Fraud (Hansard, 7 December 1977)

§ Mr. Orme

I welcome this opportunity to make a further statement.

The problem of social security fraud needs to be kept in perspective. Our comprehensive social security system now processes about 25 million new claims and pays out nearly £13,000 million in benefits each year. It makes 21 million payments each week, going to 14 million families and single people. Payments of pensions and child benefit account for about three quarters of these payments.

In a system operating on this vast scale the processes of claiming and payment must be geared to the needs of the overwhelming majority of beneficiaries, who are entirely honest. We already have problems of take-up, with many people failing to claim benefits to which they are entitled. We identified a figure of £2.6 million as the amount lost through fraud in 1975–76—about 1½p in every £50 we paid. But, according to an estimate by the Supplementary Benefits Commission, the amount of unclaimed supplementary benefit is perhaps 100 times greater than this. Though we cannot measure how much fraud may go undetected, there is no evidence at all that it accounts for more than a tiny fraction of the money we pay, and I will not countenance oppressive procedures which would hinder genuine and needy people from getting the benefits to which they are fully entitled.

Nevertheless, this Government have always accepted that proper preventive measures and counter-measures must be taken against the fraud which does arise. In July 1976 my right hon. Friend asked me to review the adequacy of our measures, and in previous statements I have outlined the action plan on which my officials, in close collaboration with those of my right hon. Friend the Secre- 746W tary of State for Employment, have been working. In reply to my hon. Friend the Member for Oldham, East (Mr. Lamond) on 17th February 1977 I said that we were giving high priority to the completion of the first phase of these studies and intended to implement measures arising from them as quickly as we could.

I have now received a report on these matters from officials, and, in view of the general interest about this important subject and this Administration's policy of more open government, I am taking the unusual step of placing a copy of this report in the Library of the House. The report records, among other developments:

(a) a substantial redeployment of local office staff to tackle fraud, from some 600 man-years—including part-time duties—in September 1975 to about 900 by April 1977. There has also been an increase of about 65 in the number of fraud specialists based at our regional offices, and of 25 at Headquarters;
(b) a complete revision of our training arrangements for fraud specialists, with the introduction both of a programmed learning booklet and a centralised course, using closed-circuit television, on the techniques of interviewing;
(c) the preparation of new and better guidance for our investigators;
(d) studies of comparative performance in investigating and prosecuting fraud, so that regions of my Department and the Department of Employment have managed, by a combination of better quality investigation and a more positive approach, to increase the proportion of suspected fraud cases which are prosecuted—from less than 30 per cent. in 1970 to more than 42 per cent. in 1976;
(e) more vigorous measures now being taken to recover compensation through the courts from claimants who have gained by fraud;
(f) some major successes against organised criminals who attempt, whether by theft, forgery or trafficking, to exploit our payment system; during 1976, 70 such criminals were tried and all were convicted, with sentences of up to seven years' imprisonment;
(g) the full involvement of line-management in the fight against fraud, and general agreement on the most effective organisational arrangements for tackling fraud.

The report shows that, as a result of these developments, the number of prosecutions for social security offences has continued to grow rapidly. It doubled between 1970 and 1975—from 7,700 to 15,400; increased by a further quarter in 1976 to 19,063; and on the first nine months' figures for 1977 is likely to grow 747W by another 30 per cent. to about 24,500. This increase has not been achieved by indiscriminate methods: the two Departments still gain convictions in some 98 per cent. of the cases they prosecute. I am also satisfied that the increase stems from our more vigorous approach rather than from an increase in the amount of underlying fraud.

However, my main objective remains to prevent fraud rather than prosecute ever-increasing numbers of offenders. I accept that as a short-term response we must identify and prosecute fraud, but higher figures of prosecutions are not an end in themselves. I have, therefore, insisted that still more emphasis must be given to using the knowledge we gain about fraud to prevent or reduce the opportunities for similar frauds in the future. The report records a great deal of effort to this end. During the past year we have: (h) issued to all our local offices a "fraud awareness" package which, by visual aids and examples, illustrates the main kinds of fraud used to exploit the social security scheme; this package has been used as the basis of a widespread training programme which has been very well received by benefit staff; (i) introduced selective improvements into our payments system which, while not unduly inconveniencing genuine claimants, should make social security fraud more difficult. Measures have included the redesign of order books and Girocheques to include additional safeguards, better arrangements for the physical security of order books and Girocheques, a better flow of information to enable management to identify and respond to problem areas, and selective improvements in payment procedures where a positive risk of fraud has been identified.

In previous statements I have stressed the Government's determination to tackle the problem of the collusive employer who, in order to avoid his own social security contributions and, perhaps, pay sub-market wage rates, employs and enables social security claimants to work "on the side". The report discusses this problem in detail, and after suggesting some useful administrative improvements and experimental schemes which can be launched immediately—and which, I hope, will have an impact on the problem—goes on to discuss more fundamental measures which would need legislation. Among these possibilities are a new offence directed specifically at the collusive employer and greater rights of recovery of overpayment of social 748W security benefit from such collusive employers. I will carefully consider these proposals, and any strengthening of the powers of our investigators that may be needed to reinforce them. But before deciding on them I shall be glad to consider any comments hon. Members or others may care to make.

My right hon. Friend and I do not intend to relax our Department's attack on social security fraud, and I am making the report available to make clear the effort we are putting into this. I would like to take this opportunity to express my thanks to the staff of the Department who have responded so efficiently to my request for better anti-fraud measures. While benefit staff have played their part by their alertness to fraud risks, particular credit must go to the specialist staff, in local and regional offices, who have borne the brunt of the great increase in investigative work.

The report is a record of solid achievement, and it makes clear that we have acted throughout with a proper concern for the interests of the vast majority of honest claimants.

I hope that its publication will help to keep this matter in proper perspective, as the Government has sought to do.