Northern Ireland Assembly
Tuesday 26 June 2001 (continued)
Social Security Fraud Bill: Second StageThe Minister for Social Development (Mr Morrow): I beg to move That the Second Stage of the Social Security Fraud Bill (NIA 16/00) be agreed. The Social Security Fraud Bill is an important piece of legislation which will make provision for Northern Ireland corresponding to provision made for Great Britain by the Social Security Act 2001. There has always been parity between Great Britain and Northern Ireland, and that is how it should be. People in Northern Ireland pay the same National Insurance contributions and taxes as those in Great Britain, and they should receive the same benefits. Parity also enables us to use the same computer system in Northern Ireland and Great Britain for child support and social security, thus making it cost-effective. However, parity is a two-edged sword. Rights to benefits must be matched by obligations to society. It is right that we should enjoy the same rights and benefits as people in Great Britain; however, it is equally right that we play our part in tackling the problem of benefit fraud. Parity covers not only the content of the legislation but also the timing of its implementation. To ensure that the proposals are implemented at the same time as in Britain, the necessary powers must be available as soon as possible. The UK spends 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. That duty is reflected in the Department's objective to reduce losses from fraud and error in social security benefits by 5% per annum over the spending review period April 2001 to March 2004. In the United Kingdom, social security fraud costs at least £2 billion a year. That is clearly unacceptable, and we are determined to play our part in stemming the flow. The vast majority of people who claim benefits are honest, and it is unfair to them and to the taxpayers who foot the bill that a minority is cheating the benefits system. A wide variety of fraud is perpetrated against the system, ranging from the opportunist, such as the person who does not tell us that he has started to work, to the highly organised criminal gangs involved in counterfeiting or stealing instruments of payment and running false identity fraud. The Grabiner Report on the informal economy contained recommendations to combat benefit fraud. This Bill seeks to combat benefit fraud by putting many of those recommendations into action. Before turning to the details of the Bill's proposals, I will set them in context by illustrating the broad nature of social security fraud. Fraud takes place when people lie about their circumstances to gain benefit. There are many types of fraud. One is working and not declaring earnings, including those of a partner. Commonly this happens when a person claims to be unemployed but is working. Another type involves undeclared capital, when a person either fails to inform the Department of his assets or misrepresents their true value. A third involves undeclared income from other sources. An example of this is where a person has unearned income or income from a private pension scheme. There is fraud involving family circumstances, where a person does not declare a partner who is living with him. Then there is residency fraud, where a person claims to reside at one address, but, in fact, lives at another. Identity fraud involves the hijacking of a real identity, or the creation of a false one, although with tougher checks on claims, the latter is becoming much more difficult. It is estimated that in Northern Ireland about £73 million per annum is lost from public money due to benefit fraud. (Madam Deputy Speaker [Ms Morrice] in the Chair). 11.30 am Fraud is not a small-time activity or a victimless crime, although it is often portrayed as such. Rather, it is more often a planned, calculated act, and it diverts a great deal of public money away from other objectives. The provisions of the Bill will help to reduce that loss, both through prevention and earlier detection, using the powers to acquire data from the private sector; and through deterrence, using the powers to remove benefit from persistent benefit offenders and the swift, effective punishment of collusive employers. Turning now to the measures proposed by the Bill, one of the key recommendations in Lord Grabiner's report on the informal economy was a power to take benefits away from people who persistently abused the benefits system. Rights to benefits must be matched by obligations to society. If we are to restore the public's confidence in the social security system, we must deter hard-core benefit cheats by getting across a strong message that they cannot repeatedly commit fraud and still expect to be able to claim benefit again as if nothing had happened. For the vast majority of benefit cheats, their first conviction is their last, because the process of being interviewed under caution, appearing in court, being sentenced and finding themselves named in their local paper is an extremely salutary experience. However, there are hard-core cheats who simply refuse to learn their lesson and continue to offend. They must be made to realise that they cannot abuse the benefit system and steal from the rest of society with impunity. This Bill provides that those convicted of benefit fraud will be warned that a further conviction within three years would mean that they could lose benefits for a period of 13 weeks. This would happen when they defrauded virtually any social security benefit. These are known as disqualifying benefits. However, the sanction itself will apply to a smaller range: the sanctionable benefits. We will not apply the sanctions to benefits that are specifically for children (child benefit and guardian's allowance) or to those which meet the extra costs of disability (disability living allowance and attendance allowance). Nor will we sanction retirement pension, as research has shown this benefit to be virtually free of fraud. The measures are intended to be tough, but, as with other sanctions in the social security system, they include fallback provisions to protect the most vulnerable - those people and their families who rely on income- related benefits. People on income-related jobseeker's allowance will be able to apply for help under a hardship scheme. If their other circumstances are not such as to protect them from hardship, they will be paid at a rate which reduces the offender's personal allowance by 40%, or 20% for cases of particular interest: for example, where a member of the household is seriously ill. Benefits for the rest of the household will be unaffected. For people on income support, access to such a scheme would be automatic. Housing benefit would remain in payment, as would access to other benefits such as milk tokens and free school meals. The scheme closely mirrors the hardship scheme that already operates for labour market sanctions, a scheme which has been tried and tested. We believe that this scheme is fair in that it strikes the right balance between, on the one hand, a punishment which brings home the point that fraud will not be tolerated, and on the other, ensuring that offenders, and their families in particular, do not suffer unduly. I should stress that the main aim of this measure is deterrence. We do not want to see it being applied to large numbers of people: indeed, quite the reverse. The fewer people who are subject to the sanction, the better, because that means it is having the intended deterrent effect. A second key to cracking benefit fraud identified by the Grabiner Report is the need for access to independent information about a claimant's financial and other circumstances. Fraud is committed by people telling lies or concealing the facts about their circumstances. If we are to succeed in rooting fraud out of the system, we need to be able to check what people tell us with third parties. For example, if we suspect that a person is claiming benefit and is concealing his earnings from work, cross-checking the information that we hold with additional independent sources, for example banks, would help to establish the fraud. The Bill includes measures to allow officers authorised by the Department or the Housing Executive to require information from specified private- or public-sector organisations, including banks, building societies and credit reference agencies, where we have reasonable grounds for suspicion. I must stress that these powers do not provide carte blanche to pry into people's bank accounts. The Bill is clear on that, and it will also be made clear in a publicly available code of practice that will set out how the powers will be used. (Mr Speaker in the Chair) First, it is important to say that what constitutes reasonable grounds will vary from case to case, and for that reason it is not appropriate to put specific conditions into the legislation. There would be reasonable grounds for suspicion where there were reasons to believe that a person was receiving or claiming benefit fraudulently. Staff authorised to use these powers will need to analyse their records and note their suspicions. They will always consider whether there could be an innocent explanation for any circumstances. Examples of what would be taken into account are tip-offs from members of the public, suspicious behaviour on the part of a claimant or unsatisfactory identity documents. Objective statistical evidence that a person was disproportionately likely to commit fraud would also provide reasonable grounds. For example, we know that people who have committed benefit fraud before are more likely to do so again. I stress that the evidence would need to be objective, and obviously these powers would not be used on grounds such as community background, race or sex. The Bill also seeks to tackle the problem of housing benefit being paid on empty properties. In some cases, that is a calculated fraud, where the address is being used to support a claim for income support or jobseeker's allowance under a false identity - known in the trade as a "giro drop". In others, the fraud is committed by the landlord, who does not tell the Housing Executive that the tenant has moved out. In other instances, the tenant simply abandons the property without bothering to tell the landlord or the Housing Executive. To help to put a stop to this and other types of fraud, the Bill will enable us to obtain information from the utility companies about abnormal levels of consumption that may indicate benefit fraud. I have already referred to the problem of people working and claiming benefit. We have looked beyond the problem itself to one of its major facilitators - employers who are more than happy to have the state subsidise their wage and National Insurance bills by colluding with their employees in committing this type of benefit fraud. They are taking advantage of their workforce by denying them proper terms of employment, and they gain unfair advantage in the market by paying low wages. That is unfair competition against honest employers. The prosecution of employers who have colluded in benefit fraud can be lengthy and costly and may not always be the most effective way of tackling this problem. Obviously, we will continue to prosecute the most serious cases. For the less serious cases, the Bill allows the application of a swift civil penalty that will bring home the message that operating in the informal economy carries a high price and will not be tolerated. That will strengthen the ability of the Department and the Housing Executive to bring to book employers who collude with their employees in social security fraud. The measures provide for an administrative penalty of between £1,000 and £5,000 to be paid by a colluding employer as an alternative to prosecution. The penalty would be subject to the same safeguards that apply to administrative penalties for claimants - the employer will have the option of having the court decide the case. If an employer accepts the penalty as an alternative to going to court, he has up to 28 days to change his mind. It is estimated that up to 70% of fraud occurs not at the start of a claim, but during its currency, when changes of circumstances which affect benefit entitlement go unreported. Current legislation fails to impose a watertight duty on claimants to report changes and is therefore inadequate for cases where payment is made directly to a bank account and where no signed declaration of unchanged circumstances is available. We are reforming those powers to ensure that they are effective and to give a clear message that such sins of omission are crimes nonetheless and will be punished. Finally, the Bill contains tidying-up measures that will clarify the legislation that enables prosecution when claimants deliberately fail to report changes of circumstances. It will allow the Department and the Housing Executive to act together to offer administrative penalties in place of prosecution in cases involving housing benefit as well as Department for Social Development administered benefits. It will strengthen arrangements for the supply of information by the Housing Executive to the Department, or to the Secretary of State for Social Security, by specifying in directions rather than regulations what information is required. The provisions of the Bill are a measured response to the problem. Considerable care has been taken to ensure that the Great Britain and Northern Ireland Bills are compatible with the European Convention on Human Rights. In conclusion, the Bill contains important measures that will significantly reduce fraud in the benefit system and thereby restore the public's confidence in it. I commend the Bill to the Assembly. Mr Paisley Jnr: Today's debate need not have taken place. It is only taking place because accelerated passage was denied to the Bill a few weeks ago. We are here to commence a gestated period of debate because of that denial. I had hoped that accelerated passage would have been given to the Bill, because it is important that the Assembly offer an immediate response to an immediate and ongoing problem. Millions of pounds are lost to the Social Security Agency every year because people defraud it. Of course, there are people who do not claim their benefit, but the fear of fraud and the concerns about it are a problem that must be dealt with. It is very disappointing that this Bill cannot go through the House quickly, so that we send out all the right messages to those who are trying to steal money from other people's pockets. It is unfortunate that a certain party decided to oppose accelerated passage. However, given that the Assembly has chosen the normal course for passage of this Bill, I am amazed that that party is not even here today. They are not even here to give us their view. People will watch the gestated period of Committee proceedings and further readings carefully to see whether that party is interested in making a major contribution to change this Bill. The party's denial of accelerated passage was more to do with political opposition to the Minister and political opposition to catching the fraudster than a constructive approach to the Bill. It is important that the Assembly send out all the right messages when tackling fraud - and that it sends out a clear signal on this matter. Some people may be reluctant, but it is absolutely necessary that we do that. The Minister said that the Bill is about protecting the vulnerable. That is a key issue. It is about protecting those who are having their rights taken from them. It is crucial that everything is done to ensure the delivery of benefit payments to the right people at the right time, all the time. The Social Security Fraud Bill is one way to protect the vulnerable from losing their rights. I understand that £73 million has been lost because of social security fraud in Northern Ireland. 11.45 am That is an amazing amount of money, and it could have been used for a far greater good than going to false claimants. It is unfair to honest claimants and to the public in general that a small minority of claimants can cheat the system and make big money. The Assembly is aware of the problem of fraud; Mr Billy Bell highlighted some of those problems in a previous report. I am all the more amazed, therefore, that the Assembly should try to slow the passage of the Bill, after his investigation into fraud in the social security system. Just today, Members received a press release on the Northern Ireland Audit Office's report on the agency's management of social security debt collection and fraud. It highlights the need for active encouragement for work to tackle fraud in Northern Ireland. Unfortunately, any delay in the tackling of fraud will cost Northern Ireland hundreds of thousands of pounds every month. As the Minister said, parity is a two-edged sword. It is correct that we should enjoy the same rights and benefits as people in Great Britain, and it is equally right that we play our part in tackling benefit fraud. With the right to benefit comes the responsibility to tackle those who defraud the benefits system. I agree wholeheartedly with the Minister about that. I also agree with the Minister that the Bill is not draconian, nor is it a great axe that he looks forward to wielding. It is a deterrent. It is important that people keep things in perspective. The Bill will help the Department to prosecute the more serious cases, and it will deter those who see other people cheating the system from thinking that they can get away with it too. The Minister made it clear that the Department hopes that the deterrent value will be such that it will not have to use those powers repeatedly. The ability to check information will itself be a significant deterrent to would-be fraudsters. The Bill allows for the checking of the information that a claimant must give; it does not ask for anything special. I would like to refer to clauses 1 and 2. Fraud takes place when people knowingly lie about their circumstances in order to obtain benefit. They have not made a mistake; they deliberately try to mislead the Department. By definition, a person who engages in fraud will not volunteer the truth. People lie about whether they have a job. There should be a deterrent to stop people lying about that. Mr Speaker: Order. The Member may be under some misunderstanding about the passage of the Bill. He said earlier that, with accelerated passage, this debate need not have taken place. That is not correct. With accelerated passage, there would still be a Second Stage; it is only the Committee Stage that would not take place. The purpose of this Stage is for discussion of the general principles of the Bill, but the Member is now moving into a discussion of each clause. That is properly the function of the Committee Stage, which will now take place, according to procedure. This is a debate about the broad principles of the Bill. Mr Paisley Jnr: I thank the Speaker for that direction. I will stick to the broad principles contained in clauses 1, 2 and 15. Mr Speaker: Order. The debate is about the broad principles of the Bill, not the broad principles of clauses 1 and 2. Mr Paisley Jnr: The Bill is an attempt to clamp down on people who lie about whether they have a job, whether they have savings, whether their partner works and about who they are and where they live. It is essential that the Department have the strength to investigate those matters to find out whether the information is correct and to ensure that the right money goes to the right people at the right time. I also look forward to seeing the code of practice and the safeguards contained in it. It is essential that the Department attempt to ensure that social security money goes to the right people, not to those who try by mischief to defraud the Department. If the powers to obtain information are not introduced in Northern Ireland at the same time and date as in the rest of the United Kingdom, Northern Ireland will lose a vast amount of money. I have read that that loss could be as much as £400,000 a month. It will be interesting to find out whether that loss is incurred if we do not put this instrument in place at the same time as in the rest of the United Kingdom. Other important clauses in the Bill would make it an offence to fail to notify a change in circumstances. Will the Minister tell the House how many cases last year could have been affected by the absence of the Social Security Fraud Bill, particularly in regard to those matters outlined in clause 15? I will finish with an apocryphal story - or perhaps it is not an apocryphal one. Some time ago, a certain politician, it is believed, used a car under the motability scheme when that person ought not to have done so. After a television documentary, it appeared that some people's concerns about motability fraud still had not changed. However, the prospect of a mayoral car was seen as a measure to prevent further motability fraud. That did not seem to do the trick, because yet another political party did not believe that that was the right strategy to tackle motability fraud. Today, the House should send out a clear "No" to fraud and give the Department every encouragement and strength to tackle any attempt to prevent the right money going to the right people at the right time. Even though the legislation must go through a Committee Stage, I hope that the Minister can take encouragement that there are parties in the Assembly that are willing to back him in his fight to tackle fraud as it raises its head in the social security system. Mr Morrow: I welcome Mr Paisley Jnr's comments. He has spoken in support of what the Department for Social Development is trying to achieve. I will not go through a long winding-up speech. Mr Paisley Jnr asked how many cases could have been affected by the absence of a provision similar to clause 15. He is entitled to the most accurate answer that I can give him. Last year, there were 228 fraud cases involving payment by automated credit transfer, with the potential - and I emphasise "potential" - to be prosecuted. However, the absence of the provision contained in clause 15 precluded such action in those cases. Therefore the Department for Social Development will be better armed and better equipped to deal directly in cases of fraud when the Social Security Fraud Bill becomes law. The code of practice is now available and will be in the public domain shortly. When I went before the Committee for Social Development to explain the different parts of the Bill, Members expressed their concern about the availability of the code of practice. I am happy to confirm that the code of practice is in place and will be made available. I welcome the comments made by Mr Paisley Jnr and his wholehearted support for what we are trying to achieve. Question put and agreed to. Resolved: That the Second Stage of the Social Security Fraud Bill (NIA 16/00) be agreed. Department for Employment and Learning Bill:
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