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Lord Astor of Hever: I thank the Minister for that full response. We feel that the two amendments merit such a response. As the Minister said, transnational social security fraud is a very serious problem. We on these Benches will do everything possible to help to stamp it out.

I was grateful for the Minister's assurances on asylum seekers, and for the assurance that the Government will not enter into any arrangement with any country that does not have an adequate use for such information or a democratic form of government. I thank my noble friend Lady Fookes for her support. In the light of the Minister's helpful response, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 66 not moved.]

Clause 4 agreed to.

Clause 5 agreed to.

Clause 6 [Loss of benefit for commission of benefit offences]:

[Amendment No. 67 not moved.]

5.30 p.m.

Lord Goodhart moved Amendment No. 68:

The noble Lord said: Members on these Benches regard this as an important amendment. During the clause stand part debate on Clause 6, I shall again emphasise that, as your Lordships already know, we are extremely concerned about using the reduction of benefit as a method of imposing punishment for misbehaviour.

I wish that I could speak with the eloquence that my noble friend would have used if he had been here today. This subject is of great concern and raises questions about the fundamental nature of state means-tested benefits. The proposal is that there should be a reduction in certain benefits of 40 per cent. Evidence taken by the Delegated Powers and Deregulation Committee made it clear that there were certain--admittedly rather limited--circumstances in which that 40 per cent reduction could be applied twice over, which would lead to a reduction of 80 per cent.

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That could occur in the context of a refusal to attend a job interview under the rules relating to the jobseeker's allowance.

Income support includes something that is perhaps a little more than a basic minimum standard of living. It does so even if the basic minimum is looked at in the short term. Obviously, income support includes an element that will enable people to clothe themselves. It is arguable that if benefit were withdrawn for a short period of no more than three months--that is the maximum period, under the Bill, during which benefit can be withdrawn--one could always defer one's need to buy clothes until the end of that period.

There is no study or definition of what might be called the absolute minimum basic standard below which one would start to suffer really serious problems, such as malnutrition. The relevant figure is likely to be somewhat higher than that associated with the absolute basic minimum standard, and it is likely to be somewhat higher than 60 per cent of income support. Although we do not know the answer to certain questions, it appears that there is a real risk that reducing income support to only 60 per cent of the standard level will mean that one goes below that absolute basic minimum standard.

The 10 per cent figure that is proposed in the amendment might not take one below that absolute basic minimum standard. If one goes below that standard, the benefit fraudster may suffer hardships that are damaging to his or her health. He or she may have standards of nutrition and of heating during cold weather, for example, that are less than those that he or she would have had in prison.

An even more important consideration involves the fact that when the fraudster is the member of a household, the other members of the household will not get differential treatment. The fraudster will not be told by the rest of the family, "You can have a piece of bread without cheese while the rest of us have bread with cheese". There will be a common standard between all members of a household; their resources will be pooled. A hardship will therefore be imposed on the fraudster, which may be regarded as a legitimate form of punishment, and, inevitably, on the other members of the family, especially on children. That will apply even if, as is the case, the children's element in income support payments is not reduced. If the cut means that the family has to choose between the fraudster's cigarettes and the children's clothes, I am afraid that it is all too obvious who is likely to lose out.

We are seriously concerned about the use, in any circumstances, of benefit reductions as a means of punishment, even over a relatively short period. We feel that any figure should be imposed only after it has plainly been justified by a study as a figure below which real long-term problems such as damage to health are likely to begin. On that basis, we are not satisfied that a 40 per cent reduction would be justifiable. We believe that a considerably lower figure is necessary.

Lord Higgins: This is the sort of amendment in relation to which the noble Earl, Lord Russell, would

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convey his view with eloquence. We are sorry that he is not with us and hope that he will soon recover and return to help us in our debates.

The problem with the penalty--withdrawing benefit from someone who has committed benefit fraud--was spelt out by the noble Lord, Lord Goodhart; namely, that the relevant person may be in very limited circumstances, unless, of course, the fraud has been singularly successful. The amendment that the noble Lord moved will reduce the extent of the penalty to 10 per cent. I rather doubt whether that would make a significant difference one way or another. The problem is rather different.

I have a question for the Minister about the clause. Subsection (3) states that,

    "the offender's entitlement for that period were reduced in such manner as may be prescribed".

I am not clear about the word "manner" in line 42 on page 10. It is a rather odd word to use in that context. It might be preferable if the Bill stated that the entitlement would be reduced "by such an amount as may be prescribed". The phrase, "in such manner" is a little strange.

The noble Lord referred to the problem of cigarettes. Some time ago, the then Policy Studies Institute carried out a survey which had a most extraordinary finding. People living absolutely on the limit as regards income support spend a very high percentage of their income support on cigarettes. The survey also showed the extent to which the Treasury gained as a result of that operation. There would be a real problem if such a sanction were imposed.

The sanction is related to the approach that involves the ruling, "Two strikes and you're out". I understood from our earlier debate on local authorities that only 800 individuals were prosecuted last year. Presumably, a small proportion of those are second-time offenders. Perhaps that is not the case and they all are. Even so, the total is still only 800.

I forget the precise paragraph in the excellent report of the noble Lord, Lord Grabiner, which deals with this issue. However, it raises the question of whether this type of penalty is appropriate. Either the offence is serious, in which case presumably a custodial sentence would be appropriate, or it is not serious and the consequences spelt out by the noble Lord, Lord Goodhart, would follow.

That brings me finally to our earlier discussion about, for want of a less "jargony" expression, the light end and the heavy end of the market. The more I think about what the noble Baroness said earlier, the more doubtful I am about the distinction and the extent to which the Bill will be effective on the light and heavy ends of the market. However, I believe that the penalty set out in this clause is clearly directed at the light end of the market; that is, towards people who have somehow slid into fraud. It is not directed at the organised crime or collusive employer end of the market.

Therefore, from that point of view, the penalty appears to be remarkably badly targeted. If we are to make a distinction between the light and heavy ends of

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the market, we need to consider what the appropriate penalties might be and whether an alternative penalty to that proposed in the clause might not be more appropriate.

Baroness Hollis of Heigham: Before the noble Lord sits down, perhaps I may ask what he has in mind.

Lord Higgins: I was intending to wait and see what the Minister might suggest. I believe that a genuine problem exists here. Clearly one can go for custodial sentences or whatever in relation to the heavy end of the market. However, if the case appears to be at the light end of the market but none the less the Government carry out an investigation and find that fraud is involved, I am not sure whether we should consider a penalty which is more closely related to the criminal side of the operation.

I agree that a real problem has been outlined which we need to consider. I am unable to propose an alternative off the top of my head, but the matter raises all the problems which the noble Lord, Lord Goodhart, spelt out.

Baroness Crawley: From this side of the House, I, too, wish the noble Earl, Lord Russell, a speedy recovery from his flu. However, we do not wish his amendment well for the single and simple reason that the effectiveness of the proposed sanctions in the Bill will be unacceptably diluted by it. The sanction of a 40 per cent reduction in income support and JSA for two-time offenders needs to be robust in order truly to tackle the fraud perpetrated. We are talking about single-minded, incessant offenders.

The sanction also needs to be robust in order to act as a proper deterrent. In that regard, I believe that the issue of numbers raised by the noble Lord, Lord Higgins, is important. In a sense, it is not so much the precise scale of the number of offenders that matters as the ability to reduce that number and ensure that a sufficiently robust sanction is in place to act as a deterrent.

Yet, although the sanctions are robust--there is no doubt about that--they are proposed with qualifications. Those qualifications are included so that the sanctions do not constitute hardship in the sense referred to by the noble Lord, Lord Goodhart, with regard to levels of survival, starvation and so on. We are not talking about that. We are talking about a robust deterrent which gives a clear signal to those who might be tempted to go down that road. However, it should also ensure that two-time offenders do not suffer unacceptable hardship.

5.45 p.m.

Baroness Hollis of Heigham: I, too, regret that the noble Lord, Lord Higgins, should be absent for such a bad reason as flu--I am sorry; Freud says that one never makes a mistake--that the noble Earl, Lord Russell, is absent due to flu. Clearly it is the noble Lord, Lord Higgins, who is giving me the hard time

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and that is why his name came to mind. I do not wish him to catch flu. Our proceedings would not be the same in his absence, despite the very able support which he receives from his noble friend Lord Astor.

Before I respond to the amendment, perhaps I may pick up one point. The noble Lord, Lord Higgins, asked me about the weight of "in such manner". "Manner" covers different amounts: it may be 40 or 20 per cent, depending on the personal allowances of the claimant. Those can vary according to the claimant's age, for example, or the age of his children, and so on. That is why the word "manner" is included in the Bill rather than the word "amount".

I return to the substance of the amendments. They seek to limit to 10 per cent of a single person's allowance the amount by which income support or JSA could be reduced by the imposition of a fraud sanction. As my noble friend Lady Crawley said, the intention of the two-strikes clause is to deter the persistent, hard core, repeated benefit offender from re-offending. We are tackling that problem by reducing benefit or denying such people access to benefit.

It is not right that people should expect to remain on benefit as though nothing has happened when, according to the court, they have abused the system not once but twice. I suspect that most people would be surprised to learn that, having defrauded the system at least twice as established in the courts of law, offenders continue to draw benefit.

It may be helpful if I provide some statistics. The best information that I have is that we expect approximately 10,000 prosecutions of people who have committed one offence. However, the figure would be approximately 500 in relation to those who have committed two offences. That is the scale of the problem which we are discussing.

The noble Lord, Lord Goodhart, asked whether a double sanction would apply in some cases; for example, where someone was claiming JSA, was actively seeking work and was sanctioned. Such situations are extraordinarily rare--we believe that only 10 cases a year may arise. In such a situation, a person could free himself of the 40 per cent reduction whenever he wished by becoming available for work. In other words, the second 40 per cent sanction is entirely in the hands of the person who is defrauding the benefits system. If he wishes, he can repair the situation immediately. Therefore, I do not accept the weight of the concern expressed by the noble Lord, Lord Goodhart.

As my noble friend Lady Crawley said, for the sanction to be meaningful, it must be seen to be proportionate. The current provisions for hardship payments and benefit reductions have been in existence for many years and have also been introduced more recently for those who fail to comply with the ONE work-focused interviews, the CSA and so on. I have given an undertaking that the hardship payments which are available to those who are sanctioned but are without adequate other means will maintain parity with these levels of sanction.

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Currently, the sanction is a reduction of 40 per cent of the single person's allowance, or 20 per cent if a member of the household is either pregnant or seriously ill. I believe that assurance was sought with regard to the delegated power, and we shall ensure that that situation is made clear.

The provisions relating to the 40 and 20 per cent reductions on JSA have been tried and tested. We believe that they provide a sensible balance between protecting vulnerable people and their dependants while remaining meaningful and effective. A member of a family may defraud the system and it may be established twice by the courts that he has done so. If that person then expects to maintain his standard of living at the expense of the children, I agree that it will be difficult to alter that situation from the outside.

Such incidents already occur in families which many of us may regard as, to use a technical term, dysfunctional. One member of a family may inappropriately apportion to himself an unfair degree of benefit. Such problems arise when one is dealing with a household-related benefit. I accept that. There is no way to overcome that unless the person who has committed the fraud is ejected from the household, and the household becomes a lone parent household. We think that reducing the sanction to just 10 per cent would be inadequate. The noble Lord, Lord Higgins, said he did not think that that would make much difference.

To put the matter in perspective, I should like to give some examples that have been worked out for me. The first is of a lone parent with two children, receiving housing benefit and council tax benefit worth 70 a week on top of income support. If she had the full sanction of 40 per cent, possibly because she was cohabiting, or there were undeclared earnings that we had not been aware of, her current income of 191.30 would fall to 170.42, a cut of about 21. For a couple with two children, a cut of approximately 21 would also apply. In the case of a seriously ill or pregnant lone parent with one child, with a total benefit income, unsanctioned, including housing benefit and council tax benefit of 186.95, a sanction of 20 per cent, given that she was seriously ill or pregnant, would bring her income down to 176.

The sanctions are meant to be a deterrent. They are not so harsh that they would put people into serious destitution. I believe that we have struck the right balance. We have gained experience from other areas of the DSS where these sanctions apply, and where it has been accepted that the balance is about right.

The noble Lord, Lord Higgins, has certain worries, which I can understand, but perhaps he can suggest a sanction that would not bear on other members of the household but only the person committing the offence. That is a real dilemma. The scope of the sanction, which tends to be between 10 and 30 off benefits, is not so unreasonable that it would generate real hardship. But it would have the deterrent effect we

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seek. In the light of those remarks, I hope that the noble Lord, Lord Goodhart, will feel able to withdraw the amendment.

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