Cameron’s war on benefit fraud: the unanswered questions

Where will the savings go? And what about the £40bn lost to tax avoidance?

The coalition is living up to its "breakneck" reputation today with David Cameron launching a new crusade against benefit fraud. He's written an article for the Manchester Evening News that promises an "uncompromising" strategy for tackling the £5.2bn lost to fraud and error each year.

The crackdown comes at a crucial time for the coalition, not least because, as today's Times reports, ministers have been asked to review all proposed cuts following the fiasco over free school milk.

The big question remains: if significant savings are made (and it's a big if) where will the money go? Most ministers would like any savings to be claimed as cuts to overall spending, remembering George Osborne's promise that large reductions to the UK's £192bn welfare bill could mean less pain elsewhere.

But Iain Duncan Smith and his allies (including Nick Clegg) would like any savings to be used to fund his radical welfare reforms. Duncan Smith's mission to incentivise work comes with a large price tag. It involves either increasing payments to those in work or reducing benefits to those out of work or in the lowest-paid jobs -- widening inequality in the short term.

Then there's the coalition's conspicuous failure to launch a comparable war on tax avoidance, which costs the UK some £40bn a year. If saving money really is the priority, it would make a lot more sense to start there.

George Eaton is political editor of the New Statesman.

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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.