For as long as I can remember, the UK has sought to create a hostile environment for benefits fraudsters. Outraged newspapers have run angry headlines about the need to ‘beat the cheat’; government campaigns have used tough-sounding names like ‘No compromise’, ‘No ifs no buts’, and ‘We’re closing in’.

If caught, the benefits cheat faces harsh punishment. In 2013, the then Director of Public Prosecutions Keir Starmer issued guidance to prosecutors that they should consider charging benefits cheats under the Fraud Act—which has a 10-year maximum sentence—rather than the Social Security Act, which carries a maximum of seven years. It was time for a ‘tough stance’, he said.

Although it’s possible to punish benefits fraud with an administrative penalty, the DWP has a policy of sending any case of benefits fraud to prosecutors where the potential amount recoverable is more than £5,000. This policy has resulted in 86,000 people over the last 10 years being prosecuted for benefits crimes. 13,500 have been handed prison sentences.

Why does the UK pursue benefits fraud so aggressively? One thing I can tell you for sure is that it’s not about the money. According to DWP figures, the total amount of fraud and overpayments in the benefits system is £4.6 billion. Fraud accounted for £2.8 billion.

A large amount of overpayment and fraud (around £1 billion) is reclaimed by DWP. Take into account the fact that many benefits claimants underclaim, and the net amount the government loses to fraud and error in the benefits system is little more than a rounding error at £1.6 billion.

Tax fraud, which is in many ways a similar offence to benefits fraud given that the victim in both cases is the Treasury, costs the country almost ten times more than benefits fraud: a total of £20 billion, according to our estimate based on HMRC figures.

Yet without a baying mob, government policy for at least 70 years has been to not prosecute the vast majority of tax crime. Over the same time that the UK prosecuted 86,000 people for benefits crime, there were just 3,700 prosecutions for tax crime of all kinds.

The government argues that its policy is justified on the grounds of economic efficiency. Criminal investigations are time-consuming and expensive, and HMRC can collect any unpaid taxes and penalties via civil procedure.

Rather than refer all tax fraud cases worth a certain amount to prosecutors, HMRC’s policy is to reserve criminal investigations ‘for cases where HMRC needs to send a strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate.’

Individual tax fraud cases worth millions are settled with private agreements rather than in the harsh light of a criminal court. In 2019/20 HMRC closed 528 so-called ‘COP 9’ civil investigations into tax fraud for a total yield of £121.3 million – an average penalty of £230,000. Just to remind ourselves, the DWP will normally refer fraud case worth more than £5,000 for criminal prosecution.

The injustice in the way that we treat benefits crime and tax crime is particularly egregious when we consider that much of what is considered to be benefits fraud would never be treated as fraud if the same actions resulted in a loss of tax. This includes cases like former Nolan Sister Linda Nolan, who overclaimed £12,000 after she says she misunderstood the rules on what constituted a ‘change in circumstances’. She fully complied with the DWP investigation into her case, and yet after agreeing to pay back the money in full, was charged with benefits fraud.

To make matters even worse, government assertions that their softer policy on tax crime yields more in tax are highly questionable.

In 2009, 3,600 names of UK citizens with accounts at the Swiss branch of HSBC appeared in the hands of HMRC, after they were stolen by an IT contractor, Herve Falciani, and then seized by the French police.

In response to public pressure to finally do something about wealthy individuals stashing their cash in secret Swiss bank accounts, the UK government negotiated a new agreement with Swiss authorities. This agreement allowed the UK to start charging tax directly on Swiss bank accounts held by British citizens, but committed HMRC to not pursue criminal investigations into the bankers and accountants that had facilitated tax evasion by UK citizens in the past.

They also agreed to not buy stolen data from Swiss banks in the future. In order to deal with past liabilities from UK taxpayers, the agreement also allowed UK holders of Swiss bank accounts to allow their bank to disclose their assets to HMRC and to make use of the so-called Lichtenstein Disclosure Facility.

This was an enormously generous tax amnesty that allowed people who had evaded tax by stashing their cash in the tiny principality of Lichtenstein to pay the tax they should have paid, plus a 10 percent penalty. In return, the government agreed not to prosecute them for tax evasion.

As a result, the UK only prosecuted one person from the Falciani list, and between 2010 and 2015 there were only 11 prosecutions for offshore tax evasion of any kind. Again, to remind you, DWP policy is to refer benefits fraud cases worth £5,000 to criminal prosecution.

In total, the UK’s softly-softly approach to Swiss tax evasion was supposed to net the government £2.3 billion in the first year of operation. They got just £800 million.

The US Justice Department took an altogether different approach. First, they indicted a number of Swiss banks, including the largest bank in Switzerland, UBS, which ended up paying a $780 million fine. Prosecutors also laid charges against a number of senior bankers.

For Swiss banks that were not under active criminal investigation, the US government announced that they would start proceedings against any bank that did not hand over all the details of US citizens holding secret accounts. That included banks that had no presence in the US whatsoever. Where a bank disclosed that they held secret accounts on behalf of US citizens, they had to pay a fine equal to at least 20 percent of the account balances.

In total, Swiss banks paid over $1.3 billion in penalties. The information gained from the banks was then used to pursue individual tax evaders for tax fraud; there was no need to rely on incentives or voluntary disclosures.

All of this points to only one conclusion, which is that by any measure, our government takes a relatively soft touch approach when it comes to tax fraud. The result of this is that people will end up in jail for relatively minor benefits crimes while individuals that have evaded millions in taxes will walk free.

If we are to be all equal before the law, this cannot be justified – especially when the evidence from across the ocean demonstrates that the government is leaving cash on the table by failing to bring those that facilitate tax crimes to justice.