AGGRAVATED OFFENCE OF LANDLORD FRAUD

HC Deb 04 February 1997 vol 289 cc807-24

'. Where a person is found guilty of an offence or offences under section 111A of the Social Security Administration Act 1992, as inserted by section 13 above, and the offence is or the offences are in respect of—

1. (a) more than one claimant for benefit, and
2. (b) benefits paid in respect of persons resident in accommodation owned, managed or controlled by him,

he shall be liable, on conviction on indictment, to imprisonment for a term not exceeding twelve years or to a fine or to both, and in determining the level of any fine imposed, the court shall have regard to the sums dishonestly obtained by him.'.—[Mr. McLeish.]

Brought up, and read the First time.

3.49 pm

Mr. Henry McLeish (Fife, Central)

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

Madam Speaker

With this, it will be convenient to discuss also the following: Government amendments Nos. 5 to 7.

Mr. McLeish

The Bill provides for careful examination of landlords' activities in housing benefit fraud, and new clause 1 would create a new offence of aggravated landlord fraud. We think that such an offence is necessary, because the Government have not yet been sufficiently tough on such fraud. In Committee, we discussed at great length the extent of the problem, and some of the points are worth repeating in the House.

We are currently spending almost £11 billion on housing benefit, a sum which has grown dramatically since 1979. In 1979, we spent £440 million, at 1995–96 prices, whereas, in 1996–97, we spend more than £5.5 billion for private tenants. For local authority tenants, the amount has grown from £1.7 billion, in 1978–79, to £5.2 billion, in 1996–97. We are therefore talking about an enormous amount of public expenditure, and that is the first important context in which we should consider the new clause.

The second context is that the scale of fraud is considerable. There is possibly a consensus that £1 billion of our annual £11 billion expenditure on housing benefit is being defrauded, although some people have suggested that the figure may be much higher. Although there is some controversy surrounding the £2 billion fraud figure that has been suggested and mentioned in some Social Security Select Committee decisions, that may be the upper level of housing benefit fraud.

Nevertheless—no matter whether the figure is £0.5 billion, £1 billion or £2 billion—fraud costs an enormous sum of money, and the House and the Government, of whichever colour, must take it seriously. We have tabled new clause 1 because of the scale of the problem.

In Committee, the Government were sympathetic to a request for a landlord register, and we agreed that Ministers should go away and formulate a new clause dealing with some of the issues that we raised and then return to the Committee. Consequently, we withdrew our new clause dealing with a landlord register. The Government accepted that suggestion, which represent progress, which we welcome. Now the Government have an opportunity to pass a second test, on the matter of an offence of aggravated landlord fraud.

The Minister said in Committee that the Bill already contained provisions to deal with that offence, but we do not accept that it does. The Bill is clearly focused on landlords and claimants, but far too much emphasis has been placed on claimants and not enough on landlords. Therefore, we want to strengthen the Bill's provisions, particularly those dealing with landlords. We also want to show landlords and the public that we are serious about the annual multi-million-pound fraud. In both the substance and the spirit of legislation, it is important that we send a powerful message to landlords, and especially to those in the private sector, that the House will not tolerate fraud, especially current levels of fraud.

In new clause 1, we suggest that a person involved in aggravated landlord fraud shall be liable, on conviction on indictment, to imprisonment for a term not exceeding twelve years or to a fine or to both, and"— of course— in determining the level of any fine imposed, the court shall have regard to the sums dishonestly obtained by him or her.

We think that the type of offence that we are considering deserves the punishment we are suggesting, because there are different levels of landlord fraud. One landlord may have a few properties or a few tenants and be defrauding the system, perhaps in collusion with one or more of his tenants. There is then a gradation in criminal activity, however, in which some landlords in our cities are committing organised big-time fraud. We will simply be sending the wrong message if the Bill does not include a specific offence of landlord fraud.

The new clause also deals with multiple fraud. It provides a tough prison term, but defrauding the state is a serious offence. Most of the London local authorities that have been at the sharp end of this serious crime suggested that the Bill needed to be strengthened even more, and we agree. We find it difficult to understand why the Government will not accept the further strengthening that Labour is offering now, just as we did in Committee.

The Government have often talked about being tough on fraud—we support and applaud their attitude—but we have to match the rhetoric and fine words with tough action to show that we not only deplore what is happening but intend to root out the worst excesses of fraud by landlords.

In the past few years, the amount of housing benefit going to the private sector has risen to the point where it will overtake that paid to public sector tenants. Indeed, over the next two years, perhaps another £800 million will be added to the private sector rent allowance housing benefit. That is a staggering sum.

The Government should accept our proposal with good will. We want to toughen the Bill and strengthen the attack on fraudulent landlords. By accepting new clause 1, the Government will do just that, and will send a powerful message to landlords who are currently defrauding the housing benefit system.

Mr. Chris Davies (Littleborough and Saddleworth)

I warmly welcome the new clause, and urge the Government to accept it. Since 1988, there has been a 350 per cent. increase in the housing benefit paid to the private sector. As the hon. Member for Fife, Central (Mr. McLeish) said, the opportunities for fraud have increased considerably, and it is estimated that between £1 billion and £2 billion is disappearing into the pockets of fraudulent landlords.

Fraudulent landlords are getting rich at the expense of the taxpayer. They are doing so in various ways: some simply continue to claim for a tenant who has moved on, while some create fictitious tenants in order to claim housing benefit. Others who own several properties form a conspiracy, and set out to defraud local authorities by arranging for fictitious tenants—or, indeed, real tenants using fictitious names—to move so rapidly from one of their properties to another that it is impossible for the local authority agents to pursue them effectively.

One problem is that local authorities are so strapped for cash that they may not prosecute even when they know that fraud has taken place. Gathering the evidence required for a successful prosecution puts a strain on their manpower. Too often, when a landlord has been detected committing a fraud, all that happens is that the payment is stopped and the landlord goes unpunished. The penalties introduced in the new clause would concentrate the minds of local authorities and of the landlords who seek to defraud the taxpayer.

The Government claim to be tough on crime, and the new clause simply apes the Government's own sentiments by introducing penalties to curb a problem that we all recognise as one of the utmost seriousness.

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

A claimant or a landlord can be guilty of this offence. The new clause deals only with the sentence. How can it be right to lay down a sentence of 12 years for landlords involved in organised fraud and one of seven years for claimants involved in a series of organised attacks on the benefit system? That is nothing but ludicrous.

Mr. Davies

With respect, we are dealing only with one new clause, which is aimed at landlords. Whether the matter should also be addressed in other ways is for the Minister to determine. It is for him to take the opportunity to table amendments at the appropriate time. If the Government wish to be tough on crime, they have an opportunity to demonstrate it.

4 pm

Mr. Frank Field (Birkenhead)

I should like to set the new clause in context. It is an extraordinary turn of events for the Minister to find himself in his current position. It must appear to the outside world that he is softer on crime by landlords than on crime by claimants.

Mr. Heald

The Bill contains eight solid measures to tackle landlord fraud. Is the hon. Gentleman denying that?

Mr. Field

No, I am not denying that. I await with anticipation the Minister's speech, in which I hope that he will put forward cogent arguments as to why the Government do not accept the new clause. I was merely warning him that, if he fails to do so, he will stand in the dock appearing to the public to have two standards—one for claimants and a gentler one for landlords, as the hon. Member for Littleborough and Saddleworth (Mr. Davies) has just said.

The debate has taken a surprising turn. When the Select Committee on Social Security began its investigations into fraud, it had two clear objectives. The first was to find ways of protecting the largest of public budgets from people who make fraudulent claims, either accidentally or on a more organised basis. It seemed to us inconceivable that the budget was not under attack. The second objective was to try to build a consensus in the House—such a consensus exists in the country—on fighting fraud. It appeared to us that the easiest way to build a consensus was to seek redress for the abuses by claimants and landlords.

One of the positive results of the report is the unanimity that has developed in the House on tackling social security fraud. Indeed, listening to what Ministers say, it becomes clear that the debate has so changed that Labour is now calling for tougher measures than those that the Government propose. That is the crux of the new clause. To answer the case cogently made by my hon. Friend the Member for Fife, Central (Mr. McLeish) and the hon. Member for Littleborough and Saddleworth, the Government must explain what measures in the Bill will fulfil the objectives of the new clause. If they fail to provide such an explanation, they will appear to voters to have two standards.

It would not be surprising if a large number of people thought that. Until the new consensus emerged in the House, it was all too easy for the Government to put over the message that fraud was a claimant issue, allowing people to think subliminally that it was a Labour problem, because Labour supporters were perpetrating the fraud. The Select Committee report suggested a more even-handed approach to the issue.

Labour has certainly adopted such an approach. We are as serious about rooting out individual abuse by claimants as about giving the authorities the most effective powers possible to counter landlord fraud. I wait with interest to find out how the Government will deal with that.

Let me pick up another issue that was touched upon earlier in the debate. Have we become more effective in trying to prevent social security fraud, and do we always pursue those who perpetrate it? In other words, do we have a system of incentives that encourages local authorities not only to prevent fraud, but actively to prosecute those who commit fraud and publicly bring them to justice? Many Opposition Members are worried that, although the present structure of incentives and penalties seeks to prevent fraudulent claims—that is important—local authorities do not always have the resources to prosecute those who perpetrate large-scale fraud.

I hope that the Minister will not join the Secretary of State in skating on thin ice and trying to get away with double standards to counter fraud. At present, we are prepared to throw the book at fraudulent claimants, but we tend to be much more careful in respect of landlords.

It may be true that fraudulent claimants get away with more money, but that is questionable. Nevertheless, there is no question that the largest individual acts of fraud are perpetrated by landlords, as it is much easier for them.

Mr. Heald

The hon. Gentleman should recognise that the offence that the Bill addresses is the same whether it is perpetrated by a landlord or a claimant. The new clause proposes that the sentence for a landlord should be 12 years rather than seven years. How does the hon. Gentleman square that with a difficulty that regularly arises when organised gangs who are not landlords attempt to attack the benefits system? Their criminality is just as serious as that of fraudulent landlords. In those circumstances, why should there not be equality?

Mr. Field

Indeed there should be equality. It is not too late for the Minister to table a manuscript amendment to that effect. We are anxious to make a distinction between fraud committed by individuals and that which is seriously organised by groups of people. The public are most concerned about that.

As I have said, it would be inconceivable if the largest budgets were not under attack by organised crime, yet many people make a distinction between that category of social security fraud and fraud that is committed by individuals. It is not that the public approve of that fraud, but it is quite clear that certain individuals commit fraud because their position in the labour market has been transformed in the past 10 years by the Government's massive extension of means-tested assistance.

Many such people keep quiet about the change in their circumstances because of the reduction in their personal income during that period. Although that is wrong and needs to be stopped, it is clearly different from the problem that the new clause seeks to address—landlord fraud and the groups of claimants to whom the Minister referred, who determinedly commit fraud against the public purse.

I sit down with considerable excitement. I hope to hear not only that the Government intend to accept our new clause, but whether they will table a manuscript amendment seeking to single out groups who are organising fraud in a similar way to landlords, and treat them the same as fraudulent landlords.

Mr. Ian Bruce (South Dorset)

I came into the debate to speak on subsequent amendments that excited me, but having listened to the hon. Member for Birkenhead (Mr. Field) express his excitement about waiting for my hon. Friend the Under-Secretary to get to his feet, I have become excited about how much new Labour has permeated the thoughts not only of the hon. Gentleman, who is one of the most knowledgable Members on social security matters, but the Liberal Democrats. It is extraordinary to see the web that is being woven. I am sure that Opposition Members are acting in an honourable way, but it is nonetheless an extraordinary way.

The Labour party has traditionally been against landlords. Socialists would always be attacking them. Labour is obviously trying to put down a marker for when it goes back to being old Labour and returns to its socialist roots. It is trying to set a trap for the Government, so that it will be able to claim on the hustings and in its election manifesto that it is the tough party on law and order. Opposition Members know very well that the new clause will not be accepted.

Mr. Field

The biggest landlords in the country are local authorities. The Opposition are as clear about preventing fraud among them as they are about preventing it among landlords in the private sector. There are no double standards on the Opposition Benches. It is interesting how standards are developing on the Conservative Benches. If we wait long enough before the excitement of the Under-Secretary's reply, we will no doubt see new Conservatism.

Mr. Bruce

One might have to wait an awful long time for new Conservatism. Conservatism is, of course, a very basic approach, to which we have been sticking through thick and thin, despite the Labour party trying to out-Conservative the Conservative party.

I was trying to expound what came through clearly from Opposition Members' speeches. Labour and Liberal Democrat Members are saying, "Here we have a wonderful opportunity through the new clause"—even if it is not voted on—"to say that we are the really tough group of people." Perhaps even the Ulster Unionists will be making such a claim, although I am sure that they are much too sensible to jump on the bandwagon.

I am glad to say that all of us in the House are very pleased to see the clampdown on fraud. I am sure that my hon. Friend the Under-Secretary will be able to tell us whether other offences, such as conspiracies to defraud, would put very large fraud into a category outside the Bill's remit.

Mr. Robert G. Hughes (Harrow, West)

In case my hon. Friend is misinterpreted, I should point out that, whereas the Labour Front Benchers and the Liberal Democrats are all over the place on the issue, the hon. Member for South Antrim (Mr. Forsythe), who serves on the Social Security Committee, knows precisely what he is talking about. He brings a great deal of wisdom and expertise to the Committee.

Mr. Bruce

I am grateful for the trailer for the hon. Gentleman's speech. I was very careful not to put him on one side of the web or the other. I am sure that he will speak for himself, and very ably.

We can clearly see the web that is being constructed. Labour Members are taking what they believe is a wonderful opportunity to say that they are tougher on crime than the Conservatives. One can see that entering their election manifestos immediately. I am tempted to suggest to my hon. Friend the Under-Secretary that he accepts the new clause.

Mr. Field

Ah, that is what we want.

Mr. Bruce

With a big smile on his face, the hon. Gentleman says that that is what Labour wants, but is that really sensible?

As many hon. Members know, I quite often speak about prisons—I am often invited on to television programmes to talk about the situation in them. There are two prisons in my constituency, and we might be getting a third. Labour and Liberal Democrat Members constantly tell me that long prison sentences do not work, and that the Government should be trying other measures.

If the new clause had been tabled by the Government, a Labour party spokesman would no doubt have told us about the wonders of community service orders in dealing with multiple fraud. Such is the nonsense that comes up. I really stood up to speak so that, when we see the election manifestos, people will be able to go to Hansard, and so understand what the Opposition were up to.

4.15 pm

Mr. Clifford Forsythe (South Antrim)

I sat through the Committee stage of the Bill, and well remember the debate there on this matter. I recall a suggestion from Opposition Members that they would leave the clause until it came to the Floor of the House, so as to give the Minister the opportunity to think the matter over and perhaps bring forward something acceptable to the Opposition.

Knowing the Bill, I have listened to the Minister and heard his point that people should not be treated differently, and that, if there is a penalty for doing something that is wrong, it should apply to everyone equally. Of course, there is the difficulty that the Minister himself raised when speaking about organised gangs.

If the Minister takes the view that those who are carrying out organised crimes should perhaps be treated differently, that could be extended to landlords, because, if they commit that sort of crime, it is arguable that a distinction should be made. While those who are receiving benefit personally might do something wrong through force of circumstances, it is arguable that, although the action is wrong, an allowance could be made because of the circumstances; whereas the Minister might consider that those who deliberately set out in an organised way to defraud the taxpayer should be treated differently.

Mr. Heald

My point is that measures in respect of conspiracy to defraud and offences under the Theft Act 1968 are adequate to deal with such cases, and that the offence we are debating has its own special place in the scheme of things.

Mr. Forsythe

I understand that, perhaps in a way that differs from the understanding of others on the Opposition Benches. I understand that the Government, and especially Ministers in the Department of Society Security, are anxious to reduce fraud in the system, and I praise them for that. What is debatable is whether the system that they are now introducing is sufficient.

Contrary to what the hon. Member for South Dorset (Mr. Bruce) said, I, as a member of a Committee, make up my mind on the basis of the debate, the argument and my instincts as to whether legislation is correct and will do what is it supposed to do. I do not want to frighten the Minister, but I shall listen carefully to what he says. I do not make up my mind beforehand.

Mr. Ian Bruce

I am listened carefully to the hon. Gentleman. I had not intended to paint him into a corner with other Opposition Members, but he seems to be going down the same route.

Let us imagine a case of organised fraud in which a massive fraud was organised by claimants—by people who were not landlords—who inveigled many landlords into taking part. If all the participants were prosecuted under the same Act, would it not be strange that the individual little landlords would be likely to receive a much higher sentence than the persons—the claimants—who did the massive organisation?

Mr. Forsythe

I think that the hon. Gentleman has misunderstood, or perhaps he has a preconceived notion of the road that I am going down. However, I think that the Minister understands exactly what I am saying. I am patiently trying to put the two sides of the argument and achieve a balance. I have not made up my mind, and I have not yet recommended to my hon. Friends how we should vote. But I shall listen carefully to the Minister.

I am a member of the Select Committee on Social Security, and I have listened to the evidence, as have others among my hon. Friends, so I shall be most interested to hear what the Minister has to say. The recommendation I make to my hon. Friends will be based on that, and on what has already been said.

Mr. Heald

We have heard distinguished comments by my hon. Friend the Member for South Dorset (Mr. Bruce) and by the hon. Member for South Antrim (Mr. Forsythe), and interesting and helpful comments by others who have spoken. We have also heard the hon. Member for Fife, Central (Mr. McLeish) putting the case for the Opposition.

However, I must start by saying that the new clause is really simply another attempt by Opposition Members to suggest that the Government and the Bill are in some way soft on landlord fraud. They are not. The reverse is true. Initiatives already in place, together with the measures in the Bill, amount to a 10-point plan to crack down on landlord fraud—

Mr. Frank Field

Will the Minister give way?

Mr. Heald

I should like to make a little progress first.

Mr. Field

On that precise point?

Mr. Heald

All right, then.

Mr. Field

The Minister has misread the situation. We relied on the people in the field who are countering fraud, both to help us choose the subject of our inquiry and to guide that inquiry. We did not come to the subject with views; we were not experts on it. The Bill follows many of the report's recommendations, and we are grateful for the Government's response. Those very people, who helped us to shape our inquiry and our report, suggested that we should investigate the area, and it is they who now suggest that the new clause is necessary. It is not a great game put up by the Opposition; it comes from the people who put us on to the issue in the first place.

Mr. Heald

As you will have noticed, Madam Speaker, I was in the process of criticising the Labour Front-Bench spokesman rather than the hon. Member for Birkenhead (Mr. Field). I am always complimentary about the Select Committee, because of the complimentary remarks that it in turn has made about my right hon. Friend the Secretary of State and his efforts in this context.

The 10-point plan contains new powers of entry for local authority investigators, which will enable them to enter landlords' business premises and to make inquiries about any person believed to be a benefit claimant or recipient. That new power will help in the fight against landlord fraud.

There are also new powers, where the local authority has grounds for suspecting impropriety or fraud, to require a landlord or agent receiving direct payments to give information about all the properties that he owns and controls. That is another strong measure in the battle against landlord fraud.

Thirdly, the new provision for the recovery of overpayments will discourage the type of fraud in which a landlord continues to receive benefit after a claimant has left the premises. It will do that by allowing for overpayment recoveries of benefit in respect of one tenant to be made from benefit paid direct to a landlord in respect of his other tenants. That is another strong measure in the battle against landlord fraud.

The ability of local authorities to exchange information should make multiple claims, which represent one of the most common landlord frauds, much more difficult.

The fifth measure will mean that crooked landlords will no longer be able to sit at home and use the postal redirection service to receive their ill-gotten gains. New powers in the Bill will enable the post office to return such post to the local authority that sent it, thus saving the taxpayer from landlord fraud.

The new benefit fraud inspectorate, using the powers provided in the Bill, will assist local authorities by making recommendations to improve their anti-fraud performance, which will include measures to tackle landlord fraud. The seventh measure is the new offence of dishonest representation or failure to disclose, which is intended to be used against serious fraudsters including landlords.

In addition, we announced in Committee that my right hon. Friend the Secretary of State intends to bring forward proposals for regulations as soon as practicable to enable local authorities to refuse or to terminate direct payments when an authority has reasonable grounds for doubting that the recipient—including a landlord—is a "fit and proper person". The Department of Social Security will make clear in guidance to local authorities that they do not have to make direct payments to landlords unless claimants are substantially in arrears with their rent. The new measures give local authorities powerful new tools to tighten up on crooked landlords and to combat serious frauds.

The eighth point is that the Government have made available £1 million in start-up money for the London organised fraud investigation team, which is designed to tackle serious landlord fraud in London. The team became operational in December 1996.

The ninth measure is the national roll-out of the housing benefit matching service, run by the Department. This began in November 1996, and is expected to be complete by 1998. It is able to match one local authority's housing benefit data with that held by other authorities, and with DSS benefit data. Discrepancies which point to suspect claims—including false representations by landlords—will be referred for investigation.

Where local authorities have information about landlords—for instance, those who have made false representations—this can be disclosed to other local authorities for the purposes of the prevention or detection of benefit fraud and checking the accuracy of housing benefit information under the new section 122E of the Social Security Administration Act 1992, which clause 3 introduces. This will help to stop multiple claims by landlords.

Mr. Alan Howarth (Stratford-on-Avon)

The Minister has been describing a number of initiatives involving data management that are already under way. Are those measures legitimate under existing law, or will the Bill put them on a sound basis ex post facto?

Mr. Heald

The existing data matching measures used by the Department are all covered by the legal regime under the Data Protection Act 1988, and they meet the terms of the European convention on human rights. The external data matching we carry out at present is limited to cases where there is evidence of fraud, and, in those circumstances, it is covered by the appropriate legislation. We are not approving something retrospectively, although the new powers will, of course, take us further in the data matching direction—something that the Select Committee recommended, and with which we agree.

Under the anti-fraud incentive scheme—the tenth measure—local authorities receive significant additional subsidy when they successfully tackle all types of benefit fraud—including fraud by landlords. Moreover, local authorities were awarded a further £6 million this year to finance a variety of anti-fraud projects. It is sometimes said that there is not enough Government money to help with these tasks, but local authorities earned £27.8 million in 1995–96 in additional subsidy for successfully tackling fraud. It is estimated that that figure will be higher this year. When looked at together, the measures produce a substantial package to deal with landlord fraud.

New clause 1 is a new variation on a familiar theme. In Committee, the Opposition sought to introduce an additional offence, which was intended to target dishonest behaviour by landlords in connection with multiple claims to housing benefit and council tax benefit, with a maximum penalty of ten years imprisonment. The Committee rejected that proposal. Yet we now have before us a new clause that seeks to top that by introducing a maximum of twelve years for certain types of landlord fraud.

I am pleased that, in tabling the new clause, the Opposition appear to have accepted my explanation that the offence in clause 13 applies equally to a landlord as to a claimant, and they no longer suggest that there should be a separate offence. I am disappointed that they continue to argue that landlord fraud is somehow inherently more serious than all other types of benefit fraud, including that committed by professional organised criminals.

The real question is whether a separate, more severe sentence is needed for landlords. As I said in Committee, the new offence in clause 13 is not the only basis for prosecuting landlords who commit serious fraud. They can also be prosecuted—and are in appropriate cases—under the Theft Act 1968 and for conspiracy. Conspiracy to defraud and a Theft Act offence both carry a maximum penalty of 10 years' imprisonment.

4.30 pm

I fail to see any justification for a maximum penalty of 12 years directed specifically at landlords. Landlord fraud is serious, particularly when it involves abuse of a position of trust, but 12 years is a higher penalty than that for many serious offences against the person, such as indecent assault, cruelty to children, causing death by dangerous driving, or causing death while under the influence of drink or drugs.

As I said in Committee, existing fraud offences for which there is a 10-year maximum sentence may involve multi-million-pound frauds or a particularly vulnerable victim, such as an old lady callously defrauded out of her life savings; yet new clause 1 would make a landlord who committed a serious fraud, but on a smaller scale and without aggravating circumstances, liable to 12 years in prison just because he was a landlord. The Opposition have failed to make a convincing case to show the need for such a severe maximum sentence.

The Court of Appeal has considered the range of sentences which it and the courts feel are appropriate for serious dishonesty in the benefits field, involving large sums of money and an element of breach of trust. Its guideline, which is established as a benchmark, is six years' imprisonment for contested trials in those circumstances. Above that benchmark, the courts have headroom to pass even more serious sentences in more serious cases. However, it is hard to see what a landlord acting as a landlord would have to do to merit a sentence of 12 years, which is double the benchmark.

In summary, landlord fraud is serious. The Bill introduces a range of practical measures that will help local authorities to investigate fraudulent landlords and bring them to justice. Landlords can be prosecuted under a range of tough offences, carrying maximum sentences of up to seven years under social security legislation and up to 10 years under the Theft Act 1968 and common law conspiracy. A separate, even more severe, sentence is just window dressing.

I shall now briefly explain the Government amendments. Clause 13 creates a new offence of dishonest representation for obtaining benefit. It covers dishonestly making a false representation, and dishonestly producing or furnishing false information, or causing or allowing another person to do so.

Social security frauds can continue for a long, time and involve very many false declarations. In the past, we have relied on specimen charges to reflect that criminality. However, in 1996, in the case of R v. Clark, the Court of Appeal ruled out that approach. The implication for social security fraud is that the court would be able to sentence only on the basis of the specimen offences, each of which relates to only one period of two weeks, instead of being able to take into account the individual's full criminality in relation to benefit fraud. This is totally inappropriate where a fraudster is a landlord or a professional criminal, and hundreds of payments may be involved.

We therefore need an offence—as serious as those under the Theft Act 1968—for those cases in which dishonest obtaining of benefit over a period is a direct consequence of a single false statement or failure to notify changes of circumstances, so that we can avoid having to charge for each girocheque obtained. This is intended to relate the entire dishonest overpayment to the person's initial false statement.

That new offence is intended to be, in effect, what may be regarded as a continuing offence: an offence that covers the continuing period of dishonest behaviour. The inclusion of the offence of dishonest failure to report a change of circumstances is intended to enable the offence to relate to the full overpayment consequences arising from the failure to report, instead of relying on a series of false representations thereafter to the effect that no change had taken place.

Clause 13 also makes it an offence for someone dishonestly to cause or allow another person to fail to notify a change of circumstances which regulations under the Social Security Administration Act 1992 require them to notify.

I hope that I have not trespassed on the House's good will in outlining those details, but it is important to have the reasons for the change clearly stated on the record.

The purpose of amendments Nos. 5 and 6 is to clear up any possible ambiguity in the reference to "him" in this subsection by making it clear that the "him" referred to is, in all cases, the person who is required by regulations to report the change of circumstances.

Clause 14 extends the existing provisions in section 112 of the Act to include the offence of failure, without reasonable excuse, to report a change of circumstances which regulations require to be reported. It will also be an offence for someone knowingly to cause or to allow another person to fail to notify such a change of circumstances.

Amendment No. 7 introduces a further test. The offence of "failing to notify" is being introduced to enforce the existing duty on beneficiaries to disclose a change of circumstances. Much social security fraud arises from omissions rather than acts of commission. That duty is laid on both claimants and, in certain circumstances, third parties.

The provision will catch, where appropriate, automated credit transfer cases where no declarations are made at the point when payments are received and where a landlord receiving direct payments of housing benefit fails in his duty to notify the local authority of a change. Such cases cannot easily be prosecuted under current legislation.

As I explained to the Committee, it is not the intention that failures to notify caused by a genuine mistake should be treated as cases of fraud and prosecuted. In a case where a person is genuinely unaware of the relevance of a change of circumstances, the intention is that the safeguard of "reasonable excuse" would apply, and that, ultimately, the courts would decide what that constituted. Additionally, the legislation would operate within the framework of the Department's prosecution policy, which is to prosecute only where prosecutions are clearly in the public interest.

We therefore believe that the defence of "reasonable excuse" provides all the safeguards needed, should proceedings be brought. Nevertheless, concerns were expressed in Committee, especially by the hon. Member for Southampton, Itchen (Mr. Denham), about the scope of the offence, particularly where it could be the underlying alleged offence for an offer of an administrative penalty under clause 15.

In practice, we would not expect a prosecution or an administrative penalty offer in a case where the claimant genuinely did not know that a change of circumstances needed to be reported. However, having reflected on the points made in Committee, the Government consider that it would increase confidence in the prosecution and penalty arrangements if the offence were amended to underline the policy intention.

The amendment therefore introduces an additional safeguard by adding to the offence of failing to notify the same test as applies elsewhere in section 112—that the person knows that he is required to notify the change of circumstances. That will ensure that only fraudsters can be offered penalties, and people who have simply made a mistake cannot be brought into the penalty regime. I hope that the amendment will allay the fears that were expressed.

I propose to retain the test of "reasonable excuse", for the reasons that I explained when the matter was discussed in Committee. I want to exclude, for example, someone who had had to go to hospital and had not notified the change, even though he knew that he should have made that notification.

Like the more serious offence in clause 13, clause 14 contains a reference to a third party causing or allowing another person to fail to notify a change of circumstances. As I explained in the introduction to the amendment to clause 13, there may be a possible ambiguity in the reference to "him". Amendment No. 7, therefore, in addition to introducing a test of knowledge, clears up that ambiguity by making it clear that the "him" referred to is, in all cases, the person who is required by regulations to report the change of circumstances.

In summary, therefore, I ask the House to reject new clause 1 and to accept Government amendments Nos. 5, 6 and 7.

Mr. McLeish

I am disappointed by the Government's response to new clause 1. In a sense, they have had three tests. First, we asked them to review the direct payments system and allow local authorities to stop direct payments to landlords if fraud was suspected. They refused to accept that suggestion. Secondly, in Committee we proposed the creation of a landlord register. They accepted the merits of that proposal, and came back with their own new clause.

Now we find that they will fail at the final hurdle, because this new clause has been concocted for the benefit of no one; it has been proposed so that this Parliament can say to landlords, "We shall simply not accept what you have been doing, and will crack down firmly with this new offence of landlord fraud." If the Government do not accept new clause 1, they are sending the wrong message to the country. That is why we hope that, as Conservative Members have suggested, there will be a consensus on being tough on the matter.

It is not right to say that organised criminal landlord fraud is exactly the same as an individual claimant defrauding the system. Both are fundamentally and utterly wrong, but the difference is the scale of fraud and the volume of expenditure involved in the case of private housing landlords. That is the key reason that we want the new clause to be accepted.

The Government have had their opportunity, but they have failed to accept new clause 1. We shall therefore divide the House.

Question put, That the clause be read a Second time:—

The House divided: Ayes 244, Noes 297.

Division No. 64]	[4.40 pm
AYES
Ainger, Nick	Cohen, Harry
Ainsworth, Robert (Cov'try NE)	Cook, Frank (Stockton N)
Allen, Graham	Corbett, Robin
Alton, David	Cousins, Jim
Anderson, Donald (Swansea E)	Cox, Tom
Anderson, Ms Janet (Ros'dale)	Cunningham, Jim (Cov'try SE)
Ashton, Joseph	Cunningham, Dr John
Austin-Walker, John	Dafis, Cynog
Banks, Tony (Newham NW)	Dalyell, Tam
Barnes, Harry	Darling, Alistair
Barron, Kevin	Davidson, Ian
Battle, John	Davies, Bryan (Oldham C)
Bayley, Hugh	Davies, Chris (Littleborough)
Beckett, Mrs Margaret	Davies, Ron (Caerphilly)
Bell, Stuart	Davis, Terry (B'ham Hodge H)
Benn, Tony	Denham, John
Bennett, Andrew F	Dewar, Donald
Benton, Joe	Dixon, Don
Bermingham, Gerald	Dobson, Frank
Berry, Roger	Donohoe, Brian H
Betts, Clive	Dowd, Jim
Blunkett, David	Dunwoody, Mrs Gwyneth
Boateng, Paul	Eagle, Ms Angela
Bradley, Keith	Eastham, Ken
Bray, Dr Jeremy	Ennis, Jeff
Brown, Nicholas (Newcastle E)	Etherington, Bill
Bruce, Malcolm (Gordon)	Evans, John (St Helens N)
Burden, Richard	Ewing, Mrs Margaret
Callaghan, Jim	Faulds, Andrew
Campbell, Mrs Anne (C'bridge)	Field, Frank (Birkenhead)
Campbell, Menzies (Fife NE)	Fisher, Mark
Campbell, Ronnie (Blyth V)	Flynn, Paul
Campbell-Savours, D N	Foster, Don (Bath)
Canavan, Dennis	Foulkes, George
Cann, Jamie	Fyfe, Mrs Maria
Chisholm, Malcolm	Galbraith, Sam
Clapham, Michael	Galloway, George
Clarke, Eric (Midlothian)	Gapes, Mike
Clelland, David	Garrett, John
Clwyd, Mrs Ann	George, Bruce
Coffey, Ms Ann	Gerrard, Neil

Gilbert, Dr John	Michie, Bill (Shef'ld Heeley)
Godman, Dr Norman A	Milburn, Alan
Golding, Mrs Llin	Miller, Andrew
Gordon, Ms Mildred	Mitchell, Austin (Gt Grimsby)
Graham, Thomas	Moonie, Dr Lewis
Griffiths, Nigel (Edinburgh S)	Morgan, Rhodri
Griffiths, Win (Bridgend)	Morley, Elliot
Grocott, Bruce	Morris, Ms Estelle (B'ham Yardley)
Gunnell, John	Morris, John (Aberavon)
Hain, Peter	Mowlam, Ms Marjorie
Hall, Mike	Mudie, George
Hardy, Peter	Mullin, Chris
Harman, Ms Harriet	Murphy, Paul
Hill, Keith (Streatham)	Oakes, Gordon
Hinchliffe, David	O'Brien, Mike (N Warks)
Hodge, Ms Margaret	O'Brien, William (Normanton)
Hogg, Norman (Cumbernauld)	O'Hara, Edward
Home Robertson, John	Olner, Bill
Hood, Jimmy	O'Neill, Martin
Hoon, Geoffrey	Orme, Stanley
Howarth, Alan (Stratf'd-on-A)	Pearson, Ian
Howarth, George (Knowsley N)	Pendry, Tom
Howells, Dr Kim	Pickthall, Colin
Hoyle, Doug	Pike, Peter L
Hughes, Kevin (Doncaster N)	Powell, Sir Raymond (Ogmore)
Hughes, Robert (Ab'd'n N)	Prentice, Gordon (Pendle)
Hughes, Roy (Newport E)	Prescott John
Hughes, Simon (Southwark)	Primarolo, Ms Dawn
Hutton, John	Purchase, Ken
Illsley, Eric	Quin, Ms Joyce
Ingram, Adam	Radice, Giles
Jackson, Ms Glenda (Hampst'd)	Randall, Stuart
Jamieson, David	Raynsford, Nick
Janner, Greville	Reid, Dr John
Jenkins, Brian D (SE Staffs)	Rendel, David
Jones, Barry (Alyn & D'side)	Robertson, George (Hamilton)
Jones, Ieuan Wyn (Ynys Môn)	Roche, Mrs Barbara
Jones, Jon Owen (Cardiff C)	Rogers, Allan
Jones, Dr L (B'ham Selly Oak)	Rooker, Jeff
Jones, Martyn (Clwyd SW)	Rooney, Terry
Jones, Nigel (Cheltenham)	Ross, Ernie (Dundee W)
Jowell, Ms Tessa	Rowlands, Ted
Kaufman, Gerald	Ruddock, Ms Joan
Kennedy, Charles (Ross C & S)	Sedgemore, Brian
Kennedy, Mrs Jane (Broadgreen)	Sheerman, Barry
Khabra, Piara S	Sheldon, Robert
Kilfoyle, Peter	Shore, Peter
Lestor, Miss Joan (Eccles)	Short, Clare
Lewis, Terry	Simpson, Alan
Liddell, Mrs Helen	Skinner, Dennis
Litherland, Robert	Smith, Chris (Islington S)
Livingstone, Ken	Smith, Llew (Blaenau Gwent)
Lloyd, Tony (Stretf'd)	Snape, Peter
Llwyd, Elfyn	Soley, Clive
Loyden, Eddie	Spearing, Nigel
McAllion, John	Spellar, John
McAvoy, Thomas	Squire, Ms R (Dunfermline W)
Macdonald, Calum	Steel, Sir David
McFall, John	Steinberg, Gerry
McKelvey, William	Stevenson, George
Mackinlay, Andrew	Straw, Jack
McLeish, Henry	Sutcliffe, Gerry
McNamara, Kevin	Taylor, Mrs Ann (Dewsbury)
MacShane, Denis	Taylor, Matthew (Truro)
Madden, Max	Thompson, Jack (Wansbeck)
Maddock, Mrs Diana	Thurnham, Peter
Mahon, Mrs Alice	Timms, Stephen
Mandelson, Peter	Tipping, Paddy
Marshall, David (Shettleston)	Touhig, Don
Marshall, Jim (Leicester S)	Trickett, Jon
Martin, Michael J (Springburn)	Turner, Dennis
Martlew, Eric	Tyler, Paul
Maxton, John	Vaz, Keith
Meacher, Michael	Walker, Sir Harold
Meale, Alan	Wallace, James
Michael, Alun	Wardell, Gareth (Gower)

Wareing, Robert N	Wise, Mrs Audrey
Watson, Mike	Wray, Jimmy
Wicks, Malcolm	Wright, Dr Tony
Wigley, Dafydd
Williams, Alan (Swansea W)	Tellers for the Ayes:
Williams, Alan W (Carmarthen)	Mr. Greg Pope and
Winnick, David	Mr. John Cummings.
NOES
Ainsworth, Peter (E Surrey)	Dicks, Terry
Aitken, Jonathan	Dorrell, Stephen
Alexander, Richard	Douglas-Hamilton, Lord James
Alison, Michael (Selby)	Dover, Den
Allason, Rupert (Torbay)	Duncan, Alan
Amess, David	Duncan Smith, Iain
Arbuthnot, James	Dunn, Bob
Arnold, Jacques (Gravesham)	Durant, Sir Anthony
Atkinson, David (Bour'mth E)	Dykes, Hugh
Atkinson, Peter (Hexham)	Eggar, Tim
Baker, Kenneth (Mole V)	Elletson, Harold
Baldry, Tony	Emery, Sir Peter
Banks, Matthew (Southport)	Evans, David (Welwyn Hatf'ld)
Banks, Robert (Harrogate)	Evans, Jonathan (Brecon)
Bates, Michael	Evans, Nigel (Ribble V)
Batiste, Spencer	Evans, Roger (Monmouth)
Beggs, Roy	Evennett, David
Bellingham, Henry	Faber, David
Bendall, Vivian	Fabricant, Michael
Beresford, Sir Paul	Fenner, Dame Peggy
Biffen, John	Field, Barry (Isle of Wight)
Body, Sir Richard	Fishburn, Dudley
Bonsor, Sir Nicholas	Forman, Nigel
Booth, Hartley	Forsyth, Michael (Stirling)
Boswell, Tim	Forsythe, Clifford (S Antrim)
Bottomley, Mrs Virginia	Forth, Eric
Bowden, Sir Andrew	Fox, Dr Liam (Woodspring)
Bowis, John	Fox, Sir Marcus (Shipley)
Boyson, Sir Rhodes	Freeman, Roger
Brandreth, Gyles	French, Douglas
Brazier, Julian	Fry, Sir Peter
Bright, Sir Graham	Gale, Roger
Brooke, Peter	Gallie, Phil
Brown, Michael (Brigg Cl'thorpes)	Gardiner, Sir George
Browning, Mrs Angela	Garel-Jones, Tristan
Bruce, Ian (S Dorset)	Garnier, Edward
Budgen, Nicholas	Gill, Christopher
Burns, Simon	Gillan, Mrs Cheryl
Burt, Alistair	Goodlad, Alastair
Butler, Peter	Goodson-Wickes, Dr Charles
Butterfill, John	Gorst, Sir John
Carlisle, John (Luton N)	Grant, Sir Anthony (SW Cambs)
Carlisle, Sir Kenneth (Linc'n)	Greenway, Harry (Ealing N)
Carrington, Matthew	Greenway, John (Ryedale)
Carttiss, Michael	Griffiths, Peter (Portsmouth N)
Cash, William	Grylls, Sir Michael
Channon, Paul	Gummer, John
Chapman, Sir Sydney	Hague, William
Clappison, James	Hamilton, Sir Archibald
Clark, Dr Michael (Rochf'd)	Hamilton, Neil (Tatton)
Clarke, Kenneth (Rushcliffe)	Hampson, Dr Keith
Clifton-Brown, Geoffrey	Hanley, Jeremy
Colvin, Michael	Hannam, Sir John
Congdon, David	Hargreaves, Andrew
Conway, Derek	Harris, David
Coombs, Anthony (Wyre F)	Haselhurst, Sir Alan
Coombs, Simon (Swindon)	Hawkins, Nick
Cope, Sir John	Hawksley, Warren
Cormack, Sir Patrick	Hayes, Jerry
Cran, James	Heald, Oliver
Currie, Mrs Edwina	Heath, Sir Edward
Curry, David	Heathcoat-Amory, David
Davies, Quentin (Stamf'd)	Hendry, Charles
Davis, David (Boothferry)	Heseltine, Michael
Day, Stephen	Hicks, Sir Robert
Deva, Nirj Joseph	Higgins, Sir Terence
Devlin, Tim	Hogg, Douglas (Grantham)

Horam, John	Pattie, Sir Geoffrey
Howard, Michael	Pawsey, James
Howell, David (Guildf'd)	Peacock, Mrs Elizabeth
Howell, Sir Ralph (N Norfolk)	Pickles, Eric
Hughes, Robert G (Harrow W)	Porter, David
Hunt, David (Wirral W)	Portilio, Michael
Hunt, Sir John (Ravensb'ne)	Powell, William (Corby)
Hunter, Andrew	Rathbone, Tim
Hurd, Douglas	Redwood, John
Jack, Michael	Renton, Tim
Jackson, Robert (Wantage)	Richards, Rod
Jenkin, Bernard (Colchester N)	Riddick, Graham
Jessel, Toby	Rifkind, Malcolm
Johnson Smith, Sir Geoffrey	Robathan, Andrew
Jones, Gwilym (Cardiff N)	Roberts, Sir Wyn
Jones, Robert B (W Herts)	Robertson, Raymond S (Ab'd'n S)
Jopling, Michael	Robinson, Mark (Somerton)
Kellett-Bowman, Dame Elaine	Roe, Mrs Marion
Key, Robert	Rowe, Andrew
King, Tom	Rumbold, Dame Angela
Kirkhope, Timothy	Ryder, Richard
Knapman, Roger	Sackville, Tom
Knight, Mrs Angela (Erewash)	Sainsbury, Sir Timothy
Knight, Greg (Derby N)	Scott, Sir Nicholas
Knight, Dame Jill (Edgbaston)	Shaw, David (Dover)
Knox, Sir David	Shaw, Sir Giles (Pudsey)
Kynoch, George	Shephard, Mrs Gillian
Lait, Mrs Jacqui	Shepherd, Richard (Aldridge)
Lamont, Norman	Shersby, Sir Michael
Lang, Ian	Sims, Sir Roger
Lawrence, Sir Ivan	Skeet, Sir Trevor
Legg, Barry	Smith, Sir Dudley (Warwick)
Leigh, Edward	Smith, Tim (Beaconsf'ld)
Lennox-Boyd, Sir Mark	Soames, Nicholas
Lester, Sir Jim (Broxtowe)	Speed, Sir Keith
Lidington, David	Spencer, Sir Derek
Lilley, Peter	Spicer, Sir Jim (W Dorset)
Lloyd, Sir Peter (Fareham)	Spicer, Sir Michael (S Worcs)
Lord, Michael	Spink, Dr Robert
Luff, Peter	Spring, Richard
Lyell, Sir Nicholas	Sproat, Iain
MacGregor, John	Squire, Robin (Hornchurch)
MacKay, Andrew	Stanley, Sir John
Maclean, David	Steen, Anthony
McLoughlin, Patrick	Stern, Michael
McNair-Wilson, Sir Patrick	Stewart, Allan
Madel, Sir David	Streeter, Gary
Maitland, Lady Olga	Sumberg, David
Malone, Gerald	Sweeney, Walter
Mans, Keith	Sykes, John
Marland, Paul	Tapsell, Sir Peter
Marlow, Tony	Taylor, Ian (Esher)
Marshall, John (Hendon S)	Taylor, John M (Solihull)
Marshall, Sir Michael (Arundel)	Temple-Morris, Peter
Mates, Michael	Thompson, Sir Donald (Calder V)
Mellor, David	Thompson, Patrick (Norwich N)
Merchant, Piers	Thornton, Sir Malcolm
Mitchell, Andrew (Gedling)	Townend, John (Bridlington)
Mitchell, Sir David (NW Hants)	Townsend, Sir Cyril (Bexl'yh'th)
Moate, Sir Roger	Tracey, Richard
Monro, Sir Hector	Tredinnick, David
Montgomery, Sir Fergus	Trend, Michael
Needham, Richard	Trotter, Neville
Nelson, Anthony	Twinn, Dr Ian
Neubert, Sir Michael	Vaughan, Sir Gerard
Newton, Tony	Waldegrave, William
Nicholls, Patrick	Walden, George
Nicholson, David (Taunton)	Walker, Bill (N Tayside)
Norris, Steve	Waller, Gary
Onslow, Sir Cranley	Ward, John
Oppenheim, Phillip	Wardle, Charles (Bexhill)
Ottaway, Richard	Waterson, Nigel
Page, Richard	Watts, John
Paice, James	Wheeler, Sir John
Patnick, Sir Irvine	Whitney, Sir Raymond
Patten, John	Whittingdale, John

Widdecombe, Miss Ann	Wolfson, Mark
Wiggin, Sir Jerry	Wood, Timothy
Wilkinson, John	Yeo, Tim
Willetts, David	Young, Sir George
Wilshire, David	Tellers for the Noes:
Winterton, Mrs Ann (Congleton)	Mr. Bowen Wells and
Winterton, Nicholas (Macclesf'ld)	Mr. Sebastian Coe.

Question accordingly negatived.