HC Deb 05 March 1996 vol 273 cc159-248

[Relevant document: The Minutes of Evidence taken before the Social Security Committee concerning Housing Benefit Fraud on 6th December 1995, 13th December 1995, 31st January 1996, 7th February 1996 and 14th February 1996 (House of Commons Papers Nos. HC 90-i to v.]

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The Secretary of State for Social Security (Mr. Peter Lilley)

I beg to move, That this House congratulates Her Majesty's Government on the priority it has given to tackling benefit fraud, increasing success in detecting and stopping fraud, in particular in achieving benefit savings likely to amount to £1 billion in 1995/96; welcomes the creation of the new Benefit Fraud Investigation Service; commends Her Majesty's Government's proposals to step up its measures against Housing Benefit and Council Tax Benefit fraud; endorses the increasing emphasis on preventing and deterring fraud; and condemns Labour's lack of positive proposals for tackling fraud. The aim of the long-term reform of social security is positive. It is to enable this country to continue to provide a decent level of provision for those in genuine need of help—without the total cost outstripping the nation's ability to pay. We can achieve that only if we focus our huge budget—nearly £90 billion—on those in genuine need and on helping people out of dependency. That means stopping money going to those who do not need it and are not entitled to it. Every pound lost in fraud means a pound less to those in real need or to reward those who support themselves. That is why the battle against fraud has always been my top priority.

To tackle fraud effectively we need to know how much fraud, of which sort, is perpetrated against each benefit. In the past, nobody—no Government of this country or abroad—knew the extent of fraud. Estimates were based on little more than guess work. I was determined to obtain reliable information. My Department has therefore developed a reliable way of estimating and measuring the extent of fraud. It involves carrying out a survey of a representative sample of claimants of each benefit. During those surveys, investigators are able to probe in sufficient depth to identify and quantify any fraudulent or erroneous claims.

The first survey of benefit fraud was carried out on income support and unemployment benefit. After examining and cross-checking records of each person's claim, the interviewers visited claimants without prior warning. They made up to four visits to establish the claimant's whereabouts. The review showed previous undetected fraud of about 10 per cent., which amounts to £1.5 billion a year on income support and unemployment benefit alone.

The second review that we undertook was of housing benefit and council tax benefit. Again, we found widespread abuse, amounting to nearly 10 per cent. of the money in payment. That costs the taxpayer a further £1 billion a year. Those two benefit areas alone are known to be the most vulnerable to abuse, which is why we began with them.

Ms Angela Eagle (Wallasey)

Will the Secretary of State admit that the process of home visiting to discover the extent of fraud was routine in 1979 and was abolished by this Administration as a way of saving money on staff? Surely that was a false economy.

Mr. Lilley

I think that the hon. Lady's dates are slightly wrong. The big cut followed the 1976 takeover of

the economy by the International Monetary Fund after the financial crisis created by the Labour Government. It is far better to do what we are doing and to have targeted visiting than blanket visiting.

Mr. Jeremy Corbyn (Islington, North)

The Secretary of State should not pass over the issue too quickly. Does he not recall that the legislation introduced by the right hon. Member for Sutton Coldfield (Sir N. Fowler), with the assistance of the right hon. Member for Huntingdon (Mr. Major), removed the necessity to visit people to check on their benefits and removed the obligation on the Department to ensure that everyone was entitled to benefit advice to ensure that they were receiving the proper benefit? It was the Conservative Government who caused so many of the problems in the first place.

Mr. Lilley

I do not accept that point. The hon. Gentleman must agree that it is better to have targeted visiting rather than blanket visiting. However, although we have carried out reviews in the most vulnerable areas—income support and housing benefits—it would be wrong to assume that all other benefits are liable to a similar level of fraud and abuse.

By far the largest single benefit is the state retirement pension, which accounts for around a third of total social security spending. The third benefit review, which has just been completed, covered that. It confirms what most of us would expect: that fraud is extremely rare among pensioners. The results suggest that fraud amounts to some £40 million out of a pension bill of more than £30 billion. That is just over £1 in £1,000. Pensioners are generally honest citizens. As retirement pension is a contributory benefit, it is extremely difficult to obtain it fraudulently unless one can concoct a contribution record dating back two decades, which requires some forethought.

Dr. Norman A. Godman (Greenock and Port Glasgow)

Will the hon. Gentleman give way?

Mr. Lilley

I shall continue, if I may.

The only other abuse that was at all prevalent in the past involved cases where it was maintained that people were still alive after their decease. That is no longer possible because our records are linked into records of deaths. The only problem occasionally arises abroad in countries that do not have such systematic records of births and deaths. That is why we have posted officers abroad in Bangladesh and Pakistan, as has been mentioned recently in the newspapers, to check that benefits paid there are paid to those genuinely entitled to them and cease when people die.

Mr. Edward Leigh (Gainsborough and Horncastle)

My right hon. Friend said, rightly, that because a pension is a contributory benefit, it is difficult to conduct a fraud on it. Does he agree that, given the experience of Chile and Singapore, if we were to move our social security system to a more insurance-based contribution set-up, we would make enormous progress, not only in achieving more personal responsibility in society but in dealing with benefit fraud?

Mr. Lilley

My hon. Friend must recognise that our system has the positive elements that he finds present in

the Singaporean and Chilean systems. More than any other country in Europe, we have contribution-funded pensions. Three quarters of those who are entitled to do so opt out of the state scheme to build up their pension provision. That now amounts to some £600 billion of funds—more than all the other countries in the European Community put together.

If my hon. Friend is suggesting that we should do away with non means-tested provision for those who have been unable to provide for themselves, I should say that Singapore's system, which so attracted the hon. Member for Islington, South and Finsbury (Mr. Smith) and the Leader of the Opposition, makes provision for only about 2,000 people who have not provided for themselves. The rest are left to fend for themselves. I cannot believe that my hon. Friend wishes to follow the Labour party down that draconian route.

Mr. Tony Marlow (Northampton, North)

My right hon. Friend will know that his Department gave me an answer recently which, on the subject of elderly people and pensions, said that the social security bill for unfunded pensions in the UK, when spread between the population as a whole, is £500 per person per year; in the Federal Republic of Germany, it is £2,000 per person per year; and by the time today's 30-year-olds in Germany reach pension age, it will be £5,000 per year. Is not that a good reason for not joining a single currency?

Mr. Lilley

It would be a good reason, should there ever be any suggestion that we do so, to avoid unifying the obligations of different countries in Europe into any common obligation. I cannot imagine that any hon. Member would want to go down that route.

Mrs. Teresa Gorman (Billericay)

Is not it true that long before Chile and Singapore thought of private institutions to handle pensions and other needs, this country widely used the friendly society system? When we had legislation that required people to have a benefit such as sick pay, the amount that was paid, as a percentage of people's then earnings, was practically higher than it is today. It was the friendly societies that, for example, persuaded doctors to make home visits. They had never done such things before. It was a good way of getting a jolly good welfare system.

Mr. Lilley

We are fortunate in having roots that go back to the friendly societies. It is perhaps in part through them that we built up the widespread prevalence of occupational, and now personal, pensions that gives us the strength relative to other countries in Europe that I mentioned earlier. My hon. Friend will be aware that the Singapore system is state managed—which is why it is so attractive to Labour Front Benchers. It has received a return of only 2 per cent. a year in real terms since 1980, whereas private pension schemes in this country have yielded nearly 10 per cent. more than the rate of inflation since 1980.

Mr. Frank Field (Birkenhead)

Will the Secretary of State give way?

Mr. Lilley

It is becoming rather like Question Time, but I shall give way to the hon. Gentleman as he is Chairman of the Social Security Select Committee.

Mr. Field

While it is important to stress that no serious group in this country would advocate the Singapore model, in dismissing it, I ask the Secretary of State to be careful about his record. Those who depend on the state pension do not receive a 2 per cent. real-terms increase in their pensions compared with those who are in the state-run scheme in Singapore. On that basis, the figures that he has given show that the Singapore scheme is a better bet for pensioners than the scheme of which he has stewardship in this country.

Mr. Lilley

The hon. Gentleman says that no one serious would advocate the Singapore system. I urge him to read the recent book entitled "The Blair Revolution" by the hon. Member for Hartlepool (Mr. Mandelson)— who is spin doctor and guru to the Leader of the Opposition. He advocates the Singapore system, although apparently the hon. Member for Islington, South and Finsbury (Mr. Smith) has fallen out of love with it since his brief holiday flirtation on that island.

Mr. Bernard Jenkin (Colchester, North)


Mr. Field

The operative word in my intervention was "serious".

Mr. Lilley

I am grateful to the hon. Gentleman for making that point pellucidly clear. I must now make some progress before I give way again—although if future interventions are of the same quality as the last, I shall be very willing to do so.

Last July I announced a five-year security strategy to tackle fraud and abuse in the benefit system—particularly with regard to the benefits handled directly by my Department. My strategy aims to make the whole benefit payment pipeline secure against fraud from the initial claim, through internal processing and the means of payment, to any changes in circumstances affecting entitlement. It then aims to shift the emphasis from detection to prevention and deterrence. As a result, it should reduce substantially the cost of fraud losses to the taxpayer, saving some £2.5 billion in 1998–99 from all the anti-fraud work carried out by the DSS. That figure includes local authority savings.

As to the benefits handled by the Benefits Agency, my strategy contains three main elements. First, the agency will more than double the number of home visits to check new claims for benefit and undertake far more checks on existing claims. I am therefore asking for 600,000 home visits to be undertaken to check new claims for income support and jobseeker's allowance, and for more than 1 million reviews and checks of existing claims.

If those visits are targeted properly, they will be a highly effective way of preventing fraud—especially at the outset of a claim. More than 30 per cent. of home visits to new claimants since target visiting was established in July 1995 have resulted in action to prevent incorrect claims from being accepted.

Miss Kate Hoey (Vauxhall)

Will the Secretary of State give way?

Mr. Lilley

The hon. Lady must permit me to make a little progress.

Secondly, we are using developments in new technology to target our checks and visits better. The Benefits Agency is using one of the most powerful new computer systems in the world to cross-check the consistency of information that it holds about benefit claims. We plan to extend gradually the range of information from different sources which can be cross-checked by the computer. We are currently piloting a new system to match national insurance data with benefit claims in order to check on fraudsters who are both working and claiming.

Mr. James Couchman (Gillingham)

Will my right hon. Friend give way on that point?

Mr. Lilley

I have just refused the hon. Member for Vauxhall, so I must make a little progress before I give way to my hon. Friend. We already use information from a number of other Government Departments—for example, we use Home Office data to prevent prisoners from continuing to claim benefits to which they are not entitled while in gaol. We are carefully considering a wide range of other data that we might use without compromising data protection and our duty of confidentiality, such as data from the Inland Revenue on the P46 forms that an employer completes when an employee starts work and does not have a national insurance number.

Mr. Couchman

On that point, does my right hon. Friend agree that the fact that the P46 does not ask a signatory whether he or she is in receipt of benefit while signing that the job may be his or her main job, is a weakness that encourages those who are working and signing to believe that they can get away with it?

Mr. Lilley

My hon. Friend makes a valuable point, which I will certainly take into account in the work that we are doing.

Miss Hoey

I am a bit concerned that the right hon. Gentleman has not mentioned child benefit, and I am especially concerned that there appears to be no method of preventing people who move abroad from continuing to claim child benefit. How is that being tackled?

Mr. Lilley

I cannot remember off-hand the rules governing how long people are entitled to benefit when they move abroad, but I can write to the hon. Lady with that information and any further information that would elaborate on that point.

Miss Hoey

Perhaps if I could just—

Mr. Lilley

If the hon. Lady wishes to answer her own question, perhaps she will do so in a later speech. [HON. MEMBERS: "Give way."] I give way.

Miss Hoey

It is important that the Secretary of State understands what I am trying to ask. It seems as though, after people move abroad, every year a letter is sent to what was their home, asking them whether circumstances have changed. They do not have to reply to that letter unless circumstances have changed. They may well be living in Greece or Spain—I have gained evidence of that recently—and continuing to claim child benefit. There appears to be no way of checking when a person moves abroad.

Mr. Lilley

As I said, I will follow up that point and respond to the hon. Lady in due course.

The third element of our strategy is virtually to eliminate fraud in the payment system by introducing a benefit payment card to replace order books and giro-cheques for payment through post offices. Invitations to tender were issued to three consortiums on 29 February 1996. I hope to be able to announce the successful supplier of the new system in May 1996, and to see the start of the roll-out of the new system from the autumn onwards.

The five-year security strategy involves the investment of additional ring-fenced resources on top of the money already spent by the DSS on anti-fraud work. In the current financial year, we are investing more than £100 million of extra resources. Even in this first year, the investment is repaying itself nearly fourfold, with extra savings of more than £400 million. That will bring total fraud savings in the Benefits Agency this year to about £1 billion and next year we expect them to rise a further 50 per cent. to reach £1.5 billion.

The hon. Member for Islington, South and Finsbury recently suggested that my plans to achieve a 25 per cent. step improvement in the productivity of my Department would not be achieved, and certainly not without undermining our battle against fraud. I was delighted when the shadow Chief Secretary, the hon. Member for Oxford, East (Mr. Smith), contradicted him, writing in a leaked letter that the advice I am getting … suggests that savings in running costs of this magnitude are perfectly feasible, given the opportunities for efficiency gains and the scale of the investment already undertaken.

Mr. Clifford Forsythe (South Antrim)


Mr. Lilley

Would the hon. Gentleman allow me to make progress?

There is no suggestion of sacrificing anti-fraud activity to achieve our efficiency objectives. The extra funds secured for the security programme are ring-fenced and cannot be diverted to other activities. Moreover, the fraud reviews enable us, for the first time, to measure the current level of fraud benefit by benefit, to set targets for reducing it and to measure achievement against those targets. We have no intention of relaxing the target of reducing the level of fraud by 70 per cent. during the five-year security strategy period. The essence of my efficiency programme is to specify objectives and then improve our methods and processes to enable us to meet or surpass those targets.

General steps to simplify entitlement, to improve accuracy of initial claims, to bring together all customer information in one customer account and other components of the efficiency programme will all make fraud more difficult, not easier. The programme will enable all our staff to be directly involved in the battle against fraud by getting claims right first time, keeping claims right, and putting them right whenever fraud and error occur.

Ms Eagle


Mr. Lilley

I have already given way to the hon. Lady, and I wish to complete my speech. In April we shall create the Benefit Fraud Investigation Service, which will bring together specialised security staff from both the Employment Service and the Benefits Agency. Up to 1,100 Employment Service investigators will join the Benefits Agency and bring their specialised knowledge in tackling the most common benefit fraud: working and claiming. The benefit review of income support showed this form of fraud to comprise almost 30 per cent. of all fraud. The Employment Service will also bring knowledge of fraud risks specific to each employment sector. The combined investigation service will have a dedicated staff of almost 5,000.

I want to give further impetus to our drive against fraud. So I can announce today plans for a series of local anti-fraud drives, beginning in April.

Mr. Clifford Forsythe

I am sure that hon. Members support Secretary of State and congratulate him on the credible work that is taking place to combat fraud. However, is he aware that there is no such strategy in Northern Ireland? Northern Ireland may be different, but why does it not have such a strategy?

Mr. Lilley

As the hon. Gentleman knows, the Northern Ireland Office is responsible for social security and, in most respects, it mirrors what happens in the rest of the United Kingdom. My officials work with and consult their counterparts in Northern Ireland to ensure that what we do is compatible and that no leakages enter the system from one side or the other. I will report his remarks to my hon. Friend the Under-Secretary of State for Northern Ireland, who is directly responsible for social security in the Province.

Mr. Forsythe


Mr. Lilley

I hope that I have answered the hon. Gentleman's point, and he may care to elaborate on it during his contribution to the debate—if he succeeds in catching your eye, Madam Speaker. I refer to a series of anti-fraud drives that will begin in April. Each month we will select a small number of distinct areas and focus effort on them. The prime objective of the drive will be to encourage those who have drifted into abusing the benefit system to put their claims right and to crack down hard on those who fail to take the opportunity to do so.

Each local campaign will be preceded by a couple of weeks of intense local publicity, which will warn people that a fraud clean-up will begin in their area shortly. It will remind people that we look favourably on those who voluntarily acknowledge that their claim has been false, set it in order and agree to remedy past errors and omissions.

Dr. Godman


Mr. Lilley

I shall complete my announcement and then deal with any interventions that hon. Members may have. Although, of course, we shall need to look at each case on its merits, those who come forward voluntarily would be unlikely to be prosecuted. Even in the most serious cases—such as large-scale organised fraud—where a prosecution would be necessary, the courts will look leniently on a fraudster who voluntarily throws in the towel. Those who fail to come clean will face a far higher risk of being brought to book.

We shall open a freephone hotline for members of the public to tell Department of Social Security staff, in confidence, about suspected fraud—which we will then investigate. Pilot schemes have shown that these initiatives can be successful. In just five months, they have saved £800,000, have cost less than £20,000 and have had 275 successful outcomes. We shall be piloting the use of our powerful new data-matching programmes to target those most likely to be involved in frauds that are particularly prevalent in each campaign area. We shall increase the number of visits to existing claimants in circumstances where experience shows that fraud is most likely to be detected. We shall increase the number of visits to people making new claims to benefits. Bar code scanners will be introduced in local post offices to detect lost or stolen order books.

Trained investigators will focus on those categories of employers locally who are most likely to be colluding with employees in claiming out-of-work benefits and on those categories of self-employed people most likely to be involved in benefit fraud. Where fraudsters who have ignored the chance to come clean are caught, we shall be more disposed to prosecute, if appropriate, and the courts may well prove tougher in those circumstances.

Our local anti-fraud drives will be spearheaded by Benefits Agency staff. They will involve the entire DSS and we are looking to involve other Government Departments and agencies. That will include staff, claimants and the public in a concentrated attack on fraud. I shall also invite local authorities in each area to take part.

I believe that those area crackdowns will make a valuable contribution to the success of our strategy and make our determination even more visible.

Dr. Godman


Mr. Frank Field


Mr. Lilley

A queue is building up. I shall give way to the hon. Member for Greenock and Port Glasgow (Dr. Godman) first.

Dr. Godman

I am grateful to the Secretary of State for his characteristic courtesy. I do not suppose that his Scottish officials have told him of the recent, highly publicised case in the Greenock sheriff court of a woman being convicted of fraud while being employed at the local Benefits Agency office. Setting that extreme example to one side, will he confirm that the incidence of fraud in the Greenock and Port Glasgow area is very low? How many investigators will be located in Scotland?

Mr. Lilley

I take the hon. Gentleman's point about the serious nature of any fraud involving members of the DSS staff. They are much more likely to be prosecuted than an individual member of the public who may have drifted into fraud, serious though that is. We take those cases very seriously. I have no particular measure of the precise incidence of fraud in the hon. Gentleman's constituency. I accept his assurance that it is very low.

We shall target different parts of the country not on the basis they are particularly prone to fraud. Our nationwide studies suggest that fraud is prevalent throughout the country and is not localised in particular areas, although there is some evidence of it being rather more serious in central London, so we shall be choosing areas on the grounds of their compactness, among other factors.

Mr. Frank Field


Sir Peter Hordern (Horsham)


Mr. Lilley

The hon. Gentleman has had a go and my right hon. Friend has not.

Sir Peter Hordern

I am grateful to my right hon. Friend. The figures that he has given for the amount of benefit reclaimed in relation to the number of investigators appointed are so impressive that I am led to wonder whether it would be worth appointing many more investigators. At what point does that favourable ratio no longer apply? Would not it be a good idea to appoint far more investigators than he has so far in mind?

Mr. Lilley

I can reassure my right hon. Friend that the additional ring-fenced amounts of more than £100 million are being used to provide a mixture of extra investigation and information technology that is most effective. I asked my officials whether we could further accelerate the process of building up that work. We were able to do so more or less up to what we considered to be the optimum point. One can reach the point at which one can have too many cooks spoiling the broth or accelerating faster than the vehicle will take. We are doing it at the right pace and I am grateful to my right hon. and learned Friend the Chancellor of the Exchequer for making available the extra money.

Mr. Frank Field

The Secretary of State said that it was important to look at London, but why should the House take his announcement seriously after looking at the track record? On 19 January he told the House that there was £10 million of challenge money. When the various interested bodies were taken to the Adelphi six days later, £2 million of that £10 million had been nicked—rather appropriately, as it was intended to combat fraud. It was the total budget. Various groups have proposed co-ordinating their efforts across London—a really crucial activity. That activity is one that the right hon. Gentleman wants to support. I believe that he found £500,000 from his own budget as seed corn for those groups, to draw on the challenge money. I understand that the Treasury vetoed the right hon. Gentleman using that money. Why should we believe the Secretary of State's announcement today about increasing resources when in the crucial move to co-ordinate action against fraud in London, particularly landlord fraud, the right hon. Gentleman has failed to beat the Treasury in freeing his own funds to fight fraud?

Mr. Lilley

I hope that I can give the hon. Gentleman a different perspective. I said that up to £10 million—then we specified that it would be £8 million—would be available for challenge funding. In the context of the large sum that I mentioned to my right hon. Friend the Member for Horsham (Sir P. Hordern), the hon. Gentleman should not think that the difference of £2 million is crucial. I hope that a co-ordinated team specialising in combating organised fraud will be established. That proposal is still under discussion in respect of challenge funding. Decisions will be made on the basis of the sort of return that the parties concerned convince us that they can achieve. In any case, that is not the only way in which such schemes can be financed, if local authorities see merit in them. I will refer to that specific point later.

As to housing benefits—which are handled by local authorities, not the Benefits Agency—we shall seek to involve local authorities fully in the local benefit crackdowns. Last month, I announced to the House that I have been using the results of the housing benefit fraud study to develop a comprehensive strategy to tackle housing benefit fraud. I have earmarked up to £8 million for a challenge fund, to help local authorities to finance innovative schemes to tackle fraud.

From this April, I am setting more demanding targets for local authorities to detect fraud, with higher rewards for those who meet them and stiffer penalties for those who make no effort. The national threshold for savings for all local authorities will increase from £100 million to £150 million. That is challenging but realistic, and well within the levels of fraud savings that local authorities are now achieving.

The proportion of savings above the threshold that local authorities will be allowed to keep will be increased from 20 per cent. to 25 per cent. The few authorities that devote little or no effort to protecting public funds from fraudsters will suffer increased financial penalties. Any local authority achieving less than half the new threshold will have the penalty increased to £1 in the pound.

I am also establishing from the summer a national central register of housing benefit claims, which will provide a powerful tool for local authorities in carrying out data-matching exercises. It will enable local authorities to check housing benefit claims in their area with those elsewhere in the country, to weed out multiple claims and to check claims data for consistency with other DSS data on related benefits.

The central register will be a major advance, but it will still be limited in scope. It will enable each local authority to make one-off checks of their existing claimants against other data. That will help in detecting fraud, but there will be no direct on-line link to check out new claims before they are awarded. Therefore, the register will not be able to help in preventing fraud.

Direct on-line checks are virtually impossible at present, because as each local authority has its own computer system—there are more than 400 of them—any pre-claim checks can be carried out only by cumbersome, time-consuming and often clerical procedures. The Benefits Agency is developing a unified database for agency benefit data, with an individual payment account for each claimant—but local authority and housing benefit data will not at present be linked to it. I am inviting the local authority associations to join in a study of how local authority systems can be linked, to share information with each other and with the new Benefits Agency computer systems. In particular, it will examine the merits of introducing a unified computer system covering all local authorities' housing benefit work. It could eliminate the paper chase between local authorities and the Benefits Agency and be a powerful weapon against fraud and multiple cross-border fraud.

Mr. David Shaw (Dover)

Will my right hon. Friend accept the thanks of the whole House for being what I believe to be the toughest Secretary of State for Social Security and clamping down on fraud? Will he accept our congratulations on tackling the difficult issue of housing benefit, where local authorities have different computer systems? From evidence received by the Social Security Select Committee to date, it appears that different computer systems in local authorities may account for the fact that housing benefit fraud could be as high as £1.5 billion or £2 billion—equivalent to 5 per cent. on pensioners' state pension or 1 p off income tax. We are very grateful that he is tackling this important issue.

Mr. Lilley

I am grateful to my hon. Friend for his words of encouragement. He will, of course, have noticed that no positive proposals have ever been made by the Opposition on this or any other issue, and it is precisely to that area that I want to turn now, because no one doubts—

Miss Hoey

Will the Secretary of State give way?

Mr. Lilley

A last chance for the hon. Lady.

Miss Hoey

Before the Secretary of State moves away from local authorities, will he congratulate the London borough of Lambeth—my authority? Although I have been a critic of it over the years, I believe that it has now turned around. Will he congratulate in particular its fraud unit, which recently discovered that some 105 members of staff were involved in one way or another in fraud, and welcome the fact that local authorities across London are co-operating to ensure that the ordinary ratepayer is not ripped off by people who work either in the council or outside it?

Mr. Lilley

I welcome, of course, any action that local authorities take to tackle fraud, particularly following the sticks and carrots that we introduced to prompt, force and goad them into taking such measures. I welcome the points that the hon. Lady made and the action that Lambeth council has taken in that area. She referred to the long time that it has taken for such action to be introduced. She should apply that test to herself and her own local authority.

No one doubts the Government's dedication to curbing fraud. We have demonstrated that by the priority that we have given it in the Department of Social Security, the extra resources that we have committed to it and the effort and imagination that we have devoted to developing new approaches to tackling fraud.

The Labour party has always been soft on fraud and soft on the causes of fraud. The hon. Member for Manchester, Withington (Mr. Bradley), in our previous major debate on the subject, said: We must place the issue of fraud in context … We should continually bear in mind the fact that, in the context of the overall budget, even £1 billion"— of fraud— is not a large amount … There is some danger of overstating the amount of fraud in the system. One of the attitudes of Opposition Front-Benchers to fraud is to pretend that it is not very big; the other is to say that it is not very important. Their attitude to fraud is similar to the attitude of the right hon. Member for Sedgefield (Mr. Blair) on shoplifting, who said: Shoplifting is just a case of lone parents and other poor people helping themselves to a treat. Opposition Members see fraud in a rather similar light.

Mr. Keith Bradley (Manchester, Withington)

Will the Secretary of State also confirm that, in the same debate, I said right at the beginning: I wish to place on record immediately that the Labour party is as committed as any other party or the Government to rooting out fraud. We certainly support the measures that the Government have announced to ensure that the fraud crackdown continues."— [Official Report, 16 July 1993; Vol. 228, c. 1253–55.]?

Mr. Lilley

I am grateful to the hon. Gentleman for proving that he has the essential qualification for serving on the Front Bench of the Labour party: an ability to contradict himself in the same speech.

On another occasion, the hon. Member for Sheffield, Brightside (Mr. Blunkett) said that the Labour party has too long been associated with the freeloader. Opposition Members were anxious to try to get away from that message.

I acknowledge, however, that the Opposition have now, belatedly, reluctantly and grudgingly, come round to acknowledging the need to tackle fraud, but it is no more than lip service. Their hearts are not in it and nor are their minds. I have checked every reference to fraud by a Front Bench Labour spokesman in Hansard that I can find and I have not been able to locate one positive proposal from any of them on how to combat fraud.

I challenge the hon. Member for Islington, South and Finsbury to correct me. Perhaps he will remind me if I am wrong about the Opposition's plans and proposals for tackling fraud. Has he come up with any such proposals in the past? The hon. Gentleman is now more than halfway through his root-and-branch appraisal and review of Labour's social security policy. Does he now have any ideas that he is prepared to share with the House on how we can improve our efforts to combat fraud? He may not have found a root or a branch but has he found a leaf of an idea of Labour policy in this area?

The hon. Member for Islington, South and Finsbury may be the exception that proves the rule. He may be the solitary socialist with a good track record in combating fraud. The Opposition's amendment harks back 17 years and condemns by implication the 1979 Conservative Government for a lack of activity in tackling fraud in the early 1980s.

But the only participant in the debate who was responsible for combating fraud in those days was the hon. Gentleman. Between May 1981 and June 1983 he was chairman of Islington council's housing committee. In that role he was responsible for preventing housing benefit fraud. Perhaps the hon. Gentleman would like to remind the House of the initiatives that he took to curb fraud and to combat it.

I well remember the hon. Gentleman's period in office because at that time I was living full time in Islington. I remember that it was punctured by a period of Social Democratic party rule. The hon. Gentleman was ousted as chairman of housing for a few months. His job was taken by a member of the SDP, who naturally followed closely the hon. Gentleman's record while chairman of the housing committee. He has today issued a statement, which reads: To my recollection, Chris Smith was not at all interested in the issue of Housing Benefit fraud while Chairman of the Islington Housing Committee. And such interest would have been totally contrary to the spirit of the Islington Labour Party at the time.

Mr. Chris Smith ( Islington, South and Finsbury)

As the gentleman that the Secretary of State has quoted stood against me at the last general election and was roundly defeated into third place by me, he might perhaps be somewhat parti pris in his comments.

Mr. Lilley

Is the gentleman wrong or is he right? That is the issue. The hon. Gentleman failed in his intervention to set things right. We must assume that the gentleman won the argument, even if he did not win Islington, South and Finsbury at the election.

The legacy which the hon. Gentleman left behind of fraud in Islington was pretty lamentable. Until Islington council was goaded into action by the measures that we have taken—the sticks and carrots to which I have referred of about four years ago—it did not take much interest in housing benefit fraud. Since then, however, I am happy to say that the amount of fraud that it has uncovered has quintupled. The sum that they have uncovered is £2.5 million more than that uncovered four years ago. That is a pretty good measure of the minimum amount of unidentified fraud that was going on before we prompted the council into action.

The Opposition say through their amendment that the level of fraud is attributable to means testing in the benefits system. That assertion displays an extraordinary attitude. If all benefits were universally available without condition there would be no fraud because there would be no need for it. Of course there would be no need for fraud if everyone received benefits automatically.

Are the Opposition saying that they will do away with means testing and that they will pay housing benefit to anyone regardless of income with no test of the rent incurred? Will they send the equivalent of income support to everybody? A basic benefit, as some propose, might drastically reduce the level of fraud but it would dramatically increase costs to the taxpayer by a multiple of any fraud savings. Of course, the Labour party does not mean that.

When Labour Members speak today, however, I ask them to say what they propose to do if they believe that the cause of fraud is means testing. What do they propose to do about means testing in the benefits system? As far as we know, their only proposal is to extend the benefit system by introducing a guaranteed minimum income. We are assured by the hon. Member for Islington, South and Finsbury that although the Leader of the Opposition is committed to a guaranteed minimum income for pensioners, he, the hon. Gentleman, is against a guaranteed minimum pension, and believes that the two are in some obscure way different.

The Labour party is unhappy with fraud in social security because the party's entire approach to social security is intrinsically fraudulent. The Labour party seeks to convince the British people that they can have more for less—in other words, that we can enhance benefits and avoid the savings and changes that I have introduced over the years, all of which the Opposition have opposed and rejected, without increasing the costs that are borne by the taxpayer. That is nonsensical. It is intrinsically fraudulent. It is a fraud that we will expose at the next general election.

Genuine fraud in the social security system is a serious issue. It is an attack on both the taxpayer and genuine benefit claimants. We owe it to them to stamp it out. The measures that I have announced today will set record but achievable fraud and security spending saving targets. They will involve staff, claimants and members of the public in local anti-fraud drives. They will challenge local authorities to bring their fraud savings up to the levels of the best achievers.

I commend the motion and our measures to the House. 4.46 pm

Mr. Chris Smith (Islington, South and Finsbury)

I beg to move, to leave out from House to the end of the Question, and to add instead thereof: `notes that after seventeen years Her Majesty's Government has belatedly begun to realise the extent of benefit fraud; further notes that its massive extension of means-testing in the benefit system, and introduction of increasingly complex procedures for the claiming of benefits, have made the fight against fraud more difficult; believes that Her Majesty's Government's proposed moves towards self-assessment procedure will further hamper both the detection and deterrence of fraud; congratulates the many Labour-controlled local authorities which have had substantial success in tackling housing benefit and council tax benefit fraud; regrets the inadequate support and liaison from government departments in assisting local authorities in this work; and believes that successful action against fraud is worth far more than repeated government rhetoric.'. The Government have tabled an interesting motion. The most remarkable thing about it is that it started life in a rather more interesting form. The Government's original motion referred to benefit savings"— that is, from detecting and stopping fraud— likely to amount to over £1 billion in 1995/96". It later stated that the House endorses its future programme, which, through innovative techniques and additional resources, is expected to achieve £1.5 billion of benefit savings in 1996/97. You will immediately notice two specific changes, Mr. Deputy Speaker.

Mr. Lilley

The changes to which the hon. Gentleman refers were designed to make way, as I wanted to keep the motion brief, for our challenge to the Labour party to come up with positive proposals. We wait for it to rise to that challenge. I reiterated the target of £1.5 billion in my speech. The hon. Gentleman should therefore see nothing sinister in the brevity of the motion.

Mr. Smith

I note that the Secretary of State was so desperate to reduce the size of the motion that he deleted "over" from the calculation of savings that he is achieving in the current financial year. He has given us, as set out in the answer in today's Order Paper, a figure of £1.5 billion as a "target". The right hon. Gentleman has used an important word.

The Government are all over the place on their estimated savings from fighting fraud. The Red Book, issued at the same time as the Budget, says that £2.5 billion a year will be saved by 1998–99. The following day, in his uprating statement, the Secretary of State for Social Security spoke about £2.5 billion over three years, so my hon. Friend the Member for Manchester, Withington (Mr. Bradley) immediately tabled a parliamentary question asking what the Government actually meant they would save: was it £2.5 billion spread over three years or £2.5 billion in one year? My hon. Friend still awaits an answer.

Mr. Michael Fabricant (Mid-Staffordshire)

For all those estimates of what might or might not be saved, in all the months that the hon. Gentleman has been a Front-Bench spokesman, and in all the years that his predecessor, now Labour Chief Whip, who is present, and his predecessor, the hon. Member for Oldham, West (Mr. Meacher), were Front-Bench spokesmen, what single constructive point did any of them come up with to counter fraud? Name one.

Mr. Smith

I must take issue with the hon. Gentleman. The difference between £1.5 billion and £2.5 billion estimated savings from fraud is important. To dismiss the dubiety of the figures, as the hon. Gentleman does, diminishes the issue's seriousness. If he is patient for about a quarter of an hour, he will receive the answer that he is looking for, when I make eight specific proposals that the Government should be implementing, have not implemented and are not making, to assist the fight against fraud.

The other thing that the Government should take into account is how those figures of savings are calculated. Is the 32-week computation they use in calculating them sound? We need more clarity from the Government on what figures they are talking about, and whether £2.5 billion a year by 1998 is the figure to which they are working, so that we can test them against whether they will achieve it.

We know that, over recent years, fraud and error in the system have increased. The Comptroller and Auditor General has told us so. He has qualified his accounts on income support every year since it was introduced, and this year he said that the error level in the income support system was the highest ever. He identified, as the Select Committee on Social Security has in its report, a high and alarming level of fraud.

One of the reasons why fraud and error have increased is because of what the Government have done to the social security system. They have presided over the doubling of means testing. When they took office in 1979, 17 per cent. of benefit expenditure was means-tested; the figure is now 35 per cent. Inevitably, if one increases the amount of means testing in the system, one is bound to increase the scope for fraud. The Select Committee specifically identified that as an issue.

Mr. Lilley

Would the hon. Gentleman reduce the amount of means testing in the system?

Mr. Smith

The Secretary of State should consider paragraph 6 of the Select Committee report, which states: In particular, means tests tend to tax effort, as benefit is withdrawn against rising income, to undermine savings, since accumulated savings disqualify people from benefit, and to penalise honesty. That paragraph was amended and included in the report by the Conservative majority on the Select Committee. The Secretary of State should recognise that that problem is an inevitable consequence of the way in which the system operates.

Mr. Lilley

Will the hon. Gentleman give way?

Mr. Smith

I will give way, because it is the Secretary of State.

Mr. Lilley

Will the hon. Gentleman now answer my question: would the Labour party reduce the level of means testing in the system?

Mr. Smith

We are preparing a series of proposals to have a serious benefit-to-work strategy in the welfare system. That will make a fundamental difference to the problems that the Government's means-testing approach has brought to the system.

As well as increasing the amount of means testing, the Government have increased the system's complexity. The replacement of supplementary benefit by income support, the introduction of the jobseeker's allowance and of incapacity benefit, and the development of the social fund, the administrative costs of which amount to 61 per cent. of all the money that is allocated to the fund, have increased that complexity.

Ms Eagle

Has my hon. Friend read the document recently leaked about the running costs review in the Department of Social Security? It considers self-assessment of benefit, having benefit claims decided over the telephone, and the loss of up to 20,000 jobs in the Benefits Agency, but it does not mention fraud. Is he worried that such changes will increase the scope for fraud in the system rather than improve the position?

Mr. Smith

My hon. Friend is right. The Government are proposing a series of major changes to the Department's administration. We know that the Secretary of State is looking for 25 per cent. cuts in administrative costs over three years. In the wonderful jargon of the age, he calls it a "step improvement", but it threatens the Department's efficiency in the fight against fraud

Mr. Robert G. Hughes (Harrow, West)

If the hon. Gentleman is so dismissive of what my right hon. Friend the Secretary of State for Social Security suggests, will he confirm that he wrote to the shadow Chief Secretary to the Treasury and said that those savings were feasible, given the scope for efficiency savings?

Mr. Smith

I did not write to my hon. Friend the shadow Chief Secretary to the Treasury. The hon. Gentleman has misread his central office briefing. In his letter to me, my hon. Friend said: savings in running costs of this magnitude are feasible". I say just three things in response to the hon. Gentleman. First, my hon. Friend was reporting internal proposals in the Department of Social Security—he was not making his own proposals. Secondly, if the hon. Gentleman had taken the sensible step of reading the entire letter rather than the particular sentence presented to him, he would know that my hon. Friend made clear in his letter the dangers and difficulties involved in any such process in such a time scale.

Thirdly, the hon. Gentleman needs to get his English right, because what is feasible is not necessarily desirable. If he reads the "Oxford English Dictionary", he will find that the word "feasible" is defined as "capable of being done"—not as "desirable", "worthy" or "admirable".

Mr. Hughes


Mr. Patrick Nicholls (Teignbridge)


Mr. Smith

I will give way for the last time, to the hon. Member for Teignbridge (Mr. Nicholls).

Mr. Nicholls

I am grateful to the hon. Gentleman, who has always been very fair in these matters.

Presumably, the hon. Gentleman would have us read the letter thus: "The advice I am getting … nevertheless suggests that savings and running costs of this magnitude are perfectly feasible, but not desirable."

Mr. Smith

That is precisely what I am suggesting. If the hon. Gentleman had taken the advice that I gave his hon. Friend the Member for Harrow, West (Mr. Hughes), he would have read further. In his letter, my hon. Friend says: There must be doubts about the wisdom of trying to achieve so much in so short a time. I also refer the hon. Gentleman to the words of his right hon. Friend the Secretary of State. This is what confused the hon. Member for Harrow, West: the Secretary of State did indeed write a letter to his Chief Secretary to the Treasury, in October last year. In that letter, he wrote: Your proposed settlement on running costs fills me with despair. The impact on operations will be devastating. Yet, when precisely the same proposals are made, the Secretary of State tells us that they are all for the best in the best of all possible worlds.

Mr. Robert G. Hughes

Will the hon. Gentleman give way?

Mr. Smith

No, I will not. I have already given way a good many times.

Mr. Hughes

On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker (Mr. Michael Morris)

I hope that it is on a different issue.

Mr. Hughes

Is it not a courtesy of the House, Mr. Deputy Speaker, for an hon. Member who has referred to another to give way to him subsequently?

Mr. Deputy Speaker

Courtesy is very different from requirement.

Mr. Smith

I would also point out that I referred to the hon. Gentleman because I was responding to his intervention—a rather predictable and not particularly useful intervention, at that.

Mr. Hughes


Mr. Smith

I must make progress. I have given way many times.

My hon. Friend the Member for Wallasey (Ms Eagle) raised an important and serious point. The running costs review unit is currently considering these matters within the Department of Social Security, and the minutes of its meeting of 19 October have now surfaced in the public domain. They are very revealing.

It seems that the unit intends to recommend a number of what it describes as "quick-wind savings". It goes on to refer to a longer-term, more radical approach, and to discuss self-assessment before benefit. It describes that process in the minutes—minutes of important discussions taking place in the Department. Self-assessment, it says, would change if the onus was put entirely on the customer. Claim forms would give clear instructions on what verification was required. Customers would be able to seek advice about this, but BA"- that is, the Benefits Agency— staff would take no action to gather the information themselves and the date of claim would become the date that all the information required was submitted. No backdating would be involved … On changes of circumstances, the change would be implemented from the first payday following report. If the change was to the customer's advantage, no backdating would take place. However, in other cases, any overpayment would be calculated in full. Quite apart from the obvious lack of even-handedness that is proposed in the administration of benefits, that illustrates the difficulty that will confront many elderly, disabled or inarticulate claimants who are faced with a terrifying system, and with the need to produce full documentation before their claims can even be considered.

Moreover, the system will not stop the fraudsters. They will sail through it. They will know which documents they must produce, and will have them ready on demand. It is the innocent, legitimate claimants who will be harmed by the self-assessment procedure: it is the genuine citizen who will be caught. I believe that the procedure will make the fight against fraud more rather than less difficult.

Now, rather belatedly—after 17 years in office—the Government want to proclaim a great crusade against fraud. We are entirely in accord with their intention; every pound defrauded from the system is a pound less for those in real need. I might add that the drive for accuracy should cut both ways: the Government should be just as assiduous in ensuring that those who are entitled to benefit receive it. Fighting fraud and improving genuine take-up are two sides of the same coin. I wish that the Government would see it that way more often.

Even on the fraud issue, however, the Government are not waking up to the full extent of the problem; nor are they proposing sufficient remedies. They have undertaken two reviews recedntly. The first examined the extent of fraud relating to income support and unemployment benefit. The Government have proposed a number of steps, as they said in their response to the select Committee, and most of them were repeated in the Secretary of State's speech today.

The Government have proposed the deployment of information technology, and spoken of the importance of data matching and the development of central registers. That is all well and good, but it should be pointed out that central registers and data matching pick up claims only when they are made in the same or similar identities; they are not a wholesale answer to the problem of fraud.

May I ask the Secretary of State when all parts of the Department will be able to match their computer records with those of all the other parts? When will they be able to link automatically with local authority systems? The Government say that they are going to sit down and talk to the local authority associations. Where on earth have they been for the past 17 years?

The Government are also relying on the private finance initiative to fund the development of the new technology. Just four months ago, the firms that are likely to bid for the new Post Office Counters technology expressed considerable concern about the way in which the PFI was operating: they complained about the reams of paperwork, and the red tape that was strangling the processes that had to be undergone. I certainly hope that the PFI' s success rate in this instance will not mirror what happened in the saga of the Scottish air traffic control centre. Because of the nature of the PFI, the completion date has slipped from 1997 to, probably, the turn of the century.

Even worse, the Government are now in danger of making a complete mess of the introduction of benefit cards to be used with the new technology. On 12 February, the Under-Secretary of State gave my hon. Friend the Member for Bradford, North (Mr. Rooney) an astonishing answer. My hon. Friend had asked the Secretary of State if the proposed social security smart card will bear a photograph of the claimant and have a memory capacity. The Under-Secretary of State replied: The card technology and security features are a matter for the supplier under the private finance initiative."—[0fficial Report, 12 February 1996; Vol.271, c. 466] In other words, the Government are leaving the crucial question of what is to be on the card and how it is to be produced entirely to the private sector company that will be involved. That is not a matter of semantics. There is a crucial difference between having the cheap option with a card, which is a magnetic strip, and having a proper smart card with built-in technology.

A magnetic strip is much easier to defraud than a smart card, but the magnetic strip is cheaper to produce. Which are we likely to get from the private sector company? As the Government develop this technology, it is absolutely essential that they do it properly and give us a card that cannot be defrauded, rather than the one that we are at present likely to get.

The Government have told us that there will also be more home visits. There were roughly 500,000 visits in the past year, we are told, and that number will now increase to about 1.5 million, and take into account new claimants and existing claimants. That is all very well, but does the Secretary of State know how many home visits took place under the old system, in 1979, when the Government took office? There were 6.5 million home visits that year. The Secretary of State clearly did not know that, because he mumbled inanities about the International Monetary Fund in 1976, which is completely irrelevant in this context.

The Secretary of State has also said that targeted visiting is much better than random, blanket visiting. That sounds fine. However, if one knew where to target in the first place, there would be much less of a problem from the start. Random, blanket visiting is terribly useful—it was during the period of the old system—precisely because one often does not know where to target.

We have had a second review from the Secretary of State.

Mr. David Nicholson (Taunton)

Will the hon. Gentleman give way?

Mr. Smith

I shall give way to the hon. Gentleman, for the very last time.

Mr. Nicholson

Since the hon. Gentleman has given a figure of 6.5 million home visits in the last year of the previous Labour Government, perhaps he can tell the House—I am genuinely interested—what that Labour Government's record was in detecting and exposing fraud, and how much money was recovered.

Mr. Smith

Home visiting was meant to ensure that there was far less fraud in the first place. It was routine, it followed every claim that was made, and the information that was held by the then Department of Health and Social Security was far more accurate.

Mr. Corbyn

Will my hon. Friend give way—for the very last time?

Mr. Smith

I shall break my rule because my hon. Friend asks to intervene.

Mr. Corbyn

Should not my hon. Friend also emphasise the point that, in 1979, there was a far more positive relationship between the then DHSS and its customers or clients—whatever one likes to call them—than there is now? Those visits were supportive and helpful, and they also ensured that people who were under-claiming were able to claim. We now have a type of snooper's charter that has no interest whatsoever in people who are not receiving the benefits to which they are entitled.

Mr. Smith

My hon. Friend is absolutely right on that. Under the old home visiting system, the officers were first looking for fraud, but they were also looking for the take-up of entitlements. Those two features should go together in any sane, sensible and humane system.

The Government have had a second review, this time of housing benefit and council tax benefit. The review has estimated that there is about £1 billion of fraud in the system, but that is almost certainly a serious underestimate, because the methodology of the work done in it was seriously flawed. The first flaw was that the sample was less than 5,000 cases, and local authorities, in particular, have raised major concerns about how representative it was.

Secondly, the survey essentially relied on a memory test that checked the claimant's current statements against previous statements. Any serious fraudster would be able to pass the memory test with flying colours, and it was the small fish that tended to be picked up by that survey.

Thirdly, and most importantly, the entire concentration of the survey was on claimant rather than landlord fraud. Organised, deliberate fraud by landlords is almost certainly more significant than tenant-claimant fraud. The Government review said that about 6.3 per cent. of claims by claimants are definitely fraudulent, and that a further 1 per cent. are possibly so. So, according to the Government's survey, claimant fraud represents about 7.5 per cent. of claims.

The borough of Haringey carried out an intensive investigation of landlords there who were receiving direct payments. It interviewed 1,100 such landlords—the Government could only manage to interview 5,000 across the entire country—and more than 200 were found to be making fraudulent claims. That was 21 per cent. of the landlords who were receiving direct payments. The level of landlord fraud that was identified in one survey in one London borough is three times the level of claimant fraud identified by the Government in their survey.

Haringey is one of many local authorities—many are Labour-controlled, but some are hung or controlled by the Liberal Democrats—that are acting very successfully against fraud. Haringey has 21 staff who are specifically deployed to deal with housing benefit fraud. It has nine officers who, between them, are carrying out some 50 home visits every day, and they have visited their entire live case load of housing benefit claimants in the past 14 months. That record is commendable.

The London borough of Camden, which is next door to Haringey, has been awarded a charter mark by the Prime Minister for its work in countering housing benefit fraud. Recently, it also achieved the acclaim of an ISO standard.

Last summer, the council in Reading saw the launch of its innovative "fraudwatch" scheme by my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson). That scheme is being taken up elsewhere around the country, and I see that it is now one of the Government's suggestions.

This year, local authorities will save £217 million on housing benefit fraud, for a £26 million outlay from the Secretary of State's Department. That is an 815 per cent. return for the Department. So Ministers should not dare to say that the Labour party is doing nothing or proposing nothing on fraud. In local authorities up and down the country, the Labour party is doing precisely that, and providing an extremely good return to the Department.

The Government are supposedly launching new challenge funding for local authorities. They announced a figure of £10 million. As my hon. Friend the Member for Birkenhead (Mr. Field) rightly pointed out, however, a couple of days later, when the local authorities sat down to look at the facts, the amount turned out to be £8 million rather than £10 million. It then turned out that £5 million of the £8 billion was from money that was already allocated for local authority work against fraud. So the new money from the Government actually amounted to £3 million.

That should be seen against the background of the Government reducing the funds made available to local authorities. Under the current funding formulae, the £26.7 million in the current financial year will be reduced to £13.7 million in the next financial year. So this is hardly a Government who are serious about helping local authorities in the battle against housing benefit and council tax benefit fraud. Why, if they are serious about it, is the return expected from local authority schemes introduced under the challenge funding expected to meet a ratio of 3.5:1, whereas the Benefits Agency itself is expected to meet a ratio of only 2.2:1?

Why in the assessment criteria is speed of effect given a weighting of 4, whereas innovation, which the Government say they are interested in promoting, is given a weighting of only 1? Why, when local authorities want information from the Department of Employment, the Post Office or, at times, from the DSS itself in the fight against fraud, is it sometimes so difficult to obtain?

The Select Committee on Social Security's fifth report is very revealing on that point. Paragraph 8 states: We are disturbed that the threat of such fraud is taken far too lightly by some of the Government Agencies we questioned". The Government are supposed to have launched a great, determined, consistent fight against fraud, yet, when the Select Committee interviewed a series of Government agencies, it found that the threat of …fraud is taken far too lightly". All that the Government have done is announce new money that is not new. They have said that they are going to establish a central register, which is a welcome but limited proposal. They are going to go in for a lot of data matching and new information technology, which is fine. They are going to have a series of local drives which mirror what many local authorities are already doing. It would appear that they have entirely ignored the situation in Northern Ireland in doing that.

The Government have also said that they are going to return the number of home visits to a quarter of what they were before they took office. There is, of course, much more that they could do. I have eight specific proposals to make to the Secretary of State.

First, the Government could tell the House today that they are going to scrap any moves towards self-assessment procedures in applications for benefit.

Secondly, the Government could establish a special unit of investigators across local authorities, starting in London, to tackle organised landlord and managing agent fraud. Landlords use false tenant identities, switch tenants between properties and claim more rent than is actually being paid. Local authorities have been asking for such a unit to be established and supported by the Government for the past four years, yet the Government are today still saying that they are discussing it. I suggest that they make a start now, and give the money to establish the unit, which would pay for itself 100 times over.

Thirdly, the Government should give local authorities the right to obtain proof from managing agents and landlords of their right to control a property, to identify the real owners and to withhold benefit if they are not satisfied with the answers that they receive.

Fourthly, the Government should drastically tighten the issuing of national insurance numbers. The Select Committee in particular expressed concern about this matter, but the Government's response consisted only of bland assurances.

Incidentally, the Government have given a series of different answers in relation to how many national insurance numbers are in circulation. One representative of the Department said that 62 million numbers were in circulation. Another said that 65 million were in circulation, but, in a parliamentary answer to my hon. Friend the Member for Birkenhead last year, the Government said that 56 million national insurance numbers were in circulation.

It would be very useful to know exactly how many are in circulation. There needs to be clarity and specificity in relation to national insurance numbers. Surely it must be possible to have specific numbers for specific citizens—if the credit card companies can do it, for heaven's sake the Department of Social Security can surely do it.

Fifthly, the Department should end the "finders, keepers" rule between the Benefits Agency and the local authorities.

The Parliamentary Under-Secretary of State for Social Security (Mr. Oliver Heald)

A great deal of information about national insurance numbers has been bandied around, but the Select Committee was given a very full presentation of the numbers and the two computer systems, and the figures were reconciled. If the hon. Gentleman would like a copy of that presentation, I should be only too happy to arrange it.

Mr. Smith

I notice that the Minister omitted to give us the crucial information, which is how many national insurance numbers are in circulation. I am sure that the Select Committee had a wonderful presentation, and that there was all sorts of reconciliation going on between all sorts of figures that the Government have come up with, but the Select Committee was not satisfied, and I am afraid that I am not satisfied with the Minister's answer. We ought to be able to ensure the tagging of an individual national insurance number to an individual identified citizen. It must not be beyond the wit of Government to produce a precise match.

Mr. Corbyn

Will my hon. Friend give way?

Mr. Smith

I shall not, because I must make progress.

Fifthly, the Government should end the "finders, keepers" rule between the Benefits Agency and the local authorities, because it leads to competition between them for the same fraudsters. It has on occasion led to Benefits Agency investigating officers sitting in court when local authorities prosecute fraudsters in order to note down names and addresses, bung them on to the computer and claim the saving for the Benefits Agency rather than the local authorities. I suggest that there are better things that investigators from the Benefits Agency could and should be doing with their time.

The system should state clearly that the Benefits Agency can claim savings when income support fraud is identified, and that local authority benefits agencies can claim the savings when housing benefit fraud is identified. There should be close liaison and co-operation between the two, rather than the existing absurd competition.

Sixthly, we could ensure that the Benefits Agency fraud figures are audited in the same way that local authority fraud figures are audited. We know the accuracy of the local authority figures, because they have to go through an auditing process, whereas those of the Benefits Agency do not.

Seventhly, we should tackle the issue of postal redirects. At the moment, if they are sending cheques to a particular address and the cheques are being forwarded to another address by the Post Office, the Benefits Agency and the local authority are not told about the redirection of the mail. We should allow local authorities and the agency to have a list of all redirected mail for claimants.

Eighthly, employment offices ought to inform local authorities automatically when claimants cease to claim unemployment benefit or jobseeker's allowance. That happens most of the time with the Benefits Agency and income support. It is still patchy across the country, but improvements have been made. However, there is no rule relating to employment benefit offices to say that, once someone comes off unemployment benefit or jobseeker's allowance, the local authority paying housing benefit must automatically be informed. Such a rule would assist the fight against fraud.

I have outlined eight specific things that the Government could do now to assist the fight against fraud. Yes, prevention, detection and deterrence are important. It is not only the claimants we need to be examining, but organised gangs, landlords and managing agents. Yes, we need innovative information technology and administration changes, but much more is needed than the Government envisage.

We need better support and liaison for local authorities from the DSS, the Post Office and the Employment Service. We need a commitment from the Government to stop making things worse. We need a serious tightening up on the issuing of national insurance numbers. We need a more secure and sensible approach to the issuing of benefit cards.

Above all, we need dedication to ensuring that the money saved by the fight against fraud is deployed in helping people in real need. I am afraid that the Government's belated endeavours do not measure up to the task of meeting those objectives and needs.

5.29 pm
Mr. Ian Bruce (South Dorset)

I am grateful to be called so early in the debate and to follow the hon. Member for Islington, South and Finsbury (Mr. Smith). I did not think that I would be called so early and therefore felt a little trepidation at the prospect of having to prepare a response to Labour's eight stunning points. I am glad that no such response is needed because the hon. Gentleman cited a list of things that the Government are already doing. I therefore hope that at the end of the debate the Labour Front-Bench team will encourage their colleagues to vote with the Government and encourage the Government in their efforts to improve the tackling of fraud.

Although I am quite sure that the hon. Member for Islington, South and Finsbury is sincere in what he is saying and is trying to help, his statement on how Labour will tackle benefit fraud was absolutely pitiful and demonstrated that his party is bereft of ideas. Indeed, the fact that it has no other ideas for fundamental change emphasises that the Government's policies must be right.

Whenever I start a speech I always declare my interests, which are in the Register of Members' Interests. Indeed, I have been somewhat critical of colleagues for not having done so. Although none of the organisations that I advise has in any way helped with my speech or anything else, it is relevant to declare that I advise the Federation of Recruitment and Employment Services and the Telecommunications Managers Association. Some of the remarks that I shall make are certainly as a result of the benefit of working with those organisations and knowing what is going on in the real world outside.

Mr. Corbyn

How much do they pay you?

Mr. Bruce

That is also stated in the register.

Mr. Corbyn

Tell us now.

Mr. Bruce

It is a matter of public record. I shall make my speech in my own way.

Whenever any of us talk to business men or others on their doorsteps, whether they be Conservatives, Labour, Liberal Democrats, Ulster Unionists or any others—I do not meet too many Ulster Unionists on doorsteps in my constituency—people are adamant that they do not want others to rip off the state. They know very well that that is ripping them off as taxpayers and they are very keen to ensure that we work as hard as possible to eliminate fraud in the system.

The man in the street is often somewhat dismissive of people who genuinely claim benefit. People who are genuinely in need of some benefit are attacked simply because of the fraud that is going on. It is therefore imperative that the House sends out a clear message about our determination to find the fraudsters.

I congratulate my right hon. Friend the Secretary of State on the success of the studies. It is impossible to identify all fraud accurately and exactly, but unless we make an effort to measure it sensibly, which the Government have done, the size of the problem cannot be determined and we cannot assess where it should be tackled. The usual Pareto analysis applies to fraud: if 10 or 20 per cent. of the problem is tackled, 80 or 90 per cent. of the fraud will be found. There is no point in spending £1 million if only £100,000 is saved. We must ensure that we spend taxpayers' money correctly in targeting fraud.

Many of the important areas identified by the hon. Member for Islington, South and Finsbury are clearly common ground across the Floor of the House. The reports produced by the Select Committee on Social Security demonstrate that we must all be aware of the issue and that we are all very keen that it is tackled. I congratulate the Labour party on not having any fresh proposals, on the basis that it clearly understands that the Government are going in the right direction.

The Government are right to emphasise that we have gone too far in withdrawing home visits and that we must find ways of checking up on people and discovering fraud. I urge my right hon. and hon. Friends to recognise that there are other simple methods by which we can find out whether people are defrauding the state. For instance, benefit claimants could be telephoned during the normal working day, perhaps after the children have returned from school. It is amazing how many young children answer the telephone and say, "Sorry, Daddy and Mummy can't come to the phone, they are both still at work." Such calls would determine whether people are working and claiming benefit.

Other methods, including letters asking for information, tend to make people who are defrauding the system nervous. If people are asked to give additional information by letter, they think that somebody is checking up on them and decide to sign off, which is clearly what we are trying to get them to do if they are defrauding the system. People could be asked to call into the local office, especially at times when it would be difficult for them to get away from their jobs. We should remember that claimants would be travelling to such appointments in their own time and therefore such visits would be more easily accommodated by a genuine claimant than by an officer who had to make home visits. Those methods can and should be used much more. It is extremely important to use all possible flexibility.

I mentioned that I am an adviser to the Telecommunication Managers Association and I am a keen advocate of the use of information technology. I congratulate the Government on taking their first steps in that area. They are fairly tentative first steps, but there has already been some success. Data matching has been used very successfully in other countries. Australia, under new Labour, was one of the first. Perhaps if Labour had introduced data matching a little earlier it might not have been so whitewashed in the recent election.

The Government have been very supportive of the Post Office and sub-post offices over the use of information technology, and a number of companies and individuals have given presentations to some of our Back-Bench committees on how it will be used. The House might like to know that when somebody claims their benefit in future, postmasters will be connected to a computer in another area that will carry live information as opposed to all the intelligence being kept on a smart card.

Although that system is quite expensive, it is a very good way to check up on fraud and identify people who have lost an intelligent piece of information that could be used fraudulently. As soon as a loss is reported, the information can be immediately entered on the computer and the postmaster dealing with the claim can be alerted. That is beneficial, and I very much hope that information technology will be used successfully by the Department of Social Security.

I hope, too, that many of the benefits gained from using such a system will extend to other parts of the economy. The Government are large users of computing technology, and if they sign up to a particular type of technology and use IT, it will encourage other parts of the economy to do the same.

I echo some of the concerns expressed about the private finance initiative, which is a matter for the Treasury rather than for the DSS. As the guardian of public funds, the Treasury is keen to stop fraud, but it is somewhat over-bureaucratic—if not over-zealous—in the types of documentation that it requires. The DSS is working vigorously with would-be suppliers to get over the problems, but we should be aware of them and ensure that something is done to help.

I should be most grateful to learn how the new incapacity benefit is working in terms of weeding out those who have been defrauding the system. No hon. Member could oppose a disabled person who cannot work receiving help from the state. After all, if we are in Parliament for any reason, it is surely to help those who are most vulnerable. I do not want in any way to suggest that I am against ensuring that disabled people get suitable benefits—the Secretary of State and all Ministers are devoted to ensuring that they do—but it is extremely important that people who are denied benefits because they have plenty of savings are not allowed to get a doctor's note saying that they are disabled and should receive incapacity benefit. We must carry out objective and sensible tests to ensure that claimants do not rip off the system.

One of my constituents—a vigorous worker for the Labour party and many other good causes—is energetic, is always rushing around and is happy to deal with her work. She often comes here to ask me to take up issues on her behalf. It was somewhat surprising, therefore, that when the Government introduced incapacity benefit she told me that she was worried about the new incapacity benefit. She had been claiming disability benefit for the past eight years, and was rather worried that the Government were going to take it away from her. I was able to reassure her that she had reached the cut-off age, and could not have the benefit taken away. But, frankly, here was someone receiving disability benefit who was, to my mind, as fit and able to work as anybody. She worked tirelessly for the community, the Labour party and many other organisations, but did not think that she was ripping off the taxpayer.

If people can work, they should be on the right benefit and should not try to claim incapacity benefit. By doing so, they may make a genuine claimant think that others believe that he is scrounging because, unfortunately, so many people in the past claimed the benefit incorrectly. I hope that we will hear how incapacity benefit is working in that regard.

I sat next to a number of people from the pharmaceutical industry at a dinner that I attended last night. When I referred to the subjects that the House would be debating this week, the issue of prescription forms was brought up. I know that such forms are not the direct responsibility of my right hon. Friend the Secretary of State, but he will know that exemptions from prescription charges are generally based on benefits. A lady at the dinner was quite adamant—as was the whole table—that the Government are not making sufficient checks on those who simply tick the box on the back of the form to state that they are entitled to benefits. They then sign their name, and their prescription is completely free.

I understand that someone who is found to be ticking the box incorrectly receives a polite letter from the health service asking him to send only the amount that he has defrauded the system. In other words, there is no disincentive for people to tick the box incorrectly and see whether anybody finds out. I understand that few checks are made on prescription forms, as they deal with a small amount of money but require a lot of clerical effort. The Government should look at that matter and ensure that people who incorrectly fill in prescription forms feel vulnerable to prosecution. We must, on occasion, prosecute fairly minor frauds to draw a line in the sand and to show our seriousness. We know how much the taxpayer pays towards prescriptions—some 80 per cent. of prescriptions are supposedly free. That figure may be boosted by some people claiming a false entitlement to free prescriptions.

All hon. Members will have had constituents coming to see them about the Child Support Agency and its funding. I do not wish to go into great detail about the CSA, and I suspect that my right hon. and hon. Friends will be grateful for that, but time and again parents with care and absent parents are adamant that the individual whom they must pay or from whom they are receiving payments is defrauding the social security benefits system. Those parents often feel frustrated that, despite their passing information to the CSA, nothing is done about the complaint.

The Benefits Agency could target the CSA to deal with such fraud, resulting in an enormous saving to the taxpayer. In addition, those involved with the CSA may feel that they are being treated fairly. That is important, as people often complain more about being treated unfairly than about not having enough to look after their children. I urge my hon. Friends to look at the matter and ensure that information from the CSA gets through to the Benefits Agency.

Whenever I go to a village to canvass I always say hello to the local postmaster and ask what is happening. All of them know of at least one individual who is collecting a large amount of benefit to which he or she is not entitled. Most postmasters will inform the Benefits Agency of blatant cases, but they too are worried that the agency is not following up information. It is extremely important that there is such feedback.

When I am given information of an alleged benefit fraud, I can write to the Benefits Agency, which then gives me a full, but confidential, report on the case. I am duty-bound, however, not to pass on the report to the informant. All I can do is write to the informant to thank him for passing on the information, and assure him that the case has been fully considered.

An individual's right of confidentiality must, of course, be preserved, except when that individual is ripping off the system. If that person has had to pay money back or has stopped his claim, those facts should be available to the person who originally provided the information. That provides a bit of an incentive; it also prevents the situation from arising whereby someone says, "I have provided the information, but the individual seems to be carrying on as normal and I have received no firm information as to whether the claim is genuine."

I understand that often individuals will not be identified—whether or not they are receiving benefit—because that would break their right to confidentiality. But if there is a genuine case and we are ensuring that people are being found out, that information should be put in the public domain. The more that we put information in the public domain via newspapers, the better it will be for everyone because the climate will start to change. If we prosecute someone, the newspapers pick up the story and print it. We must consider how to get the information to the people.

I wonder whether we should examine one aspect of housing benefit to see whether it might be more appropriate to return it to the Benefits Agency's remit. It is important that the partnership—if there is one—between housing benefit offices and the DSS works well; it must be a seamless operation. If it does not work well and if we cannot continue to ensure that local authorities take action against fraud—as we have in recent years—we must consider the possibility of bringing the issue back under one roof. That is particularly important if the information that is available on the Government's computer systems cannot be shared around the housing benefit offices. It is important to ensure that the system is seamless and that we get rid of delays. People often tell their landlord that they are receiving housing benefit. The landlord then decides that he will allow them to stay without worrying about the rent coming in at the right time as he believes that the DSS will eventually pay. We should be worried about long delays.

I have one final tale from my days of running an employment agency. It is a cautionary tale that my colleagues may have heard before. I ran an employment agency in Yorkshire for 12 years. In all that time, everyone who came into the agency was put on the national insurance system, and paid their taxes and their national insurance. Only once in all that time did the DSS want to come and check up because it had found that someone was defrauding the system—the person had four jobs and was claiming benefit. It asked us for a list of the people who worked for us in a particular week. Some 30 per cent. of those people were working for us, paying their taxes and national insurance and claiming, but the DSS had not discovered that.

Organisations such as employment agencies should be asked to co-operate; they will be happy to co-operate with the DSS to ensure that people are not claiming as well as working. The Department needs to liaise with employers, employment agencies and everyone else to carry out that job. All of us should ensure that the system is not ripped off by fraudsters.

5.53 pm
Mr. Frank Field (Birkenhead)

I am pleased to follow the hon. Member for South Dorset (Mr. Bruce) for, like him, I wish to congratulate the Government, but for very different reasons. I want to congratulate the Government on their sheer nerve and effrontery in coming here today and presenting themselves as the friend of the taxpayer, given their record of the past 17 years.

If I am able to keep the attention of the House for a short period, I want to argue why not only the House but the country should condemn the Government for their lack of stewardship in safeguarding taxpayers' money over the past 17 years. In deploying that charge against the Government, we need to consider both fraud that is undertaken by claimants and fraud that is undertaken by gangs of highly motivated individuals—as the late leader of the Labour party once described such groups—to discover what action the Government have taken.

Clearly, whatever their circumstances, some people who claim benefit would happily commit fraud against their fellow citizens and fellow taxpayers. Others are pushed into doing so because of the circumstances in which they find themselves. I do not stand here today to make excuses for them—I have always stood up and condemned them—but I am minded to draw attention to the fact that they may have better reasons for committing fraud than other groups.

Unlike those on the Treasury Bench, I take seriously the fact that my constituents are men and women who are interested in economics and who respond to incentives and opportunities offered to them. That was why it was so important for my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) to draw attention to the massive extension of means tests under this Government which has perverted our social security system.

When Attlee finished the job of implementing his wave of reforms, for each £10 paid in welfare only £1 was paid in means-tested support. Now, under this Government, for each £3 paid in welfare £1 is paid in means-tested support. We all know how means tests operate on human character, especially when there is a scarcity of jobs—given the opportunity, all our constituents would like to take jobs. We know that means tests penalise people who work harder and penalise people who move off benefit. We know that means tests strike at that group of the population whom the Tories used to think constituted the bedrock of their support. Those people thought that saving was important and that such action would be rewarded, saluted and commended by the Government as proper behaviour, not mocked. Those people saw that they would lose out in the welfare state.

With the extension of means tests, massive penalties have been placed on people who tell the truth. Far from having a welfare state that supports those verities that any civilised, sensible society would wish to support—hard work, the search for work, savings and honesty—the Government have rescheduled the welfare state to attack those verities.

The first part of the charge sheet against the Government draws attention to their sheer nerve in coming here and saying that they are tough on fraud. It rams home the fact that, although the Government say that they know how ordinary men and women respond to economic incentives, they clearly fail to comprehend what that means in the welfare state. In addition, we must get to grips with how nasty some people are—particularly, how some of those nasty people are prepared to operate in gangs.

The Select Committee has been undertaking the inquiry not merely to try to prod the Government into some action or to find out more information than the Government have, but, in our own small way. to try to advance, support and invite those members of the public services who try to crack down on fraud—I do not say that lightly, as it is getting tougher for such people. Within the year, people who have checked up on MOT tests have been murdered by those wanting to dispense with the people who uncovered their fraud. If we took the problem seriously, they would be the most prized people in public service. There would have to be more than mere lip service offered: we would have to pay people properly for the risks that they take on our behalf in trying to get to grips with gang attacks on the social security system.

My hon. Friend the Member for Islington, South and Finsbury drew attention to the Government's somewhat complacent view of the extent of fraud. It is not just a personal game that I like to have with the Secretary of State when I draw attention to the way in which he keeps revising his estimates of the extent of fraud as he is pushed into further measures. I am pleased that he takes them. Later, I shall underline how honest such an approach is, given that none of us can know the true extent of fraud.

Let us take the example of Haringey, a borough that is serious in cracking down on fraud and not only saying that it is. My hon. Friend the Member for Islington, South and Finsbury told us about the number of staff involved in dealing with fraud. Landlord fraud is the biggest problem with housing benefit—that does not apply to other benefits—and involves at least three, and perhaps four, times the amount of fraud that the Government imagine exists.s

Mr. Lilley

indicated dissent.

Mr. Field

The Secretary of State shakes his head, but if this debates helps in one way I hope that it will be by making it clear to him that he is still not taking seriously enough the size of the problem of housing benefit fraud. That is the second part of the charge sheet. The right hon. Gentleman helps me to make that charge by saying that I am over-egging my case.

There is a third, more important, charge to be made against the Government. They have allowed the national insurance system, which should have been the fail-safe mechanism of the whole social security system, to become riddled with fraud. I do not want take too much time, so I shall give only one example of that.

We recently debated asylum seekers. I commiserated with the Secretary of State on the fact that he had been pushed by his colleagues, because of the failure of the Home Office to guard our borders properly, into using the social security system as a way of trying to control illegal immigrants. I said that I thought that he had totally misread the situation. We now have a policy of starving out asylum seekers who do not get their claims recognised. Before long, the right hon. Gentleman will rue the day he introduced those regulations, when the press wake up to the people who are already homeless and hungry and who are being serviced by charities and churches. Those people will soon set up camp cities. It will go on day in, day out. That will not be a pleasant case for him to answer.

Equally serious is the way in which the Government allowed asylum seekers to build up their claims over most of the Government's period of stewardship. If the Secretary of State had gone to the centre at Croydon during much of the Government's time in office, he would have found that the crucial role of checking whether people were genuine—whether there were real individuals at the end of claims—was performed by two government officials. They sat in their office with ring files in front of them, turning over the photographs and trying to recognise photographs on the applications that might have looked like others that they had seen five or 10 minutes ago—let alone 10 hours ago. That was the check. It was easy for people to claim that they were asylum seekers when they were nothing of the sort, to build up a series of claims, get the crucial note from the Home Office accepting that they were asylum seekers and thereby get their national insurance numbers. That is why we have large numbers of people trading in national insurance numbers.

Mr. Lilley

indicated dissent.

Mr. Field

The Secretary of State again seems to disagree, but time will tell which of us was more right. That helps to explain why, when anti-fraud officers raid some London homes, they find claimants of housing benefit or landlords with 50 or more false identities, each with different national insurance numbers. Often, they have got references through their cheque cards, bills or driving licences. We are not dealing with simple social security frauds; one fraud is reinforced by others, with addresses right across London and beyond. Much of that problem stems from the Government's continual failure to secure our borders safely. We are in an appalling state when the Secretary of State has not only to safeguard the social security budget but to act as a policeman in a way in which the Home Office is failing to do.

Far from having a secure national insurance number system that acts as gate-keeper of the huge budget to which all our constituents contribute as taxpayers, we have a series of estimates of the number of loose national insurance numbers that are running around. The Under-Secretary of State for Social Security, the hon. Member for North Hertfordshire (Mr. Heald), rightly said that the Select Committee had had a most interesting trip to the Contributions Agency, but he could not give us the crucial information on how many national insurance numbers are loose in the system. I will return to how crucial that point is, if I can keep the attention of the House, when I consider a programme for reform.

The last part of the charge sheet involves the lack of any overall drive from the very top in Government which recognises how serious the issue is. It is not only a matter of social security because, as I have tried to illustrate, the frauds do not come in nice little boxes.

Mr. Heald

The hon. Gentleman constantly talks about national insurance numbers being loose in the system. I was sorry that he was not able to attend the presentation in Newcastle last week, but I offer it to him as well. What on earth does he mean by "loose in the system"? The numbers are accounted for.

Mr. Field

We are now into the world of Alice in Wonderland. The Government have given two estimates of the total number. They say that there are two different systems. Ministers do not understand what a giveaway it is to say that there are two totals because there are two systems. We are trying to a develop a safe system of entry into our social security system. We have various explanations of why some of those numbers exist. The numbers far exceed the working population. Some people have died or moved abroad and we have to keep their files open. Those are reasons for having more national insurance numbers than people in the working population, but they do not show whether the number is X million, X plus 2 million or X plus 3 million. The Minister has not answered the crucial question: why is there not a single total?

Mr. Heald

There are two computer systems. The NIBS computer, or national insurance recording system, lists all the national insurance contributions that are paid and keeps those contribution records. There are 63.6 million records on it. We keep the records of people who have died, because their wives may wish to claim. People who have gone abroad may wish to make a claim in the future. We need their insurance records. We tag records if they are inactive.

The other system, the departmental central index or DCI system, has on it all the people who are claiming benefits. Some of them have a national insurance number but never make contributions. There are people who have never paid national insurance contributions who are entitled to benefits such as people with category D pensions. There are 77 million numbers on that computer system. The difference is simply explained: it is the difference between those whose contribution records have been kept and those who are entitled to claim benefits, some of whom never paid national insurance contributions. I can give the hon. Gentleman the fullest possible breakdown. I can account for it. If he had attended the presentation in Newcastle, our staff would have been only too willing to do that.

Mr. Field

I did not attend the presentation, because I was sick. I feel sick whenever I deal with fraud. I am extremely angry that taxpayers in my constituency are being ripped off by fraud and that it is so difficult to get the Government to take the issue seriously. The Under-Secretary may believe that the system is foolproof, but when I am visiting the Benefits Agency in Newcastle perhaps he would like to accompany the London anti-fraud squad on its patrols.

Mr. Heald

In London?

Mr. Field

The Under-Secretary would not have to travel any distance. He might explain how he can be complacent when that squad discovers people claiming housing benefit who have 50 or 76 false identities with live national insurance numbers.

Mr. Heald

The Government are not complacent: we have introduced a range of measures to toughen the system. The hon. Gentleman will concede that in the case to which he referred the police, the Benefits Agency and the local authority co-operated to catch those concerned.

Mr. Field

Precisely. That is an example of how easy it is for people to attain not just the odd national insurance number but fistfuls of them.

Mr. Heald

We caught them.

Mr. Field

Ministers did not catch them. They were caught by officers in the field. Those officers are investigating such cases, despite the difficulties they face in attracting and maintaining staff in light of the present subsidy arrangement. When the number of unemployed falls, Ministers say, "We have created more jobs." When unemployment rises, Ministers say, "It is the world economy; entrepreneurial skills are failing." We all know that the Government like to acknowledge success and ignore failure. I am simply advocating more, rather than fewer, successes.

Ministers should be horrified and shamed by the fact that anti-fraud officers can find people who have national insurance numbers which can be activated against other forms of identity, such as birth certificates. The Government should renew their efforts to combat fraud rather than maintaining that the national insurance number system—which has two computers producing two different results—is safe in Treasury hands. The clear evidence is that it is not.

I am glad that the Under-Secretary is present because, before he intervened, I was saying that the centre of Government must take the issue seriously. Today we are debating fraud in the DSS and we are not discussing neat little frauds which occur only in that Department—we are up against some very serious criminals who operate in both the public and the private sectors. If insurance companies had been included in the raid to which I referred, we would have found that people had made an extraordinary number of claims to the private sector about all sorts of policies.

Some time ago, I tabled a question to the Prime Minister asking him whether he was taking the lead in co-ordinating the Government's anti-fraud campaign. Given the level of fraud that I suspect is in the system, it seems absurd that the Government should go through their yearly exercise of trying—and failing—to control public expenditure when part of that very large public expenditure budget is being stolen. I believe that those two points are related.

The Prime Minister referred my question to the Secretary of State who referred it to the Under-Secretary. We all must start somewhere in Government, and I mean no disrespect to the Under-Secretary. However, I believe that that is a visible sign of how seriously the centre of Government treats the issue. Instead of dealing with the problem himself, the Prime Minister thought that it was more appropriate for one of his most junior Ministers to do so. I do not mean to be personal.

Mr. Gary Streeter (Plymouth, Sutton)

The hon. Gentleman is.

Mr. Field

I have said already that we all must start somewhere. Many hon. Members—including some of my colleagues—would be delighted to have the Under-Secretary's job. We are all aware of the hierarchy: Prime Ministers and Secretaries of State like to keep certain issues to themselves, while pushing other issues down through the Department for others to deal with. We all know that that occurs. The Prime Minister's actions in that case say something about the Government's priorities—what they think is important. I am pleased to see the Under-Secretary on the Treasury Bench tonight; I am simply saying that it tells us something about the Prime Minister's thoughts on the issue. We must change his views.

Mr. Lilley

For the sake of the record, I remind the House that both my right hon. Friend the Prime Minister and his predecessor held the same position as my hon. Friend at the beginning of their careers. It is an extremely distinguished and prominent post. As a result, the Prime Minister takes a great interest in those subjects and he discusses them frequently with me and my team. It is a perfectly normal, if not the invariable, practice for Prime Ministers to pass questions of a departmental nature to the Departments concerned. I see the answer to every question emanating from my Department.

Mr. Field

I am pleased to be reminded of where previous Prime Ministers began their careers. When the Secretary of State next meets his right hon. Friend the Prime Minister, he should tell him to watch his back if the Under-Secretary ever has toothache.

I am attempting to draw attention to the need to change the culture of addressing fraud. That is illustrated partly in the disputes between the Benefits Agency and local authorities, to which my hon. Friend the Member for Islington, South and Finsbury referred. It shows that the Government are more interested—perhaps naturally—in meeting their target than in combating fraud.

That is evident in the difficulty that the Secretary of State is having spending his challenge money. In light of today's debate, I hope that he will receive a letter from the Treasury saying that the initiative in London to co-ordinate a campaign against fraud should go ahead. I hope that the seed money from his Department, which will be added to the challenge money, will be forthcoming. That is not a minor point. The Treasury has sensibly laid down returns on the use of that money. That is all right if there is existing machinery, as one can hit the ground running on day one. However, it takes time to set up new machinery and there are clear difficulties in meeting the returns on challenge money if one is starting from scratch rather than building on existing framework. They are the charges that are levelled against the Government.

Mr. Barry Porter (Wirral, South)

I am grateful to the hon. Gentleman for giving way—as I am a taxpayer who does not claim benefit in his constituency, I am sure that he will forgive me for intervening. I am puzzled about his rather virulent attack on means-tested benefits. If he is advocating their abolition, that would mean either that the benefits would be devalued if they were spread more widely or that the Treasury would pay much more. Has the hon. Gentleman costed that idea? Would it have any effect on fraud? He knows as well as I do that fraud has been refined into an art form in our part of the world.

Mr. Field

I bring a certain amount of anger to the debate partly because of what some of my constituents have taught me: I am angry that they must work the system rather than work with the system and I am angry that others, who are not much better placed, must foot the bill. Any solution will take time, but the Government must make a commitment to prevent the spread of means testing. How they do that is important and it will cost money in the short term. The hon. Member for Billericay (Mrs. Gorman), who has left the Chamber, referred to the fact that the self-employed are much more effective in policing their organisations than are companies that belong to the state.

Mr. Nicholls

I understand what the hon. Gentleman says about means testing and I concede that means-testing benefits has implications for fraud. Does the hon. Gentleman agree that, as about 89 per cent. of contributors towards tax are basic rate taxpayers, if benefits are not means-tested, in many cases the working poor would pay non-means-tested benefits to people such as me and the hon. Gentleman, who do not need them? Whatever complications are inherent in means testing, although it is an imperfect instrument it is the only instrument for getting benefits to people who need them and not giving them in a blanket way to people such as the hon. Gentleman and me, who do not.

Mr. Field

I hope that we will hold a debate on wider-scale reform another time, when I can deploy arguments about how means testing—targeting in the way that the hon. Gentleman has just said—often fails to achieve the intended goal. One sees that most clearly with unemployment benefit.

There are increasing numbers of no-wage households with two, three or four wage earners. One reason is that once the senior partner—the main breadwinner—loses his job and then falls out of credit for unemployment benefit, it does not pay the wife to work because the benefit system pays the household more. A wife earning £100 a week when income support and housing benefit offer £150 a week has to be of extraordinary courage and resolve not to choose to be £50 a week better off. Many of our constituents choose not to be better off in that way, but we cannot blame constituents who, acting like rational economic men and women, take the better deal.

Mr. Nicholls

Does the hon. Gentleman agree—he is probably the only Opposition Member who would have the courage to admit this if he does—that he makes a powerful case for deciding that no one should ever be paid more on benefit than he or she would be capable of earning in the local job market if there were a job for a person of their skills? The hon. Gentleman is opening up a debate about whether we should reduce benefit so much that people with ordinary skills and talents are capable of earning more than they could ever get on benefit. That is a dangerous line of argument; it seems that the hon. Gentleman is going down that path.

Mr. Field

No, I am not. I hope that we shall debate that subject before too long, but briefly, if we were to rebuild an insurance system for which one had to pay, the system should give incentives to people to take work, to take risks, to keep partners in work and so on. That would have a lower net cost, for them as contributors and generally for us as taxpayers, than the morass that we are in. Sadly, £1 of means-tested benefit helps generate the next £1 of means-tested benefit because it is so difficult, once one is on means-tested support, to disengage oneself and get off it, especially given what has happened to the bottom end of the job market.

Average wages for re-entry jobs are at or below a quarter of median earnings; they are £56 a week or less. It is difficult not to be better off on benefit when wages are so low. We need a benefit system that encourages people to take the risk that is often involved in accepting a job so that their wives and other family members can continue in work and the family is not brought down on to means-tested assistance, from which it is so difficult to escape.

The House will forgive me if I do not continue to argue that case. I hope that we have a chance to do so in future. In the second half of this brief contribution, I shall list the proposals that I should make if we had a Government who were serious about fraud.

First, the highest priority should be given to delivering to taxpayers a safe national insurance system. It was significant, was it not, that there was no mention of such a programme in the wonderful unveiling today of yet more measures to tackle fraud?

Secondly. there should be a determined attempt, from the Prime Minister downwards, to change the national culture from one that often turns a blind eye to fraud to one that opposes fraud, so that are not talking, as the hon. Member for South Dorset (Mr. Bruce) did earlier, about whether people should report people who were committing fraud; there would be no question about it.

Thirdly, there would be a Secretary of State who was anxious to support his own fraud teams and—equally important—the local authority fraud teams in a way that enabled them to plan long term. Obviously there are difficulties because, if one gives things too easily to people, we well know that they will settle down to an easy life. I accept the stick-and-carrot approach that the Secretary of State has deployed for some time with local authorities, but to attract high-quality staff, some of whom will risk their physical safety, it is important to offer contracts that extend beyond one year during which the Secretary of State will judge whether one's subsidy will continue or not.

Fourthly, if the Government were really serious about tackling fraud, maximum flexibility would be shown in the deployment of funds to counter fraud. The example cited earlier of the London initiative that was stopped by the Treasury would be the first and last example of that to be exchanged across the Dispatch Box.

Fifthly, to obtain widespread public support against fraud, we might use the savings made in tackling fraud to finance a better welfare state. Instead of announcing cuts, more cuts and yet more cuts, the Secretary of State would win the support of his colleagues to say, "I believe that the issue has been much underestimated. This is the sort of delivery that we believe we can make. We want to spend a fair share of that on improving welfare for the most vulnerable members of our community."

That brings me to my last suggestion. If we want voters to take the matter seriously, the Secretary of State should not only make announcements about new anti-fraud campaigns but place equal emphasis on the fact that the Department's second duty is to ensure that all those who are entitled to benefit gain the benefits to which, by law, they are entitled.

It has not been said so far that, even on the Secretary of State's estimate of fraud, in all probability a larger sum is left in the Treasury by those who are poor and who do not claim. If the Government were serious about tackling fraud—on which they must do much better—and if they were humane in their approach to the issue, Ministers would never speak at the Dispatch Box about anti-fraud measures without speaking about measures to ensure that the millions of claimants who do not claim the benefits to which they are entitled were similarly helped.

6.27 pm
Mrs. Marion Roe (Broxbourne)

I welcome the opportunity to speak in this debate on social security fraud. I start by placing on record my congratulations to the Government on the initiatives that they have taken to combat bogus claims for benefit and on the new measures that my right hon. Friend the Secretary of State outlined earlier. My right hon. Friend reminded us that fraud, which cheats the needy and deprives of benefit those who have a genuine claim, also cheats the hard-pressed taxpayer, who must find the money to fund bogus claims.

I am pleased to say that Broxbourne borough council, which covers most of my constituency in Hertfordshire and serves a population of about 83,000 people, takes housing and council tax benefit fraud very seriously. Since the Government's action against fraud initiative was introduced in 1994, the council has set up an investigation and recovery section, which tackles the difficult task of fraud investigation and debt recovery. The section conducts inquiries and has a good working relationship with various agencies, such as the police, the Department of Social Security fraud inspectors and the Benefits Agency. The Government's scheme focuses on the savings to the public purse that follow from tackling fraud—a system of penalties and incentives to reward authorities that achieve target levels of savings, as set out by the Department of Social Security.

In the first 11 months of 1995–96, Broxbourne borough council identified weekly benefit savings of £381,324 against the target of £90,205. The council has earned £64,171 in cash bonuses, identified £76,835 of fraudulent overpayment and recovered £40,333 so far. It has also recovered seven council houses and flats that were bought fraudulently.

When the scheme was first established, there were suspicions that the work would become more difficult once the easy cases had been tackled, but that has not been the case—there is no shortage of work. Fraud is found in 52 per cent. of the cases that are referred to the council by the public or by the council's housing benefits administration contractor. The total case load so far this year is 456, or 4.3 per cent. of the total of 10,419 housing and council tax benefit claims.

The incentive to tackle benefit fraud is welcomed by everyone, but one must ask: if the scale of benefit fraud is so high in a small and mainly suburban area of the home counties, what is it in inner cities? Broxbourne borough council's work has uncovered a possible sub-culture of benefit abuse, including a number of cases of organised landlord fraud—which is difficult to prove.

The London boroughs fraud investigators group recently gave a presentation to the Conservative social security committee—of which I am chairman—and drew to our attention a number of concerns, one of which was organised housing benefit fraud. The income support rate for a single person is currently £45.70, hut, in a large city such as London, many landlords charge a single person two or three times that amount because of the nature of the housing market, so housing benefit fraud can be much more lucrative than income support fraud.

It is claimed that organised housing benefit fraud is much more likely to be perpetrated by managing agents or landlords than by claimants. While some claimants perpetrate organised housing benefit fraud—and make or use forged documents to do so—landlords often need to collude to be successful. Managing agents and landlords have a ready-made base of addresses that they control or own from which to perpetrate the fraud. A minimum requirement is for housing benefit claims to be substantiated by means of proof of rent and tenancy, which would be signed by the landlord.

If further action is taken to verify the claim, the landlord might be asked to confirm the details that have been given. In addition, housing benefit can be paid direct to the landlord—indeed, some landlords insist on it. In such cases, landlords often control the claim: the forms are completed in the landlord's handwriting and give the landlord's authority to discuss the claim direct with the local authority benefits section and the landlord sends in the claim form and rings up the benefit section with queries about the claim. Most cases of organised housing benefit fraud involve claims where the benefit is paid direct to the landlord or to the managing agent. Landlords will insist that the person who is claiming is living at the stated address—they would, wouldn't they—because they would lose a considerable amount of housing benefits if they did not. When visits are made to check residency, there is often no reply—but that, in itself, may prove little. Those concerned could always be out, so repeated visits should be made at different times of the day and on different days of the week.

Often, landlords use false identities or seek out real tenants who speak or write very little English. There are several advantages to them in doing so—real tenants of that type are unlikely to be aware of their housing or benefit rights, there is an apparently good reason for the managing agent or landlord completing the benefit claim forms, the managing agent or landlord is better able to tell the tenant or the claimant what to do best to suit his financial advantage and the landlord can accuse anyone of racism if they seek to investigate the claim. I understand that that is frequently done.

The frauds are usually worked in two ways. First, a completely fictitious identity is set up—which is not too difficult if the type of identity chosen is of an asylum seeker or person from abroad. In this type of a case, it is difficult to prove beyond reasonable doubt that a person does not exist, so while it may be possible to cease a claim, it is harder to prosecute for fraud. The second way in which fraud is perpetrated initially involves real people. The managing agents move claimants on to another of their properties, often in another borough, so that the borough's computer will not show up two claims as soon as the claim is put into payment. They then ensure that a new claim is put in for the new address, while they knowingly continue to receive payments for the address the tenants have left. New real tenants will, in all likelihood, already be claiming from the first address.

Moneys obtained from benefit fraud are often used to fund mortgage fraud. Managing agents, only controlling other people's properties, seek to build themselves into property-owing landlords. This is a serious problem. It is serious financial crime—far different from the image of benefit fraud. For example, a managing agent who controls, say, 30 properties containing bedsits might be able to charge an average of £70 per week per bedsit, with four bedsits per property. The experience of investigators in London is that fraudulent managing agents will operate the fraud in between 35 and 50 per cent. of the properties that they control. That means that they will fraudulently obtain between £2,940 and £4,200 a week—and many control more than 30 properties. Practitioners estimate that, across London, as much as £40 million a year may be fraudulently obtained in that way.

London local authorities must face up to the problem and take appropriate steps to tackle it. I should mention, however, that the Labour party's proposals, which we heard this afternoon, are not original. I am aware that those working in the field, such as the London boroughs fraud investigators group, favour the creation of a specialist team of investigators who would mirror the Benefits Agency multiple claims team's work on organised income support fraud. An organised housing benefit fraud team in London could work alongside the multiple claims team, where appropriate, and link up with investigations into other types of fraud against local authorities in London via the London team against fraud.

The London boroughs fraud investigators group also argues for changes to the housing benefit regulations, first, to give local authorities the right to obtain proof from managing agents and landlords of their right to control a property and of the real owner's identity as a condition of putting a claim into payment where benefit is to be paid directly to the landlord and, secondly, to give local authorities the right to refuse to put a case into payment to the managing agent or landlord where there is a refusal to provide information requested or where there is a reasonable suspicion of fraud.

I hope that the measures that the Government have proposed today will address those concerns and give further support to local authorities to prevent and deter organised housing benefit fraud. There is no doubt that serious financial crime is taking place. The benefits system, which is designed to benefit the poorer sections of society, is being exploited by some managing agents and landlords to enrich themselves and to build property portfolios. Serious and speedy action needs to be taken, and 1 hope that the Government will address those issues quickly.

6.41 pm
Ms Liz Lynne (Rochdale)

There is no question but that benefit fraud is a huge problem in Britain today. Only now is the real size and extent of the problem coming to light. I find it incredible that, before last year, the Government had not conducted a survey on the extent of benefit fraud in Britain.

Mr. Heald

Britain was the first country in the world to do it. Was the hon. Lady suggesting it?

Ms Lynne

Yes. All hon. Members have been suggesting that we should find out how much benefit fraud has been going on. The Government have had 17 years to carry out such a survey, yet only last year did the Department of Social Security actually decide to do so.

Mr. Heald

It was our idea.

Ms Lynne

The hon. Gentleman said that it was their idea, but the Government he supports have had 17 years to implement it. According to the first major survey by the DSS of income support and unemployment benefit fraud, £1.4 billion a year has been wasted and one in 10 claims is fraudulent. When we add the £546 million that is overpaid in income support alone—mainly due to official error—it is clear that there is an enormous waste of taxpayers' money.

This year, there was another Department of Social Security survey, which I welcome. I welcome the fact that, at long last, the Government are doing something about benefit fraud. The survey stated that £1 billion in housing benefit is wasted through benefit fraud—for which the taxpayer is paying—and that one in five housing benefit claims is fraudulent.

The fight has only just started. Most people think that benefit fraud is mainly down to individuals, but a survey in the January edition of Computing magazine estimated that overall benefit fraud was in the region of £5 billion and that organised gangs and terrorist organisations accounted for £1 billion of computerised benefit losses. I do not know how accurate the Computing survey was, but it is certainly interesting to consider that the extent of benefit fraud could be as much as £5 billion. None the less, we have to accept that criminals are not only ripping off the taxpayer, but financing further criminal activity.

Benefit fraud is a huge problem, but what is the way forward? We have to consider several possible solutions and look at the operation of the agencies and local councils. A parliamentary answer stated that theft in the Department of Social Security had quadrupled from the 1993–94 figure of £222,000 to £850,000 in 1995 and that housing benefit fraud was occasionally—although it is not widespread—down to local government employees.

The co-ordinator of the local authority investigation officers group said that 20 per cent. of housing benefit fraud could be internal. I do not know how accurate the surveys are, but we must take them into account. The Minister shakes his head. I should be grateful if he would tell us whether he agrees with the estimate that 20 per cent. of housing benefit fraud is internal.

We have only to look at what happened in Lambeth under the Labour-controlled council. In January, when the council was under no overall control, more than 100 council staff were involved in a crackdown and anti-fraud measures were introduced. They faced accusations that they had been making fraudulent claims in housing benefit and income support. The workers were not the only ones involved. On 21 March, there will be a by-election in Lambeth because the deputy leader of the Tory group pleaded guilty to defrauding the council of housing benefit.

Local councils face a difficult problem, because many claimants move between different council areas. There is no way of checking on whether they are already claiming in another council area. Individual councils cannot address that difficulty alone, so I welcomed the announcement the Secretary of State made in January—whatever the figure is, whether it is £10 million or £8 million—that the Government are providing money to help local councils tackle those problems. I hope that they look into other such measures.

Hopefully—I say hopefully as the Secretary of State seemed unsure about when it might happen—a national register of council tax and housing benefit will be set up so that data matching by councils can be undertaken on a national basis. It has my full support, but it must be carefully monitored to ensure that confidential information is protected.

In answer to my recent parliamentary question about how those working in different benefit organisations had improperly used confidential information, I was informed that two employees in the Benefits Agency and one in the Contributions Agency had been dismissed. The figure relating to the Child Support Agency was larger. Since 1993, eight members of staff have been dismissed and 10 have faced disciplinary action. Although the number is small, we must assume that the problem is wider—I assume that many fraudsters have not yet come to light. The Government already have generalised matching services for other benefits. It makes sense to extend those safeguards to income support, but mainly to housing benefit—but we must be aware of the pitfalls.

Home visits are another way of overcoming benefit fraud. I welcome the announcement that they are to be increased—they should not have been cut in the first place. They prevented many people from perpetrating benefit fraud. I hope that home visits will not be jeopardised by the staff cuts that the Secretary of State announced recently. I hope that the Minister will be able to give that assurance.

The Secretary of State announced that 1,100 Employment Service investigators are to go to the Benefits Agency. Will that represent an overall increase in fraud officers or a decrease? I am not sure of the number of investigators in the Employment Service and the DSS respectively and would be grateful for clarification.

Staff must be properly checked. Were the 100 or so Lambeth staff checked properly? I doubt it. Checks are particularly important in respect of staff tackling benefit fraud. The Government's response to the Social Security Committee report ruled out tighter training and closer scrutiny of staff dealing with benefit fraud in particular. I hope that the Government will change their mind, and I shall be grateful if the Minister will comment.

In another investigation by the magazine Computing, it claimed to have seen internal DSS documents showing that, in London alone, 120 staff were suspended for giving information to criminals, credit reference agencies, debt recovery groups and others seeking private information. I should like the Minister to confirm or deny the accuracy of that report when he winds up. It is vital that the situation does not worsen. If the DSS and its agencies fail to protect confidential information, and if some of its employees are on the fiddle, benefit fraud will become more difficult to tackle.

The fight against benefit fraud is welcome and I support the Government's recently announced initiatives. I shall continue to do so, provided that two criteria are met—people should be deemed innocent until found guilty, and confidential information should not be used improperly. It is often said that benefit cheats must be stopped, because every £1 that they take is snatched from someone who desperately needs it. How true—but the fight against benefit fraud must go hand in hand with a tightening up of overpayments by Benefits Agency staff and with encouraging pensioners in particular to take up the benefits that are theirs by right.

6.53 pm
Mr. David Faber (Westbury)

I warmly welcome the opportunity to debate benefit fraud again. The debate recognises the extent to which fraud is perpetrated and its draining effect on the social security budget. I warmly congratulate in his absence my right hon. Friend the Secretary of State for Social Security on his excellent speech. He more than anyone has done much over the past two or three years, in his time at the Department of Social Security, to raise the profile of the fight against fraud. Sadly, we heard little that was new from the hon. Member for Islington, South and Finsbury (Mr. Smith). I was particularly disappointed at his reluctance to give way in his speech, after my right hon. Friend entered into the true spirit of social security debates by giving way to the hon. Member for Birkenhead (Mr. Field) on at least four occasions. I was sorry not to have the opportunity to intervene on the hon. Member for Islington, South and Finsbury because he used one quote from the Select Committee's report extremely selectively. I refer to paragraph 6, on means-tested benefits. The hon. Gentleman said that the Committee criticised means testing, but omitted the next sentence: The alternative of universal benefits, however, would spread disincentives to seek employment and to save for future self-provision across the whole population, as well as being prohibitively expensive. Furthermore, all benefits are subject to fraud. The hon. Gentleman would have done us all a favour if he had given the full quotation.

The most telling remark was that of the hon. Member for Birkenhead. When the Select Committee heard evidence on 7 February, he said that when we announced as a Committee that we were doing an inquiry into benefit fraud, one of my colleagues sidled up and said, 'Typical! Another right-wing strategy from you.' It never struck me that being against fraud was actually a right-wing stance. Listening to the speech of the hon. Member for Islington, South and Finsbury, I wondered whether he was the colleague who had sidled up to the hon. Member for Birkenhead, to comment that the investigation was yet another shamefully right-wing decision by the hon. Gentleman. I pay tribute to the hon. Member for Birkenhead, as Chairman of the Select Committee. I have been privileged to serve under him since the beginning of this Parliament, and the hon. Gentleman has done more than any other member of the Committee to highlight benefit fraud and drive forward the Committee's investigations. My right hon. Friend the Secretary of State is due to give evidence to the Committee tomorrow. I am not sure whether that means that today's debate was well timed or poorly timed. It might have been better to have waited until hearing what my right hon. Friend has to say tomorrow, but I look forward to hearing his evidence.

I warmly welcome the mechanisms already put in place by my right hon. Friend, to some of which he referred today. On 10 July 1995, my right hon. Friend set out in his paper "The Right Money to the Right People" the extent of benefit fraud as the Department perceived it and his strategy for combating it. My right hon. Friend revealed in that paper, and did so again today, that fraudulent income support and unemployment benefit claims alone were costing a crippling £1.4 billion a year. He revealed that the review's investigators proved or found strong evidence of fraud in one in 10 cases. The largest proportion of income support and unemployment benefit frauds took the form of people claiming while working—a staggering £560 million of the £1.4 billion total. The second largest type of fraud, amounting to £450 million, resulted from people claiming to be single when they were living as a couple.

Those findings combined with others led my right hon. Friend to determine the new priorities for fighting fraud that he announced last July. What has been achieved to date? My right hon. Friend established the fraud strategy group, to co-ordinate anti-fraud work across the Department and its agencies. The Select Committee's fifth report in 1995 welcomed that recognition of the need for closer liaison. It heard evidence from the chief executive of the Contributions Agency that the group was "a genuinely useful forum" in which ideas and information could be exchanged under the chairmanship of a Minister. However, the Committee is also concerned to hear how liaison between agencies works at ground level. Later, I will touch on one or two of the problems that the Committee has identified from subsequent evidence, when further or much closer liaison could have been undertaken between the various agencies.

My right hon. Friend's announcements today go a long way to calming some fears. I particularly welcome the establishment of the benefits fraud investigation service, which will bring together the Employment Service and Benefits Agency in tackling the 30 per cent. of fraud in which an individual claims not to be working when he or she is doing so. My right hon. Friend has also established dedicated fraud teams at local level, about which the Select Committee has taken considerable evidence. I particularly welcome today's announcement that benefits fraud crackdowns will begin by area from April.

Last year's benefit reviews enabled my right hon. Friend to build on the work that had already been undertaken and to institute a new security approach, and we heard a good deal today about that success. I very much hope that such benefit reviews will be a continuing process, enabling the Government to measure the success of their strategy against the initial yardstick. My right hon. Friend's new security strategy has three key elements. Obviously, the first is to make the system secure. I have no doubt that the new plastic benefit card that he announced last year will make a considerable difference, but I echo one thing that the hon. Member for Islington, South and Finsbury (Mr. Smith) said.

We heard today that my right hon. Friend has gone out to the consortiums that will be asked to bid to produce the new benefit card. I hope that, in the wind-up or at some stage, we can hear a little more about the criteria that have been set for the consortiums. We await further details on how the card will work, and assurances and proof that the technology is proven, but surely the most important thing about the card succeeding is that the identifying factor, whether it is a photograph or whatever, is secure. I quote from Mr. Rob Elliot of the London boroughs fraud investigators group, who pointed out to us in evidence: In the case of a photograph, unless all photographs were collated and were able to be compared then I do not think that a photograph is secure £ Some people might suggest that a fingerprint on an ID card might be a more secure method of doing it. He went on to say, in response to the Chairman, who asked what we would need if we were in Utopia: I would not be adverse to providing both a fingerprint and a DNA sample. These questions will have to be considered, but it is very important that the identifying mechanism on the card is secure so that the public will have confidence in how it works.

Secondly, new guidance has been issued to staff who are at the sharp end—distributing the benefits—to improve the identity checks that they undertake. Thirdly, the number of checks to ensure that the correct amount of benefit is paid will be increased. Between July last year and the end of this month, an additional 1 million home visits will have been made by DSS officers to check the validity of claimants. It is worth putting on record the savings that have been made. Fraud savings for 1994–95 were £717.6 million—up from £654 million the previous year and a welcome £64 million ahead of target. There is more to be done, however, as my right hon. Friend and, indeed, hon. Members on both sides of the House, acknowledged today.

The Select Committee is currently considering where the war against fraud could be tightened still further. Although it is currently looking specifically at housing benefit fraud, I shall highlight briefly one or two of the obvious areas of concern, some of which will undoubtedly feature in our report when it is produced.

There are discrepancies about the scale of the problem. We heard a great deal today from hon. Members on the extent of the problem, dividing it into different categories for different benefits and how those benefits are prone to fraud. There still seems to be much confusion about the scale and the extent of fraud. On housing benefit alone, my right hon. Friend told us that it could possibly be as high as £1 billion, according to Government figures. Yet in evidence that it gave to us, the Audit Commission refused to be drawn any further than the figures that it gave in its 1995 update, "Protecting the Public Purse", a document that calculates the detected housing benefit fraud in local authorities at just £40 million per annum.

At the other end of the scale, the local authority investigation officers group, which also gave evidence, suggests that housing benefit fraud could range between 6 per cent. in local authorities that are well set up to fight it to as much as 12 per cent. in those that are not—an annual bill, possibly, of up to £1.2 billion that is being wasted on housing benefit and council tax benefit fraud.

Mr. D. N. Campbell-Savours (Workington)

Does the hon. Gentleman accept that one of the reasons, perhaps, for housing benefit fraud is that the Government's fair rents policy in the early 1980s drove up rents and drove people into a system that they did not really want to get into, but, having got into it, they found that they were locked into it, and in many places locked out of employment? Is not housing benefit fraud very much the consequence of Government decisions on housing at free-market prices in the early 1980s?

Mr. Faber

I do not accept that anyone is driven into fraud. It is a conscious decision that someone takes. One of the things that we found in our report is that the vast majority of housing benefit fraud is perpetrated by landlords. Hon. Members on the Opposition Front Bench acknowledged that earlier. It is clearly not something that someone is driven into. It is a conscious decision that someone takes to defraud the taxpayer.

I am not sure whether the hon. Gentleman was here during my right hon. Friend's speech, but he might have welcomed the proposals that my right hon. Friend made to target certain areas from April and to announce two weeks in advance that squads would be going into those areas. Although I very much hope that no one will think that we are offering an amnesty to those who have, as my right hon. Friend put it, "drifted into fraud", there are some who may have been caught up in fraud. I hope that they will be alerted to that fact and will come off the benefit that they should not be on very quickly indeed.

Mr. Campbell-Savours

Is not there an argument that if one reduces the number of houses in the public sector and follows a policy of ending public housing building programmes, which we had in the 1960s and 1970s, but which were terminated in the early 1980s, and drives people into the private sector, people would be drawn into the private sector, with high rents, who otherwise would never have gone into that business? If much of the housing benefit fraud is landlord induced, it is only because of the shift to dependence on private sector housing allocation.

Mr. Faber

I can repeat only what I said in reply to the hon. Gentleman's earlier intervention. If people are being brought into housing benefit fraud, they are still criminals. People who defraud the public purse are still criminals. There is no excuse for housing benefit fraud or organised fraud. I do not suggest for a second that the hon. Gentleman suggested that. Landlords go out with a conscious decision to commit fraud, and one cannot possibly condone it.

I repeat what I said a moment ago. I acknowledge that there are those—I think that this was the purpose of the hon. Gentleman's first intervention—who may have drifted inadvertently into fraud. I do not particularly like that expression, but there are people who may be on the wrong benefit and do not realise that they are. I very much hope that such people will look long and hard at what benefits they should be on and take advantage of the proposals that my right hon. Friend unveiled today, where teams will go into specific areas after publicity has been given, and, I hope, will pull them off benefit.

Mr. Campbell-Savours


Mr. Faber

I shall continue, if the hon. Gentleman does not mind.

My right hon. Friend gave us an assurance today that the figures in the benefit reviews would provide reliable information. I very much welcome that and urge him to continue to collect definitive data on the scale of the problem—data that can be used and acknowledged by everyone as the true figures. I hope that that will put an end to some of the discrepancies that exist between the various data that are available to us.

The second area that the Select Committee is examining is the way in which various agencies fight and contest fraud, and effective liaison and communication between them when dealing with specific cases. That subject was covered in our fifth report last year on the work of the DSS and its agencies. As a Committee, we remain concerned at the possible fragmentation and diminution of scope for joint initiatives between some of the agencies involved, for instance, where several agencies are affected by a single fraudster. There are two different perceptions of how successful it might be. On the one hand, several agencies will provide different opportunities to detect the fraud in each agency. On the other hand, there is often the possibility that agencies will assume that responsibility lies elsewhere and that action is being taken.

Evidence of that was given last year by the Contributions Agency, when it became clear that, in a number of areas, the Benefits Agency was considered to have prime responsibility for detecting fraud. Yet when the Benefits Agency was subsequently examined, the then acting chief executive suggested that the Benefits Agency could act only if it was certain of its source of information. That is especially relevant to the Child Support Agency, which has not been mentioned today, but on which the Committee has spent a great deal of time in the past two or three years.

I think that we have all had surgery experience of someone passing on information that is supposed evidence of fraud within the system, often involving a former partner, husband or wife. We know that such information always needs to be treated with great care. It is often based on malice, and frequently it is not based on fact. There needs to be a mechanism, however, whereby the Benefits Agency can investigate the information fully, which often may be specifically targeted and, therefore, easily and quickly investigated. It seems that too often such information can be ignored. Alternatively, its true value can be underestimated, despite the caveat that I have already entered that it could possibly have been motivated by malice.

I welcome the announcement of my right hon. Friend the Secretary of State that fraud hotlines will be introduced locally as part of local anti-fraud drives. Too often members of the public complain that it is made difficult for them to pass on information that they believe to be of value.

Last month, the deputy head of the security branch of the Benefits Agency told us that in the previous financial year alone the agency had received over 1 million potential fraud referrals from the public. I think that my right hon. Friend the Secretary of State said this afternoon that in five pilot schemes with hotlines the outcome has been an £800,000 saving for £20,000-worth of expenditure. I hope that my right hon. Friend might consider extending the system further, if not nationwide. It seems that the money would be well spent if that were to be the rate of return from whistleblowers' hotlines. Obviously, we would not wish to use tabloid language to describe such a system.

I move on to the much debated issue of national insurance numbers. Like the Chairman of the Select Committee on Social Security, I was unable to be part of the Newcastle visit.

Mr. Bradley

Was the hon. Gentleman sick?

Mr. Faber

No, I was not sick, unlike the Chairman. I was unable to make the journey on the specific day.

I was grateful to my hon. Friend the Under-Secretary of State for Social Security, the hon. Member for North Hertfordshire (Mr. Heald), for trying to clarify some of the differences between the two approaches to national insurance numbers. The system is still perceived as being extremely confusing. It is very difficult for some people to understand it. I think that it was Mr. Rob Elliot of the fraud investigators' group who said that it was difficult to do justice to national insurance numbers. He believes that they are not a sound base for investigating fraud. There is considerable confusion over the two current systems—the national insurance recording system and the departmental central index. Despite the enlightenment offered by my hon. Friend, there is still confusion over the roles that the two systems play.

My right hon. Friend the Secretary of State has announced that his Department will be pioneering the introduction of a single national computer system. Against the background of the current confusion that I have described, that is especially to be welcomed. Similarly, any steps that the Government can take or are taking to improve the security of national insurance numbers, cleaning both duplicate and redundant records, are much needed. We all look forward to hearing more about such an operation in due course, including especially a system of computer cross-checks and the harmonisation of housing benefit computers throughout local authorities.

There is also the relationship between the Benefits Agency and local authorities. The Select Committee heard conflicting evidence on service level agreements and their effectiveness in ensuring good working relationships. In evidence given last month by representatives of the Benefits Agency, we heard that by and large it encouraged locally based agreements with local authorities, and that those agreements are effective. The vast majority of Benefits Agency district offices are happy with their relationships with local authorities, and they insist that local authorities consider that the system works well from their point of view.

In previous evidence, however, especially from the London boroughs' fraud investigators, we heard that most local relationships work only moderately well and that some do not work at all. When the Committee's report is published, I hope that my right hon. Friend the Secretary of State and the rest of the Government will consider carefully the obvious discrepancy in evidence to which I have referred and seek to reassure some local authorities. We have heard from the hon. Member for Islington South and Finsbury (Mr. Smith), who spoke from the Opposition Front Bench, about some of the concerns that authorities may have. I hope that the Government will consider carefully those concerns in terms of the Benefits Agency's role in investigating fraud in individual areas.

Today's welcome announcement that a programme of crackdowns area by area, which will begin in April, will give local authorities in specific areas a crucial role. It will be vital that they work closely with the national Benefits Agency to maximise the programme's impact. I hope that all local authorities will respond to my right hon. Friend's appeal to come together to study a unified computer system for dealing with housing benefit across the board. That would surely go a great way to eradicating housing benefit fraud.

I warmly welcome my right hon. Friend's announcements. It has been an excellent debate so far. The Opposition are keen on saying that the Government have had 17 years to crack down on benefit fraud. It should be understood, however, that my right hon. Friend the Secretary of State is tackling the issues on which they are asking him to take action. I think that the hon. Member for Birkenhead must hold back some of his more venomous remarks for the Chamber. He certainly lured us into a false sense of security with some of the praise that he has heaped on the Government during sittings of the Select Committee.

I am delighted to support the motion.

7.15 pm
Mr. Clifford Forsythe (South Antrim)

Before us are a motion and an amendment, but I am sure that the House generally would support action against fraud to ensure that benefits are targeted on those who require them and are entitled to them. That is especially the position in Northern Ireland, where consumers face higher costs. Electricity is one example.

Figures have been bandied about on the extent of fraud and how much it is costing. We have also heard about how much will be spent to combat it. The Secretary of State has made various other announcements, which I support and welcome.

I would wish to compare Great Britain with Northern Ireland. When I intervened in the Secretary of State's speech, he invited me to try to catch the eye of the occupant of the Chair in letting him know to what I was referring. I am sorry that the right hon. Gentleman is now unable to be in the Chamber. I am sure, however, that the information will be conveyed to him.

I tell the House again that there is no fraud strategy in Northern Ireland. Evidence was taken last week in Northern Ireland, and we were told that there was no strategy, even though one has been introduced in Great Britain, which in many areas seems to be working well.

Perhaps some hon. Members are not aware that, in Northern Ireland, local authorities do not have anything to do with social security. Similarly, they have nothing to do with housing benefit and housing. Those matters are handled by the Social Security Agency and the Housing Executive.

In those circumstances, there is surely an excellent opportunity to introduce one housing organisation or one social security agency. I am speaking of a small area of the United Kingdom in which there are about 1.5 million people. A new strategy could have been brought into place, where it would have worked better than elsewhere.

Unfortunately, my colleagues and I have gained the impression that it appears to be assumed that everything is all right in dealing with fraud in Northern Ireland, even though no measurement is available. The assumption was that, because safeguards were in place, it automatically followed that no fraud was taking place. I will mention some of the frauds that are taking place in Northern Ireland.

In Northern Ireland, we have—I do not know whether they are called this in the rest of the United Kingdom—what are known as Giro drops: houses that people claiming benefit use as an address and where their benefit cheque is sent, even though they do not live there. The Giro drops through the letter box—that is why it is called a Giro drop. No matter how we check on housing benefit or any other sort of fraud, we would have to call at all the houses, discover where the people lived, and visit them. I am pleased that there will be more visitors at least in Great Britain. I am sure that the Minister will pass on my comments, so that such visitors will be introduced in Northern Ireland as well.

While in the building construction industry, I worked on building sites with plumbers and heating engineers. Even in those days, on certain days of the week, people "doing the double" disappeared from the site and returned after an appreciable period. They had signed on and returned to work—known by most people as doing the double. As is well known, that still goes on in parts of Northern Ireland and elsewhere.

We have a border, boundary, frontier—I leave it to hon. Members to decide what to call it—between Northern Ireland and the Republic of Ireland, but the social security system in the Republic is different from the one in the UK. It is not unknown for people living in the Republic of Ireland to claim benefit not only in the Republic, but in Northern Ireland, and vice versa.

There is another example of a fraud strategy being required in Northern Ireland. I know—and the Select Committee on Social Security took evidence on this—that there is contact and close co-operation between the Department in Northern Ireland and the Department in Dublin on that fraud, but how do we know what the position is if there is no strategy and we cannot obtain any figures?

There is another serious example involving benefit fraud in Northern Ireland. Some people claiming benefit are undertaking other activities—and I do not mean that they are working. The great problem in dealing with those claimants is simple: they are handled, under their normal duties, by junior staff, who are placed in a difficult position. Other senior officials do not handle those claimants.

It is well known, and has been mentioned in various places in Northern Ireland, that those things are happening. That is another example of fraud. All the things that I have mentioned have been and are going on, and, as has been admitted, we do not have a fraud strategy in Northern Ireland comparable with that in the rest of the UK.

Another example of fraud applies to the rest of the UK as well: in certain circumstances, employers do not pay national insurance contributions for employees. As a result, if those employees are made redundant or lose their jobs, they cannot claim benefit, because the required national insurance contributions have not been paid.

The local government auditor's 1994 report recommended that the Northern Ireland Housing Executive should have a dedicated fraud team. I was interested to hear that some of today's suggestions head in that direction. I do not wish to place the Minister in the difficult position that he seemed to be placed in by the hon. Member for Birkenhead (Mr. Field), even though I know that, as Chairman of the Select Committee—of which I am honoured to be a member—he did not mean anything personal about it.

The Minister may not have the advisers here that he may require to answer some of my points. I do not wish to let him off the hook, but I will understand if, in his winding-up speech, he cannot answer some of my queries, and I receive replies later.

However, much of the Select Committee's evidence shows that, in bringing people who have committed fraud before the courts, the Theft Act 1968 is used rather than social security legislation. The local government auditor's report commented that, under social security legislation, someone claiming benefit fraudulently could be sentenced to three months in prison. It seems strange that that Act, which involves a cumbersome operation, is often used. Surely social security legislation should be considered and implemented in appropriate cases.

In Northern Ireland, we have no measurement of fraud, so we cannot ask how much fraud there is, how it can be or has been measured, or how it will be stopped, even though the Minister and Secretary of State may say, "These are the measures that should be used to stop benefit fraud." I hope that the people in charge of these matters in Northern Ireland will note what has been said, and that something will be done.

On national insurance numbers, along with other colleagues, I was delighted to be in Newcastle. We had an excellent, well-prepared presentation—I congratulate the Minister on that. Sufficient officials were there to answer all our many questions. The majority of their answers were good and we accepted them, as we always do, but I was concerned about a couple.

I do not think that I received the answer—I may have misunderstood what was said—on piggy-backing, where someone uses another person's national insurance number. A person could be employed and paying national insurance contributions, although, at the same time, someone using his or her national insurance number is drawing benefit. That concerned the whole Committee. 1 should add that it is a very happy Committee: we work very well together. I hope that I am doing no one any harm by speaking in this way. Incidentally, the Committee also has an excellent Chairman.

I understood the Minister's observation that, when someone dies, the person left behind may need to use the national insurance number for some reason, and that it should therefore remain in existence. What I cannot understand is why the national insurance number of a single person with no relatives should remain on the record. I am not nit-picking, but I feel that such numbers could be removed from the system. The word "clutter" should not be used in this context, but the Minister will know what I am saying. Perhaps at least some of the numbers could be removed.

I welcome all proposals to prevent fraud, and to ensure that those who should receive money receive it. I feel, however, that Northern Ireland should have a proper strategy to deal with fraud, and that those concerned should be adequately trained—even members of staff. Perhaps there should be joint initiatives involving the Northern Ireland Housing Executive, the Social Security Agency, and, indeed, the Department of Health and Social Services, as it still is in Northern Ireland. Secondments would provide members of those bodies with experience. At least, at this stage, Northern Ireland should be brought into line with the rest of the United Kingdom.

7.32 pm
Mr. Patrick Nicholls (Teignbridge)

In his opening speech, my right hon. Friend the Secretary of State referred to the sums involved. Perhaps because debates such as this take on a timeless quality over the years, I sometimes feel that the sums that we discuss are so vast that the public—who have hurried off to HMSO in the morning to buy their copies of Hansard—probably decide that they are meaningless.

The figures involved in social security debates are, in fact, so large that even those who feel that they are being beaten into the ground with percentages may begin to realise just how large they are. It is not simply a case of the social security budget being larger than the education or defence budgets: it is well over twice the size of the two combined.

There are various ways of expressing the £90 billion that is spent on social security. One way is this: it is equivalent to £15 in respect of every person for every working day. Obviously, when disbursing such a huge amount on behalf of the taxpayer, the state should pay attention to where it goes.

The hon. Member for Islington, South and Finsbury (Mr. Smith)—and, I think, the hon. Member for Birkenhead (Mr. Field)—implied that the Government had discovered the situation suddenly, rather late in the day. Apparently they have a right-wing agenda, according to some anonymous person—perhaps not the hon. Member for Islington, South and Finsbury, but some other Labour Member. This, it seems, is part of some dark right-wing agenda that the Government have dreamed up in the last few hours, or at best, the last few months.

I do not consider that entirely fair. I have been in the House since 1983, and I do not think that a month, or even a week, has gone by without some reference—perhaps in a parliamentary question, in an exchange at Prime Minister's Question Time or in a well-attended debate such as this—to the fact that the wicked old Tory Government are out there grinding the faces of the poor. [HON. MEMBERS: "Hear, hear."] I am grateful for the confirmation; I knew that I had heard it before.

The Government have been out there trying to tighten up on fraud, crack down, and make the criminal law more effective. The idea that what is currently happening is spanking new is without foundation. There may, however, be a reason for its superficial credibility. The suppression of fraud is not an end in itself; it is part and parcel of the attempt to ensure that benefits go to the people for whom they are intended. We can argue, as did the hon. Member for Birkenhead, whether benefits should be means-tested more or less, but I think that hon. Members on both sides of the House would agree that the money should go to those to whom Parliament wants it to go.

When the Government came to power in 1979, the benefits system was, in a sense, wide open. In those days, the test governing whether a person received what is now known as income support was whether that person was available for work. The concept of availability for work seemed all right to begin with, but ultimately came to be seen as a complete sham. It was simply a case of "I am at home; if the telephone rings and someone wants to offer me a job, I might entertain the idea." Many people who were making no real effort were freeloading on the system. In a sense, that was a fraud on the taxpayer: money was going to people to whom it was clearly not intended to go.

To counter that, the Government introduced the concept of "actively seeking work". As soon as the two tests were applied together, the opportunity for fraud on the taxpayer in the literal sense was removed: benefits were going to those to whom they should be going. Those were the days of peace convoys cruising around the country, and social security officers taking their mobile paying-out clinics to peace convoy meetings. All that nonsense—which went on in my constituency—was dealt with by the introduction of more stringent tests.

The agenda of the 1980s was to ensure that the law was properly defined, so that only those who went out of the benefit should receive them. That was integral to the debate about fraud: until that side had been got right, there was not much point in trying to come up with "technical" mechanisms to deal with the problem. The claim that we have been doing nothing about it since 1979 is without basis: the facts do not bear it out for a moment.

It was particularly interesting for anyone with a penchant for blood sports to observe the state that the hon. Member for Islington, South and Finsbury got into when taking Conservative interventions. I must tell the hon. Gentleman—hoping, perhaps, to add to his discomfort—that I am a great admirer of his: he is a man of considerable intellectual rigour and considerable personal courage. In some ways, I pitied him for having the brief that he had been given. Faced with such a wicket, some of his hon. Friends would have resorted to a venomous opacity, kept their heads down, read out the speech without understanding it, and reached the end of it in that way. But the hon. Gentleman is not like that: when asked some pertinent questions to which he knew that there were no answers, being the honest man he is, he did not answer them.

Two questions did need answering, however. First, what has the hon. Gentleman's party done since 1979 to support the Government's attempts to crack down on benefit fraud? There is no answer to that—or, rather there is: Labour has done absolutely nothing. The beefing up of the "availability for work" test with an "actively seeking work" test was opposed by the party at the time.

Labour also opposed the attempts of my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler)—attempts that were largely, if not entirely, successful—to ensure that the availability of benefits was based on net rather than gross income, the idea being that people should always be better off in work than out of work. Such steps were part and parcel of fraud prevention.

Let me help the hon. Member for Islington, South and Finsbury, and repeat the answer to the question that he did not wish to answer: the Labour party has done absolutely nothing.

The hon. Gentleman next blamed means testing. That really is pushing it. When he was asked what benefits would be means-tested under a Labour Government, answer came there none. I have genuinely never understood why on earth the Opposition are against the concept of means testing properly carried out.

No one is saying that one should go back to the situation that obtained in the 1920s and 1930s, when an audit of the most brutal and undignified kind was done on a person claiming state benefit. We are saying that, if we are going to take money from people, we should at least make sure that it goes to those for whom it is intended.

Of course, some people say that means testing is undignified, and if we jack up the taxes on the rich, we shall not have to go through that unhappy process. That might sound like a good idea, but I understand that it has been repressed on the Opposition Benches today. I am only sorry that the hon. Member for Islington, North (Mr. Corbyn) is no longer here, because I had hoped that he would add that suggestion to the debate.

The fact is that we can think of income tax as a means-tested benefit. As I said in an exchange with the hon. Member for Birkenhead, the overwhelming proportion of taxes is provided not by the rich—there are not enough of them to soak—but by basic rate taxpayers. About 87 or 88 per cent. of the total tax take in this country is provided by ordinary working people, those who pay basic rate tax and never reach the higher rate. If they are means-tested and being asked how much they earn so that we can tax their income and spend it elsewhere, I can see nothing wrong in means-testing the recipients of that money, providing that process is carried out decently and carefully, and in a dignified manner.

I put that matter to the hon. Member for Birkenhead, whom I admire enormously. Like the hon. Member for South Antrim (Mr. Forsythe), I have served on the Select Committee on Social Security. This phrase is often used too casually, but it was a privilege to serve under the chairmanship of the hon. Member for Birkenhead, who has an extraordinary grip of the subject.

Frankly, a well-prepared and highly competent Secretary of State should have nothing to fear from an Opposition Back Bencher—it is an unequal contest, whichever party is in government. It says a great deal for the hon. Member for Birkenhead that, over the years, I have seen him press highly skilled and highly competent Secretaries of State, like my right hon. Friend the current Secretary of State for Social Security.

The hon. Member for Birkenhead is really a remarkable performer. However, when I pressed him on what he had against means testing, he entered very dangerous territory. It says much for him that he was prepared to enter that territory. Some pretty hard choices follow if one says that fraud is going to occur because the level of benefit is such that, if one wage earner in a household loses that wage, the family will be better off on benefit.

What are we doing for the dignity and credibility of a potential average wage earner if we so subvert what his own talents can achieve and earn for him that we pay him so much for not working? What does that do for his self-esteem? Nothing that we do tonight will solve that problem, but we have created a situation in which the whole structure of benefits completely undermines the working poor. There is far larger argument about the effects of this on the family, and on young males in society. A great deal of good material has been produced by sociologists here and on the other side of the Atlantic.

The idea that there is something wrong with means-tested benefit has some curious implications for the debate on fraud. At some stage, we shall have to consider why it is thought to be a good idea that the basic rate taxpayer should contribute to the child benefit that I, as a higher rate taxpayer, receive. I am grateful for it—it is useful and pays for a holiday every now and again—but I sometimes find it difficult to look into the face of the working poor and say to myself that I am part of a system that produces such an anomaly. At some stage, we shall have to get to grips with it.

Mr. Leigh

I do not agree with my hon. Friend at all. He has paid into the system all his life. It is supposed, in some sense at least, to be a contributory system, so, if he has paid in, why should he not get something back? After all, if he has children, expenses are accrued. I see no reason why he should be cheated out of the money.

Mr. Nicholls

There are three reasons why I pay into the system. First, I have no choice, and I should get done if I did not. Secondly, bearing in mind that I have an earning potential considerably greater than the average, I need to pay into a common tax pool to help look after those people who cannot look after themselves. Thirdly, if I ever fall on hard times, I would expect to be able to say that, having paid in during my good years, I now want to draw something out in my bad years. However, it is inefficient in the meantime to give me a non-means-tested benefit on the off-chance that it might be useful to me.

My hon. Friend knows as well as I that some people's livelihood and the food on the table that very day depends on their getting child benefit, whereas for others child benefit is simply drawn out once a year to be spent on a holiday. That is not an efficient way in which to run our benefit system.

Mr. Chris Smith


Mr. Nicholls

Yes, I shall give way, because I have not forgotten the hon. Gentleman.

Mr. Smith

I am following the hon. Gentleman's argument with considerable care and interest. Would he apply the principle that he has just applied to child benefit to the old age pension, which takes far and away the largest slice of the Department's expenditure but which is based precisely on the contributory principle, and is paid whether or not one is in need of it?

Mr. Nicholls

No. I do not think that the analogy is fair, for a number of reasons, the principal one being that very few people are entirely dependent on a retirement pension. Their income is topped up in a variety of ways, if necessary, by income support. Increasingly, I am pleased to say, under this Government it will also be topped up by the provision made by people during their lifetime. For many people, although not the majority, the retirement pension will not be a particularly significant part of their maintenance. I accept that the hon. Gentleman is making a useful point, but it is by no means a direct analogy.

I had not forgotten entirely what the hon. Gentleman said earlier. It says something about his party's attitude to the problem that he got into real difficulties when mention was made of the letter that he wrote to the shadow Chief Secretary. A section of it is worth reading out again in view of what he said. The letter says: The advice I am getting, which is necessarily incomplete, nevertheless suggests that savings in running costs of this magnitude are perfectly feasible, given the opportunities for efficiency gains and the scale of investment already undertaken". It says something about what the Government have done that, in private correspondence at least, the hon. Gentleman refers to "investment already undertaken". I sympathise with the hon. Gentleman—the last thing anyone wants is to have his private correspondence read out on the Floor of the House, although one does it without malice but with a great deal of glee.

The hon. Gentleman then said that we had got it all wrong and should look up the word "feasible" in the dictionary, because it means only possible, not desirable. In other words, the hon. Gentleman is saying that he accepted that it was possible to make savings for the taxpayer, but not desirable.

Mr. Smith

I intervene wearily, because the hon. Gentleman is making precisely the same point that one of his colleagues made. He is also making the same mistake. I did not write the letter to which he refers; it was written by the shadow Chief Secretary to me. If he read the whole letter, he would have seen that my hon. Friend said clearly: There must be doubts about the wisdom of trying to achieve so much in so short a time. My hon. Friend was not endorsing the suggestions or saying that they were desirable, but that they were active suggestions in the Department and that he had doubts about whether they were achievable.

Mr. Nicholls

So he was not saying that they were completely unacceptable, wrong, morally outrageous and risible, and should be rejected out of hand and scorned, but that there might be doubts about them. Fine—if the hon. Gentleman wants to put that gloss on matters, I am happy that he should do so.

I suspect that the explanation goes back to the underlying feeling that, for all that we see a new model Labour party, old ideas die hard. That was summed up very well by the hon. Member for Glasgow, Garscadden (Mr. Dewar) who is reported in the Daily Mirror—and, therefore, I assume, not misquoted—as criticising the use of new technology against fraudsters. He said: Benefit claimants may soon have to pass a palm print screening test to collect their State cash. It's one option now being considered in a fraud crackdown review, Social Security Peter Lilley revealed today. But Labour spokesman Donald Dewar denounced Government palm or finger printing, warning it would make pensioners claiming income support think that they are second class citizens". He must be joking. I assume pretty much the same sort of people go to his surgery as come to mine. I find that people are outraged by the idea that some claimants are ripping off the system. The people who take the most exception to fraud are not wealthy toffs and Members of Parliament on their inflated salaries: they are the working poor who get up early on a wet morning to do a boring, mundane job to support themselves, and who find that two doors down somebody is ripping off the system.

If people, be they claimants or pensioners, were told that the vast majority of claimants were honest, desperately sad about being out of work and anxious to get back to work, but that others were ripping off the system, and were asked whether they would co-operate in introducing a new-style pass using photographs, magnetic strips, DNA testing or whatever to ensure that they received the maximum amount of benefit and the rascals were stopped, an overwhelming majority—especially of those who complain to me about the benefits system—would reckon that was pretty much okay. That is the fault line running through Labour Members' thought. They seem to assume that, if one is claiming benefits, all inquiry must stop about whether one is entitled to those benefits.

Such a dichotomy is evident in relation to not only benefit fraud but asylum seekers. As far as the Labour party is concerned, anybody who says he is an asylum seeker is an asylum seeker. The fact that 90 per cent. of the claimants turn out to be bogus and fraudulent does not matter two hoots—it must not be tidied up. If somebody says he is a refugee, he is a refugee. It is an extraordinary flight from reality, and ultimately intellectually dishonest.

Until relatively recently, if a claimant had their mortgage paid by the Benefits Agency, they were paid an amount to hand over to the building society. Inevitably, a few people ripped off that system, and kept the money for themselves. That vice had to be stopped, because ultimately such people's houses would be repossessed, they would be made homeless, they would then present themselves to the local authority as having been made compulsorily homeless, and they would ask to be rehoused. That is not a sensible use of taxpayers' money.

I discovered two constituency cases relevant to that process. One was of a man who was severely disabled by polio in his youth, and, as a result of a number of extremely unpleasant and painful operations, was able to work. He worked his way up from a labourer to a management post, finally found that his health was breaking down, and had to give up work. To ensure that he was putting something into society, he took part in a number of charitable activities, and contributed a great deal.

One day he found that he was no longer—as he would see it subjectively—capable of looking after his own finances, and that his mortgage had to be paid for him. He eventually came to see me, because the Benefits Agency was paying in arrears, not in advance, and, given his contract with the building society and through absolutely no fault of his own, he suddenly had a notional amount of one month's arrears throughout the year, which resulted in typical correspondence with the building society.

The other case was of a person who had run a small independent school, fell on hard times, became a claimant, always discharged his mortgage, never misapplied the funds he received, and in due course found that he too was not allowed to pay his mortgage any longer. He got letters from the building society threatening repossession, because some arrears had accrued.

It is not simply a question of people being honest. If one finds that one has to live in straitened circumstances—extremely straitened circumstances in the cases to which I have referred—and one is able to do so competently and honestly, it ought to be possible in the system to distinguish between such people and the feckless and rascals.

Both my constituents asked why it was not possible to allow them to continue to discharge their liabilities unless and until there was some default. Both said that, as a result of an increased awareness of and campaign against fraudsters, of which they both entirely approved, almost unknowingly their dignity had been infringed—yet they had never let the system down.

I am not asking my hon. Friend the Minister to reply on that point in the debate. I have already written to him about both the people to whom I have referred. It is, however, relevant to the debate to say that we must always ensure that, in cracking down on the few who are ripping off the system, we never allow those who are behaving honestly to feel that the system is in some way directed against them.

There is no doubt that some people think that those living on benefits must be defrauding the system. Being a Member of Parliament brings one into contact with a cross-section of society whom we simply would not otherwise meet. That, apart from anything else, has convinced me of how honest the overwhelming majority of people are. My experience is that those who have fallen unexpectedly on hard times feel embarrassed and suspect that they are being tarred with a brush that applies to very few.

Cracking down on fraud is therefore not simply about being efficient and ensuring that taxpayers' money is being properly applied: it is the discharge of a duty to those who have no choice but to be on benefits; to ensure that they can still hold their heads up in society. The assumption is that the system should be efficient and rigorous enough to ensure that people receiving benefits are right in doing so. I think that many people who unexpectedly find themselves on hard times would associate themselves with that argument if they heard me say it.

7.56 pm
Mr. Thomas McAvoy (Glasgow, Rutherglen)

As I seem to be the last line of defence on the Opposition Benches, I shall try to live up to the responsibility. I feel as though I am intruding on a meeting of a club of past and present members of the Social Security Select Committee, former Ministers and spokespersons. Despite the trepidation that I feel in front of all those experts, I shall do my best to acquit myself in presenting the Labour party's point of view.

Conservative Members try to impute a mindset to Labour Members. The Secretary of State tried to do it again in this debate with his soundbite that Labour is soft on fraud. I cannot put myself into a frame of mind to accept that charge or see any justification for it. As some hon. Members have said, people from my type of background most bitterly resent fraud. I do not therefore accept that Labour is soft on fraud. Nor do I accept Conservative Members' mindset that we are that way inclined.

I join my hon. Friends on the Front Bench in welcoming this opportunity to discuss the Government's first systematic attempt in 17 years to combat fraud. Points have been made about certain initiatives, but I have not heard any Conservative Member offer an exposition of the systematic attempt to sort out fraud, ascertain its nature and define the extent of the problem. We have always been opposed to social security fraud in all its forms because we believe that any Government have a duty to strike at that abuse wherever it is found.

The much-quoted, happy Select Committee on Social Security said: anti-fraud activities are an integral part of ensuring that social security spending goes to those who need it most". I very strongly agree with that. As many hon. Members have said, every pound wasted on fraud is a pound less going to someone who genuinely needs it and is legally entitled to it. I have absolutely no time for people who defraud the public purse. In committing that crime, they ensure that a man, woman or child who could do with that money and support does not get it.

Starting with the Secretary of State, every Tory Member failed to mention the two sides of the coin, and I shall wait to see whether the Tories' last line of defence also fails to mention it. As well as their duty to stamp out fraud, there is a duty on the Government to ensure that all those who are legally entitled to benefits claim them: not one Tory Member has mentioned that.

Mr. Robert G. Hughes

The hon. Gentleman is right that the take-up of benefits has not been mentioned, but there is a good reason for that—the debate is not about the take-up of benefits. He is right that it is an important subject, but there have been some impressive campaigns recently—I say impressive because of their effect on the take-up of various benefits—on the subject. He is right that that effort should continue, but he should not criticise hon. Members for not mentioning something that is not the subject of the debate.

Mr. McAvoy

The hon. Gentleman's intervention is not valid. He is trying to close debate and prevent hon. Members from mentioning the overall situation. My hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) mentioned the two sides of the coin, and it is reasonable to expect at least some response from Tory Members to a point made by a Labour Front Bencher.

Perhaps the real reason why no Tory has mentioned the matter is that, by the Government's own estimates, £2 billion of social security benefits are not being claimed by those legally entitled to them. If the Government are as keen as Tory Members make out, why are they planning to abolish all the services that would encourage the take-up of that £2 billion of unclaimed benefits? There is a hidden agenda. Opposition Members—[Interruption.] That was a Freudian slip—I am looking ahead to the next few months. Tory Members have not mentioned the other side of the coin.

No firm estimate of the extent of social security fraud has been made, although claims have been made about possible savings from anti-fraud measures. I repeat that no Opposition Member wants to side with criminals, which is what benefit fraudsters are. Britain was the pioneer of social security after the war, and it is as necessary now as it was then. For the system to function effectively, however, it must be protected from corruption and abuse.

One of the great and sometimes endearing features of my hon. Friend the Member for Birkenhead (Mr. Field)—to whom tribute has been paid by hon. Members on both sides of the House—is that he thinks and says the unthinkable. That is to his credit, but we have not seen much of that attitude from Tories. A point of view expressed by my hon. Friend—a point that is appearing more and more in the policies of the shadow Chancellor, my hon. Friend the Member for Dunfermline, East (Mr. Brown)—is that the welfare state was never intended to become a permanent way of life for its users. It was intended for emergency periods in people's lives and a safety net to help those who had fallen on hard times. It was intended to provide a guaranteed minimum standard of living for people in need until they were able to support themselves. The message that receiving social security is a right and not an act of charity has been put across successfully.

The hon. Member for Teignbridge (Mr. Nicholls) referred to the means testing system used in the 1920s and 1930s. My mother, father and grandparents were subjected to that system at that time and, although it may be dismissed lightly now, we should not forget such things. I remember hearing my parents' and grandparents' experiences of that system, and Tory Members should never forget that Opposition Members—the descendants of people who were means-tested—know how that system operated. Sometimes Tory Members seem keen to implement such a system again, although I exempt the hon. Member for Teignbridge from that.

If we are to have a cohesive society, social security must play a part, but it must be conveyed more and more that the right to social security is accompanied by a responsibility. The system cannot hope to function properly if it is used irresponsibly, and those who misuse it are robbing those in genuine need. Why have the Government not responded to the problem sooner? The House heard a detailed debate between my hon. Friend the Member for Islington, South and Finsbury and Tory Members on the effect of means-testing benefits, and we need a separate debate on that subject.

As the percentage of means-tested benefits rises, the Government will have to accept that there will be suspicion among Opposition Members and throughout the country about their motives. If they want to extend means testing to different types of benefit and to maintain a socially cohesive society, there will have to be consultation between the Government and the Opposition. If there is a genuine desire for progress, there should be a consensus on the type of benefits to be means tested. If the Government merely impose the scheme, they will arouse suspicion. If they propose more intensive means testing, I will oppose it unless they give specific and justified reasons for doing so.

We must investigate cases of genuine need, although over-extending interrogation—as that is what investigation can amount to—might reintroduce the stigma that characterised means testing in the 1920s and 1930s. In addition, the system is ineffective and inefficient as it encourages false claims.

The Secretary of State lauded the concept of home visits, but what he did not say—perhaps the Minister will do so—was that even if the number of annual home visits is increased by 1 million, it will still make a total of only 1.5 million visits, as opposed to 6.5 million in the year when the Tories came to power. If home visits are so good, why have they been reduced so drastically by the Government?

The Secretary of State's idea of hit-squads targeting certain areas and advertising that the DSS will be conducting a thorough investigation will, I hope, not mean harassment, and that proposal must be scrutinised and debated. I can think of several areas in my constituency that would appear to fit the Government's criteria for such a hit-squad. I shall consider the matter and conduct some research into it. I hope to hear some more information from the Minister on it. The idea strikes fear in my heart because it immediately sections off parts of our community and makes them targets. It also displays a mindset that particular areas and particular income groups will be targeted in that manner. It seems to be accepted by the Government that certain geographical areas in this country, by definition, contain people on social security benefit and consequently should be targeted.

Mr. Heald

My right hon. Friend the Secretary of State made it clear that there was no intention of doing what the hon. Gentleman suggests. The spotlight campaigns will be focused on different areas; it has not been suggested that any specific type of area should be chosen. The evidence obtained through the benefit reviews shows that benefit fraud is widespread in different areas.

Mr. McAvoy

That intervention hints at the sort of debate that I should like to see before there is general acceptance of the policy. I accept that the Minister is not trying to mislead, but how will the Department pick an area? Will the choice be based on geography or the number of claimants? The system that will need to be created to manage the targeting smacks of big brother, Stalinism and fascism—both sides of the spectrum.

I am not a social engineer or a great sociologist, but I have experience of my community and of life. If parts of a community are targeted—which clearly will happen—what effect will that have on social cohesiveness? I do not want to start sounding like a social worker or a community worker, but what does that do to the self-esteem of individuals in the community and the community itself? The Department will immediately divide and rule, and turn areas and people into outcasts. I should like to hear more from the Government about exactly how they will choose and manage the areas that are to be targeted. It is a horrible, horrifying idea that will lead us into trouble in future.

I pay tribute to the hon. Member for Broxbourne (Mrs. Roe) for raising the subject of landlord fraud. We all know that local councils, especially in Scotland, face dreadful problems in terms of Government support for their reorganisation. I have read about what has happened in Haringey and heard, from the hon. Member for Broxbourne, about what can happen when a council investigates its own area and digs deep into the fraud carried out by landlords. If each council had a grant support settlement that enabled it to develop that aspect of its work, surely that would be cost-effective, bring in money and sort out fraud. We have heard from hon. Members on both sides of the House—it does not seem to be a matter of contention—that landlord fraud is extensive and should be investigated. That would be a cost-effective way of tackling fraud.

I agree with some of the points that have been made about the dependency culture; it is a fact of life that such a culture can build up. It would be helpful if we could break it. We have also discussed means testing and the overall picture of society. Surely the only way to tackle such problems is to consider the wider picture. Labour party policies such as the statutory minimum wage, job creation, nursery provision and incentives to work would reduce the burden on the social security budget. We should take a two-pronged approach—we should not just attack fraud, but remove poverty and unemployment, which make people claim benefits. Surely there should be a two-way attack. Instead of paying vast sums of money from the social security budget, we should get people into work and create taxpayers who contribute to the country and who have disposable incomes. That is how the system was originally intended to operate and it is the only way in which it can work.

The Secretary of State charged the Labour party with being soft on fraud. I contrast that charge with the effective, constructive, hard-headed and realistic policy proposed by the shadow Chancellor in an attempt to give young people incentives to get into work, while linking that policy to benefits. I know that such a concept is not entirely welcomed by all hon. Members, but linking benefits with a back-to-work scheme for youngsters reflects the reality that, for 17 years, our young people have not had much hope of obtaining employment, which has inculcated in them a sense of dependency. I accept that, in some areas, claiming benefit is a way of life, but that way of life must be broken; the scheme of my hon. Friend the shadow Chancellor would go some way towards doing so.

I am sometimes a cynical and suspicious person, and it strikes me as curious that the Government have brought up the subject now in the run-up to the general election, especially when not one Conservative Member mentioned the other side of the coin—encouraging people to claim benefits to which they are legally entitled. The fact that the Conservatives have raised the subject now shows that they are making a desperate attempt to score cheap political points by making scapegoats of those in need. There is nothing more unedifying than the sight of the Conservative party losing its grip on power, its fingernails scraping down the wall as it becomes more and more desperate. Today's debate is part of that desperation.

The Government always place great faith in concepts such as efficiency. If they are genuinely concerned about benefits that are paid out inappropriately, they should tackle the overpayments made by their civil servants at the DSS. According to the Public Accounts Committee's report for 1993–94, those civil servants made overpayments of £500 million, affecting 642,000 claimants. The Government might say that the payments were not made on purpose, but they are ministerially responsible for them and, as far as I can make out, they have done nothing about them. They have merely come forward with cheap headlines that attack poor people, irrespective of the merits or honesty of their case. They have done so purely and simply to get headlines because they know that most of those people will not vote for them. Those are the actions of a cynical Conservative Government.

The Treasury's proposed 25 per cent. cut in DSS running costs may be economical, but it should not be confused with efficiency. Earlier, some hon. Members read from a leaked letter—Conservative Members kept making mistakes about who had sent which letter to whom. I shall finish with a quote from the letter sent from the Secretary of State to the Chief Secretary to the Treasury. I accept that it is annoying when letters are leaked. It stated: Your proposed settlement on running costs fills me with despair". The Secretary of State has not denied that statement so, by definition, the letter and his comment are accurate.

I do not think that anyone in the House would question the Secretary of State's grasp and knowledge of the subject, so if he makes such a statement it shows that the exchange of letters between my hon. Friends the Members for Oxford, East (Mr. Smith) and for Islington, South and Finsbury were not an endorsement of, or support for, something that the Secretary of State said filled him with despair.

8.19 pm
Mr. Robert G. Hughes (Harrow, West)

From listening to the debate, I believe that there is no doubt that the Opposition have moved on since the last time we debated the subject, in 1993. The trouble with such a subject—and, I suspect, one of the reasons why my right hon. Friend the Secretary of State was keen to have this debate—is that the more we hear from Labour Back Benchers, the less they seem to have moved on. Old Labour comes shining through. The party has not changed much.

From what the hon. Member for Islington, South and Finsbury (Mr. Smith) said—and from the rather partial defence of his own record by the hon. Member for Manchester, Withington (Mr. Bradley)—I take it that the hon. Gentleman repudiates what the hon. Member for Withington said in the 1993 debate. It is all very well to quote the odd bit saying that Labour is opposed to social security fraud but then spend the rest of the speech attacking any attack on social security fraud.

I have had the dubious pleasure of reading the two speeches of the hon. Member for Withington in that debate, and very boring they were, too. Nobody could read them, or could have been present at the debate, and come away without the impression that the hon. Gentleman did not believe that this was a serious issue worthy of investigation. It is pretty fatuous, in the language of a true plutocrat, to say, In terms of overall expenditure on benefits, £1 billion is barely more than 1 per cent.—a tiny figure."—[Official Report, 16 July 1993; Vol. 228, c. 1255.] It may be a tiny figure to him but it is not to me, to my constituents or to the Government.

I waited with bated breath for the eight policy announcements that the hon. Member for Islington, South and Finsbury promised us.

Mr. David Clelland (Tyne Bridge)

The hon. Gentleman was asleep.

Mr. Hughes

It was boring, but I was not asleep. I wrote the policy announcements down for greater accuracy. I separate the first, scrapping self-assessment, from the other seven. It is populist and sounds good. The Government's idea is not that radical because most private companies have made that step-change. The successful ones have said, "Let's look at our administration. Can we save money? Can we make the savings that people have thought to be impossible before?" and they have succeeded.

The target set by my right hon. Friend the Secretary of State, welcome and sensible though it is, is quite modest when compared with what several companies have done. It is certainly achievable. In Opposition, it is easier to say that it is outrageous, unachievable and will destroy the present system. Scrapping self-assessment had to be No. 1 on their list. It is safe for them to witter on about that without anyone attacking them.

The other seven promises were a lazy man's view of making policy. If that is as far as the hon. Member for Islington, South and Finsbury has got, now that he is halfway through his review of social security policy, it is not impressive stuff. I can tell the hon. Member for Glasgow, Rutherglen (Mr. McAvoy) that, as a member of the Social Security Select Committee, I am a member of the club that he mentioned.

The hon. Member for Islington, South and Finsbury has simply got a researcher to go through the transcripts of Social Security Committee hearings and glean anything that sounded like a reasonably good idea. He has strung all seven together and called it the Labour party's programme. That is not greatly impressive and does not amount to a policy platform. He is going to have to do a great deal better if he is to carry conviction and fight off the repeated rumours in the press that, were there to be a Labour Government, the hon. Member for Birkenhead (Mr. Field) would be Secretary of State.

We accept that the Labour party has moved, but it has not moved far. People will recognise that as time goes on.

Mr. Chris Smith

The hon. Gentleman can do better than this.

Mr. Hughes

The hon. Gentleman says that I can do better than this. If he does not think much of this speech, I might say that I am merely following his lead.

The Labour party has not been in favour of fighting fraud. That has been shown not only in the speech of the hon. Member for Withington two years ago but in the whole ethos whereby the Labour party argues that to attack fraud in the social security system is, by definition, to attack people who misrepresent their circumstances but who are poor. The Labour party argues that such fraud does not matter and that those people are just trying to get a bit of extra money to keep their families together. Those arguments are understandable.

As the hon. Member for South Antrim (Mr. Forsythe) pointed out, such fraud is often given folksy, acceptable names to make people think that it is not so bad. The hon. Member talked about the double—people who work on building sites and claim social security. That is one of the problems. People think that it is an acceptable crime. I believe that those days are ending. As one or two Opposition Members have said, people are concerned about the issue, whatever their circumstances, background or politics. However, the Labour party has never bothered to have a strategy on that.

There are Labour councils where fraud is endemic. The hon. Member for Vauxhall (Miss Hoey) talked about the fraud squad in Lambeth council. One is tempted to think that there are two fraud squads in Lambeth council: the majority of people carrying fraud out and the small team trying to stamp it out. One is reminded of the true story of when there was a flood in Lambeth. The mayor, rightly, went around the council estate that had been flooded to talk to the people who had been flooded out of their homes. As he went from house to house, one of his flunkeys had a list of tenants. After a while, it became a farce because they could not find anyone on the list of tenants that coincided with the names of the people who were living in the houses.

There are perhaps quite a few such Labour councils in London. I accept that it is not all councils, but that problem became endemic in central London. There was so much housing fraud that Lambeth had lost control of its housing stock. Despite having trawled the evidence to the Select Committee, Labour Members have not mentioned the evidence that we took from Bernard Crofton, who was treated disgracefully by Hackney council.

Mr. Jenkin

It is a Labour council.

Mr. Hughes

As my hon. Friend points out, it is a Labour council. Labour Members would prefer that people forgot that. Bernard Crofton, who I remember as a housing officer on Greater London council, has shown enormous bravery in battling against the people who wanted to stifle the facts that he was bringing out. In November 1994, The Guardian quoted someone in Hackney as saying: The basic story is that Hackney has a huge fraud problem. Bernard Crofton wants it dealt with. Others at Hackney do not. The article continued: During the inquiry, employees were found to be illegally letting council flats in "keys for cash schemes", others were fraudulently claiming housing benefit, and there were council properties stuffed with fraudulently obtained mail order goods. In his evidence to the Select Committee, Bernard Crofton pointed out that it was clearly an organised fraud. When some of the flats were raided, mail order goods were found crated up to be returned to Nigeria. I make that not as a race point but to say that there is a considerable problem. [Interruption.] If the hon. Member for Withington wants to be silly, that is fine. If he has a serious point, I would be happy to give way.

There is a huge problem, which has been pointed out several times in the press and on television, of specially trained people coming to Britain to try to take advantage of our social security system. Although I shall return to this theme, it is a truism that every time my right hon. Friend the Secretary of State cracks down on the problems of benefit tourists or changes the asylum seekers benefit regulations, the Labour party opposes him every inch of the way. Therefore, it is very difficult to take the Labour party seriously.

The article in The Guardian continued: His enquiries revealed that employees were being appointed with phoney references, bogus employment histories and false qualifications. He also claims to have found a number of illegal immigrants among council staff'. Hackney council has never admitted that. There are other questions and claims that no one has ever denied—perhaps a Labour Member will deny them tonight. Where do the proceeds of fraud go? There are stories about a political slush fund in Hackney that have never been denied. We have read those stories in the newspapers and they are very convincing. If they are wrong, someone should deny them. No one has denied that the slush fund exists. If it does, where is the money going?

I think that there is a cosy consensus within the Department of Social Security—it is certainly within the Labour party—dating back many years that somehow fraud is not an important issue. Every time a Minister tried to do something about it, people asked whether it was the right time and whether it was really an important issue. I pay tribute to my right hon. Friend the Secretary of State and my hon. Friend the Under-Secretary for taking up the important battle against fraud. It is all very well Labour Members banging on about 17 years of Conservative Government—one would think that 1979 was year zero and that nothing happened before then; certainly nothing was done to combat fraud before 1979. I commend my right hon. Friend and my hon. Friend for putting a strategy in place.

I shall mention a few of the measures that my right hon. and hon. Friend have introduced. First, as to the organisational structure, the fraud strategy group has been established to co-ordinate anti-fraud work across the DSS and its agencies, with a senior official appointed to develop the strategy. I have argued that that official should be of a higher grade—I am sure that the individual concerned believes that he should; who does not? That person must command great respect across the DSS.

Secondly, dedicated fraud teams have been established at local level, preventing staff from being diverted from fighting fraud to other work. That will inevitably occur if the work builds up. Thirdly, the central computer system, initially covering 24 London boroughs, has been piloted to cross-check multiple housing benefit claims. The Government have closed legal loopholes, such as those that permitted people who entered the United Kingdom on condition that they would not be a burden on public funds to claim income support and housing benefit.

I look forward to the time when the Labour party accepts publicly that that was a responsible and a reasonable move by my right hon. Friend the Secretary of State. We all know that many Labour Members believe privately that it was a reasonable and a responsible measure: I look forward to their having the guts to say so in public.

The Government have prevented benefit tourism and they have stopped the avoidance of national insurance contributions whereby people were paid in bullion and fine wines and through the other scams that went on.

Another part of the battle against fraud concerns investment. Fraudsters have become increasingly sophisticated so, if we are to be successful in the battle against them, the system must be sophisticated also. Girocheques and order books have been redesigned to make them harder to forge and the Government have invested in security training and information technology. Lastly, as my right hon. Friend the Secretary of State said in his speech, the Government have given incentives to local authorities which administer housing benefit to expose and stop fraudulent claims. That has proved a spur for local authorities to take the problem seriously. On a non-partisan basis, I pay tribute to the work of London boroughs in concert which have sought to save money in that way.

A secure payment strategy is an important part of the Government's approach and I shall mention some aspects of it. We have the world's biggest social security data-checking operation. The hon. Member for Rochdale (Ms Lynne) said that data checking was inadequate. However, until recently, powerful computers were not available. As my hon. Friend the Under-Secretary pointed out by way of intervention, we have the world's first and biggest data-checking operation which highlights fiddles and multiple claims. Of course, much more can be done and I shall return to that point later. However, we should not lose sight of the fact that the Government are taking the lead on that issue.

Post office staff are being rewarded for catching fraudsters, and benefit claimants in the south-east have their claim books scanned electronically to check whether they are forged or stolen. Five pilot helplines have been set up to make it easier to report benefit fraud, new guidance has been issued to staff to help them to make more rigorous identity checks and a central database is assisting local authorities in identifying fraudulent claims for housing benefit.

My hon. Friend the Member for Broxbourne (Mrs. Roe) referred to the organised fraud in housing benefit, and undoubtedly many people are involved in it. A number of private landlords—I do not know how many—are either conniving in that fraud or actively part of it. That is costing a great deal of money and there must be a crackdown.

However, there is a second type of fraud that is apparently acceptable and quite legal. I believe that it is right to move to financing individuals rather than bricks and mortar—I think that a much more mixed market in rented accommodation is the only way to solve Britain's housing problems. We heard the old canard from the hon. Member for Workington (Mr. Campbell-Savours)who was in the Chamber briefly—about council house building.

I remember when blocks were built in Poplar in the late 1970s. Before they were completed, they were being described as "hard to let" blocks. It cannot be any sort of triumph to build blocks that one knows will be hard to let. That prophesy came true and some of the blocks were pulled down. If one accepts that one should subsidise individuals, that inevitably puts great strain on the housing benefit budget. Some of the changes made in the late 1980s and early 1990s have also added to that budget.

Councils, housing associations and private landlords are running what I believe is a scam. They work out the maximum rent that they can get for a flat in a particular area and that is what they charge. They know that almost all the people who will rent the property will not pay for it, as the money will come from the Government. Of course there are checks on rent, but we should treat that problem extremely seriously because I believe that it represents a fraud against the taxpayer.

Large amounts are paid for relatively ordinary flats, some of which are substandard, in the private or the other sectors and we must ask ourselves whether that is a good use of public money. It is important to have a system of checking rent levels. The Government have introduced some legislation in an effort to control those amounts, particularly for those under 25. Do they get any support from the Labour party? Do they heck. Of course not. The Labour party opposes that legislation, because it is popular to oppose it. Any suggestion of removing money from people is bound to be unpopular so, "We would not do that," sounds like a good line to take approaching an election.

Mr. McAvoy

Can the hon. Gentleman describe the cost-effectiveness of removing benefit from 16 and 17-year-olds?

Mr. Hughes

No. [Interruption.] If it had been part of this debate, I would have been briefed on it, but I was not, so I cannot. The hon. Gentleman made an uncharacteristically short speech. I should have thought that he would speak about that. What has gone wrong in that, as I understand it—at least in my local experience—is the guarantee of a training place. I accept that that has not always worked as smoothly as it might, but, characteristically, the Labour party and some community organisations have exaggerated the problems. Presumably, the hon. Gentleman suggests that we shall have the same problem with the restrictions on under-25s. I do not accept that, because we shall merely cut the money paid out to landlords.

I shall discuss two subjects, the first of which is identity cards. It is a pity that the Labour party has opposed identity cards—but then it has opposed everything. First, it opposed the efficiency improvements. We have had some confusing stuff from the hon. Member for Islington, South and Finsbury, who has said that the benefit system would be pushed to breaking point … with fewer people, more mistakes and worse service unless he was misquoted by The Independent as well as the Evening Standard. In fact, he did not say that he was misquoted but simply claimed not to have written the letter.

Mr. Chris Smith

You can do better than this, Robert.

Mr. Hughes

If the hon. Gentleman wants to intervene, I am happy to give way.

Mr. Smith

Even the hon. Gentleman must understand that there is a difference between writing a letter and receiving a letter. I received a letter; I did not write it.

Mr. Hughes

I understand that that is what the hon. Gentleman is saying. The point I was seeking to make when he failed to give way earlier is that that is what the Evening Standard believed, and if that is wrong I am happy to accept that. That was the only question I wanted to ask him. Either he or the hon. Member for Oxford, East (Mr. Smith) believes it, and it does not matter, in a sense, which one. [Interruption.] I thought the hon. Gentlemen were from one party. If the hon. Gentleman is telling us that there is one policy for the Labour shadow Treasury team and another for the other Labour Front-Bench teams, that is interesting.

It is a pity that the predecessor of the hon. Member for Islington, South and Finsbury, the hon. Member for Glasgow, Garscadden (Mr. Dewar), now the Labour Chief Whip, strongly criticised the investment in the new benefit cards. To create a single identity, it is important to use identity cards. It is important to be able to ask, "Is this a single person?" The hon. Member for Garscadden also criticised biometric checks and the use of new technology. That is a pity because, to create a single identity, it is necessary to use all available technology. In a few years, the banks will use that technology and it will become commonplace to use one of a variety of biometric checks. If the Government are left behind in the debate and we do not use that technology for social security, people will demand to know why.

Secondly, I shall discuss data matching. Some years ago, when I was parliamentary private secretary in the DSS, the tenor of the debate about data matching between parts of the DSS and other Departments was dictated by arguments that it was an abuse of people's individual freedom for the Government to compare those records. It is obvious from the evidence that is being presented to the Social Security Select Committee that those arguments no longer apply—that people understand that it is reasonable to check up on people. The tenor of the questioning from the hon. Member for Rochdale was the opposite. I am pleased to be able to welcome something that the hon. Lady says. There is a first time for everything.

We want many more DSS agencies to become involved in this, such as the Contributions Agency. The one that I want to mention, however, is the Inland Revenue. To discover whether a name or national insurance number—or whatever part of someone's identity is taken in vain—is being used fraudulently, one needs to know whether they are on the Inland Revenue computer and what it says about them. I understand that the Inland Revenue is being the dog in the manger and saying that it is impossible to do that, not for technical reasons but for bureaucratic ones. I urge my right hon. and hon. Friends to be extremely tough with the Treasury and to ensure that they obtain access to those records so that data can be matched. Most frauds, personal or organised, would be stopped by that.

Every taxpayer, benefit recipient, family, pensioner and child has a stake in this. It is an important issue, which it is right to discuss on the Floor of the House, and I hope that we do so again, because the policies followed by my right hon. Friend and my hon. Friend and the success that they are having leave the Labour party standing, without a policy, without strategy and without an explanation that they will be able to give in the next general election campaign. This is a vote winner, because people understand that we should stamp out fraud and that the Government seek to do it.

8.46 pm
Mr. David Clelland (Tyne Bridge)

I am pleased to see that the hon. Member for Beckenham (Mr. Merchant) is in his place. I recall that he once tried to live for a week on social security benefit in my constituency—and could not manage it.

Mr. Piers Merchant (Beckenham)

indicated dissent.

Mr. Clelland

If the hon. Gentleman said that he did manage, it must have been his former hon. Friend, Matthew Parris, who did not manage it. One of them did not. It is a pity that they are not giving us the benefit of their experiences.

I shall speak about the role of local government and the problems that confront it and suggest some of the best ways to tackle social security fraud from the local authorities' angle. I have nine suggestions, which is one more than my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), but I shall probably repeat some of his.

Local authorities agree about the importance of tackling social security fraud. It will be tackled effectively only if there is a proper, effective partnership between local authorities and the Department of Social Security and if local fraud strategies are developed in a stable framework. The Government have proposed a huge increase in fraud savings targets for local authorities-65 per cent. in some cases. That means that DSS subsidy payments to local authorities will fall from £26.7 million in 1995–96 to £13.7 million in 1996–97—a £13 million reduction, equal to a 49 per cent. cut in subsidy payments for fraud detection.

Mr. Heald

Is the hon. Gentleman saying that that would be the position if local authorities did not rise to the challenge of meeting the targets? If they meet the targets, surely what he says is incorrect.

Mr. Clelland

I hope to discuss the problems as local authorities see them. I shall discuss the point that the hon. Gentleman has made.

Local authorities were notified of the changes very late in the day, despite the fact that Ministers were directly advised by local authority associations of the necessary time scale requirements. Local authorities are important. For example, in 1995–96, local authority fraud staff will save an estimated £220 million in public funds. Benefit officers suggest that more fraud is being detected by local authority fraud investigation staff because there are more staff with better back-up. To avoid losing out as a result of the Department of Social Security's new subsidy proposals, it would be necessary for them to take on more staff—the cost of which would have to be met when the subsidy payments were being reduced.

The late notification of the Department's proposals for 1996–97 is inexcusable. Council budgets for the next year are finalised and it will be extremely difficult for cases to be made for extra staff. If a local authority were able to appoint extra staff, the approval, appointment and training processes would mean that it would be mid or late summer before the new staff could be effective. There is an urgent need for the Department to give local authorities stability in fraud savings targets and subsidies so that they can plan their fraud strategies and invest in their fraud investigation offices.

At the beginning of last year, it appeared that that concern had been understood. Department of Social Security letters to individual authorities and a circular dated January 1995, encouraged authorities to plan and to make long-term investment decisions on the basis of a move towards their uncapped target within two years. Many authorities took the Department at its word and made important investment decisions.

The increase in fraud targets for 1996–97 has not only shown that those statements were misleading, but, more fundamentally, it has removed local authorities' confidence in the stability of the new arrangements. Accordingly, many authorities will be reluctant to commit additional resources to fraud as offsetting income from subsidy can no longer be relied on. The case for stability is also supported by the fact that local authorities have responded positively to the existing arrangements. Savings from the anti-fraud scheme have increased from £92 million in 1993–94 to an estimated £220 million in 1995–96. There is, therefore, no argument for increasing targets on the basis of poor local authority performance.

The Department has presented the proposals as providing further incentives, but the impact for all except the top performing authorities is to reduce the amount of subsidy that local authorities could have anticipated if the present subsidy arrangements had continued. Most authorities therefore view the changes as a cynical attempt to reduce the amount of Exchequer subsidy and fear that it is a step back to the pre 1993–94 era, when local authorities incurred the costs of investigation and the Treasury benefited from the savings.

Local authorities believe that the Department, when making the proposals for 1996–97, was not aware that even good performing authorities are likely to suffer significant reductions in subsidy under the present arrangements. Unless radically revised, the proposals for 1996–97 will have a demotivating impact on most authorities. In addition, the methodology for distributing targets is crude and needs to be reviewed to take account of the findings of the benefit review. The current difference between an exceptionally high performing local authority and a good performing local authority may be more illusory than real. For that reason alone, the Department should avoid radical changes to targets and new subsidy arrangements that reward only exceptionally high performers.

There is the strongest possible objection to the transfer of £5 million from next year's provision for administration subsidy to the anti-fraud challenge fund. The initial publicity gave the impression that the initiative was to be supported by new money. I believe that it is short sighted to reduce the administration subsidy when local authorities' budgets are severely constrained. A stretched and under-resourced service is likely to give more scope for fraud than one that is adequately supported. The move demonstrates the half-hearted nature of the Department's commitment to fraud.

The lack of commitment is emphasised by the fact that the amount of challenge funding has decreased since it was first announced. The Department of Social Security's letter of 7 December stated that the amount set aside for challenge funding was £10 million, but DSS officials recently advised that it will now be only £8 million, of which only £3 million will be new money. There are major misgivings about the cost-effectiveness of the proposed challenge fund as it could divert attention from more effective mainstream fraud work. There is a role for the encouragement of good and innovative practice, but it is not considered that a competitive-based bidding system is an appropriate approach—indeed, competition for funds may deter the sharing of information and ideas.

Although the stated purpose of the initiative is to sponsor innovative schemes, innovation receives the lowest weighting in the Department's proposed scoring system, and the most weighting is given to payback. I believe that the more innovative the scheme, the more difficult it would be to predict payback. It is also clear that innovative schemes to prevent fraud are not eligible. Local authority associations have raised with the Department and in evidence to the House of Commons Social Security Committee the need for additional measures to assist prevention and detection—for example, the use of national insurance numbers as a reference for all benefits, once we have cleared up how many national insurance numbers are in circulation; the power to recover overpayments to landlords direct from subsequent payments; and the requirement that unemployment offices inform local authorities when claimants cease entitlement to unemployment benefit.

If Ministers seriously intend to encourage a more strategic and partnership approach towards tackling fraud, they should consider the adoption of the following measures. First, they should continue to provide an effective incentive to fraud work. The present targets, which results show are eliciting the necessary response from the overwhelming majority of authorities, should be retained. Secondly, if Ministers are committed to changing targets, a more graduated approach should be adopted. It is unreasonable that good performing authorities under the current scheme have to meet unrealistically increased targets merely to stand still in subsidy terms.

Thirdly, so that local authorities can plan their fraud strategies and make sensible investment decisions, a framework for targets and subsidies should be agreed for the next three years. Fourthly, the methodology for distributing targets should be reviewed in the light of the benefit review findings. Fifthly, challenge funding should not be resourced at the expense of other funding and, therefore, the £5 million cut in administration subsidy should be restored. Sixthly, resources for challenge funding would be more effectively spent by injecting the resources into the mainstream anti-fraud incentive scheme, which would partially offset the cost of the more graduated approach to targets.

Seventhly, the Government should introduce a scheme that provides financial incentives for fraud prevention and prosecution. Eighthly, they should give detailed consideration to the associations' suggestion of new measures to assist fraud prevention and detection. Finally, they should make a more realistic contribution to local authorities' mainstream administration costs so as to avoid the incentive scheme distorting administrative priorities. At the very least, they should consider switching all Government support for administration costs from the revenue support grant to specific grant, as recommended by the Audit Commission for Local Authorities.

Earlier in the debate, the Opposition were challenged to offer solutions. My hon. Friend the Member for Islington, South and Finsbury listed eight points. My hon. Friends have made other proposals and I have outlined some suggestions. We are entitled to a considered response from the Government and to expect that, if they are serious about tackling fraud in a meaningful way, they will respond positively to our proposals.

8.58 pm
Mr. Edward Leigh (Gainsborough and Horncastle)

I shall not comment on the speech made by the Member for Tyne Bridge (Mr. Clelland), who was clearly well briefed. I shall make a few points in the short time that is available.

The future of social security is one of the great unsolved policy riddles that both parties now face. It is an extremely serious subject and requires an informed national debate. We have had some fun slinging insults across the Chamber, but the issue is too important for that. We really need a national consensus on how to proceed, as any reforms will take so long to take effect that no Government of one party can be sure that they will finish the job.

Several hon. Members have mentioned the huge cost of social security. My hon. Friend the Member for Teignbridge (Mr. Nicholls) reminded us that it costs £90 billion a year—a meaningless figure to most people, but it represents £15 for every working person every day. The issue is made more serious by an aging and more demanding population. Such clichés as "a demographic time bomb" do not adequately describe the problems that a Government of any party will have to face in the next century.

When I speak to young people in colleges and universities, I tell them that, when they retire in 2030 or 2040, the nation will not be able to afford to give them an adequate state pension. We have to be honest with young people and tell them that now.

Fraud plays a vital part in the debate, although it is only part of the issue. Addressing fraud cannot solve the problem, so what should we do? Should we cut benefits? The Government claim to oppose cutting benefits—they have to say that. I am not sure, however, that their glib and obvious answer is an adequate response. As benefits rise, the poverty and unemployment trap deepens. If we run out of money, benefits may have to be cut.

Should we have more means testing? My hon. Friend the Member for Teignbridge seemed to advocate that, but more means testing deepens the poverty trap and does not provide an answer. Should we help more people out of benefit and into work? Clearly such schemes as the jobseeker's allowance are just a start and we need a full workfare system.

Madam Deputy Speaker (Dame Janet Fookes)

Order. I am sorry to interrupt the hon. Gentleman, but I should point out to him that the main thrust of the debate and the amendment is related to fraud rather than the social security budget. I hope, therefore, that he is making passing reference to it and not making it the subject of his entire speech.

Mr. Clelland

The hon. Gentleman does not have a speech.

Mr. Leigh

I am sorry that I do not have a speech to read out, as the hon. Member for Tyne Bridge did. Had I such a speech, I should have dealt entirely with fraud.

According to the studies conducted by the Department of Social Security, there may be as much as £8 to £9 billion-worth of fraud in the system. That is a staggering amount—enough to pay for a reduction of 4p in income tax. There should be no limit to the moral indignation felt by British people and the determination of all parties represented in the House to deal with it. Apparently, we saved £717 million in 1994–95, but we must do better. I shall deal in a moment with the checklist of what my right hon. Friend the Secretary of State has tried to achieve. Although some progress has been made, we must do a great deal more.

I believe that the only way to deal with fraud is to introduce a comprehensive system of identity cards based on a national computer-based system. The visit by the Social Security Committee to the Contributions Agency last week has been mentioned. I participated in that visit. People were extremely polite. I hope that the Contributions Agency will forgive me if I am rather less polite.

The Contributions Agency employs no fewer than 9,000 civil servants in Newcastle. We were shown one small department where information technology had been introduced. It should have been introduced years ago, throughout the Contributions Agency, but I understand the problems involved. The Department has to support the unemployed, and Newcastle is an area of high unemployment. The Contributions Agency employs 9,000 people and information technology would drive a coach and horses through their employment.

If fraud is to be dealt with more adequately, and if there is to be a proper contributory system, highly sophisticated information technology must run throughout the system. We talk with great pride about the benefit card, but it is not a smart card. Fraud will not be overcome until everybody has a personal identity smart card that could, presumably, be used also as a credit card, cash card and passport. Every time a person claimed a benefit or used a bank, his card would be linked to a central computer. It might be claimed that there is a civil liberty argument against such a card, but I do not believe that the average law-abiding citizen would resent it. The technology is available now.

Unless we have the vision to introduce such a card, fraud will never be tackled adequately. The only way to tackle the problem is to have complete cross-information between the private and public sectors, and at least within the public sector. It was extraordinary to hear witnesses from my right hon. Friend's Department make clear that there was not enough cross-reference between the Inland Revenue, the DSS and Customs and Excise. That visionary policy is one that the Government and the Opposition must promote.

My right hon. Friend's announcements today reflect some progress, but not enough. He said that the Department will double to 600,000 the number of home visits to check new claims for entitlement. The Labour party has a fair point when it says that the cut in home visits in recent years has resulted in more fraud. My right hon. Friend wants to increase cross-checking of information about benefit claims. I reiterate my point about the use of more sophisticated information technology in the Contributions Agency and the Benefits Agency.

My right hon. Friend will introduce from the autumn the benefit system payment card, but I do not think that it goes far enough. He will also initiate a series of month-long local anti-fraud drives in major urban areas. That is an excellent idea, but can we rely on denunciation? Do we want a society based on denunciation of one citizen by another? I have my doubts, but presumably the exercise will not be based entirely on denunciation.

My right hon. Friend wants to launch three initiatives involving local authorities: a unified computer system; a study of how best to prevent fraudulent housing benefit claims entering the system—in which IT would be a powerful weapon; and encouraging local authorities to establish teams to work alongside the Benefits Agency.

My hon. Friend the Member for Harrow, West (Mr. Hughes) mentioned the evidence of Mr. Bernard Crofton, the housing director of Hackney council. The level of fraud and intimidation against that highly diligent local government officer was an appalling indictment of London's local government system. Anybody who is interested in the subject should read Mr. Crofton's evidence to the Select Committee.

My right hon. Friend will also establish the benefit fraud investigation service. All that is good progress, but much more needs to be done. The hon. Member for Birkenhead (Mr. Field), in a written question, asked the Secretary of State if he will list each authority in England which achieved (a) less than 50 per cent. and (b) between 50 per cent. and 60 per cent. of its target level of weekly benefit savings resulting from the detection of housing benefit fraud".—[Official Report, 20 December 1995; Vol. 268, c. 12 75.] The reply revealed that some local authorities—including the Isles of Scilly, South Bedfordshire and Teesdale—achieved nil per cent. of the threshold. Clearly much more progress needs to be made. We are talking about huge figures.

Fraudulent income support claims total £1.4 billion, and 9.7 per cent. of income support cases are fraudulent, while 18.5 per cent. of lone parents are perhaps making fraudulent claims. Perhaps 30 per cent. of the total is accounted for by people working and claiming simultaneously, and for other reasons.

I believe that we are still hunting around the edges of the issue. We have not really gone to the heart of the matter. Although my right hon. Friend should be warmly congratulated on what he achieved and on the measures that he announced to tackle fraud, we must get a grip on the use of information technology.

The point that my right hon. Friend made in his opening speech was important. There is very little fraud in pension claims, which are based on contributions. We will never provide a long-term future for our social security system unless we recreate the original vision of Beveridge: a social security system based on the contributory insurance principle. That is the way to create a responsible and caring society. It will take years to return to that system, and it will be far more difficult for this country than for younger societies such as Chile, Singapore, New Zealand or Australia, where elderly people account for a far smaller proportion of the population.

We have to have the courage—on both sides of the Chamber—to accept that our social security system is slowly and inevitably running into the buffers. We have to do what Chile did. It was the first country to use the pay-as-you-go system. It was the first country to realise that it was going bankrupt. Indeed, it went bankrupt in the early 1980s. It has now moved to an insurance-based system, in which people are required to pay some of their income into private insurance companies or—if the Labour party prefers—to charitable trusts.

Something has to be done. If we have the vision, I believe that we can tackle the problem.

9.11 pm
Mr. Keith Bradley (Manchester, Withington)

This has generally been a thoughtful debate with interesting speeches from hon. Members on both sides of the House.

I was somewhat disappointed with the speech of the hon. Member for Harrow, West (Mr. Hughes), who, unfortunately, has left the Chamber. He claimed that he had read the entire debate of some three years ago. I wonder whether he read the words of the then Minister who replied, and who, commenting on my speech, said: The Opposition spokesman has been equally determined to show that the Labour party is as rigorous about fraud and abuse as it is about ensuring that everyone gets his just deserts."—[Official Report, 16 July 1993; Vol. 228, c. 1296.] That clearly sums up our position. It did so then and it does today. I would like to place on record again, so that there is no confusion or selective quoting by the Secretary of State, that the Labour party, yet again, is as committed as the Government to rooting out fraud.

We welcome this opportunity to discuss the Government's first systematic attempt after 17 years in office to discover the nature of fraud and to define the extent of the problem. Labour has always been opposed to social security fraud in all its forms. It is the duty of Government to strike at abuse wherever it is found. We agree whole-heartedly with the comments in the fifth report of the Social Security Select Committee, which were quoted by my hon. Friend the Member for Glasgow, Rutherglen (Mr. McAvoy), which said that anti-fraud activities are an integral part of ensuring that social security spending goes to those who need it most. That is crucial. Today, the Secretary of State broadly outlined some of the measures that the Government have taken and plan to take to combat fraud. I am pleased that the Government, after 17 years, have decided to do something to ensure that taxpayers' money goes to those who most need it.

Mr. Jenkin

Will the hon. Gentleman give way? Mr. Bradley: In a moment.

I believe that it is staggering, and I agree with what the hon. Member for Gainsborough and Horncastle (Mr. Leigh) said about it having taken so long to start to investigate, for example, the ways in which computers and computer development can be used more effectively to combat fraud. The hon. Gentleman said that he was pleased that the Government, after 17 years, had started to tackle fraud. How many proposals did the Labour party make designed to tackle fraud over the same period?

Mr. Bradley

Obviously, a Labour Government have not been in power for 17 years. The Labour party has been in power, however, in local government throughout the country, and initiative after initiative has been taken by local government. If the Government had taken more notice of some of those initiatives they may not have taken so long to introduce their proposals in the recent past.

It is important for the Secretary of State to confirm at the outset the exact savings that will be made as a result of the anti-fraud measures over the next three years. I have repeatedly asked him to do so. I did so, for example, during the uprating debate. The Minister who responded to that debate wrote to answer the many questions that I asked, but, surprisingly, my question on savings was not answered. I have written to the Secretary of State and I have raised the matter during Social Security questions. I have still not had a reply.

Perhaps the Government are finding it difficult to identify the way in which the fraud figures are being compiled. The figures include irregularities—not necessarily proven fraud—and notional savings in cases where investigations have found irregularities but have not led to cash being recouped. Moreover, the figures are arrived at by multiplying recorded fraudulent claims against a factor of 32. That system is based on the belief that if the fraud had not been discovered it would have taken at least 32 weeks before it would have been. Thus it may be that the Government's problem is that many of the figures that they are compiling are notional rather than hard-cash savings. These are the extrapolations at which the Government are arriving in providing estimates to the House.

When the Minister replies, it would be helpful if he could explain whether I have focused on the reasons for delay in replying to my earlier requests. I hope that he will be able tonight to give us precise figures for the year-on-year savings that he expects to make from anti-fraud measures. It would be helpful if we received that information tonight. Exactly what are the target figures that the Government are setting?

I move on to some of the work that is already under way and some of the other measures that the Government are taking to focus on social security spending on behalf of those in greatest need. We want to consider anti-fraud activities in the widest context in an effort to ensure that entitlement to benefit is recognised.

The Government's review of fraud in the social security system has had two main purposes. The first was to establish the degree of claimants' non-compliance with benefit rules. The second was to establish the reasons for fraud within the social security system. We do not argue with either of those purposes. To date, the Government have published the results of the two reviews and have used these to inform decisions on priorities for increased security within the social security system.

The first review, which was published in July 1995, focused on income support and unemployment benefit fraud. The review suggested an annual fraud level of about £1.4 billion. As a result, the Government launched their five-year programme, with the introduction of a number of measures, including the benefit payment card and a review of home visits. I mention those matters only briefly because they have been well rehearsed during the debate.

I press the Minister to give us further details about the way in which the benefit payment card system will work. The "devastating" reply that my hon. Friend the Member for Bradford, North (Mr. Rooney) received that the security card system would be based on the private finance initiative and that it would be for the contractor to determine the terms of reference of the card, was extremely unsatisfactory. When he replies, will the Minister give us precise details of the nature of the card and how the system will work in practice?

We all accept that pensioners have played little part in any fraudulent activities. Many pensioners enjoy the use of a payment book for the receipt of pensions. It is a useful tool for them in recording benefit received and benefits that they are owed. The book is a valuable source of information for them. Will the Government ensure that, with the introduction of any benefit card, pensioners will still have the option to continue to use their own books?

Despite what the Secretary of State said in his speech, the Government have reduced the number of home visits to claimants made by Benefits Agency staff. Department of Social Security and Benefits Agency officials agree that home visits are one of the most effective ways of detecting and deterring fraudulent benefit claims. In a parliamentary answer in January 1995, it was revealed, as my hon. Friend the Member for Islington, South and Finsbury said, that 6.5 million home visits were made in 1979, when the Tories came to power, but that, by 1994–95, the figure had dropped to merely 500,000. The Secretary of State has promised to increase the number of home visits as part of his new anti-fraud initiatives, but by only 1 million. That nowhere near approaches the level that the Government inherited when they took office in 1979.

Home visits have a useful dual purpose. In the past, officials checked not only what fraudulent claims were being made, but that claimants were receiving all the benefits to which they were entitled. Now, however, officers are instructed to check only on fraud. Have the Government any intention of reintroducing the essential and effective dual role that home visit officers had?

At this stage, it is important to note again that the Government's changes in the social security system have led to more open fraudulent abuse. As has been stated again in the debate, that has resulted from the growing increase in the dependency on means-tested benefit. As we know, during their 17 years in office, the Government have presided over a doubling of means testing from 17 per cent. of benefits in 1978–79 to 35 per cent. in 1995–96.

Mr. Lilley

As the hon. Member for Islington, South and Finsbury (Mr. Smith) was unable to answer on two occasions, and now that Labour Members have had time to think about this, could the hon. Gentleman answer the question: do Labour Front-Bench spokesmen propose to reduce the extent of means testing should they ever find themselves in power?

Mr. Bradley

When we find ourselves in power, through the welfare-to-work strategy that we will introduce, we sincerely intend to reduce the number of people who are dependent on means-tested benefits. [Interruption.] The Secretary of State chunters away from a sedentary position, but the introduction of jobseeker's allowance, with the move towards means-tested benefit six months earlier, will exacerbate the problem with greater complexity. We hope that the welfare-to-work strategy will mean that people will not rely on such benefits.

Mr. Jenkin

Will the hon. Gentleman give way?

Mr. Bradley

No. I have given way once to the hon. Gentleman.

Will the Minister confirm that there will be no further delay in the introduction of the jobseeker's allowance? There are persistent rumours that the computer systems that are being introduced for that benefit are not on course and that there may be some difficulties in attempting to make a smooth transition to the Government's new benefit.

Despite the people who may deliberately claim benefit fraudulently, it is important always to stress that the vast majority of benefit claimants are—and I use the words of the Secretary of State: as honest as the day is long."—[Official Report, 18 January 1993; Vol. 217, c. 9.] Three years ago, when we first debated this subject, I referred to a report by the Low Pay Unit entitled "Policing the Workshy", which pointed out that perhaps one of the greatest impediments to seeking work is that people must fill in so many forms and complete so many interview references showing that they are seeking work. Individual abuses often occur because of ignorance or mistakes in filling in all those forms. Social security officers have a duty to give claimants the maximum help to ensure that they claim correctly. More work should be done to simplify claim forms, which are still too complex for many people. Staff training, and staff sensitivity in the handling of claimants, are also essential to ensure that those who fill in the forms do not encounter difficulties.

That leads me to the subject of the Government's plan to reduce the running costs budget by 25 per cent. That would make the system less rather than more fraud-proof. As we have heard, one of the main ways of achieving savings that the Secretary of State is currently considering is self-assessment of eligibility. If that were introduced, the onus would be on claimants to prove their entitlement to benefit: they would be responsible for knowing which documents they should produce to prove their entitlement.

The analogy of applying for a passport has been used. The Passport Agency does not help people to prove their entitlement to passports; it merely approves or rejects their applications. Applying for a state benefit, however, is a vastly more complicated process. A wealth of factors are relevant—for instance, whether claimants have savings, whether they are claiming other benefits and whether other people are living with them.

As we have heard, fraudsters will not find self-assessment a problem, but pensioners, the disabled and many other vulnerable groups may find it much harder to prove their entitlement. It is they who will suffer if the Government's plan is implemented. If the Government were serious about fighting fraud, they would not be cutting running costs in that way. I hope that the Minister will assure us that they will not do so: such action would give the green light to fraudsters throughout the country.

The other side of the coin, which is equally important, is take-up of and entitlement to benefit. When attempting to root out fraud, the Government should apply the same effort and commitment to ensuring that those who are eligible for benefit receive their entitlement. According to a report in The Guardian on 1 March this year, the Benefits Agency plans to reduce some of its help for those claiming benefit: for instance, it proposes reductions in telephone advice lines and "benefit buses". If that is true, it is extremely worrying. We should be building up such work rather than cutting it. I hope that the Minister will confirm that such cuts are not envisaged as part of the attempt to reduce running costs by 25 per cent.

Pensioners are an obvious group of people entitled to benefit. As I have said, they are one of the groups least likely to commit fraud, but they are also the least likely group to take up their entitlement to benefit. DSS estimates show that up to a third of pensioners entitled to income support are not receiving it. Between £840 million and £1.2 billion is unclaimed by pensioners in a single year, and about 1 million pensioners—perhaps more—are missing out altogether. I hope that the Government will tell us tonight that they will launch new publicity drives, and support the excellent work of welfare rights officers in local authorities throughout the country who take up campaigns and help people, efficiently and effectively, to claim the money to which they are entitled.

The Government's second review—the review of the housing benefit and council tax benefit system—suggests that about £730 million is lost through fraud, and a further £110 million through error. As we have been told, in April the Government will launch a four-point plan to combat housing benefit fraud; but, as the Secretary of State said, the £10 million originally allocated to local authorities as "challenge money" has already fallen to £8 million. Local authorities have subsequently discovered that £5 million of that total was previously allocated as part of the Government's subsidy to them for fraud work that was already under way, leaving a new total of merely £3 million for work that is considered to be essential to combat fraud. Will the Minister confirm that that is the case in his winding-up speech?

As I said earlier, and as our amendment makes clear, the Government should have noticed the excellent work that Labour-controlled local authorities have already done in leading the fight against fraud through the work of their housing benefit departments. In the first three quarters of last year, local authority investigations into housing benefit saved the taxpayer £220 million, for a payment by the DSS of only £26.7 million.

We have heard of the good practice in the Labour-controlled local authorities of Haringey and Camden, and of the way in which they have even received a charter mark from the Prime Minister. In the brief time that I have left to speak, may I select another council at random—for example, Manchester. I praise the excellent fraud work that it has undertaken. In the past 18 months, it has employed five staff specifically for that work.

Mr. Lilley

The hon. Gentleman is clearly paying tribute to the measures that we introduced to give sticks and carrots to local authorities to make them do that work, after years in which many—particularly Labour-controlled—local authorities failed to do it. I am delighted that, in the past 18 months, his local authority has responded to our incentives.

Mr. Bradley

What most pleases me is the praise that the Secretary of State has given to Manchester city council for the work that it has undertaken. It has employed five extra staff and, against a target of £2 million in the first year, it has achieved savings of £3 million. Unfortunately, as a result of that success, the Government have increased its target by 50 per cent., to £3 million, and increased the subsidy pay-back to the authority from 20 per cent. to 25 per cent. Surely the Government should be more generous in ensuring that the local authority can keep more of the money that it has so successfully targeted with its fraud measures. I ask the Minister to reconsider the current subsidy arrangements.

We have heard in this debate of the excellent initiatives undertaken by the Labour party, despite the Government's reluctance over the years to spearhead a campaign to combat fraud wherever it appeared. We clearly welcome the Government's belated initiatives.

I commend the eight-point plan announced by my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith). It is worth briefly reminding the Secretary of State what the Labour party proposes. It proposes to introduce a special fraud unit to cut across local authority boundaries, particularly in London—I was pleased that the hon. Member for Broxbourne (Mrs. Roe) also welcomed that proposal; to give local authorities the power to identify the real owners of properties; to tighten up on the use of national insurance numbers; to examine the finders keepers conflict between the Benefits Agency and local authorities and how to achieve better co-operation; to introduce proper fraud audits in the Benefits Agency, in the same way in which local authorities are audited; to examine postal redirections to ensure that payments are being made to the people who should receive them; to examine the way in which employment officers and local authorities work together on these initiatives; and, particularly, to examine scrapping moves towards the general access way in which local authorities are operating. My hon. Friend proposed a series of eight important measures that build on the experience of Labour local government and good practice across the country, which the Government have recognised, albeit belatedly. We shall continue to root out fraud and will ensure that people who deserve benefits receive their entitlements.

9.34 pm
The Parliamentary Under-Secretary of State for Social Security (Mr. Oliver Heald)

We have had a useful and generally constructive debate. I pay particular tribute to my hon. Friends the Members for South Dorset (Mr. Bruce), for Broxbourne (Mrs. Roe), for Westbury (Mr. Faber), for Teignbridge (Mr. Nicholls), for Harrow, West (Mr. Hughes) and for Gainsborough and Horncastle (Mr. Leigh) for their contributions, but I must also pay tribute to the Opposition Members for what they brought to the debate.

I regret that some Opposition Members felt obliged to cavil at the Government's achievements in fighting fraud. We acted on benefit fraud long before the Opposition even discovered the issue. When I heard the hon. Member for Manchester, Withington (Mr. Bradley) talking about 13 years of inaction and how he and his colleagues had spearheaded the campaign against fraud, I thought back to his remarks in July 1993 when he said that the extent of fraud in the system was overstated and that we should not get things out of proportion. He described the problem at that stage as a small one.

Mr. Bradley

Does the Minister support the view of the then Under-Secretary of State for Social Security, the hon. Member for Bury, North (Mr. Burt)? Referring to my speech on that occasion, he said: The Opposition spokesman has been equally determined to show that the Labour party is as rigorous about fraud and abuse as it is about ensuring that everyone gets his just deserts."—[Official Report, 16 July 1993; Vol. 228, c. 1250.]

Mr. Heald

I think that my hon. Friend was being rather kind because it was a Friday; he is certainly a fair man. As I shall make clear in a moment, the hon. Gentleman made a number of suggestions, all of which were wrong and have subsequently been disproved by events, so I shall not take any advice from him on the subject.

The hon. Member for Islington, South and Finsbury (Mr. Smith) raised a number of issues that I shall deal with immediately. There is no mystery about the targets. The figure for the 1998–99 target is £2.5 billion. That is made up of all the various forms of fraud activity relating to the Benefits Agency in that one year. It also includes the work of the Employment Service which, of course, will by then have been amalgamated with that of the Benefits Agency, and that of local authorities.

The other figure of £2.5 billion that has been mentioned is the spend-to-save figure. The Government's proposals—the expenditure of £103 million this year on the security and control programme and of further sums over a future three-year period—will produce savings of £2.5 billion. If the hon. Gentleman requires further information, I shall be happy to write to him with more details.

The hon. Member for Islington, South and Finsbury also spoke about the work of the Comptroller and Auditor General, suggesting that he was in some way critical of the Government's work on benefit fraud. That is far from being the case—the Comptroller and Auditor General commended the Department and my right hon. Friend the Secretary of State for their energetic approach to tackling benefit fraud. Although he was saying, as he has for many years, that he wished to qualify the accounts because there was a high level of fraud, and although he recognised that the benefit review had established the true level of fraud, there is no question but that he was complimenting the Department on its work.

The hon. Gentleman went on to talk about means testing.

Mr. Frank Field

If the Comptroller and Auditor General is so pleased, does the Minister think that he will sign the accounts next year?

Mr. Heald

I think that I covered that point. Obviously, where there is a high level of benefit fraud, it is extremely difficult for him to do so. The research that the Department has undertaken to establish the level of fraud is the basis on which that decision will be made.

It is all very well and good for the hon. Member for Islington, South and Finsbury to criticise the increase in means testing and say that he feels that it increases the scope of fraud, but the corollary of that, if he means it, is that he is prepared to change the system to less means testing, and the disadvantages that that would bring. That point was put to him time and again and he was not prepared to make such a commitment. The Labour party has proposed a guaranteed minimum pension that, far from cutting means testing, would involve means testing everybody at state pension age. If the hon. Gentleman thinks that that will help, I suggest that he is wrong.

The hon. Member for Islington, South and Finsbury talked about what he described as self-assessment. It is true that there is an element of self-assessment in disability benefits where claimants describe their conditions on the forms that they fill in. Such self-assessment is well established. The hon. Gentleman is confusing self-assessment with the tightening up and simplifying of procedures that require benefit claimants to provide more information in documents, and so on, which is needed to establish and determine claims. I would not describe that as self-assessment, but if the hon. Gentleman does I would plead guilty. We ought to be looking at measures that put more of the onus on the individual in certain cases in order to simplify the system.

The hon. Member for Islington, South and Finsbury and a number of other hon. Members asked when we will have a uniform computer system, applying to all benefits, which will give ready access to personal details of and information about each claimant. That is being developed. It is part of the technology that underlies the benefit payment card and the private finance initiative to which the hon. Gentleman referred. Such a system will become available as we roll out the use of the benefit payment card, which the hon. Gentleman also criticised.

That PFI is on target. I cannot give the House all the details of it today, because the procurement process is still in hand. However, minimum standards and levels of security have been laid down by the Government and we are looking for proposals from the suppliers that meet that criteria. The suppliers will not be determining how the system works; they will be providing us with proposals so that we can determine the best way forward.

It is important to ensure that when the benefit payment card is introduced, elderly people find it accessible and easy to use. Sub-postmasters and those involved with the Post Office are determined to ensure that that happens. From speaking to the National Federation of Sub-Postmasters, I know that that is its view. We are also having discussions with groups that represent the elderly to ensure that the card is introduced in a form that is acceptable to the elderly, that they are given the necessary information and that the card is effective.

The hon. Member for Islington, South and Finsbury described the blanket visiting system as something we should look back on with pride and restore immediately. It is a question not only of the number of visits but of the intelligence and the information through data matching that can be given to the fraud investigator, so that when they go out on a call they know that they are visiting somebody who is likely to be a benefit fraudster. We are trying to target the visits far more. I am not saying that everyone who receives a visit is a potential fraudster. We are merely trying to underline the visiting process with intelligent technology that helps the fraud investigator. That is far better than simply sending large numbers of people to visit on a cold-canvass basis.

I applaud the work of local authorities, but I must say that they were goaded into doing it. The hon. Member for Withington described how well certain Labour councils have done. I do not disagree with him, but they have been goaded into it. The hon. Gentleman should remember that he said that the tough targets, incentives and penalties that we proposed in 1993 were unrealistically high and should be reconsidered. He has not said that the Government have done well and have put the right incentives in place to encourage local authorities to perform. He was wrong about that. What happened the year after he said that the targets were unrealistically high? Local authorities doubled the amount of money that they recovered.

Mr. Chris Smith

My hon. Friend the Member for Withington was right to say that the targets were far too challenging for authorities such as the Isles of Scilly, Upper Teesdale and South Bedfordshire—none of which is Labour controlled. But they were not too tough for high-performing Labour local authorities, such as Camden and Haringey.

Mr. Heald

I am not sure if that was a question. I might add that the target of £150 million proposed for next year has been exceeded this year.

Mr. Jenkin

I have become increasingly aware during the debate of a trap into which we have been in danger of falling, and the hon. Member for Islington, South and Finsbury (Mr. Smith) has fallen head first into it. We do not want a system in which the more fraud we find, the more pleased we are, because that will underline how much fraud we are letting through the system in the first place.

Mr. Heald

As usual, my hon. Friend is right. My right hon. Friend the Secretary of State is trying to change the system from one in which we chase benefit fraudsters to one in which we prevent and deter benefit fraud. That is what the technological innovations introduced last year were all about.

The hon. Member for Islington, South and Finsbury referred to telephone hot lines—an idea that we have piloted successfully in the past few months—and suggested that they had been dreamed up by Reading borough council. I pay tribute to Reading borough council, but the hon. Gentleman is being unfair to the Benefits Agency at Barrow-in-Furness, which piloted the scheme long before Reading. He was right to state that Reading has worked with the Benefits Agency to launch the "fraudwatch" campaign, and he was also correct in saying that we would like to take forward the hot line initiative now we have seen how well it works. The Government should also be entitled to take some credit for the idea.

The hon. Member for Islington, South and Finsbury raised the issue of challenge funding, and seemed to suggest that £8 million was insufficient. I ask him—how much would Labour put into a challenge funding system? Answer comes there none. His eight measures to solve the problem were a mixture of things that we are doing already and things that would make no difference. It reminded me of the good old Liberals at local government by-elections who, having researched what the ruling group on the council was about to do, would produce a leaflet containing all those ideas as if they had come from the Liberals. Lo and behold, those schemes would be implemented two weeks later, as planned.

The first of the hon. Member for Islington, South and Finsbury's policies referred to the scrapping of moves towards self-assessment. I believe that he is confused. The Government are looking at tightening procedures and putting the onus of proof more on the benefit claimant to create a more effective system. The hon. Gentleman confuses that with the sort of self-assessment, which is simply a matter of what the person says on the form. I do not think that he understood what was proposed.

The hon. Gentleman's second point was that we should establish a special unit across London to deal with organised fraud. We welcome that idea and want to see it happen.

Mr. Chris Smith

The Government have been sitting on it for four years.

Mr. Heald

The hon. Gentleman says that we have been sitting on it for four years. In fact, we have been discussing the subject with the London boroughs fraud investigators group and the London team against fraud since October. We are waiting for their written proposals and, when we receive them, we shall discuss them.

The hon. Gentleman's third point was that we should give local authorities the right to obtain proof of ownership of property. They already investigate the status of landlords; they conduct searches and are entitled to suspend benefits while they do so.

The hon. Gentleman suggested tightening up on national insurance numbers. We have already introduced a new system to tighten up the allocation of national insurance numbers. We tag numbers that are not being used and we are working on other measures to make the system more effective. There is nothing extra that can be done to make the system of national insurance numbers more effective. In a moment I shall come to some of the other points that were made on that subject by the hon. Member for South Antrim (Mr. Forsythe).

The hon. Member for Islington, South and Finsbury spoke of ending the "finders, keepers" system. If we did that, with what would we replace it? At present, the benefits are awarded to the investigation team that has recovered them. If we were to award the benefits without considering who had successfully investigated them, that would be a huge disincentive to the effective investigation of fraud.

The hon. Gentleman suggested that the Benefits Agency fraud figures should be checked even more. They are already checked four times, including a final check by the National Audit Office.

The hon. Gentleman talked about using postal redirect data. We do that with organised fraud and are negotiating to extend it into other areas.

Finally, the hon. Gentleman talked about employment offices telling local authorities when claims cease. As he said, that already happens in relation to income support and we shall introduce it for jobseeker's allowance which is income related. When the new computer system with single accounts is in place, we shall also be able to introduce that measure for other contributory benefits.

My hon. Friend the Member for South Dorset made a number of points in his full and detailed contribution. He suggested that home visits were a good idea, which is clearly right. He called for more telephone calls—those checks are being made and we shall certainly consider making more of them.

The hon. Gentleman asked about the effect of incapacity benefit. It is too early to say precisely how many fraudulent cases have ended as a result of the new test. I shall ensure that when that information becomes clearer, my hon. Friend is informed of it.

My hon. Friend also mentioned the Post Office reward scheme. I pay tribute to the Post Office. The workers at the counters have taken the Post Office reward scheme to heart. In the first few months, they have already saved £4 million in benefit order books that have been returned.

Mr. Jenkin

Of the 392,000 benefit cheats said to have been caught by the Benefits Agency, how many have been prosecuted in the courts?

Mr. Heald

The decision to prosecute is taken on the basis of persistence and value in benefit fraud claims. The number of prosecutions is approximately 10,000 per annum. That figure is not as high as my hon. Friend may wish, but the interesting point is that the sentences that are passed in respect of the convictions on those 10,000 cases are by no means substantial. We need to reconsider the issue of the number of prosecutions and the way in which they are handled. My hon. Friend is right to raise that important point.

Mr. Stuart Randall (Kingston upon Hull, West)

The Minister has gone through a huge list of things that the Government have been doing to overcome fraud, but fraud causes losses. What is wrong with the Government's policy?

Mr. Heald

The Government's policy is to tackle the problem at its roots. We are researching where benefit fraud occurs and putting into place the measures that are needed, such as new technology and more visits. We are doing the things that are needed to tackle the problem. It is all very well for the hon. Gentleman to sit there as though the Labour party has had idea after idea on benefit fraud which we have rejected. What have the Opposition ever come up with? We have researched what they have said. They have never had an idea about how to tackle benefit fraud.

I believe that the fraudster has no future, given the proposals that the Government are implementing. Only the Government can say that. I challenge the Opposition to tell us what their policies would be. We are devoting resources to the problem and have a clear strategy and proven achievement. What more would they do to solve the problem? It is not so long ago that they were treating it as a minor problem. They described estimates of fraud of £1 billion as overstating the amount of fraud in the system". The Labour party said: The problem after all is small. By careful research, we have proved that it is not small. We are taking a range of measures that will put the benefit fraudster out of business. The Opposition were wrong; we were right.

When the benefit card was mooted, the hon. Member for Glasgow, Garscadden (Mr. Dewar), who was then Labour's spokesman on social security, said: It is not a sensible and considered attempt to deal with the problem of social security fraud". We estimate that it will save £150 million a year. Labour was wrong; we were right.

When we introduced new incentives and targets for local authorities, Labour described them as "unrealistically high" and asked for them to be reconsidered. We did not do so. Local authorities doubled the amount of fraud they detected. Labour was wrong; we were right. After all, the Labour party has been linked to 'free loaders' for too long. Those are not my words but those of the hon. Member for Sheffield, Brightside (Mr. Blunkett) as recently as 1992. That attitude has not changed as completely as some suggest.

In the Social Security Select Committee, the hon. Member for Birkenhead (Mr. Field) recently said: When we announced as a Committee that we were doing an inquiry into benefit fraud, one of my colleagues sidled up and said, `Typical! Another right wing strategy from you."' That attitude was wrong. We welcome the support of the Select Committee and we are right.

The senior housing officer at Hackney, Bernard Crofton, who was suspended for uncovering benefit fraud, described to the Social Security Select Committee the attitudes that he encountered to it in Labour-controlled Hackney. It was suggested that any attack on benefit fraud was an attack on the welfare state. He described the "unwitting collusion" with fraud; that people simply did not want to know about it. Those attitudes were wrong. We are right to tackle benefit fraud head on.

The Government want to deal with the problem and are introducing the measures needed to do so. Labour was wrong about the scale of the problem; wrong to oppose our targets and incentives for local authorities; wrong to argue against the benefit payment card; wrong to criticise the Social Security Select Committee for taking up the issue; wrong on attitudes in Hackney—wrong, time and again. We welcome Labour's apparent conversion tonight and I invite Labour Members to join us in the Lobby.

Today's announcement by my right hon. Friend the Secretary of State of the new area fraud drives is the next tightening of the knot in the fight against benefit fraud. I apologise to hon. Members who took part in the debate whose points 1 have not had an opportunity to answer. I will answer them in writing. Today's announcements bring together all the various initiatives that deal with benefit fraud to bear on particular areas at particular times. We are convinced that that approach will get nearer to the heart of the fraud problem.

We will have benefit hot lines; data matching; more visits to both existing and new claimants; bar code scanners; and drives against collusive employers, landlords, and self-employed workers who are known to be at risk, using the intelligence that we have gained from the new technologies that we have introduced. We want to pay the right amount of money to the right people at the right time, because every pound that is wasted in benefit fraud is a pound that is not available to the needy. The Government are tackling the issue and I say to all those who are committing, or considering committing, benefit fraud, "Watch out, because we are after you and we will catch the benefit fraudsters in Britain."

Question put, That the amendment be made:—

The House divided: Ayes 231, Noes 305.

Division No. 68] [10.00 pm
Abbott, Ms Diane Betts, Clive
Ainger, Nick Blunkett, David
Ainsworth, Robert (Cov'try NE) Boateng, Paul
Allen, Graham Bradley, Keith
Anderson, Donald (Swansea E) Bray, Dr Jeremy
Anderson, Ms Janet (Ros'dale) Burden, Richard
Armstrong, Hilary Byers, Stephen
Ashton, Joe Callaghan, Jim
Austin-Walker, John Campbell, Mrs Anne (C'bridge)
Barnes, Harry Campbell, Ronnie (Blyth V)
Barron, Kevin Campbell-Savours, D N
Battle, John Canavan, Dennis
Bayley, Hugh Cann, Jamie
Bell, Stuart Chisholm, Malcolm
Benn, Rt Hon Tony Church, Judith
Bennett, Andrew F Clapham, Michael
Benton, Joe Clark, Dr David (South Shields)
Bermingham, Gerald Clarke, Tom (Monklands W)
Berry, Roger Clelland, David
Clwyd, Mrs Ann Jones, Jon Owen (Cardiff C)
Coffey, Ann Jones, Lynne (B'ham S O)
Cohen, Harry Jones, Martyn (Clwyd, SW)
Connarty, Michael Jowell, Tessa
Corbyn, Jeremy Kaufman, Rt Hon Gerald
Corston, Jean Keen, Alan
Cunliffe, Lawrence Khabra, Piara S
Cunningham, Jim (Covy SE) Kilfoyle, Peter
Cunningham, Roseanna Lestor, Joan (Eccles)
Dafis, Cynog Liddell, Mrs Helen
Dalyell, Tam Litherland, Robert
Darling, Alistair Livingstone, Ken
Davies, Bryan (Oldham C'tral) Lloyd, Tony (Stretford)
Davies, Rt Hon Denzil (Llanelli) Llwyd, Elfyn
Davies, Ron (Caerphilly) McAllion, John
Davis, Terry (B'ham, H'dge H'I) McAvoy, Thomas
Denham, John McCartney, Ian
Dewar, Donald McCartney, Robert
Dixon, Don McFall, John
Dobson, Frank McKelvey, William
Donohoe, Brian H McLeish, Henry
Dowd, Jim McMaster, Gordon
Eagle, Ms Angela MacShane, Denis
Eastham, Ken Madden, Max
Etherington, Bill Mahon, Alice
Evans, John (St Helens N) Mandelson, Peter
Fatchett, Derek Marek, Dr John
Field, Frank (Birkenhead) Marshall, David (Shettleston)
Fisher, Mark Marshall, Jim (Leicester, S)
Flynn, Paul Martin, Michael J (Springburn)
Forsythe, Clifford (S Antrim) Martlew, Eric
Foster, Rt Hon Derek Maxton, John
Foulkes, George Meacher, Michael
Fyfe, Maria Meale, Alan
Galbraith, Sam Michael, Alun
Galloway, George Michie, Bill (Sheffield Heeley)
Garrett, John Milburn, Alan
George, Bruce Miller, Andrew
Gerrard, Neil Mitchell, Austin (Gt Grimsby)
Godman, Dr Norman A Morgan, Rhodri
Godsiff, Roger Morley, Elliot
Gordon, Mildred Morris, Rt Hon Alfred (Wy'nshawe)
Graham, Thomas Morris, Estelle (B'ham Yardley)
Grant, Bernie (Tottenham) Mowlam, Marjorie
Griffiths, Nigel (Edinburgh S) Mudie, George
Griffiths, Win (Bridgend) Mullin, Chris
Grocott, Bruce Murphy, Paul
Gunnell, John Oakes, Rt Hon Gordon
Hain, Peter O'Brien, Mike (N W'kshire)
Hall, Mike O'Brien, William (Normanton)
Hanson, David O'Hara, Edward
Hardy, Peter Orme, Rt Hon Stanley
Harman, Ms Harriet Parry, Robert
Hattersley, Rt Hon Roy Pendry, Tom
Henderson, Doug Pickthall, Colin
Heppell, John Pike, Peter L
Hill, Keith (Streatham) Pope, Greg
Hinchliffe, David Powell, Ray (Ogmore)
Hodge, Margaret Prentice, Bridget (Lew'm E)
Hoey, Kate Prentice, Gordon (Pendle)
Hogg, Norman (Cumbernauld) Prescott, Rt Hon John
Home Robertson, John Primarolo, Dawn
Hood, Jimmy Purchase, Ken
Howarth, Alan (Strat'rd-on-A) Radice, Giles
Howells, Dr Kim (Pontypridd) Randall, Stuart
Hoyle, Doug Raynsford, Nick
Hughes, Kevin (Doncaster N) Reid, Dr John
Hughes, Robert G (Harrow W) Robertson, George (Hamilton)
Hughes, Roy (Newport E) Robinson, Geoffrey (Co'try NW)
Hutton, John Roche, Mrs Barbara
Illsley, Eric Rooker, Jeff
Ingram, Adam Ross, Ernie (Dundee W)
Jackson, Glenda (H'stead) Rowlands, Ted
Jackson, Helen (Shef'ld, H) Ruddock, Joan
Jamieson, David Sedgemore, Brian
Jones, Ieuan Wyn (Ynys Môn) Sheerman, Barry
Sheldon, Rt Hon Robert Touhig, Don
Shore, Rt Hon Peter Trickett, Jon
Short, Clare Turner, Dennis
Simpson, Alan Vaz, Keith
Skinner, Dennis Walker, Rt Hon Sir Harold
Smith, Chris (Isl'ton S & F'sbury) Walley, Joan
Smith, Llew (Blaenau Gwent) Wardell, Gareth (Gower)
Snape, Peter Wareing, Robert N
Soley, Clive Watson, Mike
Spearing, Nigel Wicks, Malcolm
Spellar, John Wigley, Dafydd
Squire, Rachel (Dunfermline W) Williams, Rt Hon Alan (Sw'n W)
Steinberg, Gerry Williams, Alan W (Carmarthen)
Stevenson, George Winnick, David
Stott, Roger Wise, Audrey
Strang, Dr. Gavin Worthington, Tony
Straw, Jack Wright, Dr Tony
Sutcliffe, Gerry Young, David (Bolton SE)
Taylor, Mrs Ann (Dewsbury)
Thompson, Jack (Wansbeck) Tellers for the Ayes:
Timms, Stephen Mr. John Cummings and
Tipping, Paddy Mr. Eric Clarke.
Ainsworth, Peter (East Surrey) Channon, Rt Hon Paul
Aitken, Rt Hon Jonathan Chapman, Sir Sydney
Alison, Rt Hon Michael (Selby) Churchill, Mr
Alton, David Clappison, James
Amess, David Clark, Dr Michael (Rochford)
Ancram, Rt Hon Michael Clarke, Rt Hon Kenneth (Ru'clif)
Arbuthnot, James Clifton-Brown, Geoffrey
Arnold, Jacques (Gravesham) Coe, Sebastian
Arnold, Sir Thomas (Hazel Grv) Congdon, David
Ashby, David Conway, Derek
Ashdown, Rt Hon Paddy Coombs, Simon (Swindon)
Atkins, Rt Hon Robert Cope, Rt Hon Sir John
Atkinson, David (Bour'mouth E) Couchman, James
Baker, Rt Hon Kenneth (Mole V) Cran, James
Baker, Nicholas (North Dorset) Currie, Mrs Edwina (S D'by'ire)
Baldry, Tony Davies, Chris (L'Boro & S'worth)
Banks, Matthew (Southport) Davies, Quentin (Stamford)
Banks, Robert (Harrogate) Davis, David (Boothferry)
Bates, Michael Day, Stephen
Batiste, Spencer Deva, Nirj Joseph
Bellingham, Henry Devlin, Tim
Bendall, Vivian Dicks, Terry
Beresford, Sir Paul Dorrell, Rt Hon Stephen
Biffen, Rt Hon John Douglas-Hamilton, Lord James
Body, Sir Richard Dover, Den
Bonsor, Sir Nicholas Duncan-Smith, Iain
Booth, Hartley Dunn, Bob
Boswell, Tim Durant, Sir Anthony
Bottomley, Peter (Eltham) Dykes, Hugh
Bottomley, Rt Hon Virginia Eggar, Rt Hon Tim
Bowden, Sir Andrew Elletson, Harold
Bowis, John Emery, Rt Hon Sir Peter
Boyson, Rt Hon Sir Rhodes Evans, David (Welwyn Hatfield)
Brandreth, Gyles Evans, Jonathan (Brecon)
Brazier, Julian Evans, Nigel (Ribble Valley)
Bright, Sir Graham Evans, Roger (Monmouth)
Brooke, Rt Hon Peter Evennett, David
Brown, M (Brigg & Cl'thorpes) Faber, David
Browning, Mrs Angela Fabricant, Michael
Bruce, Ian (South Dorset) Fenner, Dame Peggy
Budgen, Nicholas Field, Barry (Isle of Wight)
Burns, Simon Fishburn, Dudley
Burt, Alistair Forman, Nigel
Butcher, John Forsyth, Rt Hon Michael (Stirling)
Butler, Peter Forth, Eric
Butterfill, John Foster, Don (Bath)
Campbell, Menzies (Fife NE) Fowler, Rt Hon Sir Norman
Carlisle, John (Luton North) Fox, Rt Hon Sir Marcus (Shipley)
Carlisle, Sir Kenneth (Lincoln) Freeman, Rt Hon Roger
Carrington, Matthew French, Douglas
Carttiss, Michael Fry, Sir Peter
Cash, William Gale, Roger
Gallie, Phil McCrea, The Reverend William
Gardiner, Sir George MacGregor, Rt Hon John
Garnier, Edward MacKay, Andrew
Gill, Christopher Maclean, Rt Hon David
Gillan, Cheryl McLoughlin, Patrick
Goodlad, Rt Hon Alastair McNair-Wilson, Sir Patrick
Goodson-Wickes, Dr Charles Maddock, Diana
Gorman, Mrs Teresa Madel, Sir David
Gorst, Sir John Maitland, Lady Olga
Grant, Sir A (SW Cambs) Malone, Gerald
Greenway, Harry (Ealing N) Mans, Keith
Greenway, John (Ryedale) Marland, Paul
Griffiths, Peter (Portsmouth, N) Marlow, Tony
Grylls, Sir Michael Marshall, John (Hendon S)
Hague, Rt Hon William Martin, David (Portsmouth S)
Hamilton, Neil (Tatton) Mawhinney, Rt Hon Dr Brian
Hampson, Dr Keith Mellor, Rt Hon David
Hannam, Sir John Merchant, Piers
Hargreaves, Andrew Mills, Iain
Harris, David Mitchell, Andrew (Gedling)
Haselhurst, Sir Alan Mitchell, Sir David (NW Hants)
Hawkins, Nick Moate, Sir Roger
Hawksley, Warren Monro, Rt Hon Sir Hector
Hayes, Jerry Montgomery, Sir Fergus
Heald, Oliver Needham, Rt Hon Richard
Heath, Rt Hon Sir Edward Neubert, Sir Michael
Heathcoat-Amory, Rt Hon David Newton, Rt Hon Tony
Hendry, Charles Nicholls, Patrick
Heseltine, Rt Hon Michael Nicholson, David (Taunton)
Higgins, Rt Hon Sir Terence Norris, Steve
Hill, James (Southampton Test) Onslow, Rt Hon Sir Cranley
Hogg, Rt Hon Douglas (G'tham) Ottaway, Richard
Horam, John Page, Richard
Hordern, Rt Hon Sir Peter Paice, James
Howard, Rt Hon Michael Paisley, The Reverend Ian
Howell, Rt Hon David (G'dford) Patnick, Sir Irvine
Howell, Sir Ralph (N Norfolk) Patten, Rt Hon John
Hughes, Robert G (Harrow W) Pawsey, James
Hunt, Rt Hon David (Wirral W) Peacock, Mrs Elizabeth
Hunt, Sir John (Ravensbourne) Pickles, Eric
Hunter, Andrew Porter, Barry (Wirral S)
Hurd, Rt Hon Douglas Porter, David (Waveney)
Jack, Michael Portillo, Rt Hon Michael
Jackson, Robert (Wantage) Powell, William (Corby)
Jenkin, Bernard Redwood, Rt Hon John
Jessel, Toby Rendel, David
Johnson Smith, Sir Geoffrey Renton, Rt Hon Tim
Jones, Gwilym (Cardiff N) Richards, Rod
Jones, Nigel (Cheltenham) Rifkind, Rt Hon Malcolm
Jones, Robert B (W Hertfdshr) Robathan, Andrew
Jopling, Rt Hon Michael Roberts, Rt Hon Sir Wyn
Kellett-Bowman, Dame Elaine Robertson, Raymond (Ab'd'n S)
Kennedy, Charles (Ross,C&S) Robinson, Mark (Somerton)
Key, Robert Robinson, Peter (Belfast E)
Kirkhope, Timothy Roe, Mrs Marion (Broxbourne)
Kirkwood, Archy Rowe, Andrew (Mid Kent)
Knapman, Roger Rumbold, Rt Hon Dame Angela
Knight, Mrs Angela (Erewash) Sackville, Tom
Knight, Rt Hon Greg (Derby N) Sainsbury, Rt Hon Sir Timothy
Knight, Dame Jill (Bir'm E'st'n) Scott, Rt Hon Sir Nicholas
Knox, Sir David Shaw, David (Dover)
Kynoch, George (Kincardine) Shephard, Rt Hon Gillian
Lait, Mrs Jacqui Shepherd, Sir Colin (Hereford)
Lamont, Rt Hon Norman Shepherd, Richard (Aldridge)
Lang, Rt Hon Ian Shersby, Sir Michael
Lawrence, Sir Ivan Sims, Roger
Legg, Barry Skeet, Sir Trevor
Leigh, Edward Smith, Sir Dudley (Warwick)
Lennox-Boyd, Sir Mark Smith, Tim (Beaconsfield)
Lester, Sir James (Broxtowe) Soames, Nicholas
Lidington, David Speed, Sir Keith
Lilley, Rt Hon Peter Spencer, Sir Derek
Lloyd, Rt Hon Sir Peter (Fareham) Spicer, Sir James (W Dorset)
Lord, Michael Spicer, Sir Michael (S Worcs)
Luff, Peter Spink, Dr Robert
Lynne, Ms Liz Spring, Richard
Sproat, Iain Tredinnick, David
Squire, Robin (Hornchurch) Trend, Michael
Stanley, Rt Hon Sir John Twinn, Dr Ian
Steel, Rt Hon Sir David Tyler, Paul
Steen, Anthony Viggers, Peter
Stephen, Michael Waldegrave, Rt Hon William
Stern, Michael Walden, George
Stewart, Allan Walker, Bill (N Tayside)
Streeter, Gary Wallace, James
Sumberg, David Waller, Gary
Wardle, Charles (Bexhill)
Sykes, John Waterson, Nigel
Tapsell, Sir Peter
Taylor, Ian (Esher) Watts, John
Wells, Bowen
Taylor, Rt Hon John D (Strgfd) Whittingdale, John
Taylor, John M (Solihull) Widdeoombe, Ann
Taylor, Matthew (Truro) Wiggin, Sir Jerry
Taylor, Sir Teddy (Southend, E) Wilkinson, John
Temple-Morris, Peter Wilshire, David
Thomason, Roy Winterton, Mrs Ann (Congleton)
Thompson, Sir Donald (C'er V) Wolfson, Mark
Thompson, Patrick (Norwich N) Yeo, Tim
Thornton, Sir Malcolm Young, Rt Hon Sir George
Thurnham, Peter
Townend, John (Bridlington) Tellers for the Noes:
Townsend, Cyril D (Bexl'yh'th) Mr. Timothy Wood and
Tracey, Richard Dr. Liam Fox.

Question accordingly negatived.

Main Question put and agreed to.

Resolved, That this House congratulates Her Majesty's Government on the priority it has given to tackling benefit fraud, increasing success in detecting and stopping fraud, in particular in achieving benefit savings likely to amount to £1 billion in 1995/96; welcomes the creation of the new Benefit Fraud Investigation Service; commends Her Majesty's Government's proposals to step up its measures against Housing Benefit and Council Tax Benefit fraud; endorses the increasing emphasis on preventing and deterring fraud; and condemns Labour's lack of positive proposals for tackling fraud. the main question agreed to.