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5.24 pm
Mr. Bernard Jenkin (Colchester, North): There is no real disparity of intent or objective between the hon. Member for Birkenhead (Mr. Field) and my right hon. Friend the Secretary of State. Indeed, the principal purpose of the rhetoric adopted by our report was to encourage vigilance and to test assumptions. I make no apology to my right hon. Friend for being part of the exercise to challenge things that are currently accepted as true, to test the validity of arguments and to come up with new ideas.
I wish to point out the place of the figure of £2 billion in that report. It does not appear in any written evidence that we received. Although it features in our findings, it does not appear in the relevant paragraphs to which the summary of findings refers. The figure of £2 billion was not even uttered by the man who gave evidence when it entered the debate.
The figure of £2 billion came from the hon. Member and my former hon. Friend--I use the word "former" in the merely technical sense--the Member for Stratford-on-Avon (Mr. Howarth). On page 56 of the evidence, the hon. Gentleman himself extrapolated the figure from comments made by Mr. Webster of the Local Authority Investigation Officers Group, saying:
As my right hon. Friend the Secretary of State also said, if one extrapolates to the entire United Kingdom figures from one of the worst boroughs, which is targeting some of the worst properties in London, one might reach such a figure. Until we have harder and firmer evidence, it would be irresponsible to base policy on that extrapolated figure. Yet that is exactly what the hon. Member for Islington, South and Finsbury (Mr. Smith) has done. He has changed his whole policy as a result of that extrapolation by one of his hon. Friends, not even uttered by the witness who was being interviewed at the time.
Mr. Chris Smith:
I note that it is in paragraphs 49 to 51 of the Select Committee report that the figure of£2 billion is adumbrated. I have never endorsed that figure as a specific figure, but the hon. Gentleman suggests that I have for the purposes of his argument. I notice in the proceedings of the Committee an item that says:
Mr. Jenkin:
The hon. Gentleman's problem is that he cannot see the difference between a speculative guess, used tentatively to highlight the potential for fraud, based on what one witness said, and a hard and fast figure. Although he says that he has never endorsed the figure, he appears to have adjusted his party's policy on the basis that it is gospel. That is nothing short of hypocrisy--if I may use that term.
Mr. David Shaw (Dover):
Does my hon. Friend accept from me, as a fellow member of the Social Security Select Committee, that what we were trying to do was to come up with an order of magnitude of fraud in relation to total housing benefit of £10 billion? We were considering the possibility that fraud might be higher than the £1 billion that many people were accepting, and whether it could be as high as £2 billion. We were trying to consider all the implications of that in relation to a total figure of about £10 billion, but in my view we never said that it was a hard and fast figure that could be relied upon. We were simply trying to ensure that it was not £3 billion,£4 billion, £5 billion, £6 billion, £7 billion, £8 billion or£9 billion.
Mr. Jenkin:
With some qualifications, I agree with my hon. Friend. The important reason for including the figure in the report was to attract attention to the problem of social security fraud, to encourage vigilance and to encourage a questioning and exploratory attitude. My right hon. Friend the Secretary of State has exemplified such an attitude in his quest to deal with the problem of
Mr. Frank Field:
Would it not help us to gather evidence, and thereby help the debate, if the Secretary of State gave the Select Committee some challenge money, so that, for example, we could study the hon. Gentleman's constituency to discover the extent of fraud there, and study my constituency and four others with different characteristics throughout the country? Then we would be in a better position to know whether the problem is localised, as the hon. Gentleman would say, in bad authorities, or whether the bad people are evenly spread throughout the country.
Mr. Jenkin:
I think the hon. Gentleman is trying to bribe me with my own Government's money. Of course I very much like the idea of the Select Committee on which I serve becoming an agency of the Government, but that would be contrary to the spirit of independence of Select Committees from the Executive, and it would be a precedent-setting event if such a thing were to occur.
Nevertheless, I very much hope that my right hon. Friend the Secretary of State listened to what the hon. Gentleman said in his speech about the type of survey evidence that is necessary. Surveys are cheap compared to the costs of social security fraud, and I very much hope that, specifically, survey evidence on the security of the national insurance number system might be undertaken, to give confidence in the system if confidence is due and to expose how we might better police the system if that proves necessary. The questions have been asked, and surely it is the Government's duty to ensure that we have either confidence or action.
Mr. Barry Field (Isle of Wight):
My hon. Friend, serving on the Select Committee, has vastly more knowledge of this complicated subject than I do. When the continuing spotlight programme on benefit fraud is introduced to constituencies such as mine, which has finite boundaries, if its results are known, it should surely be possible to extrapolate from those figures a figure per thousand benefit claimants. Surely that would not be a million miles, statistically, from the reality.
Mr. Jenkin:
I think that that is right, depending on the nature of the area surveyed. The important thing about my right hon. Friend the Secretary of State's survey of housing benefit fraud, which included 5,000 respondents, was that it was based on a genuinely random sample, not selected from one specific authority. The survey was genuinely investigative; the strings were pulled until the investigators found what was on the end of them. Therefore, it could reasonably be taken to be a fair picture of social security fraud--at least, the fairest concrete picture that is as yet available to us. It produced the figure of £1 billion, on which it is prudent to base policy, not a more inflated figure, which was speculative and was included in our report to promote debate and questioning rather than as a basis for policy and recommendations.
Mr. Barry Field:
There does not seem to be, in the Select Committee, or across the Floor of the House, much disagreement about the fact that housing benefit is one of the major areas of fraud and that there has been tremendous growth in the payment of that benefit. Has the Select Committee considered the possibility of making direct payments the norm, on the basis that landlords own fixed assets so they are not transient and do not move around? One might have a starred service for the better landlords, to whom direct payment was made.
Instead, that is currently at the discretion of the local authority. In the Isle of Wight, we had a very good system. Now that we have a unitary authority, it has scrapped it and returned to paying the money to tenants, who are often vulnerable and on the move. That is where a great problem occurs with the type of fraud that I am sure the Select Committee has considered.
Mr. Jenkin:
Whether the local authority pays housing benefit direct to the tenant or direct to the landlord, it is obviously essential that there should be an actual building and a real tenant with a genuine national insurance number and a genuine basis for a housing benefit claim, that the amounts claimed should be the amounts that are required and fairly due in rent, and that there should be no skimming off in between.
I do not know whether it is possible or desirable to make it the norm to pay the landlord rather than the tenant, because very often the tenant might pay at a slightly different time from when the landlord expects the rent. I think that that matter should be at the discretion of local authorities, although I am interested to know what my hon. Friend the Under-Secretary of State for Social Security, the hon. Member for North Hertfordshire(Mr. Heald), might say about the suggestion when he replies to the debate.
I was pleased to support the report because it encourages the questioning attitude that I have discussed, but I was especially pleased with the Government's pretty generous response to that report. Of 33 recommendations--I notice the hon. Member for Islington, South and Finsbury sniggering--only six were totally rejected. Eleven were fully accepted, eight were partly accepted and six are still under consideration. That is not a bad record of influence for a Select Committee--certainly not one to be sneered at, or one to suggest that the Government are resistant to many of our suggestions.
One recommendation is vital for combating that type of fraud, or frauds where there are technical breaches or technical impersonation, where the statutory requirements of the payment of benefit are being manufactured. I refer to on-line data matching. The private sector uses vast computer systems to handle vast numbers of transactions. The banking automated transfer system must handle a huge number of transactions; and the credit card companies use a single processing centre located in the constituency of my hon. Friend the Member for Basildon (Mr. Amess).
It should therefore be possible, once it has been decided what to pay and whom to pay it to, to put all the information into a single live database system, so that anyone can look up a national insurance number and see what is coming in and what is going out--including all benefits. That must be the objective. The Secretary of State has kindly accepted it as such, but has refrained from issuing a timetable for its implementation.
I wish to press the Minister on one point: there should be a target date for putting all receipts of national insurance and all payments of insured and uninsured benefits on one computer system, so that people can see, at the flick of a switch, what is going on in individual accounts. That is why we recommended that people should be sent an account of their national insurance contributions and claims at least once a year--so that they can see for themselves what is being paid in and what they are claiming. If someone who should not be claiming has been claiming, that would quickly become apparent, and we would gain a great deal of information about false claims for insured benefits.
I understand the Government's reticence about pursuing this recommendation. As soon as we start sending people information of this kind, many of them will of course write in for further information, and supplying it will cost the Government a great deal of money. That, however, is not a reason in the long term for not setting up such a system. People increasingly believe that they have a right to such information. They feel a sense of ownership, in terms of what they have contributed to the national insurance system. If we are not prepared to reinforce people's sense of ownership, that will serve merely to underline another fraudulent aspect of the system, which is the fact that people's contributions are really just another form of tax to be distributed by the Government at their own behest, for their own convenience and for their own purposes. All we are really buying in return for our contributions, runs this argument, are the promises of future Governments, which will not necessarily be honoured.
The hon. Member for Birkenhead touched briefly on the wider nature of social security fraud, but the Select Committee dealt extensively with that matter in its report, published on 1 November 1995, on the work of the Department of Social Security and its agencies. The worst fraud perpetrated on beneficiaries of the system lies not in the encouragement to falsify, lie and defraud in a technical sense but in the system's perverse incentives to adjust one's circumstances in such a way that one becomes genuinely eligible for benefits. That is the most corrupting aspect of the system.
It should come as no surprise to find that a state bureaucracy responsible for handing out £90 billion can encounter technical problems. We Conservatives do not believe in the efficacy of the command economy, but that is what the benefits system amounts to at the moment. The system encourages disincentives to work--a fact that the Secretary of State seems to have acknowledged by starting to reduce the advantages that some single mothers appear to derive from the benefits system. Built into the system are some perverse incentives, encouraging the creation of what Charles Murray has termed "an underclass". Its members live a completely different life style; no longer do they have any incentive to look for work or to rely on themselves: they become genuinely state-dependent.
That is the true fraud being perpetrated on so many people. We should applaud and encourage those who climb out of state dependency, and we should look for ways of shaping the future benefits system so as to avoid these detrimental effects. People must have a much more
genuine stake in what they have invested in the welfare system, thereby giving them more incentives both to save and to work.
Those ideas have been assiduously encouraged by the Adam Smith project on the future of welfare, and would be further encouraged by developing its system of fortune accounts. Every individual would have a fortune account, not the dead letter box that his current national insurance number represents. Such an account would show the money that a person had accumulated over a lifetime, for pensions and for unfortunate eventualities such as disability or permanent illness.
"But we are talking here of trivial sums"--
18 Jun 1996 : Column 712
hon. Members will understand that he was using the term in its ironic sense.
Mr. Webster replied:
"If your assessment of the scale of fraud is right, the totality of fraud is somewhere nearer £2 billion."
"I agree with you."
The figure was introduced into the debate by a Labour Member of Parliament. The witness was led into talking about a possible figure of £2 billion. As my right hon. Friend the Secretary of State rightly says, it is not based on any scientific or methodological survey.
"Paragraphs 23 to 58 read and agreed to."
The hon. Gentleman agreed to those paragraphs. Why is he now disagreeing with something that he agreed to when the Committee report was accepted?
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