With council cash so tight, it was no surprise when Havering LBC grew hot under the collar over a benefit cheat who was given just a ‘slap on the wrists'. Nicholas Dobson asks if the courts should seek recompense.
As the credit crisis, with soaring fuel, energy and other costs bites hard, local authorities have a particular onus to manage public finances as efficiently and effectively as possible.
Authorities are, in many ways, statutory monopolies, with council taxpayers having to pay up on demand or face the consequences. And, unlike the market, if taxpayers don't like what their authority does, they can't take their ‘business' elsewhere. So, as effective trustees of the public purse, ie, stewards of your and my money, authorities need to do all they can to make sure this is being properly spent for lawful, public purposes, and not being siphoned off by fraudsters.
Which is why Havering LBC got so angry at what it considered to be a mere ‘slap on the wrist' handed out on 4 August by Snaresbrook Crown Court, to someone the council termed ‘one of the borough's worst benefit cheats'.
According to the council, the defendant, David Ham, was given a 20-week jail sentence suspended for one year, and ordered to carry out 60 hours' unpaid community work.
This was after he had admitted claiming £25,308 in housing and council tax benefit, despite having inherited £44,821 in October 2003 which he had failed to notify to the council.
What seemed particularly to get the council's goat was the failure of its applications that the defendant should pay £25,308 in compensation and £6,272 court costs. As leader, Michael White, indicated: ‘We are extremely disappointed... The Government is promoting a tough line on benefit fraud, but this punishment amounts to a slap on the wrist. Where is the deterrent in a sentence of community service, and where is the value to taxpayers, when we are not even awarded costs?'
Clearly, however, sentencing courts have to take an impartial and dispassionate view in light of sentencing guidelines, and all the circumstances placed before them. In 1987, the Court of Appeal pointed out that benefit fraud offences ‘involve the dishonest abstraction of honest taxpayers' money, and are not to be treated lightly'. Also, they are ‘easy to commit and difficult and expensive to track down'.
But the court did, nevertheless, say that it ‘must be remembered that they are non-violent, non-sexual and non-frightening crimes'.
But more recently, in 2004, the Court of Appeal said that due to the increasing prevalence of social security fraud, there would be cases where courts could be justified in imposing a sentence with a deterrent element.
Since 1 April 2008, the functions of the former Benefit Fraud Inspectorate transferred to the Audit Commission. As the commission points out, English councils spend around £16.5bn on housing and council tax benefits, and their efficient administration makes ‘...a vital contribution to the social and economic well-being of the area'.
However, clearly, public monies stolen from the system reduce the pot for the genuinely needy, and force the gap to be filled by already hard-pressed, honest taxpayers. Consequently, since 1996, the Audit Commission has run the National Fraud Initiative (NFI), which in 2006/2007, increased the value of detected fraud and overpayments by 25% to £140m from £111m in 2004/2005.
The commission points out that during that period, in excess of £24m housing benefit overpayments were detected, classified as 31% fraud, 62% claimant error, and 7% local authority error, with a recovery rate of 71%.
The NFI is a data-matching exercise which compares data sets ‘to identify inconsistencies or other circumstances that might indicate fraud or error'.
In a digital age where most data is now being held electronically, this is a powerful device. And the commission has recently got a new legislative tool to support it. This is Part IIA of the Audit Commission Act 2008, which came into force on 6 April 2008 and, among other specifications, specifically empowers data-matching exercises as well as the mandatory provision of data from audited bodies and other best value authorities, and relevant disclosure of the results.
Local authorities need to be ever-vigilant in rooting-out fraud and ready to act decisively when they have good reason to suspect it. Depending on its complexity, this may well require specialist external help involving both lawyers and forensic accountants. My firm, for example, has such a multi-disciplinary fraud team.
Those like Havering, which work long and hard to bring fraudsters to book, may feel understandable frustration at what they perceive to be a slender penalty. However, the case did result in a conviction, a 20-month jail sentence – albeit suspended – and 60 hours' community service, none of which are likely to enhance personal wellbeing nor CV value.
And, with data-matching and a constantly sharp council eye out for abuse, many scammers will, in future, be likely to find their fools' paradise taking a rapid detour into Hades, just when they are least expecting it.
Nicholas Dobson is a partner at Pinsent Masons
