Housing Benefit Fraud (Hansard, 18 April 2000)

Lord Campbell of Croy
asked Her Majesty's Government:
Whether, in order to reduce fraud, they will in future require all local authorities to arrange with the Post Office for housing benefit correspondence not to be redirected to other addresses, as already arranged in the present voluntary scheme.

§ The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham)
My Lords, the powers we inherited in the March 1997 Fraud Act do not allow us to compel local authorities, even if that were desirable. However, 272 local authorities have now adopted the scheme; most of the rest should do so shortly.

Lord Campbell of Croy
My Lords, I am grateful to the noble Baroness for her reply, which is encouraging. As the Chancellor of the Exchequer announced a severe crackdown on welfare fraud, why do not the Government get tough on housing benefit deception, which is known to be widespread, instead of concentrating on changes to disablement benefits? The noble Baroness has confirmed more than once in this House that there is very little fraud in relation to the claiming of disability benefit.

§ Baroness Hollis of Heigham
My Lords, I am happy to confirm again that there is little or no evidence of fraud in relation to disability benefit. A great deal of error occurs in payment primarily because, fortunately, people get better and, as a result, they should be in receipt of less disability benefit. However, they do not always report the change in circumstance and therefore continue to misdraw that benefit.
The noble Lord is right that serious fraud takes place in relation to housing benefit. Fraud, or a strong suspicion of fraud, is responsible for the loss of around £840 million in that regard. One in six housing benefit claims is probably paid in error. We are tackling this situation in three ways. We are building a verification framework with local authorities to ensure that fraud is, as far as possible, built out of the system at the point of the original claim. Secondly, given that most errors occur after the initial claim when people's circumstances change, we are aiming for a weekly benefit savings scheme with local authorities so that they have an incentive to eradicate and prosecute fraud. Thirdly, we are going for the "Do not redirect" procedures with the Royal Mail. So we have a strategy in place. We hope that, as a result, we will see a significant reduction in housing benefit fraud.

§ Baroness Maddock
My Lords, I believe that there is general agreement that the complexity of the housing benefit system is what makes tackling fraud so difficult. Indeed, the Minister's Answer this afternoon demonstrated that fact. In view of that difficulty, can the noble Baroness tell the House how the 555 Government calculate the level of housing benefit fraud and other fraud; in other words, can she give us a figure in that respect?

§ Baroness Hollis of Heigham
My Lords, the noble Baroness is absolutely right. It is very difficult to put a figure on fraud that has not yet been uncovered. One has to multiply it by the number of weeks that it would have continued had one not intervened and stopped it. More generally, we believe that benefit fraud runs between £2 billion and £4 billion a year and if, we include cases where there is mild suspicion of fraud, we believe the figure to be £7 billion.
Housing benefit fraud runs at about £840 million, but there is a 30 per cent possibility of error either way. As the noble Baroness said, our difficulty is that we do not know the level of fraud that we have failed to uncover. However, from talking to experienced investigators, that is the best estimate available. It is certainly supported by the research report of 1997–98 on housing benefit accuracy. I agree that the statistics are flaky and that they should carry a health warning.

§ Baroness Gardner of Parkes
My Lords, can the Minister comment on the logistics involved? I understood that correspondence regarding housing benefit is not meant to identify that fact on the envelope, so as not to embarrass the recipient. Therefore, if local authorities are to instruct the Post Office not to re-direct such correspondence, how can they mark such correspondence so as to ensure that it is not re-directed?

§ Baroness Hollis of Heigham
My Lords, the noble Baroness has put her finger on one of the reasons that so many local authorities have been slow to take up the "Do not re-direct" scheme. It means that they have to separate their housing benefit mail from the rest of their correspondence. But, basically, with the aid of government grant—indeed, this is entirely funded by the DSS, with £350,000 a year being spent on new envelopes—local authorities must have a "return to sender" address printed which allows the envelopes to be returned. However, even where local authorities are using their best efforts to ensure that housing benefit giros are returned to them, all the evidence suggests that it is likely that the Post Office fails to intercept perhaps 50 per cent of such correspondence.

§ Lord Higgins
My Lords, can the Minister say whether or not the original envelopes are identifiable as such?

§ Baroness Hollis of Heigham
My Lords, they come from the local authority's housing section and will have a "return to sender" address printed on the front. However, local authorities print their own envelopes and, therefore, every set of envelopes from each local authority can be different. There is no standard envelope in use across the system. Local authorities take responsibility for this because they have different forms and they may wish to include different information in the correspondence; for example, they 556 may wish to include council tax benefit, and so on. I am afraid that that is one of the problems which arise when working with a pluralist regime.

§ Lord Rotherwick
My Lords, can the Minister say whether or not it would be possible to have a common envelope that could be printed by the Government so as to solve this problem?

§ Baroness Hollis of Heigham
My Lords, I suppose so. At present, every local authority has its own envelope which may contain different types of information. But, given the fact that this is a matter of concern to your Lordships, I shall ask my colleagues to mention this suggestion at the next meeting with local authority associations to ascertain whether this is an avenue that should be pursued. However, once all local authorities are in the scheme, we have no reason to believe that this should not effectively help us to reduce fraud by some £5 million a year.