Thousands of illegal workers claiming British welfare payments: Loophole in the law costs taxpayers millions

Tens of thousands of workers with no right to be in Britain have been claiming benefits thanks to an extraordinary loophole in the law.

Ministers have discovered that Labour allowed 155,000 illegal immigrants to qualify for sickness benefits and maternity pay. Government sources put the cost to the public purse at ‘tens of millions of pounds’.

They say the shambles is a damning indictment of how Labour lost control of both the benefits and immigration systems with taxpayers left to foot the bill. Work and Pensions Secretary Iain Duncan Smith will outlaw the practice in welfare reform legislation expected to be unveiled this week.

Ministers believe most of those abusing the system came to work in Britain for a limited period and overstayed their visa. Others managed to get a job without a work permit.

At present, someone could be illegally in the UK and able to claim Employment and Support Allowance (ESA), paid to those too sick to work, as well as statutory payments such as maternity or paternity pay and sick pay.

Astonishingly, the Work and Pensions Department has not in the past asked to see work permits when assessing claims for ESA. Employers, meanwhile, have not been asked to show proof that workers are in Britain legally when processing claims for maternity or paternity pay or sick pay.

A Whitehall source said: ‘It cannot be right that people who aren’t eligible to work here can get benefits that are a substitute for earnings.

‘This is a classic example of where the welfare system has been allowed to get completely out of control. It is difficult to track because these are illegal workers, but the cost is likely to be in the tens of millions. ‘Clearly it’s incredibly unfair and ministers are acting to legislate to close the loophole as quickly as possible. 'Work permits showing people are here legally will be needed for ESA claims or an employer will have to show one when they are putting claims through. 'The Bill we are bringing forward will start the root-and-branch overhaul needed to put fairness back at the heart of the system.’

Hundreds of thousands of National Insurance numbers were handed out under Labour to illegal workers as, alarmingly, there was no requirement on JobCentre staff to check whether a person was in the country legally. Many employers wrongly believed that having an NI number meant foreign staff were allowed to work in the UK.

Illegal workers should not be eligible for any state-funded benefit, housing, or anything other than emergency NHS treatment. At the moment, a ‘habitual residency test’ is used to establish whether migrants are eligible for other types of benefit.

To qualify for jobseeker’s allowance, employment support allowance, pension credit and income support, they must demonstrate that they have either worked or have a good opportunity to get a job.

However, the European Commission has warned ministers that the rules may infringe the human rights of EU citizens and are ‘not compatible’ with EU law. It has started legal proceedings against Britain to have restrictions on welfare claims by incomers scrapped.

The Welfare Reform Bill, ministers say, will bring an end to the complex, costly and inefficient series of benefits and tax credits, replacing them with a single universal credit. Cuts to housing and disability benefits will also be confirmed.

The scale of the welfare challenge facing Britain is laid bare today in figures which show at least 330,000 children – around one in 30 – are growing up with a parent claiming Jobseeker’s Allowance.

Mr Duncan Smith said: ‘We know that family is the most important influence on a child’s life, so it is no surprise that with this many children growing up with parents on unemployment benefits we are facing intergenerational worklessness and benefit dependency on such a massive scale. ‘Our broken welfare system has reinforced this destructive cycle for generations.’

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