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Lord Richard: My Lords, is my noble friend aware--I was not, until I had it on the impeccable authority of my noble friend the Chief Whip--that the Farmers' Club has admitted women since its inception in 1842? If those bucolic attitudes are correct for farmers, should they not apply to other clubs as well?

Baroness Blackstone: My Lords, the government view is that this is a matter for voluntary change. Personally--and I think that many of my noble friends agree with me--I prefer mixed membership.

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Jobseeker's Allowance: Literacy Testing

3.5 p.m.

Earl Russell asked Her Majesty's Government:

    What they expect to be the consequence of their proposed measure to force claimants for the jobseeker's allowance to take a literacy test under pain of benefit sanction; and how they intend to monitor those consequences.

Baroness Blackstone: My Lords, on 5th December my right honourable friend issued Skills for Life, a statement for consultation on how the Government intend to improve the poor levels of adult basic skills in England by bringing about a sea change in the quality of adult learning. The statement set out how we shall pilot aspects of our approach among key target groups, such as the unemployed, by giving them incentives--but not compelling them--to improve their reading and writing. After considering partners' views, we shall launch the full strategy next month.

Earl Russell: My Lords, I did not expect an answer to my Question. Is the Minister aware that most adult illiterates will go to excessive lengths to conceal the fact of their illiteracy and that, therefore, many of them are likely to avoid the tests and suffer the sanctions? It is, therefore, the more important to ask the Minister, not for the first time, what monitoring the Government intend to do of the effect of sanctions. We were reminded recently by Professor Richard Baker that it is possible to conduct an extremely sophisticated study even of a small sample of death rates and to compare it with a balanced sample of similar age and social composition. Does the Minister share my curiosity to know whether being deprived of benefit is more dangerous or less dangerous than being a patient of Dr Harold Shipman?

Baroness Blackstone: My Lords, I am slightly puzzled by the noble Earl's remarks. I am surprised in particular that he has not recognised how important it is to help adult illiterates and to help those with poor basic skills to improve them. That is the thrust of the Government's policy. Perhaps I may remind the noble Earl that in the South East some 60 per cent of those with poor basic skills are in work; they are not unemployed. The Government recently launched a new strategy setting out proposals for pilot schemes to try to find ways of helping adult illiterates to come forward. The noble Earl was far too defeatist in his suggestion that people will not do so--they are coming forward, and the Government are doing far more to help them to come forward.

To return to my initial Answer, we do not have plans to compel people; however, we do have plans to find ways to provide incentives to unemployed people to

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come forward. The Government's intention is to find ways of testing people so that they can be helped and be given opportunities to attend appropriate courses.

Baroness Blatch: My Lords, however well intentioned the Government's plans, given the present crisis in teacher numbers where will the teachers come from to provide literacy classes?

Baroness Blackstone: My Lords, the people involved in providing classes in adult literacy are quite different from those who are employed in our schools. There is no shortage of people wanting to work with adults who have literacy problems. There is a problem in regard to improving their training, and the Government are addressing that.

Baroness Carnegy of Lour: My Lords, the suggestion that literacy training should be linked to application for benefit was originally made when the noble Lord, Lord Young of Graffham, was at the Dispatch Box opposite. If I remember correctly, the reason that it did not work very well was that the approach suggested then was precisely that proposed by the noble Baroness this time; namely, people will be expected to attend classes. Does the Minister appreciate that many of those who suffer in this way will not have the confidence to do so? Does she agree that what is needed is person-to-person tuition--very likely by volunteers? Will the Minister learn the lesson of the past and approach this important matter in that way?

Baroness Blackstone: My Lords, it is not entirely true to say that this rather skilled and difficult work can be undertaken by volunteers. On the whole, I believe that it is necessary for people to be professionally qualified to carry out such work effectively. The noble Baroness is quite right to point out that some adults do not wish to join classes to improve their literacy, but she is perhaps not sufficiently aware of the developments that are taking place in IT. Large numbers of adults can be helped through IT programmes, where they can sit in front of a PC with interactive help from tutors, and where they are not exposed to ridicule or to feelings of inadequacy, as might be the case in a classroom.

Lord Renton: My Lords, bearing in mind that there are mentally handicapped people with such severe learning difficulties that they will always be illiterate but who, nevertheless, are capable of carrying out strenuous manual work, can the Minister say what the Government propose to do to help them?

Baroness Blackstone: My Lords, in responding to this question, we really ought to focus rather more on the nearly 6 million adults who have poor levels of skills in both literacy and numeracy. A small number of people have learning disabilities such that they may never learn to read, and they need to be helped in many other ways. The Government are doing this both through the provision of improved special educational

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needs assistance in our schools and through making more help available to those with learning difficulties when they become adults.

Lord Avebury: My Lords, can the Minister say whether these literacy tests will be applied to former prisoners? Indeed, considering all the emphasis that has been placed over the past few years on trying to teach prisoners to read and write, would not the Government have knowledge of the standard of literacy of former prisoners?

Baroness Blackstone: Yes, my Lords. The Government are doing very much more to develop prison education, especially in basic skills. We shall ensure that all prison entrants are screened. That may--and should--mean that when people come out of prison their levels of literacy are higher. They will then need to be given more help and guidance about how to carry on improving their skills which will, in turn, help them to obtain jobs and prevent reoffending.

Baroness Byford: My Lords, perhaps I may press the Minister a little further on this point. I was slightly mystified by her earlier response on the question of adult literacy teaching by volunteers. Was the noble Baroness suggesting that those who have done this work in the past will not be qualified to do it in the future? Alternatively, does the noble Baroness not see this as part of this project of trying to encourage more people to improve their literacy?

Baroness Blackstone: My Lords, perhaps I did not make myself clear on this point. It is the Government's view that this is very highly skilled work. Therefore, it cannot easily be undertaken by volunteers without the extensive involvement of professionally trained people. The Government intend to ensure that the vast majority of people involved in teaching adult literacy are trained.


Lord Carter: My Lords, immediately after the speech of the noble Earl, Lord Russell, in the Second Reading debate on the Social Security Fraud Bill, my noble friend Lord Hunt of Kings Heath will, with the leave of the House, repeat in the form of a Statement the answer to a Private Notice Question tabled in the other place on the inquiry regarding recently deceased patients in Bedford Hospital.

Social Security Fraud Bill [H.L.]

3.13 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, I beg to move that this Bill be now read a second time.

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We spend over 100 billion each year on social security. It is our duty to make sure that the system is secure from both fraud and error so that the right money goes to the right people. This duty is reflected in the department's Public Service Agreement, which includes a challenging objective to reduce losses from fraud and error in income support and jobseeker's allowance by 25 per cent by 2004 and by 50 per cent by 2006.

Social security fraud costs at least 2 billion a year--and probably far more. To put that in perspective, I can tell the House that this year we plan to spend 1.7 billion on running the entire Benefits Agency. This level of loss is clearly unacceptable and we are determined to stem the flow. The vast majority of people who claim benefit are honest and it is unfair on both them and the taxpayers who foot the bill that a minority is cheating the benefit system.

A wide variety of frauds are perpetrated against the benefit system ranging from the opportunistic--such as the person who does not tell the Job Centre that he or she has started work--to the highly organised criminal gangs involved in counterfeiting or stealing instruments of payment and running false identity frauds. In just one investigation into the counterfeiting of giro cheques over 50 people have been arrested. Another investigation revealed that a gang had hijacked the identities of 171 people from the Irish Republic. The ring leaders received prison sentences of between three-and-a-half and four years. The fact that one of the gang was also sentenced for possessing a firearm shows that we are not up against amateurs but hardened criminals. Indeed, the latest report by the National Criminal Intelligence Service, whose role it is to assess the threat posed by organised crime, puts benefit fraud, along with drug trafficking, in the high impact category of criminal activities.

The report makes the point that organised crime exploits many illicit markets. Something like 17 per cent of the gangs involved in drug trafficking are also involved in benefit fraud. The two activities may, in some instances, be inextricably linked with the proceeds of benefit fraud going towards the ever larger wholesale purchases of drugs. Along with benefit fraud, the list of other activities such gangs are involved in makes chilling reading. I shall not go through it in its entirety, but it includes arms dealing, extortion, kidnapping, prostitution and child pornography.

I mention those facts not to be sensational, but to make the very serious point that every time we catch one of the gangs involved in benefit fraud and its members end up behind bars we are often putting a stop to a wide range of other serious criminal activities.

The system that we inherited in 1997 had four key weaknesses. Prior to 1995 there was no measurement of the amount of fraud in the system, so the scale of the problem was not understood. That meant that there was no overall strategy for safeguarding the system and, therefore, no meaningful targets which, in turn, meant that there was no objective measure of success. Secondly, the amount of fraud detected was the only

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measure of success. As a result, those paying benefits had the perverse incentive not to worry about preventing fraud because the more that entered the system the easier it was to find it and be rewarded for having found it.

The third weakness was inadequate investment in information technology, resulting in a failure to draw together all the information held on an individual's claims so as to guard against fraud and avoid error. For example, a local authority worker processing a claim for housing benefit did not have automatic access to details of an existing or previous award of income support. Finally, the fourth weakness was a culture throughout the organisation that too often regarded security as a bolt-on extra rather than an integral part of the everyday running of the social security system. There was not enough focus on delivery at the front end; for example, in 1997 two out of five income support claims were paid without enough evidence.

We are determined to secure the system from fraud and error. This is a huge task but we have made a good start. We set out our strategy in Safeguarding Social Security, published March 1999. For the first time we have a plan to secure the system from the first claim to the final payment. We have established a system that provides continuous measurement of levels of fraud and error in income support and jobseeker's allowance. For the first time, we have set a tough target for reducing the amount of fraud and error in the system so that people can judge our success for themselves. As I said, we seek to eradicate fraud and error in income support and jobseeker's allowance by 25 per cent by March 2004 and by half by March 2006. Those are tough, challenging targets.

The National Audit Office supports the approach of setting targets for reducing fraud and error based on regular measurement. We have introduced tighter checks at the gateway to income support before money is paid out, and have already halved the number of income support claims that were paid without enough supporting evidence. That will save over 1 billion during the course of this Parliament.

Putting the system right will take time, but we are already seeing results from the new approach. Figures released at the end of November for benefit paid between April 1999 and March 2000 showed that losses from fraud and error in income support and jobseeker's allowance had dropped by 6.5 per cent. More than 20,000 people were sanctioned or prosecuted in 1999-2000, which represented an increase of nearly 60 per cent on the previous year.

Specialist identity checks, which have been piloted in the Balham area since June 1997 (where there have been over 200 arrests), will operate across the country this year. Cross-checking DSS records and other state records has already saved over 150 million. We have introduced stronger powers to inspect employers' records to check on people who are working while claiming benefit as unemployed which we shall start using this year. Through tighter checks, targeted plans

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and better use of information we are continuing to turn the corner in the battle against fraud. But more needs to be done if we are to meet those challenging targets.

We need to make better use of IT. As a result of the Spending Review 2000, we have secured almost 2 billion for modernising our services. One of those aims is significantly to reduce fraud and error. We currently have the ability to check what claimants tell us with information held by other parts of government. We need to extend this to allow us to check information with new sources. We need to create a strong deterrent for people who are persistently fraudulent.

My noble friend Lord Grabiner, who will speak later this afternoon, was asked in November 1999 to investigate the informal economy. His report was published in March 2000 and it contained a series of recommendations to combat benefit fraud. This Bill carries forward the Government's commitment to combating benefit fraud by turning many of those recommendations into action.

Before turning to the detail of the Bill's proposals, and in case any noble Lords believe that we are talking about ignorance rather than fraud and about the kind of thing that anyone might stumble into and that therefore the DSS response is disproportionate--that is a view that I can understand noble Lords may hold--I wish to give a flavour of the kind of situations we are dealing with on a day-to-day basis.

Fraud takes place when people knowingly lie--I am not talking about accidental error--about their circumstances in order to gain benefit. The main types of fraud include someone who is working but not declaring earnings (including those of a partner). I give the example of a couple who had acquired sufficient funds through working and claiming to build themselves a brand new house. The man claimed he was sick and disabled and his wife received invalid care allowance for looking after him. It transpired that although she was caring for an invalid it was not her husband who was in work. She was in fact working at the local nursing home.

In another investigation, in an attempt to avoid detection, a man set up business as an IT consultant in a town nearly 40 miles away and by pretending to be homeless managed to obtain a local authority flat there. Meanwhile his wife and family stayed in the family home for which he was receiving mortgage assistance along with jobseeker's allowance.

The National Audit Commission has discovered a case of a local authority employee who worked for one local authority while on long-term sick leave from another. This is not a case of innocent error; it is deliberate and knowing fraud. We estimate that this type of error and fraud in income support and jobseeker's allowance costs at least 350 million a year.

A second example of this type of fraud concerns undeclared capital. In one case an income support claimant had failed to tell the department that she had received a large sum by way of damages following an accident. She claimed to have received only 4,000. In

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fact the true amount was well into six figures and had been invested for growth on the advice of a financial consultant who stated in his letter,

    "since you do not need the additional income from this capital as your current sources of income by way of your benefits adequately cover your normal living expenses".

We estimate that this type of fraud costs 34 million each year.

Further, there is undeclared income from other sources. I refer to a man who claimed income support but failed to declare that he was receiving an army pension. He was overpaid by 4,000. We estimate that this type of fraud costs 36 million a year.

I refer to family circumstances where people fail to tell us that someone is living with them. It may be hard to establish that because even if a partner is discovered living with them, and they have not declared that partner in terms of their income support claims, the standard response may well be that that person moved in the day before. However, I have come across other family circumstances in the Audit Commission's report. A widow received a pension of 3,000 a year and she died in 1988. Before her death her son had power of attorney over her affairs and continued for 10 years after her death to draw her pension. He also submitted three fraudulent life certificates and obtained 30,000. He went to prison for 15 months.

In another case on the positive side, if I may put it that way, the Contributions Agency recorded a widow as dead even though she received a work's pension and was alive and well but did not receive the DSS pension. In that case we were happy to ensure that she received 40,000 in back payments as a result of data matching.

I refer to residency fraud which involves a person claiming to be living at an address when they are actually living elsewhere. Further, there is identity fraud. The registrar's office referred a case after an application for three "dead" birth certificates from one address. Following investigation five non-UK citizens were prosecuted and convicted. They admitted using false identities. The loss was 42,000.

On top of that we have housing benefit fraud which costs us something like--

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