House of Commons
Monday 12 June 2006
The House met at half-past Two o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
Work and Pensions
The Secretary of State was asked—
The welfare reform Green Paper that we published in January set out our proposals to reduce the numbers claiming incapacity benefit by 1 million over the next decade. The proposals include extra investment in the successful pathways to work schemes, as well as replacing incapacity benefit with a new employment and support allowance in 2008.
I thank the Secretary of State for that answer. Has he seen the recent KPMG labour market research, which shows that a large minority of employers will not appoint incapacity claimants with a history of mental illness? What is his Department doing to help educate employers about the employability of previous sufferers from mental illness and has he considered offering grants to help employers with assessment, training and skills development for potential recruits?
I have seen the report to which the hon. Gentleman referred. It is an important issue; about 40 per cent. of people claiming incapacity benefit cite mental health as the reason for being unable to work. Pathways to work, as it is at present, will successfully address that issue. Conditioned management support is one way through the issue, but we stand ready to work with the private and voluntary sectors, and other parts of the public sector, to make sure that the reforms are a success for people with mental illness.
My right hon. Friend has allocated £360 million so far for the national roll-out of pathways to work, which I warmly welcome. However, concerns have been expressed, not least by the Select Committee on Work and Pensions, as to the adequacy of those resources if we are to meet the Government’s laudable objective of taking 1 million people off incapacity benefit over 10 years. Given that enabling someone to work reduces benefit payments and increases tax revenue and national insurance contributions, is my right hon. Friend working closely with the Treasury to ensure that the savings from more people achieving employment will result in more investment in pathways to work?
Yes, I work very closely with the Treasury on all such matters. May I express my appreciation for my hon. Friend’s work in supporting many of the reforms? I draw his attention to the part of the Green Paper that set out our plans in relation to the new city strategy, which is one area where we will be able to make progress in the direction to which he referred.
Can the Secretary of State tell the House on what basis the £360 million for pathways to work was calculated and whether all that sum will actually be spent on the national roll-out of pathways to work, given a recent written answer that I received from one of the right hon. Gentleman’s ministerial colleagues, which suggested that only a proportion might be spent on the roll-out of pathways to work?
The lion’s share of that £360 million will be spent on the roll-out of pathways. We are funding the national roll-out of pathways properly and fully and over the next few years we shall be looking to deliver more of the scheme through the private and voluntary sectors, which will, I hope, provide scope for more efficiency and more effective use of public money. I can assure the hon. Gentleman and the House that pathways will be properly and fully funded; to do anything less would undermine potential for the success of the reforms, and we do not intend to do that.
Surely, it is not just about getting people off incapacity benefit and into work, but also about trying to make sure that fewer people end up on incapacity benefit. Has my right hon. Friend looked at the number of occupational health professionals working in the private sector and, if so, has he noticed that the level is one of the worst of any European country? Do not we need to move forward on that agenda, too?
Yes, we certainly do, and the Green Paper set out a number of areas where we hope to make such progress. I want to work closely with my colleagues in the Department of Health, where, together, we can make the biggest impact. It is also worth bearing in mind the fact that a third fewer people claim incapacity benefit than a decade or so ago; we are just beginning to see year-on-year reductions in the total number of people claiming it. I have no doubt that the reforms are working. My hon. Friend referred to prevention and I am quite sure there is more that we can do in that regard. We set out our intention to do more in that area in the Green Paper.
Over the weekend we saw another report of Department for Work and Pensions Ministers running scared of their Back Benchers—this time, over US-style workfare policies. In evidence to the Select Committee, the Secretary of State said:
“We are not proposing at the moment to sanction failing to take work-related activities…It might become so in the future.”
Can the Secretary of State come clean and tell us if in principle he supports such a workfare-style approach? If he does, when will he tell the parliamentary Labour party?
I am afraid that it is the hon. Gentleman who needs to grow up. We set out our proposals in the welfare reform Green Paper. I shall let the hon. Gentleman read a copy of it to refresh his memory.
In the two decades prior to 1997 the number of children living in poverty in the United Kingdom more than doubled. However, in absolute terms there are now 2 million fewer children living below the poverty line than when we came into office. This has been the result of investment in the new deal for lone parents, the introduction of tax credits, the introduction of the national minimum wage and our success in creating stable economic growth.
I thank my right hon. Friend for that response. I hope that he will agree with me that constituencies such as mine in Durham have benefited enormously from measures that the Government have taken to tackle child poverty, with literally thousands of children being lifted out of poverty since 1997. Nevertheless, poverty is still disproportionately higher in the north-east than elsewhere. Will my right hon. Friend tell the House what the Government are doing to tackle regional inequalities in child poverty?
Yes. The new deal has been a huge success in my hon. Friend’s constituency and throughout many parts of Britain that suffer from high levels of unemployment. The city strategy that we set out in the Green Paper will, I think, provide further targeted help in tackling worklessness in some of the most deprived parts of the country. Together with the other reforms in the Green Paper, I am sure that we will continue to make a significant impact on improving the opportunities for families with children to share in rising national prosperity.
In a debate on social exclusion in Westminster Hall at the end of last year, I asked whether the Government’s social exclusion unit could examine the relationship of long-term family and relationship breakdown with long-term deprivation. Will the Minister make the same request in relation to child poverty? Will he also examine the work that is being done by many faith, independent and voluntary groups in supporting relationships that are in trouble? As a nation, it costs us a fortune to deal with the consequences of relationship breakdown in child poverty terms, yet we spend so little in trying to support those relationships.
I agree with a great deal of what the hon. Gentleman has said. I have decided to make the pursuit of the child poverty targets that have been set for my Department the No. 1 priority for the Department. I think that that is right if we are to break the cycle of deprivation and poverty between the generations. The social exclusion unit is the responsibility of my right hon. Friend the Chancellor of the Duchy of Lancaster. I will be working closely with her and the Minister of State to ensure that we make progress in this general area.
I congratulate the Government on nearly achieving their target of reducing the number of poor children by a quarter in five years. Does my right hon. Friend accept that probably the major reason why the Government have scored success in this area was the impact of tax credits, which cost the equivalent of a 5p reduction in the standard rate of tax? Given that that sort of money will not be available for the next five years, might my right hon. Friend, at some suitable opportunity, set out before the House how he intends to achieve another quarter’s reduction in the number of poor children in the following five years?
Yes, I will certainly be doing that. I am grateful to my right hon. Friend for his support in this area. We shall have to focus our attention in a number of areas if we are to make continuing progress, not least in relation to how we can improve the operation of the child support arrangements. That is a piece of work currently being carried out by Sir David Henshaw.
We will certainly have to consider how we can continue to make the new deal for lone parents effective. It has been hugely effective and we have seen a huge increase in the employment rate of lone parents—about 11 percentage points. We should continue to explore all these areas and avenues to ensure that we can improve the household income of families with children.
On the issue of tax credits and poverty, has the Secretary of State had a chance to read the research produced by his Department last year, which concluded that the problems in the administration of tax credits had lent an unwelcome unpredictability to a key element of financial support. It went on to talk about the profoundly negative effects on more financially vulnerable households?
Earlier, the Secretary of State indicated that he is working closely with the Chancellor of the Exchequer. May I encourage him to ask the Chancellor to consider that, as tax credits are no more than means-tested benefits, it would make far more sense to administer the credits from his Department than from the Treasury? Does the right hon. Gentleman accept that his Department could hardly do a less effective job of that?
Answer that one.
I read a great deal of research and many reports. The particular report to which the hon. Gentleman refers, apparently from my Department, I have not yet managed to read. I will need to ask the hon. Gentleman for the reference number of the report. We examine carefully the administration of tax credits. It is wrong to suggest that somehow they have not been a significant benefit to millions of families with children. They have been a huge boon to millions of households. The Department currently has no plans to take on the administration of the tax credits system.
Is my right hon. Friend aware that London is the only region where no significant progress was made in reducing child poverty for the first milestone in 2004? Does he accept that one of the key reasons for that is high housing costs? Typical of that is a constituent who came to me on Friday, who is in temporary accommodation—one of 3,000 families in temporary accommodation in my borough—who faces a rent bill of £430 every week. That is a ludicrous disincentive to work. Will he therefore take urgent action, with the Department for Communities and Local Government, to tackle the housing costs for those in temporary accommodation? Will he also agree to meet the London—
I will certainly pass on my hon. Friend’s concerns to the Secretary of State for Communities and Local Government. I remind my hon. Friend that the Prime Minister recently announced two significant projects covering the east of London and the west of London to try to bring more resources to improving employment prospects and to make the impact greater, but she is quite right to say that, sadly, it is still true today that 50 per cent. of children born in inner London are born into poor households—that is households that have 60 per cent. or less of the median income. That is not acceptable for us and we will continue to work across Government in ways that I hope that she will find sensible and an effective response to the problem that she has highlighted.
The Secretary of State knows that one in four children in poverty have a long-term sick or disabled parent. Does he also know that there are 13,000 children with caring responsibilities greater than 50 hours per week? That is a situation that can greatly aggravate the negative consequences of child poverty. In the context of eliminating child poverty, and given that we are at the start of national carers week, what specific measures does he propose to deal with the problems facing child carers?
The Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Stirling (Mrs. McGuire), who is the Minister with responsibility for disabled people, and I are currently developing a series of new proposals that will address some of the concerns that the hon. Gentleman has raised. I think that that was the first time that he has contributed to Work and Pensions questions, so I am grateful. [Interruption.] It may not be, but it felt like perhaps it was. [Laughter.] I hope that that is in no way disrespectful to the hon. Gentleman, whom we hold in high regard on this side of the House. My right hon. Friend the Secretary of State for Health also has responsibility in this area, and we are also addressing the issue through the spending review settlement.
National Insurance Numbers (Illegal Immigrants)
I have had a number of representations from hon. Members. Since the inception of the national insurance system in 1948, the allocation of a number has never been designed to confirm that an individual has the right to live or work in the United Kingdom. However, in order to tighten the system further and to build on improvements that we already made in 2001 and again in 2004, we propose to introduce a right-to-work condition that will have to be satisfied before a number is issued.
I am pleased that the Government have finally taken note of this matter, but it was six years ago, in May 2000, that Lord Grabiner brought out his report, which highlighted the issue of illegal immigrants making national insurance applications. Why has the change taken six years? Why has it taken the Home Office scandals and fiasco to bring focus to this matter? I hope that the Minister will not tell us that the Government did act in 2000 and that everything was rosy, because if it was, why did they need to change the rules last week?
The hon. Gentleman should refresh his memory of what Lord Grabiner actually said. In paragraph 4.15 of his report, he said:
“It is unlikely that a large proportion of illegal immigrants claim benefits…However, to the extent that they do…this is likely to be linked to…identity fraud.”
His specific recommendation was about identity fraud. We enacted it within a year by the introduction of the enhanced national insurance allocation system. In 2004, we amended his Government’s legislation to strengthen the controls that employers have an obligation to put into place. The third improvement that we are making is to introduce the right-to-work condition. He should welcome that.
In relation to individuals whose asylum application fails although they are granted a national insurance number, would it be possible to incorporate in the number a field or pair or digits that showed their status so that the number could be de-registered when their application is refused? Is that not the way forward, as long we do not give the project to the Accentures, the EDSs and the Capitas of this world to mess up?
I am reliably informed that in official circles there is widespread concern about the issue of temporary national insurance numbers and, indeed, multiple national insurance numbers to the same individual. On 2 March, however, the Department answered a question, saying that no temporary national insurance numbers were issued. Can he explain that apparent discrepancy?
Temporary numbers are issued in certain circumstances, but if there is doubt about an applicant’s immigration status—as I said, if they are in employment a national insurance number is issued, and that has always been the case—the matter will be referred to the IND. If they are not in employment, or if we suspect that their documentation is false, a national insurance number is not issued.
We welcome the fact that the Minister has announced plans to introduce a test of legality before issuing NI numbers from next month, but what plans does he have to recall for interview with a view, if appropriate, to cancelling national insurance numbers, the 1,712 applicants whom he recently told the Chairman of the Select Committee on Home Affairs had been referred to IND over the period April 2005 to February 2006 as potential immigration offenders, but who were issued with national insurance numbers anyway?
The Minister shakes his head, but the Chairman of the Home Affairs Committee certainly understood that to be the case. Let me ask him another question. In 2001, shortly after the Grabiner report, Jeff Rooker, the then social security Minister, said in Standing Committee in 2001 that techniques developed in the Balham project
“of in-depth analysis and more systematic questioning about NINOs are being rolled out across the country, virtually as we speak”—[Official Report, Standing Committee A, 9 April 2001; c. 74.]
Bearing in mind that commitment, will the Minister confirm that the amount of time allocated for interviews with national insurance number applicants has been cut from one hour to 45 minutes, and that interviewers have been instructed to accept photocopies of passports and other documents, instead of the originals? Despite the message from the Balham project, Lord Grabiner’s warnings, and Jeff Rooker’s commitment to the House, the Government have continued to weaken controls over the issue of national insurance numbers to foreign nationals.
There were a great many points in the hon. Gentleman’s question, but I shall respond to one or two. He said that national insurance numbers were issued willy-nilly: that is simply not the case. If our officials are aware of false documentation, national insurance numbers are not issued. He should bear in mind the fact that 20,000 applications for national insurance numbers were declined last year. The powers to which he referred in his long question are more robust following our implementation of Grabiner’s recommendations, as there is now a four-stage process, which did not exist under the previous Administration. For third-country nationals, the first stage covers telephone discussion; the second stage establishes residency; the third stage involves a face-to-face interview for identity purposes; and the fourth stage involves additional evidence. An applicant may be required to submit up to 20 documents as proof of their identity.
Incapacity Benefit (Nottingham)
Earlier this year, at the invitation of my hon. Friend the Member for Nottingham, North (Mr. Allen), I attended a conference held by One Nottingham where local plans for helping people on incapacity benefits return to work were discussed. We intend to announce next month the first wave of cities to take forward the new approaches outlined in the Green Paper.
I thank the Secretary of State and the Minister for Employment and Welfare Reform for their personal interest in pursuing that application. We promise them that that will be forthcoming in the very near future. There are over 30,000 people in Nottingham on incapacity benefit and related benefits, and the strategy presents a great opportunity to impact upon that. Does my right hon. Friend agree, though, that the strategy must lie alongside other strategies on deprivation and regeneration, such as teaching youngsters social behaviour at school and tackling the 50 most difficult families, which One Nottingham is doing? Further to the question from the hon. Member for Reading, East (Mr. Wilson) about cognitive behavioural therapy and helping people get back on the bridge into to work, it may produce tight bottlenecks in the national health service as we try to tap into the supply of those therapists. Will my right hon. Friend ensure that there are sufficient cognitive behavioural therapists available to make his strategy a success?
I am grateful to my hon. Friend for the leadership that he is showing in his own city, taking forward those proposals. I have no doubt at all that Nottingham will provide a high quality bid when the process for applications has come to an end. There is a strong local partnership in Nottingham, and one of the things that struck me when I was there was the appreciation of the extent to which any successful strategy must be based on a broad approach. I agree with my hon. Friend about the importance of cognitive behavioural therapy. In the neighbouring pathways to work scheme to his in Derbyshire, the same problem of access to CBTs was encountered and the solution was to contract that service from the private sector. Where that can deal with the bottlenecks that my hon. Friend mentioned, it is the sensible way to proceed.
We announced to the House on 16 March 2006 the Government’s intention to appoint independent consultants to conduct a strategic review of Remploy’s future business options. I have no current plans to visit the Remploy factory in Dundee.
Last Tuesday the Minister announced that the review of the Remploy organisation is to be extended. The review has been extremely controversial in Dundee, where many of the Remploy workers feel that it is no more than a convenient cover to close down the Remploy factory network, particularly the Dundee factory, which has one of the best business cases not only in Scotland, but in the UK. Will my hon. Friend agree to visit the factory with me to reassure those workers and reaffirm that the review is not simply about closing their factory?
I know of my hon. Friend’s great interest in the Remploy factory in Dundee, both as a Member of Parliament and previously as a full-time officer of the GMB, which is the predominant union in the Dundee factory. Working closely with the trade unions and other stakeholders, we have tried to ensure that there is no pre-judging the outcome of the review. I await the result of the PricewaterhouseCoopers review, and at an appropriate time I will be delighted to visit Dundee and to include a visit to my hon. Friend’s factory.
Over 80 towns and cities in Britain have Remploy factories. Does my hon. Friend agree that those considerable assets in terms of buildings and the skills of the staff there could be used to establish a much closer relationship than has existed hitherto between Remploy and the other Department for Work and Pensions agencies, such as pathfinders to work?
That depends very much on the local relationships. In some areas there is a close relationship between Remploy and its interwork, as well as its factory network, and Jobcentre Plus or pathways to work. We want to ensure that we maximise the impact of the support that we give to disabled people seeking employment. I certainly take my hon. Friend’s comments on board and will ensure that as far as possible we have a close working relationship not just with Remploy, but with other supported factories and workstep through the country.
We carry out periodic reviews to monitor ongoing eligibility for benefit. The frequency of those reviews depends on claimants’ circumstances and conditions. Approximately 65 per cent. of new claims involve medical examination.
Citizens Advice has warned that plans to reform incapacity benefit in the welfare reform Green Paper will fail unless changes are made to the way in which people are assessed. Will the Minister concede that significant improvements are needed to the medical assessment gateway?
I am tempted simply to say yes, but that would do the hon. Gentleman’s question a disservice. Citizens Advice has carried out its work thoroughly, and it welcomes the approach in the Green Paper. We need to review the personal capability assessment, because we need to assess every individual’s ability not to rely on benefit for life, but to get closer to the labour market and participate in active employment.
As the Minister knows, the tests of people on incapacity benefit sometimes consist of no more than a chat across a table, after which claimants are sometimes refused incapacity benefit. Will he allay my fears and assure me that doctors will do the job properly and that proper guidelines will be introduced to ensure that people are not called to tests for the sake of it?
My hon. Friend is right. If he has particular examples of the practices that he has described, I would obviously be willing to meet him and discuss them. Doctors have conducted more than 493,000 examinations of incapacity benefit claimants, and the number of complaints about their conduct is very small—in extreme cases, such complaints have led to doctors being struck off. We must get the matter absolutely correct, and we intend to do so as we move towards the introduction of the employment and support allowance, which is identified in the Green Paper.
In many cases, NHS examiners directly contradict claimants’ GPs and consultants. Since half of appeals are upheld, surely more radical action is required to raise the professional standards of the people who carry out those examinations for the NHS.
The medical profession is involved in different ways in such cases—the individual’s GP carries out the diagnosis and the medical examiner assesses the impact of that condition on that person’s ability to work. As Citizens Advice has pointed out, we must get such cases right first time. About 8 per cent. of cases end up going through the appeal process. That percentage is too high, and we intend to act further to reduce it as we move forward with proposals in the Green Paper.
On Friday, I discussed that issue with a GP in my constituency, who made it clear that he does not want a role in assessing whether someone is fit for work, because he thinks that that might ruin his relationship with his patients, but he would welcome others working alongside his practice to encourage people into work. Will my hon. Friend consider redesigning the personal capability test to make it wider than a medical examination and to take into account social factors, which is what disabled groups are calling for?
My hon. Friend has correctly identified some of the past weaknesses in the assessment process. We are involving stakeholders and professionals in order to ensure that we get the review of the personal capability assessment absolutely right. Again, if my hon. Friend knows about case studies from her constituency or wants to feed in the experience of local GPs, I am happy to listen. She has made the important point that GPs are involved in diagnosis with patients while medical examiners currently assess the impact of a condition on a person’s ability to work, and we remain committed to that important distinction. We must work more closely with GPs, and we will.
Child Support Agency
As my right hon. Friend the Secretary of State has already said, the overall performance of the agency is still not acceptable. However, there have been improvements in some areas. The agency’s operational improvement plan, published in February, set out the immediate priorities for improvements in client services and enforcement. Also, as we have already announced, Sir David Henshaw has been asked to report on his proposals for a redesign of child support policy and delivery before the summer recess.
Staff at the agency say that the current reorganisation will lead only to more backlog. When Sir David Henshaw concludes his report, that may lead to further disarray. This situation has been an absolute nightmare for many of my constituents and, I guess, those of Members on both sides of the House. When do the Government think that they are finally going to sort out this farce?
I know that many of the hon. Gentleman’s constituents are frustrated about the state of the CSA, and I think that that feeling is shared by our constituents across the country. However, the staff inside the agency, who work very hard to deliver its services in difficult circumstances, are right behind our drive to improve its performance. They want to be part of a successful Child Support Agency.
I reject the hon. Gentleman’s comments on the backlog. Although it is still considerable, at more than 300,000, it has fallen over the past year. The additional staff whom we are putting in should enable us to bring down that backlog even further as we move forward with the improvement programme.
Many of us have come to the reluctant conclusion from our constituency casework that the CSA is essentially broken. That being the case, and as we await the Henshaw review, can the Minister give us an absolute guarantee that Ministers will come to the House prior to the summer recess and give us a statement about exactly what the Government plan to do, bearing in mind that their previous statement promised only yet another review?
The operational improvement plan sets out the immediate priorities, including improved enforcement. The agency has already established a working group with the Magistrates Association, the Department for Constitutional Affairs and the Justices’ Clerks Society, aiming to develop a faster and more effective court referral process. As a further step in speeding that process, we will pilot the centralisation of magistrates courts’ cases.
My constituent, Lorna Leech, has sought justice from the CSA for more than 10 years. She is owed more than £30,000 of child support, and now her children are nearly grown up. Does the Minister think it acceptable for the CSA to wait for more than eight years to take that case to court, and then to seek an adjournment of a subsequent hearing? Does he agree that children are only young once, and that justice delayed is justice denied?
I agree with the hon. Gentleman—that is an unacceptably long wait for action. I am aware of some of the details of Miss Leech’s case. I understand that the agency has brought four separate liability orders in respect of her case, over a considerable period, but there is still no action in the courts. That is an unacceptable delay. I hope that the process will be speeded up. I am happy to meet the hon. Gentleman to go into the case in more detail, and I will offer any help to him and his constituent that I can.
Is it not the case the Sir David Henshaw’s brief has been restricted, and that he is therefore unable to undertake the root-and-branch review of the CSA that would allow him to consider the entire structure of child support in this country? He could, for example, look to other countries with a much more successful record in payment, such as Australia. Is that part of his brief, or not?
For the week ending 2 June, there were 153 people with outstanding claims for jobseeker’s allowance in the Coventry and Warwickshire district, and 5,291 in the west midlands.
Specifically in the west midlands, we are using facilities and staff in other parts of the country to clear the backlog to which my hon. Friend persistently, and very effectively, refers. The new figures from Jobcentre Plus on the clearance and processing of benefits will be out tomorrow. If they have not improved to the extent that he and I wish and expect them to, I am happy to meet him to discuss what further can and should be done.
National Insurance Numbers (Illegal Immigrants)
An employment-related national insurance number would usually be issued to third country nationals only if they presented proof of employment. If our officials had grounds to suspect illegal working, the matter would be referred to the immigration and nationality directorate. Our proposed right-to-work check will strengthen those arrangements.
Furthermore, possession of a national insurance number in itself is insufficient evidence to gain access to social security benefits. Robust checks to confirm identity, as recommended by the Grabiner report, are in operation.
The Minister has already quoted Lord Grabiner. However, is he aware that last week Lord Grabiner said:
“One of my key concerns was that if you got hold of an NI number then it gave you access to all kinds of benefits—everything that was going.”?
Is not the Minister’s inability today to give an estimate of the benefits paid to illegal immigrants a further indication of the utter incompetence with which the Department has handled the issue?
I will again refer the hon. Gentleman to what Lord Grabiner said in his report, which is that
“it is inherently difficult to give an accurate estimate of the numbers involved”.
That was his opinion in 2000. His report did not refer to individuals’ right to work in this country being part of the national insurance application process.
May I draw the Minister’s attention to illegal immigration in Kettering and the problem of legal migrants being subject to illegal terms and conditions of employment? Responsibility for those issues appears to fall somewhere between the IND, the Paymaster General and the Department. Is the Minister satisfied that there is effective Government co-ordination between all three Departments on those matters?
There is some sharing of responsibility. However, the Conservative Government’s legislation—the Asylum and Immigration Act 1996—placed considerable responsibility on employers to establish whether people applying for a job had a right to work in the United Kingdom. We strengthened that legislation in 2004 and we also implemented the Grabiner report’s recommendations. The system is therefore far more robust now than the one we inherited. We recently announced a further improvement.
We propose that the new crediting arrangements for carers will apply from 2010. On its own, the new carers credit will mean that approximately 70,000 more carers could gain credit to the basic state pension. It will also help around 110,000 more women and 50,000 more men to gain credits to the state second pension.
I thank the Minister for that reply. The White Paper is a bold move forward and will ensure that many carers get increased pension rights. However, does my hon. Friend know that a quarter of all women between the ages of 50 and 59 are in a caring role? Much of the time that they have spent caring has been before the introduction of home responsibilities protection and credits. Will he ensure that those women will not lose out when the excellent proposals are implemented?
That is the key group at which the reforms are aimed. They will be helped especially by the reduction in the number of qualifying years to 30. Approximately 30 per cent. of women currently reach retirement age with full entitlement to a basic state pension. In 2010, the figure will be 70 per cent. and it will be 90 per cent. in 2020. That will help exactly the group that my hon. Friend mentioned.
I am grateful for that question. We have significantly reduced the level of overpayment of jobseeker’s allowance. The overpayment level that we inherited in 1997 represented 13.2 per cent. of JSA expenditure. I am happy to tell the hon. Gentleman that the latest estimate is that, thanks to our measures, the loss is down to 6 per cent. of JSA expenditure. We will not stop there—we shall continue to strive to reduce that even further.
I thank the Minister for his response, but is not the true story that, since the 1997 general election, 910 million overpayments have been made? Will he reassure hon. Members that, with rising unemployment—44,000 jobs lost in the previous quarter ending in March—JSA overpayments will be reduced further? The Department appears to be managed incompetently when so much money is being given away unjustifiably.
I think that our record speaks for itself. When the Conservatives were in government, they did not accurately measure what was going on—that is how bothered they were about the issue. We have far more robust systems of measurement in place, however. The hon. Gentleman has asked me for more information and reassurance, so let me break down the figures for him. The level of loss in jobseeker’s allowance to fraud in 1997 was £300 million; last year, it was £50 million. In 1997, the level of loss in JSA to official error was £150 million; last year, it was £50 million. That illustrates the progress that we are making, and we shall continue to make it.
I thank the Minister for his answer. On Saturday, at the start of carers week, I visited a massive display of all the carers’ associations and organisations within Dudley. Many of the carers that they represent are women, and I was lobbied quite specifically about pension entitlement. Those women will be happy to hear the answer that the Minister has just given me. Will he undertake to visit Dudley to meet some of them, to explain their entitlements and to listen to the significant issues that some of them have about the substantial care that they provide?
I would be delighted to visit Dudley to do exactly that. I am going to King’s Lynn later this week in the context of carers week to explain our proposals, which will be extremely good news for carers. We are modernising the contributory principle because we need to recognise the contributions that people make, not only through work but through child care and other forms of care. That is exactly what we are doing.
There are regular discussions between departmental officials and officials in the Treasury on the operation of the tax credit scheme and its interaction with Department for Work and Pensions benefits.
As the Minister knows, the tax credit system is a complete shambles from start to finish—so much so that some of my constituents have been sent a letter stating:
“Unfortunately the forms”—
about how to complain—
“are not available but will be sent to you as they become available.”
So, people cannot even complain about this mess, which has been caused by the Treasury’s power grab for this aspect of policy and by the Chancellor’s obsession with gaining control of every aspect of domestic policy. Will the Minister’s Department now assert itself and get back under its control this aspect of policy that is vital for so many people on low incomes?
The right hon. Gentleman will be aware that tax credits are benefiting 6 million families and about 10 million children throughout the United Kingdom. They have also played an important part in helping to lift 700,000 children out of poverty. Of course, I reiterate the apology that has been offered by other Ministers for the mistakes that have been made in the operation of the tax credit system and for the difficulties that they have caused. However, I do so, in the expectation that Conservative Members will offer an apology for voting against the creation of the system in the first place. Of course it is regrettable that the right hon. Gentleman’s constituent has to wait for the forms, but if we were relying on him and his party, they would still be waiting for the creation of the tax credits themselves, and for the alleviation of poverty that they have brought about.
Financial Assistance Scheme
As we announced in the White Paper on pensions reform, eligibility for the financial assistance scheme will be extended to all those who meet the other qualifying conditions and were within 15 years of their scheme’s pension age on 14 May 2004. This means that about 40,000 people will receive assistance totalling more than £2 billion over approximately 50 years.
Is the Minister aware that many of my constituents lost their company pensions when Albert Fisher went into receivership? At first, they welcomed the announcement to extend the Financial Services Authority scheme and assumed that they would be entitled to 80 per cent. of their original pensions. However, the company pension expert, Ross Altmann, has looked into various matters, including the non-indexation of capital sums, and it would appear that my constituents may only get 20 per cent. of their original entitlement. Is that the case?
No, that is rubbish, actually. We made our proposals, and the fact that there would be taper, absolutely clear. That will help us to reach more people and it amounts to a significant extension of the scheme from £400 million to £2.3 billion. Unless the Conservative party is going to provide more funds to extend it even further, it should accept what we have done and welcome it.
House of Commons Commission
The hon. Member for North Devon, representing the House of Commons Commission was asked—
The Department of Finance and Administration carries out checks on the immigration status of all candidates at the interview stage of the recruitment process for prospective employees. Candidates must provide original evidence of their eligibility to work in the UK based on a limited list of acceptable documents, which follows Home Office guidelines.
I thank the hon. Gentleman for that answer, but there has been some regrettable publicity surrounding the Home Office and the way in which it has recruited illegal immigrants, often to work as civil servants. As I wander around the House early in the morning, I discover people from Francophone Africa, working for contractors—[Interruption.] I come into work very early. They are working for contractors to clean the offices, which they do perfectly well, but I suggest that it would be very embarrassing if they were found to be illegal immigrants. I trust that such people will be investigated.
I hope that the hon. Gentleman is not jumping to any conclusions about people’s immigration status simply because he encounters them working in the House. The contractors and agencies that supply temporary staff are responsible for checking the immigration status of staff and guidance has been given about how to do so. They have to sign a declaration to confirm that they have carried out the necessary checks and they have to provide the relevant documentation. The hon. Gentleman should therefore rest easy, as the proper checks are in place.
Leader of the House
The Leader of the House was asked—
House of Lords Reform
The hon. Gentleman will be aware that the Joint Committee on Conventions has now been set up and is receiving evidence. Tomorrow, my ministerial colleagues in the House of Lords and I will appear before it. I am also arranging to bring forward an order to extend its deadline from the end of July to the end of this Session. An order to that effect has already been laid in House of Lords and will come before this House, assuming that it is passed, as soon as possible. Meanwhile, I will hold informal consultations with the other parties, Cross Benchers and bishops. The hon. Gentleman knows that I am meeting him and other members of the cross-party group to discuss the way forward next week.
I am grateful for that answer, but I seek clarification of what now appears to be the timetable. The Joint Committee is likely to work until the autumn and then report. Should there be a chance for the cross-party discussions to take that advice, information and recommendations into account? Should the House of Commons then be able to deliberate and then the Government formulate their views, hopefully before next year and on a consensus basis, before putting them to both Houses of Parliament?
The hon. Gentleman is right to say that we all hope and pray to find a consensus on this matter, but we never know. It is the failure to find such a consensus in the past that has left us with a less than satisfactory status quo. As to the time scale, we will have lost some months by extending the deadline for the Joint Committee. My intention is to run the all-party discussions, including within the group, in parallel with the Joint Committee’s sittings, but not in a way that pre-empts the conclusions. We should gain a fairly clear idea about the direction in which it is moving towards October and November, and I hope that we can try to bring all these issues together either this side of the turn of the year or just the other side of it.
My friend will have read early-day motion 2307, on the reform of the Canadian Senate. Does he expect the Joint Committee to look at what is happening now in Ottawa to see whether that gives us any way to move forward in reforming the House of Lords?
The Wakeham commission took at lot of evidence about parallels with other second chambers, and I may tell my hon. Friend that the manner in which other second chambers operate, the balance of power between them and the first chamber and their systems of election and appointment are all the experiences that we need to look at very carefully before making our own decisions.
In thanking the Leader of the House for his over-modest extension of the deadline, may I ask him to confirm that he will meet that very large informal all-party group from both Houses, which includes a former leader of the Liberal party and a former leader of the Liberal Democrats in the House of Lords, and that he will listen very carefully to the unanimous view of that group, which does not believe in electing any Member of the upper House?
Like all hon. Members, the Leader of the House and I are keen to encourage greater public participation in our democracy. The Power report, “Parliament First” and the Modernisation Committee have made positive suggestions about making better use of public petitions. I am grateful to the Procedure Committee for devoting time and resources to the issue, and we look forward to being able to act on its findings.
I thank my hon. Friend for his answer. He obviously agrees with me that the Petitions Committee that has been set up in the Scottish Parliament has been shown to be in touch with the people, groups and professionals with petitions, which are vital to people. Will he continue to go down that road and ensure that he and the Leader of the House consider a petitions committee to try to engage the general public more in politics and the House?
I entirely agree with my hon. Friend—the Scottish Parliament’s Public Petitions Committee has been widely praised by people from all parties and those of no party. We recently made a change—some saw it as a landmark change—whereby petitions no longer need to be hand written but will be accepted in hard copy. I think that we can go a lot further than that.
I rather hope that we might. Certainly, the Public Petitions Committee in Scotland has been judged a great success—indeed, I believe that it is being emulated by the German Bundestag—so it is something that we should seriously consider. However, is there not a disjunction between what people are thinking at a certain time and want to put before Parliament, what Members want to put before Parliament, and what gets on to the Order Paper? Is there not a case not only for a petitions committee, but for finding a proper way to consider early day-motions signed by a great number of Members? For instance, early-day motion 1531 on Post Office accounts has been signed, as he knows, by more than half the membership of the House. Is there not a good case for putting that before the House in the form of a debate?
I certainly have no doubt that there is a disjuncture between what Liberal Democrat MPs may be doing and what the public think, and we are keen to find a mechanism that takes account of the public filling in petitions. I am keen to look at solutions to the issues that have been raised by us and in some of the reports that I have mentioned, such as the increased volume of petitions, as compared with those in the devolved Parliament in Scotland, and so on. I am sure that those obstacles can be overcome and I believe that we are at least united in wanting to ensure that the public have a better mechanism for being able to participate in discussions in the House. That is a way forward, and I look forward to the Procedure Committee coming up with some very solid recommendations that have all-party support.
I am grateful to the Deputy Leader of the House for the helpful tone in which he is responding on this issue. Although I never thought that I would stand here and say it, I think that we can learn something from the Scottish Parliament in relation to a petitions committee. However, there is a real difference between what the many thousands of people, who often sign petitions and who work hard to get signatures on petitions, feel will happen as a result of bringing their views to the House and to the Government, and the way in which those petitions are handled. We need to find a way in which people’s views are taken more seriously by the Government and the House when they have gone to all that effort.
On a technical point, may we please—I know that the Procedure Committee is looking into the petitions issue—find a way to accept petitions by e-mail? Many people find it so strange that they cannot e-mail signatures on petitions.
House of Commons Commission
The hon. Member for North Devon, representing the House of Commons Commission was asked—
House of Commons Chamber
Does the hon. Gentleman feel that there would be greater public interest in debates in the House, which are watched and listened to by very few people, were the debates more worth listening to—[Interruption]. Does he feel that a wider group of members of the public, architecture students and architects’ practices could help us to build a Chamber that was more conducive to genuine debate—[Interruption]—as opposed to posturing and shouting from a sedentary position, as is being demonstrated at this very moment, thereby making my argument?
When the hon. Gentleman raised a similar point a while ago, I suggested that he should approach the Modernisation Committee if he wanted to test the degree of support that he had among his colleagues. I am not aware of his having done that. Alternatively, he might like to table an early-day motion to test support for any idea that he might wish to put forward.
Points of Order
On a point of order, Mr. Speaker. I seek your help. Castle Point has serious antisocial behaviour problems, and I have spent some of my time over the past few weekends persuading residents not to get together in vigilante groups in order to go out on to the street late at night to protect their community, as that would be dangerous and unhelpful to the police. Has the Home Secretary indicated that he will come to the House and explain his new policy of encouraging residents to take control of their streets late at night, which seems dangerous?
On a point of order, Mr. Speaker. As the stoutest defender of Back-Bench rights and of new Members such as me, will you give me some guidance? I wrote to the Minister for Housing and Planning at the then Office of the Deputy Prime Minister on 24 January seeking a meeting to discuss planning conditions in relation to residential homes for troubled young people. When I did not receive a response, I followed up with another letter on 25 April. I phoned her office on 19 May and was told that my letter had gone from official to official and that no one had dealt with it, but that a reply would be sent within the next couple of days. Nothing further came, so my office called again on 31 May and we were told that investigations would be made and that we would be telephoned back shortly. Will you give guidance on this lamentable situation?
On a point of order, Mr. Speaker. The Foreign Secretary has rightly condemned the massacre of a Palestinian family that left only a seven-year-old girl as a survivor. The Foreign Secretary’s condemnation is welcome, and I have always condemned suicide bombings. Is there any way in which you could use your influence, Mr. Speaker, so that an oral statement can be made in the Chamber before Foreign Office questions? There is very great concern over what occurred.
Orders of the Day
Fraud Bill [Lords]
[Relevant document: the Fourteenth Report from the Joint Committee on Human Rights, Session 2005-06, Legislative Scrutiny: Sixth Progress Report, HC 955.]
Order for Second Reading read.
I beg to move, That the Bill be now read a Second time.
The Bill will reform the criminal law on fraud and dishonestly obtaining services. It applies to England and Wales and to Northern Ireland; Scotland has different provisions.
We know that fraud has a massive impact on the United Kingdom economy. It is difficult to give precise figures, because fraud is by nature secretive, but in 2000 National Economic Research Associates estimated that it cost the UK economy £14 billion. In 2004, Norwich Union suggested that the cost had risen to more than £16 billion. Despite the public perception that most fraud is a victimless crime, the reality is that it hits most of us. We all pay higher prices for security systems, banking services, credit and goods, and of course we also pay higher premiums for insurance. If the Norwich Union estimate is right, fraud is costing each household more than £650 a year.
Tackling fraud and the provisions of the Bill are therefore important to everyone. The Government’s strategy for tackling fraud has three aims. The first is to get the law right, and is the reason for the Bill. The second is to improve the investigation of fraud by the police and other agencies. The third is to ensure that the courts deal expeditiously and effectively with fraudsters. The investigation of fraud is being considered by the fraud review that the Attorney-General is currently leading, and which is expected to report soon. I shall return to that later. We have also agreed to deal with the issue of trials, particularly the contentious question of non-jury trials, in another Bill.
This Bill was the subject of a great deal of discussion in another place. By the end there was broad all-party support for most of its provisions, although I am sure that Opposition Members will want to test the detail in Committee.
Strange as it may seem, no general offence of fraud exists today. When lawyers talk of fraud, we refer collectively to a wide and complex array of deception and theft offences. The Theft Acts and the common law, compiled somewhat haphazardly, have the task of encompassing the wide range of fraudulent conduct.
In 1998, the Government asked the Law Commission to review this area of law. The commission conducted a lengthy and painstaking review, for which we thank it, producing a report in July 2002. Unsurprisingly, it concluded that the existing law on fraud was deficient and proposed changes, most of which found their way into the Bill. It identified certain key problems. First, the deception offences in the Theft Acts tend to be specific and narrow, which makes them vulnerable to technical assaults. Defence lawyers are often able to argue that a particular behaviour fell just outside the definition of the offence with which the defendant was charged, or that the defendant was charged with the wrong kind of deception and so ought to be acquitted. Defendants may indeed face the wrong charge or too many charges, and indictments may be excessively complex because of charges relating to various alternative counts.
Secondly, deception is an essential ingredient of the offence. That requires a victim to be deceived. However, a shop assistant who accepts a card for payment may be indifferent about whether the cardholder has authority to use the card as long as the payment goes through. Machines and computers have generated new problems. For example, a ticket machine has no mind of its own: can it be deceived? What of problems such as internet phishing? The more we use machines to obtain goods and services, the greater such problems are likely to become. So far the old laws are coping with those developments, but the signs of stress are beginning to show.
The Law Commission rightly took the view that it was unrealistic merely to plug the loopholes in the deception laws, or to try to create a new collection of specific new deception offences, as such piecemeal reform would produce even more complexity. Instead, the commission recommended a new general offence of fraud that would make the law more comprehensible to juries, would be fairer to defendants by making the law more straightforward, and would encompass fraud in its many unpredictable forms. In proposing that change, the Law Commission made two specific recommendations in relation to the law. First, the focus should be on dishonesty rather than on deception. Secondly, proof of gain should no longer be essential to proving the crime: it should be enough that the offender intends to make a gain for himself, to cause a loss to another, or to expose another to a risk of loss.
The Bill creates the general offence of fraud in clause 1. It will replace provisions in our law that are in daily use in the courts. It is important that we get those changes right. That is why, in 2004, after the Law Commission's report, the Government decided to carry out a further consultation on the proposals. The consultations showed wide support for the proposal for a new general offence. Most stakeholders agreed that it would be right to focus the crime on the dishonest behaviour of the defendant, rather than the deception of the victim. Most also agreed that the Law Commission was right to reject the idea of a very broad offence of dishonesty, which risked being too uncertain.
The general offence in clause 1 requires not only dishonesty and the intention of making a gain or causing a loss, but one of three other elements, which must be met before the crime can be charged. The three elements are: fraud by false representation, fraud by failure to disclose information, or fraud by abuse of position. Let me briefly describe each of them.
Fraud by false representation is set out in clause 2. The extra element is that the offender makes a false representation knowing that it is, or might be, false or misleading. The types of representation covered may be of fact or law, including making a representation as to a person's state of mind. There is no restriction on whether it is written, spoken or in non-verbal communication. The representations can be implied or expressed in any form. For example, it can be done by entering a stolen chip or PIN into a machine or by internet phishing, where someone puts a letterhead on an email suggesting it has come from a bank in order to elicit a victim’s financial details.
Under the second limb of the offence, fraud by failing to disclose information, the extra element is that the offender fails to disclose information that he has a legal duty to disclose. There were some differences of view on that proposal between the Law Commission and others. The commission’s report proposed covering circumstances where there was no legal duty to disclose but where one person trusted the other to disclose—where there was some kind of moral responsibility, for want of a better phrase—but in the Government's consultation, although there was widespread welcome for that limb of the general offence, the issue of going beyond a legal duty was questioned.
Some—for example, the Association of Chief Police Officers fraud working group—said that it would create uncertainty in the law. I can see their point. For example, how many of the minor defects of a second-hand car would a seller be trusted to disclose? The Government listened with care to those concerns and responded by restricting the offence to legal duties only—a position supported by the Rose committee, comprising members of the senior judiciary set up to ensure that legislative proposals are as well formulated as possible and can work in practice.
The incidence of credit card fraud, not merely by customers against retailers but often the other way around, is a significant problem, of which I confess I was briefly the victim in South Africa last year. Will the hon. and learned Gentleman tell the House something about the penalties proposed in the clauses and specifically how they compare with existing penalties? Is he prepared, alongside custodial sentences, to consider stiff community penalties and possibly the use of restorative justice?
We certainly need to look at the full range of penalties. Crime involving fraud, particularly cheque card fraud and other credit card fraud, varies in terms of extent. It can be a massive fraud that merits a high penalty. Indeed, the maximum penalty under the Bill is 10 years’ imprisonment. A community penalty and restorative justice may be appropriate if the amount involved were limited, the defendant had a limited record, or none at all. In those circumstances, we could look at various forms of restorative justice, particularly if the defendant were younger. I think that it is about achieving proportionality and ensuring that the appropriate sentence is delivered for the offence that was committed.
The third limb of the offence—fraud by abuse of position—is set out in clause 4. Here, the additional element is abusing a position of responsibility to commit a fraud. It applies in situations where the defendant has been put in a privileged position and by virtue of that position is expected to safeguard another's financial interests, or at least not to act against those interests.
I understand the thrust of the clause, to which we will obviously have to return in Committee, but is there not a possible problem with the lack of definition involved in a person’s occupying a position in which he is “expected to safeguard” somebody else’s interests? That is a much wider term than “a duty to safeguard” such interests.
We need to ensure that we have a view about how a relationship is created. It can be created in various ways, such as by contract, through various relationships or by a legal obligation. It is clear that, as long as there is a basis for ensuring that a person has a fiduciary duty to another person, there is the potential for such a charge to be made. But in prosecuting any such case, it will of course be necessary for the prosecutor to ensure that he identifies the way in which the circumstances had developed, and whether a fiduciary duty had indeed existed. It will then be up to him to show that that is what happened.
The Solicitor-General has used the precise expression “a fiduciary duty”, which would already provide a definition that appears currently to be absent from clause 4. In saying that, I emphasise that he might be able to persuade me during our proceedings that the current wording is better; I simply wish to register that this issue causes me some concern.
I wish to make exactly the same point. I am unclear as to why the expression
“he is expected to safeguard”
should replace a clear reference to a fiduciary duty. The question that all Members wish to ask is: who is the “he” who is expected to provide the safeguard? Is it the man on the Clapham omnibus, or the judge; or will the terms of contract provide the safeguard? What does the expression “expected to safeguard” mean? We will clearly need to explore that issue in Committee, but if the Solicitor-General can help us to understand it now, that would be to the advantage of us all.
The Law Commission cogently set out its views on how this relationship should be formed. In each prosecution, it will be necessary to assess the particular circumstances and whether there is a duty, in that a person is expected to safeguard, or not to act against, the financial interests of another. It will be for the prosecutor to show that that relationship existed, and, in due course, for the court and the jury—if it is a jury trial—to determine whether such a relationship existed.
Might that include the position of a friend? For instance, if I am selling something to a friend of mine who happens to know that its value is far higher than the price that I am selling it to him for, will he be required in law to reveal to me the full value, and will he be guilty of fraud if he fails to do so?
I do not think that that would arise under this limb of the offence, but it would depend on the circumstances and the relationship between the friends. If they are dealing as equals, it would be a straightforward contractual relationship. Under this limb, for there to be an abuse of position, it is required that a particular duty is owed by the individual, over and above that which people have when they enter into a normal contract to purchase property, or anything else.
I note the characteristically cautious reply that the Solicitor-General gave to the hon. Member for Rhondda (Chris Bryant), but is it not the case that the far more likely reaction of his friend would simply be to think that he has undervalued one of his own possessions? That is such a spectacularly implausible scenario as to merit no further discussion.
The nature of the Bill probably means that the detail is the most important aspect, but it is true that clauses 3 and 4 overlap. It is possible for one single action to be an offence under clause 3, which is reasonably happily drafted, and under clause 4, about which I have much greater concerns.
There is some overlap and I say again that it would depend on the circumstances between the two friends undertaking the financial deal that my hon. Friend the Member for Rhondda (Chris Bryant) described.
Fraud by abuse of position improves upon the current law, because it may be problematic under the current law to show that a victim has been deceived in circumstances where the defendant occupies a position of trust. In proposing the new offence, the Law Commission recommended that it should be an offence of fraud only if the abuse of position is both dishonest and secret. However, again after considering the arguments put forward during the consultation in 2004, the Government decided not make secrecy an essential part of the offence. We took that view because secrecy is difficult to define and would represent an unnecessary complication, which could lead to technical arguments in court. Moreover, conduct that is not secret is not any the less reprehensible and thus should come within the ambit of clause 4.
The Fraud Bill also creates some offences designed to complement the new general offence.
My hon. Friend will know that on 1 June EU Ministers met and agreed a formula for sharing evidence between EU countries on matters such as fraud. Does he agree that that decision, along with the decision to implement the European arrest warrant, which came into effect in 2004, will help us on cross-border issues, so that no one who commits a fraud in another EU country should believe that that will necessarily prevent them from being brought to justice here?
It is certainly right that some of the developments in the global economy that have so benefited our economy have also benefited a lot of fraudsters, who operate in Europe and globally. We now see frauds committed by a group on one continent against victims on another, especially by use of the internet. We are now developing relationships between the various prosecutors and Governments to build up new mechanisms, such as the one that my hon. Friend described, that will enable law enforcement agencies to keep abreast of the changes that the global economy is bringing. I hope that those mechanisms will enable us to get ahead of the fraudsters. My hon. Friend is not only well informed but right about the importance of developments in the EU, especially the European arrest warrants.
Some of the other changes in the Bill were recommended by the Law Commission, but others were not. Clause 11 was recommended by the commission and creates a new offence of “obtaining services dishonestly”. It is probably the most important other provision in the Bill, and the offence will have a maximum penalty of five years on indictment. It will replace section 1 of the Theft Act 1978 and will fill a gap in the existing law. At present, it is questionable what crime is committed by a person who dishonestly obtains services from a machine. Under current law, the problem is not only that fraud must involve deception, but that services cannot be stolen.
The Solicitor-General mentioned that the maximum sentence for the offence would be five years, which is a restatement of the current law. Did the Government give any consideration to increasing the maximum sentence for the offence to make it comparable with the sentence for obtaining property by deception, or with the offences that replace that offence?
We are responding to the broader consultation that took place and the work done by the Law Commission. On the face of it, the penalties that we have set out in the Bill look to be appropriate in all the circumstances. Consideration is always given to whether penalties are adequate, and we took the view that in all the circumstances they were adequate in this case. It is always possible to increase sentences, but it is necessary to look at the circumstances that the offence would contain and to determine the appropriate maximum penalty, in the knowledge that the maximum penalty is rarely imposed. None the less, the provision gives the court an indication of the relative seriousness with which Parliament regards various offences. We have taken the view that five years on indictment is the appropriate maximum, but in due course we can consider in Committee whether a higher sentence is more appropriate, and I shall be happy to discuss that point with the hon. Gentleman then.
As I indicated, the problem under current law is that fraud must involve deception but that services cannot be stolen, so the new offence of obtaining services dishonestly is a “theft-like” offence and will, for example, deal with a person who gains access to a Sky machine, or television, with an illegal decoder. It would also cover longer-standing misbehaviour such as gaining access to football matches without paying, so it moves from the more substantial to the not necessarily more substantial.
I do not want the Solicitor-General to expand his examples too widely, but would the provision also apply to downloading music? Would it put a new weapon into the hands of large music corporations for protecting their intellectual property—as they would see it?
It may. Such corporations could use other provisions, but often the real problem in the area that the hon. Gentleman mentions is not so much with the law but with the practicalities. Some of those items are downloaded from countries a long way away, so whatever our law, it is sometimes difficult for people, artists or companies to protect their copyright. That has been a long-term issue, and is better dealt with not so much through the criminal law, which is obviously related to a particular jurisdiction, but through international agreements. When I had ministerial responsibility for dealing with issues relating to internet fraud, I helped to negotiate agreements with Japan and a number of other countries so that we could begin to make the international agreements that would provide a basis for trying to protect some of the copyrights and international artistic licences that need protection. The provision could be used, but the jurisdictional problem is greater than the legal one.
The provisions to which the hon. and learned Gentleman referred had some limitations, which we believe that the broader offence will be able to ensure are covered. There have been quite a lot of changes in technology and in the way in which people commit frauds. The previous legislation had constraints. The proposed provisions are designed to ensure that we can deal with some of the modern phenomena that are causing problems, various frauds and the dishonest obtaining of services. They will ensure that the legislation covers those issues in a broader and more effective way than the previous legislation did.
That is why the Law Commission came forward with the proposal. If the hon. and learned Gentleman reads the report—I am sure that he has done so—he will be aware that the Commission argues that the provisions set out in the current legislation need to be updated. The Government have endorsed that view. When we went out to consultation, the proposal was warmly welcomed by all who commented on that consultation in 2004.
Clause 6 did not form part of the Law Commission’s report, but was developed through consultation with law enforcers and other key stakeholders who were concerned about the restricted scope of the existing law as regards the possession of articles preparatory to committing acts of fraud. The clause therefore introduces a new offence of possessing articles for use in, or in connection with, the commission or the facilitation of a fraud. It draws on the current offence in section 25 of the Theft Act 1968. Under that section an offence is committed when a person has with him, when not in his place of abode, any article for use in the course of, or in connection with, any burglary, theft or cheat.
The requirement that a person be outside his place of abode when going equipped may have worked in 1968, but in the modern world, with computers, fraud may be perpetrated by a person sitting at his computer terminal in his home. The offence should not be limited to possession outside the home.
Some commentators have referred to the fact that there is an absence of any mens rea element in this part of the Bill. The Solicitor-General has already referred to the “going equipped” part of the provision. I am concerned that a person could be in possession of an article that was for use in the course or in connection with a fraud, without knowing that that article would be for use in connection with the fraud. That is dangerous. Although I understand the reasoning for updating the law, which is very important, I think that it would have been preferable to put in the Bill a clear mens rea element.
As it needs to be shown that there was an intention that an article would be used for any involvement where someone was going equipped in connection with any burglary, theft or cheat, there is a requirement for some degree of intention. There is a mens rea, and case law shows that.
I suggest that the problem may go further, particularly with regard to clause 7. If one were a member of the Magic Circle, with all the impedimenta for deceiving people, and one were going through the streets or even in one’s own home, one might frequently be making an article that could be used or adapted in a connection with fraud. I suspect that that is one of the reasons why the original cheating provisions were so tightly drawn. That is something else that we may be able to examine during the passage of the Bill. I am sure that it is not the Government’s intention to make it impossible for conjurors to perform their trade.
Let me reassure conjurors throughout the land that, provided that they are not intending to get involved in burglary, theft or cheats or anything else of a similar nature, they should be all right. Let them continue with their tricks.
The aim of the Bill is to ensure that we get particular individuals who are seeking to go equipped, and may be equipped in their home, and to ensure that—
If the hon. Gentleman will let me complete my thought, perhaps I will. It is the intention that we should be able to catch those who are involved in something that is, properly, prosecuted. It is also the intention that there should be a maximum custodial sentence of five years, and that no tricks should be able to get someone out of choky.
May I bring the Solicitor-General back to the point made by the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) about the possibility of someone being in possession of an item defined in clause 6(1), but not knowingly? Would the Solicitor-General be amenable to returning to that matter in Committee? The simple addition of the word “knowingly” in that subsection would deal with the point.
May I make it clear that clause 6 does not go too wide, in my view? It does not introduce a strict liability offence in any way. Its wording draws on the wording of section 25 of the 1968 Act in order to attract the case law that goes with that section—notably the case of Ellames, which is referred to in the explanatory notes and which established that the prosecution have to prove a general intention that the article will be used by the possessor, or by someone else, for a fraudulent purpose. We are not dealing with a strict liability offence for which members of the Magic Circle or ordinary honest citizens are going to be caught.
There is a distinction. Under the present law of going equipped, if a person were out at night with a jemmy and various other tools, as an initial starting point it would be fairly obvious from the nature of those tools that he was up to no good. The distinction is that an article that could be used in connection with fraud might look perfectly innocent to a person such as me, who is not high-tech, or whatever the word is. Without knowing it, I could have something on my computer that might be used in connection with fraud. If I walked down the street with a jemmy, clearly that would be a different thing altogether.
Again, the hon. Gentleman seems to suggest that this is a strict liability offence, but it is not. If he were in possession of something that he ought not to be, but did not know and did not have any intention, he would be able to put forward a defence. That is right and proper. Nobody intends to catch people who are not acting inappropriately or in a way that goes outside the provisions set out in the case of Ellames. No doubt this is the sort of issue that we can discuss at some length in Committee. Having given way fairly generously, and being aware of the time that has elapsed, I would now like to try to make some progress on the rest of the Bill.
Clause 7 introduces a higher-level offence of making and supplying articles for use in fraud. This aims to catch groups who create articles for use in what may be very substantial frauds. For example, there are organised criminals who do not engage in actual frauds themselves but who sell lists of personal financial and banking details for others to misuse. The maximum custodial sentence of 10 years serves as a strong deterrent to criminals who prosper from an industry based on fraud.
Clause 9 implements a recommendation made by the Law Commission in 2002 in a separate report on multiple offending. The commission recommended that, as the existing offence of fraudulent trading under companies legislation applies only to companies, it should be “extended to non-corporate traders”—for example partnerships, sole traders, trusts or companies incorporated abroad. Fraudulent trading is an activity offence, and carries procedural and evidential advantages because it is not limited to specific fraudulent transactions. The proposal was widely welcomed in the Government’s consultation of 2004. The new clause 9 offence, together with section 458 of the Companies Act 1985, will carry a maximum sentence of 10 years.
Let me now turn to the one area of the Law Commission’s proposals that elicited opposition when the Government consulted stakeholders. The Law Commission proposed the repeal of the common law offence of conspiracy to defraud. Opposition to that proposal has come not only from law enforcers and the judiciary, through the senior judges on the Rose committee, but from many others, including the Fraud Advisory Panel, the Confederation of British Industry and the Law Society. The Government took account of those considerable objections, so the Bill does not include that repeal, although we will review the position three years after its implementation. We accepted the arguments for the retention for the time being of the common law offence, based on the need to provide a seamless transition between the current situation, in which there is heavy reliance on the offence, to compensate for defects in the statutory law, and the stage when its abolition can be safely contemplated.
The common law offence of “conspiracy to defraud” is flexible. It is of use in frauds that involve a number of conspirators and hundreds of offences. If each item were charged, the indictment would be lengthy and extremely complex. Conspiracy to defraud allows a charge that covers the agreement to carry out the crime. There are limitations, too, on the application of statutory conspiracy, and the common law offence can be used in situations where statutory conspiracy cannot be used—for example, when the final offence is carried out by someone outside the conspiracy. Overall, the new offences go a long way towards filling many gaps in the law. However, we are concerned about a number of issues, and we should ensure that the common law offence of conspiracy to defraud remains in place, at least for the meantime.
The Law Commission will shortly publish a report on assisting and encouraging crime. Any reform of the law on conspiracy to defraud or of other laws that flows from that work should be taken into account. We intend to consider the report, all the circumstances and the way in which conspiracy to defraud has been used, then make a decision, which will be informed by our operational experience, not only from the Bill once it is in force, but from the multiple offending provisions in the Domestic Violence, Crime and Victims Act 2004. Those provisions enable multiple offenders to be brought to justice for the totality of their offending. They have not yet been implemented, but we hope to bring them in later this year, making it possible for the courts to deal appropriately with fraudsters who are responsible for scams involving hundreds of victims. The Home Office will review the operation of the Bill three years after its implementation, and it will focus on conspiracy to defraud. We have put in hand measures to collect the information for the review from all Crown prosecutors so that we have a clearer picture of the way in which the common law is used after the new law is implemented.
I met the staff of the Serious Fraud Office this morning, when I made the same point. I want them to look at the ways in which they use conspiracy to defraud to ensure that it is used appropriately, and to set out their reasons for using it in particular cases so that we can make a more effective assessment in three years’ time. That will provide information on which to base a decision about whether the common law offence can be repealed. In the meantime, the Attorney-General’s guidance to prosecutors on the use of the common law offence will prove instrumental. It will state what information must be collected from the outset to inform the review, as well as setting out the circumstances in which the use of the common law might, or might not, be justified.
The Bill intends to make fraud law easier to understand. In that spirit, can the Solicitor-General define exactly which areas the common law offence of conspiracy to defraud will cover that are not covered by the new offences in the Bill?
The conspiracy to defraud has proved useful to prosecutors in several ways. For example, it can be used to reduce the number of charges that would otherwise be brought. It can be used, too, if the substantive offences are steps to achieve a wider dishonest objective, such as swindling a large number of people. It should not be used where, for example, statutory conspiracy is more appropriate. There are circumstances in which the conspiracy has involved certain individuals who carried out the steps preparatory to the offence, but the substantive offence was committed by somebody outside the circle involved in the conspiracy. There are a number of examples where prosecutors have been able to prosecute people who clearly had a dishonest intent and who were clearly carrying out acts preparatory to a fraud, but who were not involved in the final substantive act. Such cases are extremely useful to the prosecutors.
We hope that the Bill will cover many areas of fraud. However, since even Ministers do not claim infallibility, we cannot be sure that we can create a set of legal provisions encompassing all the areas currently covered by conspiracy to defraud. We therefore need to await the outcome of events and see how the Bill operates in practice. If we do not need conspiracy to defraud to capture those who are committing serious frauds, our preference would be to repeal that provision in due course. But if we still find a series of examples in which we need to use conspiracy to defraud, we will have to consider whether we can repeal the provision, or whether we should consider alternative tightening provisions.
The Theft Act 1968 was relatively good. In 1968 it was regarded as innovative—in plain words we would be able to encompass all the circumstances of theft. In practice, it has had to be amended on at least two occasions, and has been the cause of much stress, as the world has changed. We will review the operation of the Bill and see whether a repeal is possible.
Does my hon. and learned Friend agree that when people are charged with criminal offences, it is important to make it as clear as possible in the charge what the offence is? One of the difficulties with the common law offence of conspiracy to defraud is that it is too general a provision. We should always try to ensure that offences are as particularised as possible. That is why the common law offence ought to be repealed as soon as possible.
If we can repeal the offence, our preference would be to do so, but we want to ensure that we deal with the issues of fraud, so that is not appropriate at present. The prosecuting authorities and the judges took the view that we need to approach the matter with caution. The Rose committee, whose opinion is highly valued, did not consider it appropriate to repeal the offence at this stage. In principle, though, I have sympathy with the point raised by my hon. Friend.
The Bill will not be a panacea for preventing fraud. We should not overrate the capacity of the criminal law alone to solve this or any other problem. The Bill is only one of a number of measures in hand to combat fraud. Among those measures, we have provided considerable resources for the Serious Fraud Office and the City of London police to tackle fraud, including £1.08 million this year, which has been matched by the City of London. That has gone to the City of London police. We have also set up the Serious Organised Crime Agency, which is a new force in tackling and defeating serious organised crime.
The Government plan to introduce a stand-alone Bill to address the issue of non-jury trials. We have also set up a wide-ranging review of fraud to examine the UK’s long-term response to fraud. The fraud review should report shortly, and we expect it to recommend a coherent strategy for preventing, detecting and penalising fraud, and to suggest ways to improve upon the use of the various tools and techniques at our disposal to reduce the incidence of fraud and the harm to which it can lead.
This Bill is largely based on the Law Commission’s original proposals, and it is only part of the Government’s strategy for combating fraud, but it is a measure that has been eagerly awaited by many of the agencies that prosecute, and by the police. It should improve the prosecution process by reducing the chance of offences being wrongly charged, and provide greater flexibility to keep pace with the increasing use of technology in crimes of fraud.
When hon. Members consider the Bill in Committee and on Report, I hope that they give it a fair wind, so that it can proceed into law and be enforced, which will reduce some of the fraud that is all too often committed against families in this country.
I congratulate the Solicitor-General on having secured that rarest of things for a Law Officer—an outing at the Dispatch Box on Second Reading. I note that the interest of the House has not been wholly seized by this matter, but the Bill is extremely important and I am grateful for the manner in which he introduced it. Furthermore, it is clear that the Bill was well thought through before its initial presentation and I make my remarks against that background.
The Bill is an opportunity to simplify and strengthen the law in an important area. If we get it right, we will undoubtedly improve our ability to fight fraud in all its forms, and we wholly support the principle behind what the Government are trying to achieve. As with all technical Bills, this Bill has quite a long history. There is no doubt that the Law Commission’s 2002 report was a document of great value. I would not want Second Reading to pass without expressing the Opposition’s gratitude for the Law Commission’s work, because the report was a model of its kind. I note that the Serious Fraud Office was extremely positive about the commission’s proposals, stating that the suggested improvements would not only clarify offences of fraud, but simplify the law to allow more effective prosecutions, and I am sure that all hon. Members want to see exactly that.
I agree with the Solicitor-General that, although fraud sometimes sounds like an esoteric issue that affects others, that is not the case. The scale of the problem is considerable—his estimate of £14 billion appears well researched—and everyone pays for it through extra credit card payments, if nothing else, so the burden falls upon the law-abiding, who provide the fruit of such dishonest activities.
Fraud is extensively used to fuel wider criminal activity. The evidence from the National Criminal Intelligence Service shows that, unless we succeed in tackling fraud properly, there will be knock-on consequences in terms of wider criminality and, indeed, terrorism. In my career as a barrister, one fraud case that I did involved allegations of widespread benefit fraud that was being used to fuel the activities of the IRA. The fraud was taking place on a massive scale in south-east London with stolen benefit books and the case brought home to me how the eventual destination of such funds can be inimical to the public good.
There are clearly problems with the current law, which originates from a variety of sources, and I accept the Solicitor-General’s comments on that matter. The Theft Act 1968 attempted to simplify matters on obtaining property by deception, but the patchwork of law is unsatisfactory and the multitude of overlapping but distinct statutory offences does not make it easy for the prosecutor to decide the counts on which to draft an indictment, whether there should be alternative counts and how best to present a case to a jury.
In my experience of being involved in fraud trials, an astonishing number have come unstuck in one form or another, long before they could be presented to a jury, simply because the prosecutor—I hasten to add that I was defending in these particular cases—had failed to understand the true nature of the fraud or, indeed, who the ultimate victims were. Although the evidence of dishonesty was manifest, it was impossible to show that the people who were alleged to have been deceived had been deceived. In some cases, the wrong target altogether had been selected. In a case where it looked as though a building society had been the true victim, it became clear as the case proceeded that the true victim was almost certainly the taxman. Those examples classically illustrate some of the problems that arise.
In those circumstances, there is a powerful argument for reform. The Bill sets out to achieve that in a form that seems to have considerable internal logic and coherence. The creation of a new single offence of fraud that can be committed in three ways appears to be eminently sensible. We will judge it and scrutinise it in Committee on the basis that it fulfils three requirements. First, it must overcome the complexity of the current law and make it more comprehensible to juries. One way of achieving that would be to make fraud indictments simpler and more self-explanatory. At first glance, the Bill seems to go a long way towards achieving that goal.
Secondly, the new offence must provide a genuinely useful tool for prosecutors. My Front-Bench colleagues in the other place have said that the current range of specific offences can lead to complicated decisions, so we will need assurances as the Bill goes through that a single offence will really help to focus investigations at an early stage and help prosecutors to get the charge right.
Thirdly, we will need to be satisfied—we believe at first sight that we shall be—that the new offence will be adaptable to the changing face of criminality in the 21st century. The Solicitor-General pointed out areas where new offences have been created to deal with new technology. We entirely welcome that. We will seek in Committee to ensure that it delivers what he believes that it will.
Let me, at the risk of repetition, raise one or two slight areas of concern. The Solicitor-General mentioned the continuation of the common law offence of conspiracy to defraud. He provided some reassurance in the form of a promise that the Government will not just let that issue drift off into sleep. I would be happier if we had greater reassurance, perhaps by means of a sunset clause to ensure that, unless the Government revisited the matter within three or five years, the power to bring a prosecution under common law for conspiracy to defraud would lapse. The arguments against keeping the common law offence of conspiracy to defraud are enormous. Throughout my career at the Bar, there have been numerous occasions on which that offence has come into disrepute when used. It is possible for a person to be convicted of such an offence if he conspired with another person, yet if he carried out the act on his own, it would not amount to an offence. That immediately introduces an element of concern for anybody who believes in civil liberties. Although I am mindful of the Solicitor-General’s comments on the subject and appreciate that Governments have a tendency to caution, I am sorry that they have not been bolder, especially since the Law Commission stated emphatically that it perceived no good ground for the continuation of the common law offence of conspiracy to defraud. Indeed, the Government’s report of November 2004 acknowledged that when it stated:
“It is normally fundamental to a codification exercise such as this, that the common law should be repealed in favour of the new statute”.
It is strange that the Government have clung so obstinately to not doing that.
I am mindful of the Solicitor-General’s comments on the views of Lord Justice Rose and his Committee, but against that, the hon. and learned Gentleman need only read the speeches of Lord Lloyd and Lord Ackner—his contributions on many aspects of the law and, indeed, to legislating in Parliament, will be sadly missed—who argue that there is no good ground for retaining the common law offence. I hope that the Government will listen during our proceedings on the Bill. I shall not press the Solicitor-General to get rid of the offence immediately, but we need cast-iron reassurances that, unless the Government can make a good case for retaining it, we can have a finite date by which it will go.
The hon. Gentleman referred to the Rose Committee. Let me refer him to the letter from Sir Christopher Rose, representing the views of senior judges. It stated:
“We said that it would be risky to repeal common law conspiracy to defraud, as it can be the most effective charge in a case where multiple defendants are engaged in a fraudulent course of conduct. There are limitations on the law of statutory conspiracy, which has had something of a chequered history. All the judges present at the meeting agreed the Bill should not repeal common law conspiracy to defraud.”
That is not an example of the Government deciding not to do something but of the Government listening. We have listened to the consultation.
I, too, have listened to the consultation. If I had not been listening, I—and, I daresay, my noble Friends—would be pressing for the removal of the common law power. I want to make it clear that I do not seek to do that because I have read what has been said. Distinguished as the group may be that has called for the retention of the powers, I remain mildly unconvinced.
I hope that the Bill is sufficiently effective that it becomes crystal clear in two to three years that the common law offence of conspiracy to defraud is no longer necessary. The other option that one might consider if the offence remains necessary is whether that hole could be filled by something else, which does not have some of the problems that are associated with common law conspiracy to defraud that the Solicitor-General heard me discussing. He would, I am sure, be the first to acknowledge them. There may be a halfway house that we need to consider and that we have not yet explored.
Conservative Members will not try to amend the Bill to get rid of common law conspiracy to defraud. However, knowing as we do the constraints on Government of timetabling and so on, we do not want the opportunity to slip through our fingers so that we end up with the offence in 10, 15 or 20 years. I believe that there might be some way of at least ensuring that the matter is properly revisited so that either the offence’s retention is justified or it disappears.
It concerns me that arguments for the retention of the common law offence in prosecuting multiple offences are affected by the fact that provisions in the Domestic Violence, Crime and Victims Act 2004, which the hon. Gentleman and I spent time debating, have not been implemented two years on. That might have coloured the judicial voices in favour of retention in a way that would have been unjustified had implementation occurred.
The hon. Gentleman makes a good point. Indeed, one problem, given the plethora of legislation that the Government introduce, is the astonishing length of time that it takes to bring into operation much of the legislation that we pass. I do not wish to get diverted down a side road, but I would say to the Solicitor-General that we will try at least to probe the Government in Committee as to how we might best proceed in this regard. I would feel uncomfortable if we were really saying that it was inevitable that such a blunt instrument as common law conspiracy to defraud should continue to be an offence for the foreseeable future. If that turned out to be necessary, we would have failed to legislate properly here. Minds need to be concentrated on that issue.
I would like to express my gratitude to the Government, because I had feared that there might be a major difference between us over the role of juries in fraud trials, but that issue has been parked to await other legislation. May I say to the Solicitor-General that the sensible thing to do would be to wait and see how well this legislation works? If it turns out greatly to have simplified the law on fraud, no more powerful an argument could be devised for persuading the Government to drop their idea of getting rid of juries in certain fraud trials in its entirety.
I have always taken the view that juries are perfectly capable of understanding fraud trials. Indeed, as I have pointed out to the Solicitor-General, in my experience, the cases that collapsed did so long before the jury had the opportunity to consider the issues. I remain concerned about the proposals on juries in fraud trials that the Government had floated, and that will doubtless be a subject for debate at another time. The Government appear to wish to move speedily towards implementing their proposals to restrict the use of juries in certain fraud trials, but it would be odd if they did so immediately after implementing new legislation that could go far towards reassuring them that fraud trials can be considerably simplified.
In interventions on the Solicitor-General, I raised some matters of detail that gave rise for concern. We shall doubtless return to them in Committee, but I want to put them on the record today. Fraud by abuse of position is a concept that most right-thinking people have no difficulty in considering improper. However, the definition in the Bill of the position in which such fraud is committed is woolly. I am worried that we have developed a consistent pattern in recent years of passing legislation whose scope is uncertain in criminal justice terms. People behave reprehensibly at times in ways that other people would consider to be of poor moral standing. The hon. Member for Rhondda (Chris Bryant) gave the good example of a friend not revealing to another the true worth of some chattel that he was selling off to a third party—or to the friend himself—when he knew that it was in fact very valuable. However, we should be careful about moving from a position of deeming such activity morally reprehensible to saying that it is in breach of the criminal law.
Clause 4 deals with fraud by abuse of position. However, unless we define exactly who is intended to be caught by the provision, quite a wide range of people—including relatives, for example—could fall into that category. I want effective legislation on the statute book and I believe that it is possible to sharpen this measure to make it clear who is intended to be caught by it. If we do not improve clause 4, the danger is that we will end up bringing prosecutions in circumstances in which people are surprised to learn that some special duty lies on them to protect another person from making a loss.
I also highlighted the issues surrounding the making or supplying of articles for use in frauds and was delighted to hear the Solicitor-General comment that the provisions were not intended to catch conjurors or members of the magic circle, but I have to say that, looking at the plain text of the statute, such people might well be caught. The use of gadgetry that can potentially be used to defraud in order to entertain is a well-established practice, so I wonder what other safeguards could be provided to ensure sufficient mens rea in clauses 6 and 7 to avoid idiotic prosecutions of individuals who never had any intention of defrauding anyone. We shall look further into the detail of those clauses in Committee, as we will examine further the general issue in clause 2 of what constitutes gain or loss.
I do not want to take up more of the House’s time on Second Reading. As I have already told the Solicitor-General, we welcome the Bill.
The Solicitor-General makes a perfectly reasonable point that it all comes down to money and there is no doubt that resources for the investigation of fraud are limited. My hon. Friend may have seen the Norwich Union briefing, which showed that it uncovers thousands of fraud cases in any 12-month period, but that only a very small percentage of the total are even passed on to the police because of the company’s awareness of the lack of police resources.
Certainly in my experience—and it is one of the reasons why the Serious Fraud Office was set up—many a prosecution in the late 1980s and early 1990s was investigated by officers of county constabularies who, although well meaning, were often out of their depth when it came to dealing with the elements of fraud. That often coloured the way in which the prosecution was conducted. By the time the prosecutor, and certainly barristers, got involved, it was evident that the whole case was completely on the wrong track. There were real problems.
We may have an opportunity to debate in Committee the extent to which the Serious Fraud Office has been able to take a grip on the matter, but it is worth remembering that many frauds that concern individuals do not fall within the Serious Fraud Office’s remit. They are simple straightforward frauds, but they nevertheless have sufficient complexity to merit having officers—certainly police officers and, in my view, members of the Crown Prosecution Service—working on them who have an understanding of the concepts and pitfalls. My hon. Friend the Member for Ruislip-Northwood (Mr. Hurd) made a fair point, but there are resource implications, so to that extent, I am sympathetic to the Solicitor-General and the problems that he faces.
Certainly, the fraud review led by the Attorney-General will examine some of those issues, particularly how the police have dealt with fraud—mainly lower-level frauds that do not fall within the ambit of the Serious Fraud Office. I hope that, as a result of that review, we will see some improvements in the policing of fraud. Without wishing to widen our debate too much, I believe that the larger police forces will allow greater specialisation so that chief constables can identify the experts to focus on fraud cases. That should help to ensure that police forces have the level of expertise that the hon. Gentleman wants. Having larger forces will help.
I am not wholly convinced by the Solicitor-General’s arguments on the last point, especially, of course, as one of the most effective police forces in dealing with fraud is the City of London police, which is rather a small force. My hon. Friend the Member for Ruislip-Northwood (Mr. Hurd) may agree from personal experience not only that it deals with fraud rather effectively, but that its general policing is pretty effective at every conceivable level. I am afraid that that is where the Solicitor-General and I part company.
The City of London police are expert at dealing with fraud, but we have given them more than £1 million extra to ensure that they are, and the City gives them even more. That costs extra resources. If he wants to replicate the specialism of the City of London police across the country, I would be interested to see his commitment to doing so.
Is the hon. Gentleman unimpressed, as I am, by the Solicitor-General’s specific contribution in saying that we have given £1 million to the City to improve the capacity to investigate fraud? Should not those costs fall entirely on the City of London? Why should the general taxpayer be required to provide money in that way?
At the risk of straying mildly but not too far away from this issue, if the City of London was allowed to raise and keep its own rate precept of both business and domestic rates entirely to itself, so that none of it was sent to any other part of the country, including the hon. Gentleman’s constituency, I am sure that it would not ask the Government for a ha’penny. In those circumstances, he might go away and usefully review the statistics on what happens to the City’s money, which it raises both from the business community and from its domestic residents.
I look forward to engaging with the Solicitor-General in the debates in Committee for sensible scrutiny of the Bill. In its framework, it appears well judged. We will try to ensure that, when it leaves the House, it is improved in any area where that is required.
I speak in support of the Bill today. It looks to be a good Bill—one that has had a very long gestation period, which reflects its complexity, rather than its size. It is one of the better Bills for me, as it is rather slim. It is a credit to all concerned in the consultation on and the production of the Bill that it has been drafted so concisely. The accompanying explanatory notes are well laid out and a great help to people like myself, a non-lawyer, in understanding the logic behind the Bill.
Fraud is not a victimless crime; it is an insidious, indiscriminate crime that wreaks long-term damage on UK business, not only in cash terms but in undermining confidence in the institutions that are needed to trade and create wealth. It hits the pockets of individuals and creates misery for many families. It costs the people of our country dear, and I should like to extend the figure that my hon. and learned Friend the Solicitor-General put on that: it is now approaching £20 billion a year. It is a large business, and its proceeds keep organised crime funded. It also funds terrorist organisations—the very groups that are pledged to bring down our way of life. So I welcome this approach to tackling those problems, but I remind my hon. and learned Friend that the Bill is only part of the solution: we cannot will the end without providing the means.
Let me talk about the enforcement of the Bill and, if I have time, about the responsibility of financial institutions in their struggle against fraud. Who do we envisage investigating alleged fraud? Will we ensure that all investigating police officers tasked with applying the law will be trained to understand it, able to contend with modern technology or have access to specialist support? Will they be properly supported by Crown Prosecution Service lawyers?
Will judges be trained and maintained as specialists in fraud cases, to retain and reinforce expert knowledge and skill within the law? One cannot imagine going into hospital for a knee operation, or for neurosurgery, and being told that a heart surgeon will do the operation. It is ridiculous that a judge who has presided competently over a fraud trial might never oversee another fraud trial in his career. Society cannot afford such a waste of resources.
With regard to the financial institutions, it is no longer acceptable, if it ever were, for companies to pay out on claims without making thorough checks on their legitimacy, and merely to recoup their losses by passing on the costs to all policyholders through increased premiums. The scale of the problem was highlighted by Norwich Union, which, in 2004, identified and prevented 15,000 insurance frauds. It estimated that 4,000 would have met the criminal level of burden of proof. Because it did not want to over-burden the police, it submitted just 41 of the most serious cases, in which there were possible links to organised crime and the evidence was overwhelmingly persuasive. Of those, 27 were taken up by the police, and 18 came to court and resulted in conviction. I applaud Norwich Union’s attempt to tackle fraud, but until every organisation, bank and insurance company takes the same stand against organised crime and fraud, the costs of which are met through extra bank charges and premiums, it will not be tackled seriously.
Do the police have the resources to process all such cases? Do we seriously intend to use—I look to the Solicitor-General to give an answer—the Proceeds of Crime Act 2002, and to channel funds to the police for this activity, so that it becomes self-funded? Does he have any other ideas about finding resources?
Speaking not as a lawyer, but as the man on the Clapham omnibus, let me examine the plain English guide in the explanatory notes. The Law Commission recommended that the conspiracy to defraud charge should be abolished, but then had concerns that limitations on scope meant that certain types of secondary participation and fraud might still only be caught by the common law charge. Will my hon. and learned Friend give some examples? I listened closely to what he said, but he knows that there is still concern. Alternatively, will he say that the Government do not know exactly what the situation might be but that it would be prudent to leave the provision in place, as a belt and braces approach, while they reassess the legislation as they intend to do?
If the Solicitor-General has no specific time scale in mind, does he have in mind a number of cases on which case law can be built up? Until such time, will he not throw out the legislation but reinforce it with a belt and braces approach? This is the man on the Clapham omnibus speaking, not the lawyer, as the general public will not take it kindly if we throw out old legislation and replace it with new legislation that contains a loophole.
As I look through the explanatory notes, I see in relation to fraud by false representation that there is no legal definition of dishonesty. That is a surprise to me and will come as a surprise to people outside. What we have is a tortuous two-stage test as established in the case of R v. Ghosh in 1982. The first question is whether the defendant’s behaviour would be regarded as dishonest by the ordinary standards of reasonable and honest people. If that is answered in the affirmative, the second question must be whether the defendant was aware that his conduct was dishonest and would be regarded as dishonest by reasonable and honest people. That is a tough test, and it is becoming tougher by the week. It is certainly becoming tougher for those who do not come from the same culture and background as others in this country. What constitutes “honest” and “dishonest”, and what is reasonable and honest behaviour, without a definition of dishonesty?
Paragraph 16 of our “Everyman’s Guide”, the explanatory notes, refers to “phishing” for internet details. My hon. and learned Friend spoke of ties with Japan and other countries, but are we going to extend the provision to America? An internet bank could be established in America and the proceeds could go to Belize, and when the bank folded it could be found that no crime had been committed because no section of jurisprudence covered the total area. Will my hon. and learned Friend work closely with his colleagues to try to close the loophole generated by internet sites based overseas?
Clause 3 is headed
“Fraud by failing to disclose information”.
When I read that, I thought “Here we go”. I must say that it is a very brave idea. It may have escaped others’ attention that we now live in a capitalist society. Capitalists make profit, if not through sheer exploitation of individuals through labour, then through exploitation of knowledge, skills and money. That is a legal activity; it only becomes illegal when dishonesty makes it a criminal fraud. But as I have said, dishonesty is a rather nebulous concept in law because there is no firm definition, only cases in relation to which definitions can be established. Until we can establish firmly what constitutes dishonesty, the pursuit of wealth and gain through exploitation of knowledge and skills in a capitalist society must remain legal. That is one of the problems with which we shall have to struggle on for a bit longer.
Clause 4, entitled
“Fraud by abuse of position”,
causes me a few more worries. I am not talking about family membership; I am talking about a much more difficult problem. I am not talking about insurance salesmen, who must declare to their clients what commission they are being paid, what the risks are and so forth. I am not even talking about building societies that try to sell endowment mortgages: people must be well aware of those risks as well. Insurance salesmen and those selling endowment mortgages are paid for their services and can be regulated, but I am not sure whether my hon. and learned Friend has thought about this: what happens when a company’s directors are in a position of power, influence and authority, and decide that although they are already well paid, they will shovel bucketloads—shedloads—of money into their own pension fund, while the pension fund of the workers for whom they are responsible becomes a black hole? They may say, “We will put X per cent. into our pension fund and X per cent. into our employees’ pension fund”, but when they shovel money into their own pension fund, will they be guilty of fraud by abuse of position at any time in the future? If so, I—the man on the Clapham omnibus—would very much like to sit on the jury, especially if it affects my pension fund.
I think that the Standing Committee should start hammering out—unless my hon. and learned Friend can give us an answer today—whether that would be covered by the Bill, and if not, why not.
The explanatory notes tell us:
“The term ‘abuse’ is not limited by a definition”,
because it covers
“a wide range of conduct.”
Clause 4, they say,
“makes clear that the offence can be committed by an omission as well as by positive action.”
I have some difficulty with that as well.
“For example, an employee who fails to take up the chance of a crucial contract in order that an associate or rival company can take it up instead at the expense of the employer”
will commit an offence. If the employee is conspiring with the rival, fair enough. If it is a malicious act against the employer, fair enough. However, the employee may be plain stupid. Are we going to start charging people for fraud because of their stupidity? Proof must be provided that not only the company but the person involved made a gain.
My friendly notes say that the definition of property includes intellectual property, “although in practice intellectual property is rarely ‘gained’ or ‘lost’.”
It must be understood that, although the information and knowledge may not be gained or lost, the holder’s equity in that intellectual property can be seriously weakened once that has been leaked into the market. I therefore wish that we would move away from the view that intellectual property cannot be gained or lost.
We have talked about making or supplying articles for use in fraud. I understand that one or two Members are a bit concerned about the software that is loaded on their computers, and rightly so. Software may come with a package and all that stuff. The notes refer to programmes that “can be used” for fraud. Someone will be capable of being charged with having in their possession something that can be used for fraud. For an offence to be committed under the Bill, it should be made clear that the article has been used for fraud or is intended to be used for fraud—one must see that something has been downloaded or used in that manner, rather than someone just being in possession of something that can be used for fraud.
Clause 11 deals with obtaining services dishonestly. Again, this is a cracker. We have to understand the wording in law with regard to people in general. The notes say that it is an offence dishonestly
“to obtain services for which payment is required, within intent to avoid payment.”
I can see someone going to the court and saying, “M’lud, the trouble is that it says here ‘with intent to avoid payment’. I had no intent to avoid payment. I just had no cash. I intend to pay it when I have money. I will put my name down and put a paper or slip in.” When we look at these Bills, can we make sure that it is clear that, if people do not have the money to pay, they may still intend to pay?
Later we have another classic one: the decoder example. I am sure that the Minister is fully aware of all the packages that are available on the internet now for terrestrial and other channels. If he is fully aware of all the channels that are paid for and the ones that are not paid for, can he give me an indication, because I am not?
The package in my house comes through cable. We get channels that we should normally pay for but that we do not pay for because it is all-in: television, telephone and everything else. We pay once a month, so they are paid-for channels. If I get a freeview box and put it on top of the television, I cannot get the paid-for channels through the freeview box. However, if they attach the channels as part of a package, they come with the freeview box.
Imagine the nephew of some person on a council estate walking in and saying, “Auntie, you have not got a freeview box. I can supply one to you. I have a mate who has a freeview box.” Very good. He puts it in and it is £50 for the box. She does not know that she can get a box for £30. In it goes, and the card goes in. She is sitting happily watching the television. She has her freeview box on top of the television. There is a knock at the door and someone says, “You are viewing channels you are not supposed to view.” She will say, “I did not know that. If I go to the market, I can see freeview boxes every week. What makes this one different?”
The BBC is chasing up people using televisions without a licence. So why should we chase up people who watch Sky movies or any other such product? Why is Sky not chasing them up? I can understand why it is a criminal offence to make such a decoder box, and why, if such information comes to us and we find these people out, we should chase them up. But I am not sure why we should do so simply to help Mr. Murdoch make a few more million pounds.
I turn finally to the Visiting Forces Act 1952. Under the Bill, any member of the visiting forces cannot be charged because all such offences will be regarded as offences against property. Why? I recognise that visiting forces from certain parts of the world might want to have some independence of local legislation, but no serviceman of a force coming to Britain should be able to stand aside from the 1952 Act. Visiting servicemen will be able to supply such articles in this country without being tried, unless their commanding officer decides to try them.
With those few caveats, I welcome the Bill. I hope that we will fund and resource it properly, and that we will show the people of this country that we are serious about such crime, which is not a victimless crime. It causes great distress to many families, especially when people have their identities or passports pinched, or their bank cards are fraudulently made and the bank continues to issue cards in their name, even after they have told it to stop doing so. In the meantime, it bears no risk because it can pass the charges on. If someone introduced a Bill seeking compensation from financial institutions that pass on, by increasing premiums, such costs to the people on whom they impose their incompetence, I would back that as well. That said, I wish this Bill well.
I join in the general welcome for the Bill and for the way in which the Solicitor-General and the hon. Member for Beaconsfield (Mr. Grieve) opened the debate. There is a general view that the Law Commission has done an extremely good job in addressing issues relating to the prosecution of fraud, and a general realisation that we should take fraud a great deal more seriously than we have perhaps sometimes done. Indeed, there is much frustration at the fact not only that high-profile serious fraud cases have often appeared to founder, but that low-level fraud is frequently not prosecuted at all—at the fact that it is somehow regarded as a lesser offence than others that are, perhaps, committed by people not wearing white collars and ties at the time. I do not accept that view; fraud is a serious crime that should be prosecuted with as much assiduity as any other offence.
Three factors are involved in the general approach to achieving successful prosecutions. The first is the law, which we are addressing today by simplifying the law relating to the relevant offences; the second is the prosecuting and investigating authorities; and the third is the management of court cases.
I have long had a serious concern about the disjunction between the various prosecuting authorities. I know that it is fashionable to criticise the Serious Fraud Office and, to a certain extent, the prosecuting department of Her Majesty’s Revenue and Customs, but the real problem lies in the lack of resources available across the field, and in the fact that, too often, we have different compartments. Some deal with fraud against Government, and others deal with serious fraud. There is the Serious Organised Crime Agency, which is in its infancy and deals with organised crime; and the City of London police, which does a wonderful job—within the City of London. Beyond that, there is very inadequate provision across the territorial forces of this country. I know from my own experience in policing that there simply is not the expertise in most provincial forces effectively to investigate and to provide the wherewithal for successful prosecution of fraud.
The City of London police are responsible not only for fraud in the City, but more widely for London and the south-east, hence the extra resources that they receive. They have built up enormous expertise and I endorse the hon. Gentleman’s comments about the way in which they carry out their duties. We are all very grateful to them.
I concur, and, as one of the rare breed of council tax payers in the City of London, I am glad that it is not solely my contribution that enables them to do their job on behalf of the wider community. I have thought for a long time that we need a single, all-embracing anti-fraud organisation, with much better internal connections, to provide better investigations in parts of the country that are not currently well served. I hope that that will form part of the conclusions of the review that the Solicitor-General mentioned.
Even when we have successful investigations, we still have problems with the management of fraud cases. The over-simplistic view sometimes expressed on behalf of the Government that that is somehow the result of juries who cannot cope with the amount of information and the time scale of cases is unsupported by evidence. We must be clear about that. If we want an instructive case study, we need look only at the Enron trial in Houston. It was the fraud case of the century—a huge case, with huge ramifications. It did not lack for evidence, because it took evidence from 56 witnesses, but those responsible managed to conclude the trial in 15 weeks. The jury had nearly six days of deliberation and found the defendants guilty as charged. If that is possible before a Texas jury and a Texas judge, it is not beyond the wit of UK juries and UK judges to effect similar management. In contrast, the BCCI litigation—although it was a misfeasance trial, not a fraud trial—took more than two years, and cost more than £100 million in legal bills. The two opening speeches alone took 200 days of court time, only for the action to be abandoned, with all that work proving abortive. That is an effective comparison of the effectiveness of trial procedures and the Lord Chancellor—as he is at the moment—the Attorney-General and the Solicitor-General need to consider the issue carefully to see how we can make improvements.
Like the hon. Member for Beaconsfield, I hope that we will hear no more of the implementation of section 43 of the Criminal Justice Act 2003. I think that we have had an assurance from the Attorney-General that if the Government take the view that they need to restrict jury trial further—which I would oppose with every fibre of my being—he will do so by means of new primary legislation. If that is the case, he will no doubt support the amendment that I intend to table in the course of proceedings on the Bill to repeal that section as entirely otiose. We shall then have proof of the Government’s intentions.
I shall mention several issues that I hope to address further in Committee. We had a short debate on clause 4, which states:
“A person is in breach of this section if he…occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person”.
I was not entirely persuaded by what the Solicitor-General said about that provision. He seemed to be saying that he actually means “the person occupies a position in which he has a duty”—wording that seems entirely appropriate. However, the wording “he is expected to” opens the provision to all sorts of challenge, which is entirely unnecessary because there is no suggestion that there is an additional general duty on an individual citizen. I think that is what the hon. and learned Gentleman said, so it is something that we could usefully consider in Committee.
I have looked through my notes for the exact quote from the Law Commission about clause 4, which I shall read out as the hon. Gentleman has expressed concern about the issue. It states that the “necessary relationship” of a position of trust
“will be present between trustee and beneficiary, director and company, professional person and client, agent and principal, employee and employer, or between partners. It may arise otherwise, for example within a family, or in the context of voluntary work, or in any context where the parties are not at arm’s length. In nearly all cases where it arises, it will be recognised by the civil law as importing fiduciary duties, and any relationship that is so recognised will suffice”.
But—and this is important—it states:
“We see no reason, however, why the existence of such duties should be essential.”
In other words, the Law Commission has set out the type of relationships in which a position of trust might arise.
I hear what the Solicitor-General says, but I still do not entirely understand the point. I do not want to detain Second Reading by trying to reach that comprehension, so perhaps we can explore it in Committee. All those cases suggested a duty that could be expressed in those terms, so the idea that there may be some other context in which a court could be persuaded that a person had a reasonable expectation of that duty without it comprising a duty seems a very nice point, of which I would need some persuasion before embracing it.
Clause 5 gives definitions of gain and loss and, again, we can usefully explore those points in Committee. Subsection (3) notes:
“‘Gain’ includes a gain by keeping what one has”.
So how would the law apply, for instance, in the case of overpayment of a sum of money that one has received in good faith, such as a child tax credit? Again, that is something that we can explore at a later stage.
On clause 6, the point has already been raised about mens rea in the case of possession of an article and we heard warm words in support of conjurors, who will be able to go about their legal business, using their paraphernalia without fear of arrest. I am not absolutely sure that that is what the Bill says, although I accept the assurances of the Solicitor-General. At what point does a conjuring trick become a dishonest act? The three-card trick seems to be the turning point at which a conjuring trick starts to become a confidence trick. I shall be interested to know how the definition will work in such cases. The Solicitor-General was at pains to say that it would not be an absolute offence, but there is at least an intimation that it is, because the Bill does not specify a statutory defence.
I am less worried about conjurors, however, and more worried about unwitting agents of fraudsters. There are many examples of a person carrying forged credentials—forged documents or letterheads—believing that they are acting lawfully and appropriately for an enterprise when in fact they are not. It worries me that they might unwittingly find themselves in possession of an article that was being used and had been produced for the purpose of fraud, but which they were not aware was being used or had been produced for the purpose of fraud. We need to be clear about the defence that could be used in those circumstances.
We do not want to create a defence that is too easily used by someone who is probably guilty of an offence but who wishes to use their ignorance as a means of avoiding prosecution. We must also be careful to ensure that innocent people are not found guilty of an offence when they are genuinely ignorant of the purpose to which the article in their possession could be used.
As I indicated earlier, it is not a strict liability offence. It is the responsibility of the prosecution to show that the individual had an article in his possession with an intention that it should be used in some fraud. That is not on the face of the Bill, but the provisions import the case law of Elan from the previous legislation. That is clear. I say it with all the authority that a Minister has on presenting a Bill. It is intended that the provision should import previous case law.
That is extremely helpful. It is clearly not on the face of the Bill. I do not think that we can assume, but the Minister has gone a long way to helping us to assume in a way that the courts will recognise. I am grateful to him for that.
I welcome the new provisions for fraudulent business carried on by sole traders. An area that I would like to explore in Committee and perhaps at later stages is where actions are taken in anticipation of receivership or bankruptcy. I perceive that there are many instances where people carry out actions that have the long-term effect of defrauding creditors or employees of a company in the expectation of a company ceasing to trade or in anticipation of that happening. My belief is that that is fraudulent. My belief also is that there can be a deliberate intention to remove assets from a company prior to it ceasing to trade, in a way that is intended to prevent genuine creditors, including the employees of the company, from getting their proper recompense. That is not adequately covered, and is certainly not adequately prosecuted at present. I would wish to explore that.
We have already dealt with clause 11, which is the replacement of part of the Theft Act 1968. I made an intervention about downloading. I do not defend those who illegally download music. Equally, there have been occasions when large corporations have been extremely heavy-handed in either threatening to or carrying out legal action, particularly against minors who have perhaps unwittingly committed an offence. If the clause can be used to launch a private prosecution of a 12-year-old with a computer who is downloading songs off the internet, with mum and dad having no idea that that is happening, that worries me. Perhaps we shall receive some reassurance about that at a later stage.
We need a slightly more specific definition of the related offences on non-incrimination. Under clause 13 there is a requirement that a person is not to be excused from answering questions on matters relating to an offence under the Bill or a related offence. We need to know what the related offences are, rather than have an open-ended commitment at that point.
Lastly, in terms of what is in the Bill, there is the extent. I know that there has been an issue about whether we should assume extraterritorial jurisdiction in the Bill. The Government have broadly decided that they should not do so. However, the extent to which extraterritorial jurisdiction is appropriate in relation to some of the offences is still an open question. Certainly, internet crime is a real issue, as the Solicitor-General well knows. There is also an issue with unsolicited mail—something that bedevils an awful lot of our constituents. Often it originates from abroad and constitutes what I would consider a fraud on the recipient. When someone receives what purports to be a demand for money, which may have a fraudulent intent, we shall need to be careful about the point at which that becomes prosecutable and in what jurisdiction.
May I conclude with what is not in the Bill? The major issue, of course, is the fact that the Bill does not repeal the common law offence of conspiracy to defraud. The hon. Member for Beaconsfield said that the Law Commission was fairly explicit. It could not have been more explicit. Its report refers to
“the indefensible anomaly represented by the continuing survival of conspiracy to defraud”.
It is an indefensible anomaly that the Solicitor-General now finds himself in a position to defend. I am not convinced by the arguments. They are based on the existing law of fraud, rather than the law as it will be following the Bill’s enactment, and the existing law on multiple offences, rather than the position that will be the case after the rather belated implementation of provisions on multiple offences in the Domestic Violence, Crime and Victims Act 2004
The offence is a catch-all offence, which, if there are adequate alternatives, I find repellent in itself. The offence provides an easy route for dual criminality, which is becoming more and more of an issue in extradition proceedings, given that almost anything that is a lawful activity on behalf of one or more people might be interpreted as a conspiracy to defraud and might therefore provide that dual criminality to enable extradition. We need to look at this matter again, both in Committee and probably on Report. In the interim, I ask the Solicitor-General seriously to consider why it would not be appropriate to have a repeal provision in the Bill with a later commencement date or a commitment involving, in effect, a sunset clause for that particular provision, which could be reversed by Order in Council. There are ways of providing the primary legislative framework for the repeal of the existing offence, which we can do by virtue of the Bill and still have the precautionary approach that the Solicitor-General advises. The advice to prosecuting authorities needs to be extremely robust when it comes to why they should not use the conspiracy to defraud. I would like a commitment from the Solicitor-General, if he can give it, that he would be prepared to use noli prosequi powers to prevent a prosecution on that basis if he believes that there are other more appropriate offences as a result of the Bill that should be used as an alternative.
There are other matters that could have been placed to advantage in the Bill. We do not have that many Bills working in this broad area. I would have liked the Bill to be not just the Fraud Bill, but the fraud and corruption Bill. It is a perfect Bill for the incorporation of the provisions of the Corruption Bill that is before the House in the name of the hon. Member for City of York (Hugh Bayley). Many people feel that that is an essential part of our armoury against corruption on a wider scale and fulfils the expectations on this country by treaty to provide better anti-corruption legislation. It is consistent to join fraud and corruption, as there is a considerable overlap between the two, and the Bill is an appropriate vehicle to do so.
Some things that could be construed as fraud or corruption are not investigated or prosecuted. It is perhaps over-fashionable to talk about association football, but it is inappropriate for bung allegations to be investigated by the Football Association and other sporting bodies. They should, at least on a prima facie basis, be investigated by the police and other investigating authorities, and I am surprised that no such investigation has taken place on the basis of the evidence that has been made public.
Finally, does the Solicitor-General think that anything could be included in the Bill so we can deal more effectively with carousel fraud, which has become an extraordinarily serious issue? A report on figures recently released by the Office for National Statistics in the past few days says:
“Criminal gangs are cheating the taxman out of VAT on £1 in every £7 of Britain’s trade with Europe.”
That is a staggering figure—14 per cent. of all Britain’s imports and exports are subject to carousel fraud, yet we have been unsuccessful in achieving effective prosecutions and indictments. If we can do anything to make such fraud easier to investigate, to bring charges and to secure convictions, we should use the Bill to do so, as it is an appropriate legislative vehicle. I invite the Solicitor-General to consider whether that is possible.
On the whole, this is a good Bill. We wish to explore some issues in Committee and on Report, but we certainly support its passage and hope to improve it along the way.
May I begin by declaring an interest as a non-practising barrister? Like every speaker in our debate, I welcome the Bill, which is a good measure that deals effectively with an unnecessarily complex area of the criminal law.
As has been said, there can be no doubt that fraud is a serious business. The criminal law is required to deal with it effectively, and we do not want to construct laws that allow criminals to find loopholes. The Solicitor-General has made it clear that that is the purpose of the Bill, which I welcome wholeheartedly. I particularly welcome the fact that it deals with the fraudster’s intentions, rather than the consequences of fraud. Instead of dealing with deception and the question of who is deceived, which causes the problems that we have discussed, it addresses the fraudster’s intentions and whether or not they are dishonest. That is an extremely effective riposte to the fact that, as fraud is increasingly perpetrated electronically, there is no one to be deceived.
I wish to make three points about the Bill against the background of my broad welcome. First, I echo the remarks of my hon. Friend the Member for Beaconsfield (Mr. Grieve) about jury trials. This is a good Bill, because it makes the law of fraud simpler, thus weakening considerably what, in my view, is an already weak argument for a reduction of the right to jury trial for individuals accused of fraud. In my experience juries are well able to deal with the matters put before them in a fraud trial, so long as the lawyers putting those matters before them do so in a straightforward way. The Bill will help them do that, which means that juries will be more, not less, able to deal with fraud trials. I recognise that, as the Solicitor-General said, these arguments are for the time when we deal with another piece of legislation, but I hope that he will not do something counter-intuitive, by passing one piece of legislation that helps juries, and then not taking that into account when he considers whether juries are able to deal with fraud trials.
The second issue that I want to raise also follows on from comments by the Solicitor-General with which I wholeheartedly agree. It should not be up to the criminal law alone to deal with fraud. It is up to the Government to consider the other ways in which they can reduce the likely incidence of fraud. Fraud prospers in complex systems. It is much easier to perpetrate a fraud in a system that is difficult to follow, because that makes it difficult for those who enforce the rules to work out how the rules have been flouted, and difficult for a court and a jury to work out how the system has been abused.
I urge the Government to examine the systems for which they have responsibility and ensure that they are as simple as they can be. We have seen recently that in the tax credit system, the internet portal has become subject to precisely the type of fraud that the Bill is designed to address. The Government need to review not only the criminal law but the systems in place in the benefits system and the tax credits system, and ensure that where simplicity is possible, it is introduced, so as to play its part in defeating the potential fraudster.
Thirdly, I return to my earlier intervention and press the point about the maximum sentence in clause 11. The clause deals with obtaining services dishonestly. I welcome the fact that it redrafts the law so that dishonesty, rather than the deception of an individual, is the key question, but it is a restatement of the law with regard to maximum sentences. The Bill offers an opportunity, which is well taken by the Government, to simplify the whole area and make it straightforward, consistent and easy for the general public to understand so that everyone knows what they are obliged to do and what they are not permitted to do, but there is a potential anomaly in the law as it stands with regard to maximum sentences.
Under the Bill, if someone were to perpetrate a dishonest act by representation or by omission or in other ways, leading to a gain or loss of money or property, they would face a potential sentence of 10 years. If, however, they obtained services by dishonesty, they would face a maximum sentence of only five years. There must be circumstances, as we can all envisage, in which the value of services is at least as high as the value of property, which is encompassed by the earlier clauses.
If, for example, one defrauds a merchant bank of property or money to a high value, one faces a potential sentence of 10 years. If, on the other hand, one defrauds a merchant bank in such a way that one receives the services of a very highly paid, professional and experienced merchant banker, which might be worth as much as or perhaps more than the property of which the bank could have been defrauded, one faces half the potential maximum sentence.
I accept that, as the Solicitor-General says, not every case results in the maximum sentence, but we could take the opportunity in the Bill to send a message that dishonest acts leading to the defrauding of an individual or a company are all potentially very serious. Whether people are defrauding them of services or of property, the maximum penalty available should be consistent across the board. The Government could take the opportunity to establish that in the Bill, and would be well advised to do so. I hope that we will be able to return to the matter in Committee, and I invite the Government to think carefully about it.
Broadly speaking, I welcome the Bill. It is a good Bill, and it is generally well targeted. However, it could be better, and I hope that at the conclusion of its passage through the House, it will be.
I apologise for having missed the speech by the hon. Member for Somerton and Frome (Mr. Heath), although when I asked him whether he had said anything that I would not have expected him to say, he said no, so I did not miss very much.
In recent years, it seems to have become a law of Parliament that the significance of a piece of legislation to ordinary people’s lives is inversely proportional to the number of hon. Members in the Chamber. This Bill is very important for our constituents, not least because the law on fraud has been a hotch-potch until now, with different bits and pieces of legislation being knitted together to cover what many would consider to be an important offence.
Since the introduction of the Theft Act 1968 and its subsequent amendments, the nature of fraud has changed dramatically. The hon. Member for Rugby and Kenilworth (Jeremy Wright) has referred to the fact that much fraud is now conducted electronically, which is a specific issue for those trying to secure successful prosecutions. The law must keep up with technology, which it has failed to do in that area in recent years.
I know from my constituency surgeries and from letters from my constituents that a significant number of people are affected by identity fraud, the theft of credit card details and other scams. Such scams often involve relatively small sums of money, so people do not necessarily go to the police, who may find such matters too complicated to proceed with. I suspect that a large amount of fraud is barely considered by the criminal justice system, because people shrug their shoulders and say, “Ah well”.
In welcoming the Bill, I want to press the Solicitor-General on implementation and enforcement. He has referred to the Crown Prosecution Service, the Serious Fraud Office and additional funds for the police, particularly in central London. Around the country, however, police forces sometimes feel incapable of dealing with the complexity of the IT, of the fraud itself or of the law, and I hope that training will take place in all the police forces in the United Kingdom to make sure that everybody has equal access to justice.
Fraud is more than a national matter. Frauds that have been brought to my attention through my constituency casework include the Spanish lottery fraud, which is well known and has been well attested on television. In order to pursue justice in such cases, one needs a degree of Europe-wide intervention. Similarly, I am sure that all hon. Members have received e-mails from people across the continent of Africa offering them large amounts of money to set up some kind of business. Again, none of us ever refers those e-mails on to any part of the legal system—yet perhaps we should, because others who are perhaps less cynical and sceptical than us fall into those traps.
All hon. Members who have spoken have discussed whether we should abolish the common-law offence of conspiracy to defraud. I agree with the Government that fraud cases can be amazingly complex and that statutory conspiracy law may not suffice. In most major credit card fraud cases, one person does the phishing by sending out e-mails—again, I am sure that all hon. Members have received such e-mails—that make it look as if one’s bank has managed to lose one’s details and is asking for them to be restated.
Another person may use a “Trojan horse”—the practice of sending random e-mails that attach themselves to the recipient’s internet explorer and manage to inveigle them into visiting a website that they would not otherwise have visited, so that in the process, or in trying to extricate themselves from the website, they end up inadvertently giving further details about themselves. Such a fraudster may be separate from the first type.
Then, if money is to be taken out of the United Kingdom, a money mule will be required. The entire process of complex credit card fraud can involve a series of different people, each of whom is committing a fraud, but one does not get the full sense of the criminality that has been engaged in without seeing the whole package of the fraud. Indeed, individual members of the gang may not know that the others are engaged in it. In those circumstances, I understand that there may be reasons why we should want to keep the common law offence of conspiracy to defraud.
Moreover, the fact that, as the British Retail Consortium points out, many new forms of fraud are coming online as a result of new internet IT may mean that we would want to keep a stop-gap clause of some kind. However, as other hon. Members have said, some more hotly than others, it is pretty difficult to advance the argument that we should keep stop-gap legislation just in case we need it. Despite the comments of the Solicitor-General, the law says that an act committed by an individual is not an offence against the criminal law, whereas it may be an offence when it is committed by two people. That puts us in danger of bringing the law into disrepute. I realise that the Solicitor-General has moved considerably further on this issue than the Attorney-General did in the House of Lords, but I would welcome a clear indication that if we do not feel that the common law provision is still necessary, we will see a specific end date.
I question whether 10 years is a sufficient sentence. Some of this fraud is very significant. It does not always involve one person being defrauded out of a small amount of money; sometimes millions of pounds is defrauded from lots of people.
I also question, as did the hon. Member for Somerton and Frome, whether aspects of corruption should be included in the Bill. I note in particular that we have not revised for many years the legislation on the suborning of a police officer. There is some debate about precisely what that offence now is. However, many newspapers acknowledge that they pay police officers for information that would otherwise be secret and private, and should probably remain so, so that the police can perform their legitimate duties as regards a secure prosecution. Perhaps by now the Government should be advancing legislation to reform the law on suborning a police officer.
I think that what the shadow Solicitor-General said about magicians and the Magic Circle was wholly erroneous. It is clear that under clause 6, which deals with carrying articles for use in connection with a fraud, the fraud would have to involve the person making a gain for himself or another, causing loss to another, or exposing another to a risk of loss. I cannot see why magicians would be caught by that in any sense. The clause that they are most likely to be caught by is clause 2, which covers fraud by false representation, but they would probably not be dishonestly making a false representation, but honestly making a false representation.
I am trying to follow the last point, which was interesting, to say the least—a rabbit out of a hat.
The debate is important and the Bill is interesting. As hon. Members of all parties have said, it is welcome, but, as with every measure, aspects need addressing in Committee. I agree with hon. Members who spoke in favour of preserving the right to jury trial. I speak as a practising barrister and not, I hasten to add, out of self-interest. Jury trial is and always has been the bulwark of justice and it should be retained at all costs.
The Solicitor-General, who was generous in allowing interventions and has taken the debate forward through his responses, made the point that the Bill will simplify to some extent the offences involving fraud and lead to shorter indictments. That, in turn, will lead to a simpler process, which will negate the need for denuding people of jury trial. [Interruption.] I note that the Solicitor-General was with me on the first three points but unfortunately shook his head at the last one.
All of us who are involved in the criminal justice system—as legislators, practitioners and so on—are bound to try to keep matters simple. That is not to be offensive to juries. When I prosecute, if I do not keep a case simple and it is lost, it is my fault because I have not made the case properly and it therefore should be lost. It does not happen because the jury did not understand it but because the case was not made simply and understandably. It behoves us all to make law that is readily understood by all concerned, including juries.
The Solicitor-General knows that the Lord Chief Justice recently referred to some protocols, including case management, the involvement of prosecutors at an earlier stage in larger fraud cases, more effective pre-trial hearings, encouraging judges to use their powers to persuade prosecution that charges should not be pursued, severing indictments and so on. If those are proactively pursued, together with the simplification for which the Bill provides to a large extent, a good job of work will be done.
I do not intend to say much about conspiracy to defraud because others have discussed it at length. Ultimately, there will be no case for retaining that offence, but I have some sympathy with the Solicitor-General, who is effectively saying, “Let’s see how the offences bed down and, in three years’ time, we might be able to knock it on the head.” That is a pragmatic and sensible approach. The hon. Member for Beaconsfield (Mr. Grieve) said that he would like the measure to include a sunset clause. That could amount to the same thing as the Solicitor-General’s approach, if we are considering discontinuing the offence in three years. I appreciate that it is not exactly the same, but it could have the same effect. I understand his caution, especially given that several highly regarded senior members of the judiciary on the Rose Committee have said that we should be careful about ditching it now. My opinion therefore varies slightly from that of the hon. Member for Beaconsfield.
Does the hon. Gentleman agree that the fundamental difference between the course of action that the Solicitor-General proposes and a sunset clause is that the latter does not require further action on the part of the Government for the common law offence to fall whereas the former does?
That is self-evident. Surely this place can find time for the presentation of a short Bill, if the political will is there. I do not understand why I am suddenly defending the Government—it is an unusual if not unique position for me to occupy––but the hon. Gentleman is right.
Although I should like to agree that it would be appropriate to incorporate a sunset clause, what guarantee could the hon. Gentleman give that sufficient cases had come to trial within the time to be sure that we no longer needed the offence? That is the difficulty. Who can guarantee the number of cases that will come before us in a set time? Surely it would be better to build up a bank of knowledge and ensure that the measure is working before we make the decision.
I think that I agree with the hon. Gentleman. A period of three years has been mentioned and that is ample time in which to ascertain whether to get rid of the offence. I stress that I do not violently disagree with the hon. Member for Beaconsfield, who supports a sunset clause. We all want the same thing—it is a question of how we get there.
I shall be relatively succinct because others wish to speak and we are holding a Second Reading debate, which does not call for going into the minutiae. The hon. Member for Beaconsfield referred to the definition of “gain” and “loss”. Some people believe that it is too broad. We shall have to revert to the matter in Committee and I am sure that we will hold an interesting discourse on it.
I am worried about clause 6. I intervened on the Solicitor-General to point out that it requires no mens rea element and that it should do so. A few moments ago, he responded to the hon. Member for Somerton and Frome (Mr. Heath), who made the same point, by saying that intention will be necessary for a successful prosecution. That poses the question of why “knowing” or “intending” is not included in the provision. If it were, I would not have raised the matter and I am sure that many other learned commentators would not have raised it. Is the Solicitor-General open to an amendment along those lines in Committee? He was adamant that intention was required. In opening the debate, he said that there was some sort of tie-up between the old offence of “going equipped” and the clause. I tried to make the point that they are different because, if a person, late at night, is carrying bolt cutters, jemmies and all the typical gear of a housebreaker, that is one thing, but there is also the high-tech stuff—PINs, cards and so on—that is not perceived as being there specificallyeb;normal;j for a dishonest or nefarious purpose. There is therefore a distinction, which bolsters the case for including some sort of mens rea element—either “knowing” or “intending”—in the provision. It is necessary to have a serious debate about that.
Perhaps a better analogy than the offence of “going equipped” is instruments that can be used for an innocent purpose and adapted for a nefarious one, for example an iron bar or knife. It is the old distinction between “made” and “capable of being adapted” for a criminal purpose.