LONDON (Reuters) - Prime Minister David Cameron pledged on Tuesday to crack down on benefit fraud and to cut waste in the welfare system as a step towards cutting the record peacetime budget deficit.
"In our benefit system there is about 1.5 billion pounds claimed every year by people who aren't entitled to claim that money. That is fraud. That is wrong," Cameron told voters at a town hall event in Manchester, northwestern England.
Cameron said his coalition government intended to make greater use of information from private-sector credit referencing agencies to help spot benefit cheats.
Cracking down on fraud in the benefit system was "the least we can do as we try and get the budget deficit under control," he said.
The Labour Party said Cameron's deficit-cutting policies would increase the numbers of people who were unemployed and dependent on benefits -- at a cost to the taxpayer that would dwarf savings from fraud.
The Conservative-Liberal Democrat coalition, which came to power in May, has said it will make cuts of at least 25 percent across most government departments as it tackles a budget deficit running at around 11 percent of national output.
It sees welfare as a prime area for savings.
The Justice Ministry plans to cut 2 billion pounds from its 9 billion pound budget, putting up to 15,000 jobs at risk, a union said on Tuesday, citing a letter from a ministry official.
Overall, welfare and tax credit fraud and error costs 5.2 billion pounds a year, Cameron said in an article for the Manchester Evening News. He said this would pay for more than 200 secondary schools or 150,000 nurses.
Of the 1.5 billion pounds fraudulently claimed each year, only 20 million pounds was recovered, with three quarters of the people who are caught escaping prosecution, he said.
"At a time when we're having to take such difficult decisions about how to cut back without damaging the things that matter the most, we should strain every sinew to cut error, waste and fraud in our welfare system," Cameron wrote.
Last month, Work and Pensions Secretary Iain Duncan Smith launched proposals to overhaul Britain's 87 billion pound welfare system, aimed at simplifying the complex web of benefits available to reduce error and inefficiencies.
Cameron said the government was also looking at introducing tougher penalties for fraud, ensuring more prosecutions and making more effort to reclaim money that was paid out wrongly.
The government expects to publish its strategy for tackling welfare fraud and error in the autumn, he said.