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Baroness Hollis of Heigham: My Lords, I thank the noble Lord and the noble Earl for their comments. I should be even more grateful if I had been given even more notice of some of the more technical points, apart from that on polygamous marriages, which the noble Earl was kind enough to share with me. However, I shall do my best to respond.

I turn first to the points raised by the noble Lord, Lord Higgins. The point about the six-month rule for the Social Security Advisory Committee is basically that the regulations are still within the shadow cast by the debate on the Act and therefore in that context any parties who might otherwise be consulted by the Social Security Advisory Committee would have been involved in putting in submissions, lobbying etcetera on the Act. That is the reason for it. It seems rather foolish to consult the same groups one has consulted on the same matters when that was part of the framework Bill. However, I accept that there may be occasions on which that would be wise, but the matter seems to me fairly clear. We had full debates on it at the time. Therefore, perhaps in this case the noble Lord would agree that the discussions and the debate made very clear what the content of the regulations that followed would be and, therefore, that in that case consultation was redundant.

The noble Lord asked whether the measure was consistent with the ECHR. It is indeed. He then asked how we would apply the sanction within three years of the date of conviction. If someone is not on benefit following conviction, obviously there is nothing on which to bite. Clearly if, within three years, that person—I shall use the word Xhe" as a generic term—comes on to benefit, then the sanction will begin to bite. The central team will track cases and a decision on eligibility, benefits and sanctions will be made by decision-makers in the usual way. Have I understood the noble Lord's point on this matter? From his body language, I am not sure that I have.

Lord Higgins: My Lords, I am not sure. As I understand it, someone is convicted of a benefit offence when he is not on benefit. I have some slight difficulty in understanding how that can come about. However, if I understood correctly what the noble Baroness has just said, if within a period of three years someone came on to benefit, he would lose 40 per cent

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of it or thereabouts. It seems to me that the task of tracking such a situation will be extraordinarily difficult. It seems a very odd arrangement. The person in question has a sword hanging over his head depending on whether he subsequently goes on to benefit. It seems an extraordinarily strange arrangement.

Baroness Hollis of Heigham: On the contrary, my Lords. Such a person would have committed an offence the first time, would have been convicted by the courts and would then have received serious warnings. While still on benefit, he goes on to commit a second offence. It may well be that by the time the case comes to court he is no longer on benefit. Therefore, the question is: what does the department do, given that he has committed two offences involving benefit but, for whatever reason, he may simply have taken himself off benefit to avoid sanctions.

Our position is that if, over the next three years, he then goes back on to benefit, the sanction will come into play at that point. The sanction will be exactly the same as if he had received it at the time that the sentence was imposed on him. Therefore, the measure simply provides a way of preventing someone avoiding a sanction by coming off benefit for two or three weeks and then going back on to it again, whereas previously the time gap meant that the sanction no longer bit. That must be right, otherwise clearly the opportunities for manipulation are huge.

Lord Higgins: My Lords, I am most grateful. I understand what the noble Baroness is saying, but I need to think about it.

Baroness Hollis of Heigham: My Lords, I believe that the measure is only right and proper. If someone does not have the wit to come off benefit for a fortnight, he will experience sanctions, whereas someone who has the wit to come off it for a fortnight will not. We are saying, in effect, that this will bite within the three-year period.

The noble Lord asked how we arrive at the fraud estimates. We have moved away from the old system in which we had cases of confirmed fraud, highly suspected fraud and possible fraud and applied a 32-week multiplier. We now have a continuous programme of sampling cases from districts. A sample is drawn from all districts over a quarter. Two teams conduct the checks. The estimates of fraud and error are based on results from a random sample of people for the benefit concerned. In each case, the payment of benefit during a particular week is checked. The amount by which that week's benefit is incorrect is recorded and then the total weekly sum for each benefit lost is calculated with a sample in each location, and so on. I could go further into the methodology.

In other words, we have moved away from an extrapolation multiplied by 32, which, I have to say, I criticised heavily in opposition, into a system which is

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based as closely as possible on behaviour in particular district offices. That is the basis on which we calculate the estimates of fraud sums.

The noble Lord asked about fraud targets. I can confirm that, indeed, the figures of 25 per cent by 2004 and 50 per cent by 2006 remain our target. I believe that we had expected to claw back 10 per cent in the first year. We have exceeded that and the figure is now 18 per cent. That may be where the original cutting across lines happened.

The noble Lord talked about the increase in housing benefit and the problem of prosecuting housing benefit fraud. He is right; that has long remained a difficult area. However, I believe that the evidence suggests that local authorities now have the issue of prosecution in hand. For example, in the first six months of this year—2001-02—there were 686 successful prosecutions. That suggests a figure of 1,200 to 1,500 prosecutions—a significant increase on our figures in preceding years. That has been allied to the fact that we have made #160 million available to local authorities to operate the verification framework. By 2004 that will cover 85 per cent of HB expenditure.

Sixty per cent of councils have already adopted that verification framework and 367 local authorities have signed up to the department's Xdo not redirect" scheme. I am not trying to suggest that there is not still a considerable way to go, but I believe that it is the case that 60 per cent of local authorities are already within our verification framework; we expect to have 85 per cent of their expenditure covered by the year 2004; the rate of prosecution is increasing; and we are slowly beginning to see some of the benefits flowing from the interchange of common information between the department and local authorities which, after all, are administering a national benefit. I do not pretend other than that the performance is uneven and patchy across the country but we shall do our best to monitor it. We are investing #2 million this year on training up to 900 local authority fraud investigators. The department takes the matter seriously. Most local authorities are responding positively—although some are still not taking diligent action, as they need to do, on what is a big ticket crime.

The noble Lord asked about housing benefit and hardship. The maximum reduction in housing benefit is 40 per cent but that will apply only where it is not passported by income support. Even if the fraud is committed against housing benefit, that will be the last benefit on which the penalty will fall. If one receives income support or JSA, almost invariably the sanction would fall there—but not in 100 per cent of cases. One could be a low earner and get HB. If the offence were against HB at that point, it would be sanctioned. If one were an earner, the assumption would be that disposable income would be available through one's wages to make up the shortfall in rent as a result of the sanction. We have a hierarchy of benefits on which the sanction falls and HB is last in line.

Our best estimate is that, in the eyes of the courts, 500 people per year commit a benefit offence, so the benefit sanction is likely to bite on 500 households per

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year. The noble Lord asked how easy it will be to track the situation. The numbers are not great. For most offenders, the punishment handed out by the courts is enough—but there is a 5 per cent recidivist rate, which suggests that 500 or 550 people might fall within the regime every year.

The noble Earl, Lord Russell, said that the measure will bite more seriously on the less serious offences and that it will bite only on those who receive benefit. Yes, because that is the benefit being sanctioned. However, that will be in addition to the court's sanction.

The benefits fraud case involving a former professional footballer also caught my eye. That individual appears to have been earning #11,300 from TV appearances while claiming jobseeker's allowance. As he was not eligible to continue receiving benefits, the department could not sanction him but the court will punish him. I understand that sentence will not be handed down until January so I cannot say what it will be. I do not doubt that the court will take into account his mitigating financial circumstances and needs. It may be that the sentence will be appropriately more severe than might be the case for someone who remained on benefit.

Earl Russell: My Lords, I do not remember in the parent Act any instruction to the court to impose a lighter penalty on those who are already suffering a benefits sanction.

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