The duty on Jobcentres to hand over an NI number if an illegal migrant is working “really does not make sense”, an official at the Department for Work and Pensions admitted privately.

The scandal, disclosed in documents obtained by The Times, will come as a further damaging blow to the Government’s credibility in attempting to get a grip on illegal immigration.

Six years ago Lord Grabiner, QC, urged the Government to tighten up procedures for issuing national insurance numbers. A total of 440,000 were handed out to foreigners in 2004-05 but immigration checks are carried out in only 2,000 cases a year.

The Department for Work and Pensions said yesterday that it referred 3,300 cases of suspected fraud by migrants given an NI number to the Home Office last year.

The Times has seen a seven-page memo to Richard Kitchen, then chief investigation officer at the DWP, clarifying the circumstances in which NI numbers are issued when staff have suspicions about a foreigner’s immigration status.

It states: “Applicant in employment and has falsified a genuine immigration document. Where Department of Work Pensions is satisfied as to the individual’s identity, a NINO (national insurance number) would be issued in this situation even if we have suspicions around his immigration status.”

The memo from Garry Gibson, of the Identity and Security Branch, Programme Protection Division, at Jobcentre Plus, adds: “Any prosecution action in respect of the falsified immigration documentation would be the responsibility of IND (Immigration Nationality Directorate) — NOT DWP.”

The memo was sent in June 2005 but yesterday the DWP confirmed that the policy was still in operation. Asked whether someone who had submitted false immigration documents would be issued with a national insurance number, a DWP spokeswoman said: “That is the case at the moment. We do refer these cases to the Home Office.

“We would always inform the Home Office when staff have suspicions about a person’s right to work.”

She said that even if a passport were genuine but stated that the person could not work or it was clear that the person had overstayed their permitted period in the country, staff would still issue a national insurance number.

“The number application process does not look at somebody’s right to work and our regulations do not ask us to do that. Staff are acting within the regulations,” she said.

Even though the problem was highlighted in Lord Grabiner’s 2000 report on the informal economy, the spokeswoman added: “This is something that has come to light fairly recently.”

She confirmed that if individuals are in work and prove their identity. then they are issued with a national insurance number even though they may not have the right to work in the country.

She added: “We are in the process of reviewing the way they are issued to see whether there are ways we can tighten the system.”

One reason for the official inertia to close the loophole is the benefit for the Treasury: once people have a NI number, they are liable to pay tax and national insurance — even if they are not legally allowed to work. They can also be traced as both the DWP and Customs & Revenue have their national insurance number for both benefit and taxation purposes.

The advantage for individuals is that they can claim income-related benefits, such as incapacity benefit.

The DWP officially maintains that NI numbers are “simply an internal number used by HM Revenue & Customs and DWP to follow NI and benefit claims”.

A spokeswoman added: “To apply for a national insurance number you have to go through a very comprehensive identity check. A national insurance number does not give you access to anything and is not proof of identity. You need to have one because we use it as your customer number so we can identify you.”

But privately there was embarrassment at the disclosure of the loophole.

An official inside the DWP told The Times that, even though legally the onus is on employers to make checks on the immigrant’s status, ministers were keen to change the system. Holding an NI number is widely seen as establishing someone’s availability for work.

The official said: “These regulations, pretty much unchanged since 1948, are there to allow people in work to pay national insurance . . . this is why we are in this situation.”

WHAT IT MEANS

NINO: National insurance Number

DWP: Department of Work and Pensions

HMRC: Her Majesty’s Revenue and Customs

CCU DET: Central Control Unit (Detection)

NIFU: National Identity Fraud Unit

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