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Social Security (Loss of Benefit) Amendment Regulations 2010

Volume 718: debated on Tuesday 30 March 2010

Motion to Approve

Moved By

To move that the draft order laid before the House on 20 January be approved.

Relevant Document: 7th Report from the Joint Committee on Statutory Instruments

My Lords, I beg to move that the draft Social Security (Loss of Benefit) Amendment Regulations 2010, which were laid on 20 January 2010, be approved. I confirm that, in my view, the statutory instrument is compatible with the European Convention on Human Rights.

These amending regulations support the tough new powers introduced by Section 24 of the Welfare Reform Act 2009, which widened and extended the existing loss of benefit powers contained within the Social Security Fraud Act 2001. Section 24 introduced a new four-week loss of benefit or “one strike” sanction for all first-time benefit fraud offences, not just for cases which result in convictions but also those which result in an administrative penalty or caution.

The new “one strike” sanction is all about deterring people from committing benefit fraud in the first place. The Department for Work and Pensions paid out more than £135 billion in social security benefits last year. The vast majority of this money was paid out correctly to those who were entitled to it; however £1.1 billion is estimated to have been stolen through benefit fraud. So, although the department has an extensive and successful strategy to tackle benefit fraud, more still needs to be done. This new sanction will increase and strengthen the deterrent effect of the existing sanctions regime and stop more people committing benefit fraud in the first place. However, if someone does commit benefit fraud they will do so knowing that they face losing four weeks’ benefit on top of having to pay the money back and the risk of a criminal record.

I reassure noble Lords that only benefit fraud cases which result in a conviction, an administrative penalty or a caution will be liable to the new sanction. Cases where the customer has simply made a mistake will not result in a loss of benefit sanction. Such cases are dealt with separately outside of fraud investigation. The existing loss of benefit sanction, sometimes referred to as “two strikes”, will continue alongside the new provisions to maintain a tougher 13-week loss of benefit sanction for those few persistent repeat offenders who are convicted twice within five years.

I turn now to the provisions in the draft regulations which set out the details of how the new sanction for benefit fraud offences will work. Almost all of the amending regulations reflect the existing Social Security (Loss of Benefit) Regulations 2001 and merely insert references to the new sections in the Social Security Fraud Act 2001. In particular, the details of which benefits are disqualifying and/or sanctionable, which are withdrawn or reduced and the hardship provisions all remain the same. This means that the same safeguards exist for customers who are vulnerable or seriously ill, and that the sanction cannot be applied to bereavement payments, retirement pension, benefits paid for children or those that cover the extra costs of disability. In addition, entitlement to “passported” benefits such as housing benefit, council tax benefit and free school meals is also unaffected, with specific references in the new regulations to income-related employment and support allowance and pension credit to ensure that “passported” housing and council tax benefit are not sanctioned at the same time as those benefits. Additionally, the regulations allow for statutory adoption pay, statutory paternity pay and the health in pregnancy grant to be excluded from the sanction.

The introduction of the new provision also created an opportunity to simplify the existing process, and as a result the start date of the disqualification period for both one and two strikes has been aligned with the benefit payment period. The new sanction will apply only if a benefit offence was committed after the commencement of the new provision. There will be no retrospective effect. The new regulations also delete the reference in the existing regulations to a housing benefit sanction following eviction on grounds of anti-social behaviour, as this measure is no longer in force. Further changes take account of Section 33 of the Welfare Reform Act 2009, to explain when a jobseeker is not to be treated as a person in hardship. The new sanction will be included in a future Targeting Benefit Thieves media campaign, and customer notifications will be revised to ensure that customers are aware of the consequences of committing benefit fraud and the punishments that can be applied.

In conclusion, last year over 56,000 benefit thieves knowingly withheld information or deliberately failed to report a change in their circumstances in order to steal money from the benefit system that is there to protect those who are most in need. We have a duty to protect the integrity of that benefit system and we remain committed to improve and build upon the good progress we have already made by reducing benefit fraud to half the level it was in 2001. This new loss of benefit sanction will help us do this. I therefore seek approval for the regulations, and I commend them to the House.

My Lords, I thank the Minister for introducing the regulations, as my noble friend Lord Skelmersdale did when the parent provision was discussed in this House last year. As the Minister said, it is important that benefit fraud is addressed quickly and effectively, not only to save the taxpayer—although such a motivation is of course enormously important—but to retain public confidence in the system and ensure that benefits are targeted accurately towards those who need them most. I echo the Minister's closing remarks.

However, I take this opportunity to probe a little further the statistics on just how prevalent benefit fraud is. In our debates on the Welfare Reform Act 2009, the Minister said that the Government had reduced fraud across all benefits to 0.6 per cent of benefit spend; he repeated that figure just now.

That figure sounds like good news, although it is rather less impressive when we learn the absolute figure, which he gave us earlier: that benefit fraud, although halved since 2001, still accounts for £1.1 billion. How much of that £1.1 billion is fraud within the working-age benefits system, and what percentage of working-age benefits is fraudulently obtained? That £1.1 billion is an enormous amount of money, but even so, it does not reflect the true cost to the taxpayer. Undeclared work while claiming unemployment benefit, for example, hits the taxpayers’ purse twice: once in benefits wrongly claimed and, secondly, in income tax not paid. It is quite right, therefore, that the Government should take steps to deter claimants from fraudulent claims. Restricting benefits will, we hope, prove an effective method of achieving that.

I am reassured to hear the Minister say that administrative errors will not be penalised. Given the complexity of the benefits system, I would also be interested to hear whether there has been a similar improvement recently in the number of administrative errors made and the amount of money that they have cost the taxpayer.

My Lords, I, too, thank the Minister for explaining the regulations, which one might call “one strike and you’re out” rules—in other words, a new four-week loss of benefit provision, or “one strike” sanction, for all first-time benefit fraud offences. As the Minister pointed out, the purpose of the new rules is to act as a deterrent to benefit fraud of all sorts.

We on these Benches are as keen as anyone to eliminate fraud in the benefit system. Those caught making fraudulent claims, if five or six-figure sums are involved, invariably make the front pages of the red-top newspapers and bring the whole benefit system into disrepute. The lurid headlines created tend to make many people think that all benefit claimants are fraudsters, so anything that can be done to stop genuine fraud must be a good thing.

At present, the two-strike rule enables benefit to be withdrawn or reduced for a period of 13 weeks where a person is convicted in a court of law of benefit fraud twice and the second offence was committed within five years of the date of conviction for the first offence. The new rules starting next month under the Welfare Reform Act 2009 apply to those whose cases—estimated to be about 50,000 a year—result in an administrative penalty or caution, not just to those prosecuted in court. I understand that, for certain more vulnerable claimants, benefits would be abated, not completely withdrawn. That is very important, particularly if there are children in the household, who will have to pay the price for a parent's fraudulent claim. I hope that those entitled to hardship payments will be told about them automatically, and that those genuinely entitled to benefits will be encouraged to claim. It is worth repeating that fraud is estimated to be 0.6 per cent of the amount spent on benefits, with underclaiming of benefits estimated to be 9 per cent.

Fraud is one thing, and misunderstanding is another. Error—both customer error and Jobcentre Plus official error—is yet another problem. When I spoke on the parent clause in the Welfare Reform Bill last autumn, I had evidence from Citizens Advice that a lot of claimants were being sanctioned for fraud when they had genuinely misunderstood the position, either through lack of adequate English or lack of a clear explanation of the situation from a benefits adviser. That is very worrying. Citizens Advice tells me that its evidence still shows that some vulnerable clients are sanctioned for failing to comply with benefit rules through a failure to understand what is required of them. Citizens Advice fears that, under the new rules, people may feel pressurised to accept a caution to avoid further penalties, and states that many people do not realise that the interview is “under caution” until they attend. Consequently, they may not ask anyone to accompany them or seek legal advice before attending the interview.

It is, of course, particularly important for people with learning difficulties or other mental difficulties to have the support of a representative, friend or family member. The full implications of accepting a caution should be spelt out to the client, and the letter informing them of their interview should ensure that they understand that they can take someone with them. By accepting a caution, under these rules, they could now lose benefit as well as being sanctioned. If someone simply receives a letter from the DWP requesting that they attend an interview “under caution”, why would they know exactly what that meant? Finally, will the Minister confirm that if someone receives an administrative penalty, that will not count as a criminal record in future?

I, too, support the regulations. The Minister made helpful comments about the extent of fraud referred to by other speakers—£1.1 billion. How much money, if any, is recovered once the fraud has been identified? Secondly, can the Minister confirm the point made by the noble Baroness, Lady Thomas, about the amount of unclaimed benefit? It would be very helpful to have that on the record.

My Lords, I am grateful for the support that all noble Lords who have spoken have given to the regulations. I shall try to deal with each of the points raised. I agreed with the noble Lord, Lord Freud, when he said that this is not only a question of justice and stopping people taking from the system unfairly, it is about retaining public confidence in the system. That is important. He asked specifically about the extent to which fraud occurred in working-age benefits. The latest figures to March 2009 show fraud at 0.8 per cent of all benefit expenditure: £1.1 billion, as I explained. A breakdown by type of benefit—working age, pension, and so on—is published by DWP. I do not have those figures to hand, but I will be happy to provide them to the noble Lord and other noble Lords who have spoken in the debate.

The noble Lord also asked about what was happening about error: are we administering the system more effectively? We are now applying the same rigour to error as we do to fraud. Official error overpayments are at their lowest level since 2002-03, and the latest statistics show that overpayments due to official error have fallen, despite a background of significantly increased work pressures faced by the department and local authorities during the economic downturn. He again turned to the issue of undeclared income, which we debated in our recent deliberations on the Child Poverty Bill. I am not sure that there is much we can add to that debate today. Clearly, the issue of tax evasion is important and the Government have put significant resources into trying to clamp down on it. However, it remains for us all to be vigilant, just as we need to be vigilant around benefit fraud.

The noble Baroness, Lady Thomas, again supported these regulations and I am grateful for that. She referred, as did the noble Lord, Lord Laming, to the fact that we know that significant amounts of benefit are still not claimed. Again, I do not have that data to hand, but we discussed it on the Child Poverty Bill. For one more recent order, I think that we put some statistics on the record. I am happy to do that again in due course.

From recollection, those benefits where there is the lowest take-up are pension credit, council tax benefit and housing benefit. On the latter two, people often do not realise that those benefits can be claimed when you are in work as well as out of work. The Government have done a lot to focus attention on that, particularly by enabling claims for pension credit, council tax benefit and housing benefit to be made in one telephone call that covers them all. We are also looking at new ways of using the administrative data that we have, specifically to try and target people who we believe might be entitled to council tax benefit and housing benefit.

The noble Baroness, Lady Thomas, referred to interviews under caution. My information is that the letter which asks them to attend states that they can bring somebody with them. If the noble Baroness has any examples where that is not happening, I will be very happy to look into it. There is also a leaflet explaining those issues.

The noble Lord, Lord Laming, asked about recoveries of overpayments. The data which I have to hand for 2008-09 are that we have recovered something like £281 million, while £286.4 million has been written off. Obviously, there is still some way to go to recover the full amount due. The level and rate of recovery are limited as well, because it is generally, if not always, being recovered from people on low incomes.

Reverting to the point made by the noble Baroness, Lady Thomas, there are two separate interviews. In one, they are under caution and in another they are offered a caution, so a two-stage process is involved. I believe that that has dealt with each of the points that were raised. If not, I will be happy to try and have another go if noble Lords prompt me on it. Subject to that, however, perhaps we might move to acceptance of these orders.

Motion agreed.