Social Security Administration (Fraud) Bill

HL Deb 13 March 1997 vol 579 cc503-44

8.6 p.m.

House again in Committee.

[Amendment No. 57 not moved.]

Baroness Hollis of Heigham moved Amendment No. 58: After Clause 5, insert the following new clause—

REPORT TO PARLIAMENT: SUPPLY OF INFORMATION AND IDENTIFICATION OF ENTITLEMENT (". The Secretary of State shall, within two years of the commencement of this Act, lay before each House of Parliament a report on such progress as has been made on the efficiency of administration in maximising entitlement to benefit, to include—

1. (a) an assessment from each local authority as to the progress made by that authority in identifying and maximising entitlement to benefit in that authority area;
2. (b) the extent to which information held by any authority under the provisions of this Act has been used by the authority and the Secretary of State to identify those persons who are entitled to receive benefit for the purposes of determining that entitlement; and
3. (c) the extent to which information supplied to one authority for the purposes of ascertaining benefit entitlement has been used as verification for another benefit claim.").

The noble Baroness said: We return to the subject of benefit entitlement. It is an extremely important issue and only one amendment so far has addressed it. On that amendment, Amendment No. 6, with which Amendment No. 57 was grouped, we argued that in the four main income related benefits—family credit, income support, housing benefit and council tax benefit—perhaps £2 billion to £3 billion worth of benefit went unclaimed. In other words, probably as much benefit was underpaid in the DSS's budget as was lost because it was overpaid due to fraud, a pattern broadly confirmed by research abroad.

It is worth emphasising that over 30 per cent. of those eligible for the in-work benefit of family credit fail to claim it; that probably 30 per cent. of pensioners eligible for council tax benefit fail to claim it, a figure rising perhaps to 45 per cent. among pensioners who are owner-occupiers; and that 40 per cent. of pensioners entitled to income support fail to claim it. Those are very large figures indeed. I accept that there is always a loss of potential claimants whenever there is reliance on a means-tested benefit, unlike a universal benefit. But the failure especially of the elderly—and significantly, they are the under-claiming group in almost every income related benefit—to claim what is rightfully theirs is far too high.

It is often said that people fail to claim because the sums are too small. But, as we argued last Tuesday, the sums can be very large indeed. A pensioner who fails to claim income support and council tax benefit is probably losing a £20 addition to a pension of £61 a week. Again, it is sometimes said that people fail to claim because their circumstances change very rapidly. Again, that is simply not true for pensioners whose income varies very little over the rest of their non-working lives.

It is sometimes said by the Government—it was repeated by the Minister last Tuesday night—that it is a matter of personal choice. I fail to see how, realistically, it can be a matter of personal choice to live on £61 a week rather than £81 a week and have to stay in bed because you cannot afford to run the heating in the living room. We all have enough confidence in the Minister's decency to know that he does not want pensioners living below the poverty line because they fail to claim the benefits to which they are entitled. The question is how we encourage them to take up those benefits.

One thing we have found, and it is clear from the Government's own report Income Related Benefits: Estimates of Take Up, is that of all the income related benefits, housing benefit has the highest take-up, even by pensioners. More than 90 per cent. of pensioners were claiming housing benefit to which they were entitled. If they were local authority tenants, so far as I can tell from the statistics, though they are not calculated in the most useful way for this purpose, it looks as though there is almost 100 per cent. take up.

The reason is very simple. The local authority, as I well know because I have been involved in some of these campaigns, uses information technology and 100 per cent. mailing through rent books, backed up by take-up campaigns to ensure that every tenant is aware of housing benefit. It uses welfare rights officers to help with original forms and thereafter IT comes into play. As housing benefit is deducted from the gross rent, most pensioners—and certainly all of those on the basic state pension only—live, and learn to live, rent free.

In other words, we already know how to use IT backed by entitlement campaigns to ensure that there can be virtually 100 per cent. delivery of an income-related benefit to the elderly, who seem with other benefits so unwilling to claim what is rightfully theirs. We ask the Government therefore to use the same information technology which is sought to eradicate overpayment due to fraud to ensure that it also eradicates that underpayment due to under-claiming. We firmly believe that the Government could do it if they had the political will, but we believe that this Government are not interested in doing so. In his reply on Tuesday, the Minister said that ample information was available in leaflets, at post offices and on forms; this from the Government who have cut home visits, cut the helpline and cut the offices where pensioners can get help in person.

The Victorians were rather keen on categorising people and used to divide their poor into God's poor, poor devils and the devil's poor; that is, those deserving of charity, those deserving of the poor law and those deserving of prison. We are right to stamp down on fraud and to proclaim publicly that we will not tolerate it. But in the process—this must worry all of us—we run the risk of demonising claimants as scroungers and thus deterring the very people—the "deserving poor" and certainly the elderly, those who cling to standards of respectability and privacy, who conceal their poverty rather than flaunt it and who are too easily shamed by being branded as a welfare claimant—from claiming that which is their due.

Hence this amendment. We know that we have the technology to improve the take-up of benefits to meet real need. We know that a considerable number of pensioners claim one means-tested benefit, so that their financial circumstances are, so to speak, on file, but fail to claim another one. That information could be used to passport people onto that second benefit. If one took, for example, council tax benefit, we could probably reach about 70 per cent. of pensioners who are not claiming income support; not more than 70 per cent., I accept, because there are differences in the capital rules on the one hand and many pensioners live in the home of someone else so they do not receive council tax benefit. Nonetheless, if we used council tax benefit to passport people on to income support and reached those 70 per cent., where the two groups overlap according to our research, instead of only 60 per cent. of pensioners claiming their top-up in income support, we might reach between 85 and 88 per cent. We cannot get 100 per cent.—I accept all the warnings about technical difficulties, deduction rules and the like—but we can do a darned sight better than we are doing at the moment and than the Government appear willing to do.

We have the technology. We now need to ensure the political will. We want to ensure that local authorities are determined not only to stamp out fraud but also to deliver benefit to those who are entitled to it. One way of ensuring that political will is to have local authorities report to the Secretary of State and the Secretary of State report to Parliament on how successful they have been in both regards—not just eradicating fraud but encouraging take-up of benefit. By engaging in take-up campaigns which will be beneficial to the claimant and to the local economy, we believe that local authorities can be very successful on this score. The take-up campaign in which my own local authority was involved brought nearly £500,000 of extra benefit into our community in the space of a month. I very much hope that the Government accept the spirit of the amendment. I beg to move.

8.15 p.m.

Earl Russell

The point the noble Baroness makes about demonising claimants is an important one. I have looked at some of the advertisements for the fraud hotline and I believe that they run the risk of creating that effect. I accept that that is not their intention, but again I come back to the point about balance. If you stress fraud and you do not stress entitlement you create a thoroughly misleading picture. Then you get a cult of hostility to claimants. If we can believe the advance publicity for the forthcoming programme on Channel 4 it seems that a great deal of that has rubbed off on people who do not know any better than to pick up casual information. There will always be such people. So something really must be done on this front.

I intend to address this matter further on Amendment No. 59. However, if the Minister should happen to prefer the amendment in the name of the noble Baroness, I should be entirely happy with that. The points also apply about putting the local authority under two different incentives, two different criteria of success. Then the local authority can, with respect for the evidence, attempt to balance those criteria against each other. We already have targets, tables and all that apparatus for the detection of fraud. I have drawn the Minister's attention previously to the fact that Liberal Democrat councils happen to come top in them. I do not set much weight by league tables. I do not claim great credit for that fact. I just say it in order to say that I speak, as it were, from, in the Government's own terms, a position of perhaps some strength. It is from that position that I should like to see equal weight given to the pursuit of entitlement and take-up. I hope the Minister will look with favour on one or other of the amendments. It really does not desperately worry me which of them it is.

Lord Carter

I should like to come in on another point with regard to the amendment. However, before doing so, perhaps I may take up a point made by the noble Earl, Lord Russell. He referred to the forthcoming Channel 4 programme and to the people who do not know any better. I understand from the pre-publicity that they all intend to vote Conservative.

Perhaps I may return to a point that we discussed on Tuesday on Amendment No. 6, which was moved by my noble friend Lady Hollis and which dealt with eligibility for benefit entitlement. I had a friendly exchange with the Minister about the budget of the DSS. I asked how much the department estimates will be spent on benefits and how much is actually taken up. I do not think I explained it particularly well but, if I may, I shall remind the Minister of what I said: Perhaps the Minister can assist on one aspect. Presumably, when the DSS agrees its budget with the Treasury every year in the public expenditure round it must include a figure which represents its expectation of the take-up of benefit. I remember reading that almost invariably the take-up has undershot the estimate. What is the figure that the DSS persuades the Treasury that it will pay and how much does it actually pay?".—[Official Report, 11/3/97; col. 224.] I have before me an extract from the Hansard report of the Bill's Report stage proceedings in another place. I think the answer to my question is there. It will be interesting to see whether the Minister can put some flesh on this point. The Parliamentary Under-Secretary of State for Social Security, Mr. Oliver Heald, said: It is a dear measure of success that in 1994–95—the most recent year recorded—£9 out of every £10 of available benefit was claimed".—[Official Report, Commons, 4/2/97; col. 847.] When the DSS agreed the public expenditure round with the Treasury, did it include the figure expecting the £10 of available benefit to be claimed or did it use a lower figure?

This is a genuine attempt to find out how the outturn corresponds with the amount the DSS expects to be claimed. The Minister said in another place that the take-up appears to be £9 out of every £10 of available benefit. Does that mean that the DSS agrees with the Treasury on the basis that £10 will be claimed? The Minister shakes his head. I shall be interested to hear his explanation of the difference.

Earl Russell

I am sorry to disappoint the noble Lord, Lord Carter. He said that all the people in the Channel Four Dinner Party programme intended to vote Conservative. That was this morning's information. But the Evening Standard has since followed up these people and identified them and found that no more than three out of six of them intend to vote Conservative. I have no idea for whom the others intend to vote. I hope that it is not my p y and I am sure that the noble Lord also hopes that is not his party. One of them admitted to having voted last time for the Natural Law Party. Maybe it serves a useful purpose.

Lord Mackay of Ardbrecknish

By and large I do not believe that it enhances my information in any shape or form to watch Channel 4. I do not know what the noble Earl is talking about, and neither do I intend to watch a programme on Channel 4.

Perhaps I may turn to this new clause. Much of the argument is the same as that which we went over on Tuesday. I have no intention of repeating all that I said on that occasion about uptake. I say to the noble Lord, Lord Carter, that he is confusing two quite separate issues. The first is the calculations which are made from the information collected in the Family Resources Survey and the report on take-up that we produce. That is entirely separate from the second issue, which is the way in which we and the Treasury discuss what our expenditure will be in the year ahead. In fact, we use expenditure this year to calculate, bearing in mind factors such as the inflation rate, what expenditure might be in the year ahead, and so on. The two things are quite separate.

Lord Carter

Does that mean that the department does not estimate any improvement in its success rate in increasing entitlement?

Lord Mackay of Ardbrecknish

That is not a conclusion that we would reach deliberately. We use the information that we have on the money that we have spent in the current financial year and extrapolate that into the future, given the inflation rate, demography, and so on to arrive at what we would expect to spend on the same basis. My recollection is that we tend to undershoot and normally spend a little more than we have estimated. That usually appears in the Red Book at Budget time. Quite clearly, when we do that we have supplementary estimate demands on the reserve for extra expenditure. We are hopeful that, thanks to the new payment system which will be developed along with the benefit payment card, that we shall be able to project more accurately what our requirements will be in the year ahead.

The new clause before us seeks to put in place arrangements for reports on the take-up of benefit, including the use of information as proposed in the noble Baroness's other new clause, which we have now passed by and which does not form part of the Bill. Without going into the arguments to the same degree as I did then, my response to this amendment is quite straightforward. Of course, we agree that it is important to monitor all aspects of the policy in practice. We make a great deal of effort to monitor across quite a wide field. We produce a lot of information and statistics about benefits in all their shapes and sizes and about the take-up.

Every year we publish estimates of the take-up and that is where the noble Baroness gets her figures on those matters. They include the income-related benefits such as housing benefit, council tax benefit, income support and family credit. We produce such a report annually from information that we have in other fields and extrapolate from it what benefits may not be taken up. That is the information which the noble Baroness is praying in aid in this debate as she did during Tuesday's debate. I believe that the continuation of this publication, which is not in any doubt, more than adequately meets the position for producing statistics in this area.

I do not want to go into detail as I did on Tuesday about all the ways in which we attempt to make sure that people know about their entitlement to benefit. Local authorities do the same. We tell people about housing and council tax benefit if they are on income support. If they are receiving pensions that information is in the pension book. The local authorities tell people who might claim housing and council tax benefit about other benefits to which they may be entitled.

In the current three-year period the department and our various agencies are spending something like £84 million on publicity. I have already explained the various things we do and I shall not weary the Committee by repeating my speech of last Tuesday. The important point about this new clause is that it requires reports on the take-up of benefit. I believe that the income-related benefits and the estimate of take-up in the annual report from the department's Analytical Services Division largely meets the demands of the noble Baroness. I do not see the need for this new clause.

Baroness Hollis of Heigham

I must say that, unusually, for the Minister, that was a rather perfunctory reply to the amendment. The amendment asks not for a snapshot of the current statistics based on that report, of which I believe we are both well aware and which I am sure we have both studied assiduously, but for an assessment of the progress made by an authority in identifying and maximising entitlement to benefit in that authority area. Perhaps the Minister can tell me to what extent the report that he has, with which I am very familiar, in any way meets either the requirement as to progress in maximising entitlement and speaks to the efforts of local authorities. That is what the amendment calls for and that report in no way touches it. Perhaps the Minister can help us.

Lord Mackay of Ardbrecknish

I believe that I have made it clear that I believe the statistics which are collected in this report are adequate to give us a picture of the position. I do not believe that it is necessary to get each authority to produce a report. I have made that position clear. I can pad it out for the next 20 minutes, but, frankly, I do not see any point in that. We have had the argument about take-up. I believe that our present approach is the way to address the problem. The statistics that we already produce seem to give the noble Baroness more than enough information to make speeches on the subject of take-up.

Earl Russell

If the Minister does not see any point in asking local authorities to report on their efforts on take-up, why does he see so much point in asking them to report on their efforts in relation to fraud?

Lord Mackay of Ardbrecknish

We are only able to produce the first and second sections of the report by getting statistical information from the local authorities and using the other information we have to try to work out an estimate within considerable margins of error—that is something which is never pointed out by the people who use the figures—about what we think the full take-up might be in contrast to the actual take-up. We work quite hard. I have explained the ways in which we gather the information we need. The local authorities also work hard in order to make people aware of the benefits and to encourage them to take them up. That is the proper way to deal with the matter, as I said on Tuesday.

Baroness Hollis of Heigham

Perhaps the Minister had a bad supper. His reference to considerable margins of error which are never pointed out can be dealt with at some length. If the noble Lord checks his statistics against mine and the document, he will find that in most cases I took the median point of the Government's average range of variations. Where the range runs from 90 per cent. to 95 per cent., I have given a figure of 92 per cent., so I have tried to handle the figures at least as scrupulously as the statisticians.

The Minister has not even faintly begun to address the report. Because he had a speech on the subject prepared for him last Tuesday he is not willing to engage with this issue, which is concerned with encouraging local authorities to maximise entitlement and in the process to report to Parliament. I am so disappointed at the irritable and bad-tempered way in which the Minister, unusually for him, has replied. I wish to test the opinion of the Committee.

8.29 p.m.

On Question, Whether the said amendment (No. 58) shall be agreed to?

Their Lordships divided: Contents, 18; Not-Contents, 61.

Division No. 3
CONTENTS
Addington, L.	Gould of Potternewton, B. [Teller.]
Alderdice, L.
Carlisle, E.	Grey, E.
Carter, L.	Hollis of Heigham, B.
Clancarty, E.	Kilbracken, L.
Dubs, L.	Morris of Castle Morris, L.
Dubs, L.	Redesdale, L.
Ezra, L.	Russell, E. [Teller.]
Falkland, V.	Turner of Camden, B.
Farrington of Ribbleton, B.	Whitty, L.

NOT-CONTENTS
Ailesbury, M.	Henley, L.
Allenby of Megiddo, V.	Hindlip, L.
Anelay of St. Johns, B.	HolmPatrick, L.
Astor of Hever, L.	Keyes, L.
Attlee, E.	Kingsland, L.
Balfour, E.	Lindsay, E.
Belstead, L.	Long, V.
Berners, B.	Lucas, L.
Biddulph, L.	Lucas of Chilworth, L.
Blatch, B.	Luke, L.
Brabazon of Tara, L.	Lyell, L.
Brigstocke, B.	Mackay of Ardbrecknish, L.
Brookes, L.	Mackay of Clashfern, L.
Brougham and Vaux, L.	[Lord Chancellor.]
Cadman, L.	Mackay of Drumadoon, L.
Chesham, L. [Teller.]	Miller of Hendon, B.
Clitheroe, L.	Mountevans, L.
Coleridge, L.	Munster, E.
Courtown, E.	Onslow, E.
Craigavon, V.	Oppenheim-Barnes, B.
Cumberlege, B.	Park of Monmouth, B.
Denbigh, E.	Pearson of Rannoch, L.
Denton of Wakefield, B.	Renton, L.
Dixon-Smith, L.	Shaw of Northstead, L.
Downshire, M.	Skelmersdale, L.
Feldman, L.	Strathclyde, L. [Teller.]
Ferrers, E.	Trumpington, B.
Goschen, V.	Ullswater, V.
Haddington, E.	Vivian, L.
Hardwicke, E.	Wilcox, B.
Harris of Peckham, L.	Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

8.37 p.m.

[Amendment No. 59 not moved.]

Clause 6 [Role of Audit Commission]:

[Amendment No. 60 not moved.]

Clause 6 agreed to.

Clause 7 agreed to.

Clause 8 [Directions by Secretary of State]:

[Amendment No. 61 not moved.]

Clause 8 agreed to.

Clause 9 [Enforcement of directions]:

Earl Russell moved Amendment No. 62: Page 15, line 34, at end insert— ("() Before serving any such notice, the Secretary of State shall consult the Audit Commission on the question whether the local authority was capable of achieving the specified standards of service without exceeding its capping limits.").

The noble Earl said: This amendment asks the Secretary of State to consult the Audit Commission on whether an authority is capable of achieving the specified standards of service without exceeding its capping limits. We have heard about the demonising of claimants. I think that we should also think about the demonising of local authorities—and there has been a good deal of it in the past 18 years. There has been a good deal of blame heaped on authorities for not doing things which many people believe that the amount of money given to them would not have enabled them to do. The Minister is perfectly entitled to say that many people are mistaken—that has happened before and it will happen again—but the point of the amendment is not to say who is right; it is to get a competent and impartial judge of who is right, which might enable us to make a certain amount of progress on the subject.

Again, if it does not happen in this way, it might happen in another way which the Minister would find less congenial. The question whether the amount of money given to a local authority is capable of being sufficient, if competently managed, to do the task set before it, is something which is liable to judicial review. Recently that was confirmed for me in a Written Answer from the noble Viscount, Lord Ullswater. It was a judgment of the court in a case involving Claycross Council. It did not uphold the claim on that occasion but ruled that the case was one of which it could perfectly properly take cognisance. If it is not to be done by the Audit Commission, it may be done through judicial review which in this case I believe is the less competent way of doing it.

The Minister may refer to the money that is given to local authorities to fight fraud; but that money is top-sliced off an ordinary grant, so it does not increase the amount of money available but only earmarks a certain part of it. But that process of earmarking steadily diminishes the amount left over to everything else. Before everyone blames the local authorities for everything that they do, perhaps we should have some independent investigation. I beg to move.

Lord Whitty

I rise briefly to support the noble Earl's amendment. I do so in defence of hard-pressed local authorities who in this area as in others find it difficult to reconcile the escalating demands of Parliament through statutory requirements and orders such as those envisaged in this clause with the increasingly rigorous financial restrictions placed upon them by Parliament. It is in the interests of central government and all of us that local authorities improve their standards, and it is the responsibility of local authorities to do so. However, as in other areas where Parliament imposes obligations on local authorities, there is real difficulty in complying with such an order if it leads to expenditure that so distorts local authority budgets that capping limits are threatened. That is the contingency with which I believe the noble Earl is concerned. Local authorities then face the unenviable task of breaking one law or the other in the potential conflict between this clause and their responsibilities under local authority finance Acts.

This is dangerous territory. My noble friend Baroness Gould and I in our former capacities used to tell Labour-controlled local authorities that whatever they did in their budgetary strategies, they should stay within the law. Occasionally their riposte to us was, "That is all very well; but which law should we break?" It is very dangerous territory because it creates a situation in local authority management in which the reputation of the law is called into question. We do not want to get into that kind of conflict. The amendment does not of itself resolve that conflict; it ensures that the DSS and the Secretary of State seek advice from the Audit Commission and other sources and takes into account the financial and legal implications of an order under this clause so that the Secretary of State can make a judgment accordingly. In certain circumstances there may be better ways of ensuring that performance is improved which do not involve the possibility of a local authority refusing or failing to comply with this instruction. For those rather more general reasons, I support the amendment.

8.45 p.m.

Lord Mackay of Ardbrecknish

Before I come to the details of the amendment, I should like to remind your Lordships of the current funding arrangements. Subsidy is provided by central government to meet the cost of administering housing benefit and council tax benefit, including measures to ensure the prevention and detection of fraud. In addition, local authorities may earn additional funds through the weekly benefit savings scheme. This can provide extra resources to be used against fraud, and many local authorities have achieved very good performance by targeting their resources and activities intelligently. Fraud overpayments identified by the local authority attract full subsidy, and in most cases the authority will be able to recover all or some of the amount overpaid. Elsewhere in the Bill we are making changes which will further improve authorities' ability to recover these overpayments. On top of this, there is provision for authorities to bid for moneys from the challenge fund where they are able to offer innovative schemes to tackle fraud. Thus, in addition to the direct saving to the authority from stopping fraudulent claims, further effort on fraud work can produce extra income. On the more general question of capping, it is for local authorities to ensure that the budget that they set enables them to meet their statutory duties. But in setting a cap which is reasonable, appropriate and achievable, account is taken of all the circumstances that an authority may face.

I now turn to the changes to the procedures introduced by the Bill which the proposed amendment would make. The amendment appears to envisage that the issue of a notice that a determination is being considered and indeed that a direction on standards will be taken in isolation. This is not the case. There are several stages during which account should be taken of the particular circumstances of a local authority and at which the authority will be able to put forward views.

The report to the Secretary of State on the administration of housing and council tax benefit will cover the arrangements currently in place within the authority, including the measures taken to prevent and detect fraud. Recommendations in the report will reflect these and include practical steps that the authority can take to improve performance. The local authority will be given full opportunity to comment on the report. In putting forward proposals, it may include reference to any financial constraints. If the authority wishes to make representations on the resource implications of any recommendations and its impact on the timetable for improvement, it will be able to do so.

Where a direction has been issued and the local authority has failed to attain the standards required notice that a determination is being considered will be issued. This will be a further opportunity for the authority to comment, in particular, on why a determination on standards on contracting out should not be issued. Any representations made about financial constraints would need to be borne in mind by the Secretary of State before making his decision. I add that to have to refer to the Audit Commission at that stage before any response has been received from the authority or the Secretary of State has decided on a determination seems to be a pointless administrative expense.

I do not believe that this amendment is necessary to ensure that proper account is taken of the resources available to the local authority. It creates an unnecessary additional step in those cases where resources are not at issue. I hope with that explanation of how we envisage the system will work and that we believe the amendment would not help, the noble Earl will feel able to withdraw it.

Earl Russell

Of course, I understand that the proposition that the level of public funding is sufficient is always a tautology. That has been the view of Ministers for a very long time. Whatever the level may be, whatever it is meant to do, in Minister's eyes it is always sufficient because it is the level. I also understand the Minister's comment that the Secretary of State will look at any issue that arises from this, and that he will consider whether the level of public funding appears to him to be sufficient, but in that the Secretary of State is judge and party in his own cause. Therefore, he is subject to a very severe temptation to believe that the funding is sufficient.

I am grateful to the noble Lord, Lord Whitty, for his support. He made an excellent speech in which he said a great many things that I wish I had said. The point about "Which law shall I break?" is a very telling one. If one believes in respect for the law, as any drive against fraud must believe, it can only undermine the purpose if one spreads the idea that the law does not need to be obeyed. The Minister referred to the anti-fraud challenge fund. I thought he would. Does the Minister deny that the money which goes into that fund is top-sliced from general finance? Therefore, it does not put any more money into local authority coffers; it simply enables one local authority to get a bigger share of the pie than another.

The Minister's reply reminds me of a letter written by Sir Robert Walpole outlining his reasons for setting up Queen Anne's bounty. Your Lordships may remember that that was a pension for clergymen's widows. Sir Robert decided that he would create a certain number of these awards but they would not be sufficient to go round. Therefore he said that a clergyman's wife day and night, in season and out of season, would not cease to urge upon her husband the virtues of conformity. That is ministerial thinking in any generation. I shall not divide the Committee again so soon, but I confess that I have been tempted. I can occasionally resist temptation. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Earl Russell moved Amendment No. 63: Page 16, line 41, at end insert ("and").

The noble Earl said: The amendment deals with the requiring of authorities to contract out. Amendments Nos. 63 and 64 are linked amendments. Amendment No. 63 adds the word "and". Amendment No. 64 removes the words "and accepting" from the list of what local authorities are obliged to do with contracting out. The provision requires the local authority to put services out to tender but it does not require the local authority in all circumstances, regardless of what bids it receives, to accept one of those tenders.

Does the Minister believe in a free market? If he does, he must accept that a market cannot be genuinely free where one of the parties has to trade and the other does not. It is an extremely unequal negotiation which has taken place. I do not know how often the Minister has dealt with an auction house where a ring operated. One has rather low prices offered. That is precisely why auction houses in their wisdom have seen fit to put a reserve on property that they put up for sale. There is no provision in the Bill for the local authority to put a reserve on the contracting out of the services. If the Minister were prepared to provide for a reserve, he might rob my amendment of some of its force. I shall be interested to see whether he is prepared to do so. I beg to move.

Lord Mackay of Ardbrecknish

It may be helpful if I explain the purpose of new Section 139G. This section is aimed at giving power to the Secretary of State to make enforcement determinations. Such determinations could be issued following a failure by an authority to attain the standards specified in a direction and where the authority had not offered any reasons why a determination should not be issued. Thus, it would apply in only the most serious cases, where, despite being given the opportunity to improve its standard of administration, an authority had failed to do so.

The determination is designed to secure the attainment of the standards in question and, in order to achieve this, may also contain other provisions. These include that the authority must comply with specified requirements as to inviting, preparing, considering and accepting bids to carry out the work. This is necessary as the general powers on competitive tendering would not apply in these circumstances and there has to be a means for setting up a mechanism to allow this to be done. This provision also aims to ensure that, in undertaking a tendering exercise following the issue of a determination, the local authority complies with whatever requirements the Secretary of State decides are necessary, including requirements as to the quality of person to take on the work, procedures to achieve this and, assuming persons of sufficient quality apply, that a bid is actually accepted.

These amendments proposed by the noble Earl would have the effect of limiting the conditions which the Secretary of State is able to set out for the tendering process by removing the power to specify requirements relating to the accepting of bids. This would have the effect of removing all the teeth from this provision. It would allow an authority to pay lip service to the order to contract out by going through all the stages of the contracting process only to reject all of the bids out of hand or to award the contract to a bidder who could not provide the necessary effectiveness against fraud.

We do not envisage that the power to order contracting out will need to be invoked often. And we do not envisage that the powers relating to accepting bids will be used to tell a local authority which bid to accept from those that provide an acceptable level of action against fraud.

However, I think that it is important that we have the power and the teeth to make the system work effectively in the very small number of cases—hopefully, there will be no cases—where the authority is simply not prepared to take the steps which have been found to be necessary to be effective against fraud, and is going out to contract in a way which suggests that it is not looking for a bid which will give us an effective way of administering the system with the securities against fraud.

I understand the noble Earl's reservations. They are those he normally has about powers of Secretaries of State. But if we are to envisage the possibility that a local authority refuses to accept any of the points made by the fraud inspectors, and refuses to make any changes, and we have to contemplate the next step of forcing the local authority to go out to tender, we have to ensure that it is looking for and accepting a tender which will carry out the criterion of being effective against fraud that we seek.

I hope that, with that explanation, the noble Earl can withdraw the amendment.

Earl Russell

Before I decide what to do with the amendment, perhaps I may ask the Minister one point of clarification. He referred to a local authority not giving reasons for its failure to reach a required standard. Did he mean failure to advance any reasons, or failure to advance reasons which appear sufficient to the Secretary of State?

Lord Mackay of Ardbrecknish

I mean failure to advance any reasons. While I think it entirely theoretical, one might envisage the reasons the local authority gives as being thoroughly inadequate, not proper reasons, and showing no indication that it intends to change the way it has been carrying out the system.

We come back to all the discussions we have had. The local authority may give reasons which are reasonable and adequate and may suggest ways in which it might improve its system, as we discussed earlier. If those are reasonable reasons and it is making the necessary changes, the Secretary of State will accept that. We do not intend to force authorities to go out to contract willy-nilly. We wish to have this power only for those authorities which are obviously unwilling to take the necessary steps laid out by the fraud inspector.

Earl Russell

Has the Minister any idea how arbitrary he sounds? Think about it the other way around. Think of it from the view of officers of a town hall. Think of them using the same sort of language. Think of them saying that the Minister shows absolutely no ability to change, that he shows absolutely no ability to do what needs to be done, that he shows absolutely no willingness to take account of the points made. Those officers have as much right to make those points as the Minister has to make his. They have a point of view too. We cannot know in advance which of those points of view will be correct.

The Minister used the words that the local authority complies, with whatever requirements the Secretary of State decides are necessary". What would he say if he were required to comply with whatever the local authority deems necessary? There are a great many things that a local authority deems it necessary for his department to do. I do not suppose for one moment that he will do any of them.

We on these Benches complain frequently about over-centralised government. As the Minister says, we complain frequently about the powers of the Secretary of State. I have never heard quite such a barefaced defence of the Secretary of State's claim to enforce his own judgment as if it were infallible. When I rose I had absolutely no intention of asking the opinion of the Committee. But the Minister has really made me see red. I must do so. I ask the opinion of the Committee.

8.59 p.m.

On Question, Whether the said amendment (No. 63) shall be agreed to?

Their Lordships divided: Contents, 17; Not-Contents, 60.

Division No. 4
CONTENTS
Addington, L.	Grey, E.
Alderdice, L.	Hollis of Heigham, B.
Carlisle, E.	Kilbracken, L.
Carter, L. [Teller.]	Redesdale, L
Clancarty, E.	Richard, L.
Dubs, L.	Russell, E. [Teller.]
Falkland, V.	Turner of Camden, B.
Gould of Potternewton, B.	Whitty, L.

NOT-CONTENTS
Allenby of Megiddo, V.	Kingsland, L.
Anelay of St. Johns, B.	Lindsay, E.
Astor of Hever, L.	Long, V.
Attlee, E.	Lucas, L.
Balfour, E.	Lucas of Chilworth, L.
Belstead, L.	Luke, L.
Berners, B.	Lyell, L.
Biddulph, L.	Mackay of Ardbrecknish, L.
Blatch, B.	Mackay of Clashfern, L.
Brabazon of Tara, L.	[Lord Chancellor.]
Brigstocke, B.	Mackay of Drumadoon, L.
Brougham and Vaux, L.	Marlesford, L.
Cadman L	Miller of Hendon, B.
Chesham, L. [Teller]	Monk Bretton, L.
Clitheroe, L.	Mountevans, L.
Coleridge, L.	Munster, E.
Courtown, E.	Onslow, E.
Cumberlege, B.	Oppenheim-Barnes, B.
Denton of Wakefield, B.	Park of Monmouth, B.
Denton of Wakefield, B.	Pearson of Rannoch, L.
Dixon-Smith, L.	Renton, L.
Downshire, M.	Shaw of Northstead, L
Feldman, L.	Skelmersdale, L.
Ferrers, E.	Strathclyde, L. [Teller.]
Goschen, V.	Trumpington, B.
Haddington, E.	Ullswater, V.
Hardwicke, E.	Vivian, L.
Harlech, L.	Wharton, B.
Harris of Peckham, L.	Wilcox, B.
Henley, L.	Willoughby de Broke, L.
HolmPatrick, L.	Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

9.7 p.m.

[Amendment No. 64 not moved.]

Clause 9 agreed to.

Clause 10 [Adjustment of subsidy]:

Baroness Hollis of Heigham moved Amendment No. 65: Page 18, line 6, leave out from ("order") to end of line 9.

The noble Baroness said: We are hoping for the usual answers of sweetness and light which until recently we had come to expect from the Minister. In moving Amendment No. 65, I shall speak also to Amendment No. 68. They would remove the power of the Secretary of State to deduct amounts from the subsidy paid to local authorities for the cost of housing benefit and council tax benefit administration. We are concerned about the gradual withdrawal of government subsidy for benefits administration. We also doubt whether the deduction of subsidy is a sensible way to improve local authority anti-fraud performance.

We believe that local authorities' attempts to tackle fraud are hampered by inadequate levels of benefit subsidy paid by government. When local authorities took over the administration of housing benefit and council tax benefit from the DSS it was on the understanding that the cost of local authority administration would be fully met. However, over the period 1991–92 to 1995–96 total central government subsidy provision for the administration of costs for English authorities has averaged only two-thirds—65 per cent. or thereabouts—of actual costs. In 1996–97, the provision of £261 million from central government compares with local authorities' estimates of actual costs of £419 million. Accordingly, local authorities now meet £160 million of the administration of those benefits from the general fund compared with just £32 million in 1988–89. Only half of the subsidy provided is distributed direct to authorities in the form of a specific grant. The other half is fed into revenue support grant.

The effect is that authorities as a whole receive only one-third of their costs in specific grant. As many local authorities are close to their capping levels, a matter we explored in the previous amendment, any additional spend on administration must be at the expense of other services. The answer to that under-funding is to implement the Audit Commission recommendation, made in 1993 in its report on housing benefit, that all support for local authority benefit administration costs should be distributed by a specific grant. That would be neutral in terms of public expenditure. However, we still do not know why—and perhaps the Minister in his new sweetness and light mood will tell us—there has been a consistent refusal to make that change.

The second concern is that the anti-fraud incentive scheme allows authorities to earn additional subsidy by meeting government-set targets for the detection of fraud. The problem with that is that it concentrates on the amount of fraud actually detected. Therefore, it acts as a disincentive for authorities to take preventive measures to avoid fraud in the first place. Indeed, local authorities which have good preventive measures in place, and therefore less fraud to detect, may very well face a subsidy penalty for not detecting fraud that does not exist.

The DSS has established an anti-fraud challenge fund which allows authorities to compete for funds to finance anti-fraud initiatives. The problem is that the £5 million allocated to that has merely been top-sliced from existing funds. That adds to the difficulties of local authorities. The local authority associations are particularly concerned about the power in the Bill for the Secretary of State to make deductions from subsidy payments to local authorities for poor performance. Deducting subsidy from poorly performing authorities will serve only to make it more difficult for them to make improvements. The Minister really must not treat local authorities like delinquent teenagers who, they believe, need a short sharp shock to bring them up to scratch.

We await the Minister's reply. However, we believe that if central government want local authorities to respond, this is an area in which the carrot is infinitely more valuable than the stick because we share a common objective. The Government are in danger of subverting their own ends. I beg to move.

Earl Russell

I have two questions for the Minister. First, will he confirm that the Audit Commission is correct in believing that if all the money to local authorities for administering housing and council tax benefits were paid via a specific grant, that would be cost neutral? Is that the view of the Treasury as well as that of the Audit Commission? Secondly, what is to happen to a local authority with exceptionally honest citizens which does not have enough fraudsters to meet its target?

Lord Mackay of Ardbrecknish

Clause 10 re-states and makes additions to the Secretary of State's powers to adjust the subsidy paid to local authorities for housing and council tax benefit by introducing amendments to Section 140B of the Social Security Administration Act 1992. In particular, it qualifies the circumstances and manner in which deductions from subsidy must be made.

Perhaps I may describe briefly the existing power relating to deductions from subsidy and its application and the intention of the additional power introduced by Clause 10, additional powers which the noble Baroness's amendment seeks to remove. The Social Security Administration Act contains a long-standing provision for the Secretary of State to deduct from the subsidy which would otherwise be payable to an authority any amounts which he considers it unreasonable to pay. The power has been used administratively over the years to claw back from local authorities amounts of subsidy which have been or would otherwise be overpaid. Examples are where there has been an error in an earlier subsidy claim and it comes to light that the authority has incurred unlawful expenditure or has claimed subsidy twice on the same expenditure. This general power is restated in the proposed new subsection (5)(b) of Section 140B of the Social Security Administration Act, which is inserted by Clause 10. It would be removed, of course, by the second of these amendments.

The new powers relating to deductions are intended to clarify the existing general power. New subsection (4)(b) of Section 140B inserted by Clause 10 provides for deductions to be made in the annual subsidy in respect of matters other than expenditure on benefits; for example, incentive schemes. The proposed new subsection (5A) makes it clear that the powers to deduct are general and include instances where an authority has failed to comply with a direction or has failed in some other way to prevent and detect fraud.

Amendments Nos. 65 and 68 would together remove not only the Secretary of State's power to make deductions from subsidy in the case of poor fraud performance but also the general power to make deductions which is fundamental to the housing and council tax benefit subsidy regime. The removal of the power to make deductions would leave the Secretary of State powerless to provide in the subsidy order for deduction of subsidy in specified circumstances or to recoup questionably paid subsidy or to decline to pay dubious claims. I am sure that it is not the intention of the noble Baroness to remove an essential safeguard to the public purse, but this would be one of the effects.

Amendment No. 66 seeks to add a further example of circumstances in which additional subsidy may be paid; that is, for success in meeting performance targets for clearance and accuracy in administration of benefits. However, it is not necessary to include these further examples. Local authorities can and do receive additional subsidy in these circumstances and that will continue. The amendment would not permit any payment to local authorities by the Secretary of State that he cannot already make under the existing powers.

In addition, the Committee may be aware that my department is currently conducting research and carrying out tests in a range of local authorities on the feasibility of introducing a framework of minimum standards for verification, accuracy and clearance times. In the light of the research and test results we shall consider what adjustments may be needed to current funding arrangements to take account of the introduction of such a framework. Any extra subsidy that might be payable as a result of authorities meeting the standards could be paid under provisions in this Bill or provisions already in existence.

Amendment No. 67 seeks to remove some, but not all, of the Secretary of State's powers to pay additional subsidy.

Baroness Hollis of Heigham

I am sorry, it is possibly my fault but, in introducing the group, I spoke only to Amendments Nos. 65 and 68. I was expecting my noble friend Lady Turner to move Amendment No. 66, and no doubt the noble Earl, Lord Russell, wishes to speak to Amendment No. 67. If I have caused any inconvenience to the Minister, I apologise, but I thought that perhaps he had registered that.

9.15 p.m.

Lord Mackay of Ardbrecknish

I am afraid I had not registered that, but if in fact the noble Baroness is saying that she is speaking only to Amendments Nos. 65 and 68, I have probably already dealt with them.

Earl Russell

I am grateful to the Minister. Amendment No. 67 is grouped with these amendments. The points I made were intended to relate to Amendment No. 67 as well as to Amendment No. 66. So if the Minister has a reply to Amendment No. 67, I would be grateful to hear it.

Lord Mackay of Ardbrecknish

I thank the noble Earl for that. The effect of Amendment No. 67 would be to remove some but not all of the Secretary of State's power to pay additional subsidy. In particular it seeks to remove the power for the Secretary of State to reward success in preventing or detecting fraud. The provisions that the noble Lord seeks to amend enable the Secretary of State to invite applications for additional subsidy specifically for the purposes of prevention and detection of fraud. I am sure the Committee agrees that the Secretary of State should, if he deems it appropriate, be able either to reward local authorities that have been particularly successful in their fight against fraud or invite local authorities to consider new and cost-effective approaches to tackling fraud; moreover, he should be able to provide any such funding for these new measures on a statutory basis. The powers provided within Clause 10 provide just that.

The noble Baroness asked about the deduction power on administration costs. The power is not purely an administration cost. The amendment removes all powers to deduct, so all the provisions dealing with improper expenditure would be struck down. That is the point.

The noble Earl mentioned challenge funding being top-sliced. The challenge fund this year and next year includes new money, so it is not all top-sliced from the overall local authority administrative budget. But, of course, it remains within the total budget which the Government have set out and the total public expenditure plans we have already set out and which, I understand, at least the party sitting exactly opposite me—although, I accept, not the party of the noble Earl—have said will be more than sufficient for them for the next two years. I am not entirely sure that I was hearing the noble Baroness correctly. I am sure that she did not mean to make her original remarks sound like a promise to increase the funding going from central government because, of course, that would be incompatible with the views of her right honourable friend Mr. Gordon Brown, who has said that he will stick to the Government's spending plans.

Baroness Hollis of Heigham

That should cheer up the Minister enormously.

Lord Mackay of Ardbrecknish

It does cheer me up enormously, as indeed it cheers up my right honourable friend the Chancellor to have such endorsement of the Government's spending plans for the next two years. We are deeply grateful for the approval of the shadow Chancellor. If the shadow Chancellor agrees that our spending plans are perfectly all right, there does not seem to be any point in changing the person who holds the office of Chancellor of the Exchequer in the events which are about to happen in the next month or so. However, I must not be drawn into that because, as I have reminded myself—the noble Earl will remind me if I do not—we do not have a vote and therefore there is no point in electioneering here.

Earl Russell

I was merely asking the Minister to qualify what he said about there not being a case for changing the Chancellorship. What his words logically imply is that there is no point in changing it in that direction. That is all that they imply.

Lord Mackay of Ardbrecknish

I must always be careful about the noble Earl. I am happy to say that I have no little stories to tell about a man going to Ipswich or coming from Ipswich. What I meant—I am sure everyone understood—is that I thought my right honourable friend the Chancellor was doing such a splendid job, endorsed by Mr. Gordon Brown, that my right honourable friend should continue in office after the general election. However, as I said, there is no point in electioneering in this Chamber.

Over recent years the adjustments to subsidy have had a dramatic effect in influencing local authorities' attitude to anti-fraud work. The ability to adjust subsidy has led to greater effectiveness but there is still much to be done. The noble Baroness never ceases to tell me about the amount of fraud she thinks is going on as regards housing benefit. While I think the figure is about £1 billion, she thinks it is double that. If she is more correct than I am, that is all the more reason why we should take the powers which exist in this Bill to tackle the matter, and it is all the less reason to believe that somewhere there is an authority which is so virtuous that it has no fraud at all perpetrated against it. I do not believe that such an authority exists.

I think that the general administration subsidy of local authorities is intended to cover the actions for which they are responsible in assessing benefit and preventing and detecting fraud. It is worth noting that incentive payments for fraud detection are also available for detection at the outset of claims; in other words, the prevention point to which the noble Baroness referred. Challenge funding can be made available for prevention measures. Therefore the measure is not just related to the amount of fraud that is detected. I hope that I have answered the various points that have been made. I invite the noble Baroness and the noble Earl not to pursue their amendments.

Earl Russell

With respect I do not think the Minister has quite answered my question about the local authority without enough fraud. I agree it is difficult to imagine an area with no fraud but it is not quite impossible. Also, we have here something which is quantified. If one local authority detects less fraud than another, is it not just possible that it might be because there is less fraud being committed in the area of that local authority? Can the Minister eliminate that possibility? I do not know whether he was in the Chamber when the noble Lord, Lord Boyd-Carpenter, asked the noble Viscount, Lord Astor, who was then speaking from the Dispatch Box, how the Government knew the total of undetected fraud. That question deserves an answer and the noble Lord, Lord Boyd-Carpenter, did not get one. I should be glad if I were luckier.

Lord Mackay of Ardbrecknish

I referred to a figure of £1 billion worth of fraud and the noble Baroness thinks the figure is £2 billion. Against that background it is a little academic to believe that there is one local authority in the country which does not suffer any fraud perpetrated against it. It would be fortunate if that were the case; but I have indicated that incentive payments for detection are available for effective prevention. Clearly, such an authority would be effectively preventing fraud. If the steps it has taken lead to extra costs, it would be eligible for consideration for incentive payments and for challenge fund payments.

I can see that some way down the road, once we have managed to reduce the fraud considerably, we may have to look at other ways. But for the moment I see no reason why the incentive arrangements need adjustment. If they need adjustment, that can be taken into account when we look at the verification standards a local authority has in place which are succeeding, as the noble Earl prophesied, in bringing down fraud and preventing it. Those verification standards and verification procedures will be eligible for assistance to keep them in place, because clearly it is in our interests to keep them in place. We have also to guard against an authority which says, "There is no fraud here". Why there is no fraud there is because it is not looking very hard.

Earl Russell

But does the Minister understand that those incentives may be—in the words of the first Lord Burghley about the High Commission: Rather a device to seek for offenders than to reform any"? Is that not a financial inducement to find fraud regardless of how good is the evidence? Is it not very near partaking of the character of a corrupt payment?

Lord Mackay of Ardbrecknish

I do not believe that it is. The noble Earl is perhaps just pushing his argument a little too far. The fraud inspector's report on an authority would be one source of information, and if that report showed that that authority was running a splendid system and keeping on top of fraud, some of the procedures it had in place could be eligible for the payments I have mentioned—either the challenge fund payments or the other incentive payments. I can see the noble Earl's point. I should like to think—and I shall certainly check it—that an authority in that halcyon state will not find that the Government are not giving it any money to continue in the halcyon state.

Baroness Hollis of Heigham

At the end of his first reply the Minister said that he hoped that he had answered our questions. It would be fairer to say that he had addressed them rather than answered them. I accept that the amendment as drafted is defective, and so I am sure that the Minister will be delighted to know that it is not one that I intend to press.

The sustained point is I believe that the Government have developed a flawed method of supporting the administration of benefits and a deformed method of financing the eradication of fraud. The Government have constructed a system some of whose consequences are quite perverse. Some of them have been mentioned. I recall a couple of months ago bringing to this place one of the rural authorities. I cannot remember now whether it was Mendip or Chilterns. It complained that it had been complimented by the Audit Commission, and the like, on its efforts to eradicate fraud. In consequence therefore it faced a benefit penalty, because there was not the fraud there for it to uncover, as it had already set in place exemplary methods of preventing it from occurring.

Another perverse effect which has been touched on by the Minister—again local authority associations are worried about this in terms of the integrity of the public ethic—is that local authorities now have an active incentive to turn error into fraud both to meet their targets and to avoid repayment, and instead to claim subsidy. If something is an error, local authorities do not receive compensation for it. If they can turn that error into fraud by making it culpable, they do. Those are unhealthy pressures on hard-pressed local government officials where it is often the word of one person—"I did put my form in on such-and-such a date. I did so honestly"—against the word of an official. In good local authorities those issues go to members to resolve, but there will now be a perverse incentive to short-cut them. That is worrying.

As to the wider point regarding the position of a potential Labour government, I say nothing about the potential head space offered by recovering more fraud savings than the Government have so far identified. Think what one could do with the £1 billion to which the Minister repeatedly referred.

The whole method of financing this form of activity has to be reconstructed. Within the same spend figure, it could be made to deliver more effective and less perverse results than the Government have so far achieved. I am confident that that is what we shall seek to do. I beg leave to withdraw the amendment.

amendment, by leave, withdrawn.

9.30 p.m.

Baroness Turner of Camden moved Amendment No. 66: Page 18, line 15, at end insert ("or (c) success in meeting such performance targets for clearance and accuracy in the administration of benefits as may be prescribed.").

The noble Baroness said: The Minister to some extent pre-empted this amendment by replying to it in addressing previous amendments—but not entirely. The purpose of the amendment is to allow regulations to provide for an extra subsidy for better administrative performance. I emphasise that that does not mean just the detection of fraud.

The housing benefit and council tax benefit regulations state that benefit should be processed within 14 days wherever possible. We have discussed the 14-day period in relation to other amendments. Regulations or amendments to the subsidy order could be made to allow additional subsidy to be paid where authorities meet that target over a consistent period and could also include a target for accuracy.

The amendment could act as a carrot to good administration. That is its intention. It would minimise the opportunity for fraud and at the same time reward authorities that are proceeding with a very good administration in the area of benefits generally. I beg to move.

Lord Mackay of Ardbrecknish

As I explained, this clause makes changes to Section 140B of the Social Security Administration Act 1992, under which the Secretary of State pays subsidies to local authorities in respect of their expenditure on housing benefit and council tax benefit.

Subsections (4)(a) and (4A) inserted into that section by Clause 10 re-enact the Secretary of State's power to pay additional subsidy to local authorities in circumstances that are to be specified in the subsidy order. Subsection (4A) gives two examples of what that additional subsidy could be paid for; namely, the costs of administering the relevant benefit, and in respect of success in preventing or detecting fraud.

The proposed amendment seeks to add a further example of circumstances in which additional subsidy may be paid—that is, for success in meeting performance targets for clearance and accuracy in administration of the benefits.

It is not necessary to include these further examples as local authorities can, and do, receive additional subsidy in these circumstances, and that will continue. The amendment would not permit any payment to local authorities by the Secretary of State that cannot be made under existing powers.

In addition, my department is currently conducting research and carrying out tests with local authorities on the feasibility of introducing a framework of minimum standards for verification, accuracy and clearance times. When we receive those research and test results we shall consider what adjustments might be needed to the current funding arrangements to take account of the introduction of such a framework. Any extra subsidy that might be payable as a result of authorities meeting the standards could be paid under the provisions of this Bill or provisions that already exist without the further assistance of the noble Baroness's amendment. In short, the amendment is not necessary. With the assurance that what she wants is capable of being done already, I hope that the noble Baroness might withdraw her amendment.

Baroness Turner of Camden

I thank the Minister for that explanation and also for the assurance that what I seek in the amendment can already be done. I shall read his earlier remarks carefully in Hansard tomorrow. But in the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 67 and 68 not moved.] Clause 10 agreed to.

Lord Whitty moved Amendment No. 69: Before Clause 11, insert the following new clause—

REFUSAL OF PAYMENT OF HOUSING BENEFIT TO LANDLORD

(".—(1) In any case where—

1. (a) a person has claimed housing benefit and requested or consented to payment of housing benefit to another person; or
2. (b) a person is in receipt of a payment of housing benefit on behalf of another person,

an authority administering housing benefit may refuse to make such a payment or continue to make such a payment, as the case may be, in the circumstances mentioned in subsection (2) below. (2) The circumstances referred to in subsection (1) above in which an authority may refuse to make a payment of housing benefit or to continue to make such a payment are— (a) in the case of paragraph (a) of that subsection, where it is satisfied that—

1. (i) the person to whom the payment is to be made is not the landlord under the tenancy in respect of which the request was made or consent given; or
2. (ii) such a tenancy does not exist; or
3. (iii) that the person to whom the payment is to be made is or has at any time been in receipt of housing benefit as a result of fraud; and

(b) in the case of paragraph (b) of that subsection, where it is satisfied that the person in receipt of the payment is in receipt of a payment of housing benefit as a result of fraud.").

The noble Lord said: The proposed new clause and the amendment that follows bring us to one of the central areas where we feel that the legislation has a serious deficiency. It is in dealing with the widespread problem of landlord fraud.

The amendment paves the way to recognition of a specific offence, but it does not depend on such an offence being created. The next clause deals with that. This clause could apply with the offences already existing and those created by the Bill. Therefore, I shall move the amendments separately.

Amendment No. 68 recognises that, in a large number of cases identified as the main location for housing benefit fraud by the Select Committee of another place, it is not an individual claimant but a third party—a landlord, a hotelier, an accommodation agent—who creates the fraud. In some cases that is done with the connivance of the individual claimant, in other cases it is done completely without such connivance and in ignorance on the part of the alleged claimant. It can be a deception involving just one single case or it can be a multiple and criminally organised fraud of substantial proportions.

In the discussion on the Bill in another place, there was at least some grudging recognition by Ministers of the importance of landlord fraud and the need for special measures to deal with it. Clause 11 was introduced at a rather late stage in the Commons proceedings in response, I should like to think, to the eloquent arguments of my colleagues there. But it is the only explicit recognition that there is a separate and different problem of landlord fraud.

However, Clause 11 is not sufficient to deal with it. It deals only—though importantly—with the information that may be required of landlords receiving direct payment of housing benefit. It does not deal with powers against their involvement and engagement in fraudulent activities. It still seems somehow to be assumed, despite all the evidence in the Select Committee report in another place and elsewhere, that the other powers in the Bill which are directed primarily at individual claimants are sufficient to be used against landlord fraud. But they are not sufficient. The amendment deals with the circumstances: situations where the alleged landlord is not the landlord; situations where the alleged tenancy does not exist; situations where the recipient of direct payment has previously been found to be in receipt of fraudulently claimed benefits. It allows the authorities to stop and suspend payment in such cases. Such an authority which, on receipt of information, refuses or ceases to make direct payments to the landlord, may still be required to pay to the individual claimant, if the application is genuine and valid.

The wording of the new clause is similar to that in the London Local Authorities Bill, which I understand received its Second Reading in this House last night. I regret that I could not be present for the debate. That Bill envisages a comprehensive package of reforms to tackle the whole problem of landlord fraud. It would give local authorities the power to require landlords who ask for housing benefit to be paid direct to supply them with details of other properties that they control. It would be a stronger power than the permissive power in Clause 11. It would require them to maintain a register of landlords and also provide what the proposed new clause would demand: an ability to refuse payment to landlords because authorities believe that they are involved in fraudulent claims. That is a more robust and effective approach than is reflected in this Bill. It would also, in my view, protect legitimate and decent landlords from association with some of the practices that have grown up in this area.

I submit that this amendment goes some way in that direction. It is true that the Minister's colleagues in another place conceded some of the principles underlying the approach. Ministers there argued that primary legislation was not necessary. However, they undertook to come forward with changes in the regulations that govern the making of direct payments to landlords and in the guidance that is given to local authorities in the circumstances where direct payment can be made. It would be interesting for the Committee to hear what progress has been made on revising those regulations. But I have to say that, unless and until the Minister can promise watertight regulations to deal with the issues and provide for such powers, I remain unconvinced that the problem has been dealt with without the heavier primary legislation provided for in the amendment. I beg to move Amendment No. 69.

Lord Mackay of Ardbrecknish

This amendment seeks to allow local authorities, as the noble Lord, Lord Whitty, has just explained, to refuse or stop payments of housing benefit being made directly to a person other than the claimant, the landlord or indeed, I assume, his agent in certain circumstances. The circumstances are: that the proposed recipient of the direct payment has no title to let the property; that there is no such tenancy; or that the proposed recipient is or has at any time been in receipt of benefit as a result of fraud. For many of those housing benefit at present cannot be paid. Moreover, any current recipient of direct payments could have such payments discontinued if the authority is satisfied that he is in receipt of payment of housing benefit as a result of a fraud.

I understand the intentions behind the amendments. Equally, I myself was not able to be present last night when the London Local Authorities Bill was discussed, as I had another engagement. But I know that there is similarity between some of the provisions in some amendments that we have been discussing and some of the provisions in that Bill. So I understand the intentions.

Direct payments can cause difficulties. They can make it easier for landlords, and indeed for both landlords and claimants, to commit fraud. My officials have consulted representatives of the local authority associations to identify specific problems with the direct payment provision and to see how they can be put right. We have found that most of the problems that they raised with us can be tackled by amending current secondary legislation. Indeed, as the noble Lord, Lord Whitty, acknowledged and as was indicated by my honourable friends in another place, we propose to amend that secondary legislation and to issue circulars to make the situation clear to the local authorities.

But I want to make it clear, if I can, that in almost all cases there is no obligation on local authorities to make direct payments. A major factor contributing to the difficulties that local authorities have with direct payments is that many believe that they are under such an obligation. The department will issue clear guidance to the effect that local authorities are not generally under any obligation to make direct payments to landlords unless claimants are substantially in arrears with their rents. In addition, my right honourable friend the Secretary of State is currently consulting with local authority associations with a view to proposing amending regulations to deal with three specific issues.

Baroness Hollis of Heigham

I wonder whether the Minister will mind my interrupting him at this point. I take the point that he has just made that the department intends to issue clear guidance showing that local authorities are not obliged to make direct payments. But the research commissioned by his own department, undertaken, I think, by Dr. Kemp, which I have read and studied, makes it clear that increasingly landlords require direct payments as a condition of accepting a DSS tenant. What would be the Minister's advice in such a situation?

Lord Mackay of Ardbrecknish

It would rather depend on the suspicions that the local authorities might have. For example, the local authorities must in law be satisfied that the landlord is indeed the landlord and that the tenancy does indeed exist, before they pay any housing benefit. If they are not satisfied that the tenancy does exist, they should not pay anybody—either landlord or, obviously, tenant. That is a very clear provision.

So far as concerns direct payments—I believe it will certainly answer the point of the noble Lord, Lord Whitty, and I hope that it will help the noble Baroness—a circular has been drafted. I understand that it is now with the local authorities association as part of the statutory consultation that we have to undertake. That consultation is planned to end on 15th April 1997.

But I mentioned three specific issues at which we are looking. The first proposal will enable an authority to require a landlord to produce any necessary information in connection with the specific benefit claim. That might include evidence of his legal right to let the property.

The second proposal is for a discretionary power to refuse or terminate direct payments where an authority is satisfied that the recipient is not a fit and proper person. For example, an authority could refuse to make a direct payment to a landlord who had a record of obtaining benefit by deliberate fraud. It could equally decide to exercise its discretion to make a direct payment where, despite the landlord's history, such an arrangement was the only means of safeguarding the tenancy, although in such a case the authority would be expected to introduce safeguards to minimise the risk. That may go a little way to answer what I thought was the question posed by the noble Baroness.

The third proposal we are discussing would require local authorities to ignore rent arrears which are incurred while a claim or a change of circumstances is being determined. This would mean that authorities would not be obliged to make direct payments in such cases, removing what amounts to a perverse incentive to a fraudulent landlord to force a delay in the determination of a claim.

All the proposals I have outlined are being brought forward under existing legislation—and I hope answer satisfactorily the points raised by the amendment—without requiring a new primary power or producing the counterproductive results of the proposed amendment. We are discussing some of these matters with the local authorities. Others are in the circular which has been drafted and which is with the local authorities for consultation.

I hope that those assurances and indications of progress will help the noble Lord, Lord Whitty, to withdraw his amendment in the confidence that we are taking serious steps along with the local authorities in order to help the local authorities deal with the question of landlord fraud.

9.45 p.m.

Lord Whitty

I am grateful to the Minister for his reply. It goes some way towards reassuring me that these issues are being tackled. However, his reply does not deal with the central point. I am well aware, as I am sure are most local authorities, that they are not obliged to make direct payments to landlords in any circumstances. They have the discretion not to. However, the reality is that local authorities are faced with the fact that landlords are telling their tenants or potential tenants that unless they are given direct payments the tenants will not get the lodgings. In those circumstances it would be a serious problem for local authorities to insist on payment to a tenant if the landlord said that he would not then take him on. The question of the power relationship between a tenant and the landlord is involved here and is perhaps best dealt with by the subsequent clause.

However, I am more pleased than I expected to be that some progress has been made since the deliberations in another place on the redrafting of these regulations and consultation with the local authorities. In the spirit of goodwill and understanding, I am prepared at this stage to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Whitty moved Amendment No. 70: Before Clause 11, insert the following new clause—

OFFENCE OF FRAUD BY LANDLORD

(".—(1) If a person—

1. (a) dishonestly produces or furnishes or causes or allows to be produced or furnished to any authority administering housing benefit or council tax benefit or to a person authorised to exercise any function of such an authority 530 relating to such a benefit, any document or information which is false in a material particular as to persons resident in accommodation owned, managed or controlled by him or in which he has any form of proprietary interest; or
2. (b) fails to notify or causes or allows another person to fail to notify any authority administering housing benefit or council tax benefit, or a person authorised to exercise any function of such an authority relating to such a benefit, of any change of circumstances as to persons resident in accommodation owned, managed or controlled by him or in which he has any form of proprietary interest,

with a view to obtaining any benefit or other payment or advantage (whether for himself or for some other person) derived as a result of more than one claim to benefit, he shall be guilty of an offence. (2) A person guilty of an offence under this section shall be liable on conviction on indictment to imprisonment for a term not exceeding 10 years, or to an unlimited fine, or to both.").

The noble Lord said: I apologise to the Committee as I may have to take some time in explaining the amendment. We found in another place that Ministers have not taken the point on this issue. I therefore have to restate the arguments. We on these Benches have given strong support to the objectives of the Bill. We have not always shared the rhetoric that surrounds it but we are determined to play our part in bringing an end to fraud in the social security system. However, if the Government are so keen to tighten up on payment fraud, I cannot understand why Ministers are resisting the obvious parallel but separate problem of tackling criminal landlord fraud, which creams off both the welfare state and genuine claimants. Indeed, it often goes beyond that and exploits vulnerable people who for one reason or another are outside the national insurance system.

I have read carefully the report of the Select Committee of another place on these issues. It concludes that a large proportion of fraud in the housing benefit area is located in landlord fraud in the private rented sector. It quotes numerous examples. The sample survey carried out by the London Borough of Haringey revealed that no fewer than 21 per cent. of such claims were fraudulent in one way or another. Lest the Committee assumes that this is a problem of Labour local authorities, perhaps I may also draw attention to a submission to the Select Committee by the fair City of Westminster, which gave a trenchant analysis of the problems in its area, particularly with fraud by hoteliers.

I have also read carefully the proceedings on the Floor and in Committee in the other place on this Bill. There seems to be an extraordinary defensiveness about Ministers' responses here. That suggests that they, and maybe civil servants at drafting level, are being a little complacent or maybe they are living in a world of ignorance as to what is going on. We have already been warned that we should not electioneer in this Chamber. There is no point in doing so, which is rather a different matter. I do not want to undermine the efforts of my colleagues in other places to make sure that the Labour Party is seen as a party which represents the whole of the country.

But I am forced to be a little bit "classist" and "regionalist" about this. There seems to be a feeling that this is a problem only of the inner cities. In fact, the Select Committee report proves exactly the opposite. It is a problem for small towns and the shires which for at least another couple of weeks the party opposite purports to represent. Some of the worst examples are in those areas. Some of the criminals engaged in these activities are moving out of London and other cities because they are finding that life is too tough for them because of the way in which London local authorities and others are beginning to tackle these problems.

But even if we concentrate on the inner cities, this is a crime which is well understood. The DSS civil servants in the offices down the line understand it; the benefits staff of the local authorities understand it and are horrified by their inability to tackle the problem effectively. The police know of it and it is often a problem for them. The social services know of it and the general public also know it.

Until recently I lived for 20 to 25 years in south London. There is just as much tittle-tattle in the shops and pubs of south London about the existence of criminal fraud by landlords as there is about individual claimants who cream off the system. Moreover, there is also recognition at that level that the crimes are different. Ministers in the other place argued that far from there being only one clause in this Bill dealing with landlord fraud, in fact there are eight separate powers in it to tackle the problem because it is caught by the provisions in the Bill for individual fraud.

That is erroneous. It seems that the only rationale for the Government's position is that they regard landlord fraud as a secondary offence. By that I do not mean that they do not regard it seriously, but they see it as a connivance at individual fraud rather than fraud of itself. In fact, it is a massive conspiracy and often an organised one against the public purse and often against claimants. It is massive exploitation both of genuine claimants and by people who are used in these scams who purport to be claimants. At the Second Reading debate I used the term "scam" and then I corrected myself because that was too cosy a term.

Some landlord fraud deals in petty connivance and individual deception; but we are often dealing with something which is far more sinister. The police understand that they are dealing with a continuum of crime here, such as immigration rackets, overcrowding and unsafe dwellings and protection rackets. These are crimes of the unofficial economy and therefore they are quite difficult to catch up with. But in this Bill we are dealing with the point where we should most easily be able to catch up with it; namely, the point where criminals gain their money directly from the state.

These facts are known from the cases reported, from anecdotes and statistics. They were revealed very clearly in the report of the Select Committee. They all show that this is a rapidly growing problem. We can all have views as to why that is happening. There are some underlying social problems which go towards it. In many of the inner city areas and in our smaller towns, the housing market has become seriously distorted. There has been no new building for public housing and availability is limited and inadequate. There has been family break up, migration and the atomisation of households. Owner-occupation is not an option for a very large number of these people. Even the jerry-built flats built in the 1980s are beyond their purse. The private rented sector has been deregulated and now has rents which are often beyond the purse of the people we are talking about. This is a potential recipe for disaster and is already occurring.

When direct payment to landlords of housing benefit was first introduced, the assumption was that the hulk of such payment would be to public sector landlords or social landlords like housing associations. However, with the decline in public sector housing and the rise in rents in the private as well as the public sector, that is no longer entirely the case. Direct payments now account for over one-third of all payments, and that proportion is estimated to rise to one-half, yet that one-third of payments accounts for two-thirds of the fraud. Direct payments have been growing as a proportion of all housing benefit and the share to private landlords is growing. Control and monitoring are therefore primarily problems in the private sector. However, there have been a few instances of local authority officials being involved in organising and/or conniving at organised housing benefit fraud. Obviously, such individuals should be ruthlessly prosecuted; but the main issue is how to control fraud in the private sector.

What form do the scams take? The amendment partly reflects this. Landlords claim for tenants who do not exist, often using national insurance numbers which have been obtained from non-claimants by illegal purposes or deception. Tales were even told in the Select Committee and are recorded in the proceedings of another place of dossers in one part of London being paid £10 for their national insurance numbers which were then used in another area. It is clear from the Select Committee report that national insurance numbers alone do not offer sufficient protection against such fraud. There are cases of where the alleged tenant exists, but there is no dwelling—or of where there is a dwelling, but no tenant. There are cases of where the alleged tenant once existed and once lived at that property but moved out a long time ago. There are cases of where the alleged tenants exist but claim for dependants who do not exist, or who do not live there, or who have not lived there for some time.

There are also hotel frauds. I have already referred to the very telling report from the City of Westminster, which shows how hoteliers in such areas take advantage not only of potential claimants and others, but also of the social security system.

There are also cases of cheques being made out to genuine claimants but going in practice to the landlords, as a result of extortion or planned redirection. Such cheques are often cashed without recourse to a bank account by means of the growing phenomenon of slightly dubious cheque shops. I have seen some evidence from the relatively small town of Northampton of £400,000-worth of benefit cheques, the bulk of which is paid to landlords, being cashed at dubious cheque shops. There is an estimated commission on that of £30,000 which is going to somebody. Surely that was not the intention of housing benefit. It is also a way of avoiding tax. If the Bill is using data matching to check on claimants, surely we must make greater use of data matching with Inland Revenue declarations on landlords who receive benefit directly.

This is a different sort of crime. It requires separate powers. In determining the sanctions, we have accepted some of the arguments of Ministers in another place that the maximum sanction should not be too out of line with that in parallel legislation such as the Theft Act. This amendment therefore reduces the maximum penalty from the 12 years suggested by my colleagues in another place to 10 years.

The central issue here is that we need powers to identify such fraud as a crime that is separate from the individual crimes of individual claimants. The new clause would provide such powers. If the Committee were to accept the amendment, we would not only save the public purse, but take steps which would help to put a few very evil men behind bars and which would protect genuine claimants and decent legitimate landlords who suffer from the implication that so much is wrong with the sector; we would also protect a lot of very vulnerable people from being used in such conspiracies. I beg to move.

Earl Russell

Wherever there is a fireplace, there will be soot. Wherever there are sewers, there will be rats. Wherever there is a large stream of public money, there will be corruption. I have no information on the extent of landlord fraud, but it is sadly inevitable that when a large supply of public money is devoted to any purpose, some people will attempt to batten on it and to make corrupt use of it. Clearly, there is landlord fraud. Clearly, it must be combatted.

I was particularly interested in the point that the noble Lord, Lord Whitty, made about tax evasion. One of the ways in which we can tackle the frightening, widening gap between the amount of money that we need to support the services which everybody wants and the amount that it is assumed that people are prepared to pay for them is by collecting tax which can legally be collected under the present law. Wherever that can be done, it is useful.

The question raised by this amendment is whether there should be a separate offence of landlord fraud or one should take the line that fraud is fraud is fraud and it is simply a crime, no matter who perpetrates it. I hope that the Minister will be helpful on that matter. The argument put forward in favour of a separate offence of landlord fraud is the very large scale on which it can on occasions take place. That is a powerful point. However, if fraud is taking place on a very large scale, presumably it means that it is taking place in relation to a large number of dwellings.

Normally, the maximum sentence is seven years' imprisonment. The maximum sentence proposed by this amendment is 10 years. But if fraud takes place in respect of a great many different dwellings is it possible in extreme cases to impose separate sentences for separate offences and let them run consecutively? The Minister may be able to shed light on whether this amendment is the way to tackle a problem that we all agree needs to be tackled.

10 p.m.

Baroness Hollis of Heigham

Before the Minister replies, I should like to put one question to him. As I understand it, in 1994/5 £599 million of benefits fraud was detected. In 1995/6 the figure was £638 million. However, the proportion represented by detected multiple identity fraud, of which landlord fraud is the most obvious example, was only £6 million and £11 million respectively; in other words, landlord fraud represented only a tiny percentage. Does the Minister believe that this reflects the fraud practised on the ground?

Lord Mackay of Ardbrecknish

The amendment proposed by the noble Lord, Lord Whitty, seeks to target dishonest behaviour specifically by landlords in connection with multiple claims to housing benefit and council tax benefit. The amendment adds nothing to the effectiveness of the offence proposed in Clause 13. It would replicate elements of the offence already contained in that clause and to that extent it is unnecessary. With the new powers in Clause 13 as drafted we have already made adequate provision to deal with landlord fraud.

Clause 13 introduces a new offence tailored to serious social security fraud which will be capable of being applied to landlords or claimants, or both if they are involved in a conspiracy. This offence is, as is normal with the criminal law, framed so as to target particular criminal behaviour, not individual sections of society, even if legislation has been prompted by the need to overcome behaviour exhibited by specific sections of society. Landlords who receive direct payment of their tenants' housing benefit are already under a duty to report changes of circumstances which they might reasonably be expected to know will affect a claimant's right to, or the amount of, or receipt of, benefit. Clause 13 makes dishonest failure to report such a change an offence.

This new clause, as the noble Lord has so carefully explained, is intended to provide a new and separate offence of aggravated landlord fraud—an offence which differs from that in Clause 13 by being specific to landlords and specific to one type of housing benefit fraud, namely, multiple claims. But there are other types of serious housing benefit fraud, such as setting up a ghost claim or a contrived tenancy. The offence in Clause 13 as drafted is capable of being used for all types of serious landlord fraud. The additional powers introduced by this amendment therefore achieve nothing of substance other than to introduce a stiffer sentence of up to 10 years' imprisonment for a landlord involved in the dishonest obtaining of benefit in relation to more than one claim.

During Second Reading, I outlined the Government's 10 point plan for combating landlord fraud. I shall not test the Committee's patience by going through the full list tonight. But perhaps I may mention two points. The fact that authorities are isolated from each other is one of the key contributory factors enabling landlords to commit fraud. For example, a genuine claimant may move into a property and claim housing benefit which is then paid direct to the landlord. Later the claimant moves on and opens a new claim in another area but fails to notify his old authority of the move—a common occurrence. The landlord, however, continues to accept the benefit payments on behalf of the departed tenant and relets the flat. Because the authorities are unable to share data with each other, the fraud goes undected.

New measures—we have discussed them—will mean more information, particularly in relation to suspect landlords, will be available to the authorities and that information, as well as other relevant data, will be shared, making this type of fraud much more difficult to get away with.

The next important measure is that which gives local authority inspectors the right of entry into business premises. This will enable them to enter the business premises of a landlord or agent, question people there and examine the records. This will be a powerful new tool in the detection and prosecution of landlord fraud.

In addition, the new Benefit Fraud Inspectorate will make sure that all authorities are making appropriate efforts to tackle the problem of landlord fraud and will facilitate the spread of practical advice and guidance.

I have already explained that we shall be issuing further guidance to local authorities on the question of direct payment to landlords. We have already discussed that. I do not think that there is any need to repeat it.

I have great difficulty with the proposal that a separate, more severe, sentence for landlords is appropriate. The new offence in Clause 13 would increase the maximum penalty under targeted social security offence provisions to seven years' imprisonment.

The Government's approach is not to make landlords, or any other sector of society for that matter, a special case but to adopt an even-handed approach across the board. Landlords guilty of fraud will be dealt with under the same system as everyone else with the full range of offences available depending on the severity of the case. The courts will have the power to take account of the degree of criminality and the seriousness of the offence within the maximum penalty set. They will also have the ability to take account of other factors such as whether the fraudster was in a position of trust. And they will sentence accordingly. In a DSS case in 1996 the Court of Appeal established a benchmark of six years' imprisonment for contested trials where there is a considerable loss to public funds (in that case, around £300,000) combined with an element of breach of trust. In the light of this, a heavier maximum sentence than seven years in cases of serious fraud perpetrated by those in a position of trust (such as landlords receiving direct payments) appears out of line.

In the very worst cases, the new offence will not be the only basis for prosecuting landlords who commit serious fraud; the Theft Act and conspiracy charges can continue to be used by prosecuting authorities where appropriate. Section 15 of the Theft Act—obtaining property by deception—and conspiracy to defraud both carry a maximum sentence of 10 years.

Perhaps I may continue to look at sentencing as regards consecutive and concurrent sentences. Whenever someone is convicted in court of more than one offence on indictment, the judge may, if he feels it appropriate, pass consecutive sentences which can exceed the maximum for a single offence. It is a matter for the judges, and—dare I say it?—given some of the other arguments on some of the Bills of my noble friend Lady Blatch I would find it a little odd if I were invited to force judges to pass consecutive sentences and not leave it to their discretion. But they can do that if they see fit.

I believe that the noble Baroness, Lady Hollis, raised the point that the saving of £6 million and £11 million indicate that the offence of multiple ID fraud has not been tackled.

Baroness Hollis of Heigham

I sought to suggest that the figures reported indicate that the amount detected under the heading of multiple identity landlord fraud seemed to be relatively tiny compared with the pattern of fraud. It suggests to us that large swathes of landlord fraud remain undetected. I asked whether the Minister concurred in that view.

Lord Mackay of Ardbrecknish

The figures mentioned relate to work by the Benefits Agency. The remit of the agency's fraud investigators is to tackle serious fraud. By its nature, such fraud investigation is both complex and labour intensive. It is always difficult to work out the amount of fraud that is not being detected and to break it down into specific types.

In order to be helpful to the noble Baroness, I wish to explain our estimates of the total level of landlord fraud. They are based on a DSS accuracy review into housing benefit which was carefully planned and statistically sound. The review found cases where claims could not be traced, including those where the money was going directly to the landlord. The estimate for all such residence fraud was about £240 million. Half of that was going directly to the landlords. Therefore, if one takes into account collusive tenants, the suggestion is that landlord fraud may be of the order of £150 million.

That is backed by evidence given by the London Boroughs Fraud Investigation Group to the Select Committee in another place of £40 million a year landlord fraud in London. As London has one-fifth of all the private-sector rented HB claims, and if landlords in the rest of the country are as fraudulent as the fraud investigation team believes London landlords to be, landlord fraud would amount to approximately £200 million. We thought of £150 million, but as we are making estimates I do not believe that the figures are widely far apart. They certainly show the ballpark position.

I do not want it to appear, and I hope that the Opposition will not suggest, that I am somehow dismissing £150 million or even £200 million of landlord fraud as insignificant. It is very significant and I have suggested some of the ways in which the Bill will help authorities to counter such fraud, especially the kind mentioned by the noble Lord, Lord Whitty.

I am disappointed that the Opposition continue to suggest that landlord fraud is somehow more inherently serious than all other types of benefit fraud, including that committed by professional organised criminals making false claims, sometimes using, as we discussed on Tuesday, what might be called "insider trading" by having someone in an office of the local authority or Benefits Agency helping them in the creation of fictitious identities in order to commit the crimes. Of course, landlord fraud is serious. This Bill introduces a range of practical measures which will help local authorities investigate fraudulent landlords and bring them to justice. There is a range of tough offences under which landlords can be prosecuted and, despite the views of the Opposition, crooked landlords should be in no doubt that this new offence will be much more effective in dealing with them.

The way to tackle landlord fraud is through effective prevention and detection methods, followed up by prosecution under, if necessary, the new offence for all serious fraud already in the Bill. That is the approach we are taking with the Bill and with other measures which make up our anti-fraud strategy, some of which I have outlined.

I do not like to suggest it, but I believe that there is a certain amount of window dressing about wanting a 10-year sentence for landlord fraud whereas a seven-year sentence for all other types of fraud will do. All fraud, if it is of sufficient seriousness, ought to meet the same level of penalty. Seven years is a very substantial penalty. I have drawn the comparison with a Court of Appeal case where imprisonment for six years was made a benchmark. I have also indicated that the provisions of the Theft Act exist if the authorities wish to take other charges against a landlord. All in all, I believe that the approach in Clause 13 is correct and that we should not begin to categorise the type of criminal. We are attempting to root out the crime itself, whoever commits it.

I hope that after that explanation, the noble Lord, Lord Whitty, will see fit to withdraw his amendment. However, I know from debates in the other place and I suspect from debates here that the noble Lord feels strongly about the issue. In that event, if it is put to a test, I hope that my noble friends will feel convinced by my argument and will support me in the Lobby.

10.15 p.m.

Lord Whitty

I am grateful to the Minister for giving such an extensive reply. We welcome the powers in Clause 13 and the other sanctions and powers to which the Minister referred. But we are not picking out for special attention landlords as a sector in society because they are landlords. Quite the opposite. We are seeking to protect decent landlords and to provide decent rented accommodation.

The reason that landlords are a separate case is because they are the only people, apart from the claimants themselves, to whom housing benefit is paid directly by the state. Therefore, the state, in all its manifestations, has a responsibility for ensuring that that money is paid correctly and that anybody who misleads the state is dealt with by the law.

I crave the indulgence of the Committee and give just one example, which is referred to in the Select Committee report. It is a reported case of an hotelier who organised a major conspiracy as regards housing fraud. Out of 21 rooms for which benefit was claimed, only nine were found to be occupied. The documentation related to a large number of identities. One room was found to have documentation relating to five identities; another to 24; and another to 37. That was not even a case of multiple properties but a single property owned by a single hotelier who was organising that fraud.

That is of a different dimension from the fraud committed by those 66 individuals, if any of them ever existed. Each of those individual claimants would be liable potentially to sanctions of up to seven years' imprisonment. I submit that the person organising that fraud and conspiracy to defraud the public purse should be liable to greater sanctions.

I understand the provisions in this legislation and should like to give them a fair wind. But I remain unconvinced by the Minister's arguments. However, I shall reflect on them and reserve the right to come back at a later stage if we are allowed the luxury of a Report stage. I shall not divide the Committee at this point. I ask the Minister to consider our remarks, and on this side of the Committee we shall consider whether we wish to return at a later stage to the issue. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 [Information from landlords and agents]:

Earl Russell moved Amendment No. 71: Page 18, line 43, after ("supply") insert ("relevant").

The noble Earl said: In moving this amendment, I shall speak also to Amendments Nos. 72 and 73. This is a closely-related group of amendments, so close that I should like to treat them as consequential. They deal with the provisions in Clause 11 to require information from landlords and their agents.

I have no objection to the requiring of information but I wish to know precisely what information is required and for what purposes because the phrases in the Bill seem to me extremely wide. On Tuesday, the Minister told us that he did not want to go on fishing expeditions. I hope that he meant what he said because if he did he will accept a version of the amendments.

Let us consider the power given in the Bill to require information either to the authority or to a person authorised to exercise any function on behalf of the authority. It may require any appropriate person to supply information of a "prescribed description" to the authority or other person. There they are: the Government are over-prescribing again.

My amendment seeks to take out the words "of a prescribed description" and insert instead the more specific test of "relevant" information; that is, information relevant to the administration of housing benefit. Surely that is the Government's intention. That is all they want. I would like the clause amended so that that is all they will actually get.

Amendment No. 73 seeks to delete subsection (4), which says: Regulations may provide that any prescribed person, or any person of a prescribed description, is not an appropriate person for the purposes of subsection (I) above".

That means, not being an appropriate person, they would not be required to supply information. In other words, it is a blanket power by regulation to confer exemption on various people from the requirements to supply information. I do not know what the Government had in mind in drafting the clause but, under these powers, one could exempt absolutely anybody one wished. For example, one could exempt all landlords from supplying information. One could exempt all tenants from supplying information. One could exempt all employees of a local authority from supplying information. I am sure that none of that is intended by the present Minister, but he knows that he will not be in office for ever. We have no idea who in future—even in the far distant future—may be using the clause. The power is not sufficiently carefully drawn.

As for the power to supply information, in the hands of people given a blank cheque like this such powers are definitely capable of abuse. There are regrettably large numbers of people in this country who hate some category of their fellow subjects. Hearing the noble Baroness, Lady Castle of Blackburn, in such good voice earlier, I was reminded of the campaigns of the noble Baroness, and for those I take off my hat to her. They were against the cohabiting rules as they were in days of yore. Those were rules which allowed the exercise of a vast amount of prurient interest in other people's private lives. One can imagine those powers in the hands of a jealous ex-husband. I repeat the principle that public officials are also private people with all the ordinary passions that ordinary people have.

Regrettably, there are large numbers of our fellow citizens so passionately homophobic that they are prepared to commit breaches of the peace against other people they just happen to dislike. We all have every right to dislike each other, but it does not follow that we should commit breaches of the peace as a result. One could imagine information being demanded, asking for the precise details of all the sleeping arrangements, which could be brought together precisely in order to serve that kind of prejudice.

One knows also that there are certain people who are near to the point of paranoia about illegal immigration. One knows how complicated immigration documents may be: those of us who sat through the asylum Bill last summer had plenty of evidence of that. Again, for those of our fellow subjects who happen to hate everybody with a black skin—we must admit that there are such people—the powers under this clause would authorise a fishing expedition for other than a public purpose. No doubt the official concerned would be able to argue that there was a public purpose, because, of course, it is the very essence of all these prejudices that they involve the belief that the person against whom one is prejudiced is more likely to be criminal than almost anyone else.

As for the power to supply information, I imagine that the power to convey exemptions from the list of appropriate people might be used to exempt children from being required to supply information against their parents. I hope it would be so used, but the Bill does not say so. The Minister may or may not, in days to come, choose to prescribe children under subsection (4) as being not appropriate people to supply information against their parents.

There is not even any clear recognition of the basic common law provision that husband and wife may not be required to supply evidence against each other. It may be that all that will be all right in regulation but we do not know. If we are asked to accept that it will be, we are being asked to accept the creed of legislation of the noble Lord, Lord Peston, that it will be all right on the night. Perhaps it will, but perhaps it will not. If we let this clause go from us we have given up our chance to review the exercise of power. Still we are told that Parliament controls the executive. I know it does not but we ought to try every now and then. I beg to move.

Lord Mackay of Ardbrecknish

The regulation making powers within Clause 11 enable the Secretary of State to prescribe, by regulations, the type of information a landlord or agent may be required to supply. We intend that the information will cover full postal addresses and ownership details of a property, for example, where the properties are owned or run by limited companies, details of those companies, their ownership and associated companies. Managing or letting agents and other persons acting on behalf of the landlord will be required to supply the local authority, if requested, with the name of the responsible landlord, and vice versa, and may be asked to give details of other properties they manage. That matter concerns many of the important points we discussed on the previous amendment.

Information covered by this provision will not be restricted to properties which fall within the local authority's own area. It will extend to all geographical areas in which housing benefit may be payable. Moreover, information will not be restricted to those properties containing housing benefit claimants or those to whom such benefit is paid direct. This is particularly important as landlords do not always know which, if any, of their tenants is in receipt of housing benefit, if they are not being paid directly.

Amendments Nos. 71 and 72 to which the noble Earl has spoken seek to remove the Secretary of State's power to prescribe in regulations the types of information a landlord or agent may be required to supply to an authority. This would be replaced by a general provision giving each local authority or its contractor the right to demand any information from a landlord or agent it considered relevant. Of course we want the information which landlords and agents are required to supply to be relevant. But we believe that it should be relevant to the primary policy intention behind the clause: the prevention, detection and investigation of housing benefit and council tax benefit fraud. We intend to set out the detail in regulations, after consultation with local authorities and other interested organisations. The approach we have adopted ensures that we have the maximum flexibility to adapt the provisions in the light of experience.

There would be a number of difficulties if the clause were to be amended as suggested. First, removing the power to prescribe, by regulations, the types of information which may be required and putting the word "relevant" on the face of the Bill leaves open the whole question of what information is relevant, and what it is relevant to. This exposes local authorities to allegations that they are exploiting a general provision for purposes other than those for which the power is intended.

Secondly, although it might appear quite reasonable to allow local authorities to determine, in the light of their local knowledge and experience, what information is relevant to the prevention and detection of benefit fraud in their area, each local authority would apply its own set of criteria in making that decision. Practice could vary therefore from authority to authority and from contractor to contractor. The fact that this new power extends beyond local authority boundaries means that some authorities might collect one type of information, while another group might gather a different type of information. The Committee can see that a certain amount of confusion could easily arise.

The result would be multiple sets of data which, when compared with each other—this is one of the important things this Bill would enable us to do—might not reveal the very discrepancies this power is designed to uncover. To get the maximum benefit from the information gathered using this power we must ensure that we have some uniformity in the type of information to be required. It is our intention that this uniformity will be achieved by laying down in regulations descriptions of the information authorities may require a landlord to supply.

Finally, the amendments would lead to increased local authority administration costs resulting from processing differing sets of information and missed opportunities to uncover benefit fraud by dishonest landlords because different authorities would be collecting different information. These amendments would introduce difficulties which will not arise with the clause as it stands.

Turning now to Amendment No. 73, it may be helpful if I explain to the Committee that we intend to use the regulation-making powers in this provision to require information only from landlords or agents who are being considered for, or are in receipt of, direct payments of housing benefit and in relation to whom there is either a suspicion of wrongdoing or an ongoing investigation into an allegation of benefit fraud.

The reason for specifying the first of those two conditions is that one of the commonest types of fraud involving landlords is that where direct payments are received in relation to either fictitious tenants or genuine tenants who are no longer resident in their properties.

We shall be monitoring the use and effect of that power. If it should become apparent, for example, that dishonest landlords are evading the requirement to provide information by avoiding the direct payment facility, we will have the flexibility to adjust the classes of landlords or agents to whom the provisions of this clause will apply. The need for this flexibility is the reason why the details of who is to supply what information, and in which particular circumstances, have been left to subordinate legislation.

The other restriction on the use of this power—that is, to apply the requirement to landlords suspected of being implicated in some misdeed in relation to the benefit system—is designed to prevent wholly innocent landlords from being subject, unnecessarily, to a burden on their business and exposed, unreasonably, to the possibility of a penalty for non-compliance.

Those classifications of landlord will be set out in regulations made under the powers in subsection (1) of the new Section 126A of the Social Security Administration Act 1992 inserted by this clause. The separate regulation-making power in subsection (4), which this amendment seeks to remove, will allow us to make further regulations to provide for prescribed persons to be excepted from this requirement.

We do not, at present, have any plans to exclude particular persons or classes of person from these provisions but we believe that it is important to have the power to prescribe exceptions in reserve should this prove necessary in the light of experience. Our initial intention is, as I have explained, to use the powers in subsection (1) to draw the conditions for the use of this power quite tightly. That being the case, we do not feel that there is a need to define further classes of person to whom the provisions will not apply.

If, however, experience shows that we must cast our net wider, then we shall need to consider whether particular cases or classes of case which would then be caught should be excluded. Moreover, if this measure is causing extreme unintended difficulties for certain classes of landlords, or individuals, we believe it is both sensible and prudent to have the flexibility to provide for exceptions to the rule. Subsection (4), as it stands, provides for these flexibilities.

This amendment would remove that safeguard. I do not believe that to do so will assist local authorities in their fight against fraud. Nor will it usefully extend the scope of the powers already contained in Clause 11 to a greater number of landlords, if that is what is intended by the noble Earl. It will, however, make it far more difficult to provide for any anomaly which might arise in the future.

I appreciate, because it is not the first time, that the noble Earl is rightly suspicious of the Executive gaining powers. I happily concede that the department may not always have enlightened Ministers such as Mr. Lilley and myself running it. But I take a broadly generous view of the democratic process—

Baroness Hollis of Heigham

But not an optimistic one of your own party.

Lord Mackay of Ardbrecknish

Within reason, when I am old and grey, or older and greyer—depending on how noble Lords are looking at this time of night—then of course some younger colleagues in my party may well succeed me in being Ministers. I have absolute confidence in them approaching this matter sensibly. Leaving that aside, and going back to the serious point, I hope that, in the light of my explanation, which is obviously on the record, the noble Earl will feel that he has got me to put on the record what are our intentions and will feel that the amendments are not necessary.

10.30 p.m.

Earl Russell

I thank the Minister for that reply. I propose to try to save the Committee's time. We have gone around this course several times already. So, unless he objects and wishes to intervene, I propose to represent as a dialogue his points and my points. If he objects to the way these are put, I will give way to him instantly.

First, in relation to subsection (1) I do not object to the categories of information the Minister proposes to prescribe. My response is that if that is what he wants to prescribe, why does he not say so? If he did, I would make no complaint about the clause.

The Minister will invoke, as he has a thousand times, the virtues of flexibility. I reply: why only his flexibility? He talks about adapting the provisions in the light of experience. Why only his experience? When have any such provisions been adapted in the light of Parliament's experience, or the local authority's experience, or the claimant's experience? Why should the experience of the Department of Social Security have this unique privilege? It does not seem to me to be reasonable.

The Minister exclaimed in horror that if this amendment were accepted practice might vary. He will have heard of the principle of horses for courses. It has quite a lot to recommend it.

He talked about the need to compare by means of an identical system of data. In the bureaucrats' heaven the world might indeed be like that. But things are very, very different from each other. I was suddenly reminded while the Minister was speaking of a speech by the late Lord Swann during debate on the education Bill in 1988. I quote from memory and may not be quoting exactly. Lord Swann referred to a questionnaire sent to university departments asking what they were doing to promote the values of free enterprise. Lord Swann said: "This caused considerable perplexity when it fetched up in various faculties of divinity". The Minister will see from that why I think the Procrustean power to compare identically matched data, though it does have its superficial attractions, comes out of the bureaucrats' heaven and the rest of the world's hell.

Finally, I am deeply disappointed that in subsection (4) the Minister has no intention of excluding children from the category of appropriate persons. Has he considered what that will do to relations between parents and children? If information is received from an innocently prattling 4 year-old which leads to the parents being evicted, the parents inevitably will feel resentment and the child will inevitably feel guilt. Has the Minister no sense of priorities? If I had no other objection but that alone, that in my view would be sufficient for asking the opinion of the Committee.

10.37 p.m.

On Question, Whether the said amendment (No. 71) shall be agreed to?

Their Lordships divided: Contents, 11; Not-Contents, 42.

DIVISION No. 5
CONTENTS
Addington, L.	Grey, E.
Alderdice, L.	Redesdale, L.
Clancarty, E.	Russell, E. [Teller.]
	Turner of Camden, B.
Falkland, V. [Teller]	Whitty, L.
Gould of Potternewton, B.	Winchilsea and Nottingham, E.

NOT-CONTENTS
Anelay of St. Johns, B.	Long, V.
Attlee, E.	Lucas, L.
Balfour, E.	Lucas of Chilworth, L.
Blatch, B.	Lyell, L.
Brabazon of Tara, L.	Mackay of Ardbrecknish, L.
Brougham and Vaux, L.	Mackay of Clashfern, L.
Chesham, L. [Teller]	[Lord Chancellor.]
Coleridge, L.	Mackay of Drumadoon, L.
Courtown, E.	Marlesford, L.
Cumberlege, B.	Miller of Hendon, B.
Denton of Wakefield, B.	Mountevans, L.
Ferrers, E.	Park of Monmouth, B.
Goschen, V.	Pearson of Rannoch, L.
Haddington, E.	Shaw of Northstead, L.
Hardwicke, E.	Skelmersdale, L.
Harlech, L.	Strange, B.
Harlech, L.	Strathclyde, L. [Teller]
Henley, L.	Trumpington, B.
HolmPatrick, L.	Ullswater, V.
Keyes, L.	Wilcox, B.
Kingsland, L.	Willoughby de Broke, L.
Lindsay, E.	Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

10.43 p.m.

[Amendments Nos. 72 and 73 not moved.]

Clause 11 agreed to.

House resumed.