REVIEW OF EXTENSION OF COLLECTIVE ENFRANCHISEMENT

HL Deb 18 June 1996 vol 573 cc203-35

(".—(1) The Secretary of State shall keep under review the effect of this Part together with the Leasehold Reform. Housing and Urban Development Act 1993 on the extension of the right to collective enfranchisement.

(2) In conducting the review, the Secretary of State shall—

1. (a) consider new or better ways of exercising the right of collective enfranchisement; and
2. (b) consult such bodies as he considers representative of the interests of leaseholders.

(3) The Secretary of State shall, within a period of two years after the date on which this Act is passed, make a report of the review carried out by him under subsection (1), and shall lay before each House of Parliament a copy of the report made by him.").

The noble Lord said: This amendment stands in my name and that of the noble Lord, Lord Meston. There is a great deal of concern about how well the 1993 Act has been working as regards enfranchisement. Concern has also been expressed this afternoon as to how well the changes proposed in this Bill will work.

The purpose of the amendment is to ensure that within a two-year period after the Act is passed, the Secretary of State will carry out a review and will report on the way in which the measures—that is, the 1993 Act and the Bill—are working as regards leasehold matters. I share the anxiety of those who say that the last Act could not have worked well because of the small number of instances of enfranchisement that are known and that leaseholders are finding it too difficult to put into practice the provisions which the 1993 Act should have given them. I contend that they will also find it difficult to deal with the changes proposed in this measure. Let me repeat the figure that I quoted earlier. It is my understanding that 65 per cent. of leaseholders will not be able to become enfranchised because of the measures in this Bill together with the measures in the 1993 Act.

The purpose of the amendment is to put that proposition to the test—unfortunately, only after the event—so that the Secretary of State will publish the results of a full review to see how well the measures are working. I believe that it is a sensible course. We shall then have some objective—I hope—information which will enable us to judge whether further changes are needed or whether the fears expressed today by several Members of the Committee in relation to the Bill are borne out in the event. I beg to move.

Lord Strabolgi

I support the amendment. The noble Viscount, Lord Montgomery of Alamein—I am sorry to see that he is no longer in his place—said rightly that the Act was not working very well. Indeed, as my noble friend Lord Dubs pointed out, there have been very few cases of leasehold enfranchisement. I understand there have been only a few dozen. Therefore, it is crucial that the Government now have a commitment to a thoroughgoing review.

If the Government's stated intention is still to make long leaseholders the full owners of their homes, they must now commit themselves to examining how the restrictions of the 1993 Act are serving to frustrate that aim—there will be further frustrations as a result of the present Bill—and how landlords are using loopholes to deprive leaseholders of their right to buy. It is clear that leasehold as a form of tenure has not come to an end. A commitment must be given to examining how the process of enfranchisement can be made simpler, cheaper and fairer, and so allow more leaseholders to become the full owners of their homes.

What the Government continually say they want to do, although they do the opposite in legislation, is to bring the leasehold system of this country to an end, so that we can enter into the kind of tenure that is held on the Continent and in other countries, such as Australia. It is much more successful than the old-fashioned, 19th century system which still persists in this country. The Government believe in bringing it to an end. Therefore, it is time that there was a full examination of the legislation that has been brought in during their term of office to see whether we can make further improvements and ensure that the aim to which they subscribe can be fully realised.

Lord Lucas

I agree entirely with the noble Lord, Lord Dubs, that it is our responsibility to keep the effects of our legislation under constant review. That is especially so with such an important and complex piece of legislation as the 1993 Act.

That is exactly what the Government have been doing. Let me explain briefly two ways in which we are seeking to achieve it. First, at the outset we established the Leasehold Enfranchisement Advisory Service. We have already discussed the value of that body in debating a previous amendment with a view to strengthening its activities. Not only has it provided an excellent advice service to leaseholders and freeholders in relation to the enfranchisement procedures, but it also has a non-political role in advising the Government about the effectiveness of those procedures. It can do that because of its contact with an enormous number of leaseholders interested in enfranchisement. It received 4,000 inquiries in 1994 and nearly 5,000 in 1995.

It was largely at the prompting of LEAS that the Government took action in this Bill to deal with the avoidance device of the creation of flying freeholds. I can assure the noble Lord that we shall continue to rely on its very helpful and sound advice. We shall also consult groups representing leaseholders and freeholders, as we have done in the course of the preparatory work for this Bill and during its passage through Parliament.

Secondly, we have commissioned a substantial research project which is being undertaken by staff from Sheffield Hallam University into the experiences of a sample of leaseholders drawn from inquirers to the Leasehold Enfranchisement Advisory Service who have shown an interest in enfranchisement. That study is understandably quite a lengthy process, but I expect that a full report will be made to the department in the spring of 1997.

In moving his amendment, the noble Lord, Lord Dubs, suggested that the 1993 Act had proved ineffective and over-complicated and that that was why so few leaseholders had made use of the new powers. He quoted a figure of 65 per cent. who cannot enfranchise. I do not recognise that figure and do not know the basis of it. Perhaps the noble Lord will write and enlighten me. The 1993 Act was brought forward on the basis of principle—hence all the qualifying conditions. It is not something that we intend to change just to get the numbers up.

I have to admit that the Government are faced with two difficulties in trying to refute the claim that the 1993 Act has proved ineffective. First, if leaseholders do proceed to enfranchisement, then, although they may be using the provisions of the 1993 Act, they may have come to a private agreement with their landlord. The Government have no automatic knowledge of how many such agreements there have been.

Secondly, it may be that in many cases the exact procedures of the legislation are not closely followed. The two parties form a degree of mutual trust and come to a purely private arrangement. That does not mean that the legislation has proved unsuccessful because it is quite likely that in many cases, without the knowledge of the legislative powers as a reserve, no such private deal would have been reached.

Those qualifications apart, the evidence that we have available suggests that there is far more activity going on than many of the critics of the Act would lead one to believe. I do not wish to prejudge the results of our research project, but the preliminary results of one part of the research, which was a survey of inquirers to LEAS, indicate that of those wishing to enfranchise, 18 per cent. had completed the process. That represented 67 cases of completed enfranchisement. Further evidence has been made available from LEAS itself, which has sought information from its own list of professional advisers, principally those solicitors and valuers working in this area. This has produced evidence of 164 completed cases of enfranchisement involving nearly 1000 flats and 154 cases of lease extension. This is, of course, only a very partial survey but it does indicate considerable activity.

There have also been 39 cases under the 1993 Act provisions where there have been disputes resolved by the leasehold valuation tribunals. Although this is not a large number in itself, the resolution of some difficult issues, such as the share of marriage value between landlord and leaseholders, has established some important ground rules which will add a degree of certainty for prospective enfranchisers.

I accept that the numbers we have for successful enfranchisement is not large in relation to the 1 million or so leaseholders that exist, but the Government have never claimed that progress would be rapid. For example, there are still cases of enfranchisement being completed under the original 1967 Leasehold Reform Act provisions, so it is still early days. However, we do think that the evidence we have available suggests that there is a great deal of interest about enfranchisement among leaseholders and that the level of activity is markedly accelerating.

The provisions in this Bill will enable more leaseholders to acquire their freeholds in a number of ways and we will, of course, keep the legislative framework under close review. I do not rule out further research work being commissioned.

I do not, however, think that it would serve any useful purpose to place a requirement on the statute book requiring such a review to take place. With the assurances I have given to the noble Lord, Lord Dubs, I hope he will feel able to withdraw his amendment.

Lord Dubs

I thank the Minister for his reply, which is reasonably helpful. I agree with him that it would not make sense to have such a requirement permanently on the statute book. I have achieved what the amendment sought, which is a positive response from the Minister. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 255CB not moved.]

5.30 p.m.

Clause 106 [Payment of housing benefit to third parties]:

Baroness Hollis of Heigham moved Amendment No. 255CBA:

Page 70. line 29, at end insert— (" "( ) Regulations relating to housing benefit under subsection (1)(h) above—

1. (a) shall require a request for information or evidence by the determining authority to be made in such a manner and within such a period as may be prescribed, not being more than seven days from the date on which the new claim is received at the appropriate Department of Social Security office, or the designated office, whichever is the earlier, and
2. (b) where it appears to the determining authority that further information or evidence is required, shall require that request to be not more than ten days from the date on which the claim is received.").

The noble Baroness said: With this amendment we move onto the next part of the Bill dealing with housing benefit. I do not know which noble Lord on the Government Front Bench is handling it but if, as I believe, it is, the noble Lord, Lord Mackay of Ardbrecknish, may I congratulate him on behalf of these Benches on his appointment as a Privy Counsellor which is well merited. We are delighted to be able to express this here on the first occasion on the Bench.

Noble Lords

Hear, Hear!

Baroness Hollis of Heigham

As this is the opening amendment on this part of the Bill perhaps I may make a few general remarks before going into what is a fairly modest amendment. We are all very worried about the future administration of housing benefit. The system is breaking down. We have very high rates of error, very high rates of fraud and a too low take-up figure with too long delays in paying out housing benefit.

Let me look at the first of these—fraud. I will come back to this in a later amendment. Somewhere between £1 billion and £2 billion of the £10 billion paid out in housing benefit may be fraudulent, mostly paid to fraudulent landlords who invent fictitious tenants. Until recently, local authorities had to pay back any money that they recovered, which was effectively a tax on crime-busting, so they did not do so. Wisely, however, the Government have changed their policy on this and given local authorities encouragement to pursue fraud. But it requires time, it requires staff and it requires detailed information—validating the income, perhaps, of the self-employed or checking the landlord's property and the identity of tenants in a floating ethnic minority community. There is a problem of fraud and all the evidence suggests that parties on all sides of this Chamber have under-estimated the amount of fraud that is occurring in housing benefit.

Secondly, the Government have also, in my view very foolishly, introduced changes in housing benefit which allow landlords to repossess property after eight weeks rather than after 13 weeks in arrears. The more careful the local authority is to check on fraud—and that takes time—the longer it takes to pay out a housing benefit claim, the more impatient landlords get, and the more keen they are to evict.

To that has been added a third pressure. Housing benefit is now paid four weeks in arrears, which I can tell the Committee is really popular with landlords. It is the requirement now that when a local authority has collected all the information it needs the clock starts ticking and the local authority has to pay the housing benefit within 14 days of receiving that information. Even so, only 70 per cent. of authorities achieve the target figure of meeting 80 per cent. of the claims within 14 days. It can take weeks—eight, 10 or 12 weeks—to collect information, especially if a claimant is self-employed or the employer is reluctant to co-operate or where there is a particularly difficult situation involving hours of work that fluctuate because of part time or casual labour. In the meanwhile, the landlord gets impatient and seeks possession. If the local authority does make a payment on account and it turns out not to be justified, which I suspect may be the ministerial answer, it is very hard to recover and the local authority may well be criticised by the district auditor.

The Government have boxed in the local authority and the tenant. We need to have the claims thoroughly checked to avoid fraud but, in so doing, it takes longer to pay out whereupon the landlord is more likely to evict. That process is made worse by the fact that housing benefit is now being paid in arrears. All that makes the tenant increasingly vulnerable.

What we are trying to do with this amendment—it is a very modest amendment but I felt it was right to try to state the nature of our concerns—is to reduce the time that the local authority has in order to seek additional information before the clock starts ticking. This amendment would say to the local authority, "You have seven days to request the information you need to check on this claim and beyond that you have a further 10 days for any additional information." Thereafter the clock starts ticking. We bring a sense of urgency into the system and we hope that as a result we will be both scrupulous in the handling of public money vis-à-vis the landlord, but also I hope we will protect the tenant from coming under pressure from the landlord for eviction. I beg to move.

Earl Russell

I must apologise to the noble Baroness for my discourtesy in missing the first minute of her speech. I have agreed with what I have heard and I am happy to support this amendment for the time being.

Baroness Hollis of Heigham

And trust me on the rest!

Earl Russell

I certainly trust the amendment, which is what I am here to support. One extra reason for supporting this amendment is that I hope the Minister might feel that it will save us from some occasionally fruitless and vigorous exchanges across the Chamber, the last of which happened while we were engaged on the housing benefit regulations only a few weeks ago.

Before I go any further, I take this opportunity to congratulate the Minister most warmly on his elevation to the Privy Council, which is a very just honour in which I take a great deal of pleasure.

The trouble is that the Minister is always expressing with confidence figures about housing benefit delay which appear to those of us with experience of the subject on the ground to be absolutely incredible—particularly incredible if our experience happens to come, as mine does, from the London Borough of Brent. The reason why we have this trouble with information is that we are measuring different things. The 14 days within which the landlord of the housing benefit authority is supposed to determine the housing benefit runs from the day it receives the last bit of information. When information does not come in, it is extremely easy and sometimes correct to blame the tenant, but it is not always correct to do so. Local authorities, especially if they are cash-strapped, overcome by a flow of business or generally crippled by the weight of what they have to do—as sometimes happens, particularly in inner city authorities—simply may not get round to sending out requests for additional information.

I believe I am right in saying that the London Borough of Lambeth discovered three sacks of housing benefit mail which had been left unopened for three months. In such a case this amendment would apply, because it would mean that the clock would start ticking and the local authority would have to get its finger out and do something about it. It would therefore relieve a great deal of hardship among tenants whose claims are frequently delayed through no fault of their own; it would relieve the pressure on homelessness (whatever we think of Part VII of the Bill, we all agree that that pressure should be relieved); and it would relieve public funds since homelessness tends to be expensive. It would also save a great deal of often useless acrimony in debate when we are not discussing figures on the same basis.

For all those reasons I am delighted to support the amendment; I am glad it was tabled and I thank the noble Baroness for moving it.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)

I thank the noble Baroness and the noble Earl for their kind words on what the noble Earl described as his pleasure at seeing me elevated to the Privy Council—a pleasure I share. I thank them for their kind words and the Chamber for its assent in those congratulations.

Amendment No. 255CBA would require local authorities to request the information or evidence required in connection with a claim for housing benefit within seven days of that claim being made and, if they need further information, that must be requested within 10 days of the claim being received. The noble Baroness indicated 10 days thereafter. In fact, though that may be what she meant it is not what the amendment says. The amendment allows only a further three days.

The purpose of the amendment, as the noble Baroness and the noble Earl explained, is to speed up the claims process in order to get benefit to claimants more quickly. But it may well have the opposite effect.

Under this provision, authorities would have just two opportunities to obtain all the information needed to determine and maintain a claim. Once the seven days had elapsed, a local authority would only be able to seek further information within the next three days, giving the claimant no realistic time to reply to the first inquiry. If they failed to request any item of information within the statutory time limits, no matter how important, they would either have to do without or press ahead with a request for which there would be no statutory backing. In the event of the latter, the claimant would arguably be within his or her rights to refuse to co-operate. Faced with that dilemma, an authority could only determine the claim on the basis of the available evidence, which might result in benefit being overpaid, underpaid, or in the claim being rejected.

And the difficulties would not end there. Once the time limits had passed a local authority would not be able to seek any further information in connection with any subsequent review of a claimant's circumstances. Instead, the authority would have to rely entirely on the claimant reporting every relevant change correctly. The consequences of such a course and the opportunities it presents for fraudulent claims are unthinkable. I am sure that that is not the outcome the noble Baroness desires; indeed, she expressed quite contrary terms. But that may be one of the conclusions if the amendment is accepted.

There are already measures in place to help speed up the claims process, including demanding targets that staff must meet in connection with the determination of claims.

In 1994–95 local authorities determined 83 per cent. of claims within the 14-day target. Of course there must be a target of receiving all the required information; it cannot be expressed any other way and local authorities are steadily improving their performance.

The noble Earl suggested that some local authorities may not get round to sending out for the additional information and referred to three sacks of mail waiting for three months. I am sure the noble Earl would accept that that must have been due to different circumstances and would not be a deliberate policy of the local authority or its housing benefit staff. I am sure they try to get on with the job as quickly as they can and that the benefit claim is dealt with as speedily as possible. If it is not dealt with speedily and the tenant is not able to pay his rent for some weeks or months, then the person may land in the local authority's lap as a homeless person. It is not therefore in the authority's interest to stall those decisions, for whatever reason, and it is not in their interests to be inefficient.

We know that most claims are dealt with promptly and I am sure that there is not a deliberate intention on the part of the authority staff to delay claims. One must therefore be careful when one lays down procedures in law because they may hinder rather than improve efficient customer service.

I hope that with that exploration of the issue of the speedy determination of claims, the noble Baroness will be able to withdraw the amendment which makes the timetable extremely tight and could act in a contrary manner to the way in which we all wish to see local authorities act.

5.45 p.m.

Earl Russell

I am grateful to the Minister for that careful and thoughtful reply. But I wonder whether he puts a little too much weight on the argument that it is not in the local authority's interest to delay. It is not in anybody's interest to drive too fast for safety on the road; but it does happen from time to time. It is necessary that the law should restrain it, as it properly does.

I admit that the example of three unopened sacks was unusual. It came from the London Borough of Lambeth which for a long time has been unusual. I make no party point; it was simply an exceptional authority. But these things happen. I take the point the Minister made that there are a considerable number of targets on the local authority. Perhaps he could clarify one specific point.

Is there a specific target on the local authority for sending out requests for information within a certain time? If not, perhaps the Minister could give an undertaking that in future there will be such a target. That may go some way to meet the point of the amendment. It is a serious point. If the Minister does not want to meet it that way, perhaps when we come back to the Bill at Report stage, he can meet the point in a different way under Clause 94 which shortens the period for eviction for non-payment of rent from 13 to eight weeks. It would help considerably if that period were to run not from the beginning of the request from the tenant for housing benefit, but from the completion of the requests for information.

There are a great many delays in housing benefit which run well beyond the 13 weeks. Therefore, if nothing is done, people will be evicted through no fault of their own. Though the Minister made a lot of fair points, I hope that he made them with a view to finding a better way of meeting a genuine difficulty.

Lord Mackay of Ardbrecknish

Perhaps I can try to respond. On the last day on which we discussed these matters I tried to outline the average timetable of a potential eviction. The eight weeks may start the trigger but it takes a few more weeks before anything happens in relation to eviction. Of course, through that time, if the rent is paid, the clock ceases to tick and the process stops. The time therefore is a little more than eight weeks.

We are not quite up against the eight weeks' barrier. A tenant having trouble getting his housing benefit agreed would have a little more time than that. But timetables work both ways. I would be reluctant to suggest an alternative to the seven and 10 days contained in the amendment, which is what the noble Earl is inviting me to do. The fact that 83 per cent. of claims are determined and paid within 14 days is important and we would like local authorities to improve on and continue to live up to that situation.

The noble Baroness drew attention to the fact—although, I believe, not meaning it to help my argument—that if a local authority was unable to determine a claim within 14 days it is required to make a payment on account. That can be done, although on that matter the noble Baroness put in the qualification that she believes that we should remember. The irony of it is that when asked for a piece of information the tenant has four weeks in which to supply it. The timetable is quite lax, if I may use that word, on the part of the tenant, although on the part of the authorities, 14 days after the claim is certainly quite tight.

I always contemplate what has been said in these debates. I suspect that it would be rather difficult for the authorities to run on seven and 10 days. That could have consequences in some cases which are the opposite of those which the noble Earl is looking for. It may be unhelpful rather than helpful to the tenant. I hope that with my explanation we can leave the matter and all think about what we have said.

Earl Russell

Before the noble Lord sits down, perhaps I may ask him one further point of clarification. He quoted the figure of 83 per cent. of claims being determined within 14 days. Can he clarify—within 14 days of what event?

Lord Mackay of Ardbrecknish

I thought I had said that. It is within 14 days of receiving all the required information—in other words, the claim being available in a way in which it can be dealt with.

Baroness Hollis of Heigham

I hope the Minister will agree that there is a real problem here. At the very same time that the Government are empowering the landlord to evict the tenant earlier, usually for rent arrears, they are not willing to ensure that the money with which the tenant pays the rent is getting to the tenant or the landlord speedily enough. There is a real problem here, and the result is that if we do not do something about the supply side of the money as opposed to increasing the demand powers of the landlord, we shall see more evictions and more pressure on the local authority of homelessness, which is not the tenant's fault.

There is a problem here and the Minister must help us address it. We are not particularly fixed on the wording of this amendment; there may be other ways of going about it, including the Minister making it much more clear in what circumstances payment on account may take place. Perhaps I may give one example. A CAB in Norfolk reported on a single parent who moved into a housing association property in July and claimed benefit. By September no payment had been made and she received notice to quit, with all the worry that comes with it. In October she was threatened with court action for arrears of £683. This is a good, social-renting association. Benefit was finally paid after 11 weeks. The housing benefit department claimed that it had been waiting for information from the Benefits Agency, but there was still a month's delay even after the CAB had intervened.

It is not necessary that this should be the particular fault of any one person. It may be a problem of getting information for part-time employees and from, say, the Benefits Agency as regards family credit and from the claimant himself. There may be some slackness in the local authority system. But by putting those factors together one is increasing the landlord's powers to evict without at the same time ensuring that the money to stop that eviction will be paid on time. As I say, there is a problem here and we hope that the Minister will help us address it. At this stage I beg leave to withdraw the amendment, but I may seek to come back to it at Report stage.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 255CBB:

Page 70, line 29, at end insert— (" "( ) As it has effect in relation to housing benefit subsection (1)(k) shall apply so that where a claimant is entitled to income support and—

1. (a) has included in the calculation of his applicable amount the pensioner, the enhanced pensioner or the higher pensioner premium, or
2. (b) although not in receipt thereof has included in the calculation of his applicable amount the pensioner, the enhanced pensioner or the higher pensioner premium,

the award of housing benefit shall be made for the equivalent period of that entitlement.").

The noble Baroness said: This is an amendment to bring the payment of housing benefit to pensioners in line with the payment to them of other social security benefits. At the moment current housing benefit claimants have to renew their claim every 12 months otherwise they are struck off the list and the housing benefit fails to be paid. That is obviously sensible for someone of working age whose circumstances may change significantly. They may be in and out of work or the family size may alter. It is right that there should be an automatic check and reapplication, not merely relying on the tenant to notify the authority of changes in circumstances, which might just slip the mind.

As we know, the situation is not the same for pensioners. Their income fluctuates very little indeed, if at all. They are not in and out of work and family circumstances remain constant unless there is some major change such as the death of a husband or wife. The Government have accepted this provision in the field of income support. Pensioners are not required to sign on: they get special SPI forms. That means that income support is paid indefinitely unless the pensioner notifies the department of a change of circumstances.

We are seeking to do the same thing with housing benefit. There will be several advantages. It will simplify unnecessary investigation and administration. It will leave the local authority free to handle the paperwork of those whose circumstances fluctuate and who need annual renewal. It will also avoid the situation where an elderly person perhaps becomes confused and fails to return the forms on time and as a result, to their surprise and bewilderment, find themselves cut off from housing benefit altogether. As a former councillor I have had to handle quite a number of such instances in which claims have had to be renewed and back-dated because a pensioner was confused by what was happening.

Housing benefit is complicated to administer, but there is one group for whom it is relatively simple; namely, the pensioner. If it was paid indefinitely, subject to the pensioner reporting any significant changes, it will free the local authority for the more difficult and cumbersome work. It will free the pensioner from unnecessary worry and simplify proceedings. I believe it is a very useful little amendment. I beg to move.

Lord Mackay of Ardbrecknish

As the noble Baroness has explained, this amendment would enable regulations to be made requiring local authorities, who have responsibility for administering housing benefit, to make an award for an indefinite period for those claimants and their partners who are in receipt of, or have included in the calculation of their applicable amounts, the pensioner, the enhanced pensioner or higher pensioner premium. That would mean that that group of people would not have to reapply for housing benefit at regular intervals.

Perhaps I may put this amendment into context and, in doing so, explain why I am not content with it and would not suggest to the Committee that it take it on board. Housing benefit is awarded for a fixed period called "a benefit period". The length of that period is at the discretion of the local authority, but it is up to a maximum of 60 weeks. After that time the local authority must invite a repeat claim. Generally, the period is 52 weeks for the majority of claims. There is a simple reason for that. It accommodates things like annual rent increases and therefore the benefit is reviewed. It is likely to pick up any annual rent increase which has been made since the last time the level of benefit was decided.

In that way there is a formal statutory mechanism for ensuring that the benefit paid accurately reflects the applicants' circumstances, and not just their income, which the noble Baroness was concentrating on, but the rent being charged. The requirement to make a fresh claim for housing benefit applies to all claimants and not just to pensioners. It ensures that local authorities are administering the scheme correctly by paying the correct amount of benefit and thereby prevents either over-payment or under-payment building up.

In the past we have consulted local authorities and asked them to provide evidence for improving the administrative efficiency of the schemes through adopting easements similar to that which this amendment suggests. The evidence that they provided was inconclusive. There was evidence of over-payment. Some local authorities prefer to set even shorter benefit periods than the maximum 60 weeks.

In addition, we remain unconvinced that any administrative easement following a move to continuous awards would justify the costs involved in identifying the cases affected. Such a move may result in over-payment for which there would be subsidy implications for the local authority. Claimants may suffer because less frequent reviews of their entitlement may result in under-payment for which they would not be fully reimbursed as there is a 52-week limitation on paying arrears. So if it took a little time to pick up something that was indefinite, one could only go back for up to 52 weeks before any arrears were due.

There are some problems here and over-payment is in the same position. People may be asked to repay money which they have long ago spent. While I understand the argument of the noble Baroness, I think that distress may be caused in the way that she suggested and the other way round because of an indefinite review, allowing a good deal of time to pass and therefore missing some change which over time has built up.

There is no need for the renewal claim forms to be onerous. While the practice varies from one local authority to another, a local authority may at its discretion use a shorter claim form for repeat claims in order to avoid the need for claimants to repeat the same detail. I hope that local authorities that do not use this procedure will consider making use of it in order to help them and people such as pensioners who have no change of circumstance and for whom the shorter claim form may be perfectly suitable. I hope that with that explanation and some sympathy and understanding of the points that have been raised, the noble Baroness will feel able to withdraw her amendment on the basis that distress may be caused in one direction but, with indefinite payments, in certain circumstances distress may be caused in the other direction if changes have not been picked up within 52 weeks, or the outside limit of 60 weeks, of the change occurring.

6 p.m.

Baroness Hollis of Heigham

I thank the Minister for his reply and sympathy. He referred to indefinite circumstances on the pension side. That applies equally to income support where the Government continue to pay unlimited benefit. I take the Minister's point about rent changes. I just wonder whether the Minister may be prepared to consider at a later stage an amendment which would allow the local authority discretion to go beyond the 60-week period. I envisage that discretion being exercised in the area of local authority tenancies covering the bulk of pensioners where the rent is entirely covered by the benefit and computers simply talk to each other. Therefore, there is no need to send out forms. One can simply make an in-house adjustment of the housing benefit claim to reflect increased rent, because all of that falls within the local authority purview. I accept that this would not cover the situation of a private tenant where the landlord's rent is a much more individual matter. Would the Minister be willing to consider extending local authority discretion so that the position of the two-thirds or so of pensioners whose housing benefit is paid because they live in council houses or flats, where none of the obstacles that he fears need arise, can be reviewed?

Lord Mackay of Ardbrecknish

I shall have to study this matter. However, standing here and thinking about it, it appears to me that, even if it is one computer talking to another computer, a review of housing benefit is taking place. It may not require a form to be sent out and sent back, but nonetheless it is a review within the 60-week period to which I referred. If it is the wish of the noble Baroness that I look at that aspect, I see the point that she makes. If it is being done automatically by the local authorities and sending out a form has no consequence, I shall certainly have a look at that in particular. But as far as concerns the generality certainly in the private sector, I must stand where I stood earlier.

Baroness Hollis of Heigham

I believe that we have made a little progress. With the leave of the Committee, I should like to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 255CBC to 255CBE not moved.]

Clause 106 agreed to.

Earl Russell moved Amendment No. 255CBF: After Clause 106, insert the following new clause (". In section 63 of the Social Security Administration Act 1992 (adjudication of housing and council tax benefit) in subsection (3) for "reviews" substitute "appeals to social security appeal tribunals".").

The noble Earl said: This amendment provides for housing benefit appeals to social security tribunals rather than minor scale reviews. With reference to the first of the housing benefit amendments we heard how contentious some of the issues arising out of housing benefit could be and how vital they could be to some of the people involved in them. In those circumstances, it seems that a full-scale appeal procedure may be rather useful. I hope that the Minister will consider it. I beg to move.

Lord Mackay of Ardbrecknish

This amendment would transfer the responsibility for carrying out housing benefit reviews from an internal review by the local authority, with a right to a further review before a housing benefit review board, to an appeal to a social security appeal tribunal, though with no provision for any further appeal. The current housing benefit appeal system has two tiers: the first is an internal review by the local authority that made the original decision on housing benefit entitlement. The second is a statutorily independent review board which comprises local authority councillors.

In 1988 the Government commissioned a report by the Social Policy Research Unit based at York University to look at ways in which the review system could be improved. It published its report in 1991. One of its major criticisms was that review boards lacked true independence because of the way in which they were constituted, but it also found very little evidence that boards were being influenced by financial or political considerations. Since publication of the report much has been done to improve the review system. My officials have issued good practice guides on each of the two stages of the review system for use by local authorities and review boards. Regulations were also tightened up to ensure that authorities dealt with a request for a review within 14 days of its receipt or as soon as practically possible thereafter. We have good reason to believe that this has led to an improvement in standards. Appeals dealt with by this means are brought to fruition a good deal quicker than appeals before social security tribunals.

I am advised that councillors treat this responsibility very seriously. I have no reason to believe otherwise; indeed, the noble Earl made no suggestion to the contrary. If the present system works reasonably efficiently and effectively and the councillors who form these appeal committees take their work seriously and there is no evidence of any extraneous considerations creeping into their deliberations—and it is, dare I say, a relatively cheap system to run compared with the social security appeal tribunal system—perhaps we should stay with the system that we have. Currently, we are looking at the whole question of decision-making and appeals in the benefits system. In any case we will be looking at the question of housing benefit and all other benefits. I am not persuaded that we should move in the direction suggested by the noble Earl. I do not believe that the authorities would themselves welcome such a major structural change to housing benefit when there are so many other changes taking place.

Having started off the afternoon with such good spirits, I shall not begin to tease people about not being prepared to trust councillors. There appears to be evidence, and I am so advised, that councillors take this seriously, and the training courses that are run are attended in a serious way by those councillors who fulfil the obligation. In the absence of solid proof that the system is not working properly, I am inclined to suggest to your Lordships that we stay with the system that we already have. I ask the noble Earl to withdraw his amendment.

Earl Russell

I thank the Minister for a thoughtful and full reply. I did not suggest any impropriety in the way that the present system was run. I have no special reason to distrust councillors, but I believe that it is proper to distrust all power and to distrust it rather more if one happens to hold it oneself than one would under any other circumstances. I make no apology for a degree of mistrust because I believe that it is only proper. I think that anyone whom one respects will expect it. There is some force in the point that justice should not only be done but should be seen to be done, and the show of independence is worth while in terms of acceptance of decision.

But when the Minister mentioned the cost of the system he also set me thinking about what the effect of the changed programme will be over the next three years: that is, the Committee may remember, a programme for a 25 per cent. cut in the DSS running costs. Whether when that comes in everything will be working quite as well as in some places it is at present is quite another question. So we should bear that in mind as we watch the way the evidence develops over the next year. But I am certainly not going to make an issue of it tonight, so I shall accept the Minister's suggestion that I withdraw my amendment if the House will give me leave to do so.

Amendment, by leave, withdrawn.

Clause 107 agreed to.

Schedule 10 [Administration of housing benefit, 8c]:

Lord Mackay of Ardbrecknish moved Amendment No. 255CC:

Page 160, line 35, at end insert— ("( ) For subsection (5) (agreements with other authorities for carrying out of functions) substitute (5) Authorities may—

1. (a) agree that one shall discharge functions relating to housing benefit on another's behalf, or
2. (b) discharge any such functions jointly or arrange for their discharge by a joint committee.

(5A) Nothing in this section shall be read as excluding the general provisions of the Local Government Act 1972 or the Local Government (Scotland) Act 1973 from applying in relation to the housing benefit functions of a local authority.".").

The noble Lord said: With this I shall speak to Amendments Nos. 255CD and 255CE. These amendments to Schedule 10 to the Bill will make further changes to the powers in the Social Security Administration Act 1992 under which local authorities administer housing benefit and council tax benefit and the Secretary of State for Social Security pays subsidies to them in respect of their expenditure on those benefits. The proposed amendments would make good a limitation on certain of the powers in Part VII of the 1992 Act under which the Secretary of State makes his subsidy payments. They would also remove a doubt which has arisen about the powers in Part VII for local authorities to discharge another's function and how these interact with general local government legislation in England and Wales and in Scotland for such joint workings.

Section 134 of the 1992 Act (as regards housing benefit) and Section 139, which is its equivalent for council tax benefit, empower local authorities to arrange to discharge responsibilities relating to benefits on one another's behalf. Lawyers have questioned whether these specific provisions unintentionally ousted the general provisions for such working contained in the relevant local government legislation. We had all assumed that the two sets of provisions would work together.

Amendments Nos. 2555CC and 255CD will remove any element of doubt that in making such arrangements relating to benefits the authorities concerned are still empowered or bound by the relevant general provisions for joint working. They will also allow those housing authorities that are not local authorities to discharge their functions with others by a joint committee if they so wish.

The problem addressed by Amendment No. 255CE concerns payments by the Secretary of State for Social Security in respect of subsidies for administration or benefit expenditure arising from such joint action. Those powers require him to make such payments to "each authority"; that is, he must in all circumstances make a separate payment to each authority. In other words, the authorities can act together but the Secretary of State must pay his subsidies to each of them separately. That is inefficient, it is out of line with what Parliament intended for the operation of the authorities' functions in those areas and it gives rise to a multiplicity of payments, authorisations, audit trails and the like.

The problem has been highlighted for us by a joint proposal to my right honourable friend the Secretary of State from the London boroughs wishing to work together in a pilot scheme for London organised fraud teams to tackle organised landlord fraud in housing benefit. My right honourable friend has agreed to the proposals from the Association of London Government. He has made funding of up to £1 million available to get the pilot scheme going. The boroughs wish to develop the scheme with one of their number as the lead authority. That authority would take responsibility for the payment from my right honourable friend and account for it. But as matters stand he cannot meet that particular, sensible aspect of the boroughs' proposals.

There are three lessons in that example, assuming that the pilot is successful and there is a desire to continue the scheme. First, it concerns a matter raised by agreement by the local authorities concerned. Secondly,it is aimed at dealing actively with a major and unacceptable threat to the system. Thirdly, my right honourable friend is unable to respond to it in an efficient and accountable way, the way he would wish to do.

Amendment No. 255CE would open the way for my right honourable friend to match his payment arrangements with the voluntary operational arrangements Parliament has empowered the authorities to enter into.

I recommend these amendments to the Committee. They are, as I said, wholly within the spirit of the 1992 Act and very much in response to what I believe everyone will welcome as a sensible initiative between my right honourable friend and the London boroughs. I beg to move.

On Question, amendment agreed to.

6.15 p.m.

Earl Russell moved Amendment No. 255CCA: Page 160, line 43, leave out from beginning to end of line 2 on page 161.

The noble Earl said: The amendment draws attention to a passage in the Bill on which I would like to hear the Minister's comments before I take my arguments very much further. This is the passage in Schedule 10 which appears to be introducing a cap on the total amount of subsidy in housing benefit that can be paid to any one local authority. In Schedule 10, paragraph 1(7) we see: The Secretary of State—

1. (a) shall by order specify the permitted total of housing benefit payable by any authority in any year, and
2. (b) may by order specify one or more subsidiary limits on the amount of housing benefit payable by any authority in any year in respect of any matter or matters specified in the order".

So, if I have understood this correctly—and I am not sure I have—there is an attempt to put a total limit on the amount of housing benefit to be spent in any one borough.

There has been some discussion of such a proposal knocking about since 1994. I have in the past had correspondence with the Secretary of State about it. I thought, if I understood him correctly, that he was of the opinion that such a proposal was impracticable because housing benefit is an entitlement. It is essential to people's ability to work that it should be because one cannot work without being housed. But if there is a way of combining a strict cash limit in the form of a cap with an entitlement, then I have not seen it. If the Minister tells me that I have misunderstood this passage I shall be delighted. I look forward to hearing his reply. I beg to move.

Lord Mackay of Ardbrecknish

I will simply do as invited by the noble Earl and explain the background to this paragraph in the schedule. Local authorities have powers to make discretionary payments in certain circumstances; for example, in cases of exceptional need where a claimant is temporarily without funds or of exceptional hardship where the maximum housing costs allowable under the housing benefit scheme do not meet the claimant's contractual rent. As discretionary spending does not receive full central government funding, the permitted total protects local authority general funds by placing a limit on that spending.

Currently, under the provisions in the administration Act, the permitted total for any year has to be calculated by reference to benefit expenditure in that year. Consequently, authorities can only estimate at the beginning of the year, and as an ongoing process throughout the year, the extent to which they can make payments. The purpose of the express powers which the noble Earl's amendment would remove would be to allow the permitted total for a particular discretion following consultation with local authority associations to be fixed in advance of the financial year. Consequently, local authorities could manage their budgets more efficiently and the risk of inadvertently making illegal payments would be removed. The amendment would remove this amelioration, and I must say to the noble Earl that our change has been welcomed by the local authorities.

The noble Earl asked whether there was a total limit: no, there is not a limit. It is only a discretionary expenditure. As I said, the provisions in the schedule are beneficial to local authorities. I understand they are welcomed by them. With that explanation, I hope that the noble Earl will feel able to withdraw the amendment.

Baroness Hollis of Heigham

The advice I have had is that we welcome the new form of the schedule. It gives local authorities additional financial protection. So, as the Minister said, I hope the noble Earl will not press his amendment.

Earl Russell

I am grateful to the Minister for that reply. I must apologise for taking the time of the Committee. That is in part the result of the crossword method of legislation adopted in social security legislation and in part the result of the fact that we are, and remain, an amateur Chamber. When one is reading a Bill, often late at night and at home, one does not always have all one's works of reference to hand. That is the explanation of a misunderstanding for which I must offer apologies. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 255CCB:

Page 161, line 2, at end insert— ("( ) In section 135 of the Social Security Administration Act 1992 (housing benefit finance), after subsection (5) insert— (5A) The additional sum mentioned in subsection (5) shall include specific provision in respect of the costs of measures to prevent fraudulent claims for housing benefit.".").

The noble Baroness said: Like the noble Earl, I find trying to piece together the movements between housing benefit and DSS legislation at times extremely perplexing. This is a more straightforward amendment. It is obviously a probing amendment at this stage. There is a serious argument here about housing benefit fraud and how central government may best help local authorities to pursue it, recover it and stop it.

We believe that at the moment the Government's way of supporting the local authorities' tackling of fraud is in some dimensions perverse rather than helpful. I wonder whether the Minister may come to agree as we go on.

I believe that we all accept that social security administration is, as I say, bedevilled by the three interlocked problems of unacceptably high rates of departmental error in paying out benefit, unacceptably low take-up rates of people claiming benefit in fields like family credit and a worrying and unacceptable amount of fraud in areas such as housing benefit. I do not believe that there is any division between us on that matter.

Fraud, as I am sure the Minister will agree, is unacceptable wherever it occurs. Money claimed fraudulently is at the expense of other claimants or taxpayers. Most DSS fraud—not housing benefit fraud—occurs where typically the claimant misrepresents his position: he claims unemployment benefit or income support when in fact he or she is in part-time work, or when the claimant, more deliberately, has acquired several fictitious identifies by accessing missing national insurance numbers and claiming benefit for all of them.

Housing benefit fraud, however, is more complicated even than that because it involves three parties, not two: the landlord and the tenant as well as the local authority. Some housing benefit fraud is like most DSS fraud: a tenant, so to speak, falls into it. His circumstances change, he obtains some part-time work, but he does not report the changed circumstances and therefore obtains more housing benefit than he should. It is reprehensible, but in cost terms relatively minor.

The tenant is often fairly poor and the facts are fairly easy to cross-check. It is small-scale, fairly petty stuff. I repeat, I do not defend it, but a six-month rule which applies to family credit, introduced into the housing benefit system, would, I suspect, wipe out almost all tenant housing benefit fraud. I do not know, but it would be worth looking at.

The difficult area—this is where fraud most occurs—is landlord fraud, because for everyone's benefit the Government permit housing benefit cheques to be paid directly to the landlord rather than to the tenant, where the tenant requests it and agrees to it. Many landlords make it a condition of the tenancy that they receive the housing benefit cheque direct. A landlord may request it, perfectly reasonably, because the tenant has an unreliable record of passing on that housing benefit.

However, equally, direct payment is a charter for cheating. The local authority can refuse to pay the landlord the housing benefit cheque only if it believes that it is in the tenant's best interests to do so. Otherwise the local authority has little discretion. For example, local authorities have little right to refuse to make such direct payments even where they may have doubts about the landlord's probity.

Some 65 per cent. of private sector housing benefit payments are made directly to the landlord. It is within that 65 per cent. that we suspect most fraud occurs, because around that fact many rich landlords have built themselves a web of organised crime. I use those words deliberately. I repeat, most housing benefit fraud is landlord fraud. They are crimes of greed. It is widespread, organised and costly and it flourishes. The Government estimate that it costs £1 billion of the £10 billion housing benefit bill. The Select Committee of the other place estimates that it may well exceed £2 billion of the £10 billion bill—a very serious sum indeed.

As I said, I do not defend the tenant who fails to declare some casual earnings, but by far the more serious problem is the fraudulent landlord milking the system of perhaps £100,000 a year by lying and cheating. We know that such landlords claim for tenants who do not exist. They claim for tenants who speak so little English that they cannot contradict the landlords' claims. They claim for tenants who have moved to other properties owned by the landlord. Such fraud must be stopped.

Let me give a couple of examples. Hackney checked 1,800 claims. It found fraud in 21 per cent. of them. What is more, it found that up to two-thirds of the managing agents were misrepresenting the claims and pulling in a fraudulent income of about £5,000 a week. Haringey in 1994–95 spent £200,000 on employing nine fraud visitors. It saved over £4 million, most of which of course went back to the DSS.

Until recently, local authorities were under pressure to speed up their payment of housing benefit to avoid the tenant being evicted by the landlord if benefit was not received promptly while at the same time they were penalised because they had to repay to the department if they found that they had made an over-payment; in other words, that they had uncovered error or fraud. Because of the pressure on speed and the penalty for detecting fraud, it is not surprising that until recently local authorities gave priority to increasing take-up and speed and were relatively less aware and did relatively less about the scale of organised landlord fraud.

Since 1993, the Government have wisely given local authorities an incentive to detect fraud. Each year local authorities are set a target of fraud that they are expected to identify. For savings above that figure, local authorities may keep 25 per cent. and the department recovers 75 per cent. Local authorities are, however, penalised if they fall below half their target figure which is set at some £270 million-odd this year.

That is fine, and an improvement on the situation as it was, but the problem is that it encourages one to invest effort in tracking down fraud once payments have been made in order to keep one's 25 per cent. The system offers no incentive to invest resources to ensure that fraudulent payments are not made in the first place. Indeed, one is still penalised if one prevents fraud occurring, because then one is less likely to reach the target of fraud detected.

The amendment seeks to address those perversities. It assumes that it is better and more desirable to have an efficient anti-fraud culture and prevent fraud in the first place than to tolerate less efficient payment of housing benefit and to detect fraud afterwards. The amendment stresses prevention rather detection. At the moment, the Government give a modest subsidy to detection. They actually penalise prevention by cutting the housing benefit administration subsidy. As a result, not surprisingly, local authorities will spend less time on preventing fraud and more time on detecting it in order to receive their reward. That is perverse.

What is even more perverse is that those authorities which have in place efficient strategies for the prevention of fraud, and therefore which have low figures for detected fraud because there is little fraud to detect, will, under the Government's new regime, be penalised for not uncovering enough fraud.

Chiltern District Council reported on that to the Select Committee. It had invested so much money in preventing fraud that it was not reaching its target for detection and therefore was being penalised for producing an efficient prevention strategy. That is folly.

As I say, this amendment seeks to tackle some of those perversities. It requires the Secretary of State to make specific provision for measures to prevent fraud which would be paid to local authorities, especially in larger cities, so that they may build up specialist investigative teams; for example, to make home visits before a housing benefit application is granted; checking out whether the tenants for whom the landlord is claiming reflect the number of rooms in the property and so on.

The Government have produced £8 million of challenge funding for fraud protection and detection. That is utterly inadequate because £5 million of that has been found by slicing off money from the housing benefit administration subsidy. New money is not being put into challenge funding. What is needed is a strong and improved administrative subsidy to prevent fraud occurring in the first place.

I suggest that this amendment must be sensible. It will not stop all landlord fraud. Local authorities will still need other measures: for example, the ability to prosecute more readily; they should, along with decent data protection, have access to the Benefits Agency's computers and the register of national insurance numbers so that it can be checked to see whether false claims are made. Local authorities need to be able to stop the redirection of giros to false addresses and ensure that their instructions not to redirect are followed. Local authorities still need to co-operate with the Benefits Agency to overcome the hurdles of the finders/keepers rule which encourages each body to hug information to itself and not to work together to check fraud.

If the Government really had the political will to tackle landlord fraud and to work properly in partnership with local authorities, I believe that we could see a saving not of £270 million but of £500 million or more per year. This amendment is just a beginning. But it would encourage local authorities to seek to prevent fraud—at the moment, they are penalised for it—as opposed to merely rewarding them if they detect it after fraud has occurred.

If the Government reject this amendment, we can only conclude that they are soft when it comes to housing benefit fraud committed by landlords, who do so out of greed, while they are harsh on income support fraud which is committed by smaller people who are often doing it out of need, ignorance, illiteracy or error. I beg to move.

6.30 p.m.

Earl Russell

The objective of this amendment is clearly sensible. Prevention is obviously better than cure. If this amendment contributes to prevention, then it may be useful.

I am not quite certain that if the Minister were to reject the amendment, he would do so for any improper motive. There may be all sorts of technical reasons why it might not be useful, to which I should listen with interest and care. But I cannot pronounce on that until I hear his reply.

I also recall the noble Lord, Lord Boyd-Carpenter, who I regret is not at present in his place, asking the noble Viscount, Lord Astor, who was then where the Minister is now, how he could know the amount of undetected fraud. The noble Viscount said that, of course, it could only be an estimate. For the time being, all estimates must remain provisional. The disagreement between the Government and the Select Committee on the amount of benefit fraud involved is conjectural and must remain so until we have solid evidence on that.

It is clear that we are all in favour of preventing fraud whenever we can do so. I hope that it is clear also that we are all agreed that because fraud is a crime, it must be proved beyond reasonable doubt. There is always a risk, especially when you find something which may fill a hole in Treasury projections, when a very tight financial argument is in progress, that there should be controls and suspicion.

I take the point about incentives, but incentives can be overdone. I have recently read the Government's reply to the Select Committee on this subject. In paragraph 71 of that reply, the Government expressed considerable doubt about the Select Committee's proposal that there should be incentives to prosecute fraud because they thought that that might tend towards a perversion of justice. On that, I feel some sympathy with the Government and, indeed, I may tell them that there is legal authority for their position in a ruling of the judges in the year 1604 which is, I understand, still good legal authority. I agree with the thinking behind it.

The noble Baroness said a good deal about the situation in Hackney. I am not certain what is the situation in Hackney, and I believe that we would be wise not to be too certain on that point.

The proposal for a team to visit and check whether a tenant in fact exists is sensible. The suggestion that that cannot be financed unless money is made available to finance it is sensible. But I hope that we shall avoid leaping to conclusions that there is a certain amount of fraud or that we should reward prosecution for fraud in a way which might diminish respect for justice. We have more than one objective here and I hope that we shall remember all the objectives.

Lord Mackay of Ardbrecknish

As the noble Baroness explained, this amendment would require the Secretary of State to identify a specific sum of money for local authorities' fraud prevention measures. The purpose is to encourage local authorities to do more to combat fraud. I am sure that we all support that and indeed, at the risk of embarrassing her, the noble Baroness may find that all three Members of the Committee who have taken part in this short debate are absolutely four-square on the prevention of fraud in the whole social security system and in the housing benefit system in particular, which we are discussing today. Indeed, there appears to be a considerable amount of that fraud and I shall return to that point later in my speech.

But we do not believe that the amendment is the best way in which to proceed and to achieve further gains in the fight against fraud. As the noble Baroness knows, I never try to make anything of defective amendments but the amendment is defective. However, my case does not rest on that.

Local authorities have a statutory duty to protect public funds, including housing benefit. But we think that this amendment would tie the Secretary of State's hands in meeting authorities' efforts to combat fraud. The provision of a specific sum to meet the cost of measures to prevent fraud is contrary to our general approach, which is to pay subsidy according to the results achieve. The amendment would pay for anti-fraud work but we prefer to pay for the results of that work. Therefore, the amendment calls into question the method by which the benefit subsidy mechanism works which, as I say, rewards authorities by allowing them to share in the weekly benefit saving which they achieve.

The noble Baroness made some play on the point that we may be spending more on detecting fraud rather than on preventing it. I understand that point, but I hope that I shall be able to explain to her that her fears on that score are groundless. She postulated an authority which had taken such effective anti-fraud measures that in fact no fraud was attempted in that area. I do not think there is any evidence that any local authority is yet in that happy position.

Baroness Hollis of Heigham

I quoted the specific authority, Chiltern District Council, which gave evidence to the Select Committee which showed that it would struggle to meet half the target figure, at which point it would fall into areas of penalty, even though auditors had showered praise on the council, and the like, for its ability to stop fraud. It was being penalised for what it believed to have been a very effective strategy to prevent fraud rather than to detect it. Had the council not invested in preventing fraud, but instead let it occur and then detected it, it would perversely have been rewarded.

Lord Mackay of Ardbrecknish

I thought that that was what the noble Baroness was saying. I preface my remarks by saying I suppose one can either stop the fraud happening by detecting it when the claim comes in and before the claim is paid or one can detect it once the claim is in payment. The position is that both count as a form of reward to the local authority. If the claim has gone into the local authority and in the course of processing it is discovered to be fraudulent, even before it has come into payment, then the saving is, so to speak, chalked up and the local authority receives part of the benefit of the saving in reward, and of course we do, as central government, by not having to pay all that money out in benefit.

The noble Baroness is not quite right when she says that there is no reward to a local authority which runs the system and detects and stops the fraud before any money is paid out. As I understand it, that is allowed for in the situation in this country. Indeed, in the last financial year almost 90 per cent. of authorities earned additional subsidy for their anti-fraud efforts.

We accept that there is a role for special measures in the anti-productivity of local authorities. That is why the Secretary of State has focused his recent strategy on rewarding local authorities for their anti-fraud efforts. The recent government amendments to pay subsidy to one authority on behalf of a group of authorities provide the flexibility that we are trying to achieve. Indeed, the Committee accepted those amendments without any debate because we are all agreed on the objective, and the amendment passed earlier this afternoon builds on the measures that we have already introduced.

In 1993 my right honourable friend the Secretary of State introduced a financial incentive scheme for the detection of fraud. Savings have increased from £92 million in 1993–94 to £171 million in 1994–95. Figures for 1995–96 are expected to exceed £200 million. The scheme for 1996–97 has been stiffened still further, with greater rewards for high performing authorities and tougher penalties for those who are failing in their duty to protect public funds—a kind of carrot and stick approach.

The noble Earl asked what I always think is a pertinent question: how much fraud is there—how many people are smuggling things into the country, as I was asked the other day—and how many people are claiming benefits? The truth is that people are not putting up their hands and indicating that they are doing any of these things; otherwise they would be fairly easy to measure. The Government have taken their figures from a fairly detailed benefit review of fraud and the correctness of major social security benefits which we undertook between September and December 1994.

We had over 200 specially trained investigators and they took a random sample of customers: 3,000 unemployed, of which 1,000 were on income support only; 1,000 on income support and unemployment benefit; 1,000 on unemployment benefit only; 1,000 lone parents; 1,000 pensioners; 1,000 disabled, and others. The investigator undertook a full investigation of the clerical records and computer records that we hold. He carried out an unnotified visit to the customer's home, so if the house was not there or the tenant was not there it was as sure as night follows day that one kind of fraud was detected without any doubt. He verified the customer's identity and probed all the details held to verify income, savings and so on. It is from that very detailed investigation that we have arrived at the rough figure—and it can only be a rough figure—of £1 billion in housing benefit fraud.

The Select Committee in another place, on the basis of one person's evidence from one London borough and then a piece of extrapolation, thought it might be up to £2 billion. I have explained from where we got our £1 billion. It was not conjured up out of the air; we undertook a fairly detailed study in order to come to these conclusions. Whether it is £1 billion, as I suspect it is, or £2 billion, as the Select Committee suggested it is, one sure thing is that it is all wrong. As the noble Baroness said, it is either money that the taxpayer could be saved or money we could spend on the benefit system elsewhere.

We have undertaken several new fraud initiatives. Perhaps I could briefly spell them out to the Committee in suggesting that they are the best way to go and not the way suggested in the amendment by the noble Baroness: £1 million has been made available to fund and train specialised teams to crack down on organised housing benefit fraud across London. The fact of the matter is that this is a crime which is a good deal easier to commit in the anonymity of a big city—especially a city like London, which is extremely large—than it is in the country, in small towns and villages.

A housing benefit data matching service is to be set up next month to detect fraud and inconsistencies in claims. That is an important step forward. The noble Baroness mentioned that £8 million has been set aside via a challenge fund for innovative anti-fraud work. A study is taking place into the costs and benefits of a unified housing benefit computer system. The Department of Social Security and local authorities are working together to draw up a verification framework to prevent fraud getting into the system in the first place. Lastly, a rolling campaign of increased anti-fraud activities, headlined Spotlight on Benefit Fraud, has been operating at various locations across the country throughout the spring and summer.

That Spotlight on Benefit Fraud is undoubtedly bringing in considerable dividends, not just on housing benefit but across the whole benefit area as people report suspicious circumstances, circumstances in which they think someone is making fraudulent claims. They range all the way from, as the noble Baroness said, people forgetting that their circumstances have changed, or owning up to the fact that their circumstances have changed, to pretty major frauds such as the one the Committee may have read about in the papers yesterday and today of the lady who was using—it seems doubly indecent to be doing this—the birth certificates of dead children in order to perpetrate a major fraud on British taxpayers.

We are taking this matter very seriously indeed. A great deal of anti-fraud work is under way across the whole field and particularly with regard to housing benefit, but I do not believe that the amendment produced by the noble Baroness today would secure an increase in fraud activity. The methods we are using and the investigations we are undertaking are the right way to go about it. With that explanation of what we are doing, and total endorsement of the point made by the noble Baroness that we are out to crack down on people who think they can perpetrate this kind of fraud, I hope that she will be able to withdraw her amendment.

6.45 p.m.

Baroness Hollis of Heigham

I thank the Minister for that reply. As he made clear, it is certainly not a party issue and we welcome the Government's initiatives. Like him, I think the local authorities would be the first to admit that they too are not able precisely to estimate the scale of fraud.

I would like to correct something the Minister said. He gave the impression that the figure of £2 billion that I was quoting, drawn from the report of the Social Security Select Committee, was based on one officer from one London borough. On the contrary, he was the head of a team operating across and speaking for all the London boroughs. Therefore, far from this being a single, one-off, eccentric figure which could not be multiplied or extrapolated from, it represented all London boroughs. The more we explore the matter, the more evidence comes to light from similar large cities—and the Minister was right to focus on that aspect—which suggests similar levels of deception. I believe that the Minister would be advised to take the figure of, perhaps, £2 billion reasonably seriously. All the evidence coming in suggests that the figure of £1 billion may be far too low.

My second point concerns the technicalities of financing. As part of their initiatives, the Government listed challenge funding of £8 million. That is silly. The Government have top sliced £5 million off the existing administration subsidy of local authorities and put it into a pot with only £3 million of new money to hid for. Therefore, it means that the general level of everyone's administrative subsidy has been depressed and a few lucky authorities which bid for it will get a little more. That is batty; it should actually be the other way around. This is not an area in which it makes sense to top slice off the general administrative subsidy for the, perhaps, less efficient authorities, and thereby discourage them from doing more work, while giving more money to the few that are in a position to bid and compete for it, which will tend to be the better organised authorities.

If we are to have challenge funding, it must he new money. It would be far more sensible to combine that with a strengthened administrative grant, separately identified as the Audit Commission recommended. I hope that the Government will look more thoroughly at the matter. Nonetheless, the general point remains: what the Government are currently doing—and I am not criticising this aspect—is to reward to a modest degree those local authorities which detect fraud in the process of paying out, or after payment has been made. I do not criticise that; indeed, I believe that to be both sensible and welcome.

However, in addition there must be a more positive incentive for local authorities to create an anti-fraud culture in the first place to prevent it occurring. All the evidence suggests that local authorities which have created that culture so that landlords never make fraudulent claims (because they know they are likely to be prosecuted and the like) may now struggle to reach their targets of detecting fraud because they have prevented it and, therefore, may find themselves penalised.

Nothing the Minister said in his response has answered that basic perversity—namely, that if an authority is successful enough at preventing fraud it is then penalised for not detecting it. I can assure the Minister that I am correct in that respect. I see that the Minister shakes his head. In that case, perhaps the noble Lord would like to write to me and explain to me exactly where I have misunderstood the system. Certainly my advice from the local authority associations which are at the sharp end of the spectrum believe that to be the case. Therefore, I hope that the Minister takes what we are saying very seriously. We all want to see fraud eradicated, but, while the Minister has done part of that by encouraging and rewarding local authorities for detecting fraud, he is not doing enough to prevent fraud occurring. Moreover, he will be actively penalising those authorities which fail to reach half their target figure. I see that the Minister wishes to respond.

Lord Mackay of Ardbrecknish

Of course I shall look into the matter and, if I believe there is anything to be said, I shall certainly write to the noble Baroness. However, our experience is that authorities which undertake the most thorough checks and verification on claims are often those which achieve the best savings from their anti-fraud work.

Baroness Hollis of Heigham

There is no disagreement between the Minister and myself on that point. It is clear that those authorities which have been rewarded for detecting fraud are those which have detected fraud most successfully. Indeed, that is true by definition; it is a truism. However, I am concerned about the other end of the equation; namely, where authorities have been successful at preventing fraud occurring in the first place and where, therefore, there is no fraud to detect. In such cases, authorities may be penalised for not reaching their targets.

Having said that, I believe that we have made our point. I hope that the Minister will look into the matter because all of us are extremely worried about it; indeed, that applies both to local authorities and to taxpayers. The Government really must review their method of supporting local authorities in seeking to prevent as well as to detect fraud. At present the Government are sending out perverse and contradictory signals, which cannot be in anyone's interest. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Mackay of Ardbrecknish moved Amendment No. 255CD:

Page 161, line 10, at end insert— ("( ) For subsections (4) and (5) (agreements with other authorities for carrying out of functions) substitute— (4) Nothing in this section shall be read as excluding the general provisions of the Local Government Act 1972 or the Local Government (Scotland) Act 1973 from applying in relation to the council tax benefit functions of a local authority.".").

On Question, amendment agreed to.

Earl Russell moved Amendment No. 255CDA: Page 162, leave out lines 28 to 31.

The noble Earl said: In moving the above amendment I shall, with the leave of the Committee, speak also to Amendment No. 255CDB. The amendments refer to two related points about drafting but, nevertheless, they are important. I shall read some of the words in the legislation that I propose to delete so that Members of the Committee will be able to understand what is worrying me. New Section 140C(1) to the Social Security Administration Act 1992 says: Subsidy shall be paid by the Secretary of State in such instalments, at such times, in such manner and subject to such conditions as to claims, records, certificates, audit or otherwise as may be provided by order of the Secretary of State". If those words do not say that the Secretary of State may do whatever he likes, then I do not know what they mean.

So far I have made a perfectly conventional point, but what has begun to interest me is the effects on the relationship as regards the legislature, the executive and the judiciary of drafting legislation in that manner. I say that because a Secretary of State to whom those words are applied is, I believe, effectively entirely freed from statutory restraint in relation to the power there described. In fact, he is put back in the position that the executive was in before Parliament first evolved of not being controlled by parliamentary statute because it was used to freedom from control.

However, nature does abhor a vacuum. People do attempt to control power, so the natural result of leaving power thus unfettered by statute is that the only way it can be controlled is through judicial review. In speaking in a debate on 5th June my noble friend Lord Rodgers of Quarry Bank offered statistics for applications for judicial review. He said that in 1976 there were 500 applications, but that there were 3,000 in 1993.

I have many times heard the blame for that rise in applications being placed on the judiciary, and I have many times heard it being placed on the executive. The question I want to raise is: if we draft legislation which leaves Secretaries of State that free from statutory restraint, ought we not to desist from blaming either the judiciary or the executive? Indeed, should we not really be blaming ourselves? I beg to move.

Lord Mackay of Ardbrecknish

When I looked at the content of the noble Earl's amendments I suspected that the argument we have just heard would indeed be the one put forward. Perhaps I may tell the noble Earl that I am not entirely sure that the Secretary of State is given such unfettered powers by virtue of the two new subsections. In fact, they are fairly well defined: they refer to the subsidy, the instalments and the times that he should pay them in, and so on. They also refer to the, claims, records, certificates [and] audit", that he might require in order to satisfy himself that public money is being properly spent.

I am well aware that the noble Earl is always suspicious—I nearly said rightly suspicious—of the executive asking Parliament to give itself lots of power. If the noble Earl is worried about these two minor pieces of legislation I invite him to look at a clause passed in the other place only yesterday which is winging its way to this Chamber and which, I believe, gives a Henry VIII power to at least one of my clan of considerable breadth and scope. However, that is another matter.

Perhaps I may tell the noble Earl what those two subsections are about. I hope he will then be persuaded that it is not unreasonable—and, indeed, that it is in the interests of good government, both from our point of view and that of local authorities—that we should have such powers.

Local authorities are currently required to submit estimates before and during the course of the year on the basis of which payments on account of subsidy are made pending the receipt of a final audited claim after the end of the financial year. The provision at Schedule 10 for subsidy to be paid by instalment is intended to put the payments on account of subsidy on a statutory basis so that they are local authorities' by right rather than an exercise of discretion. If such payments were not made, an unacceptable burden would be placed on local authorities' budgets and cash flows.

Apart from denying authorities the right to receive subsidy in advance of incurring benefit expenditure, the amendment would also remove the power to require authorities to submit a claim for subsidy, to have it audited, to keep records and otherwise satisfy the Secretary of State as to the propriety of their claim for subsidy and the awards of benefit on which it is based. I suggest that the latter is obviously unacceptable as there would be no check on the accuracy of the claim or the propriety of the expenditure incurred. In the interests of both local authorities and the public purse I hope that the noble Earl can see the merits of new Section 140C(1).

Turning to new Section 140C(2), there are often cases where local authorities submit inaccurate or incomplete claims for subsidy which are qualified by auditors. After inquiry as to the reason for the inaccuracy, or after these claims have been qualified by the auditors, it may transpire that it is not possible for the matter to be properly quantified. Generally there is no real doubt that the local authority has incurred proper expenditure, even if its precise extent is open to question. The accepted, although infrequent, practice in these cases is for the Secretary of State to employ his powers of estimation in order to resolve the matter. The amendment, by removing the power to estimate subsidy, would leave no alternative but to withhold or claw back any subsidy for expenditure which cannot be properly quantified by auditors, or where a claim is incomplete.

I believe that it is in the interests of local authorities and local council taxpayers who would ultimately fund and subsidise benefit expenditure that the Secretary of State should retain powers to estimate subsidy. Therefore I do not believe that the Secretary of State is being given fairly unfettered power here, entirely free of any restraint. New Section 140C only fills out duties which are set out in new Sections 140A and 140B. I believe that is the way we have to proceed in order that we can set up a reasonable administrative system for paying these subsidies in a sensible way without—dare I say?—cluttering primary legislation, and without the problem of having to come back for primary powers when we need to make changes of a fairly minor nature for administrative reasons. I hope with those remarks and assurances the noble Earl will feel able to withdraw his amendment.

7 p.m.

Earl Russell

I am grateful to the Minister for that reply. He has perhaps inevitably taken the amendment in a somewhat literal manner. He has taken it as an attack on the existence of a power of any sort, whereas in fact my concern was rather with the drafting. I put it down in this form to probe the drafting because I had no intention of putting it to a Division. The Minister must by now have read the report of his noble friend Lord Renton on the preparation of legislation. I am fully in accord with the general arguments of that report. One could perhaps have said that subsidy should be paid in a reasonable manner and subject to audit, which would have been a general statement of principles by which the power was governed, and which would then be subject to interpretation by the courts. The courts would have had something to bite on. But in this drafting I really do not see what the courts can bite on, especially with the addition of the words "or otherwise".

In all the Minister said, I heard no justification at all for including the words "or otherwise". It is this full and fussy drafting which at the same time does not actually create any restriction which may be judicially investigated, which is giving me considerable cause for concern. Even if we were going to have a power, it could have been drafted a great deal better than it is here. This type of drafting invites judicial review. However, I shall not solve that problem at this time of night. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 255CDB not moved.]

Lord Mackay of Ardbrecknish moved Amendment No. 255CE: Page 163, line 28, at end insert—

("Financing of joint arrangements.

140DA.—(1) Where two or more authorities make arrangements for the discharge of any of their functions relating to housing benefit or council tax benefit—

1. (a) by one authority on behalf of itself and one or more other authorities, or
2. (b) by a joint committee,

the Secretary of State may make such payments as he thinks fit to the authority or committee in respect of their expenses in carrying out those functions.

(2) The provisions of sections 140B and 140C (subsidy: calculation and supplementary provisions) apply in relation to a payment under this section as in relation to a payment of subsidy.

(3) The Secretary of State may (without prejudice to the generality of his powers in relation to the amount of subsidy) take into account the fact that an amount has been paid under this section in respect of expenses which would otherwise have been met in whole or in part by the participating authorities.").

The noble Lord said: I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

Schedule 10, as amended, agreed to.

Clause 108 [Functions of rent officers in connection with housing benefit and rent allowance subsidy]:

Earl Russell moved Amendment No. 255CF: Page 71, line 2, leave out ("specified in the order in connection with") and insert ("required for the purpose of determining").

The noble Earl said: This is another drafting point. This is another case where the Secretary of State seems to me to have been given extremely wide powers which cannot really be judicially controlled. Clause 108(1) states: The Secretary of State may by order require rent officers to carry out such functions as may be specified in the order". I wonder whether one could tighten that by including a purpose requirement, and state instead, required for the purpose of determining housing benefit and rent allowance subsidy". That, again, would fit the principles of drafting which would allow a statement of general principle which could be made the subject of some judicial control.

Similar points apply to the second amendment in this group which concerns our old friend, transitional provision. The noble and learned Lord, Lord Simon of Glaisdale, will doubtless remember the first regulations under the Child Support Act where major provisions were changed under the transitional provision and held to be transitional simply because the Minister had changed his mind. For some time afterwards the noble and learned Lord queried the word "transitional" every time it appeared in a Bill.

All I really want to know here is exactly what the Secretary of State can do under these transitional powers, and why he needs to have such transitional powers as appear to him "to be desirable" rather than such transitional powers as are necessary for a particular purpose. Because, after all, as Dr Faustus knew, we can all desire powers for all sorts of purposes, but it is not always good for us to have them. I beg to move.

Baroness Hamwee

I support my noble friend on this amendment having teased him on a previous amendment when I said that it could have been even worse and could have referred to matters "otherwise howsoever". At least the draftsmen did not go quite that far. I hope the Minister will explain the relationship between subsections (1) and (2) of this clause. Subsection (1) gives powers which appear to be a matter of discretion. Without prejudice to those, subsection (2) suggests some of the provisions that may be contained in the order. Will the Minister also explain—and I hope confirm to the Committee—that the Secretary of State must act reasonably in specifying matters in an order under this clause?

Lord Mackay of Ardbrecknish

The final question of the noble Baroness is easy to answer in that my right honourable friend always acts reasonably. In the case of the provisions we are discussing he has to act in regard to housing benefit and rent allowance subsidy. Clause 108 replaces Section 121 of the Housing Act 1988 which enables the Secretary of State to make an order requiring rent officers to carry out certain functions in connection with housing benefit and rent allowance subsidy. Since 1989 rent officers have reviewed all deregulated private sector rent allowance cases to check that the amount of rent being covered by housing benefit is reasonable. Clause 108 would provide a new statutory basis for this work.

From 2nd January 1996 a prospective tenant has been able to apply, with the landlord's consent, through the local authority, for a pre-tenancy determination. This enables the prospective tenant and the landlord to find out the likely level of rent which will be eligible for housing benefit purposes before the tenancy is agreed.

Clause 108 extends this existing power to allow the Secretary of State to make an order to allow a prospective landlord to establish, in advance of offering the tenancy, the level of rent which housing benefit is likely to meet if a housing benefit claim is made in respect of that tenancy. It will make it possible for landlords to obtain a pre-tenancy determination for housing benefit purposes without involving a prospective tenant.

The effect of the noble Earl's amendment on the face of it would be to limit the functions that a rent officer could undertake under Clause 108 to those which were required only for the purposes of determining housing benefit. This seems directly to contradict subsection (2) of the clause which allows a prospective landlord to apply for a pre-tenancy determination. The result would appear to be that rent officers would be prevented from carrying out pre-tenancy determinations for landlords and probably also for tenants since these would relate to prospective tenancies which, although likely to result in benefit claims, may not always do so.

The fact that tenants have been able to apply for pre-tenancy determinations has been widely welcomed. It enables the tenant and his landlord to know how much of the proposed rent is likely to be met by housing benefit before the tenant commits himself to the tenancy. Clause 108 seeks to allow landlords to discover this information without having to have a prospective tenant lined up. I believe that these provisions are a positive step forward. From the noble Earl's remarks, I did not detect objections to the policy in principle. I detected a feeling, as usual, that he was unwilling to see the Secretary of State granted the powers via secondary legislation.

Amendment No. 255CG would prevent the Secretary of State from making any transitional, incidental or supplementary provisions to an order made under the powers conferred by Clause 108. The transitional provisions in any benefit change are sometimes the most difficult and can cause the greatest problems for the administration. By and large, we are all agreed that as regards making benefit changes it is important to have some transitional protection for those people whose benefit may be changed, sometimes adversely. We believe that in general it is fair to make transitional protection. Therefore provisions such as those in this clause are not unusual in social security legislation.

I realise immediately that that will not be considered a defence by the noble Earl, but I thought that I would slip it in as quickly as I possibly could, while accepting that it may not allay his suspicions. However, there may be cases where the rules are changing and there is need to make special provisions which arise at the point of change when such change has to be made. If we do not have these provisions, unforeseen hardship or inequity could result. The fact that the hardship or inequity is unforeseen makes it important that transitional provisions should be given to my right honourable friend the Secretary of State—indeed, to any Secretary of State. I do not believe that it would be right to prevent such flexibility. It is a common enough feature of such order-making powers. I hope that the noble Earl is not about to tell me of recent instances when the power has been abused. Therefore, I hope that I am on fairly firm ground in saying that there is nothing unusual and nothing underhand about this subsection. It seeks to ensure that such changes are made in as fair a way as possible.

While I realise that the noble Earl may be reluctant to accept my assurances on these matters—his suspicion of this kind of legislation is well known—I hope that he will feel able to withdraw the amendment.

7.15 p.m.

Earl Russell

I thank the Minister for that reply and my noble friend Lady Hamwee for a crucial contribution.

I am glad that the noble Lord, Lord Irvine of Lairg, is now in the Chamber. The amendment arose from thoughts following a debate which he initiated in this House on 5th June. The noble Lord will remember that we discussed the growth of judicial review. Since he was not present at the beginning of these exchanges, perhaps I may explain that I was concerned with the reasons that judicial review has increased. I suggest that one reason is the style in which legislation is drafted. Where one has a power which says that the Secretary of State may carry out such functions as may be specified, or that he may have such transitional powers as may appear to him to be desirable, it is difficult to control his powers by the use of statute. As my noble friend Lady Hamwee crucially pointed out, the only way that one can control him is to require him to be reasonable. Instead of sending him to Coventry, one sends him to Wednesbury. It is the only penalty we have available. I seek to suggest that this style of drafting is a substantial reason for the growth of judicial review.

The Minister was quite right. I have no objection to the policy intention. In fact, I believe that I was the first person to ask in this House for pre-tenancy determinations. I am grateful to have achieved them. However, I wonder whether yet again I can ask the Minister to consider the principles of drafting set out in the Renton Report: the statement of the general principle whose interpretation may then be tested by the court. We might then return to having our cases on statutes instead of searching for the town of Wednesbury. However, in the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 255CG not moved.]

Clause 108 agreed to.

Earl Russell moved Amendment No. 255CH: After Clause 108, insert the following new clause—