Dáil Éireann Debate, Wednesday - 23 November 2011
7 Deputy John McGuinness asked the Minister for Social Protection the total amount of cost savings in anti-fraud measures achieved to date in 2011; the direct impact she anticipates that the cost savings will have on the €700 million in direct reductions in her Department’s budget in 2012; and if she will make a statement on the matter. [36315/11]
Amharc ar fhreagra23 Deputy Mick Wallace asked the Minister for Social Protection her views on whether it is realistic that she can save more than €600 million tackling welfare fraud in view of the fact that it is impossible to calculate at this stage the volume of fraudulent claims; if it will prove problematic if the savings do not reach the figure suggested; and if she will make a statement on the matter. [36281/11]
Amharc ar fhreagra34 Deputy Clare Daly asked the Minister for Social Protection if she will explain and justify the claims that €600 million worth of savings can be made by the further elimination of social welfare fraud. [36201/11]
Amharc ar fhreagra37 Deputy Mick Wallace asked the Minister for Social Protection her views on the notion that she can save more than €600 million by tackling welfare fraud is seriously optimistic and will prove problematic down the road if not achieved; and if she will make a statement on the matter. [36280/11]
Amharc ar fhreagraI propose to take Questions Nos. 7, 23, 34 and 37 together.
The prevention of fraud and abuse of the social welfare system is an integral part of the day-to-day work of the Department which processes in excess of 2 million claims each year and makes payments to approximately 1.4 million people every week at a cost of approximately €21 billion per annum. However, it is important to recognise that the vast majority of people receive the entitlements due to them.
For 2011, my Department has a target of reviewing 780,000 individual welfare claims and achieving €540 million in control savings. At the end of October, approximately €536 million in estimated control savings were reported and more than 746,000 reviews have been carried out. For 2012, the target for control savings is provisionally set at €625 million, an increase of €85 million on the 2011 target.
Control savings are an estimate of the value of the various control activities across the schemes in payment. Control savings are not actual moneys recovered by the Department, but they are a good indication of the increase in social welfare expenditure that would occur without these control activities taking place. They are, therefore, an estimate of future expenditure avoided. These savings arise as a result of control activity on claims in payment and from inspections of employers. These activities also have deterrent or knock-on effects which are not readily quantifiable in monetary terms. They are used as a performance indicator for year-on-year activities. As control savings are already factored into the budget estimates, the reductions in expenditure that the Department is expected to achieve in the forthcoming budget will come on top of the existing fraud control measures of €625 million.
I recently launched a new fraud initiative which aims to put in place a range of actions to combat fraud and abuse of the social welfare system and ensure public confidence in the integrity of the system is improved. A key priority is to ensure fraudulent activity in the social welfare system is vigorously prevented and combated. Social welfare fraud undermines public confidence in the entire system. Deputies may be aware of the large increase in the volume of social welfare inspections of employers and inspectors' visits to people in receipt of a social welfare income and inspectors examining information supplied to the Department by members of the public.
I am glad to hear the Minister will achieve the target of €540 million which the Department inherited this year. I would like her to kill a myth which has evolved in recent weeks. Last week I heard the Minister of State, Deputy O'Dowd, state that of the €700 million reportedly targeted for savings in the Department, €600 million would be achieved by virtue of anti-fraud measures. Will the Minister clarify for him and others in the Government who may be portraying this view that, first and foremost, the Department has achieved the target of €540 million it inherited this year and that next year a target has been set for the Department of €625 million, which indicates the savings that can be made by the Department in this area against the target figure of €700 million amount to only €85 million? When I say "only," I do not mean to be flippant, as it is a great deal of money when we are speaking about people in great need who depend on all payment rates, let alone primary rates. I do not understand what is meant by "primary" or "secondary" when those dependent on income from the Department of Social Protection value every euro and cent they receive, irrespective of what somebody calls it. Will the Minister clarify that the net saving in respect of the target of €625 million set for next year will be €85 million and that this is the only figure that can be measured against the Department's target figure of €700 million?
Yes, I do wish that some of the statements made about fraud savings could magic away the requirements of the IMF and the troika with regard to social welfare expenditure. All of my predecessors in this portfolio would be delighted if this were to happen.
An example of what happens in most fraud control activity is finding people in a place of employment not registered for PRSI and who are, therefore, working in the black economy. Normally the explanation given is that they have just started work and it is almost impossible to prove otherwise. What happens is that fraud and error detection work prevents future expenditure on a claim which would be deemed inappropriate. These savings are built into the Department's Estimate. However, in recent times I have advocated targeting areas in which there is a good reason or information to suspect there might be fraud or abuse in order to have a targeted and coherent examination, involving visits to employers and multi-agency checkpoints with the Garda, the Revenue Commissioners, the customs service and the taxi regulator, to check that persons involved in various activities and employments are properly registered for PRSI, tax and social welfare contributions. These visits have yielded an interesting number of cases and outcomes involving people who have been claiming benefits to which they have not been entitled, or who have been working in the black economy.
May I reiterate some of the points made by Deputy Cowen? It is misleading because people were under the impression that there was welfare fraud amounting to €600 million. It was disingenuous for some people to suggest that this was the case. There is no doubt that there is welfare fraud but by all accounts it is nothing remotely close to the figure we are talking about. The Minister has probably seen the TASC report by Mr. Michael Taft in which he stated:
It suits a certain agenda which wants to soften up public opinion for social welfare cuts to claim that hundreds of millions have been lost to fraud and cheats. We have had television investigations, newspaper headlines, and attention-seeking politicians all claiming massive fraud. But out of a budget of nearly €20 billion, the Department of Social [welfare] has found only €25 million in fraudulent payments — or about 0.1% of the entire budget.
The figure of €600 million is therefore a bit misleading. Last year, some serious research was undertaken by an independent group in Britain. With a population of 60 million there, welfare fraud was estimated at £1.5 billion. The same research estimated that tax evasion and tax unpaid by tax exiles amounted to £80 billion. Our Government should examine the same scenario.
What the Deputy is saying is well accepted by people, and certainly by myself. Whether the fraud concerns social welfare or tax evasion, both mean that honest businesses and taxpayers must pay for entitlements to which others should be contributing. According to an estimate I have used before, there is approximately a 1% fraud rate in the social welfare system. We do not know, however, because the information on this is quite sketchy. Nonetheless, 1% of €20 billion is €200 million.
There is also an issue of the integrity of the system. Since the recession hit, members of the public have been contacting the Department of Social Protection in large numbers on issues that they are unhappy about. I will cite one example, if time allows. A non-residency project was carried out as one of the ongoing national projects. The special investigation unit focused on individuals who were suspected of not being resident in the State. Nearly 3,000 people had home visits and were interviewed about their claim status. A total of 308 claims were terminated as a result of the special investigations unit, with savings of €3.24 million to the Department. Those savings are important but what is also important is the confidence in the integrity of the system, so that contributors know that the money is going to those who are entitled to the relevant entitlements, such as pensioners and those on disability or invalidity benefit.
There is also a great deal of confusion about our system because people are allowed to work, and it is perfectly legitimate. They may be working part-time and sometimes their neighbours may think that is not permitted when, in fact, the system does permit it.
I am coming at things from a slightly different angle on the same point. If the intention in focusing on fraud is really about reducing the social welfare bill, would it not also be quite important to focus on ridiculous anomalies such as, for example, the case of a young man named Fergus O'Farrell, who is mentioned in a question further down the list? He wants to go on the back to education allowance but is deemed ineligible because he is too young and so is being forced to drop out of college and go back on the dole. Consequently, he will spend nine months longer on the dole, whereas he wants to go to college but cannot get the allowance to do so. Should we not examine such anomalies involving people who want to get back into education so they can be trained and upskilled rather than being dependent on social welfare? The current system is forcing them back onto dependency on social welfare.
Social welfare entitlements are set out in law, upon which the inspectors must make their decisions. The individual to whom the Deputy referred obviously has a particular difficulty. Confidence in the social welfare system is a separate issue to that of fraud. I have had numerous representations concerning difficulties in the taxi industry. That industry used to provide reliable employment for one person or a family. We now have large volumes of people working in the taxi sector where a review is currently going on. The key thing is to ensure that taxi drivers' PRSI numbers are recorded. In addition, when they are working in the taxi industry they must be recorded for tax and PRSI purposes. At the moment, special investigation units are carrying out inquiries throughout the country to ensure that people who are offering taxi services are properly registered for tax and PRSI. It is vital that every other citizen who is paying tax and PRSI has confidence that others are not abusing the system.
Does the Minister agree with the Comptroller and Auditor General when he stated that the current practice of including all overpayments arising from control activity as bankable savings is questionable? He was referring to the sum of €25 million in fraud but that equates to only 0.1% of the total budget. Overpayments from bureaucratic administration or applicants' errors account for €83 million. Does the Minister agree that that combined figure is a lot less than the €600 million she has been quoting?
The biggest problem society faces in this area is the rampant growth of the black economy, which is a big threat to legitimate businesses that are paying tax and have their employees properly recorded. It is important to inform the public about the work that is being done in this regard by my Department's special investigations unit, the Revenue Commissioners and the Garda Síochána. It would be a disaster for the economy if we were paying social welfare to those who are also working in the black economy. They are undermining legitimate businesses and are costing the State money. I accept that there are a lot of errors and misclaims arising from honest mistakes but, nonetheless, it is important to combat social welfare fraud. The last social welfare Bill included extra powers to provide for integrated checkpoints, which have been producing a great deal of additional information, as well as ensuring employers and employees are properly registered.
