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Earl Russell: Wherever there is a fireplace, there will be soot. Wherever there are sewers, there will be rats. Wherever there is a large stream of public money, there will be corruption. I have no information on the extent of landlord fraud, but it is sadly inevitable that when a large supply of public money is devoted to any purpose, some people will attempt to batten on it and to make corrupt use of it. Clearly, there is landlord fraud. Clearly, it must be combatted.
I was particularly interested in the point that the noble Lord, Lord Whitty, made about tax evasion. One of the ways in which we can tackle the frightening, widening gap between the amount of money that we need to support the services which everybody wants and the amount that it is assumed that people are prepared to pay for them is by collecting tax which can legally be collected under the present law. Wherever that can be done, it is useful.
The question raised by this amendment is whether there should be a separate offence of landlord fraud or one should take the line that fraud is fraud is fraud and it is simply a crime, no matter who perpetrates it. I hope that the Minister will be helpful on that matter. The argument put forward in favour of a separate offence of landlord fraud is the very large scale on which it can on occasions take place. That is a powerful point. However, if fraud is taking place on a very large scale, presumably it means that it is taking place in relation to a large number of dwellings.
Normally, the maximum sentence is seven years' imprisonment. The maximum sentence proposed by this amendment is 10 years. But if fraud takes place in respect of a great many different dwellings is it possible in extreme cases to impose separate sentences for separate offences and let them run consecutively? The Minister may be able to shed light on whether this amendment is the way to tackle a problem that we all agree needs to be tackled.
Baroness Hollis of Heigham: Before the Minister replies, I should like to put one question to him. As I understand it, in 1994/5 £599 million of benefits fraud was detected. In 1995/6 the figure was £638 million. However, the proportion represented by detected multiple identity fraud, of which landlord fraud is the most obvious example, was only £6 million and £11 million respectively; in other words, landlord fraud represented only a tiny percentage. Does the Minister believe that this reflects the fraud practised on the ground?
Lord Mackay of Ardbrecknish: The amendment proposed by the noble Lord, Lord Whitty, seeks to target dishonest behaviour specifically by landlords in connection with multiple claims to housing benefit and council tax benefit. The amendment adds nothing to the effectiveness of the offence proposed in Clause 13. It would replicate elements of the offence already contained in that clause and to that extent it is unnecessary. With the new powers in Clause 13 as drafted we have already made adequate provision to deal with landlord fraud.
Clause 13 introduces a new offence tailored to serious social security fraud which will be capable of being applied to landlords or claimants, or both if they are involved in a conspiracy. This offence is, as is normal with the criminal law, framed so as to target particular criminal behaviour, not individual sections of society, even if legislation has been prompted by the need to overcome behaviour exhibited by specific sections of society. Landlords who receive direct payment of their tenants' housing benefit are already under a duty to report changes of circumstances which they might reasonably be expected to know will affect a claimant's right to, or the amount of, or receipt of, benefit. Clause 13 makes dishonest failure to report such a change an offence.
This new clause, as the noble Lord has so carefully explained, is intended to provide a new and separate offence of aggravated landlord fraud--an offence which differs from that in Clause 13 by being specific to landlords and specific to one type of housing benefit fraud, namely, multiple claims. But there are other types of serious housing benefit fraud, such as setting up a ghost claim or a contrived tenancy. The offence in Clause 13 as drafted is capable of being used for all types of serious landlord fraud. The additional powers introduced by this amendment therefore achieve nothing of substance other than to introduce a stiffer sentence of up to 10 years' imprisonment for a landlord involved in the dishonest obtaining of benefit in relation to more than one claim.
During Second Reading, I outlined the Government's 10 point plan for combating landlord fraud. I shall not test the Committee's patience by going through the full list tonight. But perhaps I may mention two points. The fact that authorities are isolated from each other is one of the key contributory factors enabling landlords to commit fraud. For example, a genuine claimant may move into a property and claim housing benefit which is then paid direct to the landlord. Later the claimant
New measures--we have discussed them--will mean more information, particularly in relation to suspect landlords, will be available to the authorities and that information, as well as other relevant data, will be shared, making this type of fraud much more difficult to get away with.
The next important measure is that which gives local authority inspectors the right of entry into business premises. This will enable them to enter the business premises of a landlord or agent, question people there and examine the records. This will be a powerful new tool in the detection and prosecution of landlord fraud.
In addition, the new Benefit Fraud Inspectorate will make sure that all authorities are making appropriate efforts to tackle the problem of landlord fraud and will facilitate the spread of practical advice and guidance.
I have already explained that we shall be issuing further guidance to local authorities on the question of direct payment to landlords. We have already discussed that. I do not think that there is any need to repeat it.
I have great difficulty with the proposal that a separate, more severe, sentence for landlords is appropriate. The new offence in Clause 13 would increase the maximum penalty under targeted social security offence provisions to seven years' imprisonment.
The Government's approach is not to make landlords, or any other sector of society for that matter, a special case but to adopt an even-handed approach across the board. Landlords guilty of fraud will be dealt with under the same system as everyone else with the full range of offences available depending on the severity of the case. The courts will have the power to take account of the degree of criminality and the seriousness of the offence within the maximum penalty set. They will also have the ability to take account of other factors such as whether the fraudster was in a position of trust. And they will sentence accordingly. In a DSS case in 1996 the Court of Appeal established a benchmark of six years' imprisonment for contested trials where there is a considerable loss to public funds (in that case, around £300,000) combined with an element of breach of trust. In the light of this, a heavier maximum sentence than seven years in cases of serious fraud perpetrated by those in a position of trust (such as landlords receiving direct payments) appears out of line.
In the very worst cases, the new offence will not be the only basis for prosecuting landlords who commit serious fraud; the Theft Act and conspiracy charges can continue to be used by prosecuting authorities where appropriate. Section 15 of the Theft Act--obtaining property by deception--and conspiracy to defraud both carry a maximum sentence of 10 years.
Baroness Hollis of Heigham: I sought to suggest that the figures reported indicate that the amount detected under the heading of multiple identity landlord fraud seemed to be relatively tiny compared with the pattern of fraud. It suggests to us that large swathes of landlord fraud remain undetected. I asked whether the Minister concurred in that view.
Lord Mackay of Ardbrecknish: The figures mentioned relate to work by the Benefits Agency. The remit of the agency's fraud investigators is to tackle serious fraud. By its nature, such fraud investigation is both complex and labour intensive. It is always difficult to work out the amount of fraud that is not being detected and to break it down into specific types.
In order to be helpful to the noble Baroness, I wish to explain our estimates of the total level of landlord fraud. They are based on a DSS accuracy review into housing benefit which was carefully planned and statistically sound. The review found cases where claims could not be traced, including those where the money was going directly to the landlord. The estimate for all such residence fraud was about £240 million. Half of that was going directly to the landlords. Therefore, if one takes into account collusive tenants, the suggestion is that landlord fraud may be of the order of £150 million.
That is backed by evidence given by the London Boroughs Fraud Investigation Group to the Select Committee in another place of £40 million a year landlord fraud in London. As London has one-fifth of all the private-sector rented HB claims, and if landlords in the rest of the country are as fraudulent as the fraud investigation team believes London landlords to be, landlord fraud would amount to approximately £200 million. We thought of £150 million, but as we are making estimates I do not believe that the figures are widely far apart. They certainly show the ballpark position.
I do not want it to appear, and I hope that the Opposition will not suggest, that I am somehow dismissing £150 million or even £200 million of landlord fraud as insignificant. It is very significant and I have suggested some of the ways in which the Bill will help authorities to counter such fraud, especially the kind mentioned by the noble Lord, Lord Whitty.
The way to tackle landlord fraud is through effective prevention and detection methods, followed up by prosecution under, if necessary, the new offence for all serious fraud already in the Bill. That is the approach we are taking with the Bill and with other measures which make up our anti-fraud strategy, some of which I have outlined.
I do not like to suggest it, but I believe that there is a certain amount of window dressing about wanting a 10-year sentence for landlord fraud whereas a seven-year sentence for all other types of fraud will do. All fraud, if it is of sufficient seriousness, ought to meet the same level of penalty. Seven years is a very substantial penalty. I have drawn the comparison with a Court of Appeal case where imprisonment for six years was made a benchmark. I have also indicated that the provisions of the Theft Act exist if the authorities wish to take other charges against a landlord. All in all, I believe that the approach in Clause 13 is correct and that we should not begin to categorise the type of criminal. We are attempting to root out the crime itself, whoever commits it.
I hope that after that explanation, the noble Lord, Lord Whitty, will see fit to withdraw his amendment. However, I know from debates in the other place and I suspect from debates here that the noble Lord feels strongly about the issue. In that event, if it is put to a test, I hope that my noble friends will feel convinced by my argument and will support me in the Lobby.
Lord Whitty: I am grateful to the Minister for giving such an extensive reply. We welcome the powers in Clause 13 and the other sanctions and powers to which the Minister referred. But we are not picking out for special attention landlords as a sector in society because they are landlords. Quite the opposite. We are seeking to protect decent landlords and to provide decent rented accommodation.
The reason that landlords are a separate case is because they are the only people, apart from the claimants themselves, to whom housing benefit is paid directly by the state. Therefore, the state, in all its manifestations, has a responsibility for ensuring that that money is paid correctly and that anybody who misleads the state is dealt with by the law.
I crave the indulgence of the Committee and give just one example, which is referred to in the Select Committee report. It is a reported case of an hotelier who organised a major conspiracy as regards housing fraud. Out of 21 rooms for which benefit was claimed, only nine were found to be occupied. The documentation related to a large number of identities. One room was found to have documentation relating to five identities; another to 24; and another to 37. That was not even a case of multiple properties but a single property owned by a single hotelier who was organising that fraud.
That is of a different dimension from the fraud committed by those 66 individuals, if any of them ever existed. Each of those individual claimants would be liable potentially to sanctions of up to seven years' imprisonment. I submit that the person organising that fraud and conspiracy to defraud the public purse should be liable to greater sanctions.
I understand the provisions in this legislation and should like to give them a fair wind. But I remain unconvinced by the Minister's arguments. However, I shall reflect on them and reserve the right to come back at a later stage if we are allowed the luxury of a Report stage. I shall not divide the Committee at this point. I ask the Minister to consider our remarks, and on this side of the Committee we shall consider whether we wish to return at a later stage to the issue. I beg leave to withdraw the amendment.