By Holly Watt, Rosa Prince and Robert Winnett

Bounty hunters to cut benefit fraud by £1bn

Private agencies are to be paid by the Government to reduce benefit fraud by £1billion, David Cameron is to announce.

Finance experts will identify welfare cheats by trawling through their records, household bills and credit card applications.

The agencies will get a “bounty” payment for each fraudster they identify under government plans to cut the £5.2billion annual fraud bill.

By having access to the Government’s database of incapacity and housing benefit claimants, the companies believe they can shave at least £1billion from the welfare bill, earning as much as £50million.

The Prime Minister will say today that the level of fraud is “absolutely outrageous” and an “uncompromising” strategy is needed.

Mr Cameron will also call on members of the public to report suspected cheats and promise tougher punishments for offenders.

The Daily Telegraph understands that Experian, the credit reference agency, will begin working with the Department for Work and Pensions within weeks.

Full credit checks will be carried out on all new benefits applicants as well as on existing claimants who are suspected of fraud.

Despite concerns by civil liberties groups, all of the checks are legal and covered by the Data Protection Act.

Employment minister Chris Grayling thios morning defended the use of credit rating agencies, saying that the Government was simply making use of commercially-available data.

“Why should the Government not use the same tools available to independent organisations?” he told the BBC Radio 4 Today programme.

“This is data that is publicly available, that is publicly on sale, that is available to set out spending patterns – what loans you have taken out, what your overall patterns of spending in your life are.

“If there is a huge mismatch between the way you are living your life and the amount of money you are supposed to be receiving from the state in benefits, surely it is right and proper that we should be saying ‘How is that happening?’

“Where it is legitimate and legal to use data, I see no reason why Government shouldn’t do so.”

As an estimated one in three claimants is suspected at some point, either through being reported by a whistle-blower or after suspicions are raised by staff, the financial records of millions of people could be vetted.

The credit company will be able to cross-check information about private household spending, such as utility bills, mobile phone payment details and satellite television subscriptions, against benefit records to identify potential fraudsters.

People with “lifestyles that are inconsistent with those claiming incapacity benefit” will also be highlighted.

Claimants spending large sums on gardening, DIY and foreign holidays may come under scrutiny.

Financial experts will also be looking for people who apply for benefits while claiming to be living alone but in fact have an undeclared partner with a job.

The use of private credit reference firms is the centrepiece of the crackdown on benefit fraud.

It is understood that the proposals being discussed involve the credit reference agencies being “paid by results”.

They would receive a percentage, likely to be less than five per cent, of fraudulent claims recovered.

For example, they would receive less than £5million for every £100million of fraudulent claims identified.

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