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4.45 pm

Mr. Hoban: My hon. Friend has set out a sorry tale of delays and prevarication by the Government. Might he perhaps be tempted to explain to us why he thinks that the Government may have prevaricated in providing that information to the House to enable hon. Members to make a judgment as to the extent of fraud in that system?

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Mr. Clappison: A variety of explanations were put forward in Committee, but my hon. Friend assumes in his question that the Government themselves know, so it would be good to have a straightforward answer from the Financial Secretary whether he knows the outcome of the benchmarking exercise carried out by the Inland Revenue. Does he know how much fraud there is in the working families tax credit?

If the Financial Secretary does know, would he tell us whether he will kindly put that figure in the public domain? I am not asking him to clarify what was said in Committee by the Paymaster General. To summarise, she said that the Government were afraid of encouraging people to commit fraud by giving away too many details. Well, we are not asking how to commit fraud. We are not asking for details like that. We are simply asking how much fraud there is. If it is the Minister's argument that it would be dangerous to say how much fraud there is, that in itself would be a very strong temptation to people to commit fraud if they heard something like that coming from the Government. It is hardly a ringing endorsement of the invulnerability of tax credits to fraud.

The same argument has not applied to fraud in the benefits system. At the most recent Work and Pensions questions we were told by the Secretary of State himself, I believe, how important it was to know how much fraud there was in the benefits system. The same considerations apply to the Tax Credits Bill, so today we are looking to the Financial Secretary to give us some straightforward answers to straightforward questions.

Knowing how much fraud takes place is very important, but that is only a starting point; it is also important to find out what is being done about it. That brings me to amendment No. 3, in which we propose that we have a report every year on the extent of tax credit fraud, so that we know what is happening. We would have a starting point—we would know how much fraud there was to begin with. We would know what measures were being taken to deal with it and, as a result of that report, we would know each year what progress was being made in dealing with fraud.

The Government said in the 1998 Green Paper on fraud that that scenario would be desirable. They said it is important to have better information about the extent of fraud and then to discover what is being done about it. In Committee, the Paymaster General told us that early detection is important to stop abuses that may arise in the system. We agree with her, so that would be specifically required under amendment No. 3, which, we hope, will find favour with the Financial Secretary for that reason.

We believe that much more can be done. In Committee, we explained how we would like tax credit fraud to be tackled. We would like better co-ordination between Departments and between local and central Government, greater co-operation between the public and the private sectors and as much involvement from the public as possible in providing information. We welcome the fact that there has been a significant public response to the benefit fraud hotline.

I was told in a parliamentary answer last week that the public had communicated to the Inland Revenue, through the benefit fraud hotline, 16,676 allegations of improper applications for the working families tax credit and disabled person's tax credit. We welcome that public-spirited co-operation from people who share our

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concern that fraud should be dealt with effectively. I do not know how the public would respond to what the Government have done in relation to that public willingness and spirit of co-operation.

Mr. Swire: Will my hon. Friend give way?

Mr. Clappison: I shall give way, but my hon. Friend may want to ponder on the statistics showing what the Government have done. We have heard what the public have done—they have made more than 16,000 allegations. However, I was told, by way of a written parliamentary answer, that there were 530 recoveries—presumably, recoveries of incorrect payments—18 penalties, which are financial penalties, and 2 prosecutions, even though 16,676 allegations were made to the hotline.

Mr. Swire: In developing that theme, I wonder whether part of the problem is that those who run the fraud hotline do not feel that they are given enough support. I suggest that because I have a letter from my constituent, Julie Embling of the Acorn kindergarten in Exmouth, Devon—I wrote to the Under–Secretary of State for Education and Skills, the hon. Member for Bury, South (Mr. Lewis), in November asking for a reply, but I have yet to receive one—who maintains that, in running her small private school, she is owed about £2,000 a year by people claiming the working families tax credit who do not pay it on to her. She spoke to someone at the fraud hotline about her recurring problems and was told that child minders, nurseries and pre-schools are suffering financially from that nationwide problem. Those at the hotline suggested that she write to me as her Member of Parliament to try to persuade the Government to change the laws on the working families tax credit.

Mr. Clappison: I am grateful to my hon. Friend for making that point. I am sure that his constituent will be as interested as we are in the consequences of these proposals. She will also have in mind the recent experience of fraud involving individual learning accounts. Innocent providers lost out under that system, as did the people who were innocently trying to obtain education and training, because of the disruption caused when it was suddenly discovered that large-scale fraud was taking place and the Government had to bring the system to an ignominious halt. We are trying to prevent something similar happening again by having a thorough and proper debate on fraud.

We are not impressed by the number of prosecutions for working families tax credit fraud. We do not suggest that that is the only way to tackle fraud, but we would like people who knowingly commit fraud, especially those who commit the most determined fraud—I shall deal with that in speaking to new clause 6—to be prosecuted for a serious criminal offence. We suspect that many people who could be prosecuted are not being prosecuted.

Altogether, in the two years that the working families tax credit has operated, there have been only 28 prosecutions. There has been a recent spurt in the number of prosecutions—it may be entirely coincidental that questions have been asked about that—but the figure is still low in relation to the size of the system, the number of people claiming and the amount of fraud in other parts of the benefits system. I emphasise that we, like members of the public, are interested in prosecuting people who commit serious fraud and in dealing with them severely.

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New clause 6 is designed to create an offence of aggravated tax credit fraud for those who repeatedly commit fraud or obtain large sums. Those determined fraudsters need to be dealt with more seriously. We need to decide how best to protect the interests of taxpayers and the majority of tax credit claimants who are honest and who also believe that the fraud is unacceptable. They want us to get to the people who commit serious frauds to obtain a large amount of money or who defraud the state again and again.

Treating such offences more seriously would be in line with what the Government are trying to do in other parts of the benefits system. The Social Security Fraud Act 2001 tackles fraud in other benefits. It received Opposition support and removes benefits from people who are repeatedly convicted of offences. There is a widespread desire to ensure that those who commit the most serious frauds are dealt with more strictly.

We have asked many questions about fraud and want straightforward answers. It is time that the Government came clean. They should tell us what the level of fraud is and set out more clearly what they intend to do about it. We will continue to press for answers.

Mr. Webb: I congratulate the hon. Member for Hertsmere (Mr. Clappison) on his assiduous studying of the Bill in Committee which led to the correction set out in Government amendment No. 23. I wholeheartedly associate myself with his comment that large chunks of it were not scrutinised because of the tight timetable. It would be regrettable if other aspects of the Bill were not picked up on. I hope that the Government take a lesson from that the next time they programme our discussions. They should realise that it is in their interests to have proper scrutiny. Indeed, we would all benefit in such circumstances.

Mr. Frank Field (Birkenhead): The hon. Gentleman says that that would be in the Government's interests, but would it not be in the taxpayers' interests?

Mr. Webb: This is a win-win situation. It is in all our interests that there is proper scrutiny. However, the Government's reputation for producing good legislation is damaged if Bills are not properly scrutinised and have to be corrected later on. So I welcome Government amendment No. 23 and the process by which it came about.

I also welcome the suggestion in amendment No. 3 and amendment (a) that there should be annual reports on the extent of fraud, what is being done about it and how it contributes to the total error in claims. My slight hesitation is that a detailed exposition of what is being done to tackle fraud might show our hand too much, but the request for information on the scale of fraud and the overall progress in tackling it would be welcome.

I will be interested to hear the Financial Secretary's response to new clause 6. We all agree that fraud is a bad thing and that repeated or large-scale fraud is even worse. There is only one question, therefore: what is the appropriate penalty? When my colleagues and I ask whether a proposed penalty, of whatever magnitude, is not serious enough or too serious, it is sometimes suggested that we either approve of the crime or are not tough enough. We want such crime punished properly,

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but does new clause 6 set out the right punishment? The hon. Member for Hertsmere did not try to justify the specific tariff or degree of severity that it sets out, which is why I have an open mind about whether to support it.

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