Thickest Idea Evar !
So, this Is basically a Daily Mail readers wet dream. That's why the Conservatives and indirectly their underlings... sorry "partners" are pushing it. The idea of all these insipid poor people cheating these upright Middle Class and Upper Class people who would never think of dodging tax or exploiting poor people to turn a buck just makes me ill.
Shame on you poor people ! Shame !
But has anyone asked if this estimated £1.5 Billion per year would cost us more than the initial start up and operating costs for the new "Trawl and Haul" scheme.
Let's think about these costs.
1) Startup Costs; creation of department / re-organisation of existing department; to encompass transferral of staff or hiring new staff, new furniture & IT equipment, possible relocation to new site.
One could approximate maybe £10 Million to get things started.
2) Cost of employment; If this figure is to be believed then it could mean upwards of over more than 500,000 people defrauding the Government @ an average of £3000 per year. Of these how many are repeat offenders? How many are one off offenders, who are now employed and out of the system? The Government does not know, indeed it can't even publish an estimation of just how many "Benefit scroungers" there are at all.
Let us say for every 1000 fraudsters there is 1 public employee and say 5 private employees @ an average £25,000 per year, so around 500 Public workers = £12.5 Million. Private companies will of course require that any dedicated staff be paid out of the public purse. So around 2500 private workers = £62.5 Million. Thus overall cost of employment is only £75 Million. Sounds cheap in comparison to the £1.5 Billion being lost. However that is not the only cost
3) Operational costs; Coffee Machines, Rent, Power, Software licences etc
Perhaps not more than a £5 Million a year ?
4) Bounty fees; Private companies will want commission of that there is no doubt just paying the wages and balancing the books is not enough they will want to turn a profit from this new "revenue stream". If the average Fraudster is making a hookey £3000 grand every year their bounty might be say much as 25% of that ? let's say they detect at the full 100% every year lol, that's £250,000,000 straight into private hands. Of course they will catch much less maybe only as much as 20% (100,000) but even at the likely estimation that's still £75 Million and of course 80% of the fraud us still occurring (£1.2 Billion). Perhaps they will target those who are taking the most but then that involves targeted investigation and will cost more to achieve.
Either way the cost will be high and 50% plus success will be unlikely especially in the first 3 years of the scheme.
5) Judicial costs; The cost to produce evidence and the cost of trial. Firstly one can assume the defendants will require Legal Aid. Secondly one can assume that the majority will have no saving or equity that can be used to pay the fine if one is given, it is highly unlikely that any will have a house which can be repossessed. So if say that 100,000 people are caught every year and brought to trail (the current figure is 56,000 per year) and that the cost of legal aid is £100 per hour and that each trial/hearing is at least 1 hour long and the consultation with the defendant is at least 2 hours in total that is £30 Million pounds per year. The CPS' costs will be slightly more as they will have to gather evidence and that may take more time. Let us say the total is 6 hours for them., that's £60 Million. the rest of the court fees could come to as much as £200 per hearing, so another £20 Million. Then there are admin fees of course. All together cost of trial could be upwards of £110 Million per year.
Even if the defendants are fined, most of them will not have the finances to pay and as they will be back on benefits the Government may well be paying itself.
This bring us to the other main point. The government will not recoup the money lost in any way as the fraudster will most likely not have anything to pay back with. The cost of incarceration, probation or community service supervision may well be more than the fraudsters original cost to the Government. The only benefit to any of this is to stop hardcore offenders from doing the same thing the following year and to pander to the Daily Mail mob, but as there will always be new potentially fraudulent claims one doubts that there is even a long term saving.
Perhaps the most telling aspect with regards to the true nature of this policy is that benefit fraud only accounts for less than 1% of £148 Billion spent every year whereas Tax evasion costs in excess of 15 times the amount benefit fraud costs.
Also think of how much wealth is concentrated in just a 1000 companies evading tax ? I would argue much more than the 500,000 people potentially defrauding the benefits system. You could recoup more by doing much less targeting tax evasion.
I think it can safely be said that this us more of a political stunt and Tories acting out their deepest sadistic sexual fantasies... those embedded in their ancient cultural psyche... the unconscious remembrance of beating and raping ones servants, serf's & slaves.
This has nothing to do with economics.