State Pension Credit Bill [Lords]

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Annabelle Ewing: The Under-Secretary may be about to answer this point, but I and other hon. Members asked about the possibility of having a freefone number, at least during the transition period.

Maria Eagle: Yes, indeed. The telephone calls will all be at the local rate. We shall be perfectly willing to call back those who wish it, so that people will not necessarily have to spend a lot of money making long calls. It should not be a problem. I hope that I have allayed the hon. Lady's fears in that regard.

The new clause appears to require us to deal with pensioners on a face-to-face basis, even if they want to deal with us on the telephone. That is my reading of it, although the word ''may'' appears in subsection (1), which casts some doubt on its meaning. In any event, it is far too prescriptive in its intent. We have every intention of providing an excellent service without having to use such a clause to prescribe the details of the information service and the regulations. We fully intend, and I hope that I have been able to convince the Committee of this, to provide an excellent service to pensioners. That is what we are setting out to do.

Andrew Selous: The Under-Secretary has just told the Committee that pensioners calling the service will be charged at the local rate. Given the falling cost of telephone calls in Britain, will she undertake to the Committee to follow up the Select Committee's recommendation 52? Will the Department consider the cost of providing a freefone number? If the figure were very low, there might be grounds for setting up such a number in the near future.

Maria Eagle: I can certainly promise the hon. Gentleman that the Department will respond in full to the Select Committee's report in the usual way. No doubt we will consider his point carefully. I hope that I have satisfied the hon. Gentleman that his new clause adds nothing to the Bill except perhaps some confusion about whether it forces us to see people face to face. I hope that, in view of my assurances, he feels able to withdraw it.

Mr. Webb: We have had a full debate on the new clause and I am grateful to all those who have contributed their different insights, often from their constituency experience. The constructive comments about the culture change in Jobcentre Plus are worth reflecting on.

The principal issue that we have discussed is that of standards, entitlements and targets. Is it a question of a Government and a Department with good will trying to do their best? Should we all be reassured of that and

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go away happy, or do pensioners have entitlements and rights? The new clause implies that it is not enough for Ministers to assure us that the service will be much better and have bells and whistles. If the new clause is added to the Bill and the Government are true to their word, it would not do any harm because the quality of service will meet its criteria. It is designed to ensure that face-to-face services are available, not mandatory, and that they will be provided by suitably qualified people.

Mr. Boswell: Does the hon. Gentleman agree that the new clause is very much in the spirit of the citizen's charter, which was introduced by the then right hon. Member for Huntingdon, John Major? Even if it did not always work, it was materially useful in raising standards in the public service generally.

Mr. Webb: The idea of minimum standards is good. The Under-Secretary has a lot of time for the idea of local discretion, and the way in which the services are delivered will need to vary from area to area. At the same time, people should be able to expect certain minimum standards in the quality of outcome nationwide. To draw a brief analogy, we have minimum standards in response times for ambulances. They are different in rural and urban areas, but we still have minimum standards. Although the mechanism for delivery needs to tailored to the local area, there is no need for a degree of discretion that would allow one area and its pensioners to have a poorer standard of service than another.

If the new clause is added to the Bill, it would not require the Government to do anything that they are not telling us they will do. If they do what they say they will, it will have no binding effect, but if they do not, the measure will be a stopgap and a safety net for pensioners to ensure that wherever they live they get the accessible service that we all want for them. For that reason, I wish to test the Committee's opinion on whether the clause should be added to the Bill.

Question put, That the clause be read a Second time:—

The Committee divided: Ayes 6, Noes 9.

Division No. 3]

Boswell, Mr. Tim Brazier, Mr. Julian Clappison, Mr. James
Ewing, Annabelle Selous, Andrew Webb, Steve

Cairns, David Cruddas, Jon Eagle, Maria McCartney, Mr. Ian Mann, John
Osborne, Sandra Smith, Angela Turner, Mr. Neil Tynan, Mr. Bill

Question accordingly negatived.

New Clause 2


    'The Secretary of State shall as soon as practicable after the end of the fiscal year 2004–05 and as soon as practicable after the end of each year thereafter lay before Parliament a report setting out—

    (a) the extent of fraud in state pension credit claims; and

    (b) the measures he has taken to deal with fraudulent claims for state pension credit.'.—[Mr. Clappison.]

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Brought up, and read the First time.

11 am

Mr. Clappison: I beg to move, That the clause be read a Second time.

We now come to the entirely different subject of fraud. The amendment is modest but important. It proposes that the Government set out a report each year before both Houses that contains a statement as to the extent of fraud in state pension credit claims and what measures they are taking to deal with the problem. Fraud is taking place across the range of benefits—in credits, social security payments, credits administered by the Inland Revenue, and so forth. Fraud is an important subject and we need to know what the Government are doing about it, because a substantial amount of public money is at stake.

We have raised the question of fraud throughout the deliberations of Committees on tax credits, especially on the working tax credits in the new Tax Credits Act 2002 and the working families tax credit. We are still waiting for an answer from the Government about the prevalence of fraud in working families tax credit. They initiated a survey—a benchmarking exercise—to discover the extent of fraud within that credit, but it was abolished before we got sight of the survey report. We are still waiting, and the Treasury seems shy about telling us how much fraud there is. We hope that Ministers in the Department for Work and Pensions will do a little better than their colleagues in the Treasury.

Fraud is an important subject. In evidence to the Public Accounts Committee in July 2000, the Department gave its estimate of the level of fraud throughout the social security system as approximately 3 per cent. of benefit expenditure. Estimates vary depending on whether fraud is proven or suspected. One Government Minister said it could be as low as £2 billion or as high as £7 billion, if one took into account cases of suspected as well as proven fraud.

In the course of our deliberations, we have already made observations about the prevalence of fraud within pension credits and benefits for the elderly. It may be less prevalent among elderly people claiming benefits and taking up benefit entitlements, but it is not unknown. However, instances of fraud appear to be low in respect of retirement pension, and the same is true of other universal benefits with age-related entitlements.

Fraud seems to be greatest in means-tested benefits, not least because of their complication, which sometimes encourages people to embark on fraud. If a benefit is complicated, people might commit fraud and then find themselves trapped in fraudulent situations. The pension credit is a means-tested benefit, so we should be on our guard about fraud. We should therefore be grateful if the Minister would tell us what steps the Government will take to ascertain the level of fraud in pension credit. We hope that he can also give us details about who will investigate the fraud, and whether investigations will be made on the same basis as others carried out by his Department.

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We would also like to know the Government's strategy for dealing with fraud in pension credit. We seek reassurance that they are doing all that they can, both in the Bill and in secondary legislation, to design out that fraud. We make no apologies for raising the subject, as we think that it is important. We want to save public money, and get it to the people who are properly entitled to it, not those making fraudulent claims.

Mr. McCartney: This is perhaps the third occasion that we have discussed fraud, but I am not complaining. As I said on the previous two occasions, we all recognise that we are not attacking and impugning the character of pensioners per se. We are holding a genuine debate, which must take place, on the design of a new form of income. We must also discuss how the credit impacts on the Government's strategy of fraud prevention, how to establish when fraud is taking place, and the processes for dealing with it by means of the legal system.

Although I have no problem engaging in discussion with the hon. Member for Hertsmere (Mr. Clappison) on the subject, I am a wee bit disappointed. I thought that when we discussed it previously I gave as full and as frank an explanation as one could give at this stage. Also, by offering to have further discussion with officials, I had indicated that we were in an ongoing process. It is worth saying that, as we are bringing in a brand new benefit and scrapping the weekly means test, we have to rethink the strategy for measuring underlying losses caused by fraud or error.

Our Department's fraud investigation service has worked with us from the outset in designing both parts of the pension credit: the minimum income guarantee and the guarantee credit. There is also inter-relationship with working-age services and the Pension Service in the development of their business strategies. It is an integral part of both the development of the policy and its outcome—the implementation strategy—that those in the Department with expertise in the subject of fraud work with us. It is important to say that from the outset. Measures against fraud are not seen as a peripheral issue or an add-on. They are part of the integral core activities in the design and implementation of pension credit.

The new clause would place a statutory requirement on the Secretary of State to report annually to Parliament on the level of fraud in pension credit and the measures taken to deal with fraudulent claims. We believe that the new clause is unnecessary; we do not need a statutory requirement for an integral part of our business. As the weekly means test no longer applies, the pension credit will significantly reduce the scope for mistakes, and with that for fraud, on the part of the claimant. Many mistakes are made because pensioners forget to, or do not realise that they have to, report a change in circumstances—most commonly an increase in their capital or their second pension.

However, we are not so naive as to believe that we have completely removed the potential for fraud, or that pensioners never steal from us. Figures show that 3.2 per cent. of MIG claims are fraudulent. That is about a third of the level of fraud in benefits for lone

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parents, and well below the figure of 9 per cent. for fraudulent job seeker's allowance and incapacity benefit claims. Pension credit has the least fraud of any of the benefits for which we have indicators, but fraud still occurs. Pensioners are just as determined as we are that they should not be defrauded by fellow pensioners—that minority of a minority. It is therefore in all our interests to get this right, and in a non-partisan way.

I do not believe that there is a difference between the political parties on the concept of getting rid of fraud. Arguments have been advanced in the past about whether parties could clamp down on fraud as they claimed to want to do and about how best to do so. However, we all appreciate the benefit to the citizen and the taxpayer if fraud does not take place, whether at a low, medium or high level, and of tackling it and bringing to justice those who perpetrate it.

I am trying to make it clear to the hon. Gentleman how seriously we take the matter in designing pension credit. I hope that at the end of my remarks he will be sufficiently secure to say that he has made his point, that the measures that we are putting in place will be preventive and that we have the capacity to deal with fraud both in the transitional arrangements to transfer the old MIG, or income support, system to the new pension credit system, and when the new system is effectively up and running.

As I said, we are not naïve about the potential of a minority of pensioners to steal from us. The key to success in preventing fraud in pension credit is to ensure that the application process is secure. The design of the process is still being refined, with that purpose in mind. As I said earlier, I shall be more than happy on another occasion to discuss with the hon. Gentleman how that will be achieved.

Since day one, experts involved in the Department's fraud strategy have been involved in the design and are playing a key role in ensuring that the process is as secure as possible. That is not to say that the application process will be off-putting for pensioners. The balance must be correct. We do not want to meet a public perception of dealing with fraud in a way that is so off-putting that it deals neither with fraud nor with pensioners' capacity to be put off by the bureaucracy involved or to be confused by the bureaucracy and to fall into fraud through no fault of their own.

As the hon. Gentleman says, it is important that the design features design out fraud. However, they must also tackle fraud in existence intelligently. We must get the balance right and ensure that the process is simple but not simplistic and has the capacity to catch those who intend to defraud or attempt to do so. That involves working intelligently behind the scenes with information provided in order to identify rogue claims. For example, it might be possible to identify an undeclared occupational pension from the details of a person's retirement pension calculation. We shall use existing intelligence in the system alongside the new design features that will be available.

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The new clause is restricted to fraud. It is imperative that fraud should be rooted out, but what about other forms of incorrectness, such as genuine error on the part of the claimant or departmental error? Such cases do not constitute fraud in common language, but they are the main causes of benefit being overpaid or, indeed, underpaid to the pensioner involved.

When the Government first took responsibility in 1997, although the Department was far from short of targets for its anti-fraud activity—on number of visits, number of fraud referrals, weekly benefits savings from detected fraud, and number of claims withdrawn—there was nothing on which success in removing fraud and error from the system could be judged. There was no process for judgment.

Success can be measured only in terms of outcome. The key question is, has the level of losses from fraud and error been reduced? That is the basis of our public services agreement target for reducing fraud and error in income support and jobseeker's allowance. We are in the process of developing a robust strategy for measuring losses from fraud and error in pension credit, too. The hon. Gentleman asks whether we shall be able, in the public domain, to judge reductions in fraud, loss and error as we have for income support and jobseeker's allowance. The answer is yes.

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