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Mr. John Butterfill (Bournemouth, West): rose--

Mr. Darling: Perhaps the hon. Gentleman from the Back Benches can tell us how the Conservatives will save all that money.

Mr. Butterfill: The right hon. Gentleman talks about unsubstantiated assertions. I remind him that in a letter to me of 28 November he said that the new IT systems would save more than £1 billion by 2005. That claim is

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unsubstantiated too. How does he substantiate that figure? I have no doubt that he will make some savings, but how he substantiates his claim I am not clear.

Mr. Darling: The point about IT is simple. The systems that we inherited from the Government whom the hon. Gentleman supported are ageing and will not last much longer. It is not an option simply not to replace them. It is not good enough for an organisation such as the Department of Social Security, which pays out more than £100 billion a year, to rely on IT systems that are 20 or 30 years old. The system needs to be replaced. If we do not do so, there will certainly be more errors in the system and it will be more and more difficult to track fraud.

One of the advantages of the new equipment will be, for example, that if someone claims a benefit in one office and then tries to do so in another office, the information will immediately be cross-matched. The clerk will know that someone has done so. The present system does not allow that.

My argument is straightforward. Replacing the IT systems in the DSS is essential. The NAO has drawn attention to the need to do so for about 12 years. It qualified the accounts of the Benefits Agency for years under the Conservative Government and one reason was that the IT system for keeping track of the amount of money paid out was not up to scratch. We have the money to replace the system. If the Tories were elected again, their guarantee of £16 billion in cuts would mean that the money would not be there to replace the system.

Mr. Butterfill: I entirely agree that it is desirable--indeed essential--to install that equipment. That was not my point. I was merely saying that the right hon. Gentleman had not substantiated the figure that he gave me. I have no doubt that he will make savings, but he said that the shadow Chancellor had not substantiated his figures and I was saying that he makes similar claims without any basis for doing so.

Mr. Darling: I said that the Government will reach the target that they set for a 50 per cent. reduction in fraud and error in JSA and income support. That will be done through a variety of means: tighter gateways to the system, more investment in IT, and ensuring that we have the staff on the front line to check claims. The approach involves a variety of measures, all of which will bear down on fraud.

I repeat that we have, for the first time, seen a significant reduction in fraud and error in income support and the jobseeker's allowance. The Conservatives could never claim that during their time in office. Again, I repeat that they did not even begin to measure fraud and error in the system until 15 years after they were elected. That is an extraordinary state of affairs.

Several hon. Members rose--

Mr. Darling: I shall certainly give way to my hon. Friends. As has been pointed out from the Opposition Front Bench, we have all night--or at least several hours--and I am happy to stay in the Chamber talking about fraud and error for the whole time.

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I look forward to hearing from the hon. Member for Havant. He, too, will have plenty of time for his speech; if necessary, I shall persuade my colleagues to sit tight until he has explained how, simply by setting up a national benefits squad, the Tories will save £1 billion that they have already spent. That is their claim; that is their promise. They say that they will save £1 billion, yet they have already spent it--several times in fact. It will be interesting to hear how they intend to magic up £1 billion--just like that.

Mrs. Joan Humble (Blackpool, North and Fleetwood): I thank my right hon. Friend for giving way; I have no intention of keeping him here well into the night. On more than one occasion, he has visited Warbreck house--the disability living allowance unit headquarters--in Blackpool, in my constituency. During his visits, did he see the computer pilot project that is under way? It is already paying dividends--to respond to the point made by the hon. Member for Bournemouth, West (Mr. Butterfill). Decision-making DLA staff already find that the new computers in the pilot enable them to operate much more efficiently. Those staff are dealing with many more cases; they are looking forward to the installation in the autumn of more computers throughout the building, so that they can offer the efficient service to which my right hon. Friend refers.

Mr. Darling: I confirm that, as and when new IT is delivered throughout the Department, quality of service improves. Anyone who visited a Benefits Agency office--or indeed Warbreck house--was struck by the quantity of paperwork. Comparison with banks or other financial institutions, which are often paper free, will show just how far we have had to travel. It is a testament to the neglect of the Tories that, during their 18 years in office, they did nothing to replace the tools with which staff were meant to do their job.

Dr. Norman A. Godman (Greenock and Inverclyde): I am extremely lucky locally, because officials in the local offices of the Benefits Agency treat claimants with commendable civility. What resources and training are to be given to local officials charged with the responsibility of recovering payments made in error? I hope that we shall move beyond the usual letter sent to claimants. Will my right hon. Friend look afresh at how such persons are treated when they have received overpayments due to errors made by local staff?

Mr. Darling: My hon. Friend raises an important point. The quality of the letters sent out by the antique computer systems leaves much to be desired. Some of those letters were insensitive and inappropriate; for example, we are changing the letters sent to people who have recently been bereaved.

If the Department makes a mistake, it should put its hand up and admit it. Equally, where an individual has made a mistake or, in some cases, has been downright untruthful, that individual has to accept the consequences. I shall explain some of the measures that will help in such cases. Staff try to behave appropriately, according to the circumstances.

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We are implementing a further measure that will make a difference in dealing with fraud. In two years, we shall increasingly pay benefits directly into bank accounts as the normal method of payment. That will save about £100 million a year on losses through order book and giro fraud. The Conservatives did nothing much about that during their time in office although they did come up with the benefit card--as the right hon. Member for Hitchin and Harpenden would no doubt have jumped up to tell me if I had not pointed it out. That was, of course, another Tory disaster. It did not work; it was behind time; there was a cost overrun and it had to be scrapped. Despite that, the Conservatives are against our plans to pay money directly into people's bank accounts; at least that is my understanding--it is not always easy to make out exactly where they stand. When one considers their strategy, one is struck by the fact that they do not have one credible policy that would work and deliver savings.

We are making progress. We have a strategy that is beginning to bear fruit, but we need to do more to meet our targets. The Bill is the next stage of our reforms--[Hon. Members: "Ah!"] I know that the Conservatives do not like to hear about their shortcomings--about all the things that they failed to do during their time in office. However, when people come to make a choice as to who is best equipped to keep social security spending under control, they will contrast the Conservative party, which allowed that spending to double over 18 years--despite the rhetoric and the conference speeches--with the Labour Government who have kept social security spending growth at its lowest since the second world war. At the same time, we can spend more on families, pensioners and children because we are not spending so much on waste and failure. We are spending on our priorities.

The Bill builds on some of the recommendations made by Lord Grabiner in the report that we commissioned in 1999. We have already implemented many of his recommendations; for example, we have extended nationwide the tighter procedure for the issue of national insurance numbers that we successfully piloted in an area of London. The tighter procedures in that pilot area resulted in more than 300 arrests and the refusal of more than 4,500 applications that might well have been granted if the procedures that we inherited had still been in force. Tightening up on the issuing of NI numbers--also something that the previous Conservative Government failed to do--is central to ensuring that we cut that fraud.

The Grabiner report recommended measures in two further areas that will need the new powers set out in the Bill. First, the Benefits Agency and local authorities need new powers to obtain information from third parties in cases of suspected fraud. Those measures are set out in clauses 1 and 2--I shall return to them shortly.

Secondly, we need to send a clear signal to the hard core of people who carry on cheating the system even when they have been caught. That will not be tolerated. Those who are convicted twice of fraud will lose their benefit--as is set out in clauses 7 to 13. Clause 15 introduces new penalties to crack down on those employers who collude with their employees to commit benefit fraud. Those penalties will offer an alternative to the sometimes more costly court proceedings.

We also need to combat transnational benefit fraud, whereby people fraudulently claim benefit in more than one country or use foreign identities to claim benefit in

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this country. A more routine exchange of information will help to identify such crimes more quickly. Clause 5 will allow benefits agencies to supply information to other countries in cases where adequate safeguards exist.

Clause 16 will toughen the offence of failure to report a change of circumstances while claiming benefit. That is one of the biggest sources of fraud in the system.

The Bill has, of course, been scrutinised in another place. Today, I shall concentrate on three main aspects: the power to check the facts where fraud is suspected; the "two strikes and you're out" policy; and the penalties in relation to collusive employers.

First, I shall deal with the measures to provide access to independent information about a claimant's circumstances. The problem is that for far too long the system has had to deal with people who, when it came to the crunch, knew full well that the Department could not check what they had told it. That will change. If we are to succeed in rooting fraud out of the system, we need to be able to cross-check the information that people give us. It is in everybody's interest--individuals and businesses--to ensure that people will be found out when they cheat the system or do not tell the truth.

Almost half of the fraud in two key benefits--the JSA and income support--is due to people failing to tell the truth about their incomes, earnings or capital. The Benefits Agency must have the ability to check where it suspects fraud; and, where it is faced with someone who refuses to co-operate, it needs to require banks or other financial institutions to provide the facts necessary to enable it to discover the true position. The powers for the Benefits Agency and for councils to get information from specified organisations are set out in the Bill.

The use of these powers will be tightly controlled. There will be a limited number of authorised and named officers who can use these powers; I propose to authorise 175 initially, but that figure will rise to 300 officers at 14 principal units across the country.

Clause 3 introduces a statutory code of practice, which sets out for all to see the way in which the powers will be used. We shall consult on that code and it will be laid before Parliament. A draft of the code is available to Members in the Library. The powers will allow only authorised officers to obtain records relevant to a suspected fraud. These powers will also help with housing benefit fraud where a landlord or a tenant claims benefit for someone who is living somewhere else.

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