Mr. Boateng: Of course I will write to the hon. Gentleman about the number of appeals. I suspect that there have not been many. He makes the interesting suggestion that we should extend the jurisdiction of the county court. My immediate response is that, as he will have noticed, we are seeking throughout the Committee's deliberations to provide a regime for tax credits that is on a par with the rest of the tax system. The appeal has traditionally been from commissioners to the High Court. It would not necessarily be a welcome innovation for those who administer and preside over county court hearings to extend their jurisdiction in such a way. They do not have experience of the High Court in dealing with tax matters, and I am not persuaded of the desirability of having one appeal destination for one part of the tax system and another for another part. The hon. Gentleman may be suggesting that all tax appeals from commissioners should go to the county court, but that would not be a good idea.
We should not break with the tradition that tax appeals from the commissioners go to the High Court, which is very experienced in dealing with tax matters and has streamlined procedures to minimise any inconvenience or excessive cost to appellants. I hope
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that, on reflection, the hon. Gentleman will withdraw the amendment.
The hon. Member for Arundel and South Downs (Mr. Flight) asked about definition. The term ''employer'' in clause 24(5) means the legal body—the company, partnership or sole trader—not individual officers of the company. I hope that that sets his mind at rest.
Mr. Clappison: No doubt members of the Committee know that the Financial Secretary and I have encountered each other in several incarnations in both government and opposition. I have often heard him uphold tradition as he has today. He makes a splendid upholder of tradition, and as one who loves tradition I am inclined to have some sympathy with him. However, on this occasion my sympathy is tempered by the need to make a modest, but useful and desirable reform that would give access to justice to people who may be daunted by the existing provisions.
I should not be surprised to learn that not many appeals are brought in respect of tax credits. The claimants involved are generally people of modest income who would find a visit to any court daunting in several respects, not least that of worrying about liability for costs. A visit to a county court, which is a more local forum, would be a less daunting prospect than a visit to the High Court, with all its majesty and attendant procedure. I am not entirely convinced by the Financial Secretary's arguments in support of tradition. As he knows, county courts are presided over by very competent legal tribunals; such matters are well within their capabilities.
Nevertheless, our proposal is modest and we are about to come to important matters. In the interests of making progress, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 2 agreed to.
Offence of fraud
Mr. Clappison: I beg to move amendment No. 22, in page 21, line 40, leave out 'seven' and insert 'ten'.
We now come to an important part of the Bill and an important amendment that would improve it significantly. The amendment would increase the maximum sentence for offences of fraud involving tax credits from seven years to 10 years following conviction on indictment. We regard it as a test of our determination to tackle tax credit fraud. Deterrence plays a part in that effort—it is not the whole story, but it is an important part of it. I hope that we will have a wider debate on what else needs to be done to tackle fraud during the clause stand part debate and consideration of amendment No. 23.
We need to let those who commit tax fraud know that they are committing a crime and they will be sentenced by a criminal court. Those who commit the most serious and determined fraud must be told that they run the risk of a substantial term of imprisonment. However, as matters stand, that is not
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the case. Tax credit fraud is not being treated as seriously as it should be: in fact, in the first two years of the working families tax credit, to September 2001, there were only 22 prosecutions for false applications. Shortly, we will debate the extent of fraud in the tax credit system, but whatever estimate one makes and on whatever basis one makes it, 22 is an extremely low number of prosecutions compared with the relative scale of fraud.
It follows from those figures that there is a very low risk of being prosecuted for fraud. Perhaps we will be told, as we were in an earlier debate, that prosecution is reserved for the most serious cases; if so, the Government are being extremely selective. Given that, for all practical purposes, hardly any prosecutions are instigated, it is likely that some of the more serious cases are not prosecuted. Against that background, it would be interesting to know how the courts have dealt with those who are convicted. According to the most recent Government answer to a written question, only 13 of the 22 people with minor prosecutions outstanding have been convicted thus far. Can the Minister give a breakdown of the sentences received by those convicted of tax credit fraud, and state how many have received a sentence of imprisonment? We believe that tax credit fraud, which defrauds the taxpayer and harms the interests of honest claimants, should be treated more seriously.
Our comments about fraud should cast no reflection on honest claimants. As I hope we made sufficiently clear in earlier debates, we draw a distinction between those who commit fraud and those who make innocent mistakes or are negligent. We do not approve of the way in which, for the sake of convenience, fraud and negligence have been bracketed together in other clauses. I do not want to labour the point, but negligence and fraud are very different matters, and we need to draw a distinction between those who knowingly set out to defraud the system and those who are careless and fail to live up to a proper standard, but who do not intend fraud.
The amendment is important. As the Financial Secretary knows, increasing the maximum sentence is one way to make it clear that an offence should be regarded in a more serious light in future. The amendment is testimony to our determination to tackle fraud, and we hope that the right hon. Gentleman will show that he shares our determination.
Mr. Boateng: The best evidence of determination to tackle fraud is not ratcheting up the maximum sentence, but activity on the ground to bring to justice those who would defraud the public purse and undermine the integrity of the Revenue. The commissioners are possessed of such determination and they will not hesitate to prosecute in cases of serious or organised fraud. In decisions on whether to prosecute, the criteria include evidence of collusion or corruption, or of the use of forged documents. Those criteria are published by the Revenue and are in line with those used in cases relating to tax or national insurance contributions for many years, including the period in which the Revenue was under the stewardship of the Conservative Government. There is therefore nothing new about the provision, nor is
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there evidence that the Revenue is not treating such matters seriously.
On the question of whether some people are more likely than others to be prosecuted for fraud, the Revenue applies the criteria equally to all people, but it is more likely to prosecute someone who works in the tax credit or judicial system—for example, Inland Revenue personnel who collude in fraud would be likely to face prosecution. The scale of the alleged fraud is not of itself a determining factor when considering prosecution, but the board's view is, quite properly, that the more extensive and substantial the alleged fraud, the more likely prosecution is.
I doubt whether the hon. Member for Hertsmere, even at his most bullish, would suggest that the most cost-effective approach to dealing with fraud and non-compliance is anything other than the use of civil penalties, backed up by selective prosecutions to act as a deterrent against fraud. The hon. Gentleman shakes his head. This is somewhat surprising and constitutes a departure. Perhaps he has been influenced by the shadow Chief Secretary to the Treasury, the hon. Member for Buckingham (Mr. Bercow), who is calling for a different image for the Conservative party. I hope that the hon. Member for Hertsmere shares his hon. Friend's view that the Conservatives' approach to the criminal justice system should be rational, reasoned and evidence based.
The evidence suggests that running an effective revenue system requires the use of selective prosecution, rather than a scattergun approach. Civil penalties should be used where appropriate, but one should not take the view that everyone who falls foul of law should be prosecuted. Such an approach does not make sense. One should condemn fraud or negligence and ensure that appropriate powers exist to deal with such matters, and that they are used by the Revenue in an appropriate way. One should also ensure that the courts are armed with the sentencing powers necessary to do the job.
Experience shows that, in practice, it is unlikely that any court will pass a sentence for tax fraud or tax credit fraud that exceeds, or is even close to, seven years; therefore the amendment would have little material effect. However, in a case of tax credit fraud so exceptional or extreme that a sentence in excess of seven years seemed appropriate, the prosecuting authorities would be able to ensure that the perpetrator was charged with the common law offence of cheating the public revenue, rather than the specific offence of tax credit fraud. Therefore, if the accused were convicted, the court would be able to impose a sentence of whatever period of imprisonment it felt appropriate. As the hon. Gentleman knows well from his experience of the criminal justice system—on the right side of it, I hasten to add after hearing a snigger from the Liberal Democrats—the use of such common law offences is standard practice.
What is important is that the powers exist. Our argument is that they do exist, in the form of common law offences. The statutory powers are as outlined in
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the Bill. We well understand the hon. Gentleman's intentions, but think that his zeal for yet higher maximum sentences is misplaced in this instance. I hope—forlornly, I fear—that he will reflect on my comments and withdraw the amendment.