Examination of witnesses (Questions 40
- 59)
TUESDAY 21 JULY 1998
RT HON
FRANK FIELD,
MP and MS
HILARY REYNOLDS
Ms Stuart
40. Before I go into that particular point,
there has been some recent legislation which allows you to stop
the Post Office from redirecting post.
(Mr Field) That was in the Fraud Act and I hope
before the summer is out that we will be able to report to you
on how that policy is being implemented. Initially, when we came
into office, it seemed to be that was being negotiated as a policy
at regional level. The previous committee were insistent that
it should be a national policy. There will be a national policy.
It is being negotiated with the Post Office. I hope we will be
able to, very shortly, report progress more quickly than we are
able to produce the report.
41. Now turning to National Insurance Numbers
and reconciliation with Child Benefit accounts. I understand from
the memorandum that you submitted to us that some 97 per cent
have been verified, which just to put it into context is close
on seven million, but there is a significant minority of a quarter
of a million which have not a verified NINO. Then you sent out
a mailshot and some 220,000 did not reply. Where do we go from
here? Do we know who they are?
(Mr Field) The mailshot of the 220,000 who did
not reply was a couple of years ago. There will be a second mailshot
very shortly, and I will approve the letter that goes out. I am
very keen that the letter stresses that this is the second time
of asking, and in fact if you do not reply then we will consider
withdrawing benefit and you will then have to come forward. We
are obviously anxious as a department to behave properly and within
the law. Had we now decided to act on the letter that was sent
out two years ago we might have faced, quite properly, difficulties
in the courts, given the two year lapse. Therefore there is a
new letter going out. I hope within the letter there will be a
very clear statement that "If you do not come forward with
the information that we want we will assume there is something
wrong with the claim. Of course the claim will be restarted once
we are satisfied that you should be having the benefit".
Where we have not been able to allocate the relevant numbers to
these accounts and we should not go on indefinitely paying benefit
in those circumstances.
42. Are there some regional variations to
these numbers? For example, there are pockets in my constituency
where for certain mothers claiming Child Benefit English may not
be their first language.
(Ms Reynolds) I could not give you that information
now but I can follow it up and see if there have been regional
variations.[3]
Mr Leigh
43. You will remember in the last Committee
you—we—had quite a lot of fun with National Insurance
Numbers—I will not say "fun", it is too serious
an issue—raising the scandal of the lost numbers. I just
want to get a general feel from you on Child Benefit, perhaps
generally. What did you find when you went into the department?
Did you feel that enough was being done? Have you managed to make
a difference? I would have thought if the public knew just how
many lost numbers there were, I forget the figures that were given
to us in the last Parliament, it was something staggering, was
it not——
(Mr Field) It was not lost numbers, it was perhaps
spare numbers.
44. Sorry, spare numbers. Can you just give
me a general feel for the work you have managed to do, how you
have managed to improve the situation and what you found when
you arrived and whether it was as bad from the inside as it was
looking from here?
(Mr Field) I think it would be fair if I told
you what is now going to happen and that in the Green Paper we
have two major areas of concern. There is the stock of numbers
and there is the access to National Insurance Numbers. There are
three main routes on to the National Insurance Number scheme.
Firstly there is when you change from Child Benefit to the issuing
of your National Insurance Number. Second, there are those who
quite legitimately are in this country who wish to claim benefit
and are given a National Insurance Number. Third there are those
who come to this country and quite legitimately wish to work and
have a National Insurance Number. We are now looking at these
three gateways into the National Insurance system to see how we
can improve the security on each of those fronts. One of the areas
in which we are improving security is in looking at the numbers
of staff who have the authority to issue National Insurance Numbers.
What I think will happen is the numbers of staff in future who
will have the authority to issue will be fewer than it is now.
In order to help advise us on the security of the system, which
as you rightly say was a big issue of concern to this Committee
in the last Parliament, we have asked the Benefit Fraud Inspectorate
to advise on what measures need to be taken. The Green Paper lists,
for example, our concern that in the past we have perhaps not
been as diligent as we should have been in checking on the references
of people who were at the core of this very centre. In the first
place that has been changed for new staff. Obviously we want to
look at existing staff but to do it in a way in which does not
adopt bully-boy tactics. It is something they wish us to do and
accept. Those negotiations are also about to begin. There is the
cleaning up of the numbers themselves, that is a process which
started in the last parliament and will continue. Also there is
greater care on safeguarding those three gateways into the National
Insurance system both procedurally in issuing numbers and reducing
the numbers of staff who have authority to issue them and being
much more careful which staff undertake that function. My view
has not altered from when I sat on the other side of the table.
If you were on the outside and you were very skilful, very clever—and
were running a gang fleecing money from taxpayers, the National
Insurance Number system would be one of the areas you would have
in your sights to attack. That view has not changed. All that
has changed is that it is a greater priority for Government now
than it was.
45. Do you think, following your practical
experience of trying to reform the system, that we should stay
with the system or is it just too difficult to make a fundamental
reform? What is your view? Is it different from the view you had
before?
(Mr Field) Not at all. This is the system we have
and it can be much improved. It is being improved and it will
continue to be improved. Why I was hesitant in answering openly,
fully, your first question was what I think we need to do is to
look at the fraud debate in this country, at the counter-fraud
debate. For a long period of time it did not have the priority
that the electorate thought it should have had. The previous administration
then began to change the whole tempo of this. We have continued
to do thateven more. If you belong to an organisation where your
political masters for decades thought this was totally unimportant
and there must be something weird with you if you were raising
these issues, it is quite easy for organisations both under the
last administration, and this, to feel somehow that they are being
blamed because politicians of yesteryear did not give it the priority
it ought to have had. Therefore, I am anxious about not to throw
bricks at staff for anything one might find. I am anxious about
what the performance is now and how the programmes of reform are
actually being taken forward. I think what has happened is the
Green Paper signals that the Government intent to the electorate
that it is taking this issue with the utmost seriousness. What
we need to present to the electorate is that the fraud which they
see in their daily lives is only one part of the fraud and the
very sophisticated, the entrepreneurial fraud, as I would call
it, is, by its very nature, fraud which one does not actually
see very easily and that is an equally important part of our battle
to safeguard our public finances. What we have seen in the Department
is a real sea change of movement to this programme and time is
not being wasted on thinking of any new system, but given how
workable this system has been, despite the low priority it has
been given in the past. It is about building it into part of the
sort of service we want to provide and making it as first class
as we possibly can.
Mr Flight
46. Could I just go back to ask how thorough
was the 4,000 sample? Did you get down to checking that every
single payment was correct and are you happy that it is sound
on that basis or actually could there have been things that slipped
through?
(Mr Field) Hilary may want to come in and give
you the details of just how thorough it was. I was quite amazed
when I asked to be briefed on the mechanics of it, but all I wish
to emphasise again is the point that I made to Malcolm, in that
our statisticians are satisfied that it is a representative sample
and gives us a total, global shot of the size of fraud and where
it is. What you cannot do, given the size of that sample of 4,000
odd, is to take the sub-samples and read significance from those.
Say, for example, very few people going abroad naturally appear
in that small sample and yet, from what we have said, we take
going abroad very seriously. The answers to Frank, for example.
It is an area where I believe there will be significant gains
for taxpayers with quite minimal outlays of costs, given how we
are now collecting the information. So it is quite proper to read
global figures from it, it is quite proper to look at areas where
we would want to follow up on over 16-year-olds and people leaving
this country and dig deeper and do more work on that, but I am
perfectly happy to put my name to the accuracy of that sample,
given what samples prove and the sub-samples. I think the Committee
would like to hear, Hilary, if you could go through the part where
we are looking at those who are not on Income Support and just
give the Committee the amount that went into that because, as
you know, I was briefed just before we came into the Committee
and I was quite pleased to hear it.
(Ms Reynolds) For people who were on child benefit
only, we did what we call an office-based investigation. Now,
that sounds as though it is a bit superficial, but it is not.
What we took was the 2,970 cases and for every single one, we
went through the following third degree. We did internal data-matching
where we took from the sample case information from the child
benefit system, all other departmental benefit systems, including
the contributions system, all information relative to the customer,
the dependant and the partners, so every single name on that case
was checked against all other forms of internal data we had, as
was the address and the date of birth, et cetera, so we did internal
data-matching. We then got print-outs from the Contributions Agency
on contributions records and employment records to start looking
at 16 to 19-year-olds who may be appearing on the contributions
side. We also got contributions information on partners. Having
done the internal data-matching, we then moved on to external
data-matching and clearly we were restricted to publicly available
external data when we used the electoral roll, the register of
deaths and the Post Office forwarding address file, so there are
a number of big databases there against which we can re-match.
Having done that, we issued a customer questionnaire to every
single case sample at the address held for the customer for return
within two weeks and where we had already found a discrepancy
during our data-matching——
(Mr Field) In Birmingham and Edgbaston!
(Ms Reynolds) ——we in fact followed
that up separately through our trained fraud investigators, but
for the bulk where we appeared to have consistent data, we went
out with the customer questionnaire. On those questionnaires we
asked for consent to approach a third party, either a doctor or
a health visitor or a school—those are the key contacts
for us—and we got questionnaires back and we then sent out
third-party verification questionnaires. We sent out reminders
by registered post where we did not get them within two weeks.
We then verified and examined all the information we got back
and we followed up with some telephone checking the third-party
verification questionnaire and the like. From that scrutiny, we
then determined what further action we needed to take, if any,
to satisfy ourselves that we had verified the information and
that might be further contact with the customer by phone or letter
or visit or an adjudication on the information we had received
or a no change could be attached to that case at the time. We
did visit 29 cases, having gone through the internal, external,
questionnaire, third-party verification, through our trained fraud
investigators who are also trained in interview techniques, so
we got that route as well. In all cases where we concluded a change
of circumstances had occurred, we then passed them to trained
adjudication officers for re-assessment of the circumstances we
now presented them with, and those whose benefit was affected
had full adjudications done on their cases. Some cases led to
the withholding of benefit and they were acted upon under the
appropriate regulations, and any customer refusing to provide
information required to substantiate their claim was advised in
writing before they had their benefit withheld. So throughout
the period of the review, there was that constant verification
of cases and we had investigators and child benefit experts, adjudication
experts throughout and also the National Audit Office were kept
informed and assessed the robustness of the methodology throughout
and also they did an independent audit check of how we had done
and we also put 5 per cent of sample checks in all processes and
100 per cent checks in all the change of circumstances. Therefore,
I am reasonably convinced that the way in which we did it was
as robust as any we could have done.
47. And the statistical sample likewise?
(Ms Reynolds) Yes, that was done by our professional
statisticians and it was random, but stratified.
Ms Stuart
48. I did not quite finish the earlier question
on national insurance numbers and the reconciliation with child
benefit accounts. I am somewhat puzzled about how we ever got
to this situation where child benefit claims were processed without
a national insurance number.
(Ms Reynolds) National insurance numbers are not
a requirement for a child benefit claim and you do not have to
put it on your form. It is not a requirement in the regulations.
49. But, as the Chairman said, it should
be.
(Ms Reynolds) We operate according to the regulations
laid down.
(Mr Field) But you may be making a report on this
and you may be making recommendations which we will be very, very
happy to consider constructively, but I do think there are two
aspects here. One is what is the caucus of information that everybody
should provide for any claim and we ought to apply that then in
a standard way across benefits and maybe only have one entry,
so you only have to provide this information once for any benefit,
and then, secondly, Edward's point, that if we are going to put
reliance on the national insurance numbers, then the policy both
of cleaning up the actual stock of numbers which we have now and
much more emphasis on securing the gateways to the scheme similarly
must actually have priority. Otherwise, as you know, a previous
controller of the Contributions Agency talked about, was it, I
think Smarties, or maybe it was the Committee that did that, and
if you are going to put reliance on it, it must be robust and
I do not think there has been the robustness in the past to carry
the weight that people thought it should carry.
Ms Buck
50. Are there any groups of people who do
not have national insurance numbers at any given time, given the
mobility of the population?
(Mr Field) There could have been. If you go through
the mechanics of it, then in a world in which women may not have
actually gone into work, you can imagine that the natural transition
from child benefit to working situation for some would not have
taken place. It is almost inconceivable that that does not take
place now. Certainly anyone coming into this country who either
wants to claim benefit or legally work also requires a national
insurance number, so I think we have left behind a world in which
there would have been people who did not need national insurance
numbers, who actually never entered the labour market, who would
have moved from school to university to marriage and to being
a full-time worker in the home.
51. Whilst wholly agreeing that it is unlikely
to be in large numbers, it would be very helpful to try to pin
it down a bit. We know, sadly, that there is a decent proportion
of young children virtually, becoming children, who will never
work, who are teenage mothers. What is our estimate there of those
young girls having babies at 16/17 who may never have got a National
Insurance Number in their own right? Not now but it would be helpful
to know. Secondly, asylum seekers coming to this country since
the introduction of the 1996 Act who do not qualify for benefits
other than through the 1948 National Assistance Act, do they automatically
get National Insurance Numbers? We are starting to get into decent
sized numbers now. Thirdly, there are also people at any given
time making an application and there will be processes in transit.
Given the huge scale of numbers involved, it is possible in those
different categories we could have quite a large group of people,
almost the size of your 200,000-odd who do not have numbers potential.
(Ms Reynolds) I would suggest we give you a note
on the technical number of questions because I certainly have
not got the answers in my head.
52. I was not expecting the answer right
now.
(Ms Reynolds) On the question of how do you get
one, if your mother claims Child Benefit in respect of you you
get a child reference number and that converts to a National Insurance
Number at age 15 years five months. If you never get claimed for
you will not be there and then you are into adult registration.
I suggest a separate note on that.
Chairman
53. It would be helpful if we could have
a note on that.[4]
Thank you very much for the offer. Could I just turn to the area
of false or multiple identities. I think we have always got to
resist the temptation to be complacent about all of this. I am
reassured, certainly by what the Minister tells us, about the
robust way in which the methodology and desktop study was carried
out. You do not need to have too many Mr Sunday Afolabis, do you?
In the memorandum that we got from the Minister in May it indicated
that he was operating under 29 different identities. You can lose
an awful lot of money. This is something that I know caused the
previous incarnations of the Committee some very great concern.
How prevalent do you think this form of fraud now is? What work
is currently under way to try and tackle it?
(Mr Field) We actually do not know. By the very
nature of fraud it is impossible to put a figure on it. It does
come back to Edward's question about securing the National Insurance
system. It is its failures in the past which have allowed people
to acquire these clutches of numbers which they then use. In relation
to Karen's point about asylum seekers and the position they may
find themselves in, we did have a period during the previous government
where care was not taken over the movement from that status to
acquiring National Insurance Numbers and some people maybe acquired
them in abundance. One of the areas we are looking at is to what
extent, from Home Office records, can we sensibly locate that
suspected fraud and carry out further checks and whether that
would be cost-effective in the taxpayer's interest or not. I think
it is largely from around that period that many of the large numbers
of spare identities have actually come from. What it does show
is that the discovery of these has often been not from the individual
tip-offs that we may have got but from the quality of the staff
being involved in the work. That is why the Green Paper puts such
emphasis on how important these staff are to us, like every member
of staff is, in actually building counter-fraud into our system.
Some are charged with that as a special responsibility. How their
skills are not only taken up-market but constantly replenished
and how the best practice today becomes common practice tomorrow,
all of that is important in getting the department in front of
those who I call the entrepreneurial fraudsters who run this side
of their business on far too large a scale. In the one case, which
was discovered in London, as you know, they had social insurance
identities in New York. It is not just in this country that this
is taking place. The example that you cite is too worrying just
to be dismissed.
54. Of course, there is in addition to that
the fraudulent abuse of birth certificates. As I recall, in fact,
in the last Committee Jeff Rooker submitted a case, a very distressing
case, from Birmingham where twin birth certificates were abused
for years and years and years. There was a Green Paper in 1990
called "Registration Proposals for Change" to try and
make the issuing of birth certificates more secure. I do not think
anything has happened about that. Why has it taken this length
of time to get these changes brought forward?
(Mr Field) Partly because there are only 24 hours
in day. Changes have occurred. We earlier commented upon access
now to the register of deaths. One is beginning to see in the
system details of those young children who die, and preventing
those birth certificates to be used in a way that they may have
been previously used in the past. Again, I do not want to go into
too much detail because it is quite sensitive as to how we have
drawn the lines there. We have put emphasis, and the previous
government did as well, on allowing staff who have to examine
birth certificates to actually examine them in a way that uses
the best technology that one can generally have to see whether
it is a real certificate or not. There are two very important
issues here. The Ministerial Working Group will be looking at
this. Earlier you talked about National Insurance Numbers and
Edward raised the importance of securing that system and cleaning
it. We do it partly because we want to run the most secure service
possible but we know other people use National Insurance Numbers
as some sort of way of establishing somebody's identity and they
then may get another form of identity on the back of that which
is then used to some other group to further establish identity.
In talks I have with staff, the big question they want us to consider
is that of identity. Is the person sitting before them the person
that they say they are? A great deal of effort will be going into
that. Clearly birth certificates have a part to play but they
are not the only part. People also use driving licences. Driving
licences are issued to give people authority to drive on the road
but people do think there is some extra significance attached
to this. Because there is a number then it must confirm a status
on the person who is actually producing it. You have that and
one or two other bits of evidence and you begin to build up an
identity which may be true or may be false. That is why I said
earlier the Ministerial Working Party has got a panel of those
in the private sector who have a similar interest in ensuring
that if a person says they are Frank Field, then they are actually
Frank Field and not somebody else.
Chairman: As the department
now in charge of a substantial piece of legislation going through
all its parliamentary stages just about every year, two or three
clauses to tighten up the registration of birth certificates does
not seem to me to be an awful lot to ask. Would somebody put that
on the agenda for the Queen's Speech this coming year or beyond?
I think Malcolm Wicks has some questions.
Mr Wicks
55. Only if I am talking to the real Frank
Field!
(Mr Field) I have accepted that you are the real
Malcolm Wicks. I think that is a greater degree of trust than
agreeing that I am Frank Field.
Chairman
56. We will compare driving licences later.
(Mr Field) Will the real Malcolm Wicks please
stand up.
Mr Wicks
57. Is not the real problem here that once
you have got through this so-called gateway, once you have gained
access to Child Benefit, suppose you have done it fraudulently,
you have got to be pretty unlucky for anyone to find out that
you are a fraud. I can see there might be legal problems. Does
it not sound slightly pathetic that 220,000 people claiming Child
Benefit do not reply to a perfectly reasonable letter? They have
got a right to Child Benefit, hopefully they have a duty to reply
to information and yet we are bit timid about withdrawing their
Child Benefit. Why not, for example—and this may not be
the best idea—require everyone claiming Child Benefit to
keep the authorities up to date on any school that the child goes
to or when the child changes school so that if necessary cross-reference
and maybe records could be made to the older children? One way
or another, should we not from time to time, maybe not every year,
say to parents, "Really you have got to prove now that you
are legitimately claiming child benefit"?
(Mr Field) Well, I hope one of the many benefits
from this Committee hearing will be that people will see that
they are not passive agents here, but they can help prevent fraud
in a number of ways. One of which is actually to keep their own
accounts up to date. What you suggest, Malcolm, is eminently reasonable,
given the Chairman's point about why have we not done all these
other things. There are only 24 hours in a day and only limited
resources which taxpayers at any one time will give the Department
to counter fraud. Given what we found on the over-16s and what
we know about people coming to this country and then not telling
us that they have moved out of the country again, what we have
to weigh up is whether there would not be quicker gains to safeguard
taxpayers' money at least in the first instance of moving on that
front before we actually were trying to get to everybody. In an
ideal world, I agree with you, but we might actually need quite
an increase in staff to cope with all the amount of information
which came flooding in if it was done on an annual basis. If you
could get people to think about telling us of changes they tell
their bank and, similarly, Patricia's point, looking at whether
there should be one point where they tell government they have
changed address which is then filtered out to relevant authorities,
that then seems to me to be a sort of reasonable balance that
we could ask from citizens.
58. Those who return abroad or go abroad
and still claim their child benefit, when they are found out,
does the Department ask them for the money back?
(Mr Field) It does, but we are not in a terribly
strong position. If, for example, you take frauds on that occur
in this country, of people who have taken from fellow taxpayers
considerable sums of money, we can have a claim on their estate.
Take, for example, the pensioner who was sentenced for claiming
her mother's old age pension after she died, up to the time she
would have approached the grand age of 100. When that person dies,
we, after the undertaker, will be after that estate on behalf
of the taxpayers. We will also be seeing to it that people do
not unfairly divest themselves of assets so that the taxpayers
do not get their funds back. In this area, whereas one may not
have been able to say it in all areas, the quality of our legal
staff and the proficient way that they not only pursue, but make
sure that there are no loose ends, this often gets very good comments
from the judges who actually hear the cases. In this area, Malcolm,
we are actually quite good at pursuing when they remain in this
country, but it is quite difficult if they have actually disappeared
abroad.
(Ms Reynolds) We frequently do not know where
they have gone and that is our main problem, so we cannot actually
pursue them. We do flag the cases in case they come back.
59. After all, it is a very crucial
fact that your findings can only relate, because of embarkation
records, to non-EU and non-Commonwealth citizens, in other words,
we do not know very much about most fraudulent cases here. Given
that, nevertheless, some of those families are people who may
well return to this country in the future, would it be unreasonable
that the alleged fraud is put on immigration records either at
the Foreign Office or the Home Office or both?
(Mr Field) Well, they are on our records, Malcolm,
so that if they came back and were claiming under the same name,
then we would know. If you are dealing with people who are dedicated
fraudsters, they are not all going to keep coming back with the
same name and that is the problem. I am not saying we should not
be doing these things because we clearly should. But, in reply
to Frank's question, whilst it is important on the movement in
and out, I do not want the Department to think that it can push
this responsibility on to someone else. We have people coming
into this country who illegitimately claim child benefit and we
flag up that point as they claim. We are now thinking about how
we use that information to check to see whether they are still
here, on a random basis, whilst asking what will be the gains
for taxpayers and what will be the expenditure from any such move.
Clearly once we know that they have gone and should not have been
claiming, we keep a record of that. But if you are right that,
sadly, we are only beginning on this task of securing this part
of the system, as you presented the question, most of the people
who are doing it, we do not actually know they are doing it yet,
so there is actually no record anywhere, but as we acquire the
information, it will go on to our system.
3 See Ev. pp. 29-31. Back
4
See Ev. pp. 30-32. Back
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