Draft Social Security Administration Act 1992 (Amendment) Order 2002

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Mr. David Heath (Somerton and Frome): It is a pleasure to serve under your chairmanship for the first time, Mr. Beard.

I do not intend to repeat all the points made by the hon. Member for Hertsmere (Mr. Clappison), as that would be otiose. The main purpose of the order is to adjust existing legislation to bring it in to line with the current situation. I have no quarrel with that, as the proposals make no generic change. None the less,

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important questions have to be asked about the Government's general approach to the matter.

I could not agree more that it is important to have effective anti-fraud measures, to protect not only the taxpayer but those whom we hope to help through the social security system. Every penny fraudulently obtained is unavailable to those who need it most. Those are the most important considerations.

The Minister suggests that the Government are doing well on fraud, but I beg to differ. The hon. Member for Hertsmere has already said that the number of prosecutions has decreased from the number they inherited from the Conservative Government. Even more alarming is the volume of fraud and error that is identified: a recent report from the Department for Work and Pensions states that fraud and error in income support has increased in the past 12 months from £705 million to £727 million. That is a matter of considerable concern. The report also states:

    ''Relative incidences of fraud and error . . . were very similar to those found in previous years.''

That does not suggest a policy that is effective in making the considerable savings from tackling benefit fraud that the Chancellor of the Exchequer has said that he wants.

One of the reasons is the ever-increasing complexity of the social security system. Simplicity is the enemy of the fraudster and complexity the fraudster's friend. The Government seem obsessed with creating a system that is increasingly complex and difficult to understand, which invites people to play the system off against itself and makes more difficult the job of those who are charged with preventing fraud. That point was made well by the former Chairman of the Public Accounts Committee, the right hon. Member for Haltemprice and Howden (David Davis), in a debate that he initiated. He said that it was reasonable to suppose that as we introduced new tax credits, the incidence of fraud would increase.

I do not want to rehash debates that took place before the introduction of the Social Security Fraud Act 2001, but a balance must be struck between the powers that are rightly given to officials to investigate fraud and the rights of individuals to have their private affairs remain private. There are issues about intrusion, but I do not intend to challenge the powers on the basis of the amendments to the legislation contained in the draft order.

From time to time, banks, other financial institutions, and utilities companies prove that they are capable of error. I hope that that capability is taken fully into account by those who are charged with investigation. I cannot believe that the information supplied to investigating officers is always accurate—cases brought to our surgeries demonstrate clearly that that is not the case. I hope that the code of practice will also take account of that.

The hon. Member for Hertsmere made an important point about the justiciability of the current investigative process. I agree that the process can be challenged only by judicial review—a procedure that is not only onerous but impossible for many people who

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find themselves at the wrong end of the process. The lack of any affordable and available method of challenging a decision to acquire information demonstrates a failing in the legislation. That worries me and I look forward to hearing the Minister's replies to the questions put to him by the hon. Member for Hertsmere about the exercise of the powers that are currently available.

The code of practice will have to be amended, as the explanatory memorandum suggests it will. I commend the Minister on the explanatory memorandum, which is helpful, but it would have been just as helpful to have a draft of the amended code of practice before the Committee today, because it would have enabled us to comment the proposals. The draft code of a practice was available to the Standing Committee on the Social Security Fraud Bill, and there seems to be no reason why the draft amended code should not be available, as it and the draft order are part and parcel of the same mechanism. In a well-run bureaucracy, the changes to be made to the code of practice will have been considered as a consequence of the order, giving us an opportunity to comment on them.

My second and last point relates to the regulatory impact. Let us not forget the impact of the legislation on both the private and the public sectors. It represents a substantial imposition on a great number of people. If we are to impose costs of £2.3 million to £7 million a year, as is suggested in the regulatory impact section of the explanatory note, the goal must be seen to be worth £2.3 million to £7 million to the public Exchequer and the social security accounts. That is not demonstrable at the moment. Can the Minister reassure me that the money will be well spent?

4.55 pm

Malcolm Wicks: I thank the hon. Members for Somerton and Frome (Mr. Heath) and for Hertsmere for their useful contributions. The powers do not come into force until late April—that deals with a number of the important questions that have been raised—and they will be exercised only when there is reasonable suspicion. We do not engage in fishing expeditions, and we shall use bulk information on the quantity of supply only when it relates to a particular address.

Mr. Clappison: I do not want to get technical, but I should be grateful for clarification as to whether the threshold for the use of the powers is suspicion or belief. Belief is a higher threshold than suspicion. The wording of the 1992 Act suggests that the threshold is belief, not suspicion, but the Minister has just said that it is suspicion. If he turns to the relevant part of the Social Security Fraud Act 1992, he will see that it says ''belief''.

Malcolm Wicks: Rather than get into a discussion about the meanings of the two terms now, I shall return to the point later.

Mr. Clappison: I can assist the Minister. The relevant part of the Act is section 1(2)(c).

Malcolm Wicks: A good research assistant is invaluable. I thank the hon. Gentleman for pointing us in that direction.

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Our chief investigation officer is discussing with local authorities how they should authorise the implementation of the powers and what criteria are to be used. I have been asked about complaints about our use of powers. There is a two or three-stage complaints procedure, and it is important to have a simple system for complaints so that they can be dealt with quickly. Complaint can ultimately go to the Department's professional standards unit.

Mr. Heath: Will the Minister tell me—I am ignorant of the matter—whether there is a procedure for notifying the individual concerned at the time of the inquiry? No complaint can be made if the person is not aware of the inquiry.

Malcolm Wicks: Whether there is a what?

Mr. Heath: Will the Minister tell me whether there is a formal process of notification of the individual that his bank account, or whatever, has been examined? It is impossible to make a complaint about an improper inquiry against a bank or other body if one is not aware that something has taken place, and one might well not be if no prosecution occurs.

Malcolm Wicks: No, there is not, because we do not think it sensible to warn a person who might be a fraudster that inquiries are being made, just as I do not think a sensible police officer warns a criminal that an investigation is taking place. If a case proceeds to a prosecution or a benefits sanction, at that stage the person will be in a position to make a complaint if they think that an injustice has occurred.

The Secretary of State has allowed our chief investigation officer to authorise 175 officers in the Department to exercise the powers. The chief investigation officer has introduced training, but has not yet authorised any specific officers to undertake exercise of the powers. That 175 represents a small proportion of officers in the Department.

Working families tax credit is not included. The provisions of the draft order are available only to investigate social security fraud, which is a benefit offence, and working families tax credit is technically not a social security benefit. We are discussing an amendment to social security law, not to general anti-fraud legislation.

Let me talk about the number of cases that we investigate for fraud or error. The Social Security Administration (Fraud) Act 1997 introduced new powers to punish offenders by administrative penalties and cautions. That has led to a total number of sanctions that now exceeds 25,000 a year. We have new powers and we all want cases of serious benefit fraud to proceed to prosecution, but when smaller sums are involved and there is doubt about whether there is true fraud or serious error, it is important that we have powers to issue sanctions instead.

The hon. Member for Somerton and Frome challenged our record on social security fraud. None of us is complacent. There is substantial fraud, and although we can argue about the precise amount, we are convinced that there is at least £2 billion of fraud in

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the system. The hon. Gentleman is a fair-minded man, so he will recognise, based on good data from sample surveys, that we have reduced fraud and error in the jobseeker's allowance and income support system by 18 per cent. in about two and a half years. We have tough targets to hit in coming years, but I hope that he will concede that we have made a start on that important matter.

We are currently undertaking a research exercise so that we have some up-to-date information on the amount of fraud in the housing benefit system. There is certainly fraud present, and it is important that we tackle it. As the Minister responsible for housing benefit, I want to ensure that we exercise all the powers available to us.

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