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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

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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

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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.

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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?

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