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10 August 2010

Cameron’s war on benefit fraud: the unanswered questions

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

By George Eaton

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.

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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.