'Big Brother' sets sights on tax fraudsters

BIG Brother may be coming to a council near you. An Edinburgh firm claims it has developed search software that could save local authorities up to £100 million a year in fraudulent council tax discount claims.

Leith-based Data Discoveries says its software, which simultaneously checks a series of databases such as the electoral roll and postal records, could help local councils shave millions off their budgets as they face some of the most stringent spending cuts for decades.

The firm, whose clients include the Prudential and Royal Mail, says its technology is so advanced that it will be able to seek out households which, for example, are claiming single occupancy discounts when more than one person is living there.

The self-confessed "data geeks" cross-reference a wide range of databases so they can detect when a council tax payer has made a false statement. For instance, if a man claims he is living alone, Data Discoveries will pick up on something such as the regular delivery of a woman's magazine.

A local authority can then use this evidence to confront the council tax payer, according to Data Discoveries' managing director Ken Naismith. It is estimated that 300,000 households across the UK fraudulently claim a single person's discount on their council tax.

"Every other council tax payer is paying an extra fiver because of this fraud," says Naismith. "We believe a total of 100m could be returned to local government and the cost of doing this is minimal."

Data Discoveries has already worked with one council in England which recouped 500,000 on the first trial. "Around 80 per cent of the people who were asked (if their claim was incorrect] fell over at the first hurdle and confessed," Naismith said.

Although the firm's techniques may sound like the surveillance society portrayed in George Orwell's 1984, Naismith insists that Data Discoveries only uses information already in the public realm.

"It's all fully compliant and it's very important that people know their data is safe," he said. "The secret is in the software which simultaneously cross-references multiple databases. It allows data to be checked without the people at the council or us necessarily seeing any of the detail."

Naismith added that the technology can also detect cases where people aren't claiming discounts they are rightly entitled to.

Data Discoveries says its software can also be used to detect other cases of fraud beyond single person occupancy. It is aiming to double its turnover – currently at around 2m – in the next two years as it targets local authorities.

Local governments are expected to launch a major crackdown on benefit fraud over the next couple of years as they cope with swingeing budget cuts. It is estimated that benefit fraud costs the UK 1 billion a year. Naismith, who joined Data Discoveries in January following a career in the oil industry, says he hopes this latest application will help the firm move into a "growth phase".

Until recently, methods of detecting fraud were so expensive that it cost more to seek out criminals than government was losing in revenue. New technologies are making the process more cost-effective but local councils are likely to face an increasing number of complaints from civil liberties groups amid accusations that Britain has turned into a "surveillance society". In 2008, a number of local authorities, including Edinburgh City Council, introduced lie detecting technology to probe new benefit claims.