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Mr. Paul Burstow (Sutton and Cheam): I shall speak briefly to amendment No. 1, but I must first pick up on a couple of comments made by the hon. Member for Brentwood and Ongar (Mr. Pickles). He referred to the exchanges in Committee on 9 April and, in particular, to the Minister of State's attempt to parody or caricature the position taken by the Liberal Democrats. The hon. Gentleman did his best to do the same.

We are not in the business of rewarding cheats. Like Labour and Conservative Members, Liberal Democrats believe that we have to bear down on benefit fraud, but we also believe that the punishment should be appropriate and targeted on the offender. It should not be so indiscriminate as to impact on the family, as if guilt by association justifies applying a sanction that will result in difficulties and hardship not only for the individual, who may deserve to face hardship, but for his relatives. We have therefore tabled amendment No. 1, although as my hon. Friend the Member for Northavon (Mr. Webb) said, we would much prefer the clause not to see the light of day.

We believe that a delay is necessary because the Government should surely take time not only to reflect, but, better still, to gather the evidence on which they want to justify their policy. There is a lack of evidence to sustain the case that the measure represents an effective means not only of sending a signal, but of genuinely changing behaviour. There are questions, which my hon. Friend raised in Committee and on Second Reading, as to the knock-on, collateral damage that will be done to the families of benefit cheats. It is wrong that families and children should be made to suffer for the sins and omissions of parents who are tempted to defraud the system.

My hon. Friend the Member for Northavon referred in Committee to the limited research that has already been done on the matter by the Department for Education and Employment and the Department of Social Security. That work is set out in research report No. 86, which evaluated jobseeker's allowance. I believe that Ministers have relied on that report at least as evidence to show that they have researched these matters, but the important thing is that it was based on a sample of only 30 people. That is the basis on which their policy is being built. When one considers what those 30 people said and the change of behaviour that was involved, one sees that the evidence does not support the Government's policy.

That is why we propose a novel idea to the House and to the Government: evidence-based policy. There should be some evidence before the Government act in a way that will do harm. That is why we are saying that they should delay the measure for two years. Why two years? We believe that, if the matter is to be investigated effectively, time will be needed to set up the necessary research and to track the impact of the policies and

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sanctions that are already in place in respect of jobseeker's allowance and the Child Support Agency. We must track their impact over time to investigate their effects on families and so on. Finally, at the end of such a project, there must be a proper evaluation.

As I said, we believe that benefit cheats should be punished, but that the children, who will be innocent of the crime, should not be punished with their parents. That is why we have said that benefits sanctions are about seeking retribution. We do not believe that that is the role of the state, although we think that it does have a role in seeking restitution and rehabilitation. That is the proper balance, but the Bill is unbalanced and is unfair and unjust as a result. It is entirely right to demand that people who defraud the system should repay the money, pay fines and give community service, and to ensure that habitual fraudsters serve time; but it is wrong of the House to agree to an unfounded, unresearched and ill-conceived measure without even having the grace to pause and conduct proper research. I hope that the House will consider accepting amendment No. 1, even if it is minded to reject the other Liberal Democrat amendments.

Angela Eagle: The amendment would either remove the two-strikes provision or delay it for two years. In effect, the delay would be longer, because the two strikes must be built up. It is reasonable to assume that it would be unusual for somebody to receive two convictions for benefit fraud in a single year, so the amendment would delay the biting of the two-strikes sanctions even further, and it will not surprise the House to learn that the Government oppose it.

The hon. Member for Brentwood and Ongar (Mr. Pickles) almost argued in his welcome last-ditch appearance in our proceedings that the Bill was modest. He seemed to hint that he wanted us to go further. However, the hon. Member for Northavon (Mr. Webb) was almost apocalyptic about the poverty that the two-strikes sanction would cause to innocent members of the families of benefit fraudsters. I do not underestimate the effect of sanctions, and the hon. Gentleman might have had a point if the sanctions involved in the two-strikes process, which is set out from clause 7 onwards, removed all benefit, but they apply only to the personal elements of benefits and are designed specifically to operate alongside a hardship scheme, which ensures that innocent members of a family unit whose head has been involved in benefit fraud are appropriately protected. He was guilty of the grossest exaggeration in his portrayal of some of the effects of the two-strikes sanction.

7.15 pm

Last year, more than 22,000 people were sanctioned for cheating the benefit system, and almost half of them were subsequently convicted of benefit fraud. On the hard core of repeat offenders, the hon. Member for Brentwood and Ongar rightly referred to 500 people; indeed, about 500 people a year would fall under the two-strikes provisions. The intention of the provisions is to deter those who persist in repeat defrauding of the benefit system, but never come across any sort of sanction.

I can give some examples of the sort of cases that are involved, some of which are mind boggling. For example, one person was prosecuted for working while claiming

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and was then done for stealing and cashing a relative's child benefit book. Undeterred, that person was then prosecuted again for attempting to claim jobseeker's allowance to which he was not entitled. The people whom we are targeting steal vast sums of money that could be better spent elsewhere on more deserving causes such as the alleviation of child poverty.

Two people were recently convicted because of their part in a ring involving stolen girocheques, which caused an estimated loss to public funds of £670,000. In another case, a woman admitted making false benefit claims after 11 benefit order books and documentation relating to several other different identities were found at her address. The overpayment was calculated at more than £140,000.

At the other end of the scale, a man was recently convicted of stealing from a blind friend a disability living allowance order book and girocheques worth £1,200. In another case, a man who had previously been convicted of order book fraud admitted on arrest to obtaining his ex-partner's order books and advancing the dates on them. He also admitted to a series of irregularities covering a further seven order books and a girocheque.

Mr. Pickles: Those examples illustrate the utter callousness of people who defraud the state, but surely the Under-Secretary's remarks do not apply to war pensions. Is not it better to concentrate on fraudsters such as those whom she describes and not to establish powers for war pensions that have not been taken in relation to state pensions?

Angela Eagle: I shall deal with the war pensions aspect of the amendments in due course. I am happy to answer the hon. Gentleman's question, but I would prefer to do so when I am speaking about the relevant aspects of the amendments.

The Department does not prosecute in cases where there is no public interest in doing so. The people whom the sanction will hit are the cheats who systematically abuse the system for their own gain, not only once but again and again. It is intended not only to provide a deterrent, but to send a signal saying that such repeat behaviour will not be tolerated in the system. I hope that it works as a deterrent. Paradoxically, one of the signs that suggest that it might be working is that there are few repeat offenders. People realise that the game is up and that they cannot continue cruelly and callously to milk the system. They must realise that cheating the benefit system and stealing money from the most vulnerable people in society, who rely on the welfare system, ensures that there is less money to go round for those who are needy. That is why we must consider a viable deterrent. The Government believe that the two-strikes sanction is an appropriate way of dealing with the problem.

The hon. Member for Northavon expressed in exaggerated terms his worries about the effect on the families of people who have committed the offences. The Government intend that the sanctions should hit the people who were responsible for the fraud, rather than their innocent family members. The sanctions affect 40 per cent. of the personal allowance, or 20 per cent. of it if there are vulnerable people in the family, which is the case when the claimant or a family member is pregnant or seriously ill.

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Those sanctions are not new; they have been a feature of the benefits system for a long time. However, we are extending them to those who systematically defraud. Housing and council tax benefits will be unaffected when the claimant has an underlying entitlement to income support or income-based jobseeker's allowance. If there is no such underlying entitlement, we intend to reduce housing and council tax benefits by an amount equivalent to 40 per cent. of a single person's allowance or 20 per cent. if the claimant or a family member is pregnant or seriously ill.

The opposition of the hon. Member for Northavon to sanctions is well known. I know that I will not persuade him to change his mind, but I should like him to consider and accept that child benefit will never be withdrawn, that housing and council tax benefits will continue to be paid even when jobseeker's allowance or income support is sanctioned, and that premiums payable for the family and children will not be reduced. Only the personal allowance will be affected. Free prescriptions and school meals will remain available even when a benefit is sanctioned. All those protections will ensure that innocent members of families, about whom the hon. Gentleman is so worried, will not suffer.

The hon. Gentleman must accept that benefit sanctions are designed to deter persistent defrauding of the system. They therefore need to be tough. However, I hope that he will also accept that we have attempted to strike a balance and provide protection by granting access to hardship schemes. Those affected will, after all, have been convicted twice. I expect us to revert to those matters in future, but I cannot accept amendments that would tear the Bill in half and remove the sanctions.

I expect us to repeat some of the discussions that we held in Committee on war pensions. However, the amendments would have the unintended effect of preventing war pensions from being a disqualifying benefit. That would mean that fraud against it would not count as a strike under the two-strikes provisions. The amendments would also stop war pensions being a sanctionable benefit. If that happened, people could target war pensions for fraud. I suspect that the hon. Member for Northavon did not intend that.

War pensioners are decent and law abiding, and the money that they receive reflects the debt that society owes them. I can therefore understand the reasons for some hon. Members' reservations about their inclusion in a fraud- related provision. However, we believe that it would be inappropriate to exclude them. Opposition Members will not agree with me, but I shall explain why we remain of that opinion.

In Committee, the hon. Member for Northavon argued that if there was a good case for excluding retirement pension on the ground that there is almost no evidence of fraud, that also applied to war pensions. However, we are considering not merely numbers but whether a benefit should be sanctionable or has the potential for fraud.

The retirement pension is not a sanctionable benefit, and the majority of war pensioners are now over pension age. However, there are big differences between the rules for the two benefits. Those for the retirement pension are simple. Anyone who is over a certain age and has paid contributions receives it. It is difficult for someone to

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commit fraud against it. However, that does not apply to war pensions, and entitlement depends on other issues, such as income.

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