Fraud

Oral Answers to Questions — Social Security – in the House of Commons at 12:00 am on 5 March 2001.

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Photo of Desmond Swayne Desmond Swayne Shadow Spokesperson (Health) 12:00, 5 March 2001

If he will make a statement on the cost to business of the measures arising from the Social Security Fraud Bill. [150481]

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

The vast majority of businesses will be unaffected because generally only the large companies—typically, financial institutions—will be asked to provide information. The hon. Gentleman asks about costs. For one large bank, the annual cost of providing the information under the Bill is estimated to be equal to just over one hour's profit.

Photo of Desmond Swayne Desmond Swayne Shadow Spokesperson (Health)

These additional costs, which are estimated to be £7.6 million, are on top of the costs of administering the working families tax credit, the stakeholder pension and so on. Is that £7.6 million going to be worth paying given that clause 79 is soft on fraudsters because it provides for sanctions for only 13 weeks and for any number of exemptions?

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

The Bill provides that if someone is convicted of benefit fraud twice, their benefit is stopped, which did not use to happen. The hon. Gentleman also asked about the cost to banks. I repeat that the cost to a bank or other large financial institution in an entire year is estimated to be equal to just one hour's profit, so he will realise that what we are asking is not unreasonable. It is in the interests of banks and insurance companies that we stop fraud because people who defraud the DSS could also be interested in defrauding those financial institutions. That is probably why our proposals have been widely welcomed as a valuable contribution to the fight against social security fraud.

Photo of Mr Chris Pond Mr Chris Pond Labour, Gravesham

Does my right hon. Friend agree that most businesses, and certainly those in my constituency, will feel that the small amount of extra work involved represents good value because it tackles the major problem of social security fraud? Does he agree also that the introduction of the ONE service will provide a major means of tackling such fraud? It not only saves claimants from having to go from pillar to post but enables the Benefits Agency to build a relationship with claimants and to see them through the system, and in the process staff may be able to spot fraud at an early stage.

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

My hon. Friend is right on both counts. First, banks and other financial institutions have welcomed what the Government are doing because they recognise that it is in their interests that fraud should be tackled and discouraged. He is also right to say that experience has shown that the more often people are seen and their benefit claims are checked, the more accurate the payment of income support and other benefits becomes. For the fist time, we have seen a significant reduction—6.7 per cent.—in fraud and error in the payment of jobseeker's allowance and income support because we are checking details far more often.

The Government fixed a target to reduce fraud by 10 per cent., which was to be reached in 2002, and I can tell my hon. Friend that we are on track to do that 18 months early. That is because we are tightening the gateways to the benefit system in order to cut fraud and error. The Bill is just one means of doing that. It should have happened years ago.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet

If he will make a statement on progress in tackling benefit fraud. [150482]

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

As I have just said, the results that we published in November show that we have already made a 6.7 per cent. reduction in fraud and error in the payment of income support and jobseeker's allowance. That is the first ever significant reduction. As I told the House, we are on course to meet our first target, of a 10 per cent. reduction in fraud and error, 18 months ahead of schedule.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet

I am grateful for that information. However, under this Government there has been announcement after reannouncement about the need to tackle benefit fraud—I have counted almost 50 so far—and whatever the Secretary of State promises in future, it will not change the fact that two things have happened. First, the amount of benefit fraud has gone up. His Department estimates that its value is about £7 billion. Secondly, the number of prosecutions is going down. Are not those two facts evidence of the way in which the Government—first, other Departments and now this one—talk toughly but act softly?

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

The hon. Gentleman is wrong on just about everything that he said. The number of prosecutions and sanctions has increased during our time in office. The previous Government, of whom he was a member, did not begin to measure fraud in the social security system until 1995, and no significant measures were taken to tackle the problem until 1997—some 18 years after they first took office.

In case the hon. Gentleman was not listening to the answer that I gave a few moments ago, I repeat that for the first time there has been a significant reduction in the amount of fraud and error in the payment of JSA and income support. We will have reached the target that we set for reducing fraud and error by 10 per cent. 18 months ahead of schedule. That is because we are increasing the powers available to the Department and investing in the information technology needed to keep track of people's claims—investment that the hon. Gentleman's party opposes.

Finally, by stabilising the staff whom we employ on the front line, we are able to check more claims and get them right. If the Conservatives cut 5,000 Benefits Agency staff, as they now pledge, there will be more fraud and error, not less. We have a record on which we are happy to fight. We are beginning to turn the corner in the fight against fraud and error, which the Conservatives never did in 18 years in office.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

Will the Secretary of State confirm that the increase in checks that has been implemented to tackle fraud in income support has resulted in a saving during this Parliament of £1 billion? Does he agree that the critical factor in clamping down on benefit fraud and the best way in which to prevent it is to get the right payment going to the right person in a timely fashion? That not only tightens up on fraud, but delivers the correct benefit to the person who genuinely needs it, and it should be the objective to which the Government's efforts are directed.

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

My hon. Friend is right. It is important to prevent fraud from entering the system in the first place. As I said, by investing in the IT that the DSS needs—when we took office, some of that was approaching 30 years old and becoming increasingly ineffective—and by making sure that we have enough staff on the front line to check claims and demand verification of information, we are ensuring that we have ever more accurate information.

My hon. Friend is right to say that during this Parliament we shall save £1 billion simply by halving the error rate in income support that we inherited. The Conservatives must face up to the fact that they had 18 years in which to sort out that problem, but did not do so. We are sorting it out. For the first time ever, figures show that we are beginning to turn the corner and bear down on the amount of fraud and error in the system.

More money was lost through fraud and error than it cost to run the Department. That is an indictment of the 18 years that the Conservatives had to put matters right.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

Are the Secretary of State's comments not refuted by his former colleague, the right hon. Member for Birkenhead (Mr. Field), who said that his first discovery on taking office was the realisation of his colleagues' political reluctance to bear down on welfare fraud? Has not that observation been borne out by running down the beat-a-cheat line, closing down spotlight campaigns against fraud, missing all the fraud targets so far and cancelling the benefits card, which would have been the most effective means of stopping fraud?

The Secretary of State says that we did not measure fraud until 1995, but will he acknowledge that ours was the first Government in this country or any other in the world to devise a method of doing that? Officials had said that it was impossible until I decided that it had to be done.

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

I have no wish to be churlish, especially as I read last week of some extremely complimentary remarks that the right hon. Gentleman made about the Government's stakeholder pensions. I am grateful to him for having recognised how valuable a contribution they will make.

On the question of fraud, I understand why the right hon. Gentleman seeks to clear his name, but he will know that it was not until 1995 that any serious attempt was made to measure fraud and error in the system. It is true, as I said, that in 1997 some efforts were made to deal with the problem; however, they focused almost entirely on simply detecting fraud that had already entered the system. The National Audit Office recognised the shortcomings of that as the sole strategy, because it almost encouraged people to let in fraud by rewarding them for detecting it. We have stopped fraud entering the system in the first place.

As I have told Opposition Members who have asked the question, the fraud and error rate in income support and JSA is down for the first time ever. We are on track to meet our target to cut fraud by 10 per cent. and we are going on to reduce fraud even further. We shall do that through legislation, by tightening up the gateways to benefit, by investing in new IT—which, as the NAO has recognised, is vital if we are to control DSS expenditure—and by ensuring that there are sufficient staff on the front line to carry out checks. As a former Secretary of State, the right hon. Gentleman will know that if his party were to get away with cutting 5,000 Benefits Agency staff, which is what they pledge to do through a freeze in civil service recruitment, the result would be more fraud and more error. That shows why the Conservatives' sums do not add up.

Photo of Eric Pickles Eric Pickles Shadow Spokesperson (Work and Pensions)

Before the right hon. Gentleman approved expensive advertisements in today's newspapers on benefit fraud, did he read the report on the trials in the pilot areas? Is there justification for what appears to be a long catalogue of reasons why people should commit benefit fraud? The cost of one page of the advertisement works out at more than £1,000 a word. Nothing is said about what a person is supposed to do if he finds a benefit cheat. There is no reference to the hotline. Why did the right hon. Gentleman not pay attention to the report that was lodged in the Library last week?

As for the trials, the report stated that the result of the campaign was that respondents within the test area perceived benefit fraud as easier to commit. Thanks to the Secretary of State, the entire country knows that benefit fraud is easy to commit. I know that he is hurt by the Opposition's suggestion that his policies are all spin and no delivery, but we never believed that he would respond not by increasing delivery but by reducing the quality of the spin.

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

I am sorry that the hon. Gentleman's reading skills did not enable him to read the whole report. If he had done so, he would have found that the advertisements in the north-west raised people's awareness of fraud and got across to them that fraud is theft from the country and that they should be concerned when it is committed. It is important to change the culture so that people recognise that fraud is bad. It took years before people accepted that drinking and driving should not be tolerated, and so it is with benefit fraud.

If the hon. Gentleman wants proof that our policies are working, I repeat that a reduction in fraud and error in income support has been achieved 18 months ahead of schedule. By ensuring that we improve the error rate in income support calculations, £1 billion has been saved. Those are examples of all the things that the Tories could have done, but did not do. We are delivering on reducing fraud and error. One reason why social security spending is growing at its lowest rate since the second world war is that we are tightening the gateways to the benefit system, which is long overdue.