Clause 33 - Offence of fraud
Tax Credits Bill
2:30 pm
Mr Mark Hoban (Fareham, Conservative)
I am grateful to my hon. Friend for that example, which is the sort of thing I have in mind. People might use the system in such ways to manipulate the terms and conditions of employees to the mutual satisfaction of both parties to the transaction.
That leads on to my next point, which is that the complexity of the system could give rise to behavioural changes. The Green Paper, ''Beating Fraud is Everyone's Business: Securing the Future'', said that complex rules make a great contribution to the occurrence of fraud. It stated:
''The detailed rules governing benefit entitlement, and contribution conditions, may also encourage behaviour which is fraudulent.''
The Green Paper identified three rules from which most fraud stems. They are:
''the rule that reduces income-related benefits when earnings cross a low weekly threshold; the rule that means that two people declaring that they live together as a couple receive less benefit than two who pretend that they live alone; and the rule that reduces income-related benefits where a person's financial capital exceeds £3,000.''
The latter point has been dealt with, in that the tax credit is based on investment income earned rather than on notional capital level, but the first two still apply in this situation. It will be interesting to see in the rules on benefit rates on the working tax credit in the Budget what the advantage and disadvantage will be for people declaring that they live alone or together. Comment has also been made on the type of event that gives rise to fraud in other benefits. Cohabitation, or failure to present that one is cohabiting, was a major cause of fraud in other benefits.
I am concerned that the complexity of the system may drive people to fraud either of their own volition or inadvertently. There are issues with processing delays. In my surgery, I have dealt with people who have put in a form for a benefit, and it has come back with a query, or more evidence is asked for. Such delays arise from the complexity of the system and people's failure to understand the rules and they encourage people to do such things as start work and not declare that they have changed their work status from unemployed to employed.
People working variable hours and in receipt of the 30-hour premium may, if they slip below 30 hours, fail to declare that their hours have fallen. That could be treated as fraud but, equally, could be classified as inadvertent error. People might not have been aware
of the complex rules around the hours and what would happen were their hours above or below 30 a week. Complexity will give rise to the opportunity for deliberate and inadvertent fraud against the Inland Revenue.