The Minister of State, Department of Social Security (Mr. Jeff Rooker ): We are pleased to see you in the Chair this afternoon, Madam Deputy Speaker. We are glad to have the benefit of your chairing our debate, which, given the current turnout, I suspect will not be too acrimonious.
The Government thought that it would be useful to have a wide-ranging debate on social security fraud. As hon. Members know, the Social Security Fraud Bill is going through another place. The subject is touched on only briefly at Question Time and I do not think that we give it the time that it deserves. The Department of Social Security's annual budget is about £100 billion, and social security fraud and error cost about £2 billion a year. Our duty is to ensure that the system is secure from those who seek to attack it, from fraud, from error in the Department, which can occasionally occur, and from genuine errors that claimants may make. The money must go to the right people, particularly those who need it most.
I shall draw attention to what we inherited in respect of social security fraud and the results of the action that we have taken so far. I shall then say a little about what needs to be done in future, after which I shall refer to the Social Security Fraud Bill.
Our best estimate is that social security fraud and error cost at least £2 billion a year. I see that that comment has made the hon. Member for Brentwood and Ongar (Mr. Pickles) raise his eyebrows. To put the problem into perspective, we spend £1.7 billion running the Benefits Agency.
From time to time, various estimates are given of the level of fraud, such as between £2 billion and £4 billion, as well as the famous figure of £7 billion. As I have said in answer to parliamentary questions, the £2 billion is what we know about. Another £2 billion may be regarded with a high level of suspicion and there is a weak suspicion--sometimes, no more than a hunch--about another £3 billion, which is how the figure of £7 billion came into the public domain. We have said repeatedly that we do not think that that is the amount of fraud. I want to put the debate into the context of what we can measure.
Mr. Eric Pickles (Brentwood and Ongar): Clearly, it is important to restate the position. Does the Minister dismiss out of hand the claim by the Public Accounts Committee that, in reality, £9.5 billion is involved?
Fraud is not, as it is often portrayed to be, a victimless crime or a small-time activity. It is true that a good deal of it arises from people working down the pub a couple of nights a week or at the bingo hall and claiming benefit, which, of course, is unacceptable, but more often than not fraud is planned and calculated--in some cases, it is highly organised--and diverts public money from other objectives.
I should say that something like three quarters of the population have contact with the Department in some way, if we include child benefit, pensions, disability benefit and all the other benefits, and the overwhelming majority of people in every sector are honest. If there are errors, they will make that clear and sometimes say, "I think I'm being paid too much." Therefore, fraud relates to a small minority, but that still amounts to a large number of people.
When we started to look at this issue in 1997, we identified four key weaknesses. We repeatedly make the point that, although we are critical of the previous Administration, in 1995, they started to measure fraud--measurement did not start in 1997. There were the beginnings, the gleam in the eye, of a strategy, even at the fag-end of the previous Administration.
Measurement was attempted in 1995, but the scale of the problem was not understood. There was no overall strategy and no targets or objective measures of success. The only measure--it was a key weakness--was the amount of fraud detected, so those paying out benefits sometimes had a perverse incentive not to worry about preventing fraud: the more fraud entered the system, the easier it was to find. They could say, "We've got a lot of fraud. Aren't we good because we've added it up?"
There was also--I think this is generally accepted--totally inadequate investment in information technology. I have described the computer systems at the Department as rubbish. They are vastly improving day by day under this Administration, whose largesse on capital expenditure will revamp the whole of the Department's IT infrastructure. Nevertheless, past investment is a real problem; it was obviously a problem for the previous Administration. The IT system did not allow us to draw together information on people's claims and to guard the system. A local authority worker processing housing benefit claims did not have automatic access to details of existing or previous awards of income support, for example.
There was a culture that saw security, fraud and detection as a cul-de-sac: it was not an integral part of the system but a bit of a bolt-on. Our assessment of income support claims in 1997 was that 40 per cent.--two out of five--were paid without enough evidence. That is a substantial number.
I turn to some of the things that we are trying to do to get a grip on the system after a good deal of neglect. We have invested more in policing the welfare state; we make no bones about that. We have tightened the gateways to benefit and devoted more staff to front-line
We have set targets for reducing the amount of fraud in the system. We have published targets and must be judged on our success in reaching those targets. We have raised our targets for reduction of losses due to fraud and error in relation to income support and jobseeker's allowance to 25 per cent. by March 2004 and 50 per cent. by 2006. The National Audit Office supports the approach of setting targets for reducing fraud and error, and will report to the Public Accounts Committee on that and a variety of other anti-fraud measures.
We have introduced much tighter checks at the gateway to income support before money is paid out. We have already halved the percentage of income support claims that are paid without enough evidence--20 per cent. are so paid, down from 40 per cent. I accept that that is still too high, but that change alone saves £1 billion during the current Parliament, which is not to be sniffed at. We have given local authorities on-line access to essential benefit information held by DSS systems. That means that 10 million forms previously sent by post from the Benefits Agency to local authorities are now sent electronically. That speeds up the process and makes it far more secure.
We have introduced the verification framework, which requires local authorities to perform tougher identity and evidence checks on housing benefit claims. No doubt I shall hear from hon. Members about some of the difficulties that some local authorities have had. The degree of competence and commitment in local authorities is variable, to say the least. Nevertheless, we are locking down avenues for fraud in the system. We have stopped housing benefit fraudsters redirecting their mail from false addresses.
It is appropriate to tell hon. Members--it may avoid lengthy interventions-- that we have introduced our own staff training. It is not just something to give them when they have nothing else to do. We are introducing professionalism to anti-fraud activity through the Professionalism In Security programme--PINS. In the Benefits Agency, Inland Revenue, Department for Education and Employment and Northern Ireland Social Security Agency, 3,000 staff have started PINS foundation training. By March this year, more than 2,000 staff will have completed the training and been awarded the accredited counter-fraud officer qualification. From this April, we are offering PINS training to up to 900 local authority investigation officers.
The training is of such good quality that certain advertisements for anti-fraud jobs in the national health service and Customs and Exercise are listing PINS training from the DSS as an advantage or requirement. That is wholly good for government and public money,
I could speak about training in more detail, but it takes the form of module courses and is organised in conjunction with the university of Portsmouth. We are making sure that our staff are professionally qualified to search out fraud and error and to deal with the problem sensitively, which ensures that a civilised system operates and that people are dealt with accordingly.
The other point that is worth mentioning is that we asked for a report on organised fraud from John Scampion, which we have received. We have implemented most of his recommendations and he is content with our approach so far. Work has begun to strengthen the organised benefit fraud investigation service, to establish a national fraud intelligence unit, to set up joint working arrangements with local authorities and to replace the weekly benefit savings regime for local authorities. Those are four key areas.
That work has included the appointment of two senior managers from outside the DSS, which we thought was important. They both joined the Department at approximately the same time in autumn 2000: John Alpass is head of fraud intelligence and Richard Kitchen is chief investigation officer. Both came from outside the DSS. That is an important aspect of what we are doing to change the system.
I shall now look at the results of our new approach. Figures published last November showed that losses from fraud and error in income support and jobseeker's allowance had fallen for the first time. For benefit paid between April 1999 and March 2000, the saving was estimated to be about £60 million. In 1999-2000, about 22,000 people were sanctioned or prosecuted, an increase of 60 per cent. compared with the previous year. [Interruption.] The hon. Member for Brentwood and Ongar cannot dismiss that. We introduced sanctions, which were not available under the previous Government. Sanctions and prosecutions must be seen in the round. The sanctions are highly effective: payback of the benefit, plus a 30 per cent. top-up. People are given a choice. We say, "We fingered you. We'll sanction you or prosecute. You can pay up what has been overpaid"--to put it politely--"and a 30 per cent. sanction on top of that." Many people choose to do that. It avoids the consequence of court appearances. We are dealing with more people than ever before by having the opportunity to sanction as well as to prosecute. One has to look at sanctions and prosecutions in tandem.
The hon. Gentleman will say that, one year, prosecutions may vary. They were down a few hundred, perhaps a thousand; I do not have the figures directly in front of me--they are in my folder. However, sanctions and prosecutions cannot be treated in isolation. Some
We are piloting specialist identity checks. Since June 1997, there has been an operation in Balham--I have been there twice in recent months--to use more intensive questioning and investigation when people apply for national insurance numbers. The interviews are very structured. I sat in on one. I was champing at the bit to jump in with the next question, but the interviewers are highly trained and skilled and have a pattern to go through.
That was only a pilot in Balham, but it has led to more than 200 arrests. Later this year, we shall be rolling out nationally the procedures that we have been using in Balham. By definition, London is a big centre for national insurance number applications from people doing casual work, people from overseas, people who have come in casually and, in some cases, people who have come to this country by surprise as asylum seekers. Self-evidently, London has a big transient population, as has every capital in the world. Nevertheless, the greater intensification of those interviews will assist greatly in ensuring that we gain better control over the national insurance number system, which is highly managed in the first place.
Of the 409 local authorities that we deal with regarding benefit, we have managed to supply 404 with on-line access to essential benefit information owned by the Department of Social Security--the obvious question is which are the five that we have not managed to supply. At least one remote access terminal has been provided to each authority. Some authorities have more than one. That is a substantial help in cross-checking information.
Mr. Pickles : I ask a straightforward question arising from the study in Balham. Approximately 14 per cent. of all cases involve some kind of fraud or customer error. Can the right hon. Gentleman say what the balance is between them?
Approximately 250 local authorities have signed up to perform tougher verification checks on housing benefit claimants. That is not such a high success rate--a little more than half. However, we are making a further £160 million available over the next three years to ensure that 85 per cent. of housing benefit expenditure is covered by the verification framework by 2004. That is intensive work. I understand the pressure that is put on local authority staff and I pay tribute to them. Housing benefit is very complicated--much more so than income support.
Mr. Andrew George (St. Ives): I am sure that the Minister knows that the complexity of housing benefit is one of a number of reasons given as to why fraud is at such a high level. Although we have heard about various
Mr. Rooker : Briefly, a White Paper on housing has been published in which aspects of housing benefit are touched on. I do not deny that the system is ripe for reform. However, I was astonished to learn--I never picked it up as a constituency Member--that 409 local authorities pay housing benefit, which means 409 application forms.
Mr. Rooker : I like the way the hon. Gentleman said, "Absolutely." Long before your time, Madam Deputy Speaker, I sat on the Standing Committee that converted rent rebates to housing benefit in 1981 or 1982, when Hugh Rossi was the Minister. The Government forgot to say, "We'll have a standard form for this."
We are on the verge of improvement. The benefit fraud inspectorate, which provides a lot of assistance in going into local authorities to check systems, is about to publish a form that it has devised following consultation. The form has a crystal mark award for plain English. It is not as short as the new minimum income guarantee form, but it is a lot shorter than it could have been. Local authorities will be encouraged to use the form, although it will be voluntary--we have not taken legislative powers to force them to do so.
Some local authorities' housing benefit forms did not even require claimants to declare their income. One would have thought that that was minimal information. We are working on it, but the nature of housing benefit means that the problem is bound to be complicated. Many variables need to be dealt with, including the income and family circumstances of claimants and the rent system that is in place, or whatever arrangement the landlord has with the tenant.
More than 350 local authorities have signed up to a scheme in conjunction with the Royal Mail that is designed to stop housing benefit fraudsters redirecting their mail from false addresses. I am annoyed that there is no follow-up because we pay for it--central, not local, Government pay. We are trying to work in partnership with local government, not to use a heavy hand. We are now cross checking--the warning needs to go out to everyone concerned--more DSS records and other Government-held records than ever before, which has already saved £150 million.
We shall soon begin a cross-check on benefit and tax records, particularly those relating to the building industry. We are assessing the high-risk aspects and, as everyone knows, the building industry is high risk. No factories are involved. The workshop is different. People move around the country. Employers come and go. They come in various sizes and, as is well known, factors such as tax exemption certificates are involved.
We shall cross check our tax records with benefit records for people in the building industry. We shall shortly start using the stronger powers that we have to inspect employers' records to check whether people are working while claiming benefit as unemployed. As a
Increasingly more information that is held by the Government is being matched. That was prevented in the past by the rubbishy computer systems inherited from the previous Administration. When I explained to one of my constituents why she was being asked some questions and said that one computer was being checked with another, she said, "Mr. Rooker, the computers is kissing each other." She was damned right. They are. When variations exist, we examine the matter at local office level to check it.
We must consider what more needs to be done. Through tighter checks and targeted plans, we are starting to turn the corner, although I am not saying that we are winning the battle--far from it. The fraud figures that we are now using are moving in the right direction.
Mr. Pickles : The Minister says that everything is above board and compliant with data protection legislation. Why does he think that Elizabeth France, the Data Protection Registrar, is so hot under the collar about the Government's proposals? She says:
We are investing money in fighting fraud. We have a large programme protection budget in the Department, but we must go further. We are setting up a national fraud intelligence unit to ensure that all available information is used strategically to steer the campaign against fraud and to ensure value for money, targeting areas of highest risk. We are tightening the management of fraud investigators to ensure that they concentrate on the most fruitful cases.
We plan to launch a national advertising campaign to get across the message and the culture that fraud is unacceptable. The hon. Gentleman may be aware of our pilot scheme in the north-west to try to change the culture. It is unacceptable to defraud the system, as the effect of doing so is fewer teachers, doctors, social workers and road repairs. Such fraud is not victimless. The victim is public expenditure for other worthy causes.
From April, we shall phase in a new incentive scheme to give more generous rewards to councils that act to prevent fraud from entering the system. It has been difficult to arrive at a system that does not allow fraud to enter the system, or people to turn a blind eye. We must strike the right balance between carrot and stick.
I do not want to open a new debate, but, as hon. Members know, I have always been a frank Minister who is willing to debate such issues. We are moving towards the payment of benefit by automated credit transfer, which will be introduced from 2003 to 2005. We are doing that for lots of reasons, one of which is to
Mr. Andrew George : I should be grateful for clarification, as there is a genuine concern that automated credit transfer may result in more fraud. Because the system will depend on technology, people will have more chance fraudulently to impersonate others and to use the necessary technology to withdraw the benefits.
The hon. Gentleman is right. The nature of the fraud will be different. We shall have to be careful. One third of all benefits is paid through ACT now, two thirds are not--that means millions of benefits. It is no good simply transferring them and then leaving the situation to look after itself. Organised crime will migrate from one system to the other--criminals will find other ways to commit fraud.
People may choose not to collect their benefit weekly at the post office, although that will still be an option. When we market ACT, more people's benefits will be paid directly into their bank or building society, so they will no longer see the postmaster. Local information will no longer be available to them. There will not be any personal contact with the claimants, as there is now, so we will have to build anti-fraud measures into our ACT strategy, for the time when all those millions of benefits are paid differently. That is an integral part of the ACT planning.
Some 140,000 claims will have to be transferred from paper-based to electronic systems every week until the work is complete. Fraudulent claims have already been made through the ACT system. I will refer later to an item in the Social Security Fraud Bill, now in the other place, which needs to be reinforced for ACT. I want to keep the issue of the Bill as a separate, discrete part of my speech.
Extra investment is being made available for information technology and front-line staff. In the 2000 spending review, the Chancellor of the Exchequer showed vast largesse by investing in massive capital expenditure programmes, the like of which could not have been dreamt of by the previous Administration. He was able to do that because of his successful management of the economy.
As everyone knows, there is a substantial capital expenditure programme. Some £2 billion is being spent on modernising the Department of Social Security with the introduction of good computer and IT systems, better trained front-line staff and better directed staff. That is crucial.
We are beginning by installing new computer programmes for the Child Support Agency and we are planning improvements to pension credit arrangements. It is important that our systems can talk to each other. In the past, each new benefit had its own computer system. No one thought of linking them up.
Mr. Andrew George : Yesterday, the Government announced--although, in my view, it was not a new announcement--their intention, should they win the general election, to address the economic tests by which the United Kingdom would enter the euro. In preparing its computer system and software, has the Department itself taken into account a potential change to the euro?
Mr. Rooker : It takes a Liberal Democrat to ask that question. I had not expected a debate about the euro. However, I did ask--in another context--about that matter. The Department has a preparatory programme, as do all other Departments and the public sector as a whole.
Our economy is highly integrated and diversified. Adopting the euro would change many of the systems. I shall be careful about what I say about the timing, but all new systems are ordered and designed to cope with the euro. When I raised the matter some months ago, I thought in my simplistic way that all it meant was changing the factor--tweaking the system, with so many euros to the pound. However, that cannot be done with the systems that we inherited. The computer systems that are on order for the new programme--the Child Support Agency and the issuers of the pension credit will be among the first to receive them--will be euro-friendly, whether or not we join the euro. Obviously, we make payments abroad; we pay retirement pensions to 1 million people abroad.
Our systems will be adequate. If and when the decision is made, after the economic tests have been looked at, after the Cabinet has agreed, after Parliament has agreed and after the British people have voted in a referendum, which the Conservative Party would deny them, the transfer programme will be massive. The answer to the question is yes. We will be okay--if and when we join the euro--with our new systems. The old systems would be a nightmare--paper-based systems and computer systems that are not geared up.
The right hon. Gentleman has confirmed that there is a programme, which will take care of future events. Will he confirm that the programme will begin the process of dealing with historic records, which is important, particularly in the management of fraud? Has the Department calculated the cost of rounding up or rounding down figures when converting into euros? Has a decision been made on the exchange rate? If so, can he give us an indication of the cost?
It could be argued that the payment of benefits weekly to the penny is ludicrous and antiquated. That is one reason why the pension credit will be a different benefit from the minimum income guarantee, which is calculated on a weekly basis. The consultation paper explains that the system will be simplified in that respect, so that it is not a weekly assessed benefit. It is a fair question, but I do not have the answer.
I am not about to make a Second Reading speech for the Social Security Fraud Bill, but it is worth putting a few points on the record. The Bill is narrow in scope and builds on reforms already made. It gives us new tough powers to tackle benefit fraud and delivers the key recommendations in Lord Grabiner's report, which was published almost a year ago.
We want to tackle the problem of persistent offenders. Some people think that we are fair game, but the new system of "two strikes and you're out" will act as a deterrent. No one can say that thousands of people will be affected--only hundreds will be--but the Bill will give the DSS and local authorities the power to catch persistent offenders. They will be able to check the bank accounts of those who are suspected of fraud.
The Bill contains four main provisions. I shall deal with them in summary form. The "two strikes and you're out" regime will act as a deterrent for the hard core of offenders. The Bill introduces new powers to reduce or to withdraw benefit for up to 13 weeks from people convicted twice of benefit fraud. That penalty will not affect those on whom sanctions have been imposed; it will affect only those who have been convicted by the court. Some benefits can be subjected to sanctions and some not, irrespective of which benefit was the subject of the fraud.
DSS and local authority staff will have the right to check information from public and private sector organisations, banks and utilities about suspected cheats. The caveat is that local authorities will not have the legal authority to check online unless they have specific permission from the Secretary of State. They will not have carte blanche rights. They will usually have to write to the banks, but they will not have on-line access without the approval of the Secretary of State.
Mr. Pickles : We may be few, but we are a merry band. The British Bankers Association is anxious that Customs and Excise and the Inland Revenue are sending only junior officers to banks. Has a decision been taken on what level of officer in the DSS and in the banks should deal with such inquiries?
Mr. Rooker : Broadly speaking, the answer is yes. Senior officers will be named. I cannot guarantee that; we have yet to make commitments in the other place. However, the Committee stage has finished and discussions are going on. We shall probably know within a fortnight. We shall have 13 area directorates, but only a small number of senior officers, working in tight teams, will have contact with the banks and financial institutions. Junior fraud investigators from local benefit agency offices, however well trained they are, will not have the wherewithal to go to the banks. I do not know what level of bank officer will be involved; we have not reached agreement on that yet. However, like us, those officials do not want people whom they do not know making inquiries about other cases, or other aspects of the same case. It is important that we have co-ordination.
I make two points clear about access to data. Under no circumstances will there be fishing expeditions. We have already agreed that one aspect of the Bill could be construed as fishing, but I have defended it on the basis of reasonable grounds--the kind of person involved, the nature of his or her employment, and whether fraud has already been committed. There was a reason for the approach, but it is too wide and could look like fishing. We need something specific to a person, using reasonable grounds, and subject to the caveats under the Bill. There will be no fishing expeditions.
A fairly tight, well-defined code of practice will be used. That will be published. I have given a commitment that it will be available in draft before Report in the House of Lords. As I speak, the draft is being discussed with industry.
Mr. Pickles : It is a narrow point, but I thought that what the right hon. Gentleman just said slightly contradicted what he said earlier about the type of employment concerned. To make matters clear, will he confirm that simply having been in a particular type of employment or having had a history of such employment would not be a reason for such action?
Mr. Rooker : I think that the hon. Gentleman is referring to what I said about the building industry. That was about an exercise to match existing Government information--tax records against social security records. That happens inside government. The Inland Revenue has its own powers, but the exercise in question has nothing to do with going to banks or credit agencies. It is an internal data-matching exercise on information held by public sector bodies. The provisions of the Bill that I have been discussing are
As to the point about ACT, I cannot remember whether clause 1 or 2 of the Bill introduces a more effective criminal offence of not declaring a change of circumstances. A clarification of the law is already needed with respect to ACT. The lawyers are always trying to make things more precise, so that they are judge-proof or slick-barrister-proof, if I can put it that way without denigrating the legal profession. We do not want to leave loopholes. The signing of an order book every week or month--that mere signature--is a declaration by benefit claimants that nothing in their circumstances has changed. With ACT, that does not happen. That gap is dealt with in the Bill.
Another key area is the targeting of employers who collude in benefit fraud by introducing the option of a swift civil penalty as an alternative to court. We do not necessarily want to prosecute; we want to get fraud out of the system. I am interested in the outcome. The process is important, but the outcome is what counts. If we achieve our aim by civil penalties and sanctions, so be it.
Other provisions in the Bill allow the DSS to exchange information with social security administrations in other countries. I imagine that we shall debate that at length. The arrangement will be made only with countries with the same type of judicial system and data protection as ours. The countries concerned will need legislation to protect the relevant data. At present, we have only a memorandum with the Irish Republic. It has not yet passed into legislation, but it will in due course. What is proposed will also improve the flow of information between the DSS and local authorities, particularly with respect to housing benefit.
The hon. Member for Brentwood and Ongar asked about the Data Protection Commissioner. We are in discussions with her to explain our position and to eliminate any misunderstandings that may have arisen. We are confident that the Bill does not contravene the Data Protection Act 1998 or the Human Rights Act 1998. Ministers, with Parliament's approval, are in charge of policy. We expect our policy and its operational aspects to conform to rules under the Data Protection Act 1998, but it is our job to decide what the policy is. I make that absolutely clear. We are certain that any misunderstandings between ourselves and the Data Protection Commissioner can be settled by the time they reach the House. We hope that the Bill will help to reduce fraud by prevention and earlier detection, by use of powers to acquire data from the private sector and by deterrence through the powers to remove benefit from those persistent offenders. It is about rights and responsibilities; there is no doubt about that.
The Bill is necessary in the United Kingdom. People might wonder what happens in Europe. One reason why we need the Bill is that, unlike other countries in Europe, we have no identity system in this country. The Bill is part of the price that we pay for not having such a system. Some member states of the European Union have pretty rigid identity systems that track people throughout their lives, through their education, tax, work and social security. Hon. Members should not run
Our estimate of confirmed fraud is £2 billion, based on a proper statistical measurement of fraud. It is not a guess. I have explained how the £4 billion and the £7 billion were made up from past figures.
The hon. Member for Brentwood and Ongar asked about the breakdown of fraud and customer error and I have a few figures to share with him. The latest Government statistical survey report covering the period April 1999 to March 2000 gave figures for the most vulnerable benefits: income support fraud, 4.4 per cent., customer error, 1.2 per cent.; jobseeker's allowance fraud, 8.2 per cent., customer error, 0.7 per cent. One can see that it is overwhelmingly on the fraud side, which is one of the reasons why we take the matter so seriously.
Mr. Eric Pickles (Brentwood and Ongar): This has been an interesting debate, almost like a Standing Committee in view of the Minister's courtesy. It is perhaps as well that this important issue is the subject of an Adjournment debate, as the Chamber is well and truly balanced at the moment and the Government's majority deeply threatened.
One cannot be unaware of the impending general election, when the right hon. Gentleman will retire. We will all be genuinely sorry to see him go. He has been a distinguished Member of the House. Some of my colleagues thought that this might be an appropriate occasion to pay tribute to him, but I do not believe that it is. I am confident that we shall be debating fraud on many more occasions. After all, this is the 49th announcement about fraud and I am certain that when the right hon. Gentleman delivers his golden address for the 50th announcement, we shall have something even more spectacular. We have had plenty of opportunities to debate the Scampion proposals. The hon. Member for St. Ives (Mr. George) is in his place and, to my certain knowledge, we have debated them at least three times in this Chamber. There seems to be almost a mathematical law that, as the number of prosecutions goes down, the number of announcements goes up--or perhaps it is the other way round.
The right hon. Gentleman gave the confirmed cost of frauds as £2 billion, but that is £5 billion less than the figure that others have given. I hope that that does not mean that he has given up the chase and is saying that we can measure only so much. The Public Accounts Committee has a larger sum in mind. When we last debated the issue, only a few months ago, the figure of £7 billion went unchallenged. That works out at about £300 a household. The Committee has talked about the much larger figure of £500 a household. As the right
Not much was said about organised fraud, but the right hon. Gentleman has been kind enough to organise various seminars on it in the past. It was quite something to see the ingenuity of some of the forged instruments, which would have fooled me. I cannot help but be struck by the irony of the fact that post offices go through an enormous rigmarole to check for a dodgy £5 or £10 note, yet are blase about handing over a giro for several hundred pounds. If the same scrutiny were given to giros as to dodgy fivers, we could eliminate a lot of fraud.
The right hon. Gentleman gave us a brief outline of the Bill that we hope to see in the dog days of this Parliament. I have a terrible suspicion that, if the Prime Minister in his wisdom decides to go to the public in April or May, we shall not have a proper Committee stage on the matter. Many problems must be dealt with. I hope that the right hon. Gentleman will not take it the wrong way, but listening to him and reading the Hansard reports of another place, there has been plenty of controversy about the question of access to people's banking or credit agency records, as though we could have a system with perfect matches.
I know that the right hon. Gentleman has been to various offices, as have I, and he is right to say that the IT facilities available are rubbish. I suspect that they were cutting edge when they were delivered. However, as we all know from our own shopping for IT, the moment that something becomes obsolete and rubbish is the moment that we undo the packing case.
Marrying information is important, but much of the information gathered by the Department is handwritten and stored in filing cabinets, especially in small local authorities. I have seen it stored in shoe boxes in one place. I do not know what happened when the boxes became full; perhaps they sent the staff out to buy some more plimsolls. We are a long way from matching all that information in a great data transfer. Better mainframe computers for the Department will not be the solution, because we are so reliant on the kind of information that is put in.
The right hon. Gentleman was right to mock local authorities for the nature of the questions asked. Some authorities do a marvellous job of cracking down on fraud. I was especially interested to read the recent report about the London borough of Wandsworth, which detailed great improvements there. Unfortunately for the British people, not all councils are as diligent as Wandsworth. Part of the problem is that local authorities have treated housing benefit forms as an opportunity to ask a couple of gratuitous questions so that they can check on various aspects, which would be good for the records. I suspect that in my time in a local authority I, too, was guilty of doing that, because it is a wonderful opportunity to get to know a little bit about the population that one serves.
However, organised criminals, and even an informal network of people who are less than honest, know which authorities have weak records and they will target them. Such authorities will feel the full effects of fraud because they are least likely to do something about it. It will take quite some time to deal with clapped-out equipment and bits of paper left hanging around. A single form would
It would help if we could ensure that housing benefit staff met regularly to identify the latest frauds and discuss ways of ensuring that mistakes are kept to a minimum. I have little doubt that that would go some considerable way towards reducing housing benefit fraud, because dealing with housing benefit fraud, and I suspect with all fraud, is the practitioner's problem. It is a difficult nuts-and-bolts operation that means getting the right people into the right jobs and dealing with procedures that are clearly understandable.
Mr. Rooker : That was one of the recommendations of John Scampion's report. We are setting up regional boards so that we can have discussions with local authorities on a regional basis. That means that they can discuss certain elements with each other, on a regional basis, which was the key aspect identified by the hon. Gentleman. There is a real problem in getting practitioners to talk with each other. I hope that those regional boards will help to facilitate that.
This has been a good-tempered debate. There are differences between us in our general approach but not in the substance of the difficult matters with which we are dealing. I was struck by the lack of discussion on such matters among local authorities, and even between adjoining local authorities. I had an opportunity to visit one of my local authorities, Epping Forest, where the manager dealing with housing benefit fraud decided, off his own bat, to get volunteers to deliver benefit forms by hand instead of posting them, as a result of which an enormous saving was made, because, during the next few weeks, it was discovered that some people had perhaps forgotten to inform the local authority that their personal circumstances had changed. Such an initiative can make an enormous difference. I know that the adjoining authorities have not taken similar action. If there were regular meetings, the problems would be understood, and that would make a considerable difference.
We know the extent of the problem of social security fraud from the Public Accounts Committee. In response to a question of mine, the Minister produced some figures a few moments ago. I regret asking that question because I have the same figures, particularly with regard to the jobseeker's allowance where errors amounted to 2.8 per cent., resulting in an overpayment. Even that small proportion amounts to £21 million. We should be able to tighten up and ensure that people are properly assessed. The Minister was quite right to say that the overwhelming majority of people who apply for various benefits do so honestly and decently, and if they are overpaid will come to the counter and say so.
In my part of the world, dealing with the Benefits Agency problems involves getting people to the agency office and persuading them to accept that they have made a mistake and will have to make recompense, but that they can wipe the slate clean quickly. We need to find a way to make the effect of changing circumstances much clearer in people's minds. That could be done through some of the recommendations in the Social Security Fraud Bill.
We have many reservations with regard to the practicality of the provisions, and particularly with regard to the role of the Data Protection Commissioner. We are not as sanguine as the Minister on the question of how judge-proof the legislation is. Nor do we always assume that what the Government are doing is legal and above board. I hope that the Minister does not find that offensive, because, particularly with the human rights legislation, the ultimate decision will rest with a judge and not with the Chamber.
The Public Accounts Committee stated that the amount of fraud in income support and child benefit alone exceeded £1.7 billion a year. The Minister says that we should disregard those figures. They are practically the same as those that he gave us for total fraud. The Benefits Agency reported to the Public Accounts Committee, about a year ago, that there was only a limited prospect of improvement within the medium term. The report also mentioned the problem that the hon. Member for St. Ives legitimately and correctly raised, that of devising an over-complicated system. I refer particularly to paragraph 37 of the third report of the PAC, which states:
All of those things can be dealt with at practitioner level; they are practical problems that we need to overcome. The simpler a system is, the easier it will be to administer. I am not as sanguine as the hon. Member for St. Ives that automatic credit transfer will cut out much fraud; the fraudsters will simply move on to another system of fraud. We know how money can be moved around the world at the blink of an eye. Automatic credit transfer may result in years of delay between payment and identification.
We are pleased that the Minister is starting to implement Scampion's proposals, but he referred to fraud and the fact that national insurance numbers are not as secure as most people think. What are the Government doing to address that? At a seminar, the Minister made great play of the falsification of records and "The Day of the Jackal" fraud, which involves people going round graveyards looking for somebody who would have been roughly the same age as them who died in infancy and taking their identity. Lord Grabiner, who considered the informal economy recently, also raised that point. What are the Government doing to tighten up that regime, so that people cannot obtain someone else's birth certificate as the prime source of their identity? When the Minister winds up what I suspect will be a short debate, it would be interesting to know what is being done about that.
The official Opposition are minded to be as helpful to the Government as possible, especially with regard to the crackdown on fraud. We want greater attention to be paid to the simplification of regulations, which the Government have considerably complicated. We accept what the Minister says about civil action, but there is a case for magistrates to be able to try people who are evading their income tax responsibilities. The Inland Revenue traditionally takes on only the more serious cases. Magistrates courts should be able to deal with benefit fraud under a fast-track procedure. The Minister did not say much about the "two strikes and you're out" initiative to ensure that people who have abused the system and have two convictions cannot continue claiming benefit at a full rate without facing the consequences of attempting to defraud their fellow citizens, which we support.
Mr. Andrew George (St. Ives): I appreciate that this is an important issue, and, as the hon. Member for Brentwood and Ongar (Mr. Pickles) said, we are grateful to have the opportunity fully to explore the Minister's opening remarks. No one is in favour of social security fraud. We are all against it and it is the role of Opposition Members to harry the Government to encourage them to do more, and to make the Minister feel uncomfortable at times on the understanding that our shared objective is to tackle such a serious problem.
As the Minister explained, we are talking about a potential cost to the taxpayer of £7 billion. To put the problem in proportion, that sum is more than the annual budget of some small Departments, and such a serious amount requires a serious response. I echo the remarks of the hon. Member for Brentwood and Ongar that, simply because not many hon. Members are in the Chamber today, we cannot conclude that that is necessarily the result of an inverse relationship with the weight of paper in the form of press releases from the Department announcing new ways in which the Government are tackling the issue. Social security fraud is a high priority, and it must be dealt with.
The Minister rightly pointed out that the first efforts to deal with fraud were made by the previous Conservative Government after they had been in office for 16 years. It was only in 1995 that they began to measure the extent of it. The present Government must be congratulated on the measures that they have announced and rolled out, and the House must debate what has been achieved as a result of their initiatives. The hon. Member for Brentwood and Ongar said that paragraph 37 of the Public Accounts Committee report refers to the fact that the total amount of fraud is unacceptable, but that much of it is the result of complex regulations. The Government have referred in the past to designing fraud out of the system, which was what the Minister was referring to when he spoke about the necessary changes to ACT. It is also important to simplify the system. The Minister must accept that some of the measures introduced by the Government add to its complexity. I have expressed my concerns about ACT, and we must watch that matter closely.
Another issue is the introduction of the working families tax credit. Originally, child benefit was the only method of supporting families effectively, but we now have working families tax credit and the children's tax credit. The more complexity is introduced into the system, the more opportunities are offered to people--who we must accept are often talented and able--to interface with those levels of complexity and find methods of defrauding the system. The Minister must identify and address those.
The Public Accounts Committee also identified the inadequacies of the Benefits Agency's computer system. The Minister, in his characteristically open way, described his concerns about the computer system in the past. As the Government introduce their proposals for ACT, there will be concern about whether they will address the weaknesses of the computer system. The Public Accounts Committee report states:
Broader questions need to be asked about data protection issues. As I understood it, the verification framework was, among other things, a way of ensuring that the interface between district councils and benefits agencies was not stymied by data protection. The Minister described it, interestingly, as computers kissing themselves--information being exchanged between departments to verify that claimants were who they said they were, and to receive confirmation from the Benefits Agency that claimants were on the benefits that they said they were on. We strongly support the proposal to reward councils financially for detecting and prosecuting fraudsters and to put in place measures for active prevention. The publicity offensive that the Minister mentioned will take matters forward.
I am sure that, like me, many hon. Members have often had constituents come to them to say that they believe that a neighbour or someone in their community is fraudulently claiming benefit. I always tell them to give me the details or to go direct to the Benefits Agency and give that information confidentially. It is important for them and for the country as a whole that such information is passed on. I urge the Government to do more to encourage people to give information when they are genuinely concerned that benefit is being fraudulently claimed.
We are pleased that the "do not redirect" scheme to which the Minister referred is netting some success, and we are glad that he considers that that is resulting in some benefit. It will be interesting to see how the greater powers for fraud inspectors under the Child Support, Pensions and Social Security Act 2000 and the benefit fraud hotline develop.
The Minister described the importance of the Social Security Fraud Bill. Does he believe that the Bill is likely to make progress and be enacted before the general election is called? The DSS website refers to 59 press releases relating to the crackdown on fraud since January 2000, announcing a variety of measures. For all the press releases, what is being achieved? Are we on course to meet the targets by March 2002?
The latest figures reveal that the total overpayment of income support and jobseeker's allowance due to fraud and error from April 1999 to March 2000 was £1.32 billion or 8.4 per cent. of the benefit paid. The DSS press release at the time stated that that represented a statistically significant reduction, but closer inspection reveals that fraud and customer error in income support alone increased by 0.6 per cent. last year from 13 per cent.--that is, 499,000 people in 1998-99--to 13.6 per cent or 513,000 people in 1999-2000. Statistically, that may not be a significant increase, but it is hardly progress by leaps and bounds towards the 10 per cent. reduction target for next year.
The recent Audit Commission report published in late January this year contains unwelcome evidence for the Minister. Housing benefit accounted for 92 per cent. of all detected fraud in 1999-2000. The average value of each detected fraud increased from £464 to £644. However, it states:
The Public Accounts Committee referred to problems with the computer system. In January 2000, the Benefits Agency paid 112,000 recipients their benefit twice, which cost £10.5 million. That was due to a failure in the new computer system that pays benefits directly to banks.
The Minister will, quite rightly, tell me that it is too early to measure success, but it would be helpful to have some encouragement about when in the coming months he believes that the kind of difficulties that I have identified will be dealt with. Local authorities should be encouraged to share best practice methods to reduce benefit fraud. The Minister has referred to the use of a carrot and stick approach. Doling out financial penalties to local authorities that are not acting effectively, and giving financial inducements to those that are, is to be recommended. As a result of anti-fraud initiatives, some local authorities are achieving savings in benefit expenditure of between 5 and 6 per cent. We should be working towards that level of saving in every local authority, and a nationwide scheme would work towards that goal. We would certainly like to see an immediate review of the best-performing local authorities to establish which methods work. Perhaps lessons have already been learned from the Balham case, to which the Minister referred earlier, that could be transmitted to other authorities.
In conclusion, this has been a welcome opportunity to debate a serious and important subject. The Minister and his Department have announced a number of initiatives, all of which are welcome. Liberal Democrats are not yet convinced that ACT is the best way to deal with benefit fraud, not least because of its impact on the post office network. Modernising the computer system and broadening the extent to which that system is able to connect information across the Department and between Departments is welcome.
On a personal note, although I appreciate the need for data protection legislation to be strongly adhered to, and despite Liberal Democrats being strong on the issue of civil liberties, the Minister is right to identify the issue of ensuring a strong and robust method of interfacing information in order properly to combat fraud, and that needs to be pursued.
Data protection, a matter raised by the hon. Member for Brentwood and Ongar (Mr. Pickles), is taken seriously. There have been changes in data protection legislation, some of which have only recently become apparent to me--not in my ministerial role, but as they affect Members of Parliament in their case work. When one thinks about it, the idea that our constituents have access to our files is tricky. Changes are afoot that will home in on Members of Parliament: legislation that they have passed will personally affect them as holders of data on their constituents. I suspect some education is due on that matter. So that there is no misunderstanding, the Balham project is nothing to do with local authorities; it is located in the Balham DSS area and relates wholly to the issuing of national insurance numbers and a more intensive type of interview.
The Audit Commission report was mentioned by both the hon. Member for Brentwood and Ongar and the hon. Member for St. Ives (Mr. George). The Audit Commission, as an auditor, operates with a different set of rules and legal authority from us. Its job is to fish, as it were, and it does; it data matches on computer in a big way, because the role of the auditor is different from that of the DSS. It data matches on a huge scale, cross-checking the hub of housing benefit, along with student loans, other benefits and urban renewal grants, which would not usually be paid to someone on housing benefit. Under legislation, it rightly has powers as an auditor to do a good deal of work and it is highly successful; its reports are most useful.
The hon. Member for St. Ives also asked about progress on the Social Security Fraud Bill. I cannot say; it will come out of the other place at some time. It is not generally known that the Government have only 29 per cent. of the vote in the House of Lords, so we have to negotiate. The Bill will come out of the other House when the combined forces of darkness, as it were--the Conservatives and the Liberal Democrats--decide to let us have it. I mention that as an aside, because there is a good deal of consensus on the Bill; I do not want to cause a problem as we finish. We have bent over backwards to ensure that we can robustly defend what is in the Bill at the Dispatch Box and in the court of public opinion outside, with the emphasis on the code of practice and the fact that there will be no fishing expeditions. We will try to get the Bill through the legislative system as soon as possible.
Mr. Pickles : I am willing to accept that the principal problem in the other place relates to data protection, and both the Conservatives and the Liberal Democrats have framed constructive suggestions to overcome that. There is no question of the Bill being held back.
Mr. Rooker : Yes. On Report, the Government and others will table brief amendments to the Bill to meet some of those genuine concerns. I make no bones about that; there will be consensus and agreement in the other place. I should not say so, but I will, because it is part of my style, but had we known that the Bill would start in
I assure hon. Members that allegations that reach the Department, locally or nationally, are checked. However, Ministers cannot report back to a third party. We have set up the fraud hotline--0800 854 440--which is used frequently, and, from time to time, we publish parliamentary answers on its use. Allegations are checked, but people who make allegations may not always understand why they cannot have a report back about the result. That situation is unfortunate, but necessary.
Data matching through the Audit Commission is done on a large scale, and we also do some fishing ourselves. Order books with signatures go into store, and, as hon. Members know, some of them end up in Northern Ireland. Checks sometimes turn up orders that were lost between the printer and the customer or beneficiary. We find the orders cashed with a signature and post office stamp, and if, after checking, we discover something, people are prosecuted.
There are several activities dealing with organised crime to which I have not referred in detail. There are big operations for which high-tech surveillance is used, and although our own staff are not exactly put at risk, they are up against gangs of organised criminals. The matter is taken seriously.
"The Day of the Jackal" scam is a bone of contention, as it should be. The misuse of birth certificates to create a false identity has become a problem. It is stated on the certificate that the certificate is not proof of identity, and that has always been the case, but people ignore that, and continue to issue driving licences, bank accounts and other documents on the basis of such a certificate. However, the DSS does not rely on birth certificates for paying benefits or issuing national insurance numbers. We have our own investigatory powers and a system for checking individuals. Needless to say, problems with people who create false identities continue to occur. Sometimes that is done by using a dead person's identity and sometimes that of a living person. Criminals sometimes piggyback on the back of an existing individual, which is upsetting to the individual concerned.
We have begun to establish a computer base in the Office for National Statistics, which links infant births and deaths. That database will be available to the Passport Agency and the Department to combat fraud. It will go back only a few years, because we have to get it up and running, but it will provide a snapshot of births and deaths since a certain date. With the help of our colleagues in the Treasury, work is under way. People do not usually know that the Treasury is responsible for issuing birth certificates, but the Office for National Statistics is part of that Department.
Complexity of regulations has been an issue. Complexity of forms is one thing, complexity of regulations is another, but the main point is that people who claim benefit fraudulently and tell lies generally know that they are doing something wrong. They cannot say, "I didn't understand the rules." Most people do not understand them. They simply want to sign and date the forms and receive their benefit. They do not need to know the mechanics of the rules; they merely need to tell us the truth. If they do that, there is no problem.
That press release is dated 8 February 2001. I rest my case.