HC Deb 25 November 1996 vol 286 cc62-123

[Relevant documents: The Minutes of Evidence taken before the Social Security Committee on 26th June 1996 concerning Benefit Fraud (HC 528-i of Session 1995–96) and on 30th October 1996 concerning Child Benefit Fraud (HC 56-i of Session 1996–97.]

Order for Second Reading read.

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

I beg to move, That the Bill be now read a Second time.

Social security costs every working person in this country £15 every working day. Despite our continuing success in getting people back to work, there are still strong upward pressures on that burden as people, happily, live longer and we give more generous help to disabled people.

If we are to meet our obligations to those in genuine need, which the Government are determined to do, we have to curb fraud and abuse. That has been my top priority since I began to reform the social security system. We have been developing the most comprehensive and effective programme of measures to combat social security fraud to be put in place anywhere in the world and it has been increasingly successful. Last year, about £1.4 billion of fraud was identified and stopped.

As we have carried forward our strategy, we have found areas where our existing legal powers are inadequate. The Bill will give us the further powers that we need to tackle fraud even more effectively. There are three main areas where additional powers are needed.

Mr. Dafydd Wigley (Caernarfon)

I want to raise a general point. Everyone recognises the need to limit and eradicate fraud, but does the Secretary of State accept that many people who should be beneficiaries of social security feel that they are being defrauded of their genuine entitlement? A report in yesterday's newspapers in Wales said that £206 million a year was being lost to those who are genuinely entitled. Will the right hon. Gentleman use the resources from savings on fraud to help those who need the money to claim it, and confirm that the Bill's long title allows that issue to be addressed at later stages?

Mr. Lilley

I do not understand the hon. Gentleman's point about people being defrauded of benefit. If he means that people who are entitled to it are not claiming benefit, I can tell him that we endeavour to make information about people's rights and entitlements widely available, to help them to take up that benefit. I am sure that he does that in his constituency. It is unhelpful to confuse that problem with fraud and abuse.

The first area in which we found that we needed extra powers was in galvanising and reinforcing the efforts of local authorities to tackle housing benefit fraud. Until a few years ago, most local authorities put little or no effort into tackling such fraud; the amount that they detected was pretty derisory.

In 1993, I introduced incentives and penalties to encourage local authorities to root out benefit fraud. I remind the House that when I did so, Opposition Front Benchers opposed us and the hon. Member for Manchester, Withington (Mr. Bradley) said: The recovery targets … are unrealistically high."—[Official Report, 16 July 1993; Vol. 228, c. 1254.] In fact, the incentives and penalties persuaded local authorities to double savings in 1994–95 and to increase them further subsequently. Performance, however, remains too patchy and inadequate, and the study carried out jointly with local authorities shows that £1 billion of undetected fraud remains in addition to that which is detected and stopped.

I therefore propose to establish a fraud inspectorate. The Bill will give it powers to examine the performance of local authorities and to inspect my Department's fraud operations. It will give me the power to direct a local authority to improve in a given time scale its performance in tackling fraud, and to penalise any authority in the—I hope—unlikely event that it fails to comply with my directions.

Some local authorities are already responding positively to the challenge that I have given them, and the Bill will reinforce their ability to tackle fraud; it will give them powers of entry to local businesses, including landlords' business premises, similar to the powers that the Benefits Agency already has to enter and obtain documentary evidence useful in the detection of fraud.

The Bill will give local authorities clear powers to exchange information with each other—for example, relating to possible cross-boundary housing benefit fraud—and with the Department of Social Security. I will be able to allow them direct access to my departmental databases. To ensure that the confidentiality of data is fully maintained, the Bill will extend to local authority staff the penalties for unauthorised disclosure of such information.

I also intend to introduce proposals for new regulations under existing powers to suspend payment of benefit when there is reason to doubt the validity of a claim. That is extremely important, as it will enable local authorities to require a resident suspected of having moved away to prove that he still lives at the address for which he is claiming.

The Bill will also improve local authorities' ability to recover overpayments to landlords. For example, if a landlord has been receiving housing benefit directly for a tenant long after the tenant has left his property, the local authority will be able to withhold cash from other direct housing benefit payments being made to the landlord, and that will not affect the tenure of other tenants in the property.

Mr. Bernard Jenkin (Colchester, North)

Will my right hon. Friend clarify that point? One of the problems that confronted the Select Committee on Social Security during our inquiry into housing benefit fraud was that there seemed to be more of an obligation on housing authorities or the Department to pay housing benefit than to withhold it in cases of doubt. Is the onus now on the claimant to prove the bona fides of his claim rather than on the local authority or the Department to prove that the claim is fraudulent before payment can be withheld?

Mr. Lilley

Yes, we are responding to the problem in existing law. If a local authority, having granted a claim, subsequently had reason to suspect that it may be fraudulent, it did not have the power to demand further information; now, it will be given the power to suspend the claim and require the claimant to produce the relevant information before it is renewed. That will be particularly appropriate when, for example, we suspect that the claimant has moved away, but there are no powers of entry, the landlord obstructs entry or it is difficult to prove whether the tenant is still there; the Bill will require the tenant to prove that he is still there and needs continued payment before the claim can be renewed. That will be a powerful new ability.

The Bill will enable authorities to stop postal redirection, making it far harder for individuals to establish claims in a number of different properties and have the benefit posted on to them. Those are all concrete, practical and powerful measures to reinforce action against fraud carried out by tenants and landlords—or, as is often the case, both in collusion.

I read in the newspapers today that the Opposition propose three measures to stop housing benefit fraud. The first is to give local authorities the power to refuse to pay directly to private landlords". They already have that power. The only circumstances in which they must pay the rent direct are if the tenant is eight weeks or more in arrears or if payments direct to a landlord for rent arrears are being made from the tenant's income support or jobseeker's allowance entitlement. I take it that Labour does not want to make evictions more likely by allowing arrears to build up even faster. That proposal therefore amounts to nothing.

The second proposal is the right to obtain proof from landlords about their ownership of properties for which they claim direct payment". Local authorities do not need such a power. They have a duty to satisfy themselves that a rent liability exists before they award benefit to the claimant.

The third proposal is the right to provide details of payments to landlords directly to the Inland Revenue to ensure that income tax is paid". The Inland Revenue can—and does when necessary—make that a duty, not a right, requiring local authorities to give it such information about direct payments to landlords. It neither wants nor needs additional powers in that sphere.

In short, Labour's proposals are insubstantial; they would add nothing to local authorities' existing powers, and nothing to fraud savings. They are another bogus part of Labour's fraudulent attempt to conjure up savings from fraud to finance its £30 billion spending pledges.

The second area where we have found our legal powers to be deficient is in the ability to cross-check data held by different Departments. Part of our anti-fraud strategy has been to cross-check information held on different databases in the DSS. For example, we hold information about whether people are working on the national insurance record system and information about those claiming unemployment benefits on the income support computers. We have information about the children in households claiming income support and we will also have records about them on the child benefit computer.

Although there was no legal obstacle to cross-checking those internal records, it used to be technically almost impossible to get different computers to speak to each other and compare data. We now have access to one of the most powerful data-matching tools to identify suspicious inconsistencies, and we have been using it to increasing effect. It is sensible to extend data-matching to relevant data held by other Government Departments.

Mrs. Anne Campbell (Cambridge)

What has the Department done about the European Union data directive, which appears to prohibit the use for unrelated purposes of data that have been collected for a specific purpose, and could make illegal the cross-checking to which the Secretary of State refers?

Mr. Lilley

Common law prohibited us from using data collected for one purpose for another purpose unless there was statutory authority to do so or an overriding public good. The law hitherto has interpreted as overriding public good a specific suspicion that an individual may be committing a fraud. We can ask the Inland Revenue whether someone is paying income tax, discover some inconsistency and use it to bring a charge, but we cannot do a straight data-match by cross-checking two files. The Bill proposes to give us the statutory authority to do so. That power will conform with the European convention on human rights, the Data Protection Act 1988 and the law. The Bill will empower us to cross-check data with the Inland Revenue, Customs and Excise and other databases, notably on immigration, emigration, passports or prisoners.

If we want to extend data-matching powers further, we shall have to lay an affirmative order before the House. I believe that the new powers will act as a strong measure to identify and stop fraud. They will also deter fraud by making people aware that they cannot tell inconsistent stories to public authorities.

Earlier this month, the hon. Member for Fife, Central (Mr. McLeish) wrote to me suggesting that the Bill should be used to promote take-up of income-related benefits by pensioners—an issue raised in the past by the hon. Member for Birkenhead (Mr. Field). It is not clear exactly how the Opposition envisage that the cross-checking exercises used to identify fraud could also be used to promote take-up of income support among pensioners. [Interruption.] I tuned in to "Woman's Hour" the other day, as I do from time to time because it is a valuable programme, and I heard the hon. Member for Peckham (Ms Harman) explain that she intended to use the powers in the Bill to identify who was not receiving income support but appeared to be entitled to it.

There are a number of problems with that proposal. First, such cross-checking would almost certainly be contrary to the European convention on human rights—at least according to legal advice that I have received—because it would be affected by the right to privacy, which restricts interference in a public authority unless the Department is pursuing a crime or some similar offence. That may be an odd consequence of the European convention, but it has quite a lot of odd consequences.

Mr. Frank Field (Birkenhead)

Being pro-European is also an odd position for the right hon. Gentleman.

Mr. Lilley

It is not unusual for me to point out problems that arise from those international derogations of the sovereignty of the House.

The practical problems with the Opposition's proposal are in any case overwhelming. Data from the Inland Revenue and other sources would certainly enable us to identify some people—but not all of them—who are not entitled to income support because they have sufficient income. If we were to contact everyone whom we did not positively know is not entitled to income support, it would require us to send out massive notifications inviting a massive number of people to make claims for income support. That would incur great cost, it would be badly targeted, it would offer poor value for money, and it would raise false expectations among many people that they might be entitled to benefit.

Ms Harriet Harman (Peckham)

A million people.

Mr. Lilley

No, many millions. Only a small proportion of pensioners are taxpayers, but many of them are not entitled to income support. We are talking about a multiple of those who are currently entitled but who are not claiming. They would receive notification from the Government that they should make a claim, but subsequently they would be disappointed and would probably take action against us as a result. The Opposition's proposal is a wholly impractical idea and outside the scope of the Bill.

The third major area where there are inadequate powers, which we propose to address in the Bill, is our ability to review, prosecute and penalise fraudulent claims. I propose a programme of measures using some powers in the Bill and some existing powers to improve the situation. First, the majority of awards for disability living allowance are made for life. Existing legislation can be read to suggest that only a claimant may subsequently seek a review of his entitlement. That was not the intention of the legislation, but that is its effect. I propose to put beyond doubt the Department's ability to require a review of any suspect case. We already withhold benefit from people who make a claim but refuse to attend medical examination. I therefore propose similarly to withhold benefit from people who refuse to attend the medical examination needed to investigate doubt about an existing award.

Secondly, as I mentioned in response to my hon. Friend the Member for Colchester, North (Mr. Jenkin), I intend to introduce proposals for new regulations under existing powers to suspend payment of housing benefit where there is reason to doubt the validity of the claim.

Thirdly, the Bill will introduce for the first time in social security legislation an offence designed specifically to fit serious social security fraud with a penalty to match. Social security frauds are often long running. Typically, the fraud involves someone making a false statement to claim benefit and continuing to receive payments over a long period. Currently, those frauds are prosecuted on the basis of a declaration made at the time of a payment. A long-running fraud, however, sometimes involves hundreds of fraudulently obtained payments, each of which needs to be charged as a separate offence. That makes the fraud unwieldy for the courts, which have ruled that a few specimen offences cannot be used to reflect the full scale of the fraud. Fraudulent payments made direct to bank or building society accounts do not even involve a specific declaration for each payment, and so cannot be prosecuted in that way.

Under the Bill, we are creating a new offence of dishonestly making statements or failing to report a change of circumstance with a view to obtaining benefit. The offence will focus on the deception itself, taking account of the consequential payments. It is intended to catch the fraudster who continues to collect a succession of payments having made a false statement or having continually failed to report a change in circumstances. The court will be able to take account of all payments fraudulently received and a penalty of up to seven years in prison, or a fine—or both—will be available.

Mr. Nigel Evans (Ribble Valley)

When the measures that my right hon. Friend has described are enacted, they will save millions of pounds. For each pound saved, another pound will be available for those who really need it. When people are convicted of such crimes, will he ensure that such cases are given as much publicity as possible so that they deter others from going down that path of fraud?

Mr. Lilley

I certainly want that. My Department already tries to ensure maximum publicity in local and regional newspapers for successful prosecutions. The Bill will provide us with material for press releases, which I believe act as a powerful deterrent—impossible though it is to measure that directly.

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

In the light of the penalties to which the right hon. Gentleman has just referred, does he anticipate such cases being heard in the sheriff court or the High Court in Scotland?

Mr. Lilley

I am reliably informed that they would be heard in the High Court in Scotland.

The fourth of the series of measures introduced in the Bill is that those who are required by regulations to report changes of circumstance but do not do so without reasonable excuse—that includes landlords who receive direct payments—will face up to three months' imprisonment. To do that, I am extending the existing provision about false representation to include failure to report a change of circumstances without reasonable excuse.

Fifthly, I propose to require that anyone making a benefit claim should provide his national insurance number and evidence to show that he is the person to whom the number refers. Failing that, that person should provide sufficient evidence to allow his national insurance number to be reliably traced or for a new national insurance number to be securely issued.

Mr. Frank Field


Mr. Lilley

I shall certainly give way to the hon. Gentleman, who I anticipated might want to say something about national insurance.

Mr. Field

Then I hope that the right hon. Gentleman has the answer ready.

Given the Government's doubt about the security of the national insurance number system, what moves is the Secretary of State taking to assure the House that the scheme will become secure once again?

Mr. Lilley

There is considerably less doubt about the system's security than has sometimes been suggested by those who loftily say that there are 20 million fraudulent numbers, when there are simply 20 million dead people whose numbers are tagged and whose information is kept as their widows or dependants may be entitled to benefit under the national insurance system. There is no chance of our failing to note a claim from a dead person because our suspicions would be aroused.

The measures that we are taking to eliminate the remaining insecurities in the system have, I believe, been reported to the Select Committee. We have a thorough and comprehensive programme to try to ensure security from end to end of the pipeline and in the use of national insurance numbers. As a result of the measures, any false statement made to obtain a national insurance number will be an offence, which will help us to penalise those who are trying to break into the system.

Mr. Field

I had not realised that what the Department had submitted to the Select Committee was an answer to that question. I understood from reading it that the Department was taking certain measures, which were welcome, but they do not add up to securing the national insurance number system. While I do not believe that all the numbers held on dead people are being fraudulently used, during the 1980s the Government gave many numbers to bogus asylum applications. What steps has the right hon. Gentleman taken to check not the claims of those whom we know to be dead, but the significant number of national insurance numbers, which is greater than one would expect, given the number of people in work and the number of people who have died?

Mr. Lilley

I still disagree with the hon. Gentleman about whether there is a discrepancy between the number of numbers issued and the number that one would expect, given the number of those in work, retired or with other means of access to the system. As I recall, the main problem involving access to benefits and the false identities of asylum seekers was that benefits could be obtained using a letter, which did not require a national insurance number and which was issued by the Home Office without a photograph or fingerprint. We remedied that problem and required claimants to make their claim at a named post office and for a shorter duration than previously. As a result, we broadly eliminated that problem. I shall confirm to the hon. Gentleman in writing whether that measure led to the issue of a large number of false national insurance numbers, but I do not think that it did.

Mr. Field

The Secretary of State has explained that he stopped the fraud that was occurring. I have been asking what measures he has taken to check on the numbers that were issued before the processes, such as putting fingerprints on forms, that the right hon. Gentleman explained to the House were in place.

Mr. Lilley

I am saying that we may have stopped a fraud that did not involve the multiplication of national insurance numbers. There is no evidence of a macro nature to show that a huge number is involved—it would have to be huge to show up in the discrepancy between the number of people we know to be at work and the numbers issued.

People have undoubtedly been breaking the system. A far more serious problem than creating bogus numbers involves people hijacking existing numbers before the other person realises that claims have been made on his number while he has been happily in work and paying into the national insurance system. The evidence that we submitted to the Committee contained measures to stop that abuse.

We have already increased to 20 per cent. the maximum deduction from current benefit that can be made to recover previous fraudulent overpayments, and that increase will form part of the programme. It is wrong that fraudsters should be treated in the same way as other people who owe us money. We shall therefore have the power to deduct up to 20 per cent. of their basic benefit while seeking repayment if they have a continuing entitlement to benefit. We shall also give priority to recovering money from fraudsters, backed up by civil proceedings where necessary.

I intend to pilot a scheme of formal cautions. We can do that under our existing powers—we shall, for example, caution people who have committed a minor transgression for the first time and are prepared to admit it. Someone cautioned once will know that he is liable to be treated more severely the next time and he will have to pay back the money that he owes.

Perhaps the most important of this series of measures is the one that will enable us to offer civil penalties as an alternative to court proceedings. Some people regard fraud as a comparatively low-risk option. Unless we prosecute, the worst that can happen is that the benefit that has been overpaid will be recovered. We shall continue to take the worst offenders to court and to demand more rapid repayment from others. The new offence that we have proposed will help us to pin penalties on the worst offenders. For intermediate cases, we shall offer the option of paying a settlement of 30 per cent. of the money owed on top of recovery of the money fraudulently taken and still not repaid. If people refuse, we shall send their papers for prosecution.

Mr. Michael Stern (Bristol, North-West)

I should be grateful if my right hon. Friend could clear up a matter of confusion. According to the notes on clauses, the 30 per cent. penalty appears to be mitigable. I have read the clause and I cannot find a provision that allows for such mitigation. Are we talking about a mitigable penalty?

Mr. Lilley

My hon. Friend has a greater knowledge of the jargon of the trade and I am sure that he will be able to explore the matter fully in Committee if he is able to become a member of it. I suspect that my hon. Friend the Under-Secretary of State for Social Security, who is far better versed in such legal technicalities, will be able to reply later—and cover up my ignorance.

I wish to remind the House about the Opposition's position on fraud.

Mr. Frank Field

What does that have to do with the Bill?

Mr. Lilley

It is extremely relevant to the Bill as we have a choice between the Government's proposals and the attitude adopted by the Opposition, who have opposed almost everything that I have done in this sphere.

When I first made tackling fraud a priority, the Opposition even denied that it was important. The hon. Member for Withington said that there was a danger of overstating the amount of fraud in the system. When I produced studies for the first time quantifying fraud, Labour's Front-Bench spokesman said that even £1 billion is not a large amount. Where the Opposition were responsible for controlling fraud in the Labour-controlled local authorities, they demonstrated a complete lack of interest in tackling it. When I introduced rewards and penalties to galvanise Labour authorities to do something about fraud, the Labour party in Parliament condemned those measures and belittled the problem. The Labour Front-Bench spokesman said that the recovery targets set for local authorities are unrealistically high".—[Official Report, 16 July 1993; Vol. 228, c. 1254–55.] But the targets subsequently led to a doubling of savings from fraud. When I announced plans for a benefit payment card, the right hon. Member for Glasgow, Garscadden (Mr. Dewar) attacked it as a waste of money. When I introduced a beat-a-cheat scheme, the Opposition immediately condemned it.

The Opposition have opposed every major legislative measure to close loopholes. They attacked the habitual residence test designed to prevent benefit tourists from milking our benefits; they opposed penalties on new age travellers and others who refused even to apply for jobs; and they voted against measures to stop benefits for bogus asylum seekers. As the hon. Member for Sheffield, Brightside (Mr. Blunkett) rightly said: Labour has been linked to freeloaders for too long". After denying that fraud was serious and after opposing measures to stop it, the Opposition are now getting into the business of fraud themselves. Their claims about the savings to be made from housing benefit fraud are fraudulent. The Labour party claims that it can conjure up £1 billion of extra fraud savings to finance its spending plans. The savings are a fraud, but the spending proposals are real, so it is the taxpayers who would pay.

Mr. Alan Howarth (Stratford-on-Avon)

Will the right hon. Gentleman give way?

Mr. Lilley

In a moment.

The Opposition base their claims on purely anecdotal evidence that the amount of fraud may be £1 billion higher than is suggested by Government figures.

Mr. Henry McLeish (Fife, Central)

The evidence comes from the Select Committee.

Mr. Lilley

I will give way if the hon. Gentleman would care to give the evidence on which the Select Committee allegedly based that claim. In fact, it did not make a claim but only remarked on it.

Mr. McLeish

The point is that the Select Committee's evidence has been dismissed as an anecdote. If the Secretary of State is going to make a sweeping attack on a major Committee of the House, it is important that he gives the evidence that proves that the claim is truly bogus, to use his words.

Mr. Lilley

I ask the hon. Gentleman to tell me what evidence the remark—

Mr. McLeish

It was evidence in the Select Committee.

Mr. Lilley

There was no evidence in the Select Committee, so I cannot dismiss it. Opposition Members base their case on a remark. The Committee interviewed a person from the London fraud officers group who, on subsequent inquiry from me, said that no survey had been carried out to back up his remark—unlike our survey, which was carried out with the help and co-operation of 56 local authorities and therefore has a scientific basis and should not lightly be dismissed.

Mr. Alan Howarth

The Secretary of State accuses the Labour party of being less than rigorous in its assessment of expenditure and in its figures relating to fraud, but can he deny that he has accepted reductions in his budget as Secretary of State for Social Security on the assumption that he will be able to recoup those resources from expenditure savings arising from the successful pursuit of fraud? Is not that lacking in rigour? Is he not giving himself the benefit of a very large doubt and counting his chickens before they are hatched?

Mr. Lilley

The hon. Gentleman is absolutely wrong. As I have reported to the House, I have secured increased resources to pursue fraud and those funds are ring-fenced. They will be devoted to tackling fraud and will secure considerable savings for the taxpayer.

The Opposition claims that much extra fraud is being committed by landlords. The Labour party document, "Recovering the missing millions", claims that Labour could achieve £310 million net additional savings from its proposals to crack down on landlord fraud in the housing benefit survey. Yet our survey—confirmed by the very organisation on which many of the misrepresentations are based—suggests that landlord fraud amounts to between £150 million and £200 million. How can Labour possibly save an extra £310 million on top of the savings already made?

Opposition Members propose unworkable measures to reduce fraud. They say that they will carry out 4 million more visits to claimants and estimate that that would yield savings of more than £544 million. Yet the local authority methods that are cited assume home visits at a rate of 50 a day per visiting officer, which would imply a mere eight minutes between visits from end to end. It is absolutely nonsensical to suggest that officers could carry out serious investigations into fraud with only eight minutes between ringing one doorbell and ringing the next.

Mr. Frank Field

Will the hon. Gentleman give way on that point?

Mr. Lilley

I have given way to the hon. Gentleman three or four times already. I would have happily given way had he proposed to answer on behalf of the hon. Member for Fife, Central (Mr. McLeish) in respect of the evidence for the £2 billion figure that we know does not exist.

Mr. Field

I shall happily answer on that point as well.

Mr. Lilley

Then I shall give way.

Mr. Field

It is interesting that, when people appearing before the Committee support a Government hunch or a Government prejudice, they are cited as giving evidence; but when they give us their estimate of fraud, the Government dismiss it. The Government should be more careful about such selectivity.

Mr. Lilley

I have no vested interest in any particular estimate of housing benefit fraud. The only matter in which I have a vested interest is getting the figure as right as possible. That is why I carried out a scientific study. with the help of 56 local authorities, which investigated a representative sample of many hundreds of claims and produced a specific figure. That method is better than bar room suggestions that the real figure might be double the Government's suggested figure.

The Labour party has also suggested that the mythical extra savings could be used to cover its spending programmes. In last week's rebuttal document, Labour claimed that five measures—jobseekers plus; the jobs, employment and training, or JET scheme; budgeting loans for the low paid; income support disregards for the wives of working men; and a higher disregard in jobseeker's allowance—will be financed from the savings in the benefit bill from combating fraud. Labour will not be able to achieve such savings and the proposed measures are pitiful, ineffective and based on unsubstantiated claims as to the amount. Labour's policies, as it now admits, imply extra spending of £136 million a year. Even The Guardian admitted: There is no money left in anti-fraud measures, so Labour will have to stump up some cash here. By contrast with Labour's repeated and semi-fraudulent proposals, our policies are practical, effective and realistic. Our experience shows that our measures work and the Bill will reinforce our powers to make the battle against fraud more effective. It will boost the efforts of Labour and other local authorities, give us greater scope for data-matching across the range of financial information available to Government and improve the penalties available to penalise those who are identified as defrauding the system. I commend the Bill to the House.

6.25 pm
Ms Harriet Harman (Peckham)

No matter where fraud on the public purse is committed and no matter by whom it is committed, it must be stamped out. Taxpayers are already reeling from 22 Tory tax increases. They are paying more and more of their hard-earned money in Tory taxes, yet millions of precious pounds are being wasted on fraud. The welfare state must, at all times, remain vigilant in the battle against fraud. Fraud not only costs money and wastes resources, but saps public support for the social security system and the welfare state.

The welfare state maintains its popular support because people want to be protected against the risks of unemployment, illness or disability. They value the knowledge that there will be support for them when they need it, but they do not want a welfare state that is exploited by fraudsters and hits their pocket through taxes. Every pound wasted on fraud wastes taxpayers' money, wastes money that could go to those in need, and wastes public support for the welfare state. It is for those three reasons that Labour is committed to cracking down on all fraud, whether by individuals or by organised fraudsters.

Despite the Government's tough talk on fraud, we know that the Tories have failed on fraud. We know that because we can see their record. At this point, I want to say to the Secretary of State that he should be more cautious before belittling the work of the Select Committee on Social Security, because, were it not for its work in listening to the people on the ground who see the mounting fraud, I doubt that the House would be debating this Bill, proposed by this Secretary of State, today. We should have a bit more humility from the right hon. Gentleman.

Mr. Lilley

Far from belittling the efforts of the Select Committee on Social Security, I bask in its praise, which has been fulsome. According to the Chairman, his original proposals were toned down somewhat because they were over-effusive in praising my efforts. I demand that Opposition Members cease to misrepresent a document that referred to a chance statement by one witness, as if it provided proof that there is £2 billion of housing benefit fraud, whereas the only established and available survey suggests that there is about £1 billion. I do not mind whether there is £1 billion or £2 billion—what I dislike is the suggestion that there is a mysterious £1 billion that can be conjured up, purloined and used to justify £1 billion of extra spending by the Labour party.

Ms Harman

The Secretary of State says that he pays tribute to the work of the Select Committee on Social Security; it is a pity that he has not adopted its proposals for the full extent of powers that are needed to crack down on fraud. It is all very well to praise the Committee's work; the Bill falls short of the Committee's recommendations for action.

Of course we use estimates when we speak about fraud—people who commit fraud do not declare it—but the Select Committee said on page vi, paragraph 6 of its 1995–96 report on housing benefit fraud: It is possible that the true total is £2 billion, perhaps even greater". The Government were warned year after year about the increasing scale of the problem, but they failed to take tough action, especially on organised landlord fraud. They failed to do so because—

Mr. Bernard Jenkin

The hon. Lady quoted from the Select Committee report; I am a member of that Select Committee. She read out the passage starting, "It is possible". I was happy to put that £2 billion in to highlight the anxiety of some of our witnesses, but I am convinced that the Government survey data are by far the most accurate record that we can lay our hands on of the true amount of fraud. What does she believe that the fraud figure is?

Ms Harman

The hon. Gentleman has sought to back off from a statement in a report to which he put his name: It is possible that the true total is £2 billion". However, bearing in mind the fact that we agree that, over the years, billions of pounds have been wasted through being defrauded from the public purse, perhaps the House should move on to consider the actions that should be taken to solve the problem.

It is my contention that the Government have failed to take action because they are complacent about the undermining of support for the welfare state, they are not vigilant on behalf of the welfare state and they are soft on private landlord cheats. Their dogmatic view that everything in the private sector is good whereas everything in the public sector must be bad means that they have shrunk away from acting against private landlord cheats who rip off the system.

The Social Security Committee estimated that as much as £1 of every £5 spent on housing benefit is wasted on fraud. The Local Authority Investigation Officers Group, to which I pay tribute for its work in drawing attention to the scale of fraud and its proposals for tackling it, told the Select Committee that housing benefit fraud could be even greater.

The Association of London Government estimates that at least £40 million is wasted on housing benefit fraud in London alone, and that much of that fraud is committed by landlords cheating the system, alone or in collusion with tenants.

A case highlighted in evidence to the Select Committee was that of a landlord in London to whom 165 housing benefit claims were paid directly. When the claims were checked, it was discovered that 56 of the claimants did not exist—phantom tenancies. The landlord was ripping off the taxpayer to the tune of no less than £5,000 a week. He was caught, but no doubt many landlords committing similar frauds are as yet undetected. In another case, when the properties of eight managing agents in Greenwich were investigated, 88 of 292 properties were found to be empty.

That is why we need the visiting officers knocking on the door. It does not take long to discover that premises do not exist or are deserted. It is a scandal that landlord cheats have ripped off the taxpayer and that the Government have failed to take action until now, when—after 17 years of Tory government—they are introducing the Bill five months before the general election.

Housing benefit fraud is serious because spending on housing benefit accounts for a large part of the social security budget. Under the Secretary of State for Social Security and his Tory predecessors, there has been a huge increase in the amount spent on housing benefit. The housing benefit budget has soared since 1979, when it was £2.2 billion, to about £11.2 billion a year. Spending on housing benefit has increased dramatically because of the huge increases in housing benefit paid to claimants in the private sector. As an increasing number of people have claimed housing benefit and the cost to the taxpayer has soared, fraud has grown.

The Bill seeks to punish those who make false claims on taxpayers' money. We could not agree more; but among the biggest false claims being made today are those of the Conservatives that they are tough on fraud. I shall set out our view of their record, chronologically and based on fact.

In the early 1980s, local authorities took action. They began appointing fraud inspectors to tackle what they believed to be the problem of housing benefit fraud. Did the Government listen to their anxieties or back up their action? No, they did not—and that was the early 1980s. In 1992, the London Boroughs Fraud Investigators Group urged the Government to set up a London-wide body to tackle the serious problem of organised landlord fraud. It asked the Department of Social Security for help. In the report that it sent to the Department as long ago as 1992, it said: Organised Housing Benefit fraud is a large, financially significant problem. It is more lucrative than Income Support fraud. Its perpetrators are mostly landlords or managing agents. The DSS does not investigate organised Housing Benefit fraud … we have a serious problem that the London Local Authorities need to tackle. It also proposed—in 1992— a specialist team investigating organised Housing Benefit fraud is what is needed. Did the Government listen or take action? No, they did not.

It was not until May 1996, four years and many billions of pounds later, that the Government set up a pilot project. In fact, much of the action that the Tories have taken in the past 17 years has hindered rather than helped the fight against fraud. They cut visits to check on fraud from 6.6 million a year under the last Labour Government to only 500,000 a year. They penalised local authorities that took action on fraud. Not only were those local authorities obliged to pay, without subsidy, for fraud investigating officers, but when those officers detected fraud, they were subject to a financial penalty from the DSS. The Tories penalised local authorities that took action on fraud in the public interest until, finally, they were pushed to change the rules in 1993.

The Tories have been complacent about the problem of organised landlord fraud. Not until May 1996, when the Social Security Committee once again brought the problem to their attention, did they prepare the Bill. While fat cat landlords have lined their pockets with taxpayers' hard-earned money, the Secretary of State has stood idly by year after year, until now. That is the background against which the Bill is introduced.

We support the proposal in the Bill to cross-match central and local government data to tackle fraud. We support it—indeed, we proposed it in our document, "Recovering the missing millions".

We support the proposal to require the Post Office to disclose or prevent the redirection of post, to tackle fraud. We support that measure—indeed, we proposed it.

Mr. Bernard Jenkin

Will the hon. Lady give way?

Ms Harman

In due course.

We support the proposal to create a fraud inspectorate—indeed, we proposed it. We supported it in "Recovering the missing millions", our policy document published this year. We supported it before the Bill was drafted. We are simply letting the Government know that we support their adoption of those proposals, which are widely supported by the Social Security Committee and the Audit Commission. We support tough penalties for those who make false claims to defraud the public purse. Innocent claimants should have nothing to fear, while guilty fraudsters will be rooted out.

Mr. Jenkin

Will the hon. Lady give way?

Ms Harman

I shall give way to the hon. Gentleman again, although I fear that it might be a mistake.

Mr. Jenkin

I suffer the hon. Lady's rebuke with due humility, but I am extremely grateful to her for giving way. She admonished the Secretary of State for following in the wake of the Select Committee on Social Security. Will she be honest enough to admit that she has taken many of her policy initiatives from that Committee? They did not go from her to the hon. Member for Birkenhead (Mr. Field); I rather fancy that they went in the opposite direction.

Ms Harman

The hon. Gentleman has it completely wrong; I admonished the Secretary of State not for failing to adopt the Select Committee's recommendations but for sneering at its recommendations and the evidence that it placed before the House, and for failing fully to take on board the sensible recommendations that it made.

The Bill must do more. In Committee, we shall press the Government to take far tougher measures to deal with organised landlord fraud. There should be a new offence to deal with landlords who make multiple false claims to rip off the taxpayer. Despite the massive scale of the problem that has emerged in recent years, no such offence exists and those who prosecute on that issue must go between the Theft Act 1978, false accounting and other bits of legislation in order to found their case. There should be a specific new offence to deal not with those who simply fail to notify or who make an individual claim, but with organised landlord fraudsters.

We must do even more. We propose giving local authorities the power to refuse to pay direct to private landlords in all but exceptional circumstances. The Select Committee and the Audit Commission recommended that action, but it is not in the Bill. The Secretary of State, who is not responsible for prosecuting in that area, says that local authorities already have that power, but the Select Committee, the Audit Commission and those investigating and prosecuting fraud say that they do not. We propose that the power should be specifically in the Bill.

We propose giving local authorities the right to obtain proof from landlords about properties for which they claim direct payment of housing benefit. The Select Committee and the Audit Commission recommended that action, but it is not in the Bill. We propose giving local authorities the power to require landlords to give notification of other properties for which they receive direct payments of housing benefit. The Select Committee and the Audit Commission recommended that tough action, but it is not in the Bill.

We also propose that local authorities automatically provide details of payments that they make to landlords directly to the Inland Revenue, to ensure that landlords pay income tax. Again, the Select Committee and the Audit Commission recommended that tough action, but where is it? It is not in the Bill.

The Secretary of State has, in the past—I concede that he did so less today—tried to draw attention away from the Government's failure to take action on fraud by blaming Labour-controlled local authorities. He has failed to tackle fraud, so he makes local councils his scapegoat. Neither the Social Security Committee nor the Audit Commission shares his assertion that Labour-controlled councils are soft on fraud. If that is the Secretary of State's view, he will never solve the problem of fraud, but will simply continue to play party political games while the public purse is defrauded. The Select Committee and the Audit Commission say that it is not the party in power in local government but the system that has been deficient.

What this country needs now is a partnership between local government and national Government, to work together genuinely to tackle fraud. I hope that that is the spirit in which the Government will approach the Bill in Committee.

Mr. Nigel Evans

The hon. Lady talks about playing politics with this issue. Is not the Labour party trying to play politics with social security fraud? By the action that they have taken since 1992, the Government have tripled the savings from more than £500 million to nearly £1.5 billion. The hon. Lady tries to argue that the savings from fraud can be much greater, so that the Labour party can go into the next election pretending that some of its extensive spending plans can be met from money saved on fraud, instead of from putting up taxes, which is exactly what it will do.

Ms Harman

It ill behoves a member of the party whose Government have promised to cut taxes and who have put up taxes 22 times to accuse us of planning to put up taxes. My case is that evidence of fraud emerged at local level. Councils responsible for administering the housing benefit system identified the problem and were concerned about it. They told the Department of Social Security about the problem and were told, "There is no problem." They went to the Social Security Committee, had a keen hearing and presented these proposals. That is the true story.

Mr. Lilley

The hon. Lady was not a Front-Bench spokesman on fraud at the time, but when we made proposals to encourage local authorities to take much more aggressive action to cut down on fraud, her predecessors told us that we were in danger of exaggerating the amount of fraud, that £1 billion was a small sum, that the measures that we were taking were excessive and onerous, and that local authorities could not meet them.

Had we accepted that advice, we would have left the problem untackled. Happily, we ignored it and we have succeeded in provoking and galvanising local authorities into more than doubling their fraud savings in a single year, and subsequently increasing them significantly. They will do so more as a result of the measures that we are introducing today. We have ignored the Labour party's continual refusal to take the fraud issue seriously.

Ms Harman

The Secretary of State says that he has provoked and galvanised local authorities into action to tackle fraud. It is quite the other way round: local authority investigators have provoked and galvanised the Government to take action on fraud.

As well as helping to catch benefit fraudsters, the proposals in the Bill to cross-match Government data provide the House with an opportunity to help some of the poorest people in Britain: pensioners. Government figures published last week show that there has been a dramatic increase in the number of very poor pensioners—those entitled to income support but who do not claim it. The figure has risen from 700,000 to 955,000. Nearly 1 million pensioners now lose out on money that they desperately need. Government figures show that they lose an average of £14 a week—more than £700 a year—which is equivalent to almost 25 per cent. of the basic state pension.

I freely admit that I was on "Woman's Hour" because 800,000 of those pensioners are women who live on their own and have no state earnings-related pension scheme, no occupational pension, no savings, no nothing. It is a scandal that pensioners who spent a lifetime at work or caring for their family are among the poorest people in Britain today. It is particularly worrying as winter approaches and pensioners throughout the country must choose between heating and eating. The problem is urgent and is made worse by the Government imposing VAT on gas and electricity.

Why are 1 million pensioners—among the poorest people in Britain—failing to claim the £700 a year in income support to which they are entitled? The Secretary of State has a simple answer. He says that they do not claim it because they do not want or need it. They make the choice, and decide that they do not want the £700.

We wrote to ask the Secretary of State whether the cross-matching of data under the Bill could be used not only to tackle fraud, but to help to get the income entitlement to the poorest pensioners. We asked him to include such a measure in the Bill. He rejected our proposal and stated in a letter of 22 November: In considering the question of take-up of benefits, I think it is necessary to remember that the claiming of benefit is, of course, a matter of personal choice and there will always be those who choose not to make a claim. Are 1 million pensioners choosing not to make a claim—not to have that £700? It is unacceptable for the Secretary of State to adopt that attitude.

The truth is different. The message to pensioners from the Government has been clear: "If you claim benefits, you are a scrounger; if you are a pensioner, you are a burden." So 1 million pensioners do not claim their entitlement. We know that pensioners feel the stigma of means testing most sharply of all.

Despite the European convention, the Bill uses the cross-matching of Government-held data to catch benefit fraud. Why cannot the Bill use the cross-matching of data to give the poorest people their entitlement?

The Minister for Social Security and Disabled People (Mr. Alistair Burt)

Before the hon. Lady leaves the topic of poorer pensioners, will she explain how her proposal for a pension to be drawn at the age of 60 at some £20 a week less for life will help in dealing with poorer pensioners?

Ms Harman

Is the Minister referring to our proposals for a flexible decade of retirement?

Mr. Burt

indicated assent.

Ms Harman

With your leave, Mr. Deputy Speaker, I will digress to comment on the flexible decade of retirement, but I will return to the cross-matching of Government and local authority data to get help to the 1 million poorest pensioners. That was a valiant attempt by the Minister, but I fear that it will be an own goal, not a diversionary tactic.

People are retiring at different ages. The pattern of employment is changing and people are retiring across a decade. There used to be a fixed pattern of work—men would leave school, get a job, work full time for their entire working life, retire at 65 and get their state pension. Many people now have occupational pension schemes, which enable them to retire earlier. We argue that there should not be a one-size-fits-all welfare state. Flexibility in the state pension system could help people to exercise more choice in their lives. If that can be done at no cost to the public purse, why not do it?

We have said that those who draw their pension five years earlier than the pivotal date will draw it at a lower rate, but if they have occupational pensions, savings or other income to ensure that they do not fall back on the state at a later date, why should they not make that choice? Hon. Members on the Government Benches are making a mistake by setting their face against greater flexibility in the social security system to meet the changing patterns of people's lives.

The Government have proposed data matching to deal with fraud. Why do they refuse to accept data matching for benefit take-up? The Secretary of State for Social Security hid behind Europe's skirts. He failed to say whether he thought that it was a good idea; he merely said that Europe would not wear it. I make two points in response to that.

First, what is the Secretary of State's view? Does he think that that is a good idea and worth doing? Secondly, it is clear that article 8 of the European convention on human rights does not stand in the way of the cross-matching of data. Just as article 8 allows an exemption under the law for the purposes of national security and public safety, it allows exceptions by law for other purposes. I do not believe that the matching of information held by the Government for the purpose of getting income to the poorest people would be found to be in breach of the European convention on human rights.

I say that with a great deal of experience of litigating in front of the European Court of Human Rights on the convention. I know how the court works. The notion that our proposal would fall foul of the European convention is absurd and cowardly. The Government will not say simply that they do not want to pay those people their money, so they will not help them get it.

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

It is clear from article 8(2) that the prevention of disorder or crime, which is the category into which benefit fraud would fall, is one of the exceptions. Which exception is the hon. Lady relying on for her scheme?

Ms Harman

Various exemptions are relevant: the protection of health, or the protection of the rights and freedoms of others. The Minister makes a bogus assertion. The Government are lurking behind the European convention and legal advice, while 1 million pensioners suffer extreme poverty and hardship. I hope that the Government will think again and support our proposals to help us to deliver their entitlement to 1 million pensioners who have given Britain so much for so long.

This week the Secretary of State has been engaged in pre-Budget briefings.

Mr. Lilley

Not so.

Ms Harman

I am glad to give the Secretary of State the opportunity to deny the reports about him in The Guardian, which states that he will help the Chancellor to pay for tax cuts by cutting £1 billion in fraud from the benefits bill. The article continues: "Mr. Lilley is confident". I give him the opportunity to say at the Dispatch Box that he is not confident and that he is not going to save £1 billion.

Mr. Lilley

Last year I saved £1.5 billion. I deplore The Guardian, whose article I have not read and with whose reporter I have not spoken, if it suggests that we shall save less in future.

Ms Harman

The assertion in The Guardian, which has been denied, is that in addition to the £1.8 billion that it is claimed will be saved, an extra £1 billion—a third as much again—will be saved this year. However, the Secretary of State has denied it. He does not think that he can save £1 billion by cutting housing benefit fraud to help the Chancellor with his tax cuts. I am glad that those were not proud boasts behind closed doors—the Secretary of State said nothing of the sort.

It is clear that the Government will not save an extra £1 billion on housing benefit fraud, because they refuse to take the tough measures required to crack down on organised landlord cheats. Despite the Bill's shortcomings, we shall work in Committee to toughen the measures in it in order to end the scandal of a multi-billion pound fraud by private landlords—a fraud on the taxpayers and on the welfare state.

6.59 pm
Mr. David Faber (Westbury)

Thank you, Mr. Deputy Speaker. I am grateful to be called to speak so early in the debate. I listened carefully to the speech by the hon. Member for Peckham (Ms Harman). I have had the same dubious pleasure during health debates in the past year and the record seems to have got stuck. She and the hon. Member for Fife, Central (Mr. McLeish) continually pray in aid the work of the Social Security Committee, which is ironic at best and disgraceful at worst. I have served on the Committee for four years and have been instrumental in helping to compile reports on benefit fraud. I have done so because I feel strongly about that issue and out of respect for the Committee Chairman, the hon. Member for Birkenhead (Mr. Field), to whose work I pay tribute. It is outrageous for the hon. Lady to twist the Committee's findings, to quote it selectively and to pay no heed to its many conclusions that form part of the legislation.

The hon. Lady accused my right hon. Friend of belittling the Committee's work. I have listened to my right hon. Friend giving evidence before the Committee for many hours and I am thankful that the hon. Lady will never have the opportunity to appear before us in that capacity. The truth is that the Committee set up its inquiry in spite of the Labour party, not because of it. I am sorry to embarrass the hon. Member for Birkenhead again, but I refer to his remarks during the Committee on 7 February this year when he 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.' It never struck me that being against fraud was actually a right-wing stance. That is the Labour party's view on benefit fraud.

We last debated the issue in March this year on a Government motion and I am delighted that we have the opportunity to discuss it again today in the context of this legislation which takes us further forward. The Committee has continued its investigations and has moved from housing benefit fraud to child benefit fraud. The Government have taken many welcome steps since the last debate. I welcome particularly the on-going benefit reviews which gauge the extent of benefit fraud. Income support and unemployment benefit fraud were tackled first, followed by retirement pensions, housing benefit and invalid carers allowance. I am sure that it is only a matter of time before the review moves on to child benefit fraud.

Since the debate, the Government have moved forward in two key areas. The contract was announced for the introduction of a payment card and I ask my hon. Friend the Member for North Hertfordshire (Mr. Heald) to allay in his winding-up speech several concerns expressed about that card. It was suggested in the newspapers recently that the chip in some cards could be tampered with, affecting their security. I seek his assurance that such technology will not be used in the payment card.

The Department of Social Security memo to the Committee says that the card will "virtually eliminate" all instrument of payment fraud. However, we remain somewhat concerned that, if the card is fraudulently obtained initially, that may legitimise other types of fraud. I seek my hon. Friend's assurance that there will be strict verification and reverification procedures upon the issuing of cards. Nevertheless, potential savings of £150 million per year for a £200 million investment are welcomed warmly.

The Government's other obvious advance in recent weeks and months is our extension of the free benefit fraud hotline nationwide. That is a very worthwhile and welcome move. The hotline has been successful at a local level— during the March debate we heard that pilot project savings were running at about £800,000 per £20,000 of expenditure. We now know that the national hotline has also proved a success and I understand that it has received 105,000 calls to date, running at 5,000 per week. I am interested to know whether the cost-benefit analysis still applies in terms of comparing the cost of running the hotline with the fraudulent benefit savings made.

Earlier this month, my hon. Friend unveiled the world's biggest social security data-checking operation in Manchester. Local authorities and Post Office employees have better incentives to tackle fraud, identity checks have improved and the number of home visits has greatly increased. Most welcome of all is the establishment of a joint project by the Benefits Agency and the Contributions Agency to crack down on national insurance number fraud. I hope that my right hon. Friend and my hon. Friend will examine carefully the Committee's concerns and recommendations as articulated earlier by the hon. Member for Birkenhead.

As we have heard already in the debate, fraudulent benefit savings have increased from £717 million in 1994–95 to £1.44 billion in 1995–96 and they are expected to rise again to £1.8 billion in 1996–97. I echo the remarks of my hon. Friend the Member for Colchester, North (Mr. Jenkin) in his intervention on the hon. Member for Peckham: she should not read too much into the information provided by the fraud investigators group. It has done some excellent work—a member is one of our specialist advisers and he knows a great deal about the issue—but it has provided no hard evidence to contradict the Government's figures about the extent of social security fraud. The on-going process of benefit reviews is providing more hard and fast data every week and every month.

Clauses 1 to 4 deal with the supply of information to those who are fighting the battle against fraud. In the Select Committee's third report, we specifically recommend that the Government should investigate whether serious social security fraud could be added to the list of categories where confidential information from Inland Revenue may be passed to the DSS. I welcome especially the Bill's proposals to allow the DSS to cross-check data with that held by the Inland Revenue and by Customs and Excise. That will make it easier for DSS agencies to investigate benefit fraud, but it is important that the flow of information be maintained to local authorities as well.

I refer my right hon. Friend to clause 1. Will local authorities be deemed to be a body supplied to, or … a person providing services to, the Secretary of State"? If that clause applies to local authorities, there will be some problems passing information from the DSS to the local authorities who need it.

Mr. Heald

Perhaps I can assist my hon. Friend. Clause 3, which deals with authorities administering housing benefit or council tax benefit, enables the Secretary of State or the Northern Ireland Department to pass information to local authorities, which would include the data to which my hon. Friend refers.

Mr. Faber

I thank my hon. Friend. That clarifies the situation, which is not explained in clauses 1 and 2. It is vital that information is passed to local authorities as they may need it most.

Another of the Select Committee's key recommendations was that local authorities should have access to the DSS central index computer which deals with national insurance numbers. I think that I understood my right hon. Friend as saying that the Government will accept that recommendation. It was accepted in the Government's response to the Committee's report, subject to certain strict criteria. Such criteria must be strict and the system must be policed sensibly and with great care, but local authorities need such information in the fight against fraud.

I welcome the Bill's recognition of the role of local authorities in combating fraud. We have heard much in this and in previous debates about some local authorities' reluctance to pursue fraudsters in the past because of ideological opposition. I think that we have moved from that argument and the Bill presents an opportunity to understand the rewards for local authorities and the penalties for those that do not perform well.

Mr. Bernard Jenkin

Does my hon. Friend agree that, while some local authorities—notably those in the London area—produced strong evidence that they required extra powers and that the local government culture needed to change, the vast majority of local authorities tended to say, "That sort of thing does not happen here"? The Committee and my right hon. Friend the Secretary of State have succeeded in changing the culture so that every local authority is aware of the potential for benefit fraud—however leafy the suburb.

Mr. Faber

I agree with my hon. Friend—and particularly with the relevance of his last comment. In the course of our investigations, it was interesting to learn how many local authorities—sometimes those in our area or in neighbouring areas—did not accept that fraud occurred in their jurisdictions. If nothing else, the Committee's report helps to highlight that fact. I join my hon. Friend in paying tribute to the representatives of the London authorities who appeared before the Committee: they understand the nature of the problem and they have decided to tackle it on a grand scale. I hope that some of their experiences and some of the measures in the Bill will give local authorities throughout the country the chance to pursue that. I hope that the Bill will open up a new area of co-operation between the DSS and local authorities.

As my hon. Friend said, the performance of local authorities is still extremely variable and needs to be improved. Some £1 billion of fraudulent claims—or 25 per cent. of all benefit fraud—is attributable to housing benefit or council tax benefit fraud, and therefore my right hon. Friend's creation of the benefits fraud inspectorate is especially welcome. Its role will be to help and improve the performance of the worst-performing councils and to advise on best practice. It will have a powerful role to play in the fight against fraud. I reiterate that it is vital that the inspectorate is set up in liaison with local authorities and that it is given powers to consider all the bodies involved in the fight against fraud, including the DSS and the various agencies within it, which already have an excellent record of combating fraud.

It is good news for local authorities that the Bill will give them the same powers as the Benefits Agency to enter business premises, including those of landlords, to inspect documents. We heard about that during my right hon. Friend's speech. There seems to be an anomaly in clause 10 in that if a private sector landlord works from both business and residential premises, inspectors will not be allowed to enter the residential premises. Many people, in all walks of life, take business home with them. On page 16, the Bill says: a private dwelling-house is not liable to inspection under this section unless an inspector has reasonable grounds for believing that a trade or business is being carried on from the dwelling-house and that the trade or business is not also being carried on from premises other than a dwelling-house. Many hon. Members take work home, and many of us work from home. If inspectors do not have the power to enter residential premises and business premises, fraudsters will simply take the relevant papers home with them and they will be lost. I should be grateful if my right hon. Friend would consider that potential loophole.

The Select Committee also recommends that the base line subsidy figures for local authorities should reflect the authorities' failure in combating fraud. I welcome the proposals in clause 9 to strengthen my right hon. Friend's powers to adjust housing benefit and council tax benefit subsidy. If an authority fails to reach the standards that he has directed them to attain, he may deduct some subsidy. Similarly, he may add to the subsidy of successfully performing authorities. That proposal is at the heart of improving the performance of poor authorities and rewarding good local authorities. I must tell the hon. Member for Peckham that it is a welcome response to one of the Select Committee's recommendations.

Another Select Committee recommendation, on the prosecution of fraudsters, has been included in the Bill. I refer to the proposed legislation covering impersonation and the sanctions and penalties that are available. I welcome the introduction of a new offence of dishonestly reporting or failing to report a change of circumstances, which will trap those who give false information or conceal information to get benefits. Quite rightly, they will be liable to a term in prison of up to seven years. The existing offence of obtaining benefit by false representation will be extended and it will become an offence for somebody to fail to report a change of circumstances, or to get somebody else to do so on their behalf.

Clause 13 provides for payment of a financial penalty, which makes a sensible civil alternative to prosecution. Where such cases are proved, the claimant will pay a penalty, as my right hon. Friend told us, at 30 per cent. of the overpayment.

I warmly welcome the proposals in clauses 18 and 19—again, they were recommended by the Select Committee—relating to the redirection of post. In future, local authorities will be able to ensure that post marked "do not redirect" will not be sent on. Similarly, the Post Office will be required to provide any information as needed relating to the redirection of benefit payment post. That proposal will greatly help the Benefits Agency and local authorities to trace and catch multiple applicants, and should prevent fraudsters from making claims from different addresses and then having the money sent on to them.

Perhaps the Select Committee's main disappointment will be the lack of specific measures in the Bill to combat organised landlord fraud, about which we heard a great deal during the debate. However, I acknowledge that plans for the fraud inspectorate are wide reaching and that it can pursue specific proposals to fight landlord fraud in conjunction, I hope, with local authorities. I hope that the inspectorate will have a wide enough brief to take on the issue of landlord fraud.

My right hon. and learned Friend the Chancellor of the Exchequer will present his Budget tomorrow. Whatever is contained in it, there is no doubt that social security fraud has reached a high level of public awareness and understanding, and that applies to hon. Members on both sides of the House. Nothing outrages the honest citizen or taxpayer more than the thought that he or she is being ripped off. We now know that the figures involved are considerable and we have to tackle the problem.

The hon. Member for Peckham was churlish in the extreme in her earlier remarks. The Bill is a natural progression of the Government's battle so far against social security fraud. I welcome the fact that my right hon. Friend has listened to what the Social Security Select Committee had to say, and I warmly support the Bill.

7.15 pm
Mr. Frank Field (Birkenhead)

As always in these debates, it is a pleasure to follow the hon. Member for Westbury (Mr. Faber). He was careful in the way in which he examined the Bill and he highlighted the aspects in which the Select Committee may have played some part, which I might have forgotten to do, so I am grateful to him. I shall address other issues.

The difference in the Secretary of State's speech today was noticeable, and it had two parts. He is very much at home with the subject, and in presenting an anti-fraud Bill, which, we are told, has considerable political popularity. I was struck at the somewhat down-key tone in which he presented the Bill. That became even more marked when he presented Labour's proposals. The whole debate changed gear. His tail was up and an interest became apparent that was not there when he was explaining the Bill to the House. I was puzzled by that.

Mr. Bernard Jenkin

The hon. Gentleman has often encouraged local authorities and others and, indeed, the Government, to come forward and celebrate the fact that they are discovering and uncovering fraud. Is it not crucial that we should not be ashamed of the fact that we find that things are not as well run as we had thought, because that shame inhibits the very process that we want these organisations to carry out?

Mr. Field

I could not agree more. For example, when my hon. Friend the Member for Vauxhall (Miss Hoey) reports to the House how effective Lambeth is becoming in tackling fraud, I deplore the jeering of Conservative Members, because she is admitting that we need honesty in the debate. We might exchange figures for the total of fraud, but the awful truth is that we do not know. As the Government introduce more measures, more gains are chalked out for taxpayers. We are certainly not in the stage that economists talk about—decreasing returns.

I shall present to the House what I consider to be the reasons for fraud, as we need different approaches to tackle the main groups that undertake fraud, and in so doing I know that the argument that I shall make will be crude, because a multiplicity of individuals are doing all sorts of things for different reasons. There are three themes among those who commit fraud. If taxpayers think that people adjusting their circumstances so that they can claim benefit fraudulently, not just behaving as rational economic men and women, is something new, they are wrong; that has been done since the creation of the welfare state. Lloyd George introduced means-tested pensions for the over-70s, in 1909–10, and we know, from looking at the censuses of 1901 and 1911, that the number who claimed to be over 70 rose by 84 per cent. People seeing an opportunity for fraud is not new. Politicians have underestimated the ingenuity of the human character in making the most of what is on offer. Fraud by individuals is not new.

However, certain fraud committed by individuals is new. That is partly due to the fact that welfare is increasingly means tested. Once people are claiming means-tested help, it is difficult for them to disengage themselves successfully by their own efforts. The Government are guilty of not knowing their history: the Victorians and Edwardians insisted that people should be prevented, at all costs, from falling on the Poor Law. Once they had claimed under the Poor Law, they could not fall any lower, and it was difficult to get them off the Poor Law. We have seen that happen with claims for means-tested assistance.

The age in which we live has had an effect, partly because of Government policy, but more importantly because of changes that have occurred worldwide. Hon. Members who represent poorer constituencies—as well as those who represent richer ones—have seen what has happened to the labour market, particularly in relation to the poorest paid. The jobs that they could at one time have expected have disappeared like snow disappears as the sun hits it. Many of them have scrambled around to find a new position in the labour market which is far less advantageous than the one that they previously held.

One reason for the increase in fraud is that people have been eager to prevent their fall in living standards from occurring too swiftly. They have sometimes claimed benefits to which they were not entitled, and sometimes claimed benefits to which they were no longer entitled when their circumstances changed, although they had originally been entitled to them. We must bear in mind the fact that some of our constituents have lived through an industrial revolution as great and as forceful as the agricultural revolution, during which many people were freed from the countryside, and were then pushed into the towns. For some of our constituents, the changes have been as dramatic as that first great change. That has been mitigated by the fact that we now, thank goodness, have a welfare state to prevent the destitution and worse suffered by some of our ancestors.

We should not underestimate how swift the changes have been, how great the drop in living standards has been and how tempting it must be for individuals, especially those with children, to try to slow down the fall in living standards that they would otherwise experience if they did not claim help.

Mr. Stern

I do not want the hon. Gentleman to think that I disagree with everything that he has just said, but it occurs to me that he may be dealing with the wrong problem. The Bill is not really designed to combat the small-scale fraud that he has described and into which he thinks people have been led. By and large, the people whom we are attacking in the Bill are not those who are trying to gain little on benefits—although they may be dragged into some of the frauds that we are dealing with—but those who are trying to obtain large sums. They are the real criminals, and they would not be in the position of those whom the hon. Gentleman has just described.

Mr. Field

I am usually—although not always—pleased to give way to the hon. Gentleman, and that is so tonight, because he makes the point that there is a third group of people who are serious about committing fraud against the social security system. Given human nature, we should not be too surprised by that. The Secretary of State is responsible for the largest Government Department—it is larger than most of his colleagues' Departments put together—so it would be amazing if no serious fraud were committed. We must be ever vigilant and, sadly, continually review ways to combat fraud. We must bring measures before the House for its approval to strengthen our fight against fraud.

The Bill comes into play when we consider that third group. It was difficult to understand the Secretary of State's low-key approach in his opening remarks compared with the fun that he had attacking Labour's supposed position on countering fraud. The hon. Member for Westbury expressed disappointment that the Bill does not contain a clause that deals specifically with landlord fraud. There is a struggle over the agenda on fraud. Naturally enough, the Opposition are concerned about organised fraud, whereas Conservative Members think that individual claimants are up to no good and should be walloped. In fact, both groups are committing fraud.

It is significant that the group highlighted in the report of the Select Committee on Social Security, although it may not account for most of the benefit fraud, clearly accounts for a large part of it. It is surprising that the Bill contains no specific recommendation on landlord fraud, although it involves fewer people. We may return to that when we take the Bill through Committee.

The absence of a clause dealing directly with landlord fraud leads us to consider the Government's attempt to create a public image that shows that they are getting on top of this small-scale stuff. I questioned the Secretary of State in the House about the fraud hotline. I had been given to believe that 90 per cent. of the information provided through the hotline was not useable, because the staff were not trained and many of them were temporary. The Secretary of State had not taken seriously the fact that such information could be valuable if only he would go a little further and provide decently trained staff to undertake that task.

That is not an isolated example. I read in a press release issued last week that the hon. Member for North Hertfordshire (Mr. Heald) is the fraud Minister. We should call him the anti-fraud Minister, not the fraud Minister. In the press release, the Minister tells us about a new initiative, and uses phrases such as "new tracing service", "important new weapon", and "rapid response arrangement". Anyone would think that we were getting ready to invade the Gulf. That new initiative is about the P46.

Mr. Lilley

It is very important.

Mr. Field

I agree with the Secretary of State that it is important. Employers have to complete a P46 when people turn up for employment without a P45. The initiative with its "new tracing service", "rapid response" and "important new weapon" is to ensure that employers send the P46 to the Benefits Agency. Neither the Bill nor the press release tells us about the staff who will follow up employers who do not do so. We do not have a problem with honest employers, because they already send in those forms. The problem is with employers who collude with claimants. They often suggest to claimants that they should accept the wages being offered and draw benefit at the same time. What measures are the Government taking to ensure that the "new tracing service", the "rapid response" and the "important new weapon" will have the resources to follow up employers?

Mr. Heald

The hon. Gentleman often talks about national insurance numbers. The point about the P46 tracing service is that, if an employee has no national insurance number, a P46 form must be filled out, and will immediately go through the system to the Department of Social Security. The hon. Gentleman also mentioned collusive employers. We have collusive employer teams throughout the country, and they are working actively with all the most modern surveillance techniques to catch employers who are behaving in that way.

Mr. Field

I am grateful to the Minister, particularly for that last sentence.

We ought not to overestimate what we can do in this place by proposing Bills that we hope will become Acts, although they clearly provide important frameworks. People must then implement what we have decided should be the law.

I do not want the debate to end without our complimenting the staff who perform their duties to combat fraud—a task which, I believe, will become more difficult and dangerous. Until now, people have not been as keen on tackling fraud as they should have been, and that has influenced the way in which they regard the staff who carry out those important functions. I support those who, on behalf of taxpayers, are trying to protect the public purse—people whom, in many instances, we should re-evaluate. I hope that we will do that before we hear too many stories about the physical danger to which they are already exposed, and will be exposed increasingly. If the Bill is as successful as the House hopes that it will be, many people who are taking large sums of public money when they ought not to be doing so will no longer be doing so, and I do not expect them to allow that money to go without a struggle.

7.31 pm
Mr. Bernard Jenkin (Colchester, North)

It is always a great pleasure to follow the hon. Member for Birkenhead (Mr. Field). I pay tribute to the work that he does on the Select Committee. He leads a very happy band of men and women, and inspires us all with his leadership. Although I have not had the benefit of having served on another Select Committee, I think that his is probably the best on which to serve.

We are, perhaps, blazing quite an innovative trail for a Select Committee, because we are not only scrutinising what the Executive does but playing an active part in the formation of policy—reflecting, perhaps, something of an emerging consensus among intelligent people in this place, and leaving aside some of the more tiresome party political prejudices that often do not do hon. Members as much credit as they think.

I welcome the Bill. It is an important contribution to the debate on this subject, and reflects very well on my right hon. Friend the Secretary of State. He has worked hard to change the culture surrounding social security fraud. The data-matching provisions are a sine qua non for proper policing of our benefits system; I hope that data matching will eventually lead to the establishment of a single on-line database for all social security benefits, because so many opportunities for fraud arise from the difficulty of reconciling the different bodies of information that are contained on different computer systems and relate to different benefits.

If only it were possible, with a single record of a national insurance number, to have a complete record of all the funds going in and out under that number, we should be much nearer to avoiding, for example, the absurd situation that allows someone who is contributing to a national insurance fund on his or her own number to find out—perhaps months later—that someone else is claiming on the same number. The inclusion of data-matching provisions will go a long way towards preventing future abuse of that kind; but, until we have a single on-line database making all the information relating to all the benefits and contributions of one individual available on one screen, it is difficult to see how it can be prevented—particularly when it is possible to match data only on the basis of intervals. It was nice to think that that would be done weekly, but I imagine that monthly, quarterly or even six-monthly will sometimes be the norm.

Mr. Stern

My hon. Friend has suggested a complete rounded record of ins and outs, but, in the context of the Bill and the prevention of fraud, what he is looking for—and what we hope to achieve—are data-matching provisions. Does he not fear, however, that the system that he is describing would impinge rather more on individual liberties?

Mr. Jenkin

That may well be a price that we must pay for allowing the state to tax us heavily and provide all these benefits. I shall deal with possible solutions later, but we already allow the state to have this information about us. It seems absurd that we should not allow the various organs of the state to share and develop the information effectively in order to protect taxpayers.

I am afraid that there is no substitute for the principle that those who are doing nothing wrong have nothing to fear. I appreciate that that is not a universal defence for state intrusion, but I think that in this instance it weighs pretty heavily, given that it is taxpayers' funds that are being abused, owing to our failure to use information effectively.

I welcome the inclusion of new offences in the Bill. I hope that the law will be strong enough against the multi-landlord fraud referred to by the hon. Member for Peckham (Ms Harman) and others. I appreciate the difficulties involved in creating new offences, and the difficulty of testing them in the courts to make them effective, and I understand that it is much easier to develop existing offences to ensure that people are caught; but I hope that that provision will be developed.

I also welcome the new powers for local authorities, which will enable them to exchange information and withhold benefit. I re-emphasise the importance of allowing those who give out benefits to withhold benefits. I even question whether we should continue to talk about welfare rights, rather than about the taxpayer's right to withhold benefit when there is doubt about whether a payment should be made.

Obviously, one objective of the benefits system must be to ensure that those who deserve help receive it, but too often the burden of proof required for the claiming of a benefit has been much less than the burden of proof needed to withhold it. That is an extraordinary state of affairs, which leads to much frustration when people do provide the authorities with evidence of potential benefit fraud, and then see that neighbours who they strongly believe are defrauding the system continue to benefit from their duplicity. I also welcome the introduction of a fraud inspectorate.

The whole Bill reflects a very positive change in the culture and outlook relating to benefit fraud. It is, I think, for us Conservatives to give at least two cheers for the Opposition parties, which for a long time tended to attack Conservative attempts to deal with benefit fraud, but which have now realised that, in order to sustain the integrity of the benefits system as a whole, it is necessary to restore the feeling among ordinary people—including ordinary taxpayers—that the system is not being taken for a ride. It is a little sad that the Opposition Front-Bench team are now perhaps over-egging the pudding, but if that serves to highlight the problem in the system and to continue to help changing the culture we will live with that.

In the next few years, there will be no substitute for fresh thinking on a complete change in the welfare structure, because fraud is encouraged by that very structure and by the way in which it affects people's work incentives and their outlook as they search for a job and try to climb out of the system. There is no resisting the conclusion that no amount of policing will make this a rational system of distributing help to poorer people.

We need a major change in the state benefit culture—for several reasons, not least cost. The benefit system takes nearly one third of total Government spending—it is not just the biggest programme in central Government, but the biggest programme by miles. My right hon. Friend the Secretary of State for Social Security quoted the cost as £15 per day per working person. When ordinary people are confronted with the scale of the cost in those terms, they are appalled, and it should appal us that the burden and cost of state welfare still do not create the happier and more contented society that we must have expected, or certainly that Beveridge must have expected if he ever thought that this much money would be spent on the welfare state.

If one programme has blown the Government's taxation policy off course, it would be the regular annual increases in the social security burden—the increases are far bigger in this Department than in any other Government Department. It should have dawned on Opposition Front Benchers by now that if, God forbid, they were ever to assume office, they would be confronted with the same problems, and that all their spending promises and tax-cut fiction would be quickly burnt before their eyes as they tried to contain social security costs

That means that we must consider three ways to start bringing down the cost of social security. The first involves savings for retirement. We must improve not only the incentives for saving for retirement, but the spread of savings for retirement. They must go beyond just retirement. We should encourage people to save, where they can save, for other eventualities, so that they do not, as a first recourse, fall back on the taxpayer.

Secondly, out of those savings, we should encourage people to take out much more private insurance for disability and for unemployment. Those should not be regarded as avant garde, off-the-wall ideas of some mad think tank. Those are the ways in which other societies are managing their welfare systems.

We should be able to learn from them to reproduce the same benefits, because, until we can encourage and enable people to self-provide such benefits much more for themselves and for their families, we will never be able to deal with the tax and benefits trap that so undermines the labour market's efficiency and ordinary people's ability to provide for themselves and their families in a dignified way, as we would hope.

Finally, we need to change the whole culture of giving out benefit. It should not be a simple financial transaction that absolves the taxpayer and the Government of any further action. In reference to other legislation and measures that the Government have introduced, the workfare experiment is exactly the sort of active help and responsibility that should accompany financial assistance to the least well-off.

It is not good enough for ordinary taxpayers to pay tax, knowing that the Government hand it over to poor people, and to say, "That absolves us of all responsibility of any other help that we might need to give those people." It is incumbent on the system to provide active and intelligent encouragement, so that the receipt of benefit is accompanied by some compulsion on the individuals concerned to show that they are prepared eventually to help themselves.

Mr. Frank Field

It is a matter not just of what is good for taxpayers: it is proper for the people themselves. For example, many of our constituents want to join job clubs immediately to help them get back to work, but the rules prevent them from doing so until they have been unemployed for six months. We know that, with every week that goes by, it becomes more difficult to re-enter the labour market, so it is not a matter of taxpayers ganging up on claimants. This policy is in the best interests of claimants, many of whom want it advanced.

Mr. Jenkin

If the hon. Gentleman studies Hansard, he will find that I more or less made that point just before he intervened.

Mr. Field

The hon. Gentleman does not have to admit that, if he changes Hansard.

Mr. Jenkin

I am shocked that the hon. Gentleman should suggest that I should commit such a fraud on the House. I am gratified to see that he is jesting, and I accept his unreserved apology.

For all hon. Members and all taxpayers who contribute to the system, perhaps the most sobering thought is that this massive expense fails the recipients so miserably, as the hon. Member for Birkenhead has described. Instead of being the help and salvation that we want welfare to be, it remains a dead weight and a disincentive for the vast majority of people, whose good qualities we know.

7.47 pm
Ms Liz Lynne (Rochdale)

We must remember that social security fraud is not a victimless crime. Someone else has to pay for it—the taxpayer—so any clampdown on benefit fraud is welcome. We must, however, have safeguards.

As we all know, fraud is a widespread criminal activity. It is estimated that, this year alone, £4 billion has gone on benefit fraud and that only £1 billion of that is detected, so, each year, £3 billion goes undetected. The Government are now tackling benefit fraud, which I welcome, but, in part, they were responsible for its increase, particularly because of the cut in home visits. In 1979–80, there were 6.5 million home visits. In 1994–95, that went down to less than half a million, so it is hardly surprising that, as home visits went down, benefit fraud went up, or that many people were fiddling the system.

Most of the specific provisions in the Bill are sensible, modest and much needed. Clause 6, for instance, gives the Audit Commission powers to help the Secretary of State for Social Security in studies to improve the administration of housing and council tax benefits. That will be of tremendous help to local authorities in particular.

Local authorities have differing rates of success in tackling housing benefit fraud. The unit for the study of white collar crime said—I would like to blow the Liberal Democrat's trumpet about it—that Liberal Democrat local authorities have the best record of tackling housing benefit crime. Perhaps that is because we have had investigators in place for a little longer than some other authorities. We have to improve on that record, even though it is extremely good at the moment.

Mr. Bernard Jenkin

I do not want to spoil the hon. Lady's fun, but in Colchester the Liberal Democrat authority was recently highlighted as having lost about £500,000 on housing benefit fraud. I know that it is now taking that very seriously, but I do not think that the Liberal Democrats have a universally unblemished record on the matter.

Ms Lynne

I am not saying that we have an unblemished record, but, according to the unit for the study of white-collar crime for the Liverpool business school at Liverpool John Moores university, we have a better record than Conservative or Labour-controlled councils. If the hon. Gentleman would like to see a copy of the report, I would be very glad to give him one. I do not believe that any local authority has an unblemished record; all local authorities could do better. All I am pointing out is that Liberal Democrats have quite a good record because of the investigators who are already in place. Of course, we have to build on that success.

One of the Bill's main aspects is the lifting of barriers between Departments so that information can be shared, which I welcome. Data-matching can be highly effective. I also believe that caution is needed to prevent the misuse of confidential information. There ought to be more liaison between Departments. I asked the Home Office not so long ago for statistics on prosecution for organised housing benefit fraud, but it had none. Departments should take a leaf out of their own books and carry on from the Bill, to establish some real liaison and find out how many prosecutions for organised crime are occurring, particularly for housing benefit.

Another part of the Bill gives local authorities and the Department of Social Security access to the Post Office database for redirection of mail. The assistant registrar to the Data Protection Registrar expressed concern about that, saying that, unless data matching techniques were supported by skilled human intervention and adequate safeguards, there could be problems. It may create serious adverse consequences, he said.

I should like to give the House an example of the possible problems. I hope that the Minister will give a reassurance on safeguards in his winding-up speech. Say, for instance, that a husband is working in a DSS department and the wife has been the victim of domestic abuse by the husband. She moves and has her mail redirected. We need to ensure that there are safeguards to prevent the husband from being able to tap into that information for purely personal reasons and find out where his ex-wife has moved to.

I should like some reassurance from the Minister that that cannot happen, and that, if it does, there will be safeguards or rules to ensure double checking within Departments on why the person needs the information.

So many other problems could arise. People could misuse information for criminal activity. We need to ensure that Departments and people who work in them do not tap into the database to get information to sell on. I know that some Departments have been worrying about that already. When the Bill is passed, as it undoubtedly will be, we need to know that there will be safeguards against such activity.

The point made by the hon. Member for Peckham (Ms Harman) has been raised by Age Concern in particular. If data matching can be used to check fraud, why can it not also be used to ensure that people, especially pensioners, receive the entitlements that they should receive? There should be a benefit take-up campaign at the same time. More than 1 million pensioners are not getting the income support or income-related benefit to which they are entitled. If they do not receive income support, they cannot receive cold weather payments either. About £1 billion goes unclaimed. Given what is already in the Bill, the Government could act to include such a measure in its remit.

When I asked the Under-Secretary about the take-up during Social Security questions, I was very disappointed with the reply. He said: No other strategy would work better than what we are doing."—[Official Report, 12 November 1996; Vol. 285, c. 146.] When £1 billion is not being claimed, I do not honestly believe that the strategy is really working. All parties must address the problem, and the Government must address it through a take-up campaign. I believe that measures to solve the problem can be encompassed in the Bill's remit, despite whatever European directives or the European Commission of Human Rights might say.

Mr. Heald

How does the hon. Lady think that the data matching process she suggests could identify pensioners who are entitled to income support but do not claim it?

Ms Lynne

If one is data matching, one has records of people's pension entitlements. Surely the information about the entitlement to income support of women who reach the age of 60 and men who reach 65 can be data-matched.

Mr. Heald

I am asking how we would know. Clearly we know who the pensioners are and who is entitled to a retirement pension. We also know various other classes of information, but none of them will tell us that somebody was entitled to income support.

Ms Lynne

The Minister is saying that we cannot use data matching for anything but benefit fraud. I do not understand his argument. If we can use it for detecting benefit fraud, it can surely be used to find out which pensioners are entitled to income support. I know that it will be difficult to trawl through the system, but I am sure that, with all the resources at their disposal, the Government can come up with some positive proposals.

If the Government cannot do so in order that the problem can be solved in the Bill, perhaps the Minister can come forward with some idea of what take-up campaign he will put in place. There is no point in dismissing the matter out of hand. Many pensioners are not getting the income-related benefits or the cold-weather payments to which they are entitled. I am asking the Minister whether he thinks that such a measure could be included in the Bill. If he rules it out, fine, but he must at least admit that some take-up campaign must take place.

Mr. Stern

The hon. Lady is placing far too great a reliance on data matching, and making the same mistake as the hon. Member for Peckham (Ms Harman). A typical pensioner could be receiving a state pension and a small occupational pension from a totally different source, and possibly have some savings income from the National Savings bank. No data matching system will bring that information together, because most of it is not declarable.

Ms Lynne

The hon. Gentleman says that it is not possible to data-match in the Bill as I have suggested, and that data matching will not work. Does he therefore agree with me and other hon. Members that some take-up campaign is necessary? If the objective cannot be achieved through data matching, it has to be achieved in some way. I thought that there might be a possibility of achieving it in the Bill. If the hon. Gentleman and the Minister rule it out completely, what other suggestions do they have for a take-up campaign?

Mr. Stern

I am grateful to have the opportunity to answer the hon. Lady. I agree that Governments must continually look at take-up campaigns. All I am trying to prove to her—she seems to have conceded the point—is that they are totally irrelevant to the Bill.

Ms Lynne

With respect, I have not conceded the point. I asked the Minister: since it is possible to detect benefit fraud, might it not be possible to give pensioners the benefits to which they are entitled? I still believe that it should be looked into further, and I do not rule out the possibility that we could do it. Technology is moving on. If it is not possible to do it within the remit of the Bill, we must have a take-up campaign, and the Government should commit themselves to that. I would be grateful if, when the Minister winds up, he will say that the Government will initiate a take-up campaign for pensioners.

Clause 12 will extend the powers to cut off benefit for false representation and for change of circumstances. If somebody stops somebody else declaring a change in circumstances, he or she can be prosecuted. It is the right step to widen that offence, but we need a clear definition in the Bill. It is too loose and the citizens advice bureaux are worried about that. They fear that they might be threatened with prosecution if they advise somebody not to declare a change of circumstances because they feel it is not relevant. Could they be prosecuted? I would like the Minister to confirm or deny that.

Clause 14 specifically deals with overpayment for one tenant that can be recovered from the payment for another tenant. In other words, if a landlord has been overpaid because one tenant has moved on, the agency can claim that money back by not giving as much money for the next tenant. I should like some assurances from the Minister that that provision will not, in his opinion, lead to more evictions. My fear is that the landlord, if he was not getting money for a particular tenant, might decide to evict that tenant. We should have more safeguards on that situation.

I give the Bill cautious support. We will have to see how it pans out in Committee, and also when it comes back to the Floor of the House. When we go through those stages, it is vital that we ensure that genuine claimants are not penalised. I have some real fears that must be addressed during the passage of the Bill, but I repeat my cautious support.

8.1 pm

Mr. Michael Stern (Bristol, North-West)

We have heard several distinguished contributions to the debate from members of the Select Committee on Social Security and I am grateful for those. I come to the debate from a slightly different perspective. The Social Security Select Committee has been considering one aspect of benefit fraud, but as a member of the Public Accounts Committee, I have considered the problem because the remit of that Committee to ensure value for money in the collection and distribution of Government revenue is most obviously breached in areas such as social security fraud. Rather than adopt a benefit-led approach to the debate, I shall concentrate on areas in which I believe that the aim of the Bill needs to be considered, either in this debate or at later stages.

Much has been said today about the data-matching provisions and the access to data, which the Bill provides in the form of additional powers for the Secretary of State for Social Security. I confess to one or two doubts in that area, not because I believe that the powers are unnecessary—they clearly are not—but because I wonder whether they are workable or go far enough. The Bill is specific about empowering the Secretary of State to obtain data from the Inland Revenue and Customs and Excise, but that would require some very powerful data-matching tools. Social security benefit data are sorted by address of claimant. Inland Revenue data, by and large, are sorted by address of employer. Therefore, within one street one would have to match the records for 20 or 30 different districts of the Inland Revenue. Customs and Excise data are sorted by point of entry. Duties are, of course, collected and paid at point of entry, but various excise data are collected by business and are not necessarily related to the individuals to whom one wishes to match the data. An extremely powerful computer system will be needed to fulfil the requirements of the Bill. I wonder whether EDS Scicon, which automatically gets all Government computer contracts these days, will be able to deliver on the promises that the Bill makes.

The Bill also does not deal with two further data matching problems. Two Government agencies—Inland Revenue and Customs and Excise—are specifically mentioned. One that I would have thought would have been particularly appropriate—the Child Support Agency—is not mentioned. I accept that any data coming from the CSA are likely to be somewhat out of date and probably inaccurate, but I would have thought that it was a potential source of data for the purposes of the Bill, both for what has been reported by one parent—whether the absent parent or the parent with care—and for what that parent has reported about the other. All hon. Members present will be aware of the day-to-day experience in our surgeries when a parent comes in to complain about the work of the CSA—it is the second most common complaint I get—and tells us as much about the parent who is not there as about the one who is. Whatever inaccuracies are involved, there must be some way to feed that data into the system. I suspect that a number of potential frauds would be uncovered as a result.

It is assumed that when data are collected, especially from the Inland Revenue and to a lesser extent from Customs and Excise, it will be linkable with the national insurance number of the claimant. I must inform my hon. Friend the Minister that that is not necessarily the case. There is a significant minority of taxpayers for whom the Inland Revenue, even now, does not possess a national insurance number. National insurance numbers given to employers are not necessarily often immediately checkable, and by the time the check has been made the employee may have moved on. I would commend for future development to my hon. Friend the Minister the system adopted for VAT numbers. Any taxpayer receiving a VAT number can, by operating a simple arithmetical check, determine whether the number is potentially genuine or false. Future national insurance numbers should be constructed on the same basis.

In an earlier intervention, I said that I would return to the question of the penalty system and the system of prosecution. I strongly congratulate my right hon. Friend the Secretary of State and my hon. Friend the Minister on importing a penalty system in mitigation of prosecution into the social security fraud prevention system. That system has worked well for Customs and Excise and for the Inland Revenue and I have no doubt that it will significantly increase the financial benefits of the detection of benefit fraud. However, I chide my hon. Friend the Minister for not having taken the system over well enough. The provisions in the Bill provide that a person who wishes to avoid prosecution will be entitled to offer to repay the overpaid benefit plus a penalty of 30 per cent. That will be a fixed penalty, but my hon. Friend the Minister has confirmed that the wording in the notes on clauses is somewhat loose and it will not be a mitigable penalty.

In contrast, the system adopted by the Inland Revenue in cases of fraud starts with a potential penalty of 100 per cent. of the amount defrauded. However, the Revenue is then able to mitigate the penalty to take into account the degree of co-operation shown by the person accused, the seriousness of the fraud and the extent to which the disclosure of the fraud was voluntary. The result is that the Revenue makes a great deal of money by collecting penalties for fraud. Without similar powers—possibly starting with a higher penalty base—I fear that my right hon. and hon. Friends will not be as successful as the Inland Revenue in discouraging fraud. Before any Inland Revenue penalty comes into effect, the fraudulent taxpayer is obliged not only to repay the tax, but to pay interest on the tax defrauded. In itself, that sum cannot be mitigated and is often a considerable percentage of the tax defrauded—often rising as high as 100 per cent. of the tax repayable.

Customs and Excise—according to traditions which go back centuries—adopt a rather more brutal approach to the collection of fraud penalties. The first thing that happens in a case of duty or excise fraud is the confiscation of the goods, so we are talking immediately about a penalty that often can be 200 or 300 per cent. of the amount of the fraud—and that is just for starters. As I have seen in my local customs house in Avonmouth, that system encourages people to own up. However, I am not sure that the Bill's provisions will be enough to encourage a significant increase in the collection of voluntary, admitted or co-operative payments of fraud penalties.

I am particularly concerned by the alternatives offered in the Bill. If an offer of penalty is made—or, once made, is withdrawn within 28 days—the alternative facing the potentially fraudulent benefit recipient is prosecution. If he is found guilty, the penalty is a maximum of seven years—or 70 per cent. of the penalty for touching an unlicensed gun. Nevertheless, that is the penalty for someone who is found guilty. Where the Bill parts from reality is in the assumption that a significant proportion of serious fraudsters are likely to be found guilty when prosecuted for fraud in this country. Experience has shown us that that is just not the case.

The chanciest area in terms of prosecution and in terms of someone being found guilty and given a significant penalty is in fraud. Our system just does not work—although it does make sure that there is a large legal aid bill. In looking in Committee at the penalty system—which is designed to recover money for the taxpayer—I hope that a greater emphasis will be placed on providing fraudsters with the certainty of a financial penalty, rather than the odds-on chance of escaping following prosecution.

I wish to refer to an area of housing benefit fraud where the combination of the Bill and the valuable work of the Select Committee on Social Security does not necessarily lead to a just result for the taxpayer. Mention is made in the list of types of fraud that are to be tackled by the Bill of fraud involving housing benefit where the landlord is a relative of the tenant, and I wish to express a word of caution at this point. The way in which such provisions are currently operated—particularly by local authorities—results in there being almost an assumption of fraud where a landlord and tenant are related.

I have heard many cases where a person has made a perfectly legitimate arrangement with a relative for the occupation of a property which takes account of the desire of a person to help a relative, and it is that expressed desire—perhaps the charging of a lower rent—that gives rise to the suspicion of fraud. We must make sure that the public purse is protected when framing law in this area, but also that there is not an assumption that there is something basically wrong with a practice that would be regarded by people in many other countries as a normal family arrangement.

Another area where benefit fraud is suspected—as has been mentioned in the accompanying literature—is in the right-to-buy scheme where a person who is not the occupier acquires the right to buy. However, I am concerned that we sometimes use this provision in the wrong way. In my constituency, there is a house known as "The Fortress" in Trowbridge road, Southmead. It is called that because of the defences that surround it. Very often, the only time people go in or out is when they are carted off in the proverbial black Maria. Bristol city council—in a laudable effort to try to disadvantage these people financially—tried to block their right to buy, but it was unsuccessful. I believe that it used the wrong provisions, and that the provisions for the removal of assets from ill gotten gains would have been more appropriate. The point that I am trying to make is that when we are designing fraud provisions in the Bill which affect benefits and the right to buy, we must be careful that these are not applied in entirely the wrong way.

I welcome the provisions in clause 15 for the periodic Benefits Agency-directed review of benefits such as disability living allowance, disability working allowance and attendance allowance. I recollect with horror when I was first elected to the House taking up a complaint on behalf of a group of constituents about one of their neighbours who was obviously claiming one such benefit on a totally fraudulent basis. As no such power to deal with him existed at that time, it took two years for that benefit to be reviewed and then automatically removed from the individual concerned. We have needed these powers for some time, and I am delighted that they are in the Bill.

Finally, there are a number of areas in the administration of housing benefit where there is an automatic assumption on the Conservative Benches that such administration will lead to fraud if it is in the hands of local authorities. As we heard from the hon. Member for Peckham (Ms Harman), there is an automatic assumption on the Opposition Benches that such benefit is likely to lead to fraud if it is in the hands of private landlords. We must be wary of falling into such obvious traps. The longest-running case of housing benefit fraud in my constituency—currently in its second year with the Parliamentary Commissioner—involves an alleged mistake by the Benefits Agency rather than by the local authority, despite the fact that there was an initial assumption that the local authority was at fault.

We have great deal of work to do on the Bill and, if nominated to serve on the Standing Committee, I look forward to helping my hon. Friend the Minister to achieve what could be a significant improvement in the take-up of public funds from the correction of the frauds that we have been discussing.

8.18 pm
Mr. Alan Howarth (Stratford-on-Avon)

I am glad to follow the hon. Member for Bristol, North-West (Mr. Stern), whose speech was thoughtful and expert. If we should both find ourselves serving on the Standing Committee, we might disagree on some points, but I suspect that we would also be in some agreement and I am certain that he would play a valuable part in refining the legislation.

We are all against fraud and while substantial criticisms should be made of elements of the Government's approach, I welcome much in it. In voicing some criticisms, I hope that I shall not be interpreted as seeking to undermine a proper determination on the part of the Government to eradicate fraud, using appropriate means.

It is in the nature of fraud that it is impossible to know its extent. We should not underestimate it, but we should also not overestimate it. The Department's review of income support and unemployment benefit, published last year, told us that up to 10 per cent. of income support claims were fraudulent, but that figure included cases in which there was insufficient evidence to prove that fraud had occurred. One of four categories of suspected fraud is when a change of circumstances has been reported belatedly and overpayment has resulted. It is cynical to assume that there has been an intention to defraud in every case when a change has been reported.

Similarly, in a paper on fraud associated with invalid carer's allowance, circulated to the Select Committee on Social Security, the categories of suspected and confirmed fraud were conflated to give a combined figure of 6.5 per cent. Official identification of fraud is cast into further doubt as the Department gives local authorities a financial incentive to classify housing benefit overpayments as fraudulent by offering a 95 per cent. subsidy where they detect fraud, but only 25 per cent. where overpayment is attributed to error by the claimant. While we must certainly be resolute in tracking down and dealing with real fraud, I must point out to Ministers as well as to members of the Select Committee that there is no virtue in overstating the problem—indeed, it is demoralising to do so.

In framing the Bill, Ministers appear to have assumed that all overpayments are likely to be the result of fraud. In reality, misrepresentation may be accidental and innocent in intent. The scope, not only for fraud but for innocent error, grows with the complexity of benefit rules. As the Department pointed out to the Select Committee, the scope for fraud in relation to child benefit is not large because the conditions for entitlement are simple.

With housing benefit, the situation is different. We all agree that housing benefit fraud is a major problem. Among the ways in which the Government should reduce it is by simplifying the conditions of entitlement as far as they can, which would help to reduce both fraud and error. The fact that innocent error is also a significant factor in incorrect payments is shown in another Department of Social Security research report—No. 43—which found that four fifths of housing benefit claimants with non-dependent deductions did not understand the thresholds for different levels of deduction. The House must be concerned at the potentially arbitrary powers that the Government are asking Parliament to confer on them. Clause 13 provides for a penalty or fine of 30 per cent. of an overpayment to be levied when the Secretary of State or a local authority believes that there is a prima facie case of fraud and that there are grounds for prosecution. I do not like to see such summary powers vested in officials. It is inevitable that over-zealous or bullying officials or agents will from time to time abuse them, particularly if they are incentivised to do so.

Nor am I happy with clause 15, which allows a review to be initiated of a decision relating to attendance allowance, disability living allowance or disability working allowance, even if no new information has come to light. Fishing trips, with unannounced visits, would be permitted under that provision to investigate and interrogate disabled people.

Mr. Heald

I must question the hon. Gentleman's view of clause 13. The payment of a penalty is entirely voluntary as far as benefit claimants are concerned. If the claimant wishes to accept a penalty, he may. Otherwise, it is entirely up to the Department whether to prosecute him. The claimant is not forced to pay the penalty.

Mr. Howarth

I accept that the option is proposed in the clause, but none the less considerable pressure will be put on a claimant who finds himself so suspected to settle for that payment rather than face the prosecution processes. One has to understand that although some sophisticated and ingenious fraudsters are exploiting the system, there are also some vulnerable people who are genuinely confused and who may panic if they are confronted with the sort of choice that the Minister envisages. That needs careful thought.

However serious the problem of landlord fraud, we must think carefully before approving the power proposed in clause 14 to recover overpayments made to a landlord in respect of one tenant by deductions from the housing benefit paid in respect of another. That could lead to the harassment of tenants and to homelessness.

There is a further hazard to civil liberties, and to privacy in particular, in this legislation. I refer to the powers that would be conferred through clauses 1, 2 and 3 to enable information held about individuals by the Inland Revenue, Customs and Excise and civil servants dealing with passports, immigration, emigration, nationality, prisoners and any other matter which is prescribed to be transferred and disclosed to the DSS. Clauses 3 and 4 extend the provisions to local authorities and their contractors, who are also enabled to exchange information between them.

There is a dilemma here for all of us. On the one hand, it is in the public interest to use the resources of information technology to defeat fraud. It may, indeed, be indispensable to do so if we are to defeat certain sorts of organised social security fraud. On the other hand, it is a cardinal duty of Parliament to safeguard the liberties of the people, including the right to privacy, which, though not yet expressly safeguarded in our law, has been regarded by custom and convention as a basic right and which we should protect. Ministers are advancing into new territory in the Bill and they are pushing their invasion boldly and far. The European convention on automatic data processing of 1981 set out the principle that data collected for one purpose should not be used for another. That was written into the Data Protection Act 1984 as the third data protection principle, which states that personal data held for any purpose shall not be used or disclosed in any manner incompatible with that purpose. Now under this Bill information gathered elsewhere and for other purposes is to be available for preventing, detecting, investigating and prosecuting offences relating to social security and for maintaining and improving the accuracy of social security information. The House should note that the prescribed purpose is not confined to dealing with fraud, but extends to making more comprehensive the state's dossiers of information about citizens. We should also note that it is not merely civil servants and local government officers—people we are still disposed to assume are imbued with a public service ethos that will not allow them to commit impropriety—who may receive and disclose such previously confidential information, but employees of private firms contracted by public authorities to carry out tasks for limited periods.

I am indebted to Liberty, with whom I have discussed the issue, for drawing to my attention remarks made by the Data Protection Registrar, commenting on the increased collection and transfer of information between Government Departments. She has warned of the dangers in those developments for the use of information out of context to the detriment of individuals; for the wide replication of errors; for unjust decisions taken about individuals simply on the basis of a 'profile' which causes them to fall into a group with certain selected characteristics; for automatic decision-making based on facts of doubtful completeness, accuracy or relevance; for the surveillance of individuals. They intensify"— she said— the need to keep data secure. Lord Browne-Wilkinson, one of our most respected Law Lords, has observed: If the information obtained by the police, the Inland Revenue, the social security offices, the health service and other agencies were to be gathered together in one file, the freedom of the individual would be gravely at risk. The dossier of private information is the badge of the totalitarian state. I worry, therefore, about legislating to allow the Government or their agents to trawl through the files on each of us that are held across Departments and to collate that information. If we are to do so, we had better at least circumscribe carefully the conditions in which such activity shall be permissible.

One safeguard should be that those wanting to undertake such a search should have to establish a prima facie case for doing so, and that a court order or warrant should be obtained when such a power is to be exercised. I recognise that such requirements would inhibit wholesale data matching; but we are talking of the use of powers closely analogous to stop and search powers, which the Home Secretary, to the anxiety of many of us, is currently proposing to extend in legislation on knives—and even he stops short of wholesale licence to the police to stop and search.

A distinguishing factor in the Bill, and an additional objection, is that the citizen would not automatically know about the search into his affairs. It may also therefore be appropriate for the person who is the subject of such a search to be informed that it is to be undertaken, what its findings have been and to whom they have been passed. There should surely be provision for complaints to be heard and for redress for any citizen who is the victim of error or injustice under procedures made legal in the Bill. There should also, I would think, be powers for the Data Protection Registrar to investigate and audit those procedures.

I am naturally disposed to defer to the legal knowledge of my hon. Friend the Member for Peckham (Ms Harman) , but I am advised that it is questionable whether the proposals in the Bill are compatible with the European convention on human rights, to which Britain is a signatory and which the Labour party wants to be incorporated into our domestic law. The issue before us shows both the need for a domestic bill of rights and the difficulty of framing it so that it protects privacy but allows for adequate policing in the information technology age.

We understand that the Government's concern is not only to root out fraud but to improve standards of administration and cut out waste of public funds. In that case, they must make a serious effort to improve the accuracy of the Benefits Agency. The agency's business plan for 1995–96 shows that targets for accuracy in benefits delivery have deteriorated; in effect, targets have been set to get more cases wrong.

In 1995–96, the target for income support claims was to pay the correct amount in 87 per cent. of cases, compared with 92 per cent. in the previous year; for incapacity benefit, the target was 94 per cent., compared with 96.5 per cent. Those less demanding targets for two major benefits were not in fact met; the figures achieved were only 78.1 per cent. for income support and 90.7 per cent. for incapacity benefit. On the face of it, that is thoroughly unsatisfactory.

Inefficient administration facilitates fraud. What proportion of benefit overpayments assumed by the Department to be fraud was in fact due to administrative error by the Benefits Agency? The chief adjudication officer, in his annual report for 1995–96, said: I find it particularly disappointing to record again poor standards of adjudication in overpayments cases. Last May, the Public Accounts Committee expressed its dismay at income support errors amounting to £848 million, or 5.1 per cent. It also found it unacceptable that 24,000 claimants entitled to aggregate payments of £90 million in severe disability premiums since 1988 had not received their benefit until 1994–95, some of them dying before they received arrears of as much as £12,500. Even after the errors were drawn to its attention, the Department took three years to put them right.

The Benefits Agency has cut its costs in areas such as home visits, which are a worthwhile investment, but in other areas its administrative costs remain disproportionately large. The £209 million spent on administration of the social fund is 46.3 per cent. of the outlay through the fund.

There are grounds for worry that contracting out may make the administration of benefits worse. Service standards should not be sacrificed to cost cutting. The precedent of the contracting of the Benefits Agency administration in Lancashire and Cumbria to BET, which was a shambles, is certainly disturbing. Parliament will need to scrutinise carefully the terms on which the Government propose to contract out the Benefits Agency medical service and indeed the administration of the entire Benefits Agency. Will fraud investigation itself be contracted out? If so, we shall need to be satisfied that appropriate safeguards are in place and to look closely at the basis of remuneration of fraud investigators.

The vigilance and energy directed to eliminating fraud and administrative slackness should equally be directed to improving legitimate take-up of benefit entitlements. The amount unclaimed in means-tested benefits alone has been estimated as up to £3.46 billion. We have recently learnt from a parliamentary answer that no less than 956,000 pensioners do not receive income support to which they are entitled.

Private sector housing benefit fraud has to be attacked, but let us also respond to the fact that there is a lower take-up of housing and council tax benefit among private tenants than among council tenants. Four out of 10 eligible couples were estimated not to be claiming family credit worth £270 million in 1994–95, and the figures are even worse for disability working allowance: the Department's new research report, No. 54, estimates that only one in five of those eligible were claiming it. If we are to have data matching, I hope that Ministers will consider seriously and constructively the Opposition parties' proposals to try to use it to improve take-up.

The Secretary of State should take great care to ensure that his strategy to counter fraud does not deter genuine but unconfident claimants from taking up benefit. He should balance his drive against fraud with a positive drive to improve legitimate take-up, but to judge by his decision to abolish the benefits help line at the same time as introducing the fraud hot line, he is unlikely to do so.

The Secretary of State should not allow his drive against fraud to discourage people from combining work with benefit to the extent to which they are entitled. At present, few people are recorded as using their entitlement to claim benefit while working up to 16 hours. I was informed in answer to a parliamentary question that only 4 per cent. of unemployment benefit claimants had earnings last February. The problem is that few people understand the complexities of the rules. Without the help line, they are less likely to find out the facts, and in an atmosphere of more severe policing of the benefits system they will be further discouraged.

The new regulations on the computation of earnings, operational from today even though Parliament has not yet debated or approved them—but that is a separate complaint—are yet another set of changes for claimants to grapple with, and in significant respects will discourage carers from working, yet presumably we all agree that the bridges linking welfare to work need to be well signposted, unobstructed and, indeed, made more numerous and accessible.

I support the essential purpose of the Bill to strengthen the Government's capacity to root out fraud, but I want it to be amended to protect citizens from the arbitrary exercise of power by the state and to safeguard due privacy. I want to see the campaign against fraud matched with better efforts to cut out other waste in social security administration and to ensure that people receive the benefits to which they are entitled.

The Bill is important and if the legislation is framed appropriately and implemented in the right spirit it could do much to rebuild confidence in the welfare state. If it becomes law in its present form, however, and if the emphasis on fraud drowns out balancing considerations, morale among claimants and those who serve them will fall yet further.

8.37 pm
Mr. Nigel Evans (Ribble Valley)

It is appropriate that I should follow the hon. Member for Stratford-on-Avon (Mr. Howarth) on the subject of fraud: 22,892 people—his majority at the general election—in his constituency must be wondering exactly what happened.

The hon. Member for Peckham (Ms Harman) implied that we had said that anyone claiming benefit or income support was a sponger. That is not the case at all. The social security budget is about £97 billion, and fraud is estimated at about £3 billion. The vast majority of people claiming social security are not spongers; they are entitled to the money and we would be extremely pleased if there were greater take-up.

The hon. Lady mentioned pensioners. I would be delighted if more pensioners who were entitled to income support took it up, although I cannot for the life of me understand how the data-matching system to which she referred could match those who were entitled to that support if they were not already claiming it.

That does not mean that we should not look at other ways of ensuring that pensioners who are entitled to benefits get them. I do not think, however, that any greater fraud was perpetrated on pensioners than when their Christmas bonus was stopped twice by the last Labour Government, when inflation reached 27 per cent., and averaged more than 15 per cent. That inflation rate robbed a number of pensioners of half their savings. That is what I call real fraud.

We all believe that it is necessary to crack down on benefit fraud. It is an integral part of the Government's strategy to provide opportunity for all. It is the hard working classes who most support the Government's efforts. One need only visit the local pub to discover how angry the regulars feel when they read in the newspapers of someone who has been convicted of a fraud that has been allowed to go on for so long. They are delighted when such people are caught. They resent the fraudsters who rip the system off and often earn more than honest hard-working people. Such fraudsters are taking money from those who need it most, at the expense of the taxpayer and of those who should be receiving that benefit.

As I said when I intervened on the hon. Member for Peckham, the Government already have an excellent record on fraud detection. In 1995–96, we detected £1.44 billion of fraud and next year we expect to save more than £1.8 billion. We will not be complacent about even that figure and we will encourage our local authorities to achieve an even higher savings.

When I heard Labour Members say that they, too, wanted a greater crackdown on fraud, I remembered serving on the Standing Committee on the Asylum and Immigration Bill. I do not remember that the Opposition gave the sort of support that they should have offered when we cracked down on bogus asylum seekers who come here and claim benefit. We were opposed by the Labour party when we made £200 million savings from those bogus asylum seekers.

The background to the Bill has been well researched and the measures that it aims to put in place will take the fight to the fraudsters. More than 18 months ago, the Government conducted benefit reviews—detailed surveys of representative samples of claims for the main benefits—whereby investigators identified fraudulent or erroneous claims in depth. So far, income support claims and housing benefit claims have been reviewed.

The work of Preston and Ribble Valley borough councils reveals what action has been taken as a result of those reviews. Only 15 per cent. of all benefit spending is devoted to housing benefit and council tax benefit, but those benefits account for 25 per cent. of benefit fraud. Local authorities are responsible for the delivery of both benefits. Housing benefit accounts for almost £1 billion of fraud, including about £150 million of fraud by landlords.

Ribble Valley borough council is doing extremely well in the fight against fraud. It was set a baseline saving target on weekly benefit fraud of £37,427. That target has been exceeded and weekly benefit savings of £40,999 are being achieved. It has detected 53 cases of proven fraud—10 false rent rebate claims, 20 false rental allowance claims and 23 false council tax benefit claims. That is the small number of fraudulent claims that one would expect in a mainly rural area with a total case load of 3,887, of which 773 are local authority tenants, 679 private tenants and 2,405 are council tax benefit claimants.

In Preston borough council's area, which covers part of my constituency, there were 950 proven fraud cases from a current total of 17,538 cases. In week 34 of the financial year, and given the baseline target saving of £320,245, it has reached a target saving of £900,000, or £26,470 a week, with a projected final figure of £1.4 million.

One aspect of the housing benefit review that I support is the unannounced visit of fraud officers from 52 local authorities to nearly 5,000 representative claimants. Those visits have been very successful in Preston and no doubt they have helped the authority to achieve its fraud-busting figures. I particularly welcome clause 9, which strengthens the Secretary of State's powers to adjust housing benefit subsidy and council tax benefit subsidy or add to the subsidy depending on an authority's success in preventing and detecting fraud.

The hon. Member for Birkenhead (Mr. Field) referred to Benefits Agency employees who visit people in their homes to investigate fraud. I visited the local Benefits Agency office at Preston a year ago and I was impressed by the dedication, skill and enterprise of the workers who have to detect fraud. I imagine that the dangers that they face may get worse as their case load grows. I hope that we will ensure that they not only receive the proper training that they deserve to foresee all the dangers that they may meet, but have full protection and backing from the Government to ensure that those dangers are lessened. Particular attention must be paid to the training of the women who work in the service so that they can protect themselves; perhaps they should not even turn up at some houses alone.

It is important to combat benefit fraud and control the social security budget, which stands at £97 billion. That is equivalent to £15 in tax from every working person every working day. It is a massive bill and we must ensure that everything is done to curb it without affecting those who need the money. The overall effect of the Government's social security reforms announced today will be a saving of £5 billion a year by the end of the century, and the figure is set to rise to £15 billion a year in the long term. The drive to contain benefit fraud is at the heart of that effort.

My right hon. Friend the Secretary of State has put in place an organisational structure dedicated to tackling fraud. The fraud strategy group has been established to co-ordinate anti-fraud work across the Department of Social Security and its agencies and a senior official has been appointed to develop its strategy. Dedicated local fraud teams have been established, which has stopped staff being diverted from the fight against fraud to other work. That has enabled them to build up the necessary expertise, which is crucial and right given the pressures of work that they will face. A central computer system has been piloted to cross-check multiple housing benefit claims. Initially, that system covered 24 London boroughs and I hope that it will be extended to cover the rest of the country as soon as possible.

I hope that when criminal rings of landlords and others who have made multiple housing benefit claims are caught and taken through the courts, they will be subjected to as much publicity as possible to deter others from such fraud.

I was pleased to note that during the Under-Secretary's recent visit to Preston, the 100,000th call was taken over the fraud hotline. That demonstrates the public's willingness to get involved. They know who is claiming benefit illegally and are prepared to give information. They know that it is their money in the first place and they want to ensure that the available money goes only to those in desperate need.

Since the hotline opened in August, it has been a phenomenal success, and has taken about 8,000 calls a week. I hope that that success continues. My constituents and I are fed up to the teeth with people defrauding the system at the expense of the taxpayer and to the detriment of those who desperately need the money. I hope that action is taken to ensure that the number of the fraud hotline is more widely known. It has already been shown to be a great success and I hope that it is given more publicity to ensure that it will be an even greater success.

The review estimated that income support fraud is more than £1.4 billion. In fact, 9.7 per cent. of income support claims—about 560,000—were found to be fraudulent. That figure shows that although all groups of claimants commit fraud, certain groups are more guilty than others. Private landlords have been mentioned and action must be taken against the fraud that they are perpetrating.

My local Benefits Agency office is working hard to ensure that money is saved and that fraudsters are prevented from abusing the system. I have received its information sheet on Blackburn and Accrington. From 1 April 1996 to 31 October 1996, 2,375 claims were investigated and the weekly benefit saving was £2.4 million. The instrument of payment saving was £239,000, so the total saving was well over £2.5 million. I congratulate the office on all its work. There are 860 cases that have yet to be completed. I hope that the Bill will ensure an increase in the number of cases successfully detected.

It is right to create an anti-fraud inspectorate to examine local authorities' performance and make recommendations to spread best practice. Some local authorities must be working much harder and using more effective mechanisms than others. A league table of local authorities showing which are more effective would enable the public to get to know which authorities are serious about detecting fraud. We can also ensure that the Secretary of State has the powers to direct local authorities that adopt a lethargic attitude to detecting fraud to take the necessary action.

It is also right to withhold the subsidy paid to local authorities for administering their benefits. It is right, too, to strengthen the Secretary of State's hand with the penalties that will be available for those who perpetrate benefit fraud: seven years' imprisonment and unlimited fines. We must ensure that such penalties attract as much publicity as possible to deter people from fraud. Benefit fraud is extremely serious. It costs the country billions of pounds and we must take the necessary action to stop it.

It has already been said that more cross-checking will ensure that people have only one national insurance number and that benefit claimants will have to show their national insurance number and a photograph, and give an address that can be confirmed and at which they can be traced. It is right that we should take such measures.

I hope that the new technology—the cards—will be fully used. I also hope that the cards will be designed so that they cannot be reproduced and so that people will not be allowed to have more than one of them; otherwise the system will be extremely expensive and a number of people will circumvent it. We must ensure that the system is as tamper-proof as possible.

We must ensure that the redirection of giros and benefits to properties is done at reasonable cost—I believe that the Bill deals with that. I hope that the Secretary of State will ensure that the Post Office will be encouraged to participate in anti-fraud measures and will do so, either for next to nothing or as part of its contribution to cutting fraud.

I welcome the Bill and all the measures that my right hon. Friend the Secretary of State will be taking, which build on the provisions that he has already announced. He has the full backing of the people of the Ribble valley, who are sick and tired of the amount of money that is being stolen from taxpayers and from those who deserve the benefits. They wish him well and I am sure that they hope that the Bill takes its place on the statute book as quickly as possible.

8.52 pm
Mrs. Anne Campbell (Cambridge)

I welcome the Bill's main provisions, particularly the prevention and detection of benefit fraud and improved benefit administration. It is not just the constituents of the hon. Member for Ribble Valley (Mr. Evans) who welcome the fight against fraud—my constituents certainly do. Many of them are hard-working, honest people who are struggling to pay their way; they feel particularly bereft because of benefit fraud, which takes resources away from them. In Cambridgeshire, huge Government cuts in recent years—particularly in education and social services—have led to a deterioration in the quality of life for many of my hard-working and honest constituents.

The great majority of benefit claimants are honest. The problem is that when fraud is rampant, many honest benefit claimants are also tarred with the same brush. We hear names such as benefit scroungers or benefit spongers—as Conservative Members have called them—and it is important to remember that those names apply to a small proportion of people claiming benefit. For many benefit claimants, there are no realistic alternatives. I refer specifically to that important, and unfortunately growing, group of people—lone parents, who cannot work because they are not paid enough to cover the cost of child care. They are therefore being forced by the Government's benefit system to survive on a very low income. Many lone parents struggle to give their children the best start in life against almost impossible odds. The Labour party will help that group of people with its proposals for a minimum wage, benefit tapers, out-of-school clubs and so on, as my hon. Friend the Member for Peckham (Ms Harman) outlined so well.

Much has been said about landlord fraud by those who know of far more cases than I do. I am sure that landlord fraud is not unknown in my constituency, but I shall concentrate on the means to improve benefit administration, which must help those dependent on benefits. The long waits for claims to be processed often lead to homelessness and destitution. Many right hon. and hon. Members will be aware that many constituents visit advice surgeries to complain about slowness and inefficiency within the benefit administration system.

Two or three years ago, when the disability living allowance was introduced, the process was in such chaos that many of my constituents came to me to complain that they were living in difficult circumstances because their claims were not being processed quickly enough. We must appreciate that increased efficiency in benefit administration often improves take-up, so perhaps it is not a cheap option.

We have been sent a briefing by the National Association of Citizens Advice Bureaux, which cites a case of a man who started agency work and was paid fluctuating wages—a situation that is by no means uncommon in today's labour market and one that the current benefits system does not adequately take into account. The man claimed council tax benefit, housing benefit and family credit. Six months later, he received a letter saying that he had been overpaid benefit by about £1,000.

When the client had an interview with the officer, he was first accused of attempted fraud because he had submitted only one wage slip with his first claim. He pointed out that that was all that the housing benefit department had demanded. He was so angry that he said that there seemed to be little point in claiming benefit and, at that stage, he was invited by the officer to withdraw his claim. The client was persuaded by his citizens advice bureau to continue to pursue the claim and to request a review of the overpayment because it had not arisen from any error on his part. However, many people do not take that view—they climb down and withdraw their claim. The Government think that they have made great savings in benefit fraud, but what has happened is that a perfectly innocent person has not claimed the benefit to which he or she is entitled.

When tightening up on fraud, we must be careful not to penalise individuals, such as that client of a citizens advice bureau, who might well have been discriminated against. We must also take into account the changing labour market and the fact that many people now do casual, short-term work. Individuals sometimes work one week, but not the next. The way in which the benefit system is currently framed does not cope adequately with that and many people find it difficult to survive as a consequence.

The Bill permits data collected for one purpose to be used, after authorisation, for another purpose and I am interested in how those procedures will work—quite apart from the difficulties associated with the European Union directive that were so ably outlined by my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth). Tax authorities, housing authorities, immigration authorities and a host of other agencies holding personal information will be required to make that information available for cross-checking against information held by other authorities.

The simplest way to do that is via the exchange of computerised information. I have doubts about whether the numerous systems used by local authorities will be capable of coping with any sort of data-checking mechanism that is established by the legislation. Not only are there different systems within the Department of Social Security itself, in the Contributions Agency, and in the Inland Revenue, but probably every local authority has its own unique computer system that works on a variety of hardware and software and uses different methods of client identification. Simply passing the legislation will not completely solve the problem of checking for fraud: considerable technical difficulties will have to be overcome.

I am also interested in the various layers of administration and inspection. Clause 5 refers to the persons who will report on administration, and I assume that they will form the inspectorate to which the Secretary of State referred in his opening remarks. Clause 6 refers to the Audit Commission, and I assume that it is to be given strengthened powers to advise the Secretary of State on methods used. In addition, clause 10 refers to inspectors appointed by an authority under instruction from the Secretary of State. That makes three layers of people who will be primarily involved in inspection, and I should be interested to hear the Secretary of State's proposals on how those three layers will work together so as to avoid duplication and overlap.

We heard a Conservative Member—I am sorry, but I cannot remember which hon. Member it was—refer to the smartcard technology that the Benefits Agency intends to introduce. There was an interesting article on the front page of the Evening Standard last week, about the work of my constituent, Dr. Ross Anderson of the Cambridge university computing department, who has worked out how to beat the smartcard. Unless the Government have come up with a new smartcard technology that differs from the one currently used by the banks, they may have to think carefully about using it. I believe that the system is called "CAPS"—common accounting and payment systems—and is being introduced by the Benefits Agency using a smartcard. The Minister should take advice on that matter and I am quite sure that Dr. Anderson would be pleased to help.

Will the Secretary of State tell us what plans he has to comply with the requirements of the European data directive? My hon. Friend the Member for Stratford-on-Avon has already pointed out that the data protection principles of that directive state that personal data should be collected and held for purposes described in the data protection register and should be used or disclosed only for those or compatible purposes. I fail to see how the Bill's requirements fit in with the EU directive.

The directive also states that the data should be accessible by the relevant individuals, who can correct or erase it when it is appropriate to do so. I see no mention in the Bill of individuals being able to correct or erase data and I should like to hear what plans the Government have to put those important principles in the Bill.

I have read the Government's Green Paper, "government.direct", and I know that they plan to rationalise their entire information strategy. I am sure that a future Labour Government would wish to do so, but without the disregard for personal privacy that has been exhibited by the Government and is exhibited in the Bill.

The Opposition support the EU directive, unlike the Government, who could only abstain when the subject came up for determination in the European Council. This is yet another European matter on which the Government appear out of line with the other states of the European Union.

At this stage in the parliamentary cycle, I should have expected the Government to propose legislation that would actively contribute to the CHANGE programme in the Department of Social Security. We are more than halfway through the second year of the three-year CHANGE programme, and the Government have not appointed a contractor to carry out their computerisation strategy, ACCORD.

It was predicted by the CHANGE programme that, by March 1998, £1 billion in Department of Social Security running costs would have been saved. I have spoken to several of the large computer firms that are bidding for the contract, and I have met no one who believes that savings of that magnitude will be made.

It might be helpful to know whether the Government believe that the Bill will provide the legal framework for the ACCORD project, which is about creating a centralised database that several Departments can tap into.

I am sure that the Minister appreciates that that saving of £1 billion will pose major problems for the next Government, whatever their political colour. One is tempted to believe that the current Government, knowing that they will not win the next general election, have decided instead to set land mines for the next Labour Government. Savings of £1 billion that cannot be achieved in the time scale are one such land mine.

If the Conservatives win the next general election, it is obvious to us that there will be many black Wednesdays—black Wednesdays of their own making, set to trap the next Labour Government, as I am quite sure that the last one was, too. Is it not time that we said "Enough is enough," and gave the people a chance to decide?

9.6 pm

Mr. Harold Elletson (Blackpool, North)

It is a pleasure to follow the hon. Member for Cambridge (Mrs. Campbell), who speaks with great authority about data protection and smartcard technology, but with somewhat less authority, I fear, about estimates of benefit fraud.

I very much welcome the Bill, which has been described by the Secretary of State as one of his top priorities and is among the top priorities of my constituents, who realise its importance to the economy. It is very important, as detected and undetected benefit fraud is estimated to stand at about £4 billion. An ability to tackle benefit fraud will enable us to provide services to people in need and to reduce the tax burden, which many, most or all Conservative Members very much hope will also be one of the Government's immediate and top priorities.

I congratulate the Secretary of State on his achievement to date. As my hon. Friend the Member for Ribble Valley (Mr. Evans) said, significant expenditure savings have been made—£1.44 billion this financial year, £717 million in 1994–95 and £558 million in 1992–93—and the Department expects to make nearly £2 billion of savings in 1996–97. The record savings made in each of the past four years will give the Chancellor much extra room for manoeuvre tomorrow. We owe the Secretary of State and his Department a great debt of gratitude for that.

The Bill will provide important new measures to tackle fraud, especially by increasing punishments for fraudsters and increasing the power of investigating authorities. As I said, it will be widely welcomed in my constituency and, I suspect, in other seaside resorts, which have become centres for benefit fraud, particularly housing benefit fraud.

I am delighted that the Secretary of State has asked the local Benefits Agency investigating teams to target Blackpool and other seaside resorts and that they have achieved significant results. In 1995, the Blackpool Benefits Agency investigating team saved £3.2 million and in 1996 it will achieve an estimated £4.2 million. That is excellent and I urge my right hon. Friend to carry on the good work. Those savings are a result of the sort of operation carried out by the Benefits Agency in the past, such as Operation Sea Breeze. That operation specifically targeted DSS hostels, which have been a terrible blight on Blackpool and other seaside resorts.

Dame Elaine Kellett-Bowman (Lancaster)

And Morecambe.

Mr. Elletson

Indeed, as my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) said, it affects Morecambe and many other seaside resorts throughout the country. I hope that those activities will continue in the future because they are paying dividends in seaside resorts.

I am delighted by some of the activities that have been undertaken by benefit fraud investigators and the Department of Social Security. One activity that has been especially successful is the benefit cheat hotline. Before it was introduced, there were 500 referrals a month in Blackpool, but the figure has now risen to more than 800. Another great success is Operation Peddler, which dealt with illegal street traders operating largely along the Blackpool promenade. Many of those traders were receiving benefit, which has now been stopped. That investigation involved many different investigating authorities, including benefit fraud investigators, the police and trading standards officers.

Also successful was Operation All Sorts—they all have interesting names—which involved benefit fraud investigators, the police and the Department of Transport and which targeted lorry drivers identified as being in receipt of illegal benefits and driving unsatisfactory vehicles. Many of those drivers had their benefits stopped as a result.

The final great success was Operation Big One, no doubt named after one of Blackpool's leading tourist attractions, on which my hon. Friend the Member for Ribble Valley has ridden on Blackpool pleasure beach. It involved examining all the board and lodgings houses in the Blackpool area, to establish whether "customers" were still living at the addresses held on their benefit record. It was extremely successful, although there is still room for great improvement. In Blackpool and similar tourist resorts, much housing benefit fraud involves the provision of inaccurate addresses.

I hope that the Secretary of State will order such investigations to continue, because total savings from those four exercises alone were more than £500,000. The Bill will help to continue that success story.

My only concern is the attitude of some employers, particularly landlords, to benefit fraud. The Bill will help to deal with that. Many employers, particularly in seaside resorts and areas with substantial seasonal employment, are prepared to turn a blind eye to benefit fraud. Certainly that is true of landlords as well. We must toughen up on that aspect and the Bill will help to do so, as it gives local authorities the same powers as the Benefits Agency to enter business premises, including landlords' business premises, to inspect documents. That will be a significant improvement and will help to tackle a major problem.

I have some concerns about the involvement of local authorities, which already have substantial powers to inspect businesses. Local business people often feel that they are wrapped up in unnecessary red tape and that local authorities behave like little Hitlers. I hope that the Secretary of State will assure us that the Bill will not have that effect.

We must be careful about local authorities handling housing benefit. Some local authorities have a close, cosy relationship with some landlords and, especially in areas where landlords do a great deal of business and make huge profits out of the DSS, great care must be taken.

I hope that my right hon. Friend the Secretary of State will examine closely the Blackpool Housing Forum in my constituency, which is a suspicious body that exists, supposedly, to advise Blackpool borough's housing authority, but which includes a large number of private landlords who have made a fortune out of DSS hostels, much to the detriment of the town. That relationship is far too cosy. If the Secretary of State intends to transfer powers to local authorities and ask them to investigate such matters, he must be sure that Labour-controlled authorities such as Blackpool will do the job properly.

That is why I am pleased that the Bill introduces a fraud inspectorate, which will check up on Labour-controlled and other authorities that might not be doing their job and that might not be properly chasing fraudulent claimants. I hope that the Secretary of State will continue to monitor Blackpool borough council closely and to target seaside resorts, where big savings will be made. I hope that he will keep up the good work, which has delivered such benefits for our economy and which will have such significant results tomorrow.

9.17 pm
Mr. Henry McLeish (Fife, Central)

I follow the hon. Member for Blackpool, North (Mr. Elletson) with some caution, mindful of the fact that we may want to win the seat. Blackpool is clearly an interesting place. My constituents would be envious of operations with names such as All Sorts and Big One, about which I have heard very little. I await my next reading of a social security brief with enthusiasm.

There have been many thoughtful contributions to the debate. We have reinforced the importance of the Social Security Committee in the work of social security generally, and we have arrived at a consensus that fraud is important because it is waste. Although we have differing views on the issues that we pursue and on the pace at which we do so, there is no doubt that every section of the House supports a firm clampdown on fraud. Labour signs up for that.

Some might say that the Bill is too little, too late. Labour will look to the Committee to strengthen its provisions. We must ensure that the Committee focuses enthusiastically on a tougher crackdown on private landlord cheats. That is an important issue that has been ignored in the past. Outside bodies have given information to the Department, but I fear that the problem is only now being taken seriously, at much cost to the taxpayers of Britain.

We must send a clear message that the apparent opt-out clause under which organised landlords have operated must be removed. If it is not removed in Committee, it will be removed by the next Labour Government. It is not too fanciful to suggest that a new breed of fat cat private landlords are living off fraudulent earnings. It is ridiculous that the House and the Department have not yet agreed to address that problem with vigour. I believe that the housing landlord and housing benefit issues should form the focus of our work in Committee.

My concerns focus on four issues or central considerations that will influence our views. First, the Government have been in power for 17 years and it is clear that we are now talking about a crackdown on housing benefit fraud. We have seen enormous expenditure increases in the past decade and it is hard to escape the conclusion that the Secretary of State and his successive ministerial teams have been soft on landlord cheats. I am genuinely puzzled about why that is so.

The Government have shown tremendous enthusiasm in pursuing individual claimants who have defrauded the system—and rightly so. However, we must have a level playing field: it cannot be right for the House to adopt a double standard. I believe that the country will support us in our call for the Government to do more to ensure that landlords are covered by the net. I hope that the Minister will confirm in his winding-up speech that that partial view of fraud in Britain will be changed in Committee—if not, a Labour Government will resolve the problem.

The second and more serious consideration is that the Bill is a missed opportunity. The Government talk about welfare to work, but this is a crucial area where we can reduce the welfare budget. If individuals contribute to society, are productive and reinforce their self-worth, as a consequence they remove the burden of cost from welfare through participation in the market economy. Why does the legislation not refer to welfare to work and how to progress that goal?

The Bill also fails to mention improving the efficiency of social security administration. It is quite clear that many problems are caused by poor first-line social security decisions that create confusion and lead to overpayment. As my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) suggested, at the end of the day it is often difficult to distinguish between fraud and overpayment. The Bill does not address the efficiency of the system overall. In its briefing paper, the National Association of Citizens Advice Bureaux states: At the same time, the Bill represents a missed opportunity to tackle the administrative shortcomings within the social security system and fails to take measures to deal with the problem of lack of take up of social security benefits". I shall deal with that issue in a moment.

The Government's second consideration is why the Department seems to have a licence to print giros, but it does not have sufficient concern for the taxpayers or for the futures of those individuals within the system. I hasten to add that "spend, spend, spend" is increasingly the hallmark of a Government who take every opportunity to lecture us about fraud, welfare and the need to cut back. I urge Ministers to explain in their future deliberations and in Committee what they are doing to reduce the welfare budget. Later in my speech, I shall point to an unprecedented explosion in housing budget expenditure which has created the climate for a spectacular increase in fraud—the two issues are indistinguishable.

The third consideration is the Government's need to create scapegoats. I ask the ministerial team: when everyone wants the Government to crack down on landlords, why do they want to crack down on local authorities? They are not the problem: they are part of the solution. Whenever there is the chance for consensus, partisanship leads to scapegoating local authorities and landlords. Of course local authorities can make much-needed improvements—we do not deny that—but social security and every aspect of Government that might be involved in the new matching process can do likewise. Why do the Government want to crack down on local authorities when we want to crack down on organised landlord fraud? Indeed, an article in The Guardian of 10 October, about the Conservatives in Bournemouth, said: The almost traditional conference crackdown on benefit fraud was announced by Peter Lilley". The article went on, in a rather more cheeky fashion, to say that his speech was not as well received as in previous years". I submit that the politics of fraud and the politics of crackdown may have prevented the level playing field—which we want to see and which would be in the interests of the country—from being developed.

The fourth consideration that the Government must address is what purpose the Bill and their efforts are seeking to serve. Is it the political interests of the party, or is it the desire to help taxpayers and provide less punishment for some vulnerable groups? There is a commitment in the Bill for more reviews and more medicals for disability living allowance, disability working allowance and disability attendance allowance. Forgive us for being slightly suspicious that that might not be used for the best advantage of the claimants. We are dealing with people who have serious problems and who do not wished to be harassed. I would not like to think that there is a pretext to attack those vulnerable individuals because of some Government mission, regardless of whether evidence of fraud exists.

The Governments's policies on fraud are often distortion and hypocrisy hiding incompetence and complacency. Those might be harsh words, but I should like the Minister to tell us why, especially on the landlord fraud issue, the Government are now being dragged screaming to a position where Labour has been for a while and the country for some considerable time. The central challenge for the House is to look beyond Second Reading and to identify some of the crucial areas that will have to be dealt with in Committee.

I raised earlier the question of housing benefit expenditure. I am a reasonable person. I am quite willing to listen to rational arguments, but I find it quite irrational that housing expenditure growth over the past decade has doubled. The Government have not caught on to the fact that there has been an explosion in expenditure and in fraud. The two do not seem to be linked in the workings or the minds of Government. It is quite damning that rent allowances in the private sector have not doubled but trebled. The cost has gone up from £1.6 billion in real terms to £5.7 billion. That is not short-change cash. It is the fastest-rising part of the Secretary of State's budget. We constantly hear about the need to control the rise in social security expenditure, but where do we see any practical demonstrations of it?

Mr. Heald

The Bill will help.

Mr. McLeish

We think that the Bill might help if it is significantly strengthened.

The other telling feature about the private sector is that, apart from expenditure, the number claiming rent allowance has doubled from 1 million to 2 million since 1988–89, but at the same time the number of claims from public sector tenants has gone down by 0.2 million.

Mr. Stern

I am listening to the hon. Gentleman's web of fantasy with great interest. Has he not noticed that, in the same period, the number of private sector tenants has gone up? One would therefore expect the number of private sector claims to go up.

Mr. McLeish

Forgive me, I am not trying to be discourteous, but that was a very obvious intervention, and the point raised by the hon. Gentleman has been recognised. The point at issue is the volume of expenditure. Of course it has not gone up three times, and it is the refuge of the despairing to suggest that that constitutes a sensible intervention.

It is no coincidence that the massive rise has taken place since 1989, and the taxpayer has just been brought in to sweep up enormous increases caused by some adjustments to rent. Over the past decade, £86.5 billion has been spent on housing benefit. If the Government want to be tough on fraud, they should seriously consider controlling expenditure. Expert opinion suggests that expenditure on housing benefit is out of control and that the ministerial team do not have a clue about how to rein in that expenditure. They are cracking down on fraud, but not on expenditure. That smacks of double standards.

Mr. Lilley

The hon. Gentleman suggests that fraud is partly due to the deregulation of rents. Does he propose to introduce rent regulation to control housing benefit expenditure? Is that Labour's policy?

Mr. McLeish

My mind takes me back to an intervention by the Prime Minister on my right hon. Friend the Leader of the Opposition. There is no suggestion that we will touch rent regulation. It is ridiculous to suggest that that is part of the thrust of Labour's policy. The Government preach the virtues of cutting expenditure, but they have administered an £86.5 billion bonanza without any regard for taxpayers. The Government find it difficult to cope with that central problem.

As my hon. Friend the Member for Peckham (Ms Harman) said, local councils have told the Government that they need more powers, but they have not been given them. The Select Committee on Social Security proposed a raft of measures, but only now have the Government incorporated a few of them in the Bill. The Audit Commission, in its 1993 report, suggested that more must be done. That view was restated in its 1994 and 1995 updates, and in its report published last week. Unlike the Government, the Audit Commission welcomes the encouraging response from local authorities, but it says that much more remains to be done to put in place the most effective arrangements for preventing and detecting fraud and corruption. There is consensus on the views that Labour has pushed this evening.

In her speech, my hon. Friend outlined the measures that Labour wants to take. I do not want to delay the House by going over them again, but I stress the issue of a landlord offence. The Government are being tested on their commitment to take housing benefit fraud seriously. Every Conservative Member who speaks wants an attack on claimants who defraud, and that is right, but the test for the Government is what they are going to do about landlords. The Bill deals with new offences, so why do we not have a clear and—to use a phrase much vaunted by the Government—unequivocal attempt to define landlord fraud? That does not involve loose change; it is massive fraud—organised gangsterism. What is happening is criminal. I hope that in Committee the Government will lessen their constraints and take seriously the need to hit landlords hard.

The other issue that I want to deal with is that of uptake and entitlement. I have exchanged correspondence with the Secretary of State for Social Security—my hon. Friend referred to that earlier. I shall set the parameters of that issue. Currently, 1.6 million pensioners claim income support. That is a scandal. To add insult to injury, nearly 1 million other pensioners are poor enough to claim income support but do not. That is modern Britain in 1996. The legacy of 17 years of Toryism is that 25 per cent. of our pensioners live on or below the officially recognised poverty level.

I shall pick my words carefully. Does that fact not touch the hearts—if they have hearts—of Conservative Members? That is a scandal, and the insult was reinforced today by the Government, who dismissed my hon. Friend's submission that we should consider ways of data matching to improve take-up. We appreciate that if we data matched every Government source—if that were technically possible—it would not provide the answer. A crisis faces Britain's elderly, but the Government refuse to do anything about it. The House will be viewed with disfavour if the Minister does not say that he will want to reconsider the matter in Committee.

We are not looking for a total, instant solution, but we are looking for a bit of sympathy—a change from the mean-minded approach shown by Conservative Members today. We want the Government to say that 1 million pensioners—10 per cent. of the pensioner population—will have the chance of a better deal. They will have that chance if we use the same processes to detect those who are not receiving benefits to which they are entitled as we use to detect fraud. Ministers should be warned that the issue will not go away; too many people are involved. That is why I think that they should reconsider, following the rather curt responses that have been made to members of all political parties today. Let us proceed with the Committee and reach a consensus on helping people as well as a consensus on detecting fraud.

Information technology gives us an intermediate opportunity to reinforce welfare benefit take-up campaigns by using such technology within Government, however undeveloped it may be in the DSS at present. I sincerely hope that my overtures will receive a positive response. We would like to assist: 1 million pensioners living on their own simply need help, and I hope that the Government will reconsider.

We have not touched on the need to prevent fraud, which is as important as detecting it. I made a point earlier about front-line decisions, some of which need to be improved. They are often surrounded by confusion and inefficiency. We talk of managing the waste in the system, because fraud is basically about waste. I hope that Ministers will go away and think more clearly about the measures that they will table in Committee to strengthen the relevant part of the Bill. Prevention and detection should go together, as should the issues of expenditure and fraud. We need a more comprehensive approach to both those issues.

Parts of the Bill, to which my hon. Friends have referred, give cause for concern. Clause 14 has been mentioned, in connection with the recovery of benefit. A host of submissions have been made by the Disability Alliance and others about that problem. I emphasise the importance of disability living allowance, disability working allowance and attendance allowance, about which there are clearly huge suspicions. In Committee, the Government must ensure that they are not well founded.

The Government have actually extended the welfare state. We have an "out-of-work benefits culture" and an "in-work welfare culture" which they have developed and intensified—and we now have workfare, which constitutes neither work nor welfare. It seems that, no matter where they are, the Government want to hit people with welfare. The sad aspect is that, while other parties are talking about a more progressive approach, the Government have extended the welfare state, not in terms of a more positive role in regard to the breadth of its activity or links with the labour market, but in terms of the massive number of people who now depend on welfare and the huge attendant cost to the public purse.

We need to move on. The Committee will give us an opportunity to look positively at the problems that we have identified, and we hope that the Government will reconsider some of their initial attitudes. Let us get down to work: if the Government respond, so will Labour.

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

We have had a lively and informed debate, with excellent contributions from my hon. Friends the Members for Westbury (Mr. Faber), for Colchester, North (Mr. Jenkin), for Bristol, North-West (Mr. Stern), for Ribble Valley (Mr. Evans)—I thank my hon. Friend for his kind comments about my visit to Preston—and for Blackpool, North (Mr. Elletson). We also heard thought-provoking speeches from the hon. Members for Birkenhead (Mr. Field), for Rochdale (Ms Lynne) and for Stratford-on-Avon (Mr. Howarth)—and, of course, from those on the Opposition Front Bench.

I begin by paying tribute to the work of the Select Committee. There is no doubt that the Select Committee has done a marvellous job in considering the evidence and the issues surrounding fraud. Just as the Committee paid tribute to the work of my right hon. Friend the Secretary of State for Social Security, it is only right to return the courtesy.

The Bill's provisions dealing with disclosure, and with housing benefit fraud particularly, will make a major contribution to cracking down on benefit fraud by individuals, organised gangs and landlords. Picking up on a point that was made towards the end of his speech by the hon. Member for Fife, Central (Mr. McLeish), who I welcome to his new responsibilities and to the debate, clause 11 contains the tough new offence of dishonestly making a representation to obtain benefit.

The clause applies equally to a landlord as it does to a tenant. What is more, it imposes a new penalty with a maximum of seven years, so this new offence is not one sided, but provides the ammunition, as it were, for the courts to pass the proper sentence in the appropriate case. Landlords are not, therefore, ignored in the Bill—far from it.

Mr. Frank Field

Did the Government think about introducing a clause that would deal specifically with landlords?

Mr. Heald

My point is that the clause does that.

Mr. Field

The Minister has not answered the question.

Mr. Heald

If the hon. Gentleman wishes to, he can make that point, but the clause does deal with landlords as much as with tenants, and provides a powerful new weapon in the armoury. Just as a landlord who is guilty of conspiracy to defraud can be prosecuted for that, he can be prosecuted under the Theft Act 1968 and under other social security legislation. Those offences provide the battery of weapons that we need.

All the penalties that we are introducing and the cautionary system provide a tough new regime, apply to landlords and can be used in the fight against landlord fraud, as well as against straightforward tenant and claimant fraud. We should remember that all the informed estimates are that about £150 million of the £1 billion of undetected housing benefit fraud is committed by landlords. It is right to think of that as an important element of fraud, but wrong to go as far as the Labour party in saying that it is going to detect £310 million of fraud because that is twice the amount that there is.

Disclosure is an important weapon in the battle against benefit fraud because it gives us the potential to check claim information against information held by the Inland Revenue relating to earnings and investments, or against value added tax information from Customs and Excise relating to self-employed people. Those are two sectors where the benefit system is susceptible to fraud and where conventional methods of prevention and detection are not always effective. The use of modern technology under carefully controlled conditions will enable quick and effective checks, without putting genuine claimants through any additional effort.

The Opposition have raised the question whether it will be possible to expand the disclosure of information provision to enable us to identify pensioners who may have an unclaimed entitlement to benefit, but that shows a misunderstanding of what is administratively possible. Detecting fraud by data matching means comparing, on a selective basis, small areas of information that, when put together, can identify inconsistencies in a benefit claim and can be investigated by a fraud investigator.

The data matching that the hon. Member for Rochdale suggests involves doing a means test on an individual. That means that we would need to piece together all the information across Government, on all the income and savings of all people, which is a different scale of task. Just to amplify my point to the hon. Lady, we know who the pensioners are and who the people who claim income support are, but just by comparing—

Ms Harman

We can take into account all housing benefit claims.

Mr. Heald

The hon. Lady says, and I am willing to accept, that we could take into account housing benefit claims. We could take into account national insurance contributions. Even with all that information, which is on a much greater scale than that which are envisaging in the Bill and which has its own difficulties, we would still have a very long list of individuals who would have to be contacted individually. Many of them may not have wanted to have had a means test conducted behind their back and we would be giving many of them the idea that they were, perhaps, entitled to a benefit when they probably were not. For example, the reason why somebody may not have any Inland Revenue records to show any receipts of income may well be that that person has granny bonds or some other security for which there is no need to make disclosure. That point was made by my hon. Friend the Member for Bristol, North-West.

Ms Lynne

If the Minister is definitely ruling out such a possibility in the Bill's remit, will he tell the House tonight that he will instigate a take-up campaign so that pensioners who are not getting the income-related benefits to which they are entitled will be able to claim them?

Mr. Heald

As the hon. Lady will know, the Government do a number of things to make people aware of their entitlements.

Ms Harman

Like calling them scroungers.

Mr. Heald

The hon. Lady is calling them scroungers—I would never do that.

We send out information about entitlement to a large range of bodies. We send advisers out to meet pensioners groups, and so on. The Department spends millions of pounds on telling people about their entitlement. From time to time, we run campaigns with Age Concern, Help the Aged and all the other bodies to make pensioners aware of their entitlement, and we shall be doing that again in January.

Mrs. Anne Campbell

Is the Minister not aware that the additional information that is needed on the claim for income support is already supplied to local authorities when pensioners apply for council tax benefit and housing benefit? Why on earth is he ruling out a very simple measure, when pension entitlement can be calculated with information that is already on local authority records?

Mr. Heald

I think that I answered that point. Of course, the other point that can be made on the matter is that the regime is different; the capital rules are different. That would affect the exercise.

Having raised a number of practical points, I do not think that we should ignore the fact that there are considerable difficulties under the European convention on human rights about the form of data matching that impinges on the privacy of an individual who may not want to be means tested despite the obvious attractions.

Mr. McLeish

I have two points. First, does the Minister accept that it is totally unacceptable that 1 million pensioners are living below the poverty line? Secondly, will he allow the Committee to pursue further the issue so that the difficulties as well as the opportunities that may be provided can be explored?

Mr. Heald

As you, Mr. Deputy Speaker, will know, I would never interfere with the role of the Chairman. The scope of the Bill is an issue not for me but others. As I have said, the Department does a great deal to try to make people aware of their entitlement, but it is ultimately up to them whether they claim them.

Ms Lynne


Mr. Heald

I will not give way again because I want to say a little more about landlord fraud.

The new offence that I mentioned is one measure to help in the battle against landlord fraud, but there are others. The power to pass information between local authorities and between a local authority and the Department will make multiple claims—one of the most common frauds involving landlords along with tenants—much more difficult and allow local authorities to share information on suspect landlords. If a local authority wished to have a register of landlords—an idea that I know that the Opposition have pursued—and a neighbouring authority wished to exchange such information, it would be possible.

The extension of powers of local authority investigators by analogy with Benefits Agency investigators will enable them to enter landlords' business premises and inspect records. If the records are not held at the business, a requirement can be made by the local authority investigator that they should be supplied to him. There is also a new provision to improve the recovery of overpayments of housing benefit from landlords who receive the original payment directly. The new powers to inspect will ensure that local authorities take appropriate action to prevent and detect fraud, including landlord fraud.

I shall now deal with some of the points raised in the debate. The hon. Member for Peckham (Ms Harman) asked why local authorities do not have powers to refuse direct payments other than in exceptional cases. They are able to refuse direct payments and local authorities have a discretion on direct payment to landlords. It is only in circumstances in which there are substantial arrears that that changes.

In an intervention, my hon. Friend the Member for Bristol, North-West asked whether the penalty was a fixed 30 per cent. or was variable. The penalty is fixed and there is no variation. The hon. Member for Peckham asked whether article 8 would stand in the way of data matching—although she agreed with it. It is right that the data matching must be necessary to achieve the interest in question. The hon. Lady also raised a point about whether local authorities should automatically provide details of direct payments to landlords to the Inland Revenue. We have consulted the Revenue, which is satisfied with its existing powers.

My hon. Friend the Member for Westbury asked about the cost and benefit of the benefit fraud hotline. I can confirm that the fraud hotline is showing value for money. It costs £1.5 million pounds a year to run the line and so far it has saved at least £15 million. I am certain that that financial return will be maintained. My hon. Friend also asked whether the benefit-payment card used the chip technology that has recently been cracked. That point was also taken up by the hon. Member for Cambridge (Mrs. Campbell). The answer is no, because the card uses a different technology and the security of the system does not rely solely on the security of the card itself. It is ironic that many pushed us to use the smartcard technology and we resisted for good security reasons. We have been proved to be right about that.

My hon. Friend the Member for Westbury also asked why the Bill will prevent inspectors from entering residential premises in which a business is being carried on. I have already made the point that the investigator will be able to demand the necessary documents. My hon. Friend also asked whether local authorities could have access to the departmental central index. The Bill will enable such access, but with strict security conditions. He asked whether strict verification would take place before a benefit-payment card was issued. The answer is yes, because the cards will be delivered to the post office and only then to the customer, who has to produce evidence of identity for the card to be activated. Strict conditions will be applied.

The hon. Member for Birkenhead asked a number of questions. I have dealt with the question of collusive employers. He also asked about the hotline and what percentage of calls led nowhere. He said that 90 per cent. led nowhere, but that is not correct. Some 80 per cent. of the calls have been referred to investigators and many are still being investigated. We believe that overall it is a worthwhile exercise and we shall produce the figures in due course. I have visited Preston and I have met the staff who are trained.

Ms Harman

You are not.

Mr. Heald

I have never claimed to be trained, but the staff are both trained and house-trained. They work to a detailed form, which they have to fill in with the information that is required by the fraud investigators. The form has been carefully constructed by the investigators to ensure that the relevant information is gathered. The investigators say that the scheme is working well and they are satisfied with it.

Mr. Frank Field


Mr. Heald

I will not give way because I am short of time. [Interruption.] The hon. Gentleman asks whether the staff are temporary. There are some full-time staff who are not temporary and there are some who are. I am happy to say that they are good at what they do.

My hon. Friend the Member for Colchester, North raised a number of points and he asked whether the social security database would have online access. In due course, it will and I agree that it will be necessary in the longer term to achieve that objective. We have asked the computer industry for proposals on a common core system. That point was also made by the hon. Member for Cambridge.

The hon. Member for Rochdale wanted an assurance that the Department would not sell on information received under the data matching process, and I can give her that categorical assurance. We have a long record of holding and handling sensitive information and keeping it confidential. She also asked what safeguards there would be for a battered wife whose husband worked for the Department. I hope that that is not a reflection on the staff of the Department who, by and large, would not welcome that example. Having said that, we expect to process the data at a single site and it will be held and handled in safe and secure conditions. We will take all necessary safeguards to ensure that only where a mismatch is found will staff become aware of the case for further investigation. We will limit the information to those who need it. She should also be aware that it is an offence to disclose information in these circumstances and that it can be considered gross misconduct within the Department.

My hon. Friend the Member for Bristol, North-West raised a number of points. I do not think that I can respond to them all, but I promise all hon. Members that I will write to them if I do not mention their points. He asked about the prosecution record for benefit fraud, and I can tell him that we have a 98 per cent. success rate where proceedings are brought and we will maintain those high standards. He asked if our data matching system will be able to cope with the new data from the Inland Revenue and other sources, and we are confident that it can. We shall not be using the contractor that he suggested, excellent though it is, because we shall be using BT Sintegra.

My hon. Friend the Member for Bristol, North-West asked us to ensure that the provisions in the Bill are not applied inappropriately to the right-to-buy provisions, and I can happily tell him that the Bill applies to benefit administration and benefit fraud and does not affect the right to buy. He asked about the Child Support Agency. Fraud allegations made to the CSA are passed on to the Benefits Agency for investigation, and the Bill does not allow us to pass information between the CSA and, for example, the Customs and Excise or the Inland Revenue. There should be no fears on that score. He mentioned mitigating the penalty, but I think that I have dealt with that matter.

The hon. Member for Stratford-on-Avon raised a number of issues, and talked about the tension between the need to detect and prevent fraud and the individual's right to privacy. We guard jealously the individual's right to privacy, but we believe that it is necessary and in the public interest to be able to match the information. A number of other points were raised which I will answer in correspondence.

I wish to respond to one or two points made by the hon. Member for Fife, Central on the Government's policy. It is a bit rich for the Labour party—which, after all these years, does not have a single idea on benefit fraud—to criticise the Government. When Labour local authorities were doing nothing, my right hon. Friend the Secretary of State came forward with the tough package of incentives and penalties that has tripled the amount of housing benefit fraud that has been disclosed. The Labour party is tough on the one hand and tender on the other on benefit fraud.

In June, the hon. Member for Islington, South and Finsbury (Mr. Smith) suggested that we should increase random blanket home visiting of claimants. Yet in August, the hon. Member for Fife, Central criticised our home visits and said that people who were totally innocent could end up being the victims of a visit by the DSS. One definition of a victim is a person suffering harm or death. Was the hon. Member for Islington, South and Finsbury suggesting random blanket suffering for all? Of course he was not.

In March, the hon. Member for Islington, South and Finsbury told us that the benefit fraud hotline in Reading was innovative and that we should follow it—although, of course, it followed us. Yet in August, the hon. Member for Fife, Central was describing it as a snoopers' charter and talking about a civil liberties problem. Labour told us in 1992 that we should not overestimate the problem of fraud, and yet overstated it itself. Labour said that it would recover £310 million from landlords, despite the best estimate being that there is only £150 million-worth a year. No wonder Labour cannot make up its mind how to vote.

Question put and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 61 (Committal of Bills).