The BBC yesterday aired a Panorama documentary called “Britain on the Fiddle”, which looked at the issue of benefit fraud.

As we noted yesterday, some newspapers trailed the screening by claiming to show the scale of the problem in this country, and not all were entirely accurate.

The Mirror claimed that “benefit fiddles” cost the taxpayer £22 billion per year, an estimate that could only accurately be applied to all fraud and error across the public sector, and not limited to benefits.

Now we have seen the programme, Full Fact wanted to follow up this piece with a further investigation of how the BBC arrived at the figure of £4 billion, which it claimed was the true sum lost to benefits cheats, tax credit fraud and social housing scams annually.

First Full Fact contacted the Chair of the Centre for Counter Fraud Services at the University of Portsmouth, Jim Gee, who appeared on the BBC programme last night to see if he could explain what the figure was based upon.

However, while he confirmed that the estimate of £22 billion being lost or stolen due to fraud or error came from a report by the Centre, he could not say where exactly the £4 billion figure came from.

The report, ‘The Financial Cost of Public Sector Fraud’, estimated that £22.4 billion is lost from the public purse as a result of fraud and error. This was calculated by applying the global survey percentages for fraud and loss to UK public sector expenditure.

However Mr Gee wasn't able to give us any further information about the £4 billion figure, and explained that it may have been arrived at through figures from the Department for Work and Pensions and the Audit Commission. The BBC have told Full Fact that Mr Gee himself made these calculations.

Full Fact has taken a look at a number of reports and has tried to work out how the figure might have been calculated.

For 2010/2011, the Department for Work and Pensions published preliminary estimates that total overpayments due to fraud and error across all benefits was £3.3 billion. However only £1.2 billion of this sum was due to fraud alone, and it only covers the benefits administered by the DWP.

The Home Office report on Fraud Focus in February 2011 estimated that benefit fraud costs £1 billion a year while tax credits fraud accounts for £460 million of lost revenue, putting this at a total of £1.5 billion a year.

However this figure wouldn’t include the ‘social housing scams’ which the BBC claims is captured by its figure.

The Audit Commission produced a report in 2009 which found that: “assuming a conservative estimate for tenancy fraud levels of 2.5 per cent in London and 1 per cent elsewhere and assuming that unlawful occupation of social housing is comprehensively tackled, this would mean that almost 50,000 properties (with an asset value of more than £2 billion) could potentially be brought back into social use.”

If we add this £2 billion to the £1.5 billion reported as lost by the Home Office, we can therefore begin to approach the £4 billion figure.

However, this does present a number of problems.

The BBC claim that this £4 billion is the sum lost each and every year to individual fraud in the welfare system.

However the Audit Commission’s estimate that £2 billion could be released by stamping out social housing fraud is based upon the value of the properties that are being misused.

This is based on the assumption that there are 50,000 such properties in total – it is not a sum that can be realised on an annual basis.

If this is indeed how the £4 billion figure was arrived at, it does not seem a reliable estimate.

The other claim trailed in yesterday’s press was that benefit fraud grew by a third in three years. This was easier to pin down.

In a joint report with PKF Accountants on the Financial Cost of Fraud, the Centre for Counter Fraud Services estimated that fraud has risen by as much as 33 per cent since before the recession.

So while the Centre for Counter Fraud Services’ work does help to explain where some of the figures used last night came from, there is still some uncertainty about the source and validity of the £4 billion figure.

We are still trying to get to the bottom of this, but in the meantime we would recommend sticking to the estimates put forward by the DWP and Home Office.

Update (05/11/2011): Full Fact has spoken to the Panorama team, who have confirmed that Mr Gee himself provided them with the £4 billion estimate, and we are hoping that they will be able to tell us exactly how this was arrived at.