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Mr. McAvoy: Can the hon. Gentleman describe the cost-effectiveness of removing benefit from 16 and 17-year-olds?
Mr. Hughes: No. [Interruption.] If it had been part of this debate, I would have been briefed on it, but I was not, so I cannot. The hon. Gentleman made an uncharacteristically short speech. I should have thought that he would speak about that. What has gone wrong in that, as I understand it--at least in my local experience--is the guarantee of a training place. I accept that that has not always worked as smoothly as it might, but, characteristically, the Labour party and some community organisations have exaggerated the problems. Presumably, the hon. Gentleman suggests that we shall have the same problem with the restrictions on under-25s. I do not accept that, because we shall merely cut the money paid out to landlords.
I shall discuss two subjects, the first of which is identity cards. It is a pity that the Labour party has opposed identity cards--but then it has opposed everything. First, it opposed the efficiency improvements. We have had some confusing stuff from the hon. Member for Islington, South and Finsbury, who has said that the benefit system
unless he was misquoted by The Independent as well as the Evening Standard. In fact, he did not say that he was misquoted but simply claimed not to have written the letter.
Mr. Chris Smith:
You can do better than this, Robert.
Mr. Hughes:
If the hon. Gentleman wants to intervene, I am happy to give way.
Mr. Smith:
Even the hon. Gentleman must understand that there is a difference between writing a letter and receiving a letter. I received a letter; I did not write it.
Mr. Hughes:
I understand that that is what the hon. Gentleman is saying. The point I was seeking to make when he failed to give way earlier is that that is what the Evening Standard believed, and if that is wrong I am happy to accept that. That was the only question I wanted to ask him. Either he or the hon. Member for Oxford, East (Mr. Smith) believes it, and it does not matter, in a sense, which one. [Interruption.] I thought the hon. Gentlemen were from one party. If the hon. Gentleman is telling us that there is one policy for the Labour shadow Treasury team and another for the other Labour Front-Bench teams, that is interesting.
It is a pity that the predecessor of the hon. Member for Islington, South and Finsbury, the hon. Member for Glasgow, Garscadden (Mr. Dewar), now the Labour Chief Whip, strongly criticised the investment in the new benefit cards. To create a single identity, it is important to use identity cards. It is important to be able to ask, "Is this a single person?" The hon. Member for Garscadden also criticised biometric checks and the use of new technology.
That is a pity because, to create a single identity, it is necessary to use all available technology. In a few years, the banks will use that technology and it will become commonplace to use one of a variety of biometric checks. If the Government are left behind in the debate and we do not use that technology for social security, people will demand to know why.
Secondly, I shall discuss data matching. Some years ago, when I was parliamentary private secretary in the DSS, the tenor of the debate about data matching between parts of the DSS and other Departments was dictated by arguments that it was an abuse of people's individual freedom for the Government to compare those records. It is obvious from the evidence that is being presented to the Social Security Select Committee that those arguments no longer apply--that people understand that it is reasonable to check up on people. The tenor of the questioning from the hon. Member for Rochdale was the opposite. I am pleased to be able to welcome something that the hon. Lady says. There is a first time for everything.
We want many more DSS agencies to become involved in this, such as the Contributions Agency. The one that I want to mention, however, is the Inland Revenue. To discover whether a name or national insurance number--or whatever part of someone's identity is taken in vain--is being used fraudulently, one needs to know whether they are on the Inland Revenue computer and what it says about them. I understand that the Inland Revenue is being the dog in the manger and saying that it is impossible to do that, not for technical reasons but for bureaucratic ones. I urge my right hon. and hon. Friends to be extremely tough with the Treasury and to ensure that they obtain access to those records so that data can be matched. Most frauds, personal or organised, would be stopped by that.
Mr. David Clelland (Tyne Bridge):
I am pleased to see that the hon. Member for Beckenham (Mr. Merchant) is in his place. I recall that he once tried to live for a week on social security benefit in my constituency--and could not manage it.
Mr. Piers Merchant (Beckenham)
indicated dissent.
Mr. Clelland:
If the hon. Gentleman said that he did manage, it must have been his former hon. Friend, Matthew Parris, who did not manage it. One of them did not. It is a pity that they are not giving us the benefit of their experiences.
I shall speak about the role of local government and the problems that confront it and suggest some of the best ways to tackle social security fraud from the local authorities' angle. I have nine suggestions, which is one
more than my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), but I shall probably repeat some of his.
Local authorities agree about the importance of tackling social security fraud. It will be tackled effectively only if there is a proper, effective partnership between local authorities and the Department of Social Security and if local fraud strategies are developed in a stable framework. The Government have proposed a huge increase in fraud savings targets for local authorities--65 per cent. in some cases. That means that DSS subsidy payments to local authorities will fall from £26.7 million in 1995-96 to £13.7 million in 1996-97--a £13 million reduction, equal to a 49 per cent. cut in subsidy payments for fraud detection.
Mr. Heald:
Is the hon. Gentleman saying that that would be the position if local authorities did not rise to the challenge of meeting the targets? If they meet the targets, surely what he says is incorrect.
Mr. Clelland:
I hope to discuss the problems as local authorities see them. I shall discuss the point that the hon. Gentleman has made.
Local authorities were notified of the changes very late in the day, despite the fact that Ministers were directly advised by local authority associations of the necessary time scale requirements. Local authorities are important. For example, in 1995-96, local authority fraud staffwill save an estimated £220 million in public funds.Benefit officers suggest that more fraud is being detected by local authority fraud investigation staff because there are more staff with better back-up. To avoid losing out as a result of the Department of Social Security's new subsidy proposals, it would be necessary for them to take on more staff--the cost of which would have to be met when the subsidy payments were being reduced.
The late notification of the Department's proposals for 1996-97 is inexcusable. Council budgets for the next year are finalised and it will be extremely difficult for cases to be made for extra staff. If a local authority were able to appoint extra staff, the approval, appointment and training processes would mean that it would be mid or late summer before the new staff could be effective. There is an urgent need for the Department to give local authorities stability in fraud savings targets and subsidies so that they can plan their fraud strategies and invest in their fraud investigation offices.
At the beginning of last year, it appeared that that concern had been understood. Department of Social Security letters to individual authorities and a circular dated January 1995, encouraged authorities to plan and to make long-term investment decisions on the basis of a move towards their uncapped target within two years. Many authorities took the Department at its word and made important investment decisions.
The increase in fraud targets for 1996-97 has not only shown that those statements were misleading, but, more fundamentally, it has removed local authorities' confidence in the stability of the new arrangements. Accordingly, many authorities will be reluctant to commit additional resources to fraud as offsetting income from subsidy can no longer be relied on. The case for stability
is also supported by the fact that local authorities have responded positively to the existing arrangements. Savings from the anti-fraud scheme have increased from £92 million in 1993-94 to an estimated £220 million in 1995-96. There is, therefore, no argument for increasing targets on the basis of poor local authority performance.
The Department has presented the proposals as providing further incentives, but the impact for all except the top performing authorities is to reduce the amount of subsidy that local authorities could have anticipated if the present subsidy arrangements had continued. Most authorities therefore view the changes as a cynical attempt to reduce the amount of Exchequer subsidy and fear that it is a step back to the pre 1993-94 era, when local authorities incurred the costs of investigation and the Treasury benefited from the savings.
Local authorities believe that the Department, when making the proposals for 1996-97, was not aware that even good performing authorities are likely to suffer significant reductions in subsidy under the present arrangements. Unless radically revised, the proposals for 1996-97 will have a demotivating impact on most authorities. In addition, the methodology for distributing targets is crude and needs to be reviewed to take account of the findings of the benefit review. The current difference between an exceptionally high performing local authority and a good performing local authority may be more illusory than real. For that reason alone, the Department should avoid radical changes to targets and new subsidy arrangements that reward only exceptionally high performers.
There is the strongest possible objection to the transfer of £5 million from next year's provision for administration subsidy to the anti-fraud challenge fund. The initial publicity gave the impression that the initiative was to be supported by new money. I believe that it is short sighted to reduce the administration subsidy when local authorities' budgets are severely constrained.A stretched and under-resourced service is likely to give more scope for fraud than one that is adequately supported. The move demonstrates the half-hearted nature of the Department's commitment to fraud.
The lack of commitment is emphasised by the fact that the amount of challenge funding has decreased since it was first announced. The Department of Social Security's letter of 7 December stated that the amount set aside for challenge funding was £10 million, but DSS officials recently advised that it will now be only £8 million, of which only £3 million will be new money. There are major misgivings about the cost-effectiveness of the proposed challenge fund as it could divert attention from more effective mainstream fraud work. There is a role for the encouragement of good and innovative practice, but it is not considered that a competitive-based bidding system is an appropriate approach--indeed, competition for funds may deter the sharing of information and ideas.
Although the stated purpose of the initiative is to sponsor innovative schemes, innovation receives the lowest weighting in the Department's proposed scoring system, and the most weighting is given to payback.I believe that the more innovative the scheme, the more difficult it would be to predict payback. It is also clear that innovative schemes to prevent fraud are not eligible. Local authority associations have raised with the Department and in evidence to the House of Commons Social Security Committee the need for additional measures to assist prevention and detection--for example,
the use of national insurance numbers as a reference for all benefits, once we have cleared up how many national insurance numbers are in circulation; the power to recover overpayments to landlords direct from subsequent payments; and the requirement that unemployment offices inform local authorities when claimants cease entitlement to unemployment benefit.
If Ministers seriously intend to encourage a more strategic and partnership approach towards tackling fraud, they should consider the adoption of the following measures. First, they should continue to provide an effective incentive to fraud work. The present targets, which results show are eliciting the necessary response from the overwhelming majority of authorities, should be retained. Secondly, if Ministers are committed to changing targets, a more graduated approach should be adopted. It is unreasonable that good performing authorities under the current scheme have to meet unrealistically increased targets merely to stand still in subsidy terms.
Thirdly, so that local authorities can plan their fraud strategies and make sensible investment decisions, a framework for targets and subsidies should be agreed for the next three years. Fourthly, the methodology for distributing targets should be reviewed in the light of the benefit review findings. Fifthly, challenge funding should not be resourced at the expense of other funding and, therefore, the £5 million cut in administration subsidy should be restored. Sixthly, resources for challenge funding would be more effectively spent by injecting the resources into the mainstream anti-fraud incentive scheme, which would partially offset the cost of the more graduated approach to targets.
"would be pushed to breaking point . . . with fewer people, more mistakes and worse service"--
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