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Baroness Hollis of Heigham: My Lords, I very much agree with my noble friend Lord Davies of Coity. Last year around 10,000 people were prosecuted for benefit fraud. The vast majority of those who were caught did not go on to re-offend, but there is a small minority who do, despite being punished by the courts. It is those persistent benefit offenders who are being targeted by this sanction.

I think that the noble Earl was running two arguments. One is that if benefits were sufficiently generous, or certainly far more generous than they are currently, he would have less difficulty with sanctions because sanctions would then only reduce those benefits to a more acceptable level. That is an argument about the relativity of benefits to wages and the like. We can discuss that on other occasions. The other implication of his remarks was that these are

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people who have fallen into hardship, for whom it is not unreasonable to commit benefit fraud and therefore any sanction that follows alongside it should be as light as possible but noticeable.

7 p.m.

Earl Russell: My Lords, did the Minister hear me at any moment say anything that suggested it was not unreasonable that they should commit benefit fraud?

Baroness Hollis of Heigham: No, my Lords, but given their straitened circumstances it was suggested that the sanctions should be as light as humanly possible, because otherwise they might get into further hardship. All requirements to see the effect of the sanctions are posited on the belief that the sanctions will produce such states of hardship, and so on, as would be unacceptable in the eyes of the noble Earl. That is as I understand it.

Under the current system--though people may disbelieve this outside--this hard core of repeat offenders can continue to receive benefit as if nothing had happened and, if they were stealing from the till and were discovered, as if nevertheless they could continue to work as a cashier. Everyone would think this was inappropriate and wrong.

We estimate that about 5 per cent of those who are successfully prosecuted end up back in court for benefit fraud. These are not inadequate people; they are not people who have a disability, a learning difficulty or other problems. They are people who are deliberately, knowingly and fraudulently cheating the system, as established by the courts, not once but more than that. We are talking, for example, of people like the disc jockey who fraudulently claimed incapacity benefit for two separate periods at a cost of 9,000. There was also the man who was prosecuted once for working while claiming and then again for stealing and cashing a relative's child benefit book. Undeterred, he was prosecuted yet again for attempting to claim JSA to which he was not entitled.

These people are claiming benefit to which they are not entitled, primarily because they have other sources of income already, such as being in work. One claimant was successfully prosecuted in February 1994 for two offences related to girocheque fraud and sentenced to three months in prison. He was prosecuted a second time in September 1996, again for cashing girocheques belonging to other people, and again received a custodial sentence. He was prosecuted a third time in December 1998, this time for working while in receipt of incapacity benefit. The overpayment was about 130, and so he had to serve a period of community service.

This is what we are dealing with. We are not dealing with inadequate people in straitened circumstances; we are dealing with people who have more than once been found guilty by the courts of deliberately and knowingly--not innocently or erroneously--cheating the system. The noble Earl, Lord Russell, will accept that for as long as there has been a benefit system provision has been made to stop or reduce benefit

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where a claimant does not comply with the rules. As far back as the early 'sixties the standard amount by which supplementary benefit--the forerunner of income support--was sanctioned was 40 per cent of the personal allowance. There was the same provision for 40 per cent of the single person's allowance, and for 20 per cent where pregnancy or serious illness was involved.

I understand the concern of the noble Earl, Lord Russell, about basic minimum standards, below which there may be difficulties for the person concerned. Therefore, this sanction has a safety net for the vulnerable, which provides a minimal level of support for the offender and any dependant, where they have no other resources to fall back on. There could be a reduction of benefit, as I have described, which works out at 10 or nearly 21, according to whether a family is involved and to their degree of vulnerability. If the claimant or any one within an assessment unit is seriously ill or pregnant the reduction of 10, the lower rate, would apply.

In the case of JSA, hardship payments would be made from day one to any family falling into a vulnerable group, which includes those responsible for a child or a young person, where someone is disabled or where the claimant or partner is pregnant, is a carer, or suffers from a chronic medical condition. In other cases anyone on JSA would be able to claim hardship payments not from day one but from the 15th day. For those on income support the same rules relating to the seriously ill or pregnant would apply to the amount of deduction.

Obviously the sanction does not remove an underlying entitlement to JSA or income support, and housing benefit and council tax benefit remain in full payment. This mirrors the hardship payment and benefit reduction schemes that are already in place in other sanction regimes.

By restricting, as the amendment would do, the level of any benefit sanction to just 10 per cent of the single person's allowance--5.25 rather than 10.50--I believe we would be saying that we view this offence of twice knowingly and deliberately committing fraud as certified by the courts to be less serious than those who are currently sanctioned with 20-40 per cent for failing to attend a job interview, or for giving up work voluntarily and who do not appear to be seeking work. In other words, at the moment we sanction 20 per cent or 40 per cent failures or offences done for the first time in some cases which, in most people's eyes, are far less serious than the persistent, knowing and continued fraud that are sanctioned here. That cannot be right.

For any sanction to be effective, we have to combine our concern for those who may be vulnerable with the need to protect the system from those who fail to meet their responsibilities. I do not believe that the amendment would do that. The sanction would last for 13 weeks, after which the benefit would be restored to the rates that would otherwise apply, and throughout this period no reduction would normally apply to housing benefit or council tax benefit.

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This would mean that for a family of four with two adults and two children they would have 128.50 a week to live on, and the housing costs would be met. For a fit single person aged 25 or more the amount would be 31.30 and the housing costs would be met. I do not think this implies destitution, homelessness and debt. At Committee stage the noble Lord, Lord Goodhart, spoke eloquently on behalf of the noble Earl, Lord Russell, and I said that we would monitor the effects of the sanction, including its use as a deterrent, together with the effect on an individual's life, including the adequacy and accessibility of hardship payments and together with the effect on specific claimant groups. I also said that we could not pursue the sort of detailed research that the noble Earl has again proposed tonight.

To do so, it would be necessary to see the effect of taking away 10 a week from the benefit level of 200 a week over 13 weeks. One would need to appraise the health of each member of the family before the sanction was imposed; and one would need to check diaries of their food, expenditure and leisure consumption. It would certainly be necessary to survey their housing and the effects of the weather and also intrude on their privacy to find out the resources of family and friends as regards possible subsidy and other sources of support. One would have to work out whether serious illness in one parent or in a child or perhaps in a third member of the family could be attributed to that deduction of 10 from a benefit of 200 over a period of 13 weeks. Other factors would have to be taken into account, such as the length of time the family had already spent on benefit, and also the amount of savings they had. I do not believe that this research, as outlined by the noble Earl, Lord Russell, is possible.

I come back to my basic argument. These are sanctions imposed only when somebody has knowingly, fraudulently and persistently defrauded the benefits system, and that has been established by the courts. They are in line with the sanctions imposed on offences against the benefits system since the early 1960s and with the rest of other benefit sanctions. We have in play hardship regimes that we think are in line with all the other hardship and benefit regimes that are in place, which have been shown by research on JSA and incapacity benefit to support people while making them realise that we expect the conditions of those benefits to be respected as part of the entitlement to them.

I know that the noble Earl will not accept my argument but I would say that at the end of the day, under these conditions, IS or JSA would normally be sanctioned either by 20 per cent or 40 per cent of the personal allowance and the benefit for the rest of the family would remain undisturbed. Child benefit will never be withdrawn. Housing benefit and council tax benefit will remain in payment, even when JSA or IS is sanctioned. Premiums payable for the family will not be reduced: only the personal allowance. Free prescriptions and free school meals will remain available, even when a benefit may be sanctioned.

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Where a claimant might deny payments to the rest of their family, arrangements can be made to pay the residual benefit to other members of the family. Access to the social fund will still remain and, in the event of a successful appeal, any payments that should have been made will be paid in full.

If people defraud knowingly the benefit system over a period of time, as established by the courts, they must know that there will be a sanction. We believe that the sanctions are proportionate and have proper legal safeguards. We believe that we have decent hardship arrangements in place, and that they have a proper read-across to the benefit sanctions that have existed since the 1960s and to sanctions applied to other forms of benefit.

Although I may not have persuaded the noble Earl, Lord Russell, I hope that I have persuaded the House that our proposal is proportionate, reasonable and appropriate given the offence of persistent, consistent and knowing benefit fraud.

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