The Parliamentary Under-Secretary of State for Work and Pensions (Helen Goodman): I beg to move,

It is a pleasure to serve under your chairmanship, Lady Winterton. Section 24 of the Welfare Reform Act 2009 widened and extended the existing loss of benefit powers in the Social Security Fraud Act 2001. Section 24 introduced a new four-week loss of benefit provision or one-strike sanction for all first-time benefit fraud offences. The regulations set out how the new sanction for benefit fraud offences will work. In my view, the regulations are compatible with the European convention on human rights.

Benefit fraud is half what it was in 2001. However, the money lost to benefit thieves remains significant. Fraudulent overpayments across all benefits in 2008-09 accounted for £1.1 billion. As a result, we are not complacent; we know that there is still more to do. About 50,000 people a year are convicted for the first time or receive an administrative penalty or caution for a benefit fraud offence. We want to deter people from committing benefit fraud in the first place. Deterrence is the key aim of one strike. This new sanction will make it clear to anyone contemplating benefit fraud that they will in the future lose ongoing support from the benefits system that they chose to abuse. That considerably strengthens the deterrent against fraud, but if someone chooses to persist, they will do so knowing that they face a tough benefits sanction, as well as having to repay the money and risking a criminal record. It is important to stress that one strike will apply only to cases of proven fraud. Customer error cases will not incur a loss of benefit sanction.

Existing loss of benefit provision, or two strikes as it is more commonly known, will continue for those offenders convicted of a second or subsequent benefit fraud offence within a five-year period. Under that provision, benefit is withdrawn or reduced for 13 weeks, in addition to any other penalty imposed by the court and repayment of the benefit overpaid.

Most of the changes mirror the existing Social Security (Loss of Benefit) Regulations 2001 and simply insert references to the new sections in the 2001 Act. In particular, they relate to which benefits are disqualifying and/or sanctionable; which are withdrawn or reduced; and the fact that the hardship provisions remain the same. One strike will be based on established processes in place in Jobcentre Plus, the Pension, Disability and Carers Service and local authorities to administer the existing two-strikes sanction. Introducing the new provision creates an opportunity to simplify the existing process, and as a result the start date for the disqualification period for both one and two strikes has been aligned with the benefit payment period.

Additionally, these regulations provide for statutory adoption pay, statutory paternity pay and the health in pregnancy grant to be excluded as sanctionable or disqualifying benefits. Safeguards ensure that customers who are vulnerable or seriously ill will continue to have access to benefit hardship provisions. The penalty cannot be applied to bereavement payments, retirement pension, benefits paid for children or those that cover the extra costs of disability. The new one-strike sanction will apply only if a benefit offence was committed after the commencement of this provision on 1 April 2010.

Where a sanction is due but benefit is no longer in payment, if a customer reclaims benefit at any point during the disqualification period, the remainder of the one-strike sanction will be triggered. Specific references to income-related employment and support allowance and pension credit are included to ensure that passported housing and council tax benefits are not sanctioned at the same time as those benefits. Where the offender accepts an administrative penalty as an alternative to prosecution, the disqualification period will start 28 days later than if they are cautioned or convicted. That is to allow the individual a 28-day cooling-off period for accepting an administrative penalty as set out in the relevant legislation.

The regulations also delete the reference in the existing regulations to a housing benefit sanction following eviction on grounds of antisocial behaviour, as that is no longer in force. Further changes are also made to take account of section 33 of the Welfare Reform Act 2009 in order to set out when a jobseeker is not to be treated as a person in hardship. That sanction supports the Government’s “Fair rules for strong communities” document, published in December 2008, which stated:

Rights must be matched with responsibilities.

In conclusion, benefit fraud is a crime, and it is only right that those customers who seek to undermine the benefit system by intentionally stealing from it know that serious consequences will result from their actions. I hope that the Committee will agree that the introduction of the one-strike benefit sanction contained in the regulations will provide an effective deterrent in our continued drive to combat benefit fraud, and that it will support the regulations.

Mr. James Clappison (Hertsmere) (Con): It is a great pleasure to serve under your chairmanship this afternoon, Lady Winterton. The Committee may sit for a relatively short time, but there are a number of questions that we must ask about the regulations. We supported the parent clause in the Welfare Reform Bill as it passed through this place. The regulations flow from those provisions; I think that the Minister mentioned section 24.

Helen Goodman indicated assent.

Mr. Clappison: I may be mistaken about this—I usually am—but my recollection is that this provision stems from section 19 of the Welfare Reform Act, not section 24. Section 24 deals with a different type of sanction—that applied to a jobseeker who does not attend an interview when they should. My copy of the Act makes it clear that section 19 is on loss of benefit provisions and benefit sanctions for offenders. I am not making a big point about that, but I have gone back to the Committee on which I served and read the report in order to satisfy myself that it was the same thing, and I think that it is section 19. I might be wrong about that—I usually am, Lady Winterton.

This provision provides for a sanction for benefit offences in cases where a person has been convicted of one or more benefit offences in criminal proceedings, and has agreed to pay an administrative penalty or been cautioned for an offence. As the Minister rightly said, such a sanction already exists in the case of repeat convictions for benefit offences, where a person is convicted of benefit fraud twice, and where the second offence was committed within five years of the date of the conviction for the first offence. That is sometimes known as the two-strikes rule.

There is a difference between this sanction and the previous one—as well as the fact that the previous sanction applies to repeat offences—because its scope is much wider. The Minister referred to it dealing with cases of proven fraud. I think that that description is right, but the earlier, existing sanction applied only to convictions. This measure applies to cautions and administrative offences as well as convictions before a court.

The Minister mentioned customer error. That is a separate matter, and I am not sure that it would be right to apply a sanction to somebody who was involved in some form of customer error. It would hardly be likely to serve as a deterrent, which is the stated aim of the Act in such a case. However, the regulations deal with cases where fraud has been admitted, whether it resulted in a conviction, a caution or an administrative penalty, which is separate from the criminal justice system.

We supported the measure when it passed through the House, although at the time, we sought and were given an assurance that it would operate independently of the criminal justice system. We think that it is important that the sanction may be applied, but whether or not the person is prosecuted for fraud and faces more serious penalties in criminal court is a separate matter. It should be decided according to separate criteria and should not be affected by the existence or the possible application of the sanction.

Although we supported the measure, we have a number of questions. What is happening to the existing sanction? How is it going? The explanatory memorandum tells us that the existing sanction

We apprehend that the number will be relatively small. It came into operation on 1 April 2002 and applies to repeat offences since that date. Can the Minister tell us exactly how many people have been sanctioned for repeat benefit offences?

We apprehend that the new sanction will be similar to the existing one in several respects, although it will last for a much shorter period. The sanction for a first offence or any offence that falls within its ambit will be applied for four weeks, rather than 13 as in the two-strikes provision. However, as I have said, it applies to benefit transgressions dealt with by administrative penalty and caution as well as by conviction.

Can the Minister tell us whether the new sanction will apply to all such benefit transgressions that fall within its ambit: that is, all offences, convictions, administrative penalties and cautions? In other words, is the sanction mandatory or discretionary? I have taken it to be mandatory, but I would like to hear from her whether that is the case. If not, how will its application be determined in the case of a sanctionable benefit? In other words, how will it be decided in which cases the sanction will apply?

We are also told in the explanatory memorandum:

Will the decision whether the sanction results in total loss or reduction depend on the type of benefit received, as is the case with the existing two-strikes sanction provision? Again, we take it that the new sanction will work in the same way, but we need confirmation.

As with the existing sanction, will income-related benefits such as income support, income-related jobseeker’s allowance and income-related employment and support allowance be subject to reduction in payments in some circumstances, rather than a total loss of payment? Where the sanction is a reduction rather than a total loss, will the reduction be for the same amount as under the two-strikes sanction? If not, by how much will the benefit be reduced?

The existing two-strikes sanction has rules relating to pregnancy, serious ill health and hardship. Will the same rules apply to the new sanction? On that general theme, we note that paragraph 7.7 of the explanatory memorandum states:

That is an important provision. Will the Minister say a little bit more about it? In particular, will she tell us what criteria will determine whether hardship payments will be made? If those criteria are met, how much will the hardship payments amount to? Also, do the same provisions apply to the two-strikes sanction? To how many people subject to the two-strikes sanction have hardship payments been made?

As I have said, unlike the existing sanction, the new sanction will apply to cases dealt with by administrative penalties, in which the individual agrees to pay a financial penalty instead of being prosecuted or accepting a caution. It is a separate way of dealing with benefits offences, as it involves an admission of offending. Will the Minister say a few words about how the sanction will interact with the administrative penalty, given that the administrative penalty is, obviously, itself a reduction in sanctions? Can we take it that the administrative penalty will begin at the end of the sanction period, including in cases where the benefit is paid at a reduced rate during the sanction period?

We have asked a number of questions, but we supported the measure in Committee. Indeed, if the Minister consults the Committee record, as I am sure she will have done, she will see that we supported it to the extent of taking the somewhat unusual course of voting with the Government, against a Liberal Democrat amendment that sought to compensate rather than sanction those who committed benefit offences. It would be interesting to hear whether that is still the Liberal Democrats’ position. Are they opposed to the provision, and do they still seek to compensate people convicted of benefit offences, cautioned or given administrative penalties? We did not get quite to the end of the matter in Committee, so it would be interesting to hear whether the Liberal Democrats still support that as a way of dealing with benefit offences.

Notwithstanding our support, we still think that it is important that the measures are subject to proper scrutiny and look forward to the Minister’s answers to our questions.

John Barrett (Edinburgh, West) (LD): I am here today instead of my hon. Friend the Member for Northavon, who has an encyclopaedic knowledge of the subject. You might be relieved to hear, Lady Winterton, that relative to how long his contribution would have been, I will be brief.

We have concerns. Contrary to what the hon. Member for Hertsmere said, we believe that those who are guilty of fraud ought to pay the price. The benefits system is vital, and we are happy to support genuine claims. As the Minister said today, fraud is a significant problem—50,000 people have been convicted—but we believe equally strongly that deterrence in the form of sanctions is effective only if they work. To lose the support of benefits is a potential deterrent, but if the end result is that innocent victims, such as the children and families of those receiving benefits or those in poor health, are affected by reductions in benefits, there might be serious unintended consequences.

That is our genuine concern. The system is complex. Many people, through no fault of their own, cannot follow the system and end up with the wrong level of benefit. I am pleased to hear from the Minister that the sanctions will not affect them. However, as I said, we fear that when sanctions are used in the ways proposed, they will have unintended consequences on other Government policies such as tackling child poverty and increasing social inclusion. Certain groups of people might be hit by a loss of benefits, which might have an impact on their health and housing. As I mentioned earlier, children might end up as victims of sanctions.

I would like reassurances from the Minister that the measures are an effective use of sanctions that will decrease the number of fraudulent claims. That would add a confidence in the system that is often lacking among hard-working taxpayers who might have no direct involvement with the benefits system but who do not like to think that the taxes that they pay are going to fraudulent claimants. Many people come to my surgery say that they do not mind if benefits go to genuine claimants, but they want fraudulent claims to be dealt with effectively.

I seek reassurance from the Minister not just for myself but for other groups such as Citizens Advice and the Child Poverty Action Group, which say that the Government overemphasise the problem of fraud. Citizens Advice believes that the criminal sanctions regime is sufficient as it is. The Minister said that the scale of the problem is serious. My understanding from the Green Paper is that fraud is 0.6 per cent. of the benefit spend, but 9 per cent. of intended spend is not taken up. If the Minister can assure me that everything that I have raised today will be covered, I will be happy to support the regulations. Fraud undermines the system. Those who pay into it want to see that the money is spent effectively. I will be looking for reassurances from the Minister that those unintended consequences do not result from these new sanctions.

Helen Goodman: I am grateful to the hon. Gentlemen who have offered their broad support for the regulations. The hon. Member for Hertsmere began by asking whether the regulations related to section 19 or section 24. That was very astute of him. It is section 24, but it started out as clause 19. Section 19 is now about community care grants. He asked about the numbers of people who had been sanctioned under the two-strikes regime. Between 2003-04 and 2007-08, the number of cases in which a sanction was applied to subsequent benefit entitlement was 256, which is pretty low. However, I want to give the hon. Gentleman some numbers on the level of criminal sanctions achieved for benefit fraud.

I will give the figures for 2007-08. There were 7,745 convictions for fraud against the Department and 6,493 for fraud against local authorities. There were 12,821 cautions for fraud against the Department and 12,569 in the case of local authorities. There were 8,445 administrative penalties for fraud against the Department and 8,416 in the case of local authorities. The total for 2007-08 was 56,489. I am sure that the Committee can see that we are now talking about a much larger number of people who would be affected if they continued to commit fraud: 50,000 as opposed to 256. It is significantly different.

The hon. Gentleman asked whether the application of the reductions would be mandatory or discretionary. It will be mandatory. He asked whether benefit would be withdrawn or abated. The situation is different for different benefits. For income support, non-passported housing or council tax benefit, pension credit and employment and support allowance, the regime will be an abatement of 40 per cent. for the single person rate, which is dependent on age, or 20 per cent. for a person who is seriously ill or pregnant. I hope that that goes some way to meeting one of the points made by the hon. Member for Edinburgh, West.

For jobseeker’s allowance, both contributory and income-based, the payment of benefit will be completely withdrawn, but people on income-based JSA can apply for the hardship rates. That means, to respond to the hon. Gentleman’s point, a reduction of 20 per cent. in the benefit. For employment and support allowance, incapacity benefit, carers allowance, war pensions, widows pensions, bereavement allowance, widowed mothers and parents allowance, industrial injuries disablement pension, industrial death benefit, and all other industrial scheme benefits, payment of all benefits will be completely withdrawn and, again, people can apply for hardship rates.

The hon. Member for Hertsmere asked how the administrative penalty relates to the sanctions regime. He is right that the sanctions will be applied first and the administrative penalty will be applied subsequently.

The hon. Member for Edinburgh, West asked about the effect on child poverty, health and social inclusion. Benefits for children—children’s tax credit, the health in pregnancy grant and maternity benefits—are not excluded from the one-strike sanction, and there is a hardship regime, which I have just described. Other benefits that will not be sanctioned include pensions, disability living allowance, attendance allowance and social fund payments. I will not give the full list, but I think that the hon. Gentleman is getting the gist of what I am saying.

He is right that we are concerned about underpayments and about people under-claiming. We are running take-up campaigns following last year’s Chinn report. One of the significant things that we need to do to achieve our child poverty objectives is increase our take-up rates, which will possibly have as great an effect as further changes to the rules and regulations. The 40 and 20 per cent. regime on employment and support allowance applies only to income-related ESA; contributory ESA would be completely withdrawn.

I am grateful for the contributions of hon. Members in this debate. I think that everybody on the Committee acknowledges that we need to tackle and reduce benefit fraud. Although we have got it down to 0.6 per cent., which is a good standard historically and by international standards, it is still £1.1 billion. That is a lot of taxpayers’ money, which is why we are continuing to attend to the issue. I hope that the regulations will provide further deterrents and will be effective.