My Lords, I thank the Minister for his explanation of the order. The Opposition has no objection to the increase in penalties and therefore to this order. Benefit fraud, like any fraud, is a serious matter and certainly the scale necessary to trigger this increased penalty is one that requires action. However, I would like to take the opportunity to ask the Minister a few questions.
First, the Secondary Legislation Scrutiny Committee commented that since the current £2,000 maximum penalty has been in force for some time—almost two and a half years—it had expected to see a more evidence-based explanation for the increase. It asked the department to issue a revised Explanatory
Memorandum—which it did, and I am grateful for that—but as far as I can see its main argument seems to be that:
“the Government considers there are still too many people committing benefit fraud”.
That obviously is true: if one person is committing benefit fraud, too many people are committing benefit fraud. However, the realities of cause and effect are slightly more complicated. The deterrent effect of penalties will be affected by the likelihood of people understanding that they are committing an offence, their belief that they are likely to get caught and the severity of the penalty if they are caught. Can the Minister tell the Committee what evidence he considered when deciding what the right maximum would be in terms of the deterrent effect? The Explanatory Memorandum very candidly states:
“Whilst we cannot estimate the deterrent impact of the measure in terms of the number of frauds committed in the future, the measure still remains an important part of our overall package of measures”.
How do the Government know? If they have no idea what effect it will have, how do they know that it is an important part of their package of measures? It might be a wholly unimportant part. What was the evidence for that?
Secondly, has the department done any research to assess the level of awareness of the level of penalty in order to understand its deterrent effect? If the presumption is that it will be a deterrent but people do not know about it, it will not. What evidence do the Government have about that?
Thirdly, and in some ways most interestingly, what would success look like? Is the aim to pursue more people who have committed benefit fraud, and, if so, does the Minister expect to see investigations and/or prosecutions rise or fall after this introduction?
Although we support the increase in the maximum penalty, the Government need to do more to convince us that they have an effective strategy to counter fraud. When this order was being debated in another place, my honourable friend Helen Goodman expressed concern that the measure might have been put forward simply so that the Government could be seen to be doing something. Since it affects at most 250 people, it would seem to be only a limited contribution. The Government’s Explanatory Memorandum makes it clear that 250 cases a year is the maximum, so what are the Government doing to tackle the bigger problem? There clearly is a problem: in 2013-14 the department overspent by £3.3 billion on error and fraud, some 2.1% of benefits expenditure. This month, the Public Accounts Committee published a very critical report that highlighted the Government’s failures on tackling fraud and error, especially in housing benefit, where overpayments have risen very significantly, from £980 million to £1.4 billion. The same report also concluded that the department’s handling of housing benefit error and fraud did not deliver value for money.
The National Audit Office has also been critical of how the department is dealing with fraud and error. In October, its report said:
“The Department has a target to reduce total fraud and error overpayments to 1.7% of benefit expenditure by March 2015. In his report on the Department’s accounts for 2013-14, the Comptroller and Auditor General noted the Department was unlikely to achieve its 1.7% target”.
The report described the problem as “escalating”. Can the Minister tell the Committee whether the department expects to hit the 1.7% target by that date and what action it is taking to do so?
Finally, the Explanatory Memorandum indicates that DWP fraud investigations resulting in an administrative penalty fell by three-quarters between 2009-10 and 2013-14, from 7,249 to 1,501. Can the Minister explain why he believes that fall took place and on what evidence he bases his answer?