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Mr. Frank Field: I rise to speak to the amendments in the group to which I have appended my name. I do so for one very simple reason: when the Opposition were in government, they were, at least in my view, open to the charge of being soft on fraud and soft on the causes of fraud. I hope that those on the Front Bench will accept the amendments, as I would not want us to go into an election with that charge not only being pinned to us, but being widely believed by the electorate.
I want to support my right hon. Friend the Financial Secretary and again emphasise to the House the difficulties that he has in trying to ensure that the civil service machine is as effective as we want it to be in countering fraud. It is not part of my normal behaviour to attack civil servants either generally or individually, but I can say that the main culprits are not in the Box tonight and that I am thinking about the generalities and not about individuals.
Two examples might suggest that the machinery supporting the Government is not as anxious to counter fraud, or to take notice of the will of the House, as it should be. I have already cited the first example. I had responsibility for fraud for about 13 weeks, and decided that we should undertake an inquiry into the patterns of fraud in family credit. That information would be made known to the Treasury so that when it came to plan the working families tax credit, it could at least design out of the new benefit the easy means to fraud that were present in the family credit system. As is known, a successor Minister has told the House that the papers carrying my decision have gone missing. That hardly suggests that there is mega-support in some Departments for countering fraud.
The second example has also been cited. Attempts to get information about the extent of fraud through a parliamentary question tabled in my name took six months to elicit a reply. Again, that hardly suggests a group of people actively engaged in trying to protect taxpayers' money. I emphasise that point because we are not talking about our money. We are talking about a large number of people, many of whom earn low wages, who pay their taxes because they believe that they should. We have an equal duty to ensure that the money raised from those people, whether rich or poor, is spent in the way in which the House requires.
If we are casual with that responsibility, in the long run there will be even less support in the House for welfare measures than there is at the moment. So, if we cannot do this for the proper reason, we should do it for another reason—namely, because those of us who are interested in ensuring that those at the bottom of the pile get a slightly better deal than they would if there were no Government intervention want those programmes to be protected.
Mr. Clappison: Just before the right hon. Gentleman moves on from that point, it is worth bearing in mind the answer that he received to his parliamentary question. It stated that
- "it is not possible to answer specific questions about the proportion of the Inland Revenue's compliance costs that relate to Tax Credits."—[Official Report, 19 December 2001; Vol. 377, c. 324W.]
Mr. Field: I hate to say this, but the Treasury looks good in this regard compared with the Department for Work and Pensions. I recently received a reply to a letter that I had sent to that Department nine months earlier. It had a "roller-towel" answer similar to the one to which the hon. Gentleman has just referred. All this suggests that, despite the Government's wish to counter fraud, that wish is not being backed up with resolute action by all civil servants. For the reasons that I have briefly outlined, therefore, I hope that when my right hon. Friend the Financial Secretary to the Treasury comes to reply, he will not surprise the House or taxpayers, and that he will express the Government's intention to adopt the amendments.
Mr. Frank Field: I give way to my namesake.
Mr. Mark Field: I thank the right hon. Gentleman—perhaps I should call him my right hon. kinsman. He has made a thoughtful contribution detailing some of the intrinsic problems that the Department faced when he was a Minister. Does he not feel, however, that an openness to fraud will inevitably be endemic in the system of tax credits? That system has been born out of a desire to push the burden of costs on to business, rather than keeping it with the Government.
Mr. Frank Field: I believe that there would still be fraud if we were operating the tax credit system in the Garden of Eden, given how easy it is to commit fraud. Hence the amendments, which are trying to send a police force into the Garden of Eden to do a bit of handiwork on the taxpayer's behalf. That is yet another reason to accept them.
I shall end on the note on which I began. In the run-up to the 1997 election, the party to which I belong was able to seize the initiative in countering fraud. Taxpayers thought that the Conservative party had totally failed to live up to its responsibilities to protect taxpayers' money. My worry is that if we are not seen to act ever diligently in protecting taxpayer's money, the charge made against the last Conservative Government—that they were soft on fraud and soft on the causes of fraud—will be made against us.
I hope that the Financial Secretary will deliver a robust response. Despite his difficulties in bringing some civil servants to heel in implementing the wishes of the House, I hope that we take an important step forward in protecting taxpayer's money and in tilting the balance towards decent citizens and against those citizens who rip us off.
Mr. Flight: The Government's approach contains a genuine flaw. They have understandably chosen a system
that prioritises giving people credits as they need them. That system is extremely complex. Indeed, the Financial Secretary said in Committee that it would be like a television set—people would not understand how it worked, but they would turn the knob on and off. We should consider those two points together.The word "fraud" may be wrong, but human nature is human nature, and, inevitably, those who qualify for tax credits will develop and understand ways in which to play the system. People will work out what cannot be checked effectively or will not be checked at all. Currently, there is a marked lack of discipline in the system, and I can understand why the Government are not keen on the kind of disciplinary measures that might tighten it up. For instance, all claimants might be required to produce a detailed annual return for the Revenue, answering all the key questions about their circumstances. That would circumvent the easy argument, "I didn't really know that I had to give that bit of information, and I didn't understand." The reply to that is, "How could you? It is a very complex matter."
Alternatively, the Revenue might have to check working hours with employers. That would not solve the problem in relation to the self-employed, but, again, checking with employers, whatever formula the Government apply in relation to average working hours, would be an enormous task and yet another burden on employers. The nature of the arrangement will encourage laxity, wheezes and playing the system—not major fraud, but a culture of fraud. We have seen such things in other areas of national life. When the Government are using the taxes and money of those who are not well-off and of others, they cannot afford to have their cake and eat it. If they are to introduce a negative income tax credits system, they must also apply the disciplines that go with it.
As other hon. Members have argued, two outcomes resulted from a similar system in the United States, on which much of the Government's approach is modelled. First, costs spiralled from, I think, $1.6 billion to more than $18 billion in a decade. Secondly, some 25 per cent. of the claims turned out to be invalid. As the Bill stands, we shall go down that road. Are the Government prepared to introduce the disciplines needed to prevent the same thing from happening here?
Mr. Hoban: I do not wish to add a great deal more, but I want to put on record part of the debate in Committee on the message that the Government are sending out on working families tax credit fraud. I also want to explain the importance of the new clause and the amendments grouped with it, which were tabled by my hon. Friend the Member for Hertsmere (Mr. Clappison).
In a parliamentary answer covering the period from October 1999 to September 2001, it was identified that there were 52,000 investigations into working families tax credit claims, of which 8,800 resulted in recovery of an overpayment. There were 478 penalties for over-claiming, but only 22 prosecutions, of which 13 were successful. My concern is that, with so few prosecutions following so many recoveries and penalties, the message to the perpetrators was that, to echo the right hon. Member for Birkenhead (Mr. Field), the Government were soft on fraud and soft on the causes of fraud. That can only encourage fraudsters to commit further fraud, which is why I support the new offence of aggravated tax relief fraud. It is important to demonstrate that there is a stiff sanction.
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