Benefit fraud claims reach pounds 2bn a year

A central benefits fraud squad and an immediate investigation of all private landlords who receive more than 20 housing benefit payments each week was demanded yesterday by an all-party committee of MPs as part of a "fundamental change of attitude" to benefit fraud.

As many as one in five claims, totalling pounds 2bn a year or more, could be fraudulent, the Commons Social Security Committee said, and countering fraud must be given the same weight by the Cabinet as controlling public expenditure. "There is no point in controlling the total spent if a lot of that money is going out the back door to the wrong people," Frank Field, the Labour committee chairman, said.

The MPs also demanded a task force to establish the extent of fraud over national insurance numbers after evidence that millions of inactive numbers, including 9 million for deceased people, remain in existence. The numbers give access to great swathes of the benefit system.

Their existence could undermine the new benefit-payment card announced yesterday by Peter Lilley, the Secretary of State for Social Security, Mr Field warned.

The new credit card-style benefit card, operating on a magnetic strip, will involve putting networked computers into all 20,000 Post Offices over the next two to three years in a pounds 200m investment which was hailed by the Post Office as "the biggest single boost we have received in living memory".

However, Mr Field said: "We could be issuing these new smart cards to people who shouldn't even be getting benefit in the first place and making it even easier for them to undertake their fraud."

Mr Lilley insisted that the system would be secure. "It isn't a smart card, because we have a smart system," he said, but it has been designed to cope with smart cards should that become necessary later, either for social security or other purposes.

Citing evidence of systematic defrauding of the system by private landlords and organised crime using false identities and non-existent claimants - one London borough alone, Harin-gey, found pounds 750,000 worth of fraudulent claims among just 15 landlords it investigated - the committee said it in no way condoned the large amount of individual claimant fraud. But the most serious frauds "can only be maintained over a lengthy period of time with the active support of the landlord and his or her agent".

The committee makes 40 recommendations, including more exemplary prosecutions, an end of the "finders-keepers" rule over benefit savings which leads to local authorities and the Benefits Agency competing rather than co- operating over fraud detection and a new reward system for councils that both detect and prevent fraud. At present prosecutions are rare.

It also wants a review of the Data Protection Act which some investigators say is hampering data-matching schemes, where benefit claims, tax and employment records can be compared. "There is an incorrect balance between openness, privacy and confidentiality."

Landlords should have to tell councils of all the properties they own, provide their Inland Revenue tax number, and all landlords receiving more than 20 direct payments a week should be investigated, it says.

8 Housing Benefit Fraud: Third Report of the Social Security Committee 1995-96. HMSO; pounds 11.50.

Housing benefit

expenditure in Britain

1995/96

prices pounds m+

1989/90 5,533

1990/91 6,133

1991/92 7,269

1992/93 8,514

1993/94 9,652

1994/95 10,461

1995/96* 10,848

1996/97* 11,178

1997/98* 11,750

1998/99* 12,600

* Projected

+Deflated by GDP deflator

Source: DSS