Benefit fraud: spies in the welfare war

Amelia Gentleman

At 6.30am, the housing estates that fringe Tunbridge Wells are silent, the roads empty. Colin Stevens drives into a cul-de-sac, searching for house number 18. There's a light on downstairs, and two cars outside. He notes the number plates, does a U-turn, parks the car around the corner and waits.

"When you are doing surveillance, you have to remain covert," he says. He has pulled in by a hedge, a good, inconspicuous position, he says, because it is not on someone else's doorstep. The sky is still purple-black, and passers-by would have to strain to see the two benefit fraud investigators sitting in the front of the car.

The men are responding to an anonymous tip-off to the national benefit fraud hotline. Someone, probably a neighbour or friend whom she's fallen out with, has alleged that the woman who lives here and who is claiming benefits as a lone parent is living with a partner. If true, and particularly if that man is working, she is not entitled to most of the benefits she is receiving and can be prosecuted. The fraud investigation service is here today for a preliminary check to see if the allegation appears justified; if it does, it will launch a formal investigation and a team member will arrange to be here every morning from 6.45am, secretly watching her home, filming people arriving and leaving, for about a week, or until they have enough evidence to present in court.

"We know that this guy takes the car to work. The good thing is that this is a cul-de-sac so there is only one way out. If I see him coming out of this close then, effectively, I've seen him leave that address," Stevens says. He is keen to protect his anonymity and has asked for his surname to be changed.

"It helps when it gets colder. If there's a thick frost on the car then that would suggest that it's been there overnight. It also means that they have to scrape the frost off and that gives you a bit more time to do surveillance. Today is bin day, which is also useful, because you might see him bringing a bin out.

"He should be coming out at 7am," Stevens says, and falls quiet. Light drizzle spatters at the windscreen.

"Hang on . . . Hang on . . ." he says, squinting at headlights that are drawing slowly out of the drive. "Here we go. Here we go. Bang on 7 o'clock. Almost too good to be true. It looks like the information was pretty good."

Satisfied, he makes some notes and drives off to another address on a nearby estate. This is the home of another single mother, who is – according to an anonymous informant – also not living alone. This is a well-maintained estate, with neat grass verges, orange leaves swept away from the hedges, but the residents here are not rich, and most are on benefits, Stevens thinks. He gets out of the car, dressed anonymously in white trainers, jeans and a black anorak, studies the two-storey brick ex-council house, now owned by a housing association, and is pleased to see a satellite dish. This will be useful because he can check whose name the Sky subscription is registered to.

"For lone parents, income support is done as a household. If a lone parent is not working, she would get income support of £90 a week, and housing benefit and council tax. But if there's another adult living with them and working, they should declare it," he explains. If the woman is found to be living with someone who is working more than 16 hours a week, the household would lose income support and probably housing benefit, council tax benefit, free school meals, dental help, school uniform help and free prescriptions.

It's 7.20 and getting lighter and busier when he drives to a third house, another home of a single mother, also believed to be living with someone. This man is thought to work for an IT company and Stevens notes down the telephone number painted on the side of a computer company van outside the house. The front room glows warm orange light, and a dark silhouette is visible fumbling at the net curtain, peering out at Stevens' car, which has paused momentarily outside. He drives off quickly and back to the office.

Tackling benefit fraud has become a high-profile mission for the new government. In an article last year, David Cameron wrote: "Simply shrugging our shoulders at benefit fraud is a luxury we can no longer afford."

The Department of Work and Pensions recently announced a zero-tolerance approach that would involve the recruitment of "another 200 anti-fraud officers to sanction a further 10,000 fraudsters every year", and proposed introducing a "system for rewarding members of the public who provide information that results in significant recovery of public funds". The department promised an additional £425m funding to combat the problem over the next four years, hoping this will deliver a £1.4bn reduction in fraud and error by 2014/15.

The previous government was also at pains to tackle benefit fraud, but something about the tone of the language used by the new administration has unsettled many poverty campaigners.

Speaking about the need to make large cuts to welfare payments, Chancellor George Osborne has described the benefits bill as "completely out of control" and criticised those who made a "lifestyle choice to just sit on out-of-work benefits". A "welfare cheat" was no different to a mugger who robs you on the street, he said. During the comprehensive spending review in October, when he set out proposed cuts, he said: "Nor will fraud in the welfare system be tolerated any more. We estimate that £5bn a year is being lost this way." The government would "step up the fight to catch benefit cheats and deploy uncompromising penalties when they are caught".

Tim Nichols, of the Child Poverty Action Group, says: "We've been worried by the government's language. There is more of a focus on benefit fraud in the Department for Work and Pensions' plan than there is on tax fraud and evasion in the Treasury plan, despite the fact that it is clearly a much smaller problem in terms of its cost. Recent figures show that we now have the lowest levels of benefit fraud that we've ever had."

The Salvation Army and a number of other charities have written to the prime minister pointing out that the £5bn figure highlighted by the chancellor was "a threefold exaggeration of the true government estimate of benefit fraud". The frequently cited figure is achieved by adding the estimated amount of fraudulent claims (approximately £1.6bn) to the estimated total of claims made as a result of an error either by the claimant or the official handling their claim.

There is an artful misrepresentation here; the suggestion is that the benefits bills is out of control because vast quantities of fraud is being committed by benefits claimants – so cutting the bill is just a question of tackling fraud. It is true that the benefits bill has grown rapidly, from £125bn in 1996/7 to £187bn in 2009/10, but this is not the result of increased fraud. The cost is higher because more people are (legitimately) claiming benefits and because an ageing population is making the cost of pensions soar. Less than 1% of people on benefits commit fraud, and those who do, campaigners argue, are often the poorest of the poor, and the sums involved very small.

"We in no way condone benefit fraud and would wish to see this reduced to zero, but we question the government's public emphasis placed upon it," the Salvation Army's letter reads. The government's language has the effect of "stigmatising the poor", it continues. "The tendency to emphasise fraud when poverty and welfare reform are discussed often distracts attention from getting resources to those genuinely in need, which accounts for the other 99.4% of benefit spending.

"We agree with the government that benefit fraud is a serious offence, but implying that the poorest perpetrate this offence three times more than is the case is clearly unjust."

The investigative skills of staff at the Tunbridge Wells fraud investigation service office have become much more sophisticated over the last couple of years. Fraud manager Graham Smith sets out the equipment available to staff in a harshly lit room above the town's Jobcentre, a room that has spectacular, panoramic views of prosperous Tunbridge Wells and the poorer suburbs, which tend to be the targets for surveillance. He lays out a bottle of Oasis, a can of Pepsi Max, a brown leather Radley handbag and a grey nylon backpack. A minuscule film camera is hidden in each of these, used with a remote-control device the size of a cigarette packet that the investigator keeps in his pocket. The handbag has a pinprick-sized hole in the strap, concealing the lens, the Pepsi can unscrews to reveal the camera, which films through a hole the size of the dot of an i, in the small-print of the ingredients. The bottle of Oasis is filled with pink liquid that you can shake around, visible above the label, but underneath there's a false bottom, hiding the camera.

"You have to be practised, otherwise you just film the ceiling or the floor," Smith says. Staff choose the device depending on who they are following: if they want to check on someone who they think is wrongly claiming disability allowance, they might follow them to a gym, and the bottle of Oasis could be casually left on a table, to film someone on the running machine, Smith says.

"Or you might put the coke can next to you on a park bench, sit and watch people playing football . . . But you can't just take it out anywhere. You have to have permission, since the European Human Rights Act was implemented. You have to show the there is no other way of obtaining the evidence that you need."

There are three different divisions of fraud control teams, a team dealing with minor administrative errors, the general investigative team, and a specialist team looking for organised criminals. The division in Tunbridge Wells is not using this surveillance to target sophisticated gangs, skilled at identity theft and organising fraud on a large scale, but is dealing with individual claimants and minor offences.

Stevens shows a film of evidence he and three colleagues have been collecting to prove that a woman who is claiming £90 a week in disability living allowance should not have been receiving any support for physical disability. "On her claim form she said she needed help going to the toilet, needed help getting out of bed, that it would take her a minute to walk 20 metres. She was receiving the highest rate of the allowance," he says.

There are snatches of film, each about a minute long, showing her walking briskly to the station, wearing high heels, walking up steps, getting out of her car. The investigators began following her in the winter, when she's wrapped in coats and scarves, on her way to work (oblivious to the team of two or three people trailing her) and resumed surveillance in the summer, when she's visible, cheerful in sunglasses, leggings and sleeveless tops, and still quite unaware that she is being followed, and filmed through a concealed camera, hidden in the strap of rucksack.

"She's the blonde women. The person behind her is another investigator, following her. Another investigator followed her on the train," Stevens explains, talking through the film. "That's her crossing the road. We counted the number of steps she walked down to get to the station." The camera zooms in on her high heels. "She likes high heels, doesn't she?" he says. "She's not a slow walker . . . There you can see her walking and texting at the same time. If you were unable to walk, you wouldn't be able to do that. She put on the form that she tripped over regularly. Not once did we see any evidence that she had a problem."

Five or six investigators have been involved in this case, which has stretched over a year, and will soon go to court. Teams like this are working on similar cases all over the country.

To an outsider, the work of the team raises uncomfortable questions. While it is obvious that fraud needs to be addressed, it is hard not to question the cost benefit of investing this heavily in one case. Equally, the focus on setting up dawn surveillance operations on single parents who are suspected of living with someone feels disproportionately draconian. Encouraging people to shop their friends and neighbours is also uneasy territory. You can't help thinking that if this wasn't an issue that touched only the country's more marginalised people, these methods might have prompted more of an outcry.

 A surveillance camera is barely visible hidden in the strap of a rucksack. Photograph: Martin Argles for the Guardian At a time when demonstrators with the UK Uncut movement are protesting about the ability of large corporations and rich individuals to avoid big tax bills, there is a dissonance in the heavy-handed tactics being used against those accused of wrongly claiming relatively small amounts. Vodafone, for example, has been accused of pressuring HM Revenue & Customs into accepting a potential tax liability reduced by £6bn; both Vodafone and HMRC deny the charge, but there is a feeling that some instances of tax avoidance are treated with more leniency than others.

Within the Tunbridge Wells office there is a lot of talk about the cases over recent years that have caught the public's attention – the pensioner who tap-danced on Britain's Got Talent while claiming disability allowance, the lap dancer who was receiving benefits on the grounds that she was too depressed to work, a football referee who claimed he was blind to increase his benefit package. But there is also a recognition that these are the exceptional cases. Staff admit that a large proportion of people who commit fraud are not motivated by greed, but do it because they are struggling.

"Thirty to 40% say they did it because of a drug dependency, alcohol, debt, money for Christmas," Smith says. "If we impose an administrative penalty that will push them further into debt." Where they can, officials will just request repayments, and recommend that between £3 and £13.95 is deducted from the weekly benefits payment. When benefits are set so low, this will push them into poverty. Smith shrugs and looks sad.

His colleague Leslie (who prefers not to give a surname) says: "You will interview people who have done some work [without declaring it] because they needed some money for a specific purpose, to give their kids a good Christmas, to clear a bit of debt. They know they have done wrong. If they are really sorry then hopefully you can offer them a caution that doesn't require a sanction.

"There's pure greed at one end of the spectrum . . . but you have more empathy for some people when you interview them. Most people will admit that they have done something wrong. Some people will say I just can't live on £64 a week, I can't live on benefits. But that's what the law says they are entitled to receive."

The Regulation of Investigatory Powers Act (Ripa), which governs how any surveillance must be conducted by the fraud inspectors, is the subject of a Home Office review that is looking at whether too many agencies have been given the right to conduct this kind of surveillance – it was introduced in 2000 to fight crime and terrorism.

Shami Chakrabarti of Liberty wonders if the methods used by the benefits fraud teams are disproportionate. "No one objects to reasonable surveillance on reasonable suspicion of serious crime, but Ripa contains insufficient safeguards against gross invasions of the privacy of the innocent and vulnerable," she says. "At a time of government crackdown, there is always a danger that the Benefits Agency becomes too free and easy about intrusive surveillance. Officials should stay out of people's sex lives unless there is a very strong justification."

In an interview in his office in the Department for Work and Pensions, Lord Freud, minister for welfare reform, admits he hoped to see less surveillance in the future. "One would prefer to get away from surveillance, not purely because it's intrusive. It's very expensive." But he is unapologetic about the need for these operations. "It is vital that people who attempt to undertake fraud feel that it is pretty high-risk and that the likelihood of detection is pretty high and that when they are caught the punishment regime is pretty effective. If we don't do those things, I think we are on a very slippery slope," he says.

The fraud investigation service's position is clear: "Stealing is still stealing even if you don't have very much money." Someone who is claiming as a lone parent, while living with someone who is working, would wrongly be receiving income support of £65.45 a week, as well as, perhaps, £80 a week in housing benefit, and £20 in council tax, and child tax credits. They could end up being overpaid around £7,500 a year.

Smith logs on to his computer and finds that the system has allocated him 46 new cases in the last five days, sorted under headings such as: "living together", "working and claiming", "undeclared capital".

A lot of them he will abandon. "We should only be taking cases that are likely to lead to criminal investigation because training our staff is quite expensive," he says. The team prosecutes about 50 people a year, aiming on average to reclaim between £10,000 and £15,000. They don't bother prosecuting for less than £2,000.

"Sometimes a lone parent is living with someone and will be receiving only £6 extra in benefits so it would not be proportionate for us to do surveillance. We might save £400 but we could have spent thousands to investigate it. We want results – someone to be getting a caution or to be prosecuted. We want the benefits to be stopped or put right."

Once the evidence is gathered, a claimant will be asked in for an interview, which will begin with a caution. "Our interviewing style is very friendly and conversational. We are very polite. We want customers to be chatty, to tell us what we need to know," Smith says.

If someone is found by the team to be wrongly claiming, payments will be stopped, the DWP will seek to reclaim the money and may also impose a fine. The issue of paying back the money is a difficult one. Benefits levels hover around the breadline, so making people pay back overpayments out of a weekly income of, say, £65 a week, is complicated. The DWP can impose a maximum weekly repayment of £13.95, so recovering the money is a long-term operation.

Tip-offs come from the police, Jobcentre staff and members of the public anonymously through the national benefit fraud hotline, which receives more than 600 calls a day, or online by typing information into the DWP's online report-a-benefit- thief service (it requests unusually detailed information on tattoos and hair type: afro, bouffant, bald, curly, dirty, dreadlocks, greasy, shaven, skinhead, wig).

Informants don't have to give any details about themselves, and staff do not delve into their motivation. "We get tip-offs from friends, family, ex-boyfriends, neighbours, a lot of ex-partners. There are a lot of disgruntled people out there," Smith says.

The government is considering paying people for information. Smith thinks that this would not be sensible. "I don't think it would be a good idea. We get a significant number of malicious allegations as it is. You get a lot of people wanting to drop people in it."

Bea Roberts, 31, from south London, knows the chaos that a malicious tip-off can cause. Three years ago her ex-husband's new girlfriend called the fraud hotline, to allege (falsely) that Roberts was still living with her ex-husband and not entitled to the benefits she was claiming. "She got jealous, and rang and told them that we were still living together. My ex-husband worked full-time, in a well-paid job, so if that had been true I wouldn't have been entitled to the JSA [jobseeker's allowance] or housing benefit."

Her benefits were frozen and it took 13 weeks before Roberts managed to persuade officials that the allegation had been a mistake. By that time she had been forced to leave her college course (because she was no longer eligible to study free, because benefits had been withdrawn, and she was unable to pay the fees herself). Although the payments were restarted, they were not backdated and by that point her rent was so deeply in arrears that her landlord evicted her. "It completely screwed my life up," she says. "It's a very dangerous system. It's not a good idea for people to be able to make these anonymous tip-offs. People should be accountable for whatever allegation they make."

There is an understanding within the DWP that much of the fraud and error it hopes to tackle is caused by the complexity of the system, which it hopes to iron out with the new universal benefit that is in the pipeline.

But organisations that support people on benefits as they look for work have questioned the new ferocity of the parallel campaign on benefit fraud, pointing out that if the government admits many of the problems are caused by the system being too complicated, it is peculiar to punish people for falling foul of its complexity.

"Less than 1% of people on benefits commit fraud, and most of those who do so need a bit of extra cash to tide them over. The complexity and perverse disincentives in the benefits system often leave them with little choice," Geraldine Blake, chief executive of Community Links, a charity working with claimants in east London, says.

Katie Lane, benefits policy officer for Citizens Advice, says: "Of course fraud should not be tolerated, but it needs to be kept in perspective. The amount of money lost to the public purse through benefit fraud is a tiny fraction of the amount that goes unclaimed by people in real need who should be getting help. "

Helen Longfield of Oxfam adds: "We know that most people want to work, that there aren't enough decent, secure jobs and that the government rarely puts an equivalent amount of effort into cracking down on tax evaders, which costs the country far more."

Lord Freud says that currently it is "very hard to disentangle fraud and error" but under the new system "it will be much more black and white. Things will be much more plainly definable as fraud and it will make it easier to police fraud."

Smith agrees: "Benefits are confusing. The government says they are confusing. No one has wanted to tackle them for years – it has always been put in the 'too hard' box. If the universal credit proposal works, it will make everyone's life easier. There will be much less opportunity for fraud and error."

For the moment, the work will continue. Stevens has cleared his diary so he can do a week of 3.45am starts to check on a house where a man (who is allegedly living with a single mother) is known to leave for work at 4.30am. It is not something he looks forward to with enthusiasm – there's not much glamour in benefit fraud surveillance.

"We're not driving through red lights or hiding under hedges. It's quite boring a lot of the time," he says. "It's quite boring and it's quite cold." The Guardian