New Clause 2 - Fraud
State Pension Credit Bill [Lords]
11:00 am
Mr Ian McCartney (Minister for pensions, Department for Work and Pensions; Makerfield, Labour)
This is perhaps the third occasion that we have discussed fraud, but I am not complaining. As I said on the previous two occasions, we all recognise that we are not attacking and impugning the character of pensioners per se. We are holding a genuine debate, which must take place, on the design of a new form of income. We must also discuss how the credit impacts on the Government's strategy of fraud prevention, how to establish when fraud is taking place, and the processes for dealing with it by means of the legal system.
Although I have no problem engaging in discussion with the hon. Member for Hertsmere (Mr. Clappison) on the subject, I am a wee bit disappointed. I thought that when we discussed it previously I gave as full and as frank an explanation as one could give at this stage. Also, by offering to have further discussion with officials, I had indicated that we were in an ongoing process. It is worth saying that, as we are bringing in a brand new benefit and scrapping the weekly means test, we have to rethink the strategy for measuring underlying losses caused by fraud or error.
Our Department's fraud investigation service has worked with us from the outset in designing both parts of the pension credit: the minimum income guarantee and the guarantee credit. There is also inter-relationship with working-age services and the Pension Service in the development of their business strategies. It is an integral part of both the development of the policy and its outcome—the implementation strategy—that those in the Department with expertise in the subject of fraud work with us. It is important to say that from the outset. Measures against fraud are not seen as a peripheral issue or an add-on. They are part of the integral core activities in the design and implementation of pension credit.
The new clause would place a statutory requirement on the Secretary of State to report annually to Parliament on the level of fraud in pension credit and the measures taken to deal with fraudulent claims. We believe that the new clause is unnecessary; we do not need a statutory requirement for an integral part of our business. As the weekly means test no longer applies, the pension credit will significantly reduce the scope for mistakes, and with that for fraud, on the part of the claimant. Many mistakes are made because pensioners forget to, or do not realise that they have to, report a change in circumstances—most commonly an increase in their capital or their second pension.
However, we are not so naive as to believe that we have completely removed the potential for fraud, or that pensioners never steal from us. Figures show that 3.2 per cent. of MIG claims are fraudulent. That is about a third of the level of fraud in benefits for lone
parents, and well below the figure of 9 per cent. for fraudulent job seeker's allowance and incapacity benefit claims. Pension credit has the least fraud of any of the benefits for which we have indicators, but fraud still occurs. Pensioners are just as determined as we are that they should not be defrauded by fellow pensioners—that minority of a minority. It is therefore in all our interests to get this right, and in a non-partisan way.
I do not believe that there is a difference between the political parties on the concept of getting rid of fraud. Arguments have been advanced in the past about whether parties could clamp down on fraud as they claimed to want to do and about how best to do so. However, we all appreciate the benefit to the citizen and the taxpayer if fraud does not take place, whether at a low, medium or high level, and of tackling it and bringing to justice those who perpetrate it.
I am trying to make it clear to the hon. Gentleman how seriously we take the matter in designing pension credit. I hope that at the end of my remarks he will be sufficiently secure to say that he has made his point, that the measures that we are putting in place will be preventive and that we have the capacity to deal with fraud both in the transitional arrangements to transfer the old MIG, or income support, system to the new pension credit system, and when the new system is effectively up and running.
As I said, we are not naïve about the potential of a minority of pensioners to steal from us. The key to success in preventing fraud in pension credit is to ensure that the application process is secure. The design of the process is still being refined, with that purpose in mind. As I said earlier, I shall be more than happy on another occasion to discuss with the hon. Gentleman how that will be achieved.
Since day one, experts involved in the Department's fraud strategy have been involved in the design and are playing a key role in ensuring that the process is as secure as possible. That is not to say that the application process will be off-putting for pensioners. The balance must be correct. We do not want to meet a public perception of dealing with fraud in a way that is so off-putting that it deals neither with fraud nor with pensioners' capacity to be put off by the bureaucracy involved or to be confused by the bureaucracy and to fall into fraud through no fault of their own.
As the hon. Gentleman says, it is important that the design features design out fraud. However, they must also tackle fraud in existence intelligently. We must get the balance right and ensure that the process is simple but not simplistic and has the capacity to catch those who intend to defraud or attempt to do so. That involves working intelligently behind the scenes with information provided in order to identify rogue claims. For example, it might be possible to identify an undeclared occupational pension from the details of a person's retirement pension calculation. We shall use existing intelligence in the system alongside the new design features that will be available.
The new clause is restricted to fraud. It is imperative that fraud should be rooted out, but what about other forms of incorrectness, such as genuine error on the part of the claimant or departmental error? Such cases do not constitute fraud in common language, but they are the main causes of benefit being overpaid or, indeed, underpaid to the pensioner involved.
When the Government first took responsibility in 1997, although the Department was far from short of targets for its anti-fraud activity—on number of visits, number of fraud referrals, weekly benefits savings from detected fraud, and number of claims withdrawn—there was nothing on which success in removing fraud and error from the system could be judged. There was no process for judgment.
Success can be measured only in terms of outcome. The key question is, has the level of losses from fraud and error been reduced? That is the basis of our public services agreement target for reducing fraud and error in income support and jobseeker's allowance. We are in the process of developing a robust strategy for measuring losses from fraud and error in pension credit, too. The hon. Gentleman asks whether we shall be able, in the public domain, to judge reductions in fraud, loss and error as we have for income support and jobseeker's allowance. The answer is yes.