Informers and Benefit Fraud


Informers and Benefit Fraud:
A Libertarian View
By Sean Gabb
February 2010

I have just been sent one of the most disgusting newspaper articles I have seen this year. It is from today’s issue of The Guardian, and describes how the British Government is considering a scheme to reward those who inform on benefit cheats. Astonishingly, the Ministers seem to think this will make people more inclined to vote Labour at the next general election. If they are right, I am not sure how much longer I want to live in this parody of a country.

But, now I have said enough about the proposed scheme, let me explain what I find so disgusting about it.

The first is that, while every respectable person has a duty to report crimes against life and property, and to bear witness if required, there is much difference between this and calling into being an army of paid spies and police informers. Such people are not needed to report genuine crimes. Their general use is to act as the eyes and ears of an oppressive state. Established for one purpose, their use inevitably spreads to other areas. There is a natural temptation for paid informers to become agents of provocation. There is an equally natural temptation for them to become blackmailers. The resulting culture is one in which friends drop their voices when discussing anything in public that might be overheard to their disadvantage – and where new acquaintances, and even old friends, are viewed with suspicion. My wife grew up in Communist Czechoslovakia, where all this was a fact of everyday life. It was this, far more than the police and security services, who were responsible for a collapse of trust between ordinary people that has outlived is cause by twenty years.

It may be argued, that unlike drugs and prostitution, benefit fraud is not a victimless crime, but is theft from the taxpayers – but that, while they may be expected to report burglaries, individual taxpayers have no incentive to turn in someone who is claiming while working on the side. This is true, but needs to be seen in perspective. No one knows how much benefit fraud actually costs – the figure of £1 billion is believed to be a gross underestimate. However, even if the cost were five or ten times this figure, it would still amount to barely two per cent of total government spending. Most of this goes on paying for services that, where not useless, are harmful to life, liberty and property. Look, for example, at Trevor Phillips. In 2006, he was appointed Chairman of the Commission for Equality and Human Rights at a salary of £160,000. Doubtless, this has since gone up. Even so, his initial salary was equal to more than 2,488 weekly payment of jobseeker’s allowance at the maximum single rate of £64.30. In return for this, his most famous achievement to date has been to hound the British National Party into not insisting that its members should be white – while doing nothing to stop the various Black Police Associations from insisting that their members should be black. As if his published salary were not enough, Mr Phillips was revealed in 2008 to be the majority shareholder in Equate Organisation, which offers a “discreet, customised service” on how to handle the sort of equality issues that are investigated by his Commission. Oh, and the man who is employed to make then nearest things acceptable in public to puking sounds every time the name Nick Griffin is mentioned apparently keeps a bust of Lenin on his desk.

But if more loathsome and better paid than most of the others, Mr Phillips is just one among hundreds of thousands of New Labour apparatchiks given our bread to eat in return for oppressing us. I have no doubt these people collectively earn more than the £116 billion that is paid out every year on benefits. According to the probably fake statistics that attended the informer proposal, benefit fraud may cost every taxpayer in this country £35 a year. Well, I for one, can live with that. Once all the excise duties are paid, it is much less than a single tank of diesel for my car. The New Labour State costs me upwards of half my income, plus my liberty and my sense of nationality.

The only people who are really harmed by benefit fraud are those committing it. They lose yet more of their self-respect. This being said, the benefit rates are so awful that I fail to see how anyone can feed himself and his children without some cheating. Certainly, those on public welfare should not be able to buy cars and flat screen televisions. But they should be able to pay their heating bills and afford Christmas presents for their children without putting themselves into the hands of loan sharks.

And I do not believe that this sort of benefit cheat costs me anything approaching £35 a year. Everyone knows that the benefits system is being systematically milked by gangs of – usually foreign – criminals. Everyone knows that key parts of the system have recently been captured from the inside by organised criminals. Twenty years ago, a friend mine worked behind the counter of a Post Office in South London. He told me at the time how workers from the local benefit office used to come round to cash cheques they had written out to each other. I shall be most surprised if this turns out now to be the worst manner of inside fraud. And these are frauds that can and should be detected by ordinary policing. They do not require the machinery of a police state.

This brings me back to the informer scheme. I cannot help mentioning that it has been by Jim Reid, the Scottish Secretary. He is said once to have been a member of the Revolutionary Communist Party. Trust a Labour politician to have dropped all his proclaimed ends of raising up the poor – but not the police state means these ends were supposed to justify. I hate everyone of my generation who went into politics. Thirty years ago, they sneered at me and people like me as “selfish” and “abhorrent”. They spent the next twenty years insisting to each other and anyone who was stupid enough to listen to them that, when they came into their own, ordinary people would live in dignity and want for nothing. They have since then matured into the worst ruling class this country has seen since the Normans assimilated. The expenses scandal is nothing compared with how they have governed the country in public.

Now, I suppose I should offer some positive recommendations of my own for dealing with benefit fraud. I doubt anyone important is listening to me. But let it be supposed that some political party were to consult me on welfare reform – what would I suggest?

In the short term, I would set the police on catching the organised gangs of benefit cheats. Once these were in prison or deported to their countries of origin, much of the problem would have been solved. For the rest, I would advise looking the other way unless some minor fraud came to the attention of the authorities in the normal scheme of enforcement.

In the longer term, I would try to make most of the state welfare system redundant by lifting the tax and regulatory burden that stops the poorest people in this country from looking after themselves. And this is not – let me say at once – some soft version of the neo-liberal gloating about forcing welfare recipients into work by cutting their already pitiful benefits. Though it may always exist in a free society, the wage system as we have known it during the past few centuries is neither natural nor desirable. It is a cleaned up version of the bottom end of the feudal system, transmitted to industrial society via the management of domestic servants.

Middle class people often moan about the surly attitude of the working classes – about their unwillingness to do as they are told unless they are banned from union membership, or unless their unions can be taken over by middle class bureaucrats who then sell their members out. But I can think of no middle class person who would like working class conditions of work. I remember reading some years ago of a B&Q warehouse in Bristol. The casual workers employed there were electronically tagged. If anyone stopped moving for more than ten minutes, a computer shouted a message into his earpiece to report to the management office. No one does this sort of work unless he is desperate. No one who does it can have any pretensions to dignity. To say people have a choice whether to work for B&Q is a patronising joke. It is B&Q or Tesco, or some other demeaning job. It is like saying a man has a choice of meals if the menu shoved under his nose offers turd sandwich or snot pizza.

What I have in mind is letting poor people start their own micro-businesses in the manner described by Kevin Carson. Let someone start a coffee shop in the front room of his house. Let a family brew beer and sell it. Let people open little schools to teach reading and writing. Let them look after other people’s children. These things are currently not permitted. Or they are prevented by taxes and regulations that raise the fixed costs of doing business to the point where unreasonably large revenues must be generated year after year. Some people may get rich from doing this. Most will not. But enrichment is not the purpose. The real purpose is to give people the ability to survive without having to rely for all their income on salaried work.

It goes without saying that all subsidies to existing large businesses should be cut off at once – no more transport subsidies that allow goods to be moved about at less than full cost; no more interventions abroad to stabilise export markets, or secure access to artificially cheap goods and labour; no more taxes and regulations that can be carried by big business as cartellised costs, while flattening new entrants to the market; above all, no more limited liability laws that foster the growth of huge joint stock enterprises that are little more than the economic wing of the ruling class.

Where welfare is concerned, people should be enabled to join together in free mutual societies, accepting members and offering such benefits as may be agreeable to the relevant parties. This means no more taxes and financial regulation, and no more money laundering laws that, again, are little more than state cartellisation.

One of the failings of libertarianism – and I do not exempt myself from past guilt – is that we have too often argued as if actually existing capitalism was the free market. We may have conceded that business was too highly taxed and regulated, and that this frequently was turned to the advantage of the bigger firms in any market. But the assumption has too often been that a free market is effectively Tesco minus the state – that the wage system and big business were both natural and desirable institutions. As said, they are neither. The state capitalism that, in the 1980s and 1990s, we called Thatcherism or Reaganism was nothing approaching a free market. It was better than state socialism. But that is not saying very much. It has to some extent been our fault if ordinary people have been offered an apparent choice between a system in which a lucky few grow gigantically rich through connections and the ability to shuffle paper in the accepted ways, and ordinary people cannot buy houses and have children without going head over heels into debt – and sometimes not even then – and the present system of shadow boxing between multinational corporations and a huge superstructure of at best intrusive and at worst corrupt officials.

I might end by accusing the present Government of moral and intellectual bankruptcy. But this would be to absolve the equally if differently useless Tories. It would also be to concede that any of these people ever had anything good to offer. They are evil. Never mind the ideals they still sometimes ritualistically claim to guide their actions. All they have ever had to offer is a land fit for police spies and agents of provocation. They must all be destroyed – politically and financially.

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11 responses to “Informers and Benefit Fraud

  1. Micro business enterprises are good for some people and the taxes and regulations (although many taxes and regulations do not apply to very small “micro” enterprise with no employees, and virtually no capital or turnover) do make it more difficult to work from home.

    However, the idea that mirco business enterprises can make any big dent in poverty is absurd.

    Large business enterprises, and (especially) small business enterprises (enterprises with only a few employees) might make a differnce – but micro business (enterprises with no employees at all – and no real capital) can not.

    On regulations – someone cutting hair in their front room is not really the issue. It is small business enterprises (with a few employees – not none) that are really hit by regulations. And, of course, many of those regulations have an E.U. origin (in directives and so on) so one can not really deal with them without getting out of the E.U.

    Of course the United Kingdom (and all other nations) should indeed leave the E.U. – which should not exist.

    Taxes….

    To reduce taxes on business (small or large) one must look to spending.

    The British government deficit is about 8% of GDP.

    Produce the cuts that will balance the budget (and end the need for the demented nonsense of the government creating money, from nothing, lending it out and then borrowing it back……) so there be real saving, and real investment (private investment) once more.

    In the present near zero percent environment real savings (and thus real investment) is crippled.

    But, as is plain from the above, monetary policy is linked to fiscal policy – whilst the government spends vastly more money than it takes in taxation, monetary policy will remain wild (in order to try and fnance the deficit spending).

    It is cutting government spending that is the key – and most government spending is on the Welfare State.

    However is “rewards for informers” the policy that is going to produce major savings?

    Like Sean Gabb, I doubt it.

    It just seems more desperate thrashing about.

    What the government should do is to first get rid of spending that is clearly without any merit.

    E.U. spending.

    Overseas aid – the Department.

    The Department of Culture, Media and Sport.

    The Department of Trade and Industry (corporate welfare).

    The endless antidiscrimination bureacracy – and the various “health Fascist” and “safety Nazi” stuff.

    And so on…….

    Of course such cuts would not be enough on their own – not nearly enough.

    But such cuts would be a sign of good faith – that the government is taking the matter seriously.

    Then the Welare State could be seriously looked at. Perhaps (as a first stop) freezing health, education and welfare spending as it is (not cutting by a single Pound – just a real freeze), for the present.

    “What about defence?”

    Heading towards 2% of GDP as it is – hardly a big burden.

    But as a gesture of good faith………

    Say a total pullout for Afghanistan – at once.

    And the end of all British aid operations and bases in places that are not British.

  2. Of course Britain should leave (and leave at once) international organisation that in no way help defend Britain – that are not defensive alliances.

    Organisations such as the United Nations and the various international “courts” (especially as the once independent European Court of Human Rights now seems to work within the E.U. system).

    And, of course, the World Bank and IMF.

    The vast sums that the government is pledging to these organisations (for their totally hopeless, and witless, bailout efforts) make the sums of money involved in benefit fraud seem very small.

  3. I am largely in agreement with Mr. Gabb. But one point: If a company or a person declared some limitation of his liabilty – I can think of various forms – and made this public, and put it – or variations – on all contracts, would that not be OK? If you are too worried about this limitation you would simply not do business with it/him/her.

    Of course, this would not include people who are not involved by contract. If a company blows up a block accidentally, then full liability would be used.

    Another thing – if limitaion of liability by corporations were introduced, it should not mean joint and several liability, but liability in proportion to the number of shares owned – otherwise even pension funds would not work.

    This is not saying that abuses don’t occure. Lots of clever games have been played by people building corporate strucures were problems are shuffled under the carpet of some subsidiary, which as the sub is itself a corporation, can then quitly go bankrupt.

    Nils

    • There is no obvious principle for the apportionment of liability in cases of tort. It could be joint and several for all shareholders, or in limited in proportion to shares owned, or something else. Or the directors could be treated as the real owners.

      I teach Company Law, and am continually astonished by the cases that are thrown up. Most capital in this country is freefloating and unowned in any meaningful sense.

  4. I agree informers are the “Scum Of The Earth” if the government is planning
    to recruit more of these, lets hope it comes back to bite them in the arse, the
    last labour government started the informer situation giving anonimity to
    the bastards when they judus their neighbors. Carl.

  5. Well said Sean. What a tonic for me to be downing this morning. Here I am going crazy asking why it is other people cannot see what I’m seeing when I look at UK & Co.

    Also well commented Paul (another person on this site that I’ve come to expect nothing less from… and thanks for that by the way). One thing though: I was talking to a chap with the name of James Somerville on Tuesday evening last week (he. of Attik fame) and asked for more detail on how he first got started. He said, that when he left Batley Art College in the mid 80s he was flat broke and reduced to sketching on street pavements for coins. He knew well enough what he wanted to do in business but couldn’t raise cash sufficient to even reach first base. Upon relating this depressing predicament to his Granny one day, she suggested he bought a gallon of paint and brightened up her attic room. Then, when he’d done, he’d have his design studio, his office and a desk; complete with telephone. He and a friend from art school – also flat broke – clubbed together and bought the paint.

    From that most unlikely beginning he took on the world and has had his share of success. Of course, I do agree with you that these micro businesses mostly tick along before too often failing. But that’s only half the story. The real point of why they are needed, lies in the fact that they offer hope to many talented people… and hope does spring eternal.

  6. I seem to have been kicked off wordpress for some reason: let’s see if this gets me back.

  7. That’s better: it’s never done that before, and left me with no dashboard bar or how to get it!

  8. Sean – From my experience as a Revenue investigator, I can personally vouch for the fact that working and drawing has been widespread in certain occupations, most notably the building trade, small factories such as those used in the Rag Trade and occupations which use a great deal of casual labour. Employers frequently connive with the employees saying they will pay them so much and they will have to make up the pay with illegally drawing benefits. It was and probably still is a routine practice in the London Rag Trade for employers making the clothes to let their employees off work so they can sign on. The self-employed, especially those operating in the black market, are also a dab hand at it.
    However, I would agree with you that it is (1) a practice whose cost is not massive in the context of the national economy or government spending and (2) immigrants and ethnic minorities are particularly likely to be found doing it. There is a possibility that the practice may have decreased since working tax credits have been available because there is less pressure on employers to force their employees to claim false benefits as they can do pretty well from tax credits, particularly if they have children. An individual could of course claim tax credits under one identity and illegal credits under another, but both are administered by the DWP and the chances of being identified as a fraudster are significantly larger because of it.
    I also agree that the idea of paying people to inform is obnoxious and pernicious in its long term effects, corroding both the moral character of the informer and the general social cohesion. I also applaud your empathy with the type of lives the poor (and increasingly anyone who is not genuinely rich) have to live for want of anything better. .
    Where I would take issue with you is your idea that state benefits could become largely redundant if taxes were lowered and the poor set free: “I would try to make most of the state welfare system redundant by lifting the tax and regulatory burden that stops the poorest people in this country from looking after themselves”.
    The problem with this is that wherever there has not been a system of universal benefits society has always come up far short of meeting even basic subsistence for all. It is unrealistic to expect most let alone almost all to be self-starters. Indeed, it is very unlikely that society would work if they were because complex societies require those to lead and those to follow simply to sustain them. Suppose everyone wanted to run their own business how would any large industrial undertaking arise or a large hospital be run?
    There is also the question of ability. Around 10% of the British population have IQs of 80 or less. An IQ of 80 or less is the level at which most psychologists think that some will struggle to lead an independent life in an advanced modern society. To those can be added the truly physically disabled, the old and children. None of those can either look after themselves or be assumed to look after themselves. Nor can private charity be expected to automatically meet their needs.
    Finally, there are great barriers being erected to young being able to make provision for housing, pensions, children and higher education. As I have pointed out before, we live in a low wage economy and the idea that someone on even average wages can meet all those demands is fanciful.

    • Various things to say, Robert. The first is that wages in any reasonably open market are not set by employers. The wages an employer is willing to pay will tend to be determined by the value added to total revenue by the last person to be employed. The ability of workers to claim benefits, or enjoy other sources of income, has no bearing on the wages an employer is willing to pay. The ability to claim does affect the wages that someone is prepared to accept. But, in standard neoclassical terms, benefits affect price only by shifting the supply curve to the right: the demand curve is unaffected. Outside conditions of monopsony or collusion, the dictation theory of wages is false.

      Second, even granting that, in other times and places, some redistribution from the top and middle has been needed to keep the poor alive, this possible consideration does not apply to a country like England in the 21st century. So long as there is a state, there will be some kind of welfare net. Perhaps there should be. But this does not need to be the safety net of first recourse.

      Third, I do not claim that the wage system would wither away in a free market – only that it would be less prevalent. Some people will always find it convenient to be told what to do , and when. But there is no good reason why virtually everyone should be in a master-servant relationship.

      Fourth, in a radically decentralised economy, without large concentrations of capital, big projects would still go ahead, but would be brought into being by various forms of sub-instruction and ad hoc joint ventures. If, in a free market, with broadly current levels of technology and wealth, there would not be a Channel Tunnel, or landings on the Moon, that does not so much indicate a market failure as a lack of real demand for such things.

      Otherwise, I agree that we live in a less ideal society than was generally expected as recently as the 1970s. This is a result of heavy taxes and regulations, and state-sponsored mass-immigration. These are all forms of state failure, or of outright sabotage by the ruling class.

  9. is their a law that states people have the right to be told who is accusing them of benefit fraud