§ 3.10 p.m.
§ The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)
My Lords, I beg to move that this Bill be now read a second time. It is estimated that fraudulent claims to welfare benefits total in excess of £4 billion every year. That is an enormous sum of money, even by the standards of the £90 billion we pay out each year.
The fight against fraud is one of the major challenges facing the Department of Social Security. Indeed, my right honourable friend the Secretary of State said during the Second Reading of this Bill in another place that he regards the rooting out of fraud and abuse as his top priority, and he has translated those words into actions. Year on year, record amounts of fraud have been detected and stopped. The House will be heartened to learn that the department anticipates that its counter-fraud work will save taxpayers £7 billion over the next three years.
Some of the examples of frauds committed against the benefit system would be amusing if the issue were not so serious. Your Lordships may remember that during our debate in November initiated by my noble friend Lord Hayhoe I regaled the House with the story of the marathon-running mountaineer who for 15 years had claimed invalidity benefit. There was a celebrated case a year or so ago where the leader of a local council, claiming benefit on the basis that he was disabled and could hardly walk, was filmed by investigators bounding up the steps of his town hall two at a time. A recent case involved a clerk employed by a local authority who used his position to create bogus accommodation agencies for fictitious claimants to housing benefit. He managed to defraud the system of some £97,000 in a six-month period. After that deception was uncovered, it transpired that he had defrauded another authority for whom he had previously worked of a further £48,000.
We have many cases of organised gangs attempting to defraud the system by using multiple identities. In March last year six people operating a multiple identity 459 fraud in London and the Midlands were each sentenced to between 18 months and three years' imprisonment. They had created 70 false identities and fraudulently obtained about £250,000 in benefit. In December, four men were gaoled for a total of 17 years for masterminding a counterfeiting ring producing forged girocheques. By the time they were caught the gang had cashed over 6,000 forged cheques with a total value in excess of £1.2 million. As the House can see, this is not a trivial matter. It is a very serious matter involving fraud, sometimes on an organised scale, at others on an individual scale.
Despite such attempts to fleece the system, we are having success with our comprehensive anti-fraud strategy. As part of that strategy the Government have placed greater emphasis on anti-fraud initiatives and increased the resources available for this work; improved the training given to investigators and other staff; and improved front-end security to stop fraud entering the system in the first place. In addition, we have introduced a number of specific initiatives such as: the "beat-a-cheat" hotline, which has received over 150,000 calls since its inception in August last year; challenge funding for new and innovative ideas; the spotlight campaigns on benefit cheats in particular areas; and we are beginning the process of introducing the benefit payment card which will virtually eliminate instrument of payment fraud via the book or the girocheque.
However, those intent on committing fraud are becoming more sophisticated and ingenious and as one opportunity is denied to them they seek to open up others. To keep ahead of fraudsters we need to be sure that those dealing with fraud at first hand have the tools they need for the job. The Bill will provide a range of measures which will be of assistance in the fight against benefit fraud.
The Bill will permit the Inland Revenue, Her Majesty's Customs and Excise and certain other government departments to disclose relevant information held by them to the Department of Social Security. The purposes of any such disclosure are limited specifically to the prevention, detection, investigation and prosecution of social security offences and for checking and, where appropriate, amending or supplementing existing social security records.
The intention is that information supplied to the department will be used in data-matching exercises which will compare the information supplied with that we already hold. Where information from another department does not correlate with that held by the DSS the discrepancy can be investigated. The discrepancy may be indicative of fraud, in which case further inquiries will be made; or the discrepancy may simply indicate that the records the DSS hold are wrong or out of date—for example, we may have the wrong post-code, in which case they will be corrected.
Access to this data may, for example, show a person registered for VAT or claiming tax allowances and yet declaring no earnings to the DSS. Or that another is receiving income from savings and investments while not declaring capital for benefits purposes.
460 During the passage of this Bill in another place my honourable friend the Member for Dorset, South related the tale of when he used to run an employment agency in Yorkshire. One day he was visited by an officer of the DSS who was investigating an allegation that an individual was working at his agency and claiming benefit at the same time. When the investigator checked through the agency's records he discovered that one-third of the staff employed there were also claiming unemployment benefit, despite the fact that they were all paying taxes on their earnings. That sort of fraud may be highlighted and uncovered by data-matching. Allowing the Department of Social Security access to Inland Revenue data has the potential to prevent this type of situation occurring.
The Bill will also allow for greater sharing of information by those agencies charged with the administration of various parts of the benefit system. It will improve the efficiency of benefit administration, especially in relation to anti-fraud measures, by allowing local authorities to share data with the DSS and with each other for relevant purposes. Authorities play a very important part in the delivery of the housing benefit system.
Expenditure on housing and council tax benefits totals about £12.5 billion a year. Although local authorities are responsible for administering the benefits, the Secretary of State has a clear duty to ensure the protection of public funds, especially as the majority of the expenditure on benefits and the costs of administration come from the department. Our best estimates indicate that housing benefit fraud amounts to about £1 billion, of which about 15 per cent.—that is £150 million—is fraud by landlords and the other 85 per cent. is fraud by claimants.
In 1993 the Government introduced financial incentives for local authorities to detect and stop housing benefit fraud. I am pleased to say that, nationally, performance in combatting this type of fraud has risen sharply, from £92 million in 1993–94 to £224 million last year.
But this national average masks wide variations in the performance of individual authorities. Some are devoting resources and managements skills to the problem and achieving good results. But others are scarcely addressing the problem and 14 authorities report that they have uncovered no fraud at all.
So, the provisions in this Bill will allow the Secretary of State to examine closely the way in which housing and council tax benefits are administered and to make directions and recommendations as to improvements that might be made. In the case of an authority failing to achieve standards set in these directions the Secretary of State will be able to reduce subsidy payments and, in extreme cases, order the work to be put out to competitive tender, making achievement of the standards part of the obligations under the contract.
However, we do not only want powers to deal with those authorities which are not taking the issue of fraud seriously. We want to help the many which are. This Bill will give two important new tools to local authorities to assist them in their anti-fraud activities.
461 The first will enable them to require landlords or agents receiving direct payments and whom authorities suspect of some impropriety in connection with a claim to benefit to supply details of all other properties they own or have an interest in. This will provide a useful source of information to facilitate the investigation of cases of landlord fraud by making it easier to assemble evidence and to uncover large multiple frauds from a single lead.
The second provision will allow local authorities to appoint inspectors to obtain information from businesses—that is, employers, landlords and letting agents—to check benefit entitlement. This will include a provision enabling them to enter business premises. These powers, which are broadly analogous to those already available to inspectors appointed by the Department of Social Security under current legislation, will prevent unscrupulous landlords and employers from frustrating an investigation by the simple expedient of denying an investigator access to relevant information.
The Bill will create a new offence of dishonestly making false representations or dishonestly failing to notify a material change of circumstances. This new offence is necessary because recent court judgments have compromised our ability to prosecute people under current provisions. In 1996 the Court of Appeal ruled in effect that specimen offences could not be relied on to reflect the full extent of a fraud. The implication for social security fraud is that, unless the defendant agreed otherwise, the court would only sentence on the basis of the specimen offences, which might relate to benefit for a period of just a few weeks out of a much longer period during which the fraud was perpetrated.
It is intended that the new offence is to be used as a continuing offence to deal with cases of serious fraud where benefit was dishonestly obtained over a period of time as a direct consequence of a single false statement or failure to notify changes of circumstances.
This offence will be punishable either, on summary conviction, by a prison sentence of up to six months, a fine of up to £5,000, or both; or, on conviction on indictment, by a prison sentence of up to seven years, an unlimited fine, or both.
The Bill will also extend the current offence, used in more minor cases of fraud, to encompass failure to report changes of circumstances. Many frauds start with a genuine claim. Then the claimant's circumstances change—they get a job, the husband who deserted returns, and so on—and the claimant knowingly omits to inform the Benefits Agency as required. The extension of the offence will ensure that this type of fraud is encompassed.
The Bill will enhance and improve the range of penalties available against those who abuse the system. It will enable the DSS and local authorities to invite a person who has been overpaid, and against whom proceedings for fraud could be instigated, to pay a penalty of 30 per cent. of the amount of the overpayment as an alternative to prosecution.
There are some 100,000 cases a year where the DSS believes that there are grounds for prosecution but only 12,000 or so of those are taken to court. The new penalty 462 will not be offered in all cases of fraud. However, we anticipate that the new provision will mean an additional 25,000 cases per year facing some form of punishment, which should act as a deterrent to others. As well as ensuring that more fraudsters face the consequences of their actions, this will allow the Department to use specialist prosecution resources much more effectively by enabling them to devote more time to preparing the most serious cases for court.
Current legislation permits that overpaid housing benefit paid direct to a landlord may be recovered from that landlord. The Bill will allow recovery to be effected from any other benefit payments due to that landlord, something which is not permissible under current legislation. This will remedy the perverse position we are faced with now whereby an authority seeking repayment from a reluctant debtor with one hand has to continue paying him benefit with the other.
The provision includes safeguards for tenants whose benefit payments are reduced in this way by treating their rental obligation as met irrespective of the fact that a deduction has been made.
The Bill also includes measures to bring procedures for checking the correctness of existing awards of disability living allowance, attendance allowance and disability working allowance more into line with those for other benefits. It clarifies the Department's right to gather evidence to establish the correctness of an existing award of disability living allowance or attendance allowance. It also provides that, where there is doubt about the correctness of an award, the claimant may be required to undergo a medical examination—normally in his or her own home—in a similar way to the existing provision for new claimants.
The Bill also extends to all benefits a requirement that the claimant produce information or evidence to allow a national insurance number to be traced and confirmed or awarded.
Finally, the Bill includes two measures relating to the re-direction of benefit mail. First, it will allow the Department of Social Security or a local authority to require the Post Office, or other postal conveyor, not to re-direct social security mail but to return it to the sender. Secondly, it will allow the DSS and local authorities to obtain information from the Post Office about re-directions—for instance, to check whether payment in respect of one address is being redirected to another.
These provisions will help to counter a common type of fraud whereby the perpetrator sets up false identities in false addresses and then uses the re-direction system to forward the fraudulently obtained benefit payments.
The Bill contains a wide range of important measures to strengthen the hand of the Department of Social Security and local authorities in their counter-fraud work. These measures, taken with other initiatives the Government have introduced or are in the process of introducing, will ensure that fraud investigators have the weapons they need to fight benefit fraud effectively and successfully. I commend the Bill to the House.
Moved, That the Bill be now read a second time—(Lord Mackay of Ardbrecknish.)
§ 3.26 p.m.
§ Baroness Hollis of Heigham
My Lords, we thank the Minister for introducing the Bill so clearly. With this Bill the Government are finally accepting the argument that we on this side of the House have consistently put to them that there is an unacceptably high level of error and fraud in a wide swathe of benefit payment. That must be stopped. It wastes public money and reduces public support for the welfare state. We want to renew the welfare state; for that to happen the welfare state must regain esteem for its effectiveness and accuracy in delivering benefit as well as for its decency in relieving need and, where possible, encouraging people back into work.
We have also emphasised that, although there is an unacceptably high amount of what I call endemic low-level fraud—the lone parent with the live-in boyfriend, the man on JSA driving a mini cab—which we in no sense condone, we have repeatedly said to Government that they have been irresponsibly lax over the past 18 years in the field of organised benefit crime.
Let me give two examples. First, the loose attitude to national insurance numbers which allows the construction of false identities, a major concern of the Social Security Committee in another place. Our confidence was further eroded when we learned that nearly 80,000 blank birth certificates had gone AWOL.
Secondly, the subject of significance of this Bill, the blind eye that has been turned for so long to organised private landlord fraud. According to the Social Security Select Committee, £2 billion worth of taxpayers' money is wasted every year on housing benefit fraud—£1 in every £5. Much of that fraud is landlord fraud, not tenant fraud. Yet the Government have been soft on it, presumably because landlords rather than tenants were the fraudsters.
We warned Government; Government policy has only made matters worse. Government have cut back on the number of visits to check on frauds from 6.6 million a year under the last Labour Government to only half a million now, although belatedly Government are coming to recognise what folly that cut has been. Until 1993 Government penalised local authorities by their subsidy rules for uncovering fraud; it is therefore not surprising that local authorities did not spend much time uncovering it.
When the Housing Bill was passing through this House last year, the Government persistently refused our efforts to strengthen controls over private landlords. For example, when we tried to require local authorities to license all their houses in multiple occupation and to allow them to keep a register of all properties held by individual private landlords, the Government blocked our amendments. Yet those amendments would have been a significant tool in local authority attacks on landlord fraud.
Housing benefit fraud is of concern because the housing benefit bill is so large. Five times more money is now spent on housing benefit than in 1979: housing benefit then cost £2 billion; it now costs almost £11 billion. That is not simply because the number of claimants has doubled but because Government 464 foolishly deregulated private rents in the late 1980s, saying that housing benefit would take the strain. So the amount of housing benefit claimed by the private sector has risen from £1.4 billion to £5.5 billion since 1985. Twice as many people are claiming four times as much benefit, thanks to the Government's kindness to private landlords.
We do not doubt that housing benefit is sometimes mispaid to tenants who mis-state their domestic circumstances. An adult son may move back home and the mother on housing benefit fails to report it because she does not realise the implications of complex housing benefit rules. Nonetheless, all the evidence suggests that such fraud is far less significant than organised landlord fraud. Because landlords demand direct payment of housing benefit cheques to them before they accept a DSS tenant and thereafter, sometimes in collusion with shady managing agents, they then go on to invent fictitious tenants for fictitious rooms at fictitious rents and enjoy a very affluent lifestyle, courtesy of the taxpayer.
That is not error perpetuated by the confused; nor is it fraud perpetuated by the hard-up or temporarily tempted. It is serious, sustained, expensive and organised white-collar fraud. Hence, in another place at Report stage, the Labour Party called for a specific offence of landlord fraud to target landlord cheats with tough new sanctions. We need that because fraudulent landlords too often conceal their responsibility behind the tenant. Such landlords, who receive direct payments with money passing direct from the local authority to the landlord without going through the tenant, will still try to argue that it is the tenant's job and not the landlord's job to inform the local authority of changes of circumstances. Responsibility for fraud then becomes hard to locate and prove. Yet the Government refused in the other place to accept such amendment.
Likewise, when the Housing Bill was before this House and we sought amendments to require local authorities to licence all HMOs and to be allowed to compile a register of all properties held by private landlords, the Government unwisely resisted our amendments, which would have done much to eradicate organised fraud.
Local authorities need to know who is claiming from whom, where it is happening, how much is involved and for how long. We want local authorities to have the full right to demand that information from landlords about the properties for which any claim for housing benefit is made. If the Government do not give in this Bill local authorities all the powers that they say they need to check landlord fraud, we shall want to know why the Government, despite all their strong words, remain soft on it and go for the little people but let the bigger fraudsters escape.
If the Government want our full co-operation on the Bill—and given the time pressures faced by the Government, they may need it—they will have to move toward us on this matter. I do not see why that should present any difficulty between us as we share the same concerns. I hope that we shall hear friendly words from the Minister on this matter when he comes to wind up the debate. 465 One of the Government's responses in Clause 16 is to allow local authorities to recover money from a landlord overpaid for tenant A by deducting it from the housing benefit due to another tenant, tenant B, of that same landlord. The Minister explained his thinking, which is ingenious and we understand the reason for it. But despite government assurances that the rental liability for that tenant will be discharged, many of us fear that it may place that tenant, tenant B—the innocent vehicle for public reimbursement of another tenant—in a precarious position with his landlord, at risk of eviction and having a non-housing benefit tenant replacing him. Keeping administrative track of separate rental and housing benefit accounts for separate tenants will become difficult, particularly if tenant B has his own problems with the top slicing of JSA for his utilities debts or past housing benefit debt. The problem will be compounded if he shares a flat with others. It will be an administrative nightmare.
We understand that one does not want to see one part of a local authority's housing benefit section paying money to a landlord while another section of the same department seeks to recover money from that same landlord. Nonetheless, we shall want to see whether we can tackle the problem in a more effective way.
Nor are we convinced that the same rules of recovery should apply to socially registered landlords, such as housing associations, as apply to private landlords. At Committee in another place, the Minister said that up to 20 per cent. of registered social landlords were failing to refund overpayments, and so on. We shall ask the Minister to produce the evidence for that and again see whether we can produce a more effective way forward than has so far been suggested.
In principle we welcome data matching so that local authorities and DSS managed benefits share a common IT architecture along the lines of project accord. But we shall want to take great care that that it does not unreasonably invade the privacy of tenants and, of course, the national and international rules about data protection. It is important that claimants can ensure that information passed from one agency to another is correct. A common spine of IT is only valuable in so far as it is accurate; otherwise, errors become exponentially multiplied.
We shall want assurance that the Bill provides adequate safeguards for data protection. We believe that that may be best achieved, as the data protection registrar says, through a statutory code of practice. Let me quote the letter of the data protection registrar to Mr. Lilley on 10th January this year:When I commented on the text published for Second Reading, I expressed my concern at the very wide powers given in respect of data matching activities. In the light of this concern, I have come to the firm view not only that there should be a code of practice but that it should have statutory force. The existence of appropriate safeguards would go a long way to providing assurance to the public that such data-matching exercises will be properly regulated to minimise the possibility of any adverse consequences for innocent individuals".466 A position calling for a stringent statutory code of practice is strongly supported by the Post Office. We shall expect the Government to accept such a code of practice and allow the registrar a supervisory role of audit over data-matching activities.
We recognise that the Government have to be concerned about the existence of fraud in any benefit, including disability benefits. But we shall seek safeguards from the Government concerning Clause 15 to ensure that the strain on disabled people and their vulnerability are recognised in the way that the Government seek to eradicate error or fraud in that range of benefits.
Similarly, we shall ask the Government to look closely at the issue of appointeeship, to prevent people with learning difficulties from being cheated by others. We shall ask the Government whether they are concerned about disability benefits, why they refuse to allow local authorities to extend their fraud-chasing remit to other local authority administered benefits, such as education awards and contractor fraud. Currently the London local authorities are promoting such a Bill. It would be helpful if the Government could indicate their thinking on this matter and, better still, allow the Bill to be a vehicle for checking fraud in associated fields also.
We all want to review the arrangements for subsidy for fraud work as well as the "finders keepers" rules. We shall also want to clarify the role of the new inspectorate. The assumption behind the Bill, confirmed by the Minister's introduction, is that the local authorities are being dilatory in exposing housing benefit fraud and need a diligent inspectorate to push them into action. That is nonsense and the Government know it. It is the Government who penalised local authorities until 1993 for uncovering fraud by taking away their subsidy. Even now, the Government penalise local authorities who prevent fraud from happening by punishing them for failing to detect what has not happened—a non sequitur if ever I heard one.
One other aspect of the subsidy rules concerns us. A subsidy from government will in future come from uncovering fraud but not from reducing error. If overpayment is due to local authority error, there is no subsidy. If overpayment is due to claimant error, there is 25 per cent. subsidy. But if it is due to claimant fraud, there is 95 per cent. subsidy. Therefore, local authorities have an indecent incentive to classify error as fraud in order to maximise subsidy. Innocent claimant error associated, for example, with an adult son coming home and the household becoming entangled in the extraordinarily complex non-dependant adult deductions of housing benefit can be classed as fraudulent in order to extract benefit.
We are not opposed to an inspectorate but we wish to emphasise that the demand to recover and stop housing benefit fraud has been led by local authorities. A year ago, across these Dispatch Boxes, the Minister was telling these Benches and myself that our assertions of housing benefit fraud, based on figures supplied by the Local Authority Associations, were wildly exaggerated. Now we notice that the Government accept our broad figures.
467 Since 1993–94, savings detected from fraud by local authorities have risen from £93 million to £220 million in two years and this should exceed £300 million in 1997–98. Of some 400 local authorities, 367 will exceed their fraud targets set down by government even though those fraud targets for 1996–97 are 50 per cent. higher than in the previous year. I only wish the DSS was half as efficient. In the field of fraud it is the Government and not local authorities who have dragged their feet.
Finally, we see this Bill not just as a vehicle for the more effective tackling of fraud, of paying money to those who are not entitled to it, we also see it as a vehicle for delivering benefit to those who are entitled to it but are not receiving it. That is particularly a problem for our poorest pensioners. Nearly 1 million poorest pensioners, over 40 per cent., who are entitled to income support do not claim it. They are losing, on average, £14 a week as well as entitlement to £8 a week cold weather payments. Similarly, Age Concern estimates that a third of a million pensioners are not claiming the housing benefit to which they are entitled, worth nearly £20 per week, and that 1.6 million pensioners are not claiming the council tax relief to which they are entitled, worth over £5 per week.
It is especially nauseating that in a month when the Government introduced the fraud hotline, they closed the benefit helpline. It seems that the only way the Government have of financing their tax cuts is not through economic growth but by discouraging our poorest pensioners from claiming the benefit to which the Government say in law they are entitled.
We may not have time on this Bill to use it as a vehicle for benefit entitlement but we want it clearly signalled that the Government, if they had so chosen, could have done so and we are setting down a marker that we shall do so.
To conclude, we are at one with the Government in wishing to check fraud wherever it occurs. In so far as this Bill will effectively aid local authorities in doing this, we welcome it. But if the Government want our wholehearted co-operation and speed on this Bill—and I rather suspect they do—we must make it clear that that is conditional on the Government meeting us on two points which they ought, in all conscience, to be able to do.
First, the Government must join with us in strengthening the powers of local authorities to deal with fraudulent landlords, perhaps by a specific offence of landlord fraud. The Government do not go far enough in this Bill to stop landlord fraud. Secondly, the Government must bring before us, in principle, a code of practice or at least insert the regulatory powers for a code of practice for data protection to ensure the proper handling of data; that it is accurately collected; that it is used for its proper purpose; that it does not give rise to abuse of confidentiality or the hounding of vulnerable people. A proper balance must be kept between collecting information to check fraud and respecting the rights of individuals to privacy, especially the rights of the poorer and less powerful people to privacy.
468 If the Government can meet us on these two points, and I really cannot see why they should not, then we will co-operate in all ways possible to see this Bill on the statute book.
§ 3.44 p.m.
§ Earl Russell
My Lords, before getting down to business, I would like to offer the Minister an apology for asking him an inaudible question a few minutes ago. I did not react fast enough to a certain amount of noise in the House and I am sorry that that was so.
In that same spirit, in spite of the slightly end-of-term atmosphere we heard a few minutes ago at Question Time, I shall attempt, unless provoked beyond endurance—and I shall make my endurance as long as possible—not to use the Bill for scoring party points. I say that not out of moral virtue—both the Minister and the noble Baroness know that I am not above scoring a party point when I think it appropriate—but because I think it is in our mutual self-interest. On the Bill all three of us will be vulnerable because we face a clash between conflicting priorities, all of them legitimate.
First, we all agree that fraud is a crime. It is properly prosecuted under the Theft Acts. Money is taken which should have belonged to somebody else and is nefariously misappropriated. That, I think, is common ground between all three of us. But equally all three of us are and must be concerned to show that we are trying to act in the interests of claimants, which may, on occasion, unless we have very careful drafting, conflict. Also, all three of us must be concerned to show that we are acting in the interests of justice. As soon as we start to accuse each other of being too soft on fraud we are liable to get back across the Chamber the accusation of not being sufficiently concerned with justice, and so forth. So if we use this Bill for party purposes, we set up a merry-go-round from which I believe none of us will gain.
The Minister will remember that I gave the Bill a guarded welcome in the debate on the humble Address. I repeat that but, having done a good deal more work on the Bill since, I find that the guardedness is slightly clearer than the welcome. Obviously we need a Bill on this subject more or less of this type. However, looking through the actual drafting of the Bill I cannot help being struck by the sense that this is the sort of Bill that one gets at the end of a parliament. Also, I cannot help being struck by the sense that when, among three conflicting and more or less equal priorities, one singles out one of the three for legislative attention, one makes the task of balance a great deal more difficult. I hope that in Committee we shall be able to restore that balance.
First, I shall deal with the legal issues which have arisen in relation to Clauses 1 to 3 since the Bill was tabled. We have first the problem of the European Convention on automatic data processing which lays down that personal data held for any purpose shall not be used or disclosed in a manner which is incompatible with that purpose.
469 I do not think we take enough account of the resistance of the public to supplying information which is wanted for official purposes. To take an example, which obviously from its nature I would not have taken for partisan purposes, I heard very recently from somebody I have known for a great many years who was objecting passionately to supplying to her local authority the information required under the Energy Conservation Bill recently sponsored by my honourable friend, Mrs. Maddock. She was quite convinced that there was some nefarious purpose behind the demand for this information and nothing I could do could convince her otherwise.
Therefore, in requiring official information, we have to concentrate on the question of preserving public trust. In computer matters that has already become more difficult because of the spread of hacking. In 1994 there were 665 Whitehall cases of hacking. The majority of those were in order to disclose information to an outsider. We should all remember that one of the major causes of this sort of problem of unauthorised disclosure arises in domestic violence cases where the violent former husband tries to trace a wife who has taken flight. I would like to think that before the Bill is completed, the Minister will have taken advice from Women's Aid and other concerned organisations on the risks to which the disclosure we are interested in may perhaps give rise.
Next we come to the question of the European Convention on Human Rights. Clause 8, the privacy clause, lays down the requirement that disclosure should be in accordance with law, which means that the law should be formulated with sufficient provision to enable a citizen to regulate his conduct. That is not a piece of nasty foreign law. It is a good, basic English legal principle. I am not going into 17th century jurisprudence. I shall quote only the memorable phrase used by George Digby in another place in 1641:Let the mark be set on the door where the plague is,And let him that will enter in die".I am not sure the Bill passes that test.
It must also be for a legitimate aim. Prevention of crime clearly is a legitimate aim within the meaning of the European Convention. There can be no dispute about that. But checking the accuracy of data, I suspect, is not a legitimate aim, although I speak as an amateur and in a case which has not yet come to court and which will take a considerable while to come to court. It would mean that it would be possible to get hold of the whole of a political opponent's tax records just in case he might be claiming income support under another name. It is the kind of thing which in a future atmosphere—perhaps 10 or 15 years down the road—could get quite seriously out of hand. We need to be careful how we go about it.
We need to be clear, in defining the circumstances under which disclosure is to be allowed, first, that overpayment is not necessarily the same as fraud. There has to be a mens rea established before overpayment can constitute fraud. We need a tighter definition of the circumstances in which disclosure is to be allowed. 470 We need some requirement of suspicion. Your Lordships may remember the outcry which has been caused at various times in the past about the notion of the police carrying out random breath tests. The case for restriction here is a good deal stronger than it was for random breath tests. There must also be a provision for review of the exercise of these powers; otherwise, as Belloc has it,It would not do For people such as me and you Who pretty nearly all day long Are doing something rather wrong".Those clauses need a good deal of thought before we leave them.
On the later clauses there is a good deal of work to do, but there are not such big issues of principle. The basic aims of Clauses 5 and 6—the sprucing up of local authority administration of housing benefit—need to be supported. However, I am a little worried by the provision in Clause 10 for subsidy to a local authority for success in detecting fraud. The decision whether something is or is not fraud is in form at least resembling a judicial decision. Financial incentives to take a potentially judicial decision in one way rather than another cause me a certain number of misgivings.
In Clauses 9 and 10 the Minister touched on provisions for subjecting the local authority to a financial penalty or contracting out. I entirely understand why the Government are thinking in those terms. After all, I live in the London Borough of Brent, and I know something about what inefficient local authorities have in the past been like. However, the financial penalty is a little like the charge from the bank for going into overdraft. I recall a social security case of someone who went into overdraft by 10p. The bank charged her £10 for it. She challenged that. The bank waived the £10 penalty but charged her £10 for the letter saying that it was doing so. This does not always help. I am unhappy with those provisions but I do not at present see an alternative. I do not intend to make any large fuss unless or until I see an alternative.
Clauses 13 and 14 are provisions on changes of circumstances. Those also cause me some misgivings. I want to ask the Minister about the use of the word "dishonestly" at the beginning of Clause 13. How much restrictive force does that have? Is that a requirement for mens rea, or is "dishonestly" being used loosely simply as a synonym for inaccurately? The answer to that question will make quite a lot of difference to me.
I was also a little taken aback by the requirement to report all changes of circumstances required by any regulations. I shall not force the Minister to plead his privilege against self-incrimination, but if I were to ask him to name the content of all social security regulations requiring disclosure of change of circumstances, it might give him a little hard work. If the Minister felt anxiety about that, what would the average benefit claimant feel? Most people are not at all sure which changes of circumstance need reporting and which do not. Above all, the change of circumstance requirement does not really keep up with the flexible labour market, with fluctuating wages changing every week. For income support there is a simple form for reporting a change of 471 circumstance. Would the Minister consider the possibility of introducing a similar form for housing benefit, and would it not save us some trouble if he did?
In Clause 15 overpayment is automatically, as far as I can see, taken as fraud. We need some proof of mens rea before that is understood. There are plenty of cases of overpayments arising because people have been given mistaken descriptions of exactly what was required of them. I have some such cases before me but I shall not detain the House with them now because time is running short. However, we may hear more of those later.
In Clauses 17 and 18 the requirement for medical examinations for people with various disability benefits has caused concern to the Royal National Institute for the Blind and is likely to do so to other disability organisations. Now we are calling in the informer through the fraud hotline, everyone is open to notification from any enemy, former lover or spurned lover alleging various forms of fraud. Some disabilities, notably acute heart trouble and epilepsy, are not at all visible to anyone who sees you about in the street, so they might think you are perfectly fit and notify you as a fraudster. I entirely agree with the Minister that fraud happens in this as in all other areas and there must be measures to check it. What I do not want is any danger of this turning into a witch hunt. I should like to know the circumstances in which regulations are likely to prescribe extra medical examinations. I should like to know how often these new medical examinations may be required. We shall have to look at that more closely in Committee.
Clause 19 concerns failure to supply information for checking a national insurance number. Again, I sympathise strongly with what the Government are after here. I wonder how it will work in practice if you apply it, say, to the street homeless, who are not very well equipped with places for keeping records; if you apply it to illiterates, with whose rights I have always had a concern; if you apply it to people with the various forms of learning disability, which are not unknown among people on benefit; or if you require alcoholics to supply this kind of information. They may not even understand your question. To take that as fraud is straining the meaning of language. Before we leave the Bill I should like to be sure that we are not going to come up with a lot of merely misguided and incompetent people when we are looking for criminals.
Clauses 20 and 21 refer to the provisions for redirecting post. I am concerned about how the prohibition on redirecting giros might affect people who have suffered from eviction, those who have suffered from matrimonial breakdown or who have fled from domestic violence. This may be a procedure which is a little too inflexible for the need that it has to meet. The Post Office is concerned about the provision in Clause 21 for gaining access to its database in order to redirect mail. I entirely understand why. Not all of those people by any means—they allege less than 1 per cent.—are involved in any sort of benefit business. Again, that is just the kind of thing which could be used regularly to trace people fleeing from domestic violence.
472 When we look at the Bill—which I hope that we shall do with great care—we must not look at it with tunnel vision, but with sympathy and from a good many other angles as well as looking at its effect on fraud. Then perhaps we might get it right.
§ 4 p.m.
My Lords, I am no expert on social security neither do I have a great deal of knowledge about fraud, but I do have practical private sector experience of administration and I shall approach the Bill from that angle.
I choose to split fraud between skilled fraud and unskilled fraud. Skilled fraud is always with us since whatever one man can do another will find a way to undo. If we leave the door open those with little principle will walk in, but when we lock it such people have neither the skill nor the determination to get inside. So there is a lot that we can do to learn from our mistakes, to tighten our vigilance and routines and to manage better.
Here is a true and recent story taken from a different discipline, but the points are nonetheless instructive. A container load of cigarettes was sent from the USA to Angola. The first leg was by ship to a Scandinavian port; the second by French truck to a Spanish car park and the third was supposed to be by local movement to the port of Vigo except, of course, the cigarettes were never seen again once they had left the car park.
No one at the Scandinavian port asked why a cargo for Angola ever came there in the first place. No one checked to find out whether that had happened before—it had—and the details of the previous theft were well known to the authorities. An investigator had no difficulty in following the journey south. The crooks were so relaxed that they had even used the same name each time when clearing Dutch customs. The investigator is on record as saying that that could not have happened a second time had there been a computerised record with the opportunity to match data.
Of course, they may have been skilled criminals, capable of moving on to different ways of achieving dishonest income, but there was nothing very skilled about what they actually did. The world is full of unskilled people who can and do take advantage of incompetence—what the Army calls "making". Computers are a prime weapon in the battle to achieve competent management because they do not work if you offer them a fudge. Computers force us to be tidier: to be more disciplined. Block the avenues of incompetence and a lot of people who only drift into crime will no longer offend.
Computers also force us to be exact. They give us the opportunity to collect and use information in new ways but, being exact, they require common definitions. There is an amusing story to illustrate this. The Ministry of Defence must have some difficulty in using headcount statistics if the following allegation, which was told to us in PITCOM recently is true. It is said that in the Army personnel are either "men" or "apprentices". In the Navy, they are either "men" or "officers" whilst in the Air Force all personnel are "men", including women.
473 I return to the subject of fraud. How does one stop someone on social security from forging a second card and applying for two benefits at two different post offices? One answer is to issue claimants with plastic cards containing unique reference numbers; build a common network across all post offices; only pay weekly benefits to authorised benefit holders and know instantaneously each time a claimant asks for a benefit which has already been paid elsewhere.
Such a system is now being implemented. It restores competence. It will eliminate another element of fraud. It will take some people out of the fraud game, and not necessarily through arrest or conviction but simply through lack of opportunity.
The consultation period on the Green Paper government.direct has just ended. The prospect is that information given once to one government department will be used by all departments. The good news is that, instead of being sent a form to your correct address and finding that the first question says, "Please fill in your name and address", the form will arrive with this already shown. In Denmark, the tax form already reaches the citizen partly filled in from existing records.
The bad news is that information held by the Inland Revenue will be available to the DSS—or is that bad news? That depends on one's outlook and, it seems to me, on whether you have anything to hide. We spend a lot of time these days extolling government and corporate transparency. It puzzles me why the thought of individual transparency gets such a bad press.
Of course, the information must be accurate, and this brings us to the other side of the equation. We need to know that information about us is accurate and is used only for such purposes as have been advised to us before we donated the information. We have the Data Protection Act to give this the force of law. There is an irony in this, in so far as concerns accuracy, because there is ample proof from the private sector that single entry of information is not only significantly less error-prone than multiple entry, but also that a wrong single entry gets discovered far faster than the one error within the multiple entry system.
The Data Protection Registrar tells us that the UK Act avoids the use of the word "privacy" but that Article 1 of the European directive, which the United Kingdom is required to implement, states that privacy is a fundamental human right. She suggests that data holders should take great care to specify the purposes for which such data may be used before they collect it, thus avoiding compliance costs later. It is in the data holder's interest to work out in advance how to avoid alienating citizens afterwards.
The Electronic Commerce Association suggests that while information supplied to government should be available to all who require it within government, the citizen must be confident that it will never be disclosed outside government, except in unidentifiable statistics, and also that the information will never be subject to the jurisdiction of any other government.
474 Government departments may well be advised in future to have a statement on all their forms stating that,in the interests of more efficient Government, any data supplied thereon may be passed to any or all other Government departments for use in respect of any of the purposes published and registered under the Act".I think that that would satisfy the current Act.
Everyone must decide for themselves whether this would constitute "Big Brother" or simply represent common sense. I suspect it depends on culture and outlook. But I forecast that what is now being called "data matching" will happen and that those nations which implement it last, or indeed implement it unsuccessfully, will lose competitive advantage in the global struggle to increase living standards.
So, if it is going to happen, then the sooner the Government move ahead in general with the implementation of their Green Paper government.direct the better. As regards this Bill, we would do better to look for checks and balances to protect the data subject than to reject the data-matching concept. There is already an avenue for checking whether a data holder complies with the Act. The names of all those registered as data keepers are now live on the Internet. The list gives contact addresses which citizens can use to find out what data is held about them. Something must be going right since the registrar says that she now gets better quality complaints.
So far as concerns this Bill, the registrar wants, as we have heard, to see a statutory requirement for a data holder's code of conduct, which complies with the existing eight data protection principles. Having spent much of my own life as one who was governed through a code of conduct, I commend such an approach. Lloyd's of London has not had much praise in this House recently, so I am delighted to tell noble Lords about something which I believe it got right. If a broker is found to have transgressed his code of conduct, it is not automatically considered to be a disciplinary offence, rather it is a matter that can be taken into account in any disciplinary hearing. This gives a powerful flexibility to the operation of a quite tough code.
In passing this Bill, Parliament will have further enhanced the importance of the registrar's position as the keeper of the checks and balances between government (the data holder) and the citizen (the data subject). I conclude by quoting from a EURIM brief, which was also its response to the Home Office concerning the need to implement the European directive. It states:The Registrar's function needs review. It should be more of a Parliamentary Commissioner than a business Regulator, particularly in respect of complaints regarding Government Departments. The advisory role of the Registrar should be enhanced: fees should be de linked from registration, becoming variable and work related. Primary legislation is highly desirable. There are potential dangers of confusion if the UK Act and the EU Directive are left separate and structural change is anyway desirable".We need this Bill. We also need an effective Data Protection Registrar for balance. I suggest that these two strands cannot be separated.
§ 4.9 p.m.
§ Lord Stallard
My Lords, I listened with great respect to the noble Viscount, Lord Chelmsford, especially when he said that he did not know much about local authorities or social security. I hesitate to say this, but I am bound to do so: many of my former constituents or those whom I helped when I was a member of a local council would not have understood what the noble Viscount meant when he spoke about the Internet and the rest of it. Those things are light years away to many pensioners.
I turn now to the Bill. Any Bill purporting to deal with benefit fraud could be expected to attract universal support—and rightly so. However, the very first sentence of the Explanatory and Financial Memorandum to this Bill states:The Bill amends the law about the administration of social security to improve the prevention and detection of benefit fraud and the efficiency with which benefits (in particular housing benefit and council tax benefit) are administered".In that sentence, the Government are admitting straight away that they are concerned with only two benefits. Although the Minister when introducing the Bill said that it will give local authorities new powers to deal more effectively with benefit fraud, in my view the Bill does not go anywhere near far enough. It does little in practical terms to tackle other types of fraud. From reading recent reports, I understand that there is a great deal of fraud in the education world, relating to grants and awards. There is certainly a great deal of fraud with contractors, particularly in local authorities. Such fraud is not mentioned in the Bill.
What puzzles me is that there is another Bill—the London Local Authorities Bill which I know has been in preparation for almost two years now. I also know that it has been awaiting its Second Reading for many months. I noticed this morning that, according to the Notices and Orders of the Day in the Minute, that Bill is due to have its Second Reading on Wednesday. Had I known earlier that that Bill was to have its Second Reading on Wednesday, I would not have put down my name to speak on this Bill. I would far rather have waited for the more comprehensive Bill that has been produced by London's local authorities because that Bill deals with many more types of fraud at greater length and far more thoroughly than does this Bill.
I shall deal with only one or two examples today. First, the London Bill will deal with fraud relating to education grants and awards. It will also deal with landlord fraud far more deeply, in much more detail and with much more practical understanding of the difficulties than does this Bill, which seems to concentrate on fraud involving individual applicants. Although I am aware of the changes that were made to these provisions in another place, in my view the Bill still does not deal adequately with fraud such as landlord fraud which, according to many reports, exists on a large scale. The London Bill is much more specific and requires landlords who ask for the benefit to be paid directly to them to supply details of all the other properties that they control in respect of which housing benefit is claimed. Local authorities will understand that. Local authorities are also to keep a register of 476 landlords who receive direct payments of housing benefit and are to pass that information to other local authorities. That is another good idea. Local authorities will also have specific powers to refuse to make direct payments of benefit to landlords if they believe that fraud is involved. In such cases, the benefit would be paid directly to the claimant.
I make those points to show that the London Bill was conceived and its provisions drafted long before this social security Bill was ever thought of. In fact, I believe that this Bill was produced in response to the local authorities Bill and that it replicates some of its proposals. So, far from the Government producing a fraud Bill in response to a lack of action by local authorities, a point on which the Minister elaborated when opening the debate—the reality is that the Government's fraud Bill has been produced in response to the initiative taken by the London boroughs in bringing forward private legislation.
I may be totally out of touch, but I do not believe that that Second Reading can now take place on Wednesday. It does not seem possible to me that we can discuss this Bill on Monday and then discuss a similar but more detailed Bill on Wednesday. In my mind that raises the question of why we are doing this. As far as I am concerned, it is being done for only one reason: the Government are in a hurry to produce something which they and their managers deem to be electorally desirable. If I were a cynic I would believe it to be true that the Government hope to rush the Bill through within the next few days or so, so that they can begin to boast about how tough they are on tenants—and on some landlords. If we were to discuss the other Bill on Wednesday, we could have a much more leisurely discussion on that Second Reading and far more detailed and specific discussions in Committee. However, I do not see how we can do that now—and certainly not in this Session. Are we saying that we shall pass this Bill now, have a Second Reading of another Bill dealing with similar provisions on Wednesday, and God knows when that second Bill can be given its Committee stage? I am sure that I am more or less right and that the Government are in a hurry because they want to be able to show in their manifesto how tough they are on fraud and what they are doing about it. However, at the same time they are saying, "We shall not boast about what we are doing to landlords because that might not be so electorally desirable". I ask the Minister whether the Second Reading of that London Local Authorities Bill is still to take place on Wednesday.
In turning to my next points I must declare my interest. As chairman of the All-Party Lords Group on Ageing Issues, I have attended a number of meetings with colleagues, and joint meetings with the Commons All-Party Group. We have met representatives of pensioners' organisations and representatives from Age Concern. Their general criticisms relate to the fact that this Bill concentrates only on taking benefit away from those who should not be receiving it. It does not take the opportunity to encourage people to take up the benefit to which they are rightfully entitled. Nothing in the Bill deals with that.
477 Some figures have already been quoted, but perhaps I may repeat that as many as 1.1 million pensioners are not claiming income support and that the average amount of unclaimed income support is £14.10 per week. As much as £800 million-worth of income support benefit is not being claimed by those pensioners who are eligible. There is a similar story with housing benefit because 320,000 pensioners are not claiming the benefit to which they are entitled. That means that 14 per cent. of eligible pensioners do not claim. The average unclaimed benefit is worth £19.70 per week. As much as £330 million worth of housing benefit is not being claimed by those who are eligible. As many as 1.6 million pensioners are not claiming the council tax benefit to which they are entitled—or 37 per cent. of eligible pensioners. The average amount of council tax benefit left unclaimed by eligible pensioners is £5.60 per week. As much as £480 million in council tax benefit is not being claimed by elderly pensioners.
It may be argued that the issue of take-up should have been included in this fraud Bill. It could be argued that where a council or government department fails to take adequate steps to identify people who are entitled to receive benefit but who are not receiving it, those people are being defrauded of that benefit. It certainly appears that the present publicity and advertising are insufficient. The Government boast that they are spending millions of pounds on advertising campaigns to publicise benefits. But would not that money be better spent in other ways? We are contacted regularly by post to ensure that our names are on the electoral register and we are contacted every so often in relation to a census. I imagine that the names and addresses of pensioners are on local and national computers and are known to voluntary organisations. With some assistance, I do not see why it is not possible to identify those people to ensure that they receive that to which they are entitled. There are a whole number of reasons, which I do not have time to go into, why people are in that situation.
We know that people are not receiving those benefits. We could find out who they are if we were prepared to divert some of the millions which are spent in the wrong direction. Could it not be said that if those sums are not paid, the people in question are being defrauded? I have mentioned sums of £800 million, £330 million and £480 million. That is £1,610 million. I wager that if pensioners were withholding any payment due or claiming that to which they are not entitled, they would soon be identified and punished. It would not take long to identify a pensioner who was fiddling his pension or cheating on his income support. Yet it is not possible to identify him when he is not receiving that to which he is entitled. I am saying that we should direct more money and time in that direction.
Age Concern has raised another matter about the structure and system of benefit appointeeships and agencies. The fraud Bill makes no reference to reviewing that system. There is no monitoring of those people who are appointed agents or appointees. Those of us who have served in local government and know the problems at street level know that there is a whole 478 area of fraud in that sphere. We know it goes on. We have all had experience of someone who has been appointed to assist a person who is perhaps not totally mentally alert and has been found to be defrauding the person entitled to the benefit. That is not mentioned in the Bill but Age Concern is concerned about it, as I am. There should be a whole review of that system; there should be a system of monitoring those who are appointed and the means to deal with anything that happens in that process.
There is no formal review mechanism. The Benefits Agency provides limited public information on the system and conducts limited, if any, monitoring of appointees and agencies. That also impinges on the implementation of the benefit payment card. Therefore, we must look at that when we are looking at all the other aspects and problems.
I received another piece of information from the Royal National Institute for the Blind which is concerned mainly about Clauses 17 and 18 which relate to disability benefits. The society asks why a Bill which is aimed at tackling fraud includes two clauses which deal with disability benefits. When that point was raised in Committee in another place, the Secretary of State said that fraud was not an issue in that respect. He said that the Bill is a convenient vehicle to deal with disability matters; that is despite the fact that their inclusion in a Bill dealing with fraud sends out all the wrong messages. I can understand that; noble Lords can understand that. If it is not an issue, why are those matters included? It is said that those two clauses have no connection with fraud, but they are contained in a fraud Bill. Therefore, we are sending out a message that there may well be fraud among members of the blind community. I think that that is a point which requires more of an answer than has been received so far.
When the Minister winds up, perhaps he will tell me how the Government justify placing clauses dealing with disability in a fraud Bill. The RNIB would like an assurance that the whole context of the report on DLA and incorrectness will be made available and that no decisions are taken on tackling incorrectness without full consultation with disability organisations. I should like the Minister to deny, on behalf of the Government, the rumours about changes in the interpretation of the "ability to walk" provisions. I ask the Minister to give an assurance that there will be no changes which may diminish the right of blind and partially sighted people to receive the lower rate of the mobility component of the DLA. I do not think that that is asking for too much on behalf of people who have been insulted by the inclusion of those two clauses in a fraud Bill. I hope that the noble Lord will be able to reply to those matters.
As I say, I should have liked to have spoken a lot longer and I would have done had the Second Reading of the other Bill been on Wednesday. I do not know whether it will be. I should like the Minister to tell us whether or not that is to take place on Wednesday.
§ 4.26 p.m.
§ Lord Lester of Herne Hill
My Lords, I begin by apologising to the House for the fact that, unfortunately, 479 I cannot be here for the whole of the debate and in particular to hear the Minister's reply to it. I have written to him with my personal apology. When I put my name down to speak in the debate, far fewer noble Lords then had their name down to speak in the debate.
As almost all noble Lords have said, the Bill has entirely laudable aims—the aims explained so clearly by the Minister. The Bill has been widely welcomed. The question which I should like to raise—and it has already been raised by noble Lords—is whether the means chosen to achieve those laudable aims contain adequate safeguards to ensure respect for personal privacy. I hope and believe that the Minister shares that concern and that he would be open-minded about the strengthening of privacy safeguards in the course of the Bill's passage to strike and maintain what my noble friend Lord Russell described as a fair balance.
Until about five years ago, data-matching was virtually unpractised in this country. Data-matching means the computerised comparison of two or more sets of records with the main aim of searching for records relating to the same individual. There are several variations of the data-matching technique currently in operation; but they are limited in scope. However, this Bill will allow wholesale data-matching; that is, a sharing of information across government departments which at present would be unlawful.
The Bill will empower public authorities to use data-matching to reveal inconsistencies in an individual's record and not only to confirm an existing suspicion, as is already permitted under the existing social security legislation. Inconsistencies which government computers highlight, at least in theory, could be the basis for further investigation by a computer-generated decision whether with or without the exercise of further human judgment.
The Bill represents a significant extension of state power. For the first time, Clauses 1 and 2 would allow the Secretary of State to collect relevant information from the Inland Revenue, Customs and Excise, agencies dealing with passports, immigration, emigration and prisoners, and, in completely cavernously open-ended language,any other matter which is prescribed".That last phrase would be in new Section 122(B)(1)(b) of the 1992 Act, inserted by Clause 2(1). I await with interest the report from the Delegated Powers Scrutiny Committee on that particular provision.
In all cases, the very wide power to which I referred is to apply not only to theprevention, detection, investigation or prosecution of offences",but also for use in checking the accuracy of information and, where appropriate, amending or supplementing it. The Inland Revenue will have greater powers to supply information relating to contributions to the Secretary of State who, in turn, will be able to supply it to local authorities, which will be able to exchange the information with each other. Some of this may well be happening already. But, if so, as with police practice in relation to electronic surveillance, it is happening without proper lawful authority, without legal certainty 480 and without adequate safeguards against misuse. The Bill is most welcome in putting some of these matters right.
Data matching will of course occur without the knowledge of the access subject. Computer errors, like human errors, will inevitably occur, and outdated stale information soon becomes inaccurate information. A common source of fraud is to use the national insurance number of someone else; so there can be cases of mistaken identity because of the activities of a fraudster. Errors are also inevitable because of the large scale on which this information is collected and the different contexts in which the information was obtained in the first place. Added to that is error which may arise from the different quality of different databases.
The Data Protection Registrar, to whom reference has already been made, is, if I may say so, a most impressive, independent expert authority to whom we would wish to pay tribute. In her annual report some years ago, the registrar drew attention to the fact that:Information can be used out of context to the detriment of individuals, unjust decisions can be taken on the basis of a computer generated profile which causes them to be placed into a group with certain characteristics, decisions can be made automatically, that is without the intervention of human judgment. The rights of individuals to check the accuracy of the information held is therefore severely restricted".Yet, despite that clear and important warning, as the Bill stands, the claimant has no right to be informed of the investigation and no clear automatic right of access to the file in order to check the accuracy of the record. Worst of all, there is no complaints procedure for people who may be wrongly accused of dishonesty and wrongly deprived of essential state benefits, through no fault of their own, because of data errors. That is a serious penalty, especially for an impecunious sole parent or pensioner innocent of any wrongdoing. No doubt the Government's intention is that the highest standards of practice will be observed; but what matters is that there are real and effective safeguards and remedies in situations where those standards are not in fact observed.
The Secretary of State, Mr. Peter Lilley, assured the other place that the principles of the Data Protection Act will be adhered to. There is no duty imposed by the Bill to comply with those principles. But, presumably, public authorities will have to register as data users under the Act. The Data Protection Act 1984 was framed long before the recent technological developments in data matching, and the general principles under the Act are too general on their own to provide adequate safeguards to keep pace with the new technology.
Perhaps I may give your Lordships some examples. The first data protection principle in Schedule I to the Data Protection Act says:The information to be contained in personal data shall be obtained and personal data shall be processed fairly and lawfully".That principle has been interpreted to mean that, as a general rule, the individual should be informed of the purpose for which the information is held, and if personal data given for one purpose is to be used for another purpose or passed to a third person. But such a general statement gives no clear guidance on what 481 information is necessary in this situation. Why, as I believe the noble Viscount, Lord Chelmsford, asked, should citizens not be informed that the personal data supplied by them to the Home Office, for example, may be made available to the DSS, or the converse?
According to Recommendation R(86)1 of the Council of Europe, made in the light of the European Convention on Data Protection 1981 and which gave rise to our 1984 Act,Personal data should not be communicated outside the framework of social security for other than social security purposes except with the informed consent of the person concerned or in accordance with other guarantees laid down by domestic law".The Bill as it stands does not provide for what that recommendation describes as,guarantees laid down by domestic law".I submit that it should contain such legally binding guarantees.
There may be breaches of the first data protection principle if automated systems are put in place which make decisions with little or no human intervention, but the Bill is not specific on that point. Article 15 of Directive 95/46/EC on the protection of individuals with the regard to the processing of personal data expressly forbids decisions based solely on automated data processing. The directive has to be given effect in UK law by 1998. I see no good reason why this Bill should not now secure compliance of our law with that directive.
After the data matching activity is complete, should the matched information from another source be destroyed or can it be retained on a central register for later use? This is another grey area.
The sixth data protection principle provides that personal data should not be kept longer than is necessary; but, again, it is unclear how the principle might apply where the main purpose is the detection of fraud. One government department might hold sensitive information about an individual's family history while another might hold a detailed financial history. How much information should be available for this cross-matching activity?
The fourth data protection principle provides that personal data held for one purpose or purposes should be adequate, relevant and not excessive. But in a widespread data-matching exercise how can that be effectively policed unless the registrar is required to be given detailed information about the exercise, and perhaps enforcement powers to overcome the existing statutory immunity for government departments?
The processing of personal data held by government as well as by private contractors will increase rather than decrease over time. Safeguards need to keep pace with rapid developments in computerised technology. Surely we must develop ways to benefit from and control this development. With the Government's declared commitment to use computerised information for the public good, as set out in the Green Paper, govemment.direct, surely, as other noble Lords have 482 stressed, they and Parliament need to put in place adequate safeguards as well as promoting public awareness of the new technology.
As the noble Baroness, Lady Hollis of Heigham, and the noble Viscount, Lord Chelmsford, observed, the Data Protection Registrar has expressed concern about the Bill and called for a code of practice with statutory force. Moreover, Justice has recommended—and I agree with this—that there should be a statutory requirement that benefits should not be withheld exclusively as a result of data matching procedure, and a requirement that those authorised to use data matching procedures must allow every individual who has been identified as being the subject of a discrepancy of information to make representations before action is taken against him or her as a result of the information discrepancy. There is also a need for a power of investigation and audit by the registrar and a monitoring power over data-matching exercises similar to that provided by the Australian guidelines.
Other countries—Canada, Germany, Australia—have preceded us with legislation specifically directed at data matching. After the Privacy Act 1988 the Australian Federal Parliament enacted the Data Matching Programme (Assistance and Tax) Act 1990, and comprehensive guidelines have been issued by the Australian Privacy Commissioner. These are not binding but constitute best practice. Among the guidelines are strict rules for notifying the public before a data matching project commences; requirements to give detailed information and explanations of the project and technical accounts to the Privacy Commissioner; clear strict rules for limiting the details that can be kept on a register and for destruction of the matched records at the end of the exercise; and provisions giving the Privacy Commissioner the power to regulate and monitor data matching activities. There is no good reason that I can see why British safeguards should be weaker than safeguards in Australia and in other democracies.
It is in the detail—that is why I make no apology for detaining the House as long as I have—that the safeguards of individual freedom will be found. A code of practice with statutory force, such as that proposed by the Data Protection Registrar, is essential. Such a code is also necessary to give effect to Article 8 of the European Convention on Human Rights. That is a matter so clearly explained in a powerful opinion given by my learned friends Richard Drabble QC and Dinah Rose that I can deal with it quite shortly.
Article 8 guarantees the individual's right to personal privacy except where necessary and in accordance with the principles of legal certainty and proportionality. As my noble friend Lord Russell has said, a law which permits data matching must be formulated with sufficient precision and it must not confer excessive powers. As it stands, the Bill is too vague and it sweeps too broadly with inadequate safeguards.
Happily, we have not reached the cold day, at the beginning of George Orwell's 1984, in which the clocks are striking 13. But we need to be vigilant as we scrutinise the Bill.
§ 4.42 p.m.
§ The Earl of Northesk
My Lords, instinct tells me that I should advise your Lordships that I own a number of tenanted properties. I am unaware whether any of my tenants is in receipt of housing benefit but certainly I do not receive any direct payments. I make the point nonetheless for the information of your Lordships. That said, I do not intend to address those aspects of the Bill.
I hope I do not disappoint my noble friend the Minister when I say that, like almost every other noble Lord who has spoken, I wish to address the Bill's provisions with respect to data matching. I share the view of other noble Lords that none of us should doubt the desirability of the purpose underlying the Bill. What really matters is that social security fraud not only defrauds the Government; it also defrauds every citizen in the land. However much of a truism that may be, we are well advised to remember it and to recognise that it is incumbent upon any government to do what they can to root out that iniquity.
I now turn to the matter of data matching contained principally in Clauses 1 to 4 of the Bill. As I said, many noble Lords have already spoken on the issue. Indeed I am somewhat embarrassed to follow the noble Lord, Lord Lester of Herne Hill, who is far more knowledgeable and erudite on these matters than I. He is a hard act to follow but I shall do my best and I hope I shall not indulge in too much repetition. If I have understood the provisions of the Bill correctly, they seek to improve the detection of certain types of benefit fraud by permitting the comparison of data held by certain government departments with data held by the DSS.
I do not wish to test the patience of your Lordships with any analysis of the arcane technology of databases and data matching—the mechanics of neural networks, fuzzy logic and the like. I simply say I am broadly content that it is justifiable that the extremely powerful analytical tools unleashed by the information revolution should be employed in the detection of fraud. However, I do not believe we should be blind to the fact that their use for this purpose raises a number of ethical questions. As mentioned by many noble Lords, the management, processing and manipulation of personal computer data is regulated under the Data Protection Act of 1984. My noble friend Lord Elton, while steering that measure through the House, observed that the Act had been drafted,to protect private individuals from the threat of the use of erroneous information about them—or, indeed, the misuse of correct information about them—held on computers".[Official Report. 5/7/83; col. 509.]More than that, the Act, following on from the recommendations of the Younger Committee's report on privacy in 1972—as we have been told by the noble Lord, Lord Lester—enshrines eight data protection principles in statute. I do not doubt that the provisions in the Bill before us today are broadly consistent with those principles. I also have it in mind that my noble friend the Minister implied confirmation of that in his introduction. However, a seed of slight suspicion is 484 sown in my mind on the basis that, as I understand it, the Data Protection Act may also seek to,prevent 'wholesale' matching between departments or agencies which have collected data for different purposes, unless there is specific enabling legislation".Of course the clauses in the Bill that deal with the issue of data matching are that specific enabling legislation.
In this context the POST note entitled Fraud and Computer Data Matching states:Public sector data matching exercises so far have … had to rely either on serendipitous provisions (e.g. the Audit Commission's power to require information from Local Authorities for the purpose of efficiency studies), or occurred entirely within a single department".Accordingly, the question I ask myself is whether this situation pertains because of an aberration—a failure perhaps of the legislation to keep pace with the technological development—or because it has been specifically framed in order to afford appropriate protection to our citizenry.
At one level at least the Government have acknowledged some sensitivity with respect to the issue. The recently released government.direct Green Paper rejects the concept of forming a single, centralised government database. That is all to the good. However, one does not need to be overly computer literate to be aware of the vast technological strides made in recent times with respect to the interconnectivity of database systems. As the POST note observes,interconnecting government computer networks risks allowing access to the totality of information, unless suitable administrative and technical security is in place".In the circumstances I can do no other than inquire of my noble friend the Minister what suitable administrative and technical security the clauses in the Bill afford against the possibility of that sort of abuse? My own, perhaps simplistic, interpretation is that enactment of these clauses could—I stress the word "could"—as the POST note says,lead to widespread data sharing in Government, without the consent of data subjects, and thus be in tension with the philosophy of current data protection legislation".In this context I should admit to being tempted to recognise a certain symmetry between this issue and that of the Government's provisions in the Police Bill with respect to telephone bugging. At its worst, indiscriminate and uncontrolled use of personal computer records could be represented as a form of eavesdropping.
As the noble Lord, Lord Lester, observed, we should also bear in mind that it is mow some 14 years since the Data Protection Act passed into statute. That is a considerable flow of water under the bridge with respect to information technology. By way of illustration—again as the noble Lord, Lord Lester, observed—the Act of 1984 did not address the specific issue of data matching, purely and simply because it is a development that post-dates its enactment, although I recognise that the registrar is empowered to interpret the principles in order to regulate this area.
I acknowledge that it is often too easy to see ogres where none exists. As the map of information technology is drawn, we can, like medieval 485 cartographers, define areas with the legend "Here be dragons" simply because they have yet to be properly explored. However, at the other end of the scale, we can, like Patrick MacGoohan, in the much admired TV series "The Prisoner", protest as vehemently as possible, "I am not a number". I make no judgment as to which is the more appropriate analogy for the Bill's data-matching provisions. I simply say that they represent a sub-plot which we would be well advised to examine in greater detail. We should be careful not to be seduced by the worthiness and great value of the Bill's headline aim of tackling benefit fraud and fail to address the wider context of data protection and privacy.
I can put it no better than the concluding paragraph of the POST note:Privacy is an abstract concept which is open to different interpretations by individuals and organisations, and Parliament may well need to address questions of where to strike the balance between protecting reasonable privacy for the individual and society's need to protect itself from crime such as fraud and to operate efficiently".To my mind, Clauses 1 to 4 of the Bill pose that question to us directly and, as suggested by the noble Earl, Lord Russell, it is one of the angles of approach for our scrutiny of the Bill in its later stages.
§ 4.51 p.m.
§ Lord Whitty
My Lords, I begin by assuring the Minister that I and noble Lords on this side of the House fully share the view that social security fraud is indeed a real problem and that we need some serious measures to deal with it. We do so partly because of our well known prudent concern for public finances but, more particularly, because the real victims of social security fraud are not the Treasury but the millions of legitimate claimants—their position and standing is besmirched every time we have a Daily Mail treatment of social security fraud—and the millions who are entitled to claim but refrain from doing so. I refer to the million or so pensioners who fail to gain their entitlement under income support.
I should have thought that the relatively limited application of the new technology of data-matching could identify those who are entitled to claim but do not do so as well as those who make false claims. However, I understand that as long as there is substantial fraud creaming off the top of the social security system the motivation for departments of state to identify those who do not claim is relatively limited.
I welcome therefore the objectives of the Bill. However, like the noble Lords, Lord Stallard and Lord Lester, and the noble Earl, Lord Russell, I have some problem about the way in which the measures in the Bill may operate in relation to individuals. I refer, for example, to the disability working allowance. There are some administrative problems. The Bill seems to confuse administrative problems with problems of fraud. I refer, for example, to the presumption that overpayment is always due to fraud and not to misunderstanding; and to the apparent requirement that the burden of responsibility is on the claimant for the accurate reporting of change of circumstances. Disabled 486 people may not be in receipt of the most accurate information as to their responsibilities. There is the suspicion that certain parts of the Bill would give effect to fishing expeditions for false claims which in some cases would be unjustified and not subject to adequate safeguards. I refer to the cavalier way in which data matching is treated. I support the bulk of what the noble Lord, Lord Lester, said in relation to safeguards in that respect. Those points will be raised in Committee by myself and other noble Lords.
However, my main intervention, as with my noble friend Lady Hollis, concerns the imbalance in tackling the causes of fraud. There are essentially three elements in relation to housing benefit: the claimants, the local authorities and the landlords. It is fairly evident from evidence received that the biggest problem lies with a small, relatively limited, number of landlords. I note that there are 21 operative clauses in the Bill: nine deal with local authorities and attempts to improve detection and enforcement in those areas; 10 deal with individual claimants; and only two relate to landlords. I welcome those two clauses. I welcome the improvements since the original Bill was presented in another place. Nevertheless, the provisions need to be strengthened.
We all know that there are individuals who milk the system, some by a few bob and others by hundreds of thousands of pounds. But we also know, as the Minister acknowledges, that there are organised gangs. Some individual fraud in the housing benefit area dilutes into relatively small amounts compared with a massive landlord fraud. That landlord fraud is not only on the social security system and on the tenants, it is also on the local authorities and the Inland Revenue. It is, as we say in London, a scam of massive proportions.
I speak of London because I know London well. I know that there are people in London who know of these scams. Many are afraid to talk about them. They are certainly afraid to identify those who perpetrate them. That makes it difficult for the authorities to detect the scam, and even more difficult for them to prove it. But the scam is there and, in order to improve detection and enforcement, we need not only the measures against claimants in support of local authorities but also resources for detection, and the enforcement of the law.
We all know why it is such an attractive scam for a few landlords. Housing benefit is big money involving prodigal amounts of money since 1985. The Select Committee of another place found that £1 in five is fraudulently claimed. That is £1 in five of £5 billion. Crooked landlords and crooked agents obviously wish to get their hands on that money. Although there does not seem to be a national figure, the anecdotal evidence from local authorities is that an increasing proportion of housing benefit is paid directly to landlords. It is paid subject to few checks except in the first instance, and often those are inadequate. Until May last year it seemed that the Government were prepared to ignore that aspect of fraud. Until local authorities and the Select Committee of another place identified the huge sums involved little was done.
The original Bill has been improved to deal with some of those issues. But there are aspects which I tend to query. More direct measures are needed. As the noble 487 Lord, Lord Stallard, said, London boroughs have come up with a Bill which was to have been discussed in this House. It calls for landlord fraud to be a specific offence. Local authorities have done well, as has been pointed out, without an increase in local authority resources, and some disincentives in terms of central government support for their activities. But long before the Bill that we are discussing was a twinkle in the eye of the Secretary of State, London boroughs had produced a firm and effective Bill which this House should consider. Some of the provisions may have been taken up in the Bill that we are debating. But the central problem of landlord fraud has not been dealt with effectively in the redrafted Bill. I shall not repeat what my noble friend Lord Stallard said about the contents of that other Bill. I merely commend it to noble Lords and to the Minister.
I used the term "scam" earlier. That may be too nice a word with which to refer to the issue. In effect, it is often a protection racket on some of the more vulnerable people in our society. It is a protection racket at the expense of local authorities, the taxpayer and legitimate claimants. A number of landlords make a lot of money by deception, extortion and intimidation. That alienates hundreds of thousands of decent tenants and claimants. Let us not be too coy about it: it accentuates some of the problems of race relations in our inner cities when it operates, as it often does, within particular ethnic communities. That is not the fault of the individuals concerned or of their families or communities. It is the unacceptable face of the new developments over the past 10 years of landlordism in our inner cities. In some areas, far from urban renewal, we have new forms of exploitation and ghettoisation—exploitation of the tenant and the welfare state, and of the loopholes in the payments system.
I say to the Minister: by all means we must tackle individuals who deliberately defraud the system. By all means we must improve the powers and effectiveness of local authorities in the public prosecution of problems. But we must also tackle the problem where it lies, in housing benefit fraud—in the new Rachmanism, on the back of tenants and at the expense of us all.
§ 5 p.m.
§ Baroness Anelay of St. Johns
My Lords, I welcome the Bill as part of the Government's long-term strategy to fight social security fraud. Like others who have spoken I, too, believe that social security fraud is not a victimless crime. It cheats us all. Too many people are deterred from claiming benefits to which they are entitled because they do not wish to be tainted by association with those who cheat the system. It is sometimes said that fraud campaigns deter the genuine claimant. But exactly the reverse can be true, provided those campaigns are properly directed and managed. If potential benefit claimants can be confident that cheats can be readily identified and prevented from making a claim, they can be more confident about making a claim themselves and retaining their good name.
This Bill gives the DSS the opportunity to build on its current use of information technology systems to detect and deter fraud. The security and control 488 programme launched over 30 projects to combat fraud. One of those, the housing benefit matching service, relies upon the development of information technology systems. Data is matched within and across local authorities and against DSS systems to detect fraud and inconsistencies. A central computer system has been piloted to cross-check multiple housing benefit claims. Initially this covers 24 London boroughs.
But the Bill harnesses the power of IT far more effectively. I welcome the proposals to al low the DSS to cross-check data, principally with that held by the Inland Revenue and Customs and Excise, but also with other databases holding information, such as those with information about passports or prisoners. That will make it easier for the DSS agencies to investigate benefit fraud whether it is carried out by individuals, organised gangs or landlords. Conventional methods of detection have not always been effective. The use of modern technology, albeit under carefully controlled conditions, will enable quick and effective checks without putting genuine claimants through any extra hoops in their claim for benefit. Some of those who commit large-scale fraud do so by making use of sophisticated IT systems to build up a web of multiple false claims. It is about time that we were able to use IT as effectively as possible to detect that kind of fraud.
Earlier, the noble Lord, Lord Lester of Herne Hill, reminded us that data-matching is rather new in the world of the DSS. I was involved in data-matching some 30 years ago when I worked in the Inland Revenue. Certainly in its infancy then, it meant that, once a year, when the tax return came in you simply held two pieces of paper side by side and, laboriously as a clerk, looked across to see whether somebody had zremembered to invent the same children again this year and, if they had, had remembered to make sure that the ages had gone up and also that they happened to have the same middle names. Thank goodness, that kind of data-matching is in the past. New data-matching is far simpler to operate and far more effective. However, like others who have spoken, I recognise that we must always use caution when expanding the ability of government departments to gain access to personal information.
The Bill also recognises the role of local authorities in fighting fraud. I hope that it will open up a new area of co-operation between the Department of Social Security and local authorities. However, the performance of local authorities is variable, despite remarks made earlier by one or two noble Lords. Twenty-five per cent. of all benefit fraud—£1 billion—is attributable to housing benefit or council tax fraud. I therefore welcome the proposal to establish a fraud inspectorate which will have powers to examine the performance of local authorities. Its role will be to help and improve the performance of the worst-performing councils and to advise on best practice. It will have a powerful role to play in the fight against fraud.
I note that Clause 3 enables the Secretary of State or the Northern Ireland department to pass on information obtained by cross-checking to local authorities to help them in their detection of housing benefit and council 489 tax fraud. I welcome, too, the measures in the Bill that improve the Government's ability to prosecute and penalise those who make fraudulent claims.
Reference has already been made to Clause 13, which creates the new offence of dishonestly making a representation or failing to report a change of circumstance in order to obtain benefit. The noble Earl, Lord Russell, made reference to his concerns on this point and wondered whether mens rea would come into effect. When I read the Bill I noted that Clause 13 makes reference to the fact that the matter of a person dishonestly making representation comes into effect only when it is done also,with a view to obtaining any benefit".I ask my noble friend the Minister to confirm what I believe to be a fact; namely, where people have innocently not made a change of circumstance known to the DSS, they could not be caught by that particular part of the clause, and that it is reserved only for those who fail to notify a change of circumstance because they have it in mind that, by doing so, they will obtain benefit to which they would not otherwise be entitled.
The clause imposes a penalty with a maximum of seven years' imprisonment in Crown Court cases or six months, as would be normal, in a magistrates' court. It therefore gives the courts the ammunition to pass the proper sentence in the appropriate case.
A typical long-term fraud involves someone making a false statement in order to claim benefit and continuing then to receive payments over a very long period. At the moment, those frauds are prosecuted on the basis of a declaration made at the time of payment. But a long-running fraud would involve hundreds of fraudulently obtained payments week by week. When I have sat at social security appeal tribunals I have seen the full record of those. Again, when I have sat on similar cases in magistrates' courts, I have then seen only specimen cases brought. I was disturbed last year to discover the effect that Court of Appeal judgments would have on the ability of the DSS to prosecute fraud successfully. If payments are made directly to a bank or building society, there is the added problem that there is not a specific declaration for each payment; so the fraudster cannot then be prosecuted under existing powers. I should be grateful if, in replying, my noble friend the Minister will confirm that this clause, like so many other provisions in the Bill, will be effective in the prosecution of not only individuals or groups of people but, in particular, landlords. As I understand it, landlord fraud is dealt with throughout every clause in the Bill.
Clause 16 introduces a provision to allow local authorities to recover housing benefit overpayments from payments made directly to a landlord in respect of other tenants. An example is where a tenant makes a claim for housing benefit, is overpaid and then moves on, not leaving a trace behind. If payments are not recoverable by deductions from benefits, the clause then makes it possible for them to be recovered by action in the county court in England and Wales and the sheriff court in Scotland. This is a very sensible measure to introduce in order to redress an anomaly.
490 Fraud endangers access to benefits by the genuine claimant. I welcome the measures introduced in the Bill. They will play a valuable part in the work of detecting and preventing the commission of fraud. In that way we can protect the vast majority of claimants who are honest. That must be the best course of action for us all. I commend the Bill to the House.
§ 5.10 p.m.
§ Baroness Gould of Potternewton
My Lords, as made clear by all noble Lords who have spoken, no one can argue against the principle of the need to tackle vigorously the corruption of our benefits system by fraudulent claims, which has a detrimental effect on the entire social security system. Nor would anyone argue, I believe, that tracing and eliminating social security fraud is not a difficult and complex process. It is perhaps simplified by information technology but, as the debate has shown, our social security system is still something of a labyrinth.
While the Bill is welcome, a number of aspects cause concern. I wish to refer to one or two, in particular the effect on individuals. For instance, the Bill appears to treat all fraud as equal and deserving of the same response: penalties appear to be mandatory in all circumstances. Yet the level and types of fraud vary considerably, from large-scale counterfeiting of order books to failure to declare a one-off payment of £5. No fraud is justified but there will be those who defraud from a straightforward criminal intent dishonestly to obtain a large sum of money while others will be people whose families, for whatever reason, find it impossible to live on the level of benefit received.
Will the Minister tell us what research was undertaken to classify the different factors which cause people to defraud the system and whether the result of that research is available? Only with that knowledge is it possible to devise the most appropriate penalties and assess whether harsher penalties will have a deterrent effect.
Another general concern is the need for assurance that the element of fairness to the genuine claimant is retained. Fraudsters, be they in the public or private sector, must be identified; but we must ensure that such activity does not deter those in need from claiming benefit. My noble friend Lady Hollis referred to cross-matching being useful not only to tackle fraud but also to ensure that those entitled to benefit receive it. I, like my noble friend Lord Stallard, fail to understand why it is not possible to identify the nearly one million pensioners who are entitled to income support but who do not claim it.
As I understand it, it is the view of the Government—and I hope the Minister will confirm or deny this—that the claiming of benefit is a matter of personal choice and that there will always be those who choose not to make a claim. That would be true for a few but, with the greatest respect, for the majority that is nonsense. Choice depends on knowledge of the different options available. Most who fail to claim do so through unawareness or because of the complexities of the system.
491 I also understand that the Government believe that the cross-checking of data for the benefit of claimants is contrary to the European Convention on Human Rights. Do the Government believe that Article 8 of that convention, as referred to by the noble Earl, Lord Russell, stands in the way of cross-checking data in such a manner? Does not the convention allow various exemptions by law for other purposes which would cover this type of cross-checking?
As stated by noble Lords, the sharing of personal information and data matching between two or more organisations, crucial as it is, raises fundamental principles of data protection, including the principle that personal information should only be used for the purpose for which it is collected. The wider the scope of data matching, the greater the threat to the individual because it involves analysis of information about large numbers of people when there is no prior cause for suspicion. There must be a balance between the use of data matching to detect fraud in order to protect public funds and the individual's right to privacy.
The Bill makes no reference to the need for compliance with the principles of the Data Protection Act nor to the rights of individuals under that Act. Claims for benefit usually follow a major and often traumatic change in a person's circumstances. Benefits are claimed on different forms from different agencies; different benefits are awarded for different lengths of time; and the changes of circumstances that need to be reported also vary. It is easy for people to become genuinely confused.
There is a serious omission of a right of redress for people who may be wrongfully accused of fraud or misrepresentation through mistaken identification or other errors which are almost bound to occur in an exercise of this size.
I turn now to the question of relevant information. Who determines relevance? At present within the Benefits Agency information which is considered relevant is currently passed to different sections in writing. Presumably that will in future be done by computer, but the principle does not change. As each section only has the expertise to deal with its particular area of benefit, important information may not seem relevant to one section but may be vital to some other aspect of the claim. I say that from heart-searching personal problems which I have recently faced. Relevance will become more complicated as the transfer of information is extended; there is no definition in the Bill.
I am also concerned about delay in making payments. It is inevitable that steps taken to prevent and detect abuse will involve some delays in dealing with claims. In the meantime, the claimant will not be receiving the benefit to which he or she is entitled. Technology will not necessarily lead to greater speed in processing claims. Delay can be disastrous to those in need. Nor will technology lead to greater accuracy. There have been many examples of incorrect accounting, of the claimant being given incorrect information, with consequent confusion and further delay.
492 It is right that the record of detection and different initiatives taken by local authorities should be actively monitored and links between authorities encouraged in order to promote best practice. In the main, local authorities do take fraud seriously. We must applaud those that have already taken innovative action to identify and eradicate benefit fraud within their own area. Good examples are the working together of the London boroughs, the DSS and the London Team for Action against Fraud and the extensive home-check programme in the London Borough of Haringey.
However, fraud is not confined to London. The Social Security Select Committee suggested that organised fraud was increasingly migrating to small towns and even rural areas. In its document Recovering the Missing Millions the Labour Party proposes the establishment of a further nine fraud investigation teams on the same basis as LOFIT. It is estimated that that would lead to net additional savings of over £310 million a year for an initial start-up cost of some £9 million, a measure which should surely be supported.
Local authority associations have also welcomed the power contained in Clause 16 to recover benefit overpayments, an area of fraud which is well organised and highly sophisticated. As my noble friend Lord Stallard said, this new power does not go far enough. The Government's own research has found that while only a third of housing benefit claims are for private rented accommodation, those claims account for two-thirds of all housing benefit money lost through fraud. The Minister cited an example of fraud to justify his case; I should like to quote two examples of landlord fraud. When eight managing agents were challenged by the London Borough of Greenwich, it was found that of 292 properties investigated 88 were empty. There is also the example of the landlord in London making 165 housing benefit claims, of which one-third were found to be bogus, costing the taxpayer £5,000 a week.
There is no doubt that the Government's lack of action on landlord cheats means that every taxpayer has lost £400 through housing benefit fraud since the last general election. Local authorities would be greatly assisted in counteracting this fraud by having the right to obtain proof from landlords and managing agents of their right to control the property for which they are claiming direct payment of housing benefit; by having the right to refuse payment if refused entry to a property; and by having a register—not just information provided—of all landlords who own a number of properties.
There are many other queries about the Bill but at this stage I shall confine my remarks to two further but related aspects. They relate to Clauses 17 and 18. I should like to hear from the Minister the justification for the provisions and his evidence of widespread fraud in relation to disability living allowance or the attendance allowance. I am sure that there is some fraud, but there is also protection. No claim is made without corroboration by either a doctor or an independent person. The people with whom we are dealing are either chronically sick or disabled. And they are extremely vulnerable. The proposal allows the Secretary of State to conduct fishing exercises, even when there is no existing 493 evidence of fraud. It could, for example, mean unannounced calls on people who have serious mental health problems or severe learning difficulties when there has been no change in their circumstances. Would not it be better, instead of the house call, to ensure that claims have to be made on a regular basis and all those claims corroborated? That would safeguard a very vulnerable group of people, many of whom live alone and find it difficult to communicate.
Similarly, there is the power to require someone in receipt of DLA or AA to submit to a medical examination "in prescribed circumstances". Can the Minister define the nature of "prescribed circumstances"? Surely it is a little draconian to withhold benefit if someone fails to attend such a medical examination before at least ascertaining the cause of non-attendance. People who have legitimate reasons for not attending should not be penalised.
Legislation is necessary to address the pernicious problems of fraud. But we have to ensure that such legislation is fair, respects the privacy of the individual and does not deflect the genuine claimant from his entitlement to benefit. The Bill as it stands does not wholly satisfy all those requirements. However, as it goes through its various stages in this House, I hope that, as opposed to our lack of success in the other place, we can persuade the Government by reasoned argument of the need for amendment.
§ 5.22 p.m.
§ Lord Mackay of Ardbrecknish
My Lords, we have had an interesting debate this afternoon on this important but, in terms of some of the Bills that I have taken through this House, quite small Bill. I noticed that the noble Earl, Lord Russell, said that he did not wish to score any party points. I rather hoped that in my contribution I had not attempted to score many party points either. I thought that enough party points had been scored in the second half of Question Time this afternoon without adding to them in the course of this Bill. I am not entirely sure that the noble Baroness, Lady Hollis of Heigham, can be absolved from not trying to score the occasional party point, but that is quite another matter. I may even attempt to keep to the noble Earl's strictures in my summing up.
This has been an interesting and wide-ranging debate, as I am sure noble Lords will appreciate. I may not be able to cover every point but those which I do not cover will, I am sure, be taken up at Committee stage.
Before I turn to the Bill itself, perhaps I may address points made by the noble Lords, Lord Stallard and Lord Whitty, about the London Local Authorities Bill and, I hope, get it out of the way before coming to the Bill in front of us.
First of all, the Second Reading of that Bill is not for Wednesday. It appears on the Order Paper as a formality. The Second Reading debate will be agreed by the usual channels. I am sure that they will note the interest in the Bill expressed by both noble Lords. The London Local Authorities Bill does not concern only fraud. It goes a good deal wider. Also, it deals only with 494 London, not the whole country. So even in those places where it may overlap, it does so only in part, with those two limitations attached to it. However, with London itself clearly there are some areas of overlap between the two Bills. My officials are in touch with the sponsors of the London Bill about the practical implications of any overlap. For example, if the current Bill receives parliamentary approval, it would be desirable to ensure that there is no conflict between the provisions applying to this Bill and those looked for in the London Local Authorities Bill.
Let me say to both noble Lords that, broadly speaking, the Government share the objective of the London Bill's sponsors to help root out benefit fraud. But it will be important to ensure that any new measures follow on from that objective. For example, the noble Lord, Lord Stallard, referred to proposals to enable local authorities to refuse direct payments where fraud is suspected. The fact is that local authorities already have not only that right but a duty not to pay benefit if fraud is considered. We propose to issue further guidance to local authorities to clarify their rights and responsibilities with respect to direct payments. I hope that answers the points raised about the London Bill and how it impinges on this Bill.
Let me take the particular parts of the Bill in turn, starting first with cross-checking of information, data-matching and the like. My noble friend Lady Anelay of St. John said very clearly that we ought to be able to harness the power of IT. She gave rather interesting examples of how we tried to match data in the paper era before information technology came along. The use of modern technology under carefully controlled conditions will certainly enable quick and effective checks to be made without putting the genuine claimant through any additional effort. Both my noble friends Lord Northesk and Lord Chelmsford emphasised the importance of the new information technology being provided to us.
My noble friend Lord Chelmsford made a particularly important point, especially when it comes to data-matching; namely, that the computer forces one to be much more exact, much more tidy and much more disciplined. Noble Lords who use a computer even at the lowest level as a wordprocessor will know that those three disciplines are certainly imposed by the computer.
Of course I understand that there are concerns about the confidentiality of information. We in government take that issue seriously. We do not believe that the powers in the Bill will allow confidential information to leak out (if I may so describe it) from government. But we believe that it is important that that information should be available to the DSS from other departments. We believe that the degree of benefit fraud is such as to justify taking the powers in the Bill. Although there is a strong public interest in ensuring confidentiality of personal information, there is, in this case, an overriding public interest in ensuring that the benefit system is secure.
The noble Baroness, Lady Hollis, sought assurances about the accuracy of the data. I have already briefly touched on the disciplines of the computer, one of them 495 being that it forces the user to be much more accurate in the input of data. But it is important to remember that in a data-matching exercise the sets of data from the different databases are compared electronically. Only cases in which there is inconsistency are "thrown out" by the computer for further attention. Those cases are then checked to eliminate what I suspect will be quite a considerable number of those in which the inconsistency is simply a result of inaccuracy: perhaps the wrong post-code was stated; perhaps someone used a different Christian name; or perhaps someone put in a middle name on one form and not on another. I understand such inaccuracies. I am not a great expert in data matching but I understand that the data-matching systems are well equipped to cope with those kinds of basic inaccuracies between different data bases.
It is only in those cases in which there is an indication of fraud or incorrect payment that there will be any reference for further investigation. Fraud officers will be fully trained to be aware of the likelihood that in fact not all cases referred to them will be fraudulent and that a charge of fraud will only be brought if the evidence is perfectly clear in that regard.
My noble friend Lord Northesk spoke of security measures in the department. May I say that all data-matching exercises will be carried out at a secure site by trained personnel. All information received from other government departments will be held and accessed in strict confidence. There have been no known or recorded incidences of successful external hacking attempts into the DSS computer system. We do attempt to protect our systems as far as possible from external attack. I hope that is helpful.
The noble Lord, Lord Lester of Herne Hill, talked about no complaints procedure or no redress in data matching. I may say to the noble Lord that the department has in place a comprehensive complaints procedure. Information on making a complaint is set out in the leaflet Tell Us About It. Anyone dissatisfied with any aspect of the service they have received can contact the customer complaints manager—there is one in every district office. If he is still dissatisfied he can contact the district manager who will investigate the complaint further. Where an individual believes that the department has mishandled matters he can complain, through his MP, to the ombudsman. If the complaint arises specifically from data matching or any other form of data processing and the individual believes that the department has not, in fact, dealt with his complaint properly, the individual can take his complaint, under the provisions of the Data Protection Act, to the data protection registrar.
As I said earlier, in data matching we will not be dealing with computer-generated decisions. Perhaps the noble Lord, Lord Lester of Herne Hill, thinks that computers are just a bit cleverer than they really are, at least at this stage of the game. Computer matching, as I have said, will enable cases which are obviously unusual or inconsistent to be investigated by trained officials and all their work will be subject to the normal rules. If, in fact, they suspend benefit it will be subject to the normal rights of appeal.
496 The noble Baroness, Lady Hollis of Heigham, my noble friend Lord Chelmsford and some other noble Lords asked whether the code of practice on data matching was statutory or one without statutory backing. As my honourable friend said in response to the Opposition's proposed amendment on this in another place, we do not see a need to make a statutory addition to the existing data protection arrangements, which are themselves subject to general review as we move towards implementing the EU directive, and I will answer that point in a moment or two.
The use of data by the department is already subject to the Data Protection Act and the Computer Misuse Act, to offences under Section 123 of the Social Security Administration Act and within the framework of the European Convention on Human Rights and the Council of Europe recommendations on the use of social data.
In addition, strict internal procedures will be observed and the assurances which my honourable friend the Parliamentary Under-Secretary gave in another place will be adhered to.
§ Baroness Hollis of Heigham
My Lords, if the Minister is continuing with this point I will gladly sit down, but before he leaves this point I did want to press him on his reply on the data protection register. If the Minister could indicate, I would be grateful.
§ Lord Mackay of Ardbrecknish
My Lords, I was about to say: however, our minds are not closed as far as a code of practice is concerned. We have certainly noted the letter which my right honourable friend Mr. Lilley received from the data protection registrar, so our minds are not closed and we will consider the case for further assurances, taking into account the points made today by your Lordships.
Leading on, as I mentioned I would, to the EU data protection directive, questions were raised by my noble friend Lord Chelmsford and by the noble Lord, Lord Lester of Herne Hill, about this. We believe that the United Kingdom's data protection regime should be the least burdensome for business and other data users while affording the necessary protection for individuals. We intend to implement the directive in order to satisfy our obligations under European law. We will consider whether any additional changes to the current data protection regime are needed to ensure that it does not go beyond what is required by the directive and the Council of Europe Convention.
We are considering whether the EU Data Protection Directive requires any extension of the data protection registrar's powers. In doing so, we will have regard to the views of the registrar herself as well as to those of other respondents to the recent consultation paper on the directive.
Moving on to the section on offences and penalties, I do not think I have much to say there. Perhaps I should answer the noble Earl, Lord Russell, and my noble friend Lady Anelay of St. Johns on the question of "dishonestly". The noble Earl asked about mens rea. The use of "dishonesty" in Clause 13 is intended to 497 represent its normal meaning in criminal law and this would convey mens rea: a dishonest intent. I hope that that is helpful to the noble Earl.
The noble Lord, Lord Whitty, suggested that the Bill shifts the burden on claimants to report changes. I do not believe that is true. Claimants already have a responsibility to report changes of circumstance which affect their entitlement. Currently there is no penalty where claimants fail to report changes, and if they have done so fraudulently we believe there ought to be some sanction other than just to repay overpayment. But that is in cases where it has been done fraudulently. The noble Earl wondered how people would know about the need to report changes of circumstances. He challenged me—I hope without expecting me to try to answer—to give a full resume of all the regulations the benefits agency has to apply in this regard. I think the only point the noble Earl makes there I might just make back to him: perhaps that underlines the need for the changed programme and for policy simplification to make all these matters a good deal simpler for those who operate them.
Applicants and claimants are informed at the outset of their responsibility that they must report changes which may affect benefit. People who sign on as unemployed are asked whether anything has changed; order books state the changes which should be reported, and ACT customers are similarly advised. When it comes to looking at changes which were not reported, it is up to the department—and to the local authorities in the case of housing benefit—to show that a failure is fraudulent and is not, in fact, just a mistake.
A good deal of the debate was taken up by landlord fraud. There is a dispute between the noble Baroness and myself about the extent of the fraud. We have been over that before and I do not think it will add anything to this debate if I simply say that our estimates are based on the DSS accuracy review of housing benefit. It is not the case, as we see it, that the majority of fraud is perpetrated by landlords. I am afraid that landlords and tenants are both involved, and sometimes involved together, colluding with the fraud. I say to the noble Baroness, Lady Gould of Potternewton, that we take landlord fraud very seriously. I suggest that the penalties on indictment, for example of seven years' imprisonment or unlimited fines, would certainly be available to a court dealing with serious landlord fraud. I do not think these penalties could be considered in any way as timorous.
Between the Bill and other action we propose we have 10 key points on landlord fraud. We are introducing the power to enable local authorities to demand information from landlords about whom there is a suspicion of wrongdoing. We are extending the powers of local authority investigators, by analogy with the Benefit Agency's investigators, to enable them to enter landlords' business premises and inspect the records. The power to pass information between local authorities and between the local authority and the department will make multiple claims—one of the most common frauds involving landlords—much more difficult. We are introducing new provisions to improve 498 the recovery of overpayment from landlords who received the original payment directly and have other payments flowing to them at the same time.
The new powers to inspect local authority performance will ensure that all authorities take appropriate action. The new offence of failing, without reasonable excuse, to report a change of circumstances required under regulations and the new system of administrative penalties as an alternative to prosecution will both apply to landlords fraudulently receiving direct payments. The ability to prevent redirection of benefit mail will prevent fraudulent landlords from exploiting the redirection facilities to collect benefit for fictional or long-departed tenants.
We have invested £1 million to set up the London-organised fraud investigation team, which will look at serious landlord fraud in the capital. We have commenced a national roll out of the housing benefit matching service, which will make landlord fraud more difficult to commit and easier to detect by allowing local authorities to data match. Finally, we are providing strong financial incentives for local authorities to tackle fraud, including landlord fraud, through the subsidy scheme.
So I believe that landlord fraud can be prosecuted, that the powers we have given local authorities will help them to deal with this issue and that the penalties available to the courts when a case gets to court should be more than sufficient, if properly used, to send out a very serious signal to people, whether landlords or tenants, who are considering engaging in serious fraud.
The noble Lord, Lord Stallard, referred to DLA and AA. The problem here is that once an award of DLA or AA has been made it cannot be reviewed unless a written application is made to the adjudication officer. There is a body of opinion within the disability lobby that maintains that the legislation as drafted gives only the claimant the legal right to apply for a review. Even if there is indisputable evidence that benefit is being paid incorrectly, the Secretary of State has no power to ask the adjudication officer to stop the overpayment. The department does not accept that interpretation, but we are keen to avoid legal challenge. Therefore, we are taking the opportunity of this Bill to put the Secretary of State's powers beyond doubt. The noble Lord, Lord Whitty, said that overpayment is not always fraudulent. I hope I have answered that point. Of course that is the case and it is up to the department and the fraud investigation officers to make that decision.
The noble Earl, Lord Russell, asked me about national insurance numbers and the position of homeless people or people with learning disabilities. I understand the noble Earl's concern in this regard. People who apply for benefit are asked to provide some basic information—their age, name, address, previous address and so on—and that, taken with other supporting information such as earlier correspondence, allows the DSS or an employer to confirm who the person is and establish the national insurance number. I can assure the noble Earl that people with learning disabilities will not be thought to be making fraudulent claims if they cannot remember their national insurance numbers. I do not 499 think we should go to the test of each of us having to show that we remember our national insurance number. I, at least, would lead the band of failures in that regard.
I was asked about the redirection of mail being used by people other than the department to find out where someone lives, perhaps in a case of domestic violence. I hope I can assure the House that the provisions of the Bill set out the uses to which the information disclosed to the department may be put. It is to be put to the use of preventing or detecting fraud, to check the accuracy of information already held by ourselves and local authorities and for official purposes relating to social security. Any official who uses any departmental information for unauthorised purposes is guilty of a serious offence. That would include checking the whereabouts of someone for whatever reason—either because they knew of them or they wanted to do a favour for a friend in a pub who wanted to find out where someone had gone. Any such official would be guilty of a very serious offence. Prosecution, dismissal from his job, or both, could easily be the outcome. I hope that helps the noble Earl.
My last point is one that is not in the Bill. I think it fair that I sum up by dealing with it briefly. I refer to take-up. We already do a great deal of work to encourage the take-up of benefits by those with entitlement. We provide information which we believe to be comprehensive, accurate, accessible and easily understood to explain to people what their eligibility may be and what benefits are available. I do not think take-up will ever reach 100 per cent. There will always be some people who, for whatever reason, do not wish to avail themselves of benefits even though they are apparently entitled to claim. I would certainly not want to see people being forced to claim benefit if they did not want to. I suspect that many of the instances that are used are for small amounts and that people actually make decisions that they do not wish to go to the bother or hassle of going to the Benefits Agency in order to fill in forms and so on if they are moving in and out of benefit as the year progresses and their circumstances change. However, we have a comprehensive policy of publicising benefits and emphasising to people what benefits are available to them.
The noble Baronesses, Lady Gould of Potternewton and Lady Hollis of Heigham, and the noble Lord, Lord Whitty, suggested that we could use data matching to identify those people who had not claimed their benefit. That would be taking data matching a good deal further than what is specified in the legislation, which is to investigate fraud. It also assumes that the data to be matched would have all the information on all the income and all the savings of all people, which I suspect would be quite a different scale of operation. I do not believe the systems we have access to contain that amount of information. Nor do I believe that it would be economic or feasible to work on the kind of scale that is being envisaged. What we do now is sufficient. We keep at it. We keep running campaigns. We work with many of the organisations mentioned by the noble Lord, Lord Stallard—Help the Aged and so on—in order to bring to the attention of people who should be applying for benefits the availability of those 500 benefits. We are also attempting through the change programme and policy simplification to make the applications for benefits simpler, easier to understand and easier to complete.
This is an important Bill in the fight against benefit fraud. It will ensure that more fraud will be detected and that those guilty of offences will face tougher penalties. In this way more cheats will he punished and more would-be cheats will be deterred. We recognise, as noble Lords have said, that the vast majority of people claiming benefit are completely honest. But for those determined to abuse the system, this Bill reduces the chance they have of success. It means that there is a greater chance that they will be caught and a greater likelihood that they will be punished. I commend these measures to the House and invite your Lordships to give the Bill a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.