unfair, therefore, to regard people on the LR as those most likely to attempt fraud and where the greatest savings can be made. For a start, social welfare payments other than JA in Ireland have higher suspected levels

116 This estimate was provided by the Accounting Officer of the Department of Social Protection to the Committee of Public Accounts on 25 February 2010 and is cited by the C&AG provides more in-depth analysis, see Accounts of the Public Services 2009, Vote Management, Report of the Comptroller and Auditor General, Vol. 2, p. 427 (September 2010).

117 Underpayments receive less attention from the media but are a concern to the DSP and C&AG. The DSP does not research them as intensively as overpayments but takes the approach that increasing people’s awareness of entitlements (e.g., through the department’s leaflets and work of the Citizen’s Information Centres) improves the likelihood that self-interest will operate to reduce the problem to a minimum.

118 Underpayments – i.e., low take-up and people not receiving income support to which they are entitled – across all the UK’s social security payments, are estimated to be £1.3bn a year and overpayments to be £3.1bn (the former is 42 per cent of the latter). See Department of Work and Pensions (2010), Universal Credit: Welfare that Works, para. 23.

Payment). More importantly, public opinion is not being informed of progress that has been made. The October 2009 survey of Jobseeker’s Allowance, already cited, is a significant advance on an earlier survey in 2003 that found evidence 16 per cent of JB/JA payments were overpayments. While the case for improving controls on social welfare spending undoubtedly has continuing validity, it should not be justified by pointing to the surge in the LR occasioned by the recession. In fact, the DSP notes that recession may reduce the incidence of JA overpayments because it has reduced the opportunities for recipients to increase hours of work and earnings and, typically, a significant proportion of overpayments arise because recipients do not alert the department in time to improvements in their circumstances (this is claimant error and, usually, without fraudulent attempt). A final observation, prompting modest expectations of the contribution tighter control can make to social welfare savings, is that social welfare overpayments – in any jurisdiction – are only reclaimed to a limited extent. Most are made to people on low incomes who spend the money on immediate needs but will have very limited means out of which to pay a bill for accumulated overpayments, should one be received at a later date. 119

Social welfare fraud, of course, unlike claimant errors, deserves no tolerance. In good and bad economic times, it takes resources from more important uses, steals from the taxpayer and is particularly damaging to the interests of social welfare recipients themselves (it justifies the more intrusive policing of benefits generally and creates greater public suspicion of welfare receipt). The most appropriate time for significantly improving the detection and sanctioning of fraud is, generally, when unemployment is low – there are fewer claimants to police, more job offers against which to test claimants’ willingness to work, and staff resources can be diverted to investigation with less damage to mainstream services. The same factors operate in reverse when unemployment is high to make it a difficult time in which to improve the detection and sanctioning of fraud.

Despite this, public and political attention to fraud appears to move in a contrary direction to trends in the underlying conditions for doing something effective about it. When unemployment was low, jobs plentiful and fiscal resources less an issue, there was little interest in – or appetite for – increasing the detection and sanctioning of fraud; if anything, a relaxation occurred (Grubb, 2009). As unemployment has risen and jobs and fiscal constraints become scarce, the issue of fraud has received significant political attention and the scope for significant savings from tightening administrative procedures and increasing investigative activities has been highlighted.120 _{Some of this current concern is an acknowledgement of the ‘legacy’}

issue, i.e., weaknesses in the system, which were not adequately addressed before the recession, now entail greater waste simply because the volume of resources being put through the system has hugely increased.

119 Dublin City Council’s prospects of recovering rent arrears illustrate this point. Underpayment of rent accumulated in the good years when many tenants failed to report salary/wage increases in time. The discovery of the underpayments was highlighted when tenants informed the Council that they had become unemployed, by which time they were no longer in a position to pay off the accumulated arrears (The Irish Times, 20/12/10).

However, how this issue is highlighted and addressed impacts significantly on unemployed people. The following are two fundamentally different perspectives: (a) believing it is now opportune to make significant changes in how fraud is detected and sanctioned, because the scale of the increase in the LR and the ‘quality’ of the inflow underline the extent to which existing procedures are outmoded and obsolescent; (b) advocating stronger controls on fraud because it is growing as an issue along with the rise in unemployment. Which perspective is communicated as guiding policy can influence how unemployed people are viewed by the still large majority of the public who have no direct experience of being on the LR. It will also influence the self-image of those on the LR themselves and the degree of courtesy and efficiency built in to the arrangements for serving them. Some points should be noted:

s The large increase in claimant numbers has made an absolute increase in the

number of fraudulent claims practically impossible to avoid. Even success in reducing the proportion of claims that are fraudulent is likely to be offset by the scale of the increase in claims;

s To seek to hold the number of fraudulent claims constant during the current

recession, let alone drive it down, implies making greater progress in improving controls and applying sanctions than was made when unemployment was low and resources more plentiful. The exigencies of processing the larger increase in claims make it difficult, and even a questionable use of resources, to increase control efforts in line with the level of processing activity;

s Some changes in the composition of the LR, principally, the growing proportion

of all claims that are subject to means-testing and the larger number who are nationals from the Accession States, have increased the overall complexity of processing and administering claims. The increased likelihood of errors (by claimants themselves, and by administrators) should not be interpreted as evidence of a growth in fraud; and

s The large numbers who have joined the LR for the first time in their lives, many

of them after extensive years of working and with a strong work ethic, would suggest that the propensity to defraud the social welfare system may have fallen, not risen, with the onset of the recession. While (perhaps, understandably) conducting the research that would confirm this has a low priority at the current time, it is important to note the absence of evidence to support the counter- thesis, i.e., that the propensity to defraud JB or JA has risen as the numbers on the LR have soared.

The increase in political and media attention given to social welfare fraud since the recession began, therefore, is not based on empirical evidence that the problem is worsening but has other roots. The belief that welfare fraud is rampant, however, has the welcome side effect of increasing support for measures that yield savings on social welfare expenditure. These measures are necessary for other reasons but they should be explained and defended without recourse to arguments that increase automatic and systematic suspicion of all who are on the LR.

lead to the postponement or shelving of measures that will, otherwise, bring the administration of JB and JA more into line with Ireland’s ambitions to develop a knowledge economy and a learning society. For example:

s ‘Signing on’ online and by mobile phone once a month is to complement

appearing in person at a Welfare Office as a way of confirming a person’s presence in the state and allowing them declare they still available for and seeking work. These more discreet and efficient methods will enable claimants to avoid the potential stigma and discomfort of queuing in public in their own neighbourhoods;

s The electronic transmission of JB and JA payments to bank accounts, suspended

for all clients early in the recession, is to be gradually restored. Having to make weekly visits to sometimes crowded post offices has been a significant deterioration in service quality for a large number of claimants;

s The new Public Services Card being introduced in 2011 is intended to deliver

efficiencies across the public service and improve customer service generally. It incorporates significantly enhanced security features (laser engraving personalisation, a signature, photograph and electronic card authentication), which can be expected to substantially reduce the rate of fraud and error arising from concealed or mistaken identity;

s The first steps are underway to enable claimants of JB seeking to transfer to JA

to self-certify their means. Placing this degree of trust on the applicant rather than on a public official to verify a household’s means constitutes a profound and welcome change in the administration of the means test. Instead of public officials being required to verify the household means of each applicant, applicants themselves will be relied upon to determine if their households qualify, and their assessment will be accepted until there are grounds for believing otherwise. As with the introduction of self-assessment for the self- employed, the realisation that public data systems increasingly ‘talk’ to each other (that DSP, Revenue, the PES and other public bodies are becoming more empowered and competent to share data), that audits will be regular and based both on advanced techniques of risk assessment and a rising level of public co- operation, and that sanctions are serious and sure to be enforced, will serve to keep the numbers tempted to claim fraudulently to a minimum. Public officials can use the time freed to improve audits and a new equilibrium can be reached in which the assumption of trust is balanced by a high level of effectiveness in identifying and punishing fraud.

These measures are welcome developments, which deserve both to be wider known and more vigorously communicated.