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Mr. Stern: I am grateful to have the opportunity to answer the hon. Lady. I agree that Governments must continually look at take-up campaigns. All I am trying to prove to her--she seems to have conceded the point--is that they are totally irrelevant to the Bill.
Ms Lynne: With respect, I have not conceded the point. I asked the Minister: since it is possible to detect benefit fraud, might it not be possible to give pensioners the benefits to which they are entitled? I still believe that it should be looked into further, and I do not rule out the
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possibility that we could do it. Technology is moving on. If it is not possible to do it within the remit of the Bill, we must have a take-up campaign, and the Government should commit themselves to that. I would be grateful if, when the Minister winds up, he will say that the Government will initiate a take-up campaign for pensioners.
Clause 12 will extend the powers to cut off benefit for false representation and for change of circumstances. If somebody stops somebody else declaring a change in circumstances, he or she can be prosecuted. It is the right step to widen that offence, but we need a clear definition in the Bill. It is too loose and the citizens advice bureaux are worried about that. They fear that they might be threatened with prosecution if they advise somebody not to declare a change of circumstances because they feel it is not relevant. Could they be prosecuted? I would like the Minister to confirm or deny that.
Clause 14 specifically deals with overpayment for one tenant that can be recovered from the payment for another tenant. In other words, if a landlord has been overpaid because one tenant has moved on, the agency can claim that money back by not giving as much money for the next tenant. I should like some assurances from the Minister that that provision will not, in his opinion, lead to more evictions. My fear is that the landlord, if he was not getting money for a particular tenant, might decide to evict that tenant. We should have more safeguards on that situation.
Mr. Michael Stern (Bristol, North-West):
We have heard several distinguished contributions to the debate from members of the Select Committee on Social Security and I am grateful for those. I come to the debate from a slightly different perspective. The Social Security Select Committee has been considering one aspect of benefit fraud, but as a member of the Public Accounts Committee, I have considered the problem because the remit of that Committee to ensure value for money in the collection and distribution of Government revenue is most obviously breached in areas such as social security fraud. Rather than adopt a benefit-led approach to the debate, I shall concentrate on areas in which I believe that the aim of the Bill needs to be considered, either in this debate or at later stages.
Much has been said today about the data-matching provisions and the access to data, which the Bill provides in the form of additional powers for the Secretary of State for Social Security. I confess to one or two doubts in that area, not because I believe that the powers are unnecessary--they clearly are not--but because I wonder whether they are workable or go far enough. The Bill is specific about empowering the Secretary of State to obtain data from the Inland Revenue and Customs and Excise, but that would require some very powerful data-matching
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The Bill also does not deal with two further data matching problems. Two Government agencies--Inland Revenue and Customs and Excise--are specifically mentioned. One that I would have thought would have been particularly appropriate--the Child Support Agency--is not mentioned. I accept that any data coming from the CSA are likely to be somewhat out of date and probably inaccurate, but I would have thought that it was a potential source of data for the purposes of the Bill, both for what has been reported by one parent--whether the absent parent or the parent with care--and for what that parent has reported about the other. All hon. Members present will be aware of the day-to-day experience in our surgeries when a parent comes in to complain about the work of the CSA--it is the second most common complaint I get--and tells us as much about the parent who is not there as about the one who is. Whatever inaccuracies are involved, there must be some way to feed that data into the system. I suspect that a number of potential frauds would be uncovered as a result.
It is assumed that when data are collected, especially from the Inland Revenue and to a lesser extent from Customs and Excise, it will be linkable with the national insurance number of the claimant. I must inform my hon. Friend the Minister that that is not necessarily the case. There is a significant minority of taxpayers for whom the Inland Revenue, even now, does not possess a national insurance number. National insurance numbers given to employers are not necessarily often immediately checkable, and by the time the check has been made the employee may have moved on. I would commend for future development to my hon. Friend the Minister the system adopted for VAT numbers. Any taxpayer receiving a VAT number can, by operating a simple arithmetical check, determine whether the number is potentially genuine or false. Future national insurance numbers should be constructed on the same basis.
In an earlier intervention, I said that I would return to the question of the penalty system and the system of prosecution. I strongly congratulate my right hon. Friend the Secretary of State and my hon. Friend the Minister on importing a penalty system in mitigation of prosecution into the social security fraud prevention system. That system has worked well for Customs and Excise and for the Inland Revenue and I have no doubt that it will significantly increase the financial benefits of the detection of benefit fraud. However, I chide my hon. Friend the Minister for not having taken the system over well enough. The provisions in the Bill provide that a person who wishes to avoid prosecution will be entitled to offer to repay the overpaid benefit plus a penalty of 30 per cent. That will be a fixed penalty, but my hon. Friend
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In contrast, the system adopted by the Inland Revenue in cases of fraud starts with a potential penalty of 100 per cent. of the amount defrauded. However, the Revenue is then able to mitigate the penalty to take into account the degree of co-operation shown by the person accused, the seriousness of the fraud and the extent to which the disclosure of the fraud was voluntary. The result is that the Revenue makes a great deal of money by collecting penalties for fraud. Without similar powers--possibly starting with a higher penalty base--I fear that my right hon. and hon. Friends will not be as successful as the Inland Revenue in discouraging fraud. Before any Inland Revenue penalty comes into effect, the fraudulent taxpayer is obliged not only to repay the tax, but to pay interest on the tax defrauded. In itself, that sum cannot be mitigated and is often a considerable percentage of the tax defrauded--often rising as high as 100 per cent. of the tax repayable.
Customs and Excise--according to traditions which go back centuries--adopt a rather more brutal approach to the collection of fraud penalties. The first thing that happens in a case of duty or excise fraud is the confiscation of the goods, so we are talking immediately about a penalty that often can be 200 or 300 per cent. of the amount of the fraud--and that is just for starters. As I have seen in my local customs house in Avonmouth, that system encourages people to own up. However, I am not sure that the Bill's provisions will be enough to encourage a significant increase in the collection of voluntary, admitted or co-operative payments of fraud penalties.
I am particularly concerned by the alternatives offered in the Bill. If an offer of penalty is made--or, once made, is withdrawn within 28 days--the alternative facing the potentially fraudulent benefit recipient is prosecution. If he is found guilty, the penalty is a maximum of seven years--or 70 per cent. of the penalty for touching an unlicensed gun. Nevertheless, that is the penalty for someone who is found guilty. Where the Bill parts from reality is in the assumption that a significant proportion of serious fraudsters are likely to be found guilty when prosecuted for fraud in this country. Experience has shown us that that is just not the case.
The chanciest area in terms of prosecution and in terms of someone being found guilty and given a significant penalty is in fraud. Our system just does not work--although it does make sure that there is a large legal aid bill. In looking in Committee at the penalty system--which is designed to recover money for the taxpayer--I hope that a greater emphasis will be placed on providing fraudsters with the certainty of a financial penalty, rather than the odds-on chance of escaping following prosecution.
I wish to refer to an area of housing benefit fraud where the combination of the Bill and the valuable work of the Select Committee on Social Security does not necessarily lead to a just result for the taxpayer. Mention is made in the list of types of fraud that are to be tackled by the Bill of fraud involving housing benefit where the landlord is a relative of the tenant, and I wish to express a word of caution at this point. The way in which such provisions
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I have heard many cases where a person has made a perfectly legitimate arrangement with a relative for the occupation of a property which takes account of the desire of a person to help a relative, and it is that expressed desire--perhaps the charging of a lower rent--that gives rise to the suspicion of fraud. We must make sure that the public purse is protected when framing law in this area, but also that there is not an assumption that there is something basically wrong with a practice that would be regarded by people in many other countries as a normal family arrangement.
Another area where benefit fraud is suspected--as has been mentioned in the accompanying literature--is in the right-to-buy scheme where a person who is not the occupier acquires the right to buy. However, I am concerned that we sometimes use this provision in the wrong way. In my constituency, there is a house known as "The Fortress" in Trowbridge road, Southmead. It is called that because of the defences that surround it. Very often, the only time people go in or out is when they are carted off in the proverbial black Maria. Bristol city council--in a laudable effort to try to disadvantage these people financially--tried to block their right to buy, but it was unsuccessful. I believe that it used the wrong provisions, and that the provisions for the removal of assets from ill gotten gains would have been more appropriate. The point that I am trying to make is that when we are designing fraud provisions in the Bill which affect benefits and the right to buy, we must be careful that these are not applied in entirely the wrong way.
I welcome the provisions in clause 15 for the periodic Benefits Agency-directed review of benefits such as disability living allowance, disability working allowance and attendance allowance. I recollect with horror when I was first elected to the House taking up a complaint on behalf of a group of constituents about one of their neighbours who was obviously claiming one such benefit on a totally fraudulent basis. As no such power to deal with him existed at that time, it took two years for that benefit to be reviewed and then automatically removed from the individual concerned. We have needed these powers for some time, and I am delighted that they are in the Bill.
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