Identity card 'would not stop welfare fraudsters' Â Â Â

David Blunkett is facing a cabinet revolt against his plans to introduce a universal identity card, amid warnings that it would do little to combat social security fraud.

Andrew Smith, the Secretary for Work and Pensions, is sceptical that the "entitlement card" announced by the Home Secretary would help to stamp out bogus welfare claims, which cost the Government up to £5bn a year.

A Whitehall source said yesterday: "The Department of Work and Pensions [DWP] will oppose the idea. It believes this is a solution in search of a problem." The source added: "If people are going to work and claim benefits, an entitlement card is not going to deter them. They will just turn up, show the card and carry on working."

DWP officials believe the Home Office plan might encourage fraud by creating a market in stolen or fake cards.

Plans by the Tory government for a "smart card" for all claimants were scrapped in 1999 by Alistair Darling, Secretary for Social Security at the time. Ministers dismissed the £1.5bn Tory scheme as an "expensive and unsuccessful gimmick".

Instead, the DWP is trying to persuade people to have benefits paid into their bank accounts, to try to cut fraud using stolen or fake Girocheques and benefit books.

DWP officials believe an entitlement card would cost the department millions of pounds and could jeopardise plans to upgrade its computers – for example, to handle a new system for child support payments.

A study by the Cabinet Office has estimated that "identity fraud" accounts for only £35m of all bogus welfare claims, less than 1 per cent of the total estimated cost to the Government of between £2bn and £5bn a year. Benefits make up only a small percentage of all identity fraud, which costs the economy an estimated £1.3bn. Research by the DWP suggested that identity fraud for jobseeker's allowance and income support cost £3m a year, just 0.02 per cent of the £15.8bn paid out.

The Cabinet Office report, published last week with Mr Blunkett's consultation document, warned: "Such a card would carry a huge premium around its secure issue and reissue. Procedures ... would have to be made more secure than current procedures as it would otherwise be the single ticket for fraudsters, giving access to a range of services."

Mr Blunkett told MPs that an entitlement card would be a powerful weapon against the identity fraud with which public and private services were "bedevilled". He conceded benefit fraud was only a tiny part of the problem, but added: "If it [a card] is good enough for benefit recipients, it is good enough for all of us."

The opposition from the DWP is a setback to Mr Blunkett's hopes of winning approval for an entitlement card. The Treasury's reluctance to back the plan with taxpayers' money has forced the Home Secretary to make it self- financing, which could mean big increases in the cost of a passport and driving licence.

The Home Office believes the introduction of a card would tackle illegal working and stem the growth of the black economy and an underclass of people paid less than the minimum wage. It argues that it would reduce the "pull factor" for illegal immigrants, who believe they can work and obtain benefits and public services with impunity.