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Session 2001- 02
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Delegated Legislation Committee Debates

Draft Social Security (Loss of Benefit) Regulations 2001

Third Standing Committee on

Delegated Legislation

Monday 10 December 2001

[Mr. Nigel Beard in the Chair]

Draft Social Security (Loss of Benefit) Regulations 2001

4.30 pm

The Parliamentary Under-Secretary of State for Work and Pensions (Malcolm Wicks): I beg to move,

    That the Committee has considered the draft Social Security (Loss of Benefit) Regulations 2001.

Welcome to the Chair, Mr. Beard.

The regulations provide the detail for one measure introduced in the Social Security Fraud Act 2001 and form part of our overall strategy in the fight against fraud. Although the key focus is deterring benefit fraud recidivism, the powers also fit into our welfare reform programme, linking the receipt of benefits more closely with the individual's responsibility to society. They will impact on the small number of people who continue to target and abuse the benefit system.

In September, following a lengthy investigation and his conviction for eight benefit offences, a man who, although he had been working, claimed benefit on the ground that he was too sick to work was given a 12-month custodial sentence. The offences were brought to my Department's attention in July 2000, less than five months after the same man had been convicted of six offences of working while receiving benefit, for which he received a custodial sentence, suspended for two years. There are too many such examples.

Although the number of people who commit repeated fraud is small, we are determined to do everything in our power to deter them from abusing the benefit system. The regulations will enable us to fight like with like. They will not replace the courts' role in considering punishment of those who commit crime, but they will deter those who choose to continue to ignore their responsibilities to the benefit system.

Loss of benefit provisions were debated at length during the legislative passage of the Social Security Fraud Act 2001, and build on the principles of the ''two strikes and you're out'' regime introduced by Lord Grabiner's report on the informal economy, published in March 2000. The 2001 Act has already established the loss of benefit principles, so the majority of the regulations are concerned with putting in place safeguards and support for people who are dependent on those who have chosen to continue to abuse the system. In developing a regime with sufficient impact to make people stop and consider their actions, we have been careful to ensure that we do not cause undue hardship.

We spend well in excess of £100 billion a year on social security, and it is our duty to ensure that the system is secure from fraud and error so that the right

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money goes to the right people. All Committee members doubtless agree with that objective. The latest figures, announced on 29 November, show that measures introduced so far to tackle social security fraud have had the marked effect of reducing social security fraud in income support and jobseeker's allowance by 18 per cent.—well ahead of the target figure. Those results show that we have made a good start towards meeting the duties reflected in the Department's public service agreement, including the challenging objective of reducing losses through fraud and error in income support and jobseeker's allowance by 25 per cent. by 2004, and by 50 per cent. by 2006.

We will ensure that following a first conviction for a benefit offence, offenders are given sufficient warning to leave them in no doubt about the implications of continuing to abuse the benefit system. The regulations provide a deterrent to such repeated abuse.

The loss of benefit provisions introduce a fixed 13-week disqualification period. Regulation 2 describes how that will be administered, ensuring that it is applied consistently to all sanctionable benefits in payment. It also describes how the sanction will be applied to offenders who try to avoid it by ending benefit, then seeking to reclaim it. The provisions are intended to act as a deterrent to recidivism. The powers are not intended to cause extreme hardship to those who have not maintained their responsibility to society in relation to the benefits system.

Regulation 3 describes the reduction to be applied to income support as a result of the two-strikes sanction. It will be 40 per cent. in most cases, or 20 per cent. in cases in which we need to protect those in special circumstances, such as pregnancy or serious illness. The application of a two-strikes sanction to all other sanctionable benefits will result in the removal of the full amount of benefit payable.

Regulations 5 to 16 provide for fall-back provisions for customers who would otherwise have no means of supporting themselves financially. They reflect the hardship scheme that already operates for labour market sanctions.

To ensure that sanctions do not affect provision of housing, regulation 18 provides for the continuance of housing and council tax benefit for those in receipt of income support or income-based jobseeker's allowance. Regulation 17 describes the reduction that will be applied to housing and council tax benefits where income support or income-based jobseeker's allowance are not received.

To ensure that an offender's responsibility for dependants will continue to be met, regulation 20 provides that child support maintenance deductions that are made from benefit will continue and will not be affected by the application of the two-strikes sanctions.

Mr. Chris Smith (Islington, South and Finsbury): I have two questions about regulations 17 and 18, which deal with housing benefit.

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First, is there a danger that a reduction of 40 per cent. in housing benefit might lead, in some cases, to a family's eviction, with a particularly adverse impact on the children? What provisions might avoid such an occurrence?

Secondly, as my hon. Friend will remember from some years back when he and I dealt with such matters together, one of the main types of fraud that we were anxious to target—as the Government still are—was landlord fraud. Are there any measures in the regulations, or in prospect, to target recidivism in landlord fraud as well as claimant fraud?

Malcolm Wicks: I am grateful to my right hon. Friend for those questions. I shall deal with the second first.

The regulations are not concerned with landlord fraud, although my Department is concerned about all fraud, including landlord fraud. We are clamping down on housing benefit fraud in many ways. Later next year, we will have the first estimates for many years on the extent of such fraud. We are tightening the net around all housing benefit fraudsters, be they tenants or landlords. My right hon. Friend's point was well made.

On the first question, the sanction on housing benefit will apply where the person concerned is receiving neither income support nor jobseeker's allowance, so such cases will be relatively rare. It follows that the person has other income, but not enough to enable payment of all rent, which is why the person receives housing benefit. The rent will still be paid because the extent of the person's other income is sufficient to push them above income support and jobseeker's allowance levels.

The measure will cause hardship and is intended to do so. We do not regard it as extreme in the sense of robbing offenders of their home—no one would want to do that, whether or not children are involved. All the situations under discussion involve a second strike. After the first fraudulent abuse of the system, offenders will be given a clear warning that, should they abuse the system again, the two-strikes sanction will be applied. People will have fair warning.

The regulations introduce a deterrent to the person guilty of repeated benefit fraud, which builds on the tried and tested sanctions regime. We are supporting the sanctions with fall-back provisions to protect the vulnerable and their dependants and we are continuing the practice of passporting to other related benefits, which is important. The regulations ensure that a two-strikes sanction cannot be avoided by merely stopping and restarting a claim for benefit or by hiding behind a partner by swapping benefit claims. The regulations do not replace the courts as the correct place to decide how those who commit crime should be punished.

We have made notable progress in the reduction of social security fraud, and we want to continue that momentum. The 2001 Act introduced several powers to support the fight against social security fraud. The regulations provide another piece in the jigsaw of our overall strategy for tackling fraud, and I commend them to the Committee.

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4.41 pm

Mr. James Clappison (Hertsmere): I join the Minister in saying what a great pleasure it is to serve under your Chairmanship this afternoon, Mr. Beard. It is the first time that I have served under you, and I look forward to doing so on many future occasions.

I should also declare an interest. I am not sure that it is strictly necessary for me to do so, but the intervention of the right hon. Member for Islington, South and Finsbury (Mr. Smith) makes it timely. I am a private sector landlord. Full details of my interests are set out in the Register of Members' Interests.

As the Minister said, the regulations emanate from the provisions of the Social Security Fraud Act 2001. They provide for the restriction of certain benefits in the case of a person being convicted of benefit fraud offences twice in three years. The Minister described the process as one of ''two strikes and you're out'', and I am not sure that that expression has always found such favour with his party. However, we approve of it for today's purposes.

As the Minister may be aware, the official Opposition voted in favour of the enabling measure for the regulations during the passage of the 2001 Act, but the matter was pressed to a Division in Committee by the Liberal Democrats. We may hear from the hon. Member for Chesterfield (Paul Holmes) on that today. The measure caused his party some excitement then, but perhaps all the other Liberal Democrat Members have been prevented from attending the Committee because they are holding a party in honour of their latest recruit.

The official Opposition support taking a tough line with people who persistently cheat the benefits system. There is no room for complacency in dealing with benefit fraud. The Minister said that the regulations are a warning to people who think that they can continue to cheat the system, and that they are designed to crack down on persistent benefit cheats.

A question arises, however, about persistence. As the Minister said, the restriction depends on there being two convictions in three years. Under the regulations, no sanction milder than a conviction matters. A conviction requires a prosecution, however, which leads me to information given in a written parliamentary answer on 7 November, which concerned prosecutions for benefit fraud, particularly those mounted by the Benefits Agency, which is in charge of investigating many of the frauds that fall within the ambit of the regulations. According to the answer, the number of Benefits Agency fraud investigations declined from 12,000 in 1997 to 9,000 in 2000-01, having dropped in each intervening year. Over the same period there was an increase in the number of cases dealt with by caution and administrative penalty. The statistics suggest a move away from prosecutions and towards cautions and administrative penalties.

Can the Minister confirm that a case dealt with by caution and administrative penalty will not count as a conviction for the purposes of triggering the sanction? If that is so, fraud that results in a caution or administrative penalty will have to be followed by

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another case of fraud resulting in a prosecution and conviction, then by a third case resulting in prosecution and conviction. Thus, there will have to be three investigations by the Benefits Agency before the provisions are triggered.

The move towards the use of caution and administrative penalty flies in the face of claims by the Minister that the regulations are a warning to people who think that they can continue to cheat the system. A clear warning should be sent to those who engage in large-scale organised fraud for substantial profit, especially those who do so repeatedly. All fraud is wrong and must be dealt with. However, those who repeatedly engage in serious fraud for big profits—with a degree of organisation—should be dealt with severely. They would fall within the ambit of the provisions if they received the necessary two convictions within three years.

Can the Minister also confirm that, in addition to the example that he has given of people who might go to prison, serious fraudsters—I emphasise that my concern is those who repeatedly commit serious fraud for big profits—will continue to receive custodial penalties? Even though this sanction might be available in such cases, can the Minister confirm that it will be appropriate for those involved in the most serious cases to go to prison rather than to be dealt with by benefit restriction? We have already made it clear that we support the provisions, but we should appreciate a response on those two points.

4.47 pm


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Prepared 10 December 2001