Do gangs cost the UK £40 billion a year?
Conservative MP David Davis responded to the recent riots across England yesterday by calling for change in the leadership of Britain's police forces.
In an article for the website ConservativeHome he argued that gangs and gang culture was a major factor that in the recent violence, claiming that gangs already cost the UK £40 billion a year.
Shocked at such a large figure, Full Fact decided to check it out and work out how it breaks down.
Firstly, it is worth putting £40 billion in a bit of context. It is larger, for instance than the budgets of the Home Office and the Criminal Justice system combined — as shown on the graph below.
But how is the £40 billion worked out and what does it actually mean?
Mr. Davis's figures are sourced in a recent Home Office strategy announcement released on 28 July this year. The second paragraph of the announcement states:
"Organised crime costs the UK public between £20 billion and £40 billion each year and poses a risk to national security. Its effects are felt by individuals, communities, businesses and our economy on a daily basis."
But the estimate has been around for a couple of years. The range was also stated in a Home Office report on 'Building Britain's Future' published under the previous Government, and a 'United Kingdom Threat Assessment' for 2009-10 put it at "upwards of GBP 20 billion a year".
The first obvious issue with Mr. Davis's statement is that he does not mention the huge £20 billion margin of error, and selects the upper extreme of the estimates. This might leave some readers with a slightly exaggerated impression of the costs.
The second important point is that if using this as a figure for the costs of 'gangs' or 'gang culture', we are talking here about more than just the people involved in this week's violence.
The Home Office report from the previous Government provided a detailed breakdown of the figures, complete with explanations of the caveats involved in each estimate.
Sourced from numerous different studies, the estimates provided put the total cost of Serious Organised Crime in the UK at £32.2 billion.
The largest slice of this was the trafficking of controlled drugs, the costs of which were estimated at £17.6 billion. This and the other contributing factors are shown in the chart above.
But looking at some of the other categories, it isn't necessarily the hooded hoodlums that have appeared on our tv screens this week that would be behind much of the intellectual property theft, or the fraud/financial crime in the chart - the £40 billion is a figure for organised crime more broadly.
The large resulting margin of error of £20-40 billion in the estimate is not common amongst Government figures, however further research revealed why such a conservative approach was being adopted.
In drug-related crime, the Home Office cites the 'intangible costs of victimisation' as a key caveat. Similarly, the proportion of fraud that is actually conducted by serious organised criminals is unknown.
With regards to people trafficking, a document released by Freedom of Information demonstrates that this excludes the trafficking of men and children, and also includes estimates of costs to public services such as healthcare following physical violence from traffickers or clients.
Finally, the cases of Intellectual Property Theft and Item Smuggling (involving spirits, tobacco and diesel) rely on the assumption that the stolen products would have been bought in the same amounts at full price, which is by no means certain.
Hence the roughly £10 billion margin either side of the £32.2 billion estimate is understandable given the numerous caveats.
So while Mr. Davis's statement was within Home Office estimates, it needs to be kept in mind what this figure actually means. It was taken at the upper extreme of the available figures. Likewise in this context 'gangs' is shorthand for organised crime more broadly.
In addition, any reference to the economic and social costs of Organised Crime more broadly should be treated with caution.