Examination of Witnesses (Questions 80-99)
MS RACHEL LOMAX, MR JOHN CODLING AND MS ALEXIS CLEVELAND
MONDAY 4 FEBRUARY 2002
80. No, I realise that, but they cannot be all that different.
(Ms Lomax) What I am saying to you is that the quantity of fraud per case does vary a lot.
81. Are you saying that you do not have a figure with you now and you can write to us?
(Ms Lomax) Sums are going on behind me as we speak. This is the first time I have seen this table, but I am going to take the risk of reading it out to you. The cases which were incorrect, which I suspect is fraud and customer error, were 216,000, but that was fraud and customer error. That underlies the amount overpaid of £559 million, which is what we are talking about and the amount underpaid of £14 million.
82. So to say 150,000 would not be an outrageous assumption to make. There are probably 150,000 cases of deliberate fraud by claimants.
(Ms Lomax) Yes; okay. All right.
83. Why then do you only prosecute 11,000?
(Ms Lomax) Because you have to have evidence to get a conviction in a court of law.
84. Surely you have all the evidence. If you are cutting somebody's benefit you have the evidence there.
(Ms Lomax) We did not cut benefit in all these cases.
85. Am I not right in thinking that the reason you do not prosecute is because you do not think it is cost effective to prosecute because you are only talking about a few thousand pounds?
(Ms Lomax) Yes, if they were very small amounts of money, I suspect that would be a good reason.
86. Is it a good reason? I am asking whether that is the policy, because I do not think it is a good reason. Surely there is a deterrent effect here and when you have things like difficulties over checking people's bank statements, where they have £1/2 million hidden or even £20,000 hidden somewhere, when you have difficulties in identifying whether somebody has a live-in lover in their house, privacy issues, surely therefore you are relying on deterrent to deter people from making these fraudulent claims. As far as I can tell, a prosecution rate of less than eight per cent is not a deterrent. If all you are doing is claiming back the money they have claimed illegally, then there is really no down side to making an illegal claim if you are prosecuting fewer than eight per cent of fraudsters. Surely, regardless of the amount of money at stake, you should be prosecuting a much higher proportion than eight per cent.
(Ms Lomax) I note what you are saying.
87. Do you not agree?
(Ms Lomax) I think there always has to be a judgement as to which cases you take to court. The courts have a limited capacity and if we decided to prosecute absolutely every case no matter the state of the evidence or the sums of money involved, the courts would pretty quickly grind to a halt.
88. Do you not think eight per cent is outrageously low and provides a zero deterrent to people? I think it should be more like 50 or 60 per cent.
(Ms Lomax) We prosecute ten times as many cases as local authorities do.
89. That means what? Does that mean you are good?
(Ms Lomax) We have had a policy every year of prosecuting a lot of people committing benefit fraud and 500 of those people went to prison.
90. Out of 150,000 people who committed fraud, I think you have a serious policy issue to address here. This kind of low level of prosecutions must be the root cause of £900 million of fraud and that is why your accounts have been qualified every year. Do you not think you should re-address this issue? Do you not think you should re-address this issue of the level of prosecutions?
(Ms Lomax) Yes, our prosecution policy should always be kept under review.
91. And will it?
(Ms Lomax) I very much doubt whether it would ever be cost effective to prosecute absolutely every one of those 150,000 people.
(Ms Lomax) Because you are talking sometimes about people with very small
93. Do you not accept the deterrent argument?
(Ms Lomax) There are other ways. It is true that we try to get people off benefit rather than take them to court if that is the quickest way of doing it.
94. Do you really feel you have a sufficient deterrent to deter people from committing fraud against the benefit system, given that 6.7 per cent of your payments are fraudulent or in error and that constitutes £900 million just for one benefit alone? I think there is something seriously wrong with your prosecutions policy.
(Ms Lomax) Prosecution is only a part of it. The probability of being caught is extraordinarily important as well.
95. But what happens if they are caught? What is the downside to being caught?
(Ms Lomax) The probability of being caught is also extremely significant.
96. You just pay the benefit back, do you not? There is no real downside to being caught, you just pay the benefit back.
(Ms Lomax) Under the Fraud Act 2001, when we commence that in a few weeks time, anybody who offends twice can have their benefit suspended for 13 weeks.
97. Wow. Big deal, if it is a fraudulent claim.
(Ms Lomax) If you are a person who is living pretty close to the breadline
98. We are not talking about people living close to the breadline, we are talking about people deliberately committing fraud.
(Ms Lomax) Seventy per cent of fraud cases involve failure to report changes of circumstances. There is casual fraud and there is deliberate, organised fraud and you need to distinguish between the two.
99. I asked that at the beginning and it seemed to me at the beginning you made it clear that a large proportion of this was deliberate fraud. That was why I asked at the very beginning what the division was.
(Ms Lomax) I should like to draw a distinction between people fiddling and committing casual fraud by failing to report changes in circumstances and organised gangs going in for multiple identities and instrument of payment fraud. There really is a spectrum here and to fail to recognise it is to misunderstand the nature of the problem.