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Mr. Butterfill: If someone applies to a building society for a mortgage, is it unreasonable for the building society to ask to check the person's status with his bank? Is that an intrusion into his privacy? Is there not an analogy with someone asking for state benefits and being asked whether a check can be carried out with his bank? Is that really such an erosion of people's private rights?

Mr. Webb: When one applies for a mortgage, the information that is requested is limited, specific and relevant. On the occasions when I have applied for a mortgage, I do not remember being asked for copies of my bank statements. I might have been asked to state what my salary was and I might have been asked to produce mortgage statements from other lenders, but not for all sorts of extraneous information. One of my concerns about the powers in the Bill is that the temptation to do a bit of fishing is considerable.

First, there will be the question about whether there is an account, and perhaps a question about the balance, then the investigating officer might think, "Maybe we should look a little further. We might find something else." That must be a huge temptation. There is no cost to the civil servant concerned. By pursuing the matter as far as possible, he might turn something up and get a pat on the head for finding something, even if that does not happen nine times out of 10.

Mr. Butterfill: The hon. Gentleman is generous in giving way again. Perhaps there is something wrong with the way in which disclosure is dealt with at present. He may not be aware that whenever he asks for any form of credit--for example, from a building society, or for a loan to buy a new car--he will sign a form that entitles the lender to make all sorts of inquiries about him, including his status with his bank.

Mr. Webb: There is a difference between my status with my bank, and copies of my bank statements for the past six months. The question is how far it is legitimate

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for the state to go in pursuing suspected fraud. How strong does the suspicion need to be? It is the lack of scrutiny that worries me.

We will not oppose Second Reading--I shall not keep the House in suspense any longer--and we think that it is legitimate for the state, in tightly controlled circumstances, to check some of the information that it might need to corroborate, but we want to be sure that there is independent scrutiny, that the investigation is not carried out on such a massive scale that scrutiny is impossible and that the information requested is specific and limited, not just general fishing.

Until the Bill went through another place, there was a clause stating that the people who would be scrutinised would include those in a category more likely than others to commit fraud. The fact that the Government even thought of writing that in is extremely worrying. I do not know whether they had in mind people who looked a bit shifty or people with funny accents.

I am not sure what the criteria were to be, but the fact that the Government thought of including a clause that would allow them to examine the bank accounts and so on of people who seemed more likely than others or who were statistically more likely than others to commit fraud suggests the sweeping ambitions that the Government had. I am delighted that in another place the Government responded to criticism and reined in those ambitions, but I am concerned that the ambitions existed in the first place.

Mr. Willetts: The best that Ministers could come up with was the suggestion that the measure would attack window cleaners. Perhaps, with an election looming, they were so worried about losing the window cleaner vote that they abandoned the idea. However, that was the only explanation that the Government could come up with when challenged on the point that the hon. Gentleman rightly makes.

Mr. Webb: That suggests entirely new angles on laundering, I suspect.

We are anxious that the powers should be independently scrutinised by senior staff and should not be on such a large scale that they get out of hand. I spent a riveting time this afternoon reading the code of practice. It is not just civil service staff but subcontractors who will potentially have those powers, so the powers could be exercised at one more remove. That is a further source of concern to us.

I have already asked what assurance there was that the information requested would be the minimum that was needed. The incentives are all wrong. The incentive for the member of staff must be to ask for as much as possible, because in one case out of 10, 100 or 1,000, something extra will be detected. How much intrusion should be balanced against that? We are worried that there are not sufficient controls to prevent such fishing expeditions.

There are questions about who will bear the cost. Often, the actions of central Government incur costs for local government, and local government never gets reimbursed. Under the Bill, local authorities will have to supply information. Will that be just another burden on local authorities, or will the Government meet the cost?

Have the Government considered a possible side-effect of the Bill? As a result of the power of the state to gain access to people's bank accounts on a much larger scale

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than ever before, people may stop having bank accounts. Have the Government assessed the likelihood of that? Given that one of the Government's strategies is to create a universal bank and to get more people to have accounts, is there a danger that if people think that their financial affairs are not private and their transactions are not secure in a bank account, fewer will have bank accounts? I should be grateful for the Minister's response.

I mentioned earlier my concern that the Government are not using their existing powers to crack down on housing benefit fraud. In an intervention, I asked the Secretary of State what he thought of the fact that housing benefit fraud detected by local authorities had gone down between the second and third years of his Government. He said that the Government were trying to do more to stop fraud in the first place, but I was not convinced that that explained why local authorities were finding less fraud.

My reading of the situation is, first, that local authorities have not been supported enough in their anti-fraud work, and, secondly, that the Government have not used the powers that they have to make sure that local authorities are doing more. The hon. Member for Havant (Mr. Willetts) mentioned, rightly, that the Government's existing powers have been used only once, against Northampton council. That local authority detects 1 per cent. of benefit expenditure in fraud. The most successful local authorities detect 5 or 6 per cent. of expenditure in fraud. If the worst performing authorities could be brought to the average of the best, the Government could save £400 million or £500 million. That seems a credible goal for a two or three-year period. The key question is why the Government have not used those powers more. The Secretary of State did not answer when the hon. Member for Havant asked about the matter, but I hope that the Minister of State will do so. Of course, there are huge variations in local authority anti-fraud activity. Detected fraud has fallen, but there is not much evidence to suggest that the Government are using existing powers before they ask the House for more.

I should like to refer to one further aspect of the Bill about which the Liberal Democrats are perhaps especially concerned--the effect of the benefit sanctions. I spoke about war pensions in a slightly hurried intervention on the Secretary of State. I wanted him to deal with the issue before he finished his speech. Bizarrely, a "Two strikes and you're out" approach is applied to fraud in respect of war pensions, but not to fraud on retirement pensions. When Baroness Hollis was asked why retirement pensions were not included in the Bill, she gave the reason that there was virtually no fraud in respect of such pensions.

Does the Minister of State believe that serious fraud exists in connection with war pensions? It would be helpful for an answer to be put on record. If no serious fraud is committed and it is accepted that Britain's war pensioners are decent, law-abiding people who should be getting the money, the inclusion of war pensions in the Bill is insulting. If he is considering tabling amendments, he should be aware that knocking war pensions out of the Bill could remove a potential source of offence at no cost to the Government. War pensions should not be included in the Bill.

What of the people who are sanctioned? Few of us will have any sympathy for such people, as they will have attempted twice to defraud the benefits system. However, we must consider the appropriate punishment for such

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people. For example, is it appropriate to punish their dependants, who are likely to be children? The Minister of State will say "We're not touching the child rates; only the personal allowances", but that still reduces the total amount that is coming into the household. Anybody who has tried to live on income support for any period will know that income will already be at a minimum. The Bill can take somebody who has committed two offences below income support levels, along with the rest of the household.

In another place, the Government were challenged by my noble Friend Earl Russell about research evidence in that respect. What research have they undertaken into the effect of the benefit sanctions on those who are sanctioned? What does the Bill do to such people and to their dependants? The short answer is that the Government do not have a clue. In fact, they do not care. Whenever they are asked such questions in the House, they say that people should not commit fraud anyway.

We must consider the appropriateness and proportionality of any punishment. As I have previously reminded the House, when people are convicted of murder, we still feed them, clothe them and put a roof over their head. The Bill requires people who have committed benefit fraud twice to live below the poverty line for a sustained period of punishment. How can it be appropriate that although somebody who has committed a severe crime is guaranteed the human rights of food, clothing and shelter, somebody who has done something far less serious can be denied those basic rights?

The Government talk a lot about rights and responsibilities. I do not want to take away from anyone the basic human rights of food, shelter and clothing, especially when he or she has committed a crime that is far less serious than those for which imprisonment is the usual punishment. There is a serious danger, however, that that is what the cumulative effect of the Government's benefits sanctions will mean. The 40 per cent. sanction mentioned in the Bill can be applied on top of another 40 per cent. sanction. That may happen in only a few cases, but such measures are getting out of control. The Liberal Democrats believe that the Government should not introduce any further benefits sanctions until they have commissioned proper research into the effects on those who are sanctioned.

We are concerned about the Bill, but we will not stand in its way, as we share the commitment to tackling fraud. However, the response to fraud must be proportionate, independently verified and properly controlled, and we have yet to be convinced that those conditions will be satisfied.

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