Selling the magazine provides a lifeline for hundreds of homeless people across the country who buy it for 25p and resell it for 60p. The founders of the magazine use any profits to fund training programmes and other schemes for the homeless.
The Employment Service said Mr Bird had agreed 'to co-operate' where they had 'a named individual who is allegedly committing benefit fraud'.
'We have received further information that certain named individuals have been selling the Big Issue whilst claiming benefit and these individual cases will be investigated.'
Mr Bird denied agreeing to co- operate, but said: 'I am not prepared to impede any legitimate investigation that the department carries out. But first of all we have to determine whether it's within their power to investigate in this manner.'
The Employment Service and the Big Issue are currently embroiled in a legal stand-off, with officials demanding the names of all vendors who sell the magazine to check against their records of benefit claimants and Mr Bird refusing. Officials from the service can demand the names of employees, but Mr Bird says they do not employ the vendors, they simply sell products to self-employed people.
'We're not supplying work to anybody - we're retailers. We sell the vendors products. How they sell them, where they sell them and at what time of day they sell them is up to them.'
Mr Bird said the Employment Service would have to uncover its own information on individual vendors because 'I'm not prepared to do the job of the Employment Service'. Officials from the service are now seeking legal advice on whether they can compel Mr Bird to hand over the names.
'We believe we do not fall under their remit and we are prepared to go to court to prove that,' Mr Bird said. He added he would stick strictly to the law and was not prepared to break it.
'I don't see myself as a heroic figure because that doesn't go anywhere. What we hope to arrive at is a good old English compromise,' he said.
The move by the Employment Service is seen by the vendors as an attempt to pick on a vulnerable group because they are an easy target. Mr Bird said: 'You don't victimise a whole group of people by saying 'you look a suspicious lot'. If you do, you create a whole lot of problems for people who are trying to pick themselves off the floor.'
If Mr Bird is forced to reveal the names, rather than just supplying employment information on named individuals, 'it would put a lot of people off' selling the Big Issue, Kate, a 21-year-old vendor picking up her daily supply of magazines at the Clerkenwell distribution centre in London yesterday, said.
'Already there's a feeling about that you're constantly being watched. We're an easy target. It's a lot easier to pick on the poor. It's like all the real fraudsters: they're hard to catch so they don't bother with them.'
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