Social Security Fraud Bill [Lords]

Public Bill Committee, 9 April 2001.

Standing Committee A

Social Security Fraud Bill [Lords]

John Maxton (Labour, Glasgow Cathcart)

It may be convenient for members of the Committee if I inform them that the hon. Member for Beckenham (Mrs. Lait) has suggested that, when we discuss clause 7, amendments Nos. 51 and 52 be taken together. Clause 5 Exchange of information with overseas authorities

Clause 5 - Exchange of information with overseas authorities

Jacqui Lait (Conservative, Beckenham)

I beg to move amendment No. 45, in page 9, line 2, leave out

`it appears to the Secretary of State'

and insert

`the Secretary of State is satisfied'.

John Maxton (Labour, Glasgow Cathcart)

With this it will be convenient to take amendment No. 46, in page 9, line 37, leave out

`it appears to the Department'

and insert

`the Department is satisfied'.

Jacqui Lait (Conservative, Beckenham)

The two amendments would make changes similar to those that have been made previously, although they concern information exchanged with overseas authorities. Throughout our proceedings, we have suggested that tightening up some wording may be beneficial to the Government. The amendments would remove some conditionality and ensure that the Secretary of State and the Department were satisfied with the arrangements.

There could be a need to exchange information with overseas authorities and we would not wish to prevent that. However, we want to ensure that the information that is sought, given or used by either authority is properly guarded. I am sure that Under-Secretary will assure us that the European Union and the United States of America have proper systems that already satisfy the Department and the Secretary of State, but may I quietly suggest that one or two EU states may not have in their systems the degree of safety that we may expect from others that are used to computers.

We must also consider closely the well-known issue of benefit fraud--one or two serious cases have involved people from Nigeria. I hope that, sooner rather than later, many central European countries will join the EU, which leads us to ask whether they will have systems that the Department is satisfied are sufficiently robust. Many constituencies, including mine, have experienced an influx of asylum seekers and refugees from the Balkan states. In due course, when the area has settled down, which we hope devoutly that it will, many such people will return, but they may have been given national insurance numbers and have access to our benefit system, which, in certain hands, could be used improperly.

At the same time, those who are legitimate, as I assume the bulk of them are, would not have to cope with information that was used improperly either in their original country or in this country. Will the Under-Secretary give us some idea of the criteria and assure us that the Secretary of State and the Department will be most rigorous in ensuring that the systems will not be open to abuse? Will she publish lists of countries that the Department believes to have sufficiently and insufficiently rigorous systems? It would be useful if she were to tell us what criteria the Department would use to satisfy itself that the safeguards in the Bill have been met by those countries.

Angela Eagle (Labour, Wallasey)

I hope that I can satisfy the hon. Lady that the safeguards are adequate to protect information and our citizens' rights in relation to exchange of information.

The Secretary of State may supply information only when it appears to him that arrangements are in place for the legal transfer of information and when it appears that the other country has adequate safeguards against the abuse of information provided to it by the Secretary of State. The amendment suggests leaving out the words

``it appears to the Secretary of State''

and replacing them with

``the Secretary of State is satisfied''.

A similar change is suggested with regard to Northern Ireland.

In reality, however, the amendments would have no effect; they would achieve the same purpose as the Bill. I hope to persuade the hon. Lady that the Bill does what her amendments suggest that it should. For the Secretary of State to be satisfied that something is so, it must appear to him that it is so. Therefore, for a Secretary of State to be satisfied that a country has adequate safeguards against the abuse of information, it must appear to him that those safeguards are adequate. The amendments would not add anything.

I shall explain to the hon. Lady how we envisage the operation of the Secretary of State's decision-making process under the clause. There is a European convention on human rights and a European Union data protection directive, which govern what can be done with information held by a Government about a person and also safeguard that person's privacy. For it to appear to a Secretary of State that the other country has adequate safeguards against abuse, he must therefore be satisfied that the other country is subject to the ECHR and the directive or to similar enactments in other countries. We would also consider other factors such as whether the other country has a stable, democratic system of government. We would not transfer information to a police state or a country with a bad human rights record, where such information might be abused.

The Secretary of State would be under a duty to act reasonably at all times, and would be subject to judicial review if he did not do so. A decision that it appeared to him that there were adequate safeguards against abuse would therefore have to be reasonable. If it was not, the decision would be open to judicial review and could be set aside if the review was successful. If the Secretary of State transferred information unreasonably—for instance, to a country that did not have adequate safeguards against abuse—he would have acted unlawfully. Therefore, his action might also breach the Data Protection Act 1998. If so, it would be open to challenge by the Information Commissioner.

The Information Commissioner could serve the Department with an enforcement notice informing it that it would have to stop sending information to the country causing concern. If it failed to comply with that notice, the Information Commissioner could serve it with a further enforcement notice to stop it processing data altogether. I hope that the Committee agrees that that would be a significant deterrent against wrongdoing by the Department. Clearly, it would have no desire to become involved in wrongdoing or to transfer information to countries that did not meet the criteria.

Amendment No. 46 deals with Northern Ireland, to which everything that I have said about amendment No. 45 applies. I hope that those assurances satisfy the hon. Lady and that she will withdraw her amendment.

Jacqui Lait (Conservative, Beckenham)

I beg to differ on the definition of ``appears'' and ``is satisfied''. Indeed, the Under-Secretary said that a decision would have to be reasonable, but did not qualify that through the use of ``appears''. We are concerned about the conditionality of that. Although I agree that all the countries in the EU are governed by the European convention on human rights and the data protection directive, I am also convinced that some computer systems are not as robust as they might be, and that could lead to abuse in some EU countries. That is a concern, but I hope and expect that such systems will become more robust.

The Under-Secretary did not address the admittance of central and eastern European countries to the EU. Taking into account their proposed transition periods, is the Secretary of State satisfied that, when admitted, such countries will have electronic infrastructures that are sufficiently sophisticated satisfactorily to exchange information with our Government? I shall refrain from asking related questions about the Balkan issue and housing benefit frauds committed by Nigerians, to which I referred earlier. I am not persuaded by the arguments concerning grammar and the use of ``appears''.

Angela Eagle (Labour, Wallasey)

I have been advised that, as the law stands and given that the Secretary of State must always act reasonably, there is no practical difference between the phrase proposed in the amendment and the wording of the Bill, although the hon. Lady is not obliged to agree with that advice.

The Secretary of State would not reach an agreement with a country unless he or she were satisfied that it had in place robust protections for citizens and democratic systems. I have mentioned those criteria. However, I cannot give the hon. Lady a list of countries that would meet them; such matters must be decided case by case. The only country with which we have a bilateral agreement is Ireland, as our social security systems are similar, and the citizens of both countries can travel freely between the three jurisdictions--the Republic of Ireland and the United Kingdom, including Northern Ireland as a separate jurisdiction.

I cannot give a view as to whether we would immediately come to an arrangement concerning exchange of information with any particular country in eastern Europe or the Balkans, but I hope that I have enlightened the hon. Lady about the criteria that would be used to decide such matters. Arrangements would not be considered with countries that have bad human rights records and inadequate protections for the privacy of the individual, or which lack agreements in law that largely conform to the European convention on human rights and the data protection legislation, which are subscribed to by the UK and the rest of the EU.

I am not sure what the hon. Lady has in mind when she refers to computer systems in the EU that are not sufficiently robust. There must be adequate protection and recourse in law for individuals who might be subject to some form of abuse with regard to the exchange of information between countries. Those are the criteria, which I set out to reassure her about the clause's intention.

Jacqui Lait (Conservative, Beckenham)

The entire matter is unravelling before my eyes. I hoped that I would receive answers, but the Under-Secretary's comments are generating new questions in my mind. I am fascinated that we have a bilateral agreement with Ireland, given that it is a member of the EU and that, theoretically, under the criteria that she has explained, sufficient protections are in place.

With regard to potential difficulties with countries such as Nigeria, the Under-Secretary said that information would not be exchanged with such countries if their systems were not sufficiently robust. However, we might need information from countries such as Nigeria.

The Under-Secretary discussed my comments about robust computer systems. I had in mind mainly whether the electronic safeguards would be sufficient to protect people from hacking, to use the vernacular. If the systems were not sufficiently robust, the information could be available to people on a much wider basis and could corrupt our systems, despite the data protection legislation and the work of the Information Commissioner.

Those are just a few of my thoughts. I am fascinated that m'learned friends cannot see a difference between ``it appears'' and the conditionality implied in that phrase, and ``is satisfied''. I am interested in the Under-Secretary's response, but perhaps it will be best if I take the matter away for more detailed consideration. That extra time might allow her to produce the list that she implied that she would be able to produce. In a couple of weeks, when we consider the Bill on Report, we may return to the matter.

Angela Eagle (Labour, Wallasey)

I am sorry if I have given the hon. Lady the wrong impression. I said that each country would have to be dealt with case by case, so I cannot provide her with a list of countries that would qualify or that we would want to involve in the information exchange immediately. Under the provisions, we could not exchange information with a country until it had legislated to give us its information. That country's legislating would allow us to check that it was introducing adequate controls and safeguards for the use and collection in that country of the information that it would hand over to us.

The clause is enabling. However, that does not mean that, from the day after the Bill receives Royal Assent, we shall be able to dash out and exchange information everywhere immediately. We intend matters to develop bilaterally from country to country as we pick up particular problems in our anti-fraud work.

Many of the issues raised relate to identity fraud and to non-EU citizens posing as EU citizens to access benefits under EU rules agreed throughout the EU. Those are the two sorts of fraud that we are trying to discover and tackle, and we shall do so bilaterally, within the terms of the clause. We shall not take a scattergun approach. As matters develop, agreements reached, such as that with Ireland, will specify the parameters under which information will be exchanged and help will be used. As part of that, we shall check, as is the legal duty of the Secretary of State under the clause, that adequate protection of the sort that the hon. Lady referred to is provided for people whose information may be included in such exchanges. I hope that that reassurance answers a few questions, at least.

Jacqui Lait (Conservative, Beckenham)

The best thing for me to do is withdraw the amendment and, perhaps, return to the matter on Report.

Amendment, by leave, withdrawn.

Jacqui Lait (Conservative, Beckenham)

I beg to move amendment No. 47, in page 9, line 17, leave out 'reasonable' and insert 'necessary'.

John Maxton (Labour, Glasgow Cathcart)

With this it will be convenient to take the following amendments: No. 48, in page 9, line 19, leave out 'or impliedly'.

No. 49, in page 10, line 6, leave out 'reasonable' and insert 'necessary'.

No. 50, in page 10, line 8, leave out 'or impliedly'.

Jacqui Lait (Conservative, Beckenham)

I was all but determined to table the amendments simply to remove that ghastly word ``impliedly''. I should have thought that we could use ``by implication'' or ``is implied'' or some other term--not ``impliedly'', which jars slightly. However, the amendment carries more weight than merely trying to change a rather nasty word.

When discussing the previous group, we tried to remove conditionality. In this case, we are trying to remove subjective judgment, but the arguments are similar to our previous ones. The amendment would replace ``reasonable'' with ``necessary'' and would delete ``or impliedly'' to try to ensure that specific levels of security were enforced in the exchange.

The argument is similar to those that we used when discussing previous clauses, as it relates to fishing expeditions and officers having a gut feeling about someone, as opposed to being in possession of established information. Some people get into a routine of asking the same six questions without regard to whether they are relevant. The argument is familiar, therefore, and I hope that either Govt Front Bencher will have a word with the drafters and even if they want to retain the idea of implication, they might at least change the word. Will the Under-Secretary also tell us why the word ``reasonable'' is used rather than ``necessary''?

Angela Eagle (Labour, Wallasey)

Although the amendment deals with the word ``necessary'', we feel that it is unnecessary. If the Secretary of State failed to take a necessary step, it would be difficult to understand how he might be said to have acted reasonably. As the hon. Lady knows, the Secretary of State is under the compunction to act reasonably at all times in all those matters. Therefore, ``necessary'' and ``reasonable'' amount to the same thing in this context.

Our memorandum of understanding with the Government of the Republic of Ireland states that information given us by that country may be used for social security purposes alone. That means that we could not provide it to the Inland Revenue for tax purposes. Under the clause, the Secretary of State would have to take all reasonable steps to ensure that information provided to him by the Republic of Ireland was used only for social security purposes. For example, he must allow only those staff to control the information who are fully informed of what they may do with it. The hon. Lady's amendment and the wording in the Bill are similar for those purposes.

As I am not a lawyer, I have a great deal of sympathy with the hon. Lady's comments on seemingly cumbersome words such as ``impliedly''. However, lawyers tell me that, over the years, those words acquire a meaning that all lawyers understand in the context of Acts of Parliament and Bills before Parliament. Although she is worried about the cumbersome and alienating nature of the prose, ``impliedly'' achieves something in the text. If we did not keep it, we would have to list every possible purpose in the agreements reached with other countries, which would almost certainly result in their being revisited often. Fraud, international or otherwise, evolves and changes over time. As one loophole closes, others may open and other ways of defrauding the system are created. The language we use in our Acts of Parliament seeks to put a stop to such practices and to keep up with that evolution.

Due to the bilateral nature of the information exchanges, agreements known as memorandums of understanding will be reached between two countries and will list the purposes for which the information will be exchanged. Those will be public documents—they will not be secret in any way. If we did not use ``impliedly'' in the primary legislation, we would need to list in each bilateral arrangement every possible use of the information.

The term ``impliedly'' allows us some flexibility. I give the hon. Lady an example, which will, I hope, enlighten her, although I had to read it a couple of times before it enlightened me. In our memorandum of understanding with Ireland, we state that information may be used for social security purposes, but imply social assistance purposes, too. Social security includes social insurance or contributory benefits, whereas social assistance includes non-contributory or means-tested benefits. In the United Kingdom, we do not differentiate in that way, but use the term ``social security'' to cover both areas. Other countries make the distinction.

Keeping the term ``impliedly'' will allow flexibility to accommodate the different terminologies and different ways that countries have of administering their social security systems. Otherwise, we would require a list of all possible terminologies in the primary legislation. The term will allow the flexibility to fit particular arrangements with different countries' social security systems. That will give our memorandum of understanding with another country a greater chance of catching as much fraud as possible, in the context in which the arrangement is agreed.

I hope that the hon. Member for Beckenham, despite her dislike of the phrase, understands that such flexibility is important in an evolving fight against social security fraud and that she will withdraw her amendment.

Jacqui Lait (Conservative, Beckenham)

The Under-Secretary may or may not believe this, but I now understand the meaning of ``impliedly'', although that does not mean that I like the word. I have some sympathy with it, but I wish that we could simplify the wording in the legislation so that we do not have to go through this process. It is ironic that the lawyers understand the meaning of ``impliedly'', but do not believe that there is a difference between conditionality and the word ``appears''. Never mind.

As I understand that rather horrible word, and now that its precise meaning is on the record, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.

Clause 6 ordered to stand part of the Bill.

Clause 7 - Loss of benefit for commission of benefit offences

Jacqui Lait (Conservative, Beckenham)

I beg to move amendment No. 51, in page 11, line 35, after 'proceedings', insert

`where benefit is in payment or, if benefit is not in payment, when the entitlement first arises,'.

John Maxton (Labour, Glasgow Cathcart)

With this it will be convenient to take amendment No. 52, in page 11, line 37, at end insert—

`(6A) The Secretary of State shall provide for a central record to be maintained of

(a) all convictions for benefit offences

(b) all subsequent periods of disqualification of sanctionable benefits

(6B) Such records shall also include reference to the National Insurance Number held by the individual concerned.'.

Jacqui Lait (Conservative, Beckenham)

I thought that considering the amendments together would be easier for the Committee, because amendment No. 52 is consequential on amendment No. 51.

The purpose of amendment No. 51 is to include the sanction implied in page 29, paragraph 106 of the explanatory notes to the Bill, which state:

``The offence for which the second set of proceedings has been brought must occur within a period of three years of the date on which the offender was convicted for the first offence.''

If such a hazard exists, it should be dealt with by the Bill. If the two-strikes provision is to be effective as a deterrent, it must be clearly enforced.

Amendment No. 52 sets out the measures that should be consequent on amendment No. 51. The most important factor is the use of fraudulent national insurance numbers, which are known to most of us as NINOs. That matter is dealt with in the second part of amendment No. 52, which would also provide for the keeping of a clear and precise record of offences that would enable an enforcing officer at the Benefits Agency or the Department to ensure that the claimant served any period of disqualification. The loss of benefit provision must be properly enforced to provide the deterrent that the Government seek.

Amendment No. 52 reflects the concern that we all have about the large number of national insurance numbers in operation. There are more than 81 million such numbers, and the Minister of State has helped us by breaking down where they come from. We understand that every person in the country, whether they work or not, has a national insurance number. Therefore, that accounts for about 60 million. Roughly 12 million NINOs remain in existence that belong to people who have died whose estates may affect other people's entitlement to benefit. That makes roughly 72 million, so about 9 million are going begging.

In a reply to a question about NINOs asked by the right hon. Member for Birkenhead (Mr. Field), the Minister of State said that

``only in 11 cases has it been established that the account was deliberately created in order to establish a false identity and fraudulently gain access to benefits.''—[Official Report, 13 March 2000; Vol. 346, c. 53W.]

The Balham experiment, which showed that there were about 220,000 mismatched numbers, resulted in about 166 arrests and six deportations for identity fraud. In a debate on the Bill in the other place, Baroness Hollis said that extending the experiment to neighbouring Benefits Agency offices in 1999 resulted in a further 46 arrests. The Balham experiment suggests that the problem with NINOs is much larger than the Department found when it made a computer check. I understand that the computer check is being run again. Is the Minister of State planning to extrapolate the Balham experiment to other benefit offices so that we can get a feel of whether the 9 million missing NINOs is made up of the 220,000 mismatched numbers multiplied by the number of benefit agency checks required? That may give us some idea of what percentage of those 9 million NINOs are fraudulent and, therefore, how tough the Department will need to be to sort out the national insurance numbers system.

Taking the two amendments together has made it easier for the Committee to debate the problem of benefit fraud. I look forward to the Minister of State's response.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I think that I can satisfy the hon. Lady--I cannot accept the amendment, but I can do the next best thing. I shall not read my speaking notes, but shall use the pre-note. I am told that amendment No. 52 would have no effect; what it states is precisely what the Department intends to do. Regulations will be made once the Bill is enacted. I shall not speak about the technicalities of amendment No. 51. The argument is flawed, but that is inevitable because of the way in which such measures are drafted. However, such a measure is not needed.

We intend to prescribe in regulations made under the powers in clause 7(6) that the disqualification period will start either within 28 days of the second conviction if, at that point, the person is entitled to a sanctionable benefit or, if the offender is not entitled to a sanctionable benefit at the time of the second conviction, when he first becomes entitled to a sanctionable benefit within three years.

I shall try to be as brief as I can—I could be a lot more wordy if I used my speaking notes. We can deal with the points raised by the hon. Member for Beckenham. First, I have outlined how we intend to operate. Secondly, that will be made clear in regulations. There will be no doubt about when the ``two strikes and you're out'' provision will be used, and I repeat that it cannot be used unless there has been a second conviction. The Department will not operate on the basis of punches; it will require convictions in a court of law before the ``two strikes and you're out'' sanctions can be applied.

There are not 9 million missing NINOs or missing people. Without the benefit of my notes, I can tell the hon. Lady that the figure of 60 million, to which she referred, plus the 12.5 million numbers relating to deceased people, which are kept on the system, make up the 72.5 million. That leaves another 9 million to make up the 81 million. Since the national insurance system started, anyone who has worked here or who was born here and left the country permanently has had a NINO. Those numbers still exist.

Anyone who came to the country for a couple of weeks' fruit picking in East Anglia or in Scotland was allocated a NINO. They might never come back to the country, but they have been given a number. Millions of people have left the country since 1948 and, over those 50 years, others came to work here temporarily. They were given a NINO, but they may have left and might not come back. They amount to a substantial number of people. I am not saying that that represents the grand total, but it is substantial. There are not 9 million missing people or missing NINOs.

As to data cleansing, on Second Reading I said that in the last year for which we have figures, we cleansed and removed more NINOs than we did in the previous few years combined. However, I do not have the exact number. During the cleansing operations, we have found instances of either one person with two NINOs or two people sharing the same one. Such things happen, perhaps because an employer supplies the wrong number or because of human error during data inputting, but discovering such discrepancies is part of the cleansing operation; then we can upgrade the system.

The NINO system is an actively managed operation. It is not a static list of 80-odd million numbers, locked away in the Department's computers and left there. Where there are doubts or suspicions, flags are placed on numbers so that if they are ever activated again, the system will show that that has happened and that we need to investigate why and by whom the number is being used.

The hon. Member for Beckenham referred to the Balham project, which was a pilot. We have put it on record that the Balham techniques of in-depth analysis and more systematic questioning about NINOs are being rolled out across the country, virtually as we speak. They will be fully rolled out by October, so there will be designated people across the country trained in those techniques. I have sat behind an interviewer at Balham who was going through the process and I know that we shall apply what we learned at Balham across the country. That is not to say that we can in any way extrapolate the Balham arrests and deportations. However, we can say that those who were interviewed in Balham about national insurance numbers were spoken to on the basis that they had a job offer, but did not have a NINO.

That situation can apply only under a peculiar set of circumstances. It does not occur in the case of 16-year-olds born in this country, because their NINOs are activated automatically. In the light of the Balham project, the issue of national insurance numbers will be a much more tightly controlled and systematic operation. The fruits of that will become clear as the months pass.

I have been as brief as possible, and I hope that I have answered the hon. Lady's points about the amendments and about the Balham project. However, I am happy to answer any other question that she has.

Jacqui Lait (Conservative, Beckenham)

I am grateful to the right hon. Gentleman for saying that our amendment was correct. It seems unfair that it should not be included in the Bill, but no doubt a version of it will be included in the regulations. Will those regulations be subject to the affirmative resolution procedure? If so, I am sure that we will meet in this Committee Room or another to thrash out the question in due course.

It is nice to know that we are on the right track. I am sure that the right hon. Gentleman or his successor will keep us and the country abreast of progress on the cleansing of the NINO records. That is crucial—I have constituency cases that are affected by the problem.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I can confirm that the regulations will be subject to the affirmative resolution procedure.

Jacqui Lait (Conservative, Beckenham)

That is the best news that we have heard today. On that basis, I beg to ask to leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Jacqui Lait (Conservative, Beckenham)

I beg to move amendment No. 53, in page 11, line 44, at end insert—

`; likewise any third party either informed of the restriction or contacted as part of the investigatory process shall be notified of the quashing of the conviction.'.

John Maxton (Labour, Glasgow Cathcart)

With this it will be convenient to take amendment No. 55, in clause 9, page 15, line 17, at end insert—

`; likewise, any third party either informed of the restriction or contacted as part of the investigatory process shall be notified of the quashing of the conviction.'.

Jacqui Lait (Conservative, Beckenham)

The amendment is designed to provide a system of redress for a claimant whose benefit is withdrawn. We acknowledge that such a system already exists, under which, when a conviction that has resulted in the restriction of benefit is quashed, all payments and adjustments are made to the claimant as though the conviction had not occurred. However, we are concerned about those who are subject to an investigation that is found to have been ill advised and unnecessary. Such abortive investigations have an effect. Most of us will know of people who have been turned down for credit or hire purchase because the credit reference agency did not have sufficient information. That can happen because the person is not on the electoral register. It happened to me when I lived in the city of London; the city of London electoral register was not on the credit reference agency's computer and I was turned down for credit. Luckily, I could use a cheque, but not everybody can do that.

If an investigation proves to be unfounded and is abandoned, there may still be traces—footprints—on a person's record showing that such an investigation has taken place. We want to ensure that there are safeguards for people who find themselves in that position. I should be grateful if the Under-Secretary would reassure the Committee on that.

Angela Eagle (Labour, Wallasey)

I hope that I can reassure the hon. Lady. The clause is designed to ensure that any money resulting from withdrawal or reduction of a claimant's benefit as a result of a two-strikes sanction is repaid if one of the convictions is quashed, which is right and fair. The same principle is applied to other benefit sanctions.

Accepting the amendments would mean that the Department would have to inform any third party contacted over the course of a fraud investigation, who may have been notified of the imposition of a sanction, that the conviction had been subsequently quashed on appeal. That would mean that any individual, agency, employer or Government organisation—irrespective of the extent of their involvement in the investigation—would have to be notified of the quashing of the conviction whether they knew the outcome of the original investigation or not.

It has never been normal practice to go back through an investigation file and inform third parties either of the result of an investigation in which they may have been involved, or whether a sanction has been imposed. The process that the hon. Member for Beckenham suggests should be adopted would be cumbersome and expensive. I hope that the key thing she is getting at with the amendment is that any quashed conviction ought to result in the repayment of benefit rather than a mass declaration of innocence to all the people or agencies that may have been involved in the initial investigation.

Mrs. Lait rose—

Angela Eagle (Labour, Wallasey)

The hon. Lady is champing at the bit, so I shall give way.

Jacqui Lait (Conservative, Beckenham)

I am talking not about people who have been convicted, but people who have been investigated and found to have no case to answer.

Angela Eagle (Labour, Wallasey)

I thank the hon. Lady for clarifying that. I do not know whether it will reassure her—I hope that it will—to know that we are making arrangements with credit reference agencies so that footprints will not be left in any records and credit reference agencies will not record criminal convictions. No footprints should be left by any of our investigations. I hope that that will persuade the hon. Lady that her worries on this point are groundless, and that she will consider withdrawing the amendment.

Jacqui Lait (Conservative, Beckenham)

I shall be happy to withdraw if the Under-Secretary assures me that if evidence emerges of any footprints remaining—not just with credit reference agencies but with utilities, banks, insurance companies or any of the other organisations that the Department will be able to contact to check people's bona fides—the Government will take immediate steps to ensure that they are eliminated and that the necessary qualifications are placed on people's records.

Angela Eagle (Labour, Wallasey)

It is not our aim to leave footprints and place innocent people in difficulties with their credit reference agencies or in other business transactions. That understanding will be an important part of the agreement when we share data. We do not intend the Bill to result in innocent people being put on a blacklist because of information sharing, whether that involves utility files—which the hon. Lady should remember contain addresses, not names—or any others. If anything were to go wrong with our proposal, it would be incumbent on those involved in the information sharing to rectify matters as quickly as possible, but we hope that such errors will be preventable.

Jacqui Lait (Conservative, Beckenham)

I am grateful for the Under-Secretary's reassurances, and I accept them. I am glad to have it on the record that the Government will take instant action if anything is proved to have gone wrong, and I hope that in such an event the Under-Secretary would share the information with the House. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Jacqui Lait (Conservative, Beckenham)

I beg to move amendment No. 54, in page 12, line 17, leave out `(ii) working families' tax credit'.

John Maxton (Labour, Glasgow Cathcart)

With this it will be convenient to take amendment No. 44, in page 12, line 19, leave out from `pay;' to end of line 20.

Jacqui Lait (Conservative, Beckenham)

The amendment is an attempt to include working families tax credit as a payment which, if the subject of an offence, could be withdrawn or lost. We have already discussed working families tax credit as a Treasury issue, and the fact that the authorised officer is at a higher level, under the Taxes Management Act 1970, than the relevant officer in the Department of Social Security. However, all the international evidence is that tax credit fraud is quite prevalent and that there are potential problems.

Steve Webb (Liberal Democrat, Northavon)

Amendment No. 44 is intended to tease out why the Department has chosen to exclude retirement pension from the list of disqualifying benefits but to include war pension. When the Bill was debated in another place, three Lords expressed concern, on behalf of war pensioners and their organisations, about the inclusion of war pension on the list. When Baroness Hollis responded to the debate, she said:

``So far as I am aware, we have detected only six frauds during the past six months involving war pensions.''—[Official Report, House of Lords, 16 January 2001; Vol. 620, c. 1091.]

Given the scale of that fraud, one assumes that there were no repeat occurrences.

This part of the Bill will probably have no effect, so why should it not be taken out? It should be removed, because to leave it in would offend the war pensioner community. I cannot find the exact reference, but I am sure that, when challenged as to why retirement pension was not included on the list, Baroness Hollis said, ``Because we do not think there is a problem of fraud with retirement pensions.'' Why exclude retirement pension but not war pension?

The Minister of State, in responding to the Second Reading debate, seemed to imply that the logic of my argument required that retirement pension should be included. As he well knew, that was not the point that I was making. I was suggesting that if there is a good case for excluding retirement pension, because there is practically no evidence of fraud, there is a good case for excluding war pension, too. It is on the record that the number of cases of war pension fraud is negligible, so the provision is unlikely to have any practical effect, except that of giving offence to Britain's war pensioners. On that basis, I hope that the Government will be sympathetic to the amendment.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I am sorry if I misunderstood the hon. Gentleman on Second Reading. I do not have a window into people's minds, and I naturally assumed that he was arguing the other way around.

It may be repetitive, but it is important to reiterate what was said in the House of Lords. There is a distinction between retirement pension and war pension, and between retirement pension and many other benefits. It is almost impossible for someone to commit fraud with with regard to retirement pension. As long as people are the right age, are who they say they are, and have paid their national insurance contributions, retirement pension is theirs by right. There are no qualifying conditions. It is simple—date of birth and identity can be checked easily.

Fraud can occur when the person entitled to the retirement pension no longer requires it, but someone else continues to collect it. Sometimes the centenary lady at the DSS spots that; sometimes it goes on for a long time. In such cases, the fraud is committed by someone entirely different, not by the benefit claimant. Retirement pension fraud committed by benefit claimants themselves is almost non-existent. That is one reason for not including retirement pension in the Bill.

As the hon. Gentleman told us, Baroness Hollis said that in the past six months only six frauds involving war pensions had been detected. The level of war pension fraud has never been measured. Information is available only on the frauds detected. No benefit review, like those of jobseeker's allowance and other benefits, has been conducted.

The hon. Gentleman has asked me to distinguish between war pension and retirement pension. Unlike retirement pension, war pension has areas in which fraud can occur. This is most likely in five areas. With treatment allowance, false claims about attendance for treatment can be made. Fraud in respect of the allowance for the lowered standard of occupation takes the form of a failure to declare an increase in earnings. There could also be a failure to declare employment when an unemployability supplement was being paid. False statements could be made about walking ability when war pensioner's mobility supplement was being paid. There could be a failure to declare co-habitation when war widow's pension was being paid.

Rigid conditions covering age, identity and national insurance contributions apply to retirement pension, but other factors apply to war pension. I am not casting a slur on war pensioners, but fraud has occurred, and I am not aware of any fraud concerning retirement pension, except when it is committed not by the pensioner, but by someone else who has collected the pension after the pensioner's death.

There is a difference between the two pensions. Conditions covering war pension and some of its supplements do not cover retirement pension. I am referring to the basic retirement pension, not the add-ons, the minimum income guarantee and so on, so the scope for fraud almost non-existent--I am not daft enough to say that it is totally non-existent. On the other hand, there is scope for fraud in war pension.

Steve Webb (Liberal Democrat, Northavon)

I accept the Minister of State's point that war pension is more complicated and that there is more scope for abuse, but the provision would apply only when fraud had been confirmed—and there have been only six cases in six months. The likelihood of a conviction happening twice is probably nil. The potential for fraud does not matter, because the provision would be activated only if fraud was detected. The Minister's figures show that it was detected only half a dozen times, and the chance of it happening twice must be next to nil, so why not remove the provision from the Bill?

Jeff Rooker (Labour, Birmingham, Perry Barr)

It is even worse than that. I may be undermining my case, but I want to be as open and frank as possible: six cases of fraud were detected, but there were no prosecutions. Judgments were made on the circumstances of each case, and no one was prosecuted. It can be argued that the provision should be removed, but I have listed five factors with potential for fraud, which show that there is a great difference between war pension and retirement pension, so it is sensible to leave war pension on the list, but not to include retirement pension.

This is not a question of promising or planning to change policy on prosecutions. There is no policy not to prosecute; there happened to be no prosecutions, but that was not a decision for Ministers. War pension includes factors--mobility, earnings, and cohabitation, for example--in connection with which fraud could occur, but those factors do not apply to retirement pension, and we do not want to wipe out the sanction, so it is sensible to leave war pension on the list. We constantly review legislation, and the House will also examine what happens in the fullness of time, but that is for the future, not now. I have explained the difference between retirement pension and war pension, and there are good grounds for leaving war pension on the list.

The hon. Member for Beckenham did not press the point about the working families tax credit, which we debated at an earlier sitting. It is available only to people who are working at least 16 hours a week, and replaces family credit. If a sanction were applied--I am not saying that we have considered that, and if we did, it would be a matter for the Inland Revenue, not the Department of Social Security--it might hit the children and other members of the claimant's family, and we have sought not to do that in respect of other sanctions. It might put a person's employment at risk, which is not what the working families tax credit is intended to do. The idea is to make work pay, and to get people off benefits and into work. The working families tax credit was designed to ensure that benefits paid in respect of a child or a partner are not sanctioned.

As I have said, tax credit fraud is a matter for the Government as a whole, and for the Inland Revenue and the Treasury in particular. In saying that, I am not opting out; the Government are actively interested in that issue. The credit—I almost said the benefit, but I stopped myself—is new, and time will tell how we will ensure that payment is made to the correct people at the appropriate rate, and prevent fraud in the system.

Perhaps I will never be able to convince hon. Members about war pensions—an issue with an emotive aspect that I understand and respect. If I were sitting where the hon. Member for Northavon is sitting, I would be making the same case that he is making. However, having examined the matter I believe that there is a genuine case for including war pensions in the list, and I am quite comfortable with its inclusion. In terms of the rules, there is a distinction to be drawn between a war pension and a retirement pension. I am not simply spouting that line because I am taking the Queen's shilling, as it were. The distinction between a war pension and a retirement pension justifies including the former in the list, and it certainly justifies excluding the latter.

Steve Webb (Liberal Democrat, Northavon)

I am grateful to the Minister for his open response, which, as he hinted, has in fact strengthened my argument. He is arguing that a retirement pension and a war pension are different forms of benefit, and I fully accept that. However, the practical question is whether they are different in terms of fraud convictions, because it is only such convictions that will trigger the provisions in the Bill. He said that there had been no war pension fraud convictions in the past six months, but seemed unsure whether there had been any retirement pension fraud convictions involving the claimant.

Jeff Rooker (Labour, Birmingham, Perry Barr)

There are none that we are aware of.

Steve Webb (Liberal Democrat, Northavon)

If that is so, the two benefits have that in common. Given that the war pension is more complicated, it could in theory give rise to prosecutions, but the reality is that in the past six months it has not.

Jeff Rooker (Labour, Birmingham, Perry Barr)

May I make one further point? We are not making a big issue of the ``two strikes and you're out'' principle. We have made it clear that it is a deterrent, and that we do not expect many cases to arise. Off the top of my head, I think that of the millions of claims made, we anticipate only 500 cases a year. Rather than dwelling on the huge problems that exist, we are trying to send a signal that will persuade people to change their behaviour. We accepted the recommendation, laid out in the Grabiner report, that such a signal would be useful and would act as a deterrent. As I said, we do not expect thousands of cases, but it is important to make clear the existence of a deterrent. If no prosecutions arise, that will be the big success. We want not to sanction people but to prevent them from committing benefit fraud.

Steve Webb (Liberal Democrat, Northavon)

The Minister says that the point of the provision is to send a signal, but to whom will it be sent? We are discussing war pensioners, and it is the suggestion that serial fraud among war pensioners is a real issue that has given offence. The provision will send the signal to war pensioners and their organisations that, in the opinion of the DSS, serial war pension fraud is a real, or potential, issue—but the evidence does not bear that out. There has been not a single conviction in the past six months, let alone a repeat one.

The Minister will be unsurprised to hear that I do not find his response convincing—and perhaps he himself does not. I am not sure whether I am at liberty to divide the Committee on this issue, but I hope that the House will be able to return to it in future.

Jacqui Lait (Conservative, Beckenham)

We have debated the working families tax credit before, so I shall be happy to withdraw the amendment.

John Maxton (Labour, Glasgow Cathcart)

The hon. Gentleman could press amendment No. 44 if he wished to, but I take it that he does not.

Mr. Webb indicated assent.

Jacqui Lait (Conservative, Beckenham)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Peter Atkinson (Conservative, Hexham)

I want to use the discussion of clause 7 as an excuse to ask the Minister a question, which may also apply to clause 8. In a decision to reduce benefits, what discretion is available to Benefits Agency staff? In particular, jobseeker's allowance can be reduced rather than removed entirely, which, as mentioned in the explanatory notes, passports the claimant back on to housing benefit and council tax rebate. I want to discover whether discretion is involved in that process. Does it involve withdrawing one of the disqualifying benefits? I understand that maternity allowance cannot be withdrawn from a claimant. Are there circumstances in which certain allowances can be withdrawn? I ask that because there are many serial offenders—some in well organised criminal gangs—who commit fraud. It would be nonsense for such people, who have prosperous lifestyles and are claiming everything that they can get, including housing benefit and maternity allowance, to be allowed to keep those allowances when they had been convicted of a serious fraud offence. Will the hands of Benefits Agency staff be tied by the regulations?

Steve Webb (Liberal Democrat, Northavon)

If there is one clause that we would remove from the Bill, it is this one. It allows the Department to sanction someone who twice has been convicted of benefit fraud, and people can be sanctioned on benefits such as the means-tested safety net guaranteeing the basic minimum income. We are not arguing about whether someone who has committed fraud twice is in the wrong, but about whether the punishment under clause 7 is appropriate. In all cases of punishment, we must consider the concept of appropriateness and whether we have the right level of punishment for the offence. If society deems that someone has committed a serious offence, they are deprived of their liberty; we do not deprive them of food, clothing and shelter, because we do not believe that is an appropriate punishment even for the most serious crimes. Even murderers are fed, housed and clothed. Our contention is that the consequences of clause 7 would leave some of those thereby sanctioned below the poverty line and potentially unable to feed, clothe or shelter themselves. That is why we object to the clause.

I recently raised that issue with the Department during a Committee on a statutory instrument. The Under-Secretary responded by saying that the breach of community service orders was another action for which the Government intend to introduce benefit sanctions. My noble Friends in the other place, talking about the Government's strategy of sanctions, asked about the lack of research undertaken by the Department. There has also been a failure to take account of the limited research that has been undertaken. When I challenged the Under-Secretary about that research, she prevaricated until she was informed that a research report had been published in November 1998.

Angela Eagle (Labour, Wallasey)

I did not prevaricate; I had the research document in front of me.

Steve Webb (Liberal Democrat, Northavon)

I gained the impression that the hon. Lady did not have the document then, but I apologise if I was wrong.

When the Department was challenged to produce evidence of the effect of sanctions on claimants, it cited a piece of research two and a half years old. Naturally enough, I have read that report, which refers to a sample of 30 claimants. It is in the nature of qualitative research that samples are not huge, but the Department is not making much of an effort if the principal research evidence that it can adduce on the effect of sanctions on recipients is based on a sample of 30 people taken two and a half years ago.

I make that point because the report's findings do not support the Department's sanctions policy. For the record, I am referring to research report No. 86 from the DFEE and the DSS, ``Jobseeker's Allowance Evaluation: Qualitative Research on Disallowed and Sanctioned Claimants. Phase Two: After Jobseeker's Allowance''. Page 27 of that report states:

``Seven of the respondents in the first round''—

that is, about a quarter—

``lived with their partner and child(ren). As might be expected, they appeared to be the hardest hit by the cuts in their benefit income.''

I am sure that the Minister of State will refer to the hardship payment system, which is supposed to mitigate the effects of sanctions—but the report examines the actual effects of actual sanctions. Families with children are the sort of people who might be entitled to hardship payments, but the research found that families with children

``appeared to be the hardest hit.''

That is not sanctioning the claimant; it is affecting the whole family, including innocent children. I should like to know how the Under-Secretary can tell us that the Department has taken account of its research in framing clause 7, when the clause goes no further than existing protections against hardship, which, according to its research, hit families with children the hardest.

A second group of respondents were those who lived alone. The report states:

``Most of the respondents who lived alone appeared not to be able to turn to their parents/family for support.''

A natural argument is, ``We sanctioned somebody, but they can go home to mum and dad, or ask their mates.'' However, the research states that that is not the case. The report continues:

``They gave the impression they were on their own and said that they could ask for only a limited amount of help from friends.''

The idea that they can get round the sanctions by asking their mates for a loan is unrealistic, and is not what the Department's research suggests.

There is other research on the effects of sanctions, which was commissioned not by the Department, but by Janet Allbeson, who has links with citizens advice bureaux. She—this quote is reproduced in the Department's research report—describes the severity of sanctions as

``causing a level of destitution out of all proportion to the `offences' involved.''

The evidence from that study reinforces the critical point that sanctions impose real hardship. [Interruption.] The hon. Member for Hexham (Mr. Atkinson) says that that is the idea of sanctions, but proportionality must be the key to punishment. We deprive people whom commit the most serious offences of their liberty, but we do not deprive them of the basic necessities of life such as food, clothing and shelter.

The study discusses someone in the community whom we would all—including the DSS—agree has committed a less serious offence, but is facing destitution

``out of all proportion to the offences involved.''

We are not arguing that there should be no punishment, but we are asking whether that is an appropriate level of punishment.

It is important that we make a stand on clause 7. It is another step on a road down which the Government have been marching, and we shall see them make more strides down that road if they win the next general election. Benefit entitlement will be seen as more conditional. Basic money for food, clothing and shelter will become conditional on jumping through a whole lot of hoops that will get tighter and tighter. The Government are clearly moving in that direction, and clause 7 takes us further down that road.

The Government may say that they do not have to worry because there are hardship provisions. However, hardship provisions still leave people below basic benefit levels, although not as far below as they might otherwise have been. Given that people on basic benefits are often in debt—to the social fund and all sorts of other lenders—and are already getting by on less than basic benefit levels, even a hardship scheme that modifies the penalty leaves them prone to destitution. Is that the punishment that the Government think appropriate? It will not make murderers destitute; it will make benefit fraudsters destitute.

If the hardship scheme is to be a defence, it must work properly, yet the Department's research report questions whether that is so. Page 28 states:

``One young man said that not only was he refused hardship payments, he was told he could not have a Social Fund loan because the sanction was intended to cause him hardship, as a punishment''.

That advice from the Benefits Agency was inaccurate. The hardship scheme leaves people below the basic benefit levels for food, clothing and shelter and, moreover, the people who run the system apparently do not know how it works.

The Government's response to such criticism from Liberal Democrats is, ``Well, people shouldn't do it, should they?'' I hear that from Ministers all the time. However, we are not questioning the fact that such acts are wrong, criminal and deserving of punishment, but whether the punishment is right. Obviously, people should not do such things. They should not murder, but they do, and we must decide on an appropriate punishment. The same is true of benefit sanctions.

We will object to the sanction on principle until two conditions are met. First, decent evidence of its effects on the people who are sanctioned must be produced to determine whether it is appropriate or proportionate. That is frequently mentioned by Earl Russell in another place, where his views are treated with respect. Secondly, when that research is commissioned, there must be evidence that the Department is taking a blind bit of notice of it. So far, it has roundly ignored such research as has been undertaken. The punishment is not appropriate to the offence, and we therefore do not accept that clause 7 should stand part of the Bill.

Jeff Rooker (Labour, Birmingham, Perry Barr)

The hon. Gentleman is on the borderline—and has perhaps gone over it—of describing persistent benefit cheats as lovable old rogues. They are not. I have sometimes stood at the Bar of the House in the other place listening to Earl Russell and thinking, ``How out of touch can you be?'' There is nothing personal about that—I have never had a conversation with him—but he is not living in the real world.

I freely admit that the sanction is tough; it is intended to be. It is supposed to act as a deterrent to prevent people from becoming persistent benefit cheats. On any reasonable test, we have built in safeguards for some benefits. In other cases, the subject of the sanction will not be the benefit that is cheated on, but a benefit from the list of sanctionable benefits. It is a two-stage process.

The hon. Gentleman mentioned research. We assume that offenders can read. They have already cheated the system, so they must have known how to fill in a form: how to read the questions and lie in response. The first time that someone is convicted by a court of cheating the benefits system, we will put a note into their hands saying, ``If you do this again and get convicted, you're for the high jump, sonny: you'll lose some of your benefit''—assuming that it is a sanctionable benefit. There will be no misunderstanding. The person will not be able to say, ``Oh, I didn't understand; I thought that I would be able to carry on cheating the system. They never explained to me that if I did it again and was taken to court, I would lose money.'' In the past, they might have got away with it—but now, no way.

We must make it absolutely clear that there is a dividing line between us and the Lib-Dems, with their wishy-washy policies. The hon. Gentleman gave the impression that they want to defend benefit cheats. We will not allow cheats up and down the country to make the excuse that they did not understand the consequences of cheating a second time. They will not have that argument, because we will tell them the first time, ``Do it again and bang—we're going to hit you.'' No amount of past or future research can let such cheats off the hook.

As I understand the findings of the jobseeker's allowance research, a majority of respondents said that they would take care and be more wary in future, and that they had become more determined to find work. That is part of the exercise. We aim to get everybody in the country into gainful employment, if physically possible. There is no excuse not to be gainfully employed. The greatest asset that any country has is its people's capacity and willingness to work. If we fail to use any part of that asset, it is bad for us economically as well as bad for the quality of life of the people concerned. That is why we ask people what they can do, rather than telling them what they cannot do. We are trying to change the culture.

I want to spell the matter out as it is, so that there is no misunderstanding. We are not in favour of persistent benefit cheats, but the Lib-Dems are giving the impression that they are, by continually making excuses for them. We will not allow those excuses to go unchallenged.

Steve Webb (Liberal Democrat, Northavon)

Will the Minister of State give way on that point?

Jeff Rooker (Labour, Birmingham, Perry Barr)

I will give way in a moment, and then the hon. Gentleman can make all the points that he wants. We have plenty of time for that.

It will not be the case that people will not understand what is happening. The people who we are talking about are not lovable rogues, but persistent benefit cheats. We could give many examples of people who have cheated the system twice or even tried to do so a third time. We catch and prosecute them, but all of a sudden, we still have to pay them benefit. My constituents, many of them low-paid taxpayers, wonder what the hell is going on. Why are we allowing that to occur? We have reached the point of saying, ``Sorry, but we are not doing this any more.''

Mr. Webb rose—

Jeff Rooker (Labour, Birmingham, Perry Barr)

In a moment I will sit down, or give way to the hon. Gentleman, but I first want to make it absolutely clear that there is a set of benefits that will not count as a strike. They will not be withdrawn, even if a person defrauds the system and is prosecuted. They are maternity allowance, statutory maternity pay, statutory sick pay, working families tax credit and disabled persons tax credit.

Another list is of benefits that are disqualifying benefits but will not be sanctioned. One is the retirement pension. If a person is caught cheating on that, and prosecuted twice, it will not be sanctioned, but other benefits, such as income support, will be. Others benefits are disqualifying and sanctionable, including income support, jobseeker's allowance, and housing and council tax benefits. There are conditions for hardship allowance. For example, we will not withdraw free school meals, irrespective of the conditions. We have been very strict about what we will sanction. The hon. Gentleman mentioned proportion, but we are talking about the restriction of, say, £20.80 a week—or £10.40 for a person with children—for 13 weeks. That is not 26 weeks, or a year, or for ever. Housing benefit will remain, so the point about shelter is inaccurate.

Our policy is moderate in scope and tough in intent. It is designed to provide a deterrent and to ensure that the overwhelming majority of taxpayers and benefit claimants who are law abiding—neither benefit cheats nor persistent benefit cheats—do not suffer. The small minority who are persistent benefit cheats will be dealt with. The clause makes a technical adjustment of the benefit system to achieve that. I give way, as it looks like the hon. Gentleman has something more to get off his chest.

Steve Webb (Liberal Democrat, Northavon)

On a point of order, Mr. Maxton. The Minister has repeatedly refused to give way, so I would rather make a separate contribution.

John Maxton (Labour, Glasgow Cathcart)

I call the Minister.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I have finished speaking.

Steve Webb (Liberal Democrat, Northavon)

One can always tell when the Minister has things wrong—he will not accept interventions. He goes along creating a straw man in order to knock it down. The phrase ``lovable rogue'' came from his lips, not mine, and it was not said by my noble Friend Earl Russell. If the Minister had been listening, he would know that I said that everyone agrees that people who defraud the benefit system are doing wrong and deserve appropriate punishment. No one claims that these are nice or good people who should not be punished. A mature, grown-up debate would be about what punishment is appropriate. The Minister has simply asserted that the punishment in the clause is right on the basis, practically, of no evidence.

Let us examine the available evidence. Research reported in the Allbeson study suggests that a majority of people questioned did not fancy being ``close to destitution'' and might try harder next time. Any fool can impose a severe sanction to force people to do what he wants; the key question is whether, in a civilised society, the sanction is appropriate or excessive. That is our key point. It is not that we like these people or defend what they do; it is simply that the Government's sanction is not proportionate but excessive.

I specifically asked the Minister about children in affected families, but he ignored the question, perhaps accidentally. The report used the word destitution and the Department's researchers found that families with children were the worst affected. The Minister glossed over that, because it is good knockabout politics to pretend that other parties are soft on benefit fraud. What about the children? The Minister has not responded. One presumes that he believes that because parents should not defraud, it does not matter what happens to their children. These children suffer as a result of the present sanctions. The Minister is about to introduce new sanctions, which will mean more innocent people suffering. He offered no defence, because he has no defence.

Before we go further down the road of sanctions, the Liberal Democrats want the Department to recognise their effect—so far the Department has chosen to ignore what little evidence is available—and to take account of it in framing the pattern of sanctions. Instead, the Department has opted for this populist nonsense and suggested that we are soft on benefit fraud. We agree that fraud is wrong; we agree that it should be punished; but the question in a mature democracy is what punishment is appropriate. The punishment in the clause is inappropriate, so we shall oppose the clause.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 11, Noes 2.

Clause 15 - Colluding employers

Jacqui Lait (Conservative, Beckenham)

I beg to move amendment No. 56, in page 17, line 35, leave out from `where' to end of line 36 and insert

`the Secretary of State or an authority that administers housing benefit or council tax benefit is satisfied'.

The amendment should not detain us long. We tabled it not because we wish to raise yet again the definition of ``appears'' but to try to tease out from the Government the process that they envisage for dealing with colluding employers. Do they envisage an either/or situation of prosecution and penalties simultaneously, or prosecutions or penalties first? We thing that the best way to encourage employers not to collude is not necessarily to prosecute them, but I should be grateful if the Minister enlightened us about the general philosophy behind the Government's approach.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I shall deal with this matter briefly. In a nutshell, the sanction is an alternative to prosecution. In other words, a sanction will be offered—someone of much greater authority than a fraud investigator would decide—where there is sufficient evidence to bring a prosecution. The hon. Lady asked whether there will be a prosecution and a sanction. No, there will not be both. The sanction is an alternative to prosecution for the collusive employer. The decision whether to offer a sanction will depend on the scale of the alleged offence and the amount of money involved, which must be factors. I assume that that is so even now, because we can offer sanctions to people under the Social Security Administration (Fraud) Act 1997, which was enacted by the Conservative Government.

We offer sanctions to around 10,000 people a year and we prosecute 10,000 people a year. The ability to offer sanctions is a useful additional tool in the armoury to enable us to deal with fraud in the system. We want to be able to offer sanctions to an employer just as we would to an individual citizen. We want consistency in the process. The amendment would introduce a degree of inconsistency.

Taking a case to the point where a sanction can be offered means undergoing the process of facilitating a prosecution, therefore following all the procedures under the Police and Criminal Evidence Act 1984. The sanction is not offered on a whim. It is not an alternative to doing the work necessary to bring the case to the point of prosecution. The basic homework must still be done. It is true that it saves the time and effort of going to court, and it also spares the individual a conviction, but the sanction is not light. The money that has been stolen must be paid back plus 30 per cent. on top. That is the ballpark figure.

In summary, we want consistency. We want to be able deal with colluding employers as we have been able to deal with individual benefit claimants following the 1997 legislation, which made sanctions available to the Department the first time.

Jacqui Lait (Conservative, Beckenham)

I am grateful to the right hon. Gentleman. I think that he has made the position clear; doubtless when we read the record, we will see that it is. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15 ordered to stand part of the Bill.

Clauses 16 to 19 ordered to stand part of the Bill..

Clause 20 - Commencement

Jacqui Lait (Conservative, Beckenham)

I beg to move amendment No. 57, in page 23, line 17, at end insert—

`(4) The provisions of this Act shall lapse in its entirety three years after the date on which it receives Royal Assent.'.

The amendment is a further opportunity for us to tease out from the Government how they will measure the effectiveness of the Bill, when enacted. We have proposed that it lapses after three years. Some of us think that there is much common sense in a lot of legislation lapsing after three years.

The Government have enacted several initiatives to curb fraud, and the Bill is about the 43rd. There is conflicting evidence about how effective such measures have been, and we want to ensure that there is a mechanism that concentrates minds and measures the Bill's effectiveness. Suggesting that such powers are likely to lapse within three years could concentrate minds powerfully on ensuring that the measures that we support under the Bill are implemented effectively. An audit would be taken of their effectiveness and there would be a drive towards ensuring that, by the end of the third year, the work related to bringing an end to fraud was of such a scale that there was a need to continue with the Department's powers under the Bill. The Government would therefore have to return in three years' time and ask for the Act to continue.

Will the Under-Secretary explain how the Government are planning to measure the effectiveness of the Bill, when enacted? We will then consider whether to withdraw the amendment and whether three years is sufficient for common sense to prevail.

Angela Eagle (Labour, Wallasey)

I hope that I can persuade the hon. Lady that her draconian option of liquidating the entire Act after three years is over the top and unnecessary. Clearly, we shall continue making our measurements of fraud more sophisticated. Area benefit reviews are now being undertaken into particular benefits that will give us much more accurate information about what is fraud and what is overpayment, and more information about those matters that we discuss constantly while contemplating the amount of money that leaks out of the system and that is defrauded from it. We shall also be monitoring the effects of the extra powers under the Bill.

The hon. Lady is asking us to provide information about a deterrent effect—in other words, how much fraud had been prevented. Clearly, it is impossible always to measure such matters. We can detect fraud that has been prosecuted successfully, but much of the Bill is about deterring it, too. I agree with my right hon. Friend the Minister that part of the ``two strikes'' sanction is an attempt to change the culture and the public attitude in which, at present, there is an all too ready acceptance that benefit fraud is not as bad as other forms of criminality. We say that it is. In fact, given that such fraud is stealing benefit from some of the poorest people in the country, who rely on it, it is even worse than other forms of behaviour that are less tolerated by society.

The intention behind the Bill is partly to change those attitudes and partly to deter people from contemplating benefit fraud in the first place. That part of the Bill's effect will never be able to be measured. However, we will be able to measure—in fact, we are under strict injunctions to measure—our success in reducing the fraud already committed in the system. We have announced tough public service targets to detect and reduce fraud in the system, which will be constantly measured. The Bill will give us new and important powers to detect, prosecute and deter some of that fraud.

The hon. Lady suggests that the powers in the Bill should fall three years after it comes into force. When I first read the amendment, I thought that a mistake had been made and that it referred to the data powers alone. However, now it appears that she wants the amendment to affect the whole Bill. That would mean that the Bill would dissolve automatically after three years—a subject about which she takes an interesting view. Such a policy would make us much busier as a Parliament. We need to refine the powers that we have, as fraud and tax evasion evolve, for example, and change some of our powers to catch those things, but it would not be sensible to do that by wiping the powers from the statute.

We should remember, too, that the power to sanction the ``two strikes and you're out'' provision would be severely compromised by such an amendment, because that power is based on two benefit offences within three years of each other. We will not be able to implement the ``two strikes'' policy immediately, as the administration of such measures takes some time to process. The hon. Lady's proposal would remove the statute before some of it had had a chance to bite, and make it harder to assess the deterrent effect of the ``two strikes'' sanction, which she supports.

Parliament has ways of bringing the Government to account. There are already mechanisms for parliamentary and public scrutiny of legislation. The hon. Lady knows what those mechanisms are: the Social Security Committee, the Public Accounts Committee, the independent watchdogs, the National Audit Office and the Parliamentary Commissioner for Administration can all investigate and assess departmental activities in these areas. The courts may rule against any misuse of the powers that we are taking.

The proposed sunset provision would render some of the powers in the Bill seriously ineffective and cause Parliament to revisit that which it had already considered. The hon. Lady should remember that we have consulted widely on those powers; we have listened to comments made in the other place and changed the Bill after consultation. We have tried to create proportionate and reasonable powers that keep up with some of the new forms of fraud that we know are in the system. That process has left us with a platform from which to fight benefit fraud rather than something that needs to be removed altogether at a certain time.

I hope that the hon. Lady agrees that the sunset provision is a drastic way in which to achieve parliamentary scrutiny. I would welcome her observation of how the measures are working; we will be open about the way in which we assess their effect. Given those reassurances, I hope that she will withdraw her amendment.

Jacqui Lait (Conservative, Beckenham)

I said in my introductory remarks that the measure was fairly draconian, although I may not have said that in those precise words. Therefore, I accept the Minister's point in relation to the ``two strikes and you're out'' provision. However, it is important that public measurements are made of the outcomes of the effectiveness of the Bill. The Minister thought that it would be difficult to measure outcomes—

Angela Eagle (Labour, Wallasey)

Some.

Jacqui Lait (Conservative, Beckenham)

Some outcomes. I am not entirely convinced that it is difficult to measure outcomes. The thought that springs immediately to mind is that a reduction in the number of applications that turned out to be fraudulent would be measurable. That is a separate issue from the reduction in the estimates of known fraud, because the nature of fraud is that the total is unknown. As we know, estimates have risen from £2 billion to £7 billion. The hon. Lady said that she expects that there will be measures of outcomes. It would be useful to debate measurements of outcomes, perhaps when we debate the regulations. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 20 ordered to stand part of the Bill.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I beg to move amendment No. 1, in clause 21, page 23, line 22, leave out subsection (3).

The subsection is purely technical, and would not be in the Bill if it had not been initially considered in another place. It relates to privilege, and enables the Bill to pass between one House and the other. As there is a money resolution, and consideration in Committee has all but finished, the subsection can be removed.

Amendment agreed to.

Clause 21, as amended, ordered to stand part of the Bill.

New clause 2 - Request for information

Jacqui Lait (Conservative, Beckenham)

I beg to move, That the clause be read a Second time.

I shall be brief. This debate is similar to a previous one, but it provides an opportunity to seek reassurance from the Government about the information that is the subject of a pending prosecution. The purpose of the new clause is to provide a further safeguard in the drive to prevent misuse of investigating powers and offer an element of redress for all claimants. A number of outside agencies have sought reassurance on this aspect of the Bill, and Liberty has commented that

``Full record should be kept of the use of these powers, both by the investigators and the people or organisations from whom information is requested . . . People should be told at the conclusion of an investigation that information about them has been disclosed and should be able to seek effective redress where powers have been exceeded.''

I would be grateful for the Minister of State's view on that.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I think that I can satisfy the hon. Lady in relation to the new clause. It is drafted in such a way that it covers everybody—not merely the DSS and local authorities, but banks, utilities and the private sector, to which the early part of the Bill refers. That may or may not have been her intent, but there is no need for the new clause. Nothing in the Bill will enable the Government or the Department to contravene the Data Protection Act 1998. Anybody who has been subject to inquiries or about whom records have been kept can ask for access to that information. Indeed, new clause 2 largely replicates the access provisions. Everything that it would achieve is already provided, except that the Data Protection Act allows 40 days for compliance rather than 21.

We have not costed the effect on the private sector of 21 days rather than 40. We struggle to meet the requirement of 40 days. Our best endeavours are used to meet the legislative requirements, so it would be a real struggle to meet them in 21 days. When people have been investigated but no action takes place, the information that was used is destroyed afterwards. We are not allowed to keep information that we do not need. The subject's powers and rights are fully protected under the Data Protection Act. Nothing in the Bill will allow us to get round that or contravene it. I hope that, having said that, the hon. Lady will withdraw the motion.

Jacqui Lait (Conservative, Beckenham)

I am grateful to the Minister for putting his clear view on the record. I am sure that many organisations will read it closely. On that basis, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Schedule agreed to.

Question proposed, That the Chairman do report the Bill, as amended, to the House.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I should like to place on record that this has been a special Committee for you, Mr. Maxton, and for me, as it will be our last—I think; the pension credit Bill could come before the House before the election, as the election is not due until May next year. I thank you for the way in which you have presided over our proceedings. I thank my hon. Friends for their support, and Opposition Members, including both the Liberal Democrats and the hon. Member for Beckenham and her team, although we did not see most of its members.

I hope that no one will believe that we have railroaded the Bill through. We have tried in the time available to tease out—I hope that the Opposition have teased out of the Government—the key aspects about which people are worried. The Bill has had a good going over in Committee and in the other place. I thank you, Mr. Maxton, the Clerk, Hansard and the Department of Social Security team that has put the Bill together on behalf of the Government.

Jacqui Lait (Conservative, Beckenham)

I add my thanks to you, Mr. Maxton. I should like to believe that this is not your valedictory appearance.

John Maxton (Labour, Glasgow Cathcart)

I would.

Jacqui Lait (Conservative, Beckenham)

The geniality with which you have chaired the Committee has, I am sure, had a general effect on proceedings.

I also thank the Clerk, the Hansard staff, the Department staff for being able to brief the Ministers on our points, my colleagues—those who are present—the Minister and the Under-Secretary. I doubt that the pension credit Bill will reach Committee before the Minister retires, but we shall return to the subject before any general election. I thank him and the Under-Secretary for the usual courtesy and help. Even though we may disagree, we have teased out some information, and I am grateful to all members of the Committee for allowing our proceedings to pass so smoothly.

John Maxton (Labour, Glasgow Cathcart)

I call Mr. Davey.

Steve Webb (Liberal Democrat, Northavon)

Or even Mr. Webb; I am grateful for the impact that I have made on the Committee.

I thank you, Mr. Maxton, for your genial but fair chairmanship, the Ministers for their responses, and the hon. Member for Beckenham, who has done most of the work in preparing amendments. More in sorrow than in anger, I observe that, when the Bill was considered in another place, it was subject to mature discussion and appropriate amendment. One always feels that that never quite happens in Committee in this House, which is a source of regret. We have had the time that the Committee felt that it needed to scrutinise the Bill and to make key points, and we are grateful for that.

John Maxton (Labour, Glasgow Cathcart)

I apologise, Mr. Webb. I was looking at the annunciator and automatically read the name on the screen.

I thank all three of you—the Minister and the hon. Members for Beckenham and for Northavon—for your kind remarks about me. Those who are present in the Room—the Clerk, Hansard staff and others who have to be present for our proceedings—will have heard your thanks, too. It has been a genial Committee, as much as a result of your efforts as anything that I have done. Whatever the Minister thinks about his doing another Committee, I have no intention of doing another.

I thank the Committee.

Question put and agreed to.

Bill, as amended, to be reported.

Committee rose at twenty-four minutes past Six o'clock.