HL Deb 02 April 1998 vol 588 cc465-94

House again in Committee.

Clause 27 [Restrictions on entitlement to benefit in certain cases of error]:

Lord Hardie

moved Amendment No. 76A: Page 17, line 28, at beginning insert ("Subject to subsection (1 A) below,"). The noble and learned Lord said: In moving Amendment No. 76A I wish to speak also to Amendments Nos. 78, 79, 81, 85, 85A, 87, 91 to 97 inclusive, 132, 147E to H inclusive, 147J and 147M.

Amendments Nos. 87, 97 and 132 relate to entitlement to arrears where claimants have obtained a revision of the Secretary of State's decision. The other amendments will ensure that the provisions of Clauses 27 and 44 and paragraph 47 of Schedule 6 comply with European Community law requirements to provide an effective remedy. They will also ensure compliance with the European Convention on Human Rights (ECHR) which requires a proper determination of civil rights.

During the Bill's Second Reading in this Chamber the noble Lord, Lord Goodhart, raised concerns regarding Clause 27 and its compliance with European legislation. I am grateful to him for that. I shall explain the purpose of our amendments. I am also grateful to the noble Earl, Lord Russell, who also raised concerns about Clause 27. I hope that I shall be able to satisfy the noble Earl's concerns.

It may assist the Committee if I briefly explain the purpose of Clause 27 before I explain why the amendments have been proposed. Clause 27 deals with restrictions on entitlement to arrears of benefit following a decision by a commissioner or a court which overturns the previous view of the law. The clause replaces and clarifies existing provisions in Sections 68 and 69 of the Social Security Administration Act 1992. These provisions are complicated and have been subject to legal challenge.

The clause applies where a commissioner or a court makes a decision in a case which reinterprets the law in a particular area. But the clause as originally drafted provides that only the person involved in that case will have any increase in his benefit entitlement paid from the date of the original decision. All others affected by the new interpretation of the law would have had any increase paid from a common date set in regulations. That approach was intended to safeguard public funds.

However, in the light of what was said at Second Reading, we have looked again at the construction of the clause and have concluded that to ensure compliance with European law—and to satisfy, at least as far as possible, the concerns of noble Lords opposite—amendments are required.

Amendments Nos. 76A and 85A will ensure that when the outcome of an appeal overturns an understanding of the law, arrears will be payable in look-alike cases where the Secretary of State withheld making a decision as a decision in a lead case was pending; required an appeal tribunal or a commissioner to refer a case to her so that she could withhold making a decision until after the lead case was decided; and where the Secretary of State supersedes the decision of a tribunal or a commissioner as a consequence of the decision in a lead case. I hope that that will answer the question posed by the noble Lord, Lord Higgins, when we discussed Clauses 25 and 26.

Amendments Nos. 91 and 96 provide similar provisions for child support in Clause 44 as do Amendments Nos. 147E and 147M, which relate to paragraph 47 of Schedule 6.

Amendments Nos. 78, 79, 81 and 85 will ensure that people who have lodged an appeal against a decision before the date of the commissioner's or court's determination in the lead case will have any arrears of benefit paid from the date they become entitled to the relevant benefit. This will ensure that where claimants have done all that they could to correct an error by appealing, they will not be disadvantaged when the point of law in a lead case is decided favourably to them.

Amendments Nos. 92, 93, 94, 95, 147F, 147G, 147H and 147K will ensure that similar provisions will apply where a person has appealed against a child support decision before the date of the commissioner's or the court's determination in the lead case.

The restrictions on payment of arrears will still apply to claimants who did not appeal against the Secretary of State's decision and are nevertheless affected by the re-interpretation of the law. Amendments Nos. 87, 97 and 132 will clarify in the Bill and in the Social Security Administration Act 1992 that this includes claimants who obtained a decision from the Secretary of State, or a revision or supersession of that decision but did not subsequently appeal. Claimants in this position will have any change to benefit or maintenance applied from a common start date—the date of the "determination" of the commissioner or the court in the lead case.

The department always seeks to act within the law. However, there are occasions when a long-standing interpretation of the law is overturned by the courts. Without a power to restrict arrears, the new interpretation could mean that increased benefit would be payable to large numbers of people from the date of their original benefit decision. Allowing windfall payments of arrears of benefit for past periods following a reinterpretation of the law would not be an effective use of limited resources.

The department spends £100 billion of public money each year. We want to make sure that expenditure is focused where need is greatest. This clause, as amended, will mean that the department can fulfil the requirements of European Community law and the European Convention on Human Rights while at the same time exercising proper stewardship of the public purse. It makes sure that changes in interpretation of the law do not result in large unforeseen public expenditure consequences to people who have not made the necessary application. What is more, trawling through thousands of cases to find the ones affected would cost time and money—money better spent on improving services for all claimants.

I hope that I have assured the Committee that the amendment will ensure that the Bill's provisions restricting benefit entitlement in these circumstances comply with the requirements of European Community law and the European Convention on Human Rights.

Perhaps I may again acknowledge the constructive contributions made at Second Reading on this clause. I trust that the amendments will reassure the Committee on the concerns voiced during that debate. I beg to move.

Baroness Anelay of St. Johns

First, I confirm that the explanation given by the noble and learned Lord satisfies the points previously made by my noble friend Lord Higgins with regard to arrears.

I have to take issue—that may be too strong a word—on a few points. I am somewhat bemused by the explanation given by the Minister. Had it come from Members of our Benches when we sat on the other side of the Chamber, it might have raised more than just one eyebrow of those who belong to the Minister's party. I am pleased to hear the Government taking such great care of the national purse. However, I question the use of the word "windfall" in this context. I am aware that there are occasions when a policy intention is frustrated unexpectedly. What one had thought was the law is not the law because of the way it has been determined in another place. That can happen, and people can find themselves eligible to receive benefits to which they did not appreciate that they were entitled but hoped that they were. I would not call that a windfall. I would have said that that was the money to which they were entitled. Whether those people consider it a bonus is another matter. I believe that they would simply consider it as benefit to which they were entitled and upon which their case had been proved.

I welcome the fact that the Government have approached the problem of the incorporation of the European Convention on Human Rights in the Bill. Perhaps I may be somewhat cheeky and venture to suggest that this is the first Bill going through your Lordships' House where the Government have managed to address the problems of both the incorporation of the ECHR and the consequences of devolution in one Bill. I hope that this is a good sign for activity by the Government on those bases in future Bills.

Lord Goodhart

I do not wish to say much on this occasion. I fear that I may trespass on what my noble friend Lord Russell may say on the next group of amendments. I know that he will wish to expand somewhat on the effect of the amendments in the current group.

However, I am most grateful to the noble and learned Lord the Lord Advocate. This has moved a substantial way in the direction we sought at Second Reading. I am particularly grateful that the Government have taken on board the points that I and others raised on the European Convention on Human Rights. Therefore so far as the amendments go we welcome them.

Lord Hardie

I would not suggest for a moment that the noble Baroness could ever be cheeky either in this House or elsewhere.

Perhaps I should clarify the use of the word "windfall". I had in mind people who had not claimed benefit. The provisions which we shall bring into effect, subject to the amendment being accepted, will be to the benefit of the people who thought they were entitled to benefit, and claimed. They would obtain the benefit. But in respect of those who had not so claimed, involving trawling through records, I think that it would be seen in the nature of a windfall if they were to receive a cheque for a substantial sum of money in respect of payment over a number of years. I commend the amendment.

On Question, amendment agreed to.

Earl Russell

moved Amendment No. 77: Page 17, line 33, after ("decision") insert ("on another case"). The noble Earl said: In moving this amendment, with the leave of the Committee, it might be convenient if I were to take with it the question that Clause 27 stand part. It is in the next group. One reason is that I would have to say at least three quarters of the same thing which does not seem a good idea. Another reason is that it will take me some time to work out exactly how many amendments in the group might be made redundant by the amendment just put forward by the noble and learned Lord the Lord Advocate. My impression is that it would make a number of them redundant, but probably not all of them. Since the issues involved are all quite technical, and since they are all interrelated, it might be as well to take them all together.

All of these issues relate to what is known colloquially as the anti-test case rule. The effect of that rule is: if there is a test case which establishes a principle in consequence of which it becomes clear that many other people have an entitlement to benefit, the entitlement to benefit goes back only to the time the case was decided, not to when they originally acquired what is now seen as the entitlement.

That rule is not new. It has been the subject of a good deal of litigation and parliamentary proceedings. It led to some drama in this Chamber during debate on the Social Security Bill in 1990, when, I regret to say, I disgraced myself by having the House count it out—which, I assure your Lordships, was not my intention.

I was quite relieved when that provision came before the Court of Appeal. Lord Justice Millett said that the Secretary of State's interpretation of the clause to which I had objected was "so unreasonable that Parliament could not possibly have intended it". The provision with which we were dealing in 1990, which tried to prevent the courts from upsetting the anti-test case rule, directed the courts to treat past judgments as if they had not been made. Lord Justice Millett said that that was an attempt, not so much to change the law, as to rewrite history.

So the question which is behind all this argument about the anti-test case rule is how we understand the concept of entitlement—whether, in fact, we accept the principle of Lord Justice Scarman that all social security law rests on the concept of entitlement, in which case the entitlement was there from the beginning; or whether we treat it as more a matter of grace and favour. The noble Baroness, Lady Anelay, touched very expertly on that issue.

I am, I must admit, on the entitlement side of this argument. I regard it as akin to the concept of a peerage in abeyance. It may be in abeyance—in one or two recent cases possibly as far back as the reign of Henry VII—but once the matter is resolved, it is clear that all the intervening generations were in fact Peers, even though that was not perceived by the Committee of Privileges of this House. Similarly, it might be argued that an entitlement is an entitlement, whether or not the courts have yet perceived it. The alternative interpretation has the effect, as it were, of suspending claimants from a sky-hook with no visible means of support. But since we dealt with that argument in relation to Clause 25, I do not need to enter into it again.

This Bill does not invent the anti-test case rule. What it does is to extend it from claims and reviews to appeal tribunals, social security commissioners and the courts. It extends that sort of control over the operation of the courts into a much higher area of the law, and therefore makes the possibility of collisions between the legislature and the courts rather more acute than before.

This string of amendments, beginning with Amendment No. 77, restricts the operation of Clause 27 so that it shall apply only to cases where, in consequence of a decision in the lead case, a person makes a new claim for benefit or applies for his case to be revised. I shall read Hansard carefully to see exactly how that fits with the remarks of the noble and learned Lord. It is a question that I cannot resolve on the sudden, but I am very interested in comparing the two matters together. It disapplies the anti-test case rule where a claim has been postponed under Clause 25 or the Secretary of State has revised or superseded a decision, exercising her powers under Clause 26. There again, I shall look with great care at the amendments the Minister has put forward. Again, it is not a decision I should want to make on the sudden. Or, it disapplies the anti-test case rule where the initial decisions on a lookalike case were made in accordance with the case law that was then binding. It disapplies them—that I did not hear in the noble and learned Lord's amendment—where the test case was made under regulations subsequently found to be ultra vires. If that were allowed, the Secretary of State would in effect be benefiting from her own poor decision-making, which would be, to say the least, undesirable.

On the other hand, clause stand part—which I confess I regard as the preferable option—would altogether stop these extensions of the anti-test case rule into the higher areas of jurisdiction. One of the amendments prevents the extension of the anti-test case rule to the European Court of Justice.

I listened with great interest to what the noble and learned Lord had to say about European law. I do not think I heard him say that he was stopping the extension of the anti-test case rule to the European Court of Justice. If I am mistaken, I apologise to him, but I did not hear it.

It is doubtful whether Parliament has the power to bind the European Court of Justice. Indeed, it is more than doubtful; it seems to me in the very highest degree improbable that it has. The pillars of the European Court of Justice arise under the treaties; they do not arise from any Act of this Parliament. There is, I think, a very strong case for arguing that that is something which cannot actually be done. It raises the whole question on which the noble and learned Lord, Lord Slynn of Hadley, touched in his resolution of Bate's case, to which I referred earlier; whether the whole of this principle of the anti-test case rule is in fact compatible with European law at all. That is a question which has not yet been the subject of any judicial proceedings, and on which many doubts have been expressed—in this House, in the Court of Appeal and in the Appellate Committee of this House. It is one good reason why the anti-test case rule should be dropped altogether.

The noble and learned Lord will say that that will have a consequence for public funds. Indeed it will, and it is a matter that should be taken seriously. But one has to set two possible wrongs in balance against each other. Wherever any proceedings are pending, something has to be done pending their resolution. That something will be to the detriment of either one party or the other; there is no way that that can be avoided. I would have thought that there was a case for arguing that these things ought to be resolved in the interim period in the interests of the claimant, who is less able to bear the loss, rather than in the interests of the taxpayer, who is collectively rather better able to resolve the loss, and that the underlying principle which reconciles the two of them is that justice should not be unduly delayed, a principle of which I know the Government are perfectly well aware, as we all are. I beg to move.

Lord Hardie

These amendments, as the noble Earl observed, overlap considerably some of the amendments that we have just dealt with. I am pleased to say that the Government support the general thrust of the amendments that the noble Earl has brought forward, but we think and hope that we have addressed those concerns in the amendments to which I spoke a few moments ago.

Amendment No. 77 seeks to clarify that the provisions of the clause do not apply to the lead case. I can assure your Lordships that it was never the intention that the restrictions on arrears provided for in this clause should apply to that case. The provisions of the clause will apply to other cases to which the new interpretation of the law applies. Full arrears will be payable in the lead case. Accordingly, the amendment is unnecessary.

Amendment No. 80 seeks to ensure that the restrictions on arrears of benefit do not apply to decisions made in lookalike cases by an appeal tribunal, a commissioner or a court. The Government have been concerned that claimants should be entitled to an effective right of appeal against a decision of the Secretary of State, an appeal tribunal or a commissioner. As a result, we tabled Amendments Nos. 78, 79, 81 and 85 which will ensure that the provisions of the clause will apply only to decisions made by the Secretary of State. The government amendments will also ensure that the clause complies with obligations arising in EC law and the European Convention on Human Rights. Claimants will have an effective remedy against decisions.

Amendments Nos. 82 and 84 would allow unlimited arrears for people who happened to have applied for a revised decision or applied for a decision on their entitlement to be superseded before the date of the commissioner's or court's determination in the lead case. Claimants who did not apply for a revision or supersession before the relevant determination would have any award of, or increase in, benefit limited. This would lead to inconsistent and unfair treatment between claimants.

The proposed amendments would also have other implications. A significant period of time may have elapsed before a commissioner or a court reinterprets the law. Potential arrears of benefit may be considerable. For reasons I have already explained, it would not be appropriate to pay those arrears in cases where there was no outstanding claim prior to the decision in the lead case.

Amendment No. 83 proposes that a decision of the Secretary of State to revise a claimant's entitlement to benefit should be made in accordance with an earlier decision of a commissioner or court. However, the clause is drafted in such a way that the relevant determination must have been made in order for the Secretary of State to revise a decision. Therefore the amendment would appear to be unnecessary.

Amendment No. 86 seeks to remove paragraph 4 of the clause. Paragraph 4 puts beyond doubt that restrictions on arrears will also apply where the commissioner or court determines that regulations are invalid for the period before the relevant determination. As your Lordships will know, the Secretary of State makes regulations based on her understanding of the powers laid down by Parliament. If that power is misunderstood, there are well-established procedures for handling these cases, and the restrictions of Clause 27 will apply.

Amendment No. 88 seeks to exclude decisions of the European Court of Justice from the restriction of the clause. The Bill makes it clear that decisions of the European Court of Justice are determinations by a "court", so restrictions on arrears apply. It is not a new provision. The words are on the face of the Bill to clarify existing legislation. The amendment seeks to exempt these judgments and would result in potential unlimited backdating of arrears. It would be unfair to exempt the decisions of the European Court of Justice while maintaining that the restrictions apply to decisions of other courts.

Amendment No. 89 would remove the subsections of the clause which allow regulations to be made to prescribe how the date of the relevant determination shall be determined. The amendment would specify that only the first decision on an issue, made in the claimant's favour, will be a relevant determination. We intend to prescribe how the determination of a higher court is to be treated as if it had been made on the date of a determination of a lower court. For example, a commissioner may decide a case in one way, the Court of Appeal take an opposite view, and this House, sitting as the Judicial Committee, decide that the commissioner's interpretation is correct. The regulations would clarify that the date of the relevant determination would be that made by the commissioners. These regulations will apply equally when cases are determined in the Secretary of State's or the claimant's favour. The first decision made by a commissioner of the court which is subsequently confirmed by a higher authority will be the relevant determination subject to any further appeal. Therefore this amendment is unnecessary.

Amendment No. 90 proposes to insert a new subsection in the clause which will ensure that decisions made by the Secretary of State under Sections 25(4) and 26(3) or (5) are not subject to the restrictions of the clause. I hope that the noble Earl, Lord Russell, will be reassured to know that the Government have tabled amendments which we have already dealt with and which have addressed many, if not most, of his concerns in this area. I have already explained the amendments in full to the Committee and do not think it is necessary to repeat what I have said. In those circumstances I would invite the noble Earl to withdraw these amendments at this stage. He has of course indicated that he would wish to read specifically about the government amendments. In the light of that I would invite him to withdraw his amendments.

As far as clause stand part is concerned, I think I have effectively dealt with the thinking behind Clause 27 in part-outlining the Government's amendments when I spoke earlier. I would again invite the noble Earl to withdraw his opposition to that.

9.15 p.m.

Earl Russell

I thank the noble and learned Lord most warmly for that reply. I am sorry to have put him to the trouble of going through some of these things twice, but this is by way of being the Schleswig-Holstein of social security law, and at times I feel rather like its Lord Palmerston.

I think the noble and learned Lord has gone a very long way towards meeting what I was worried about in the amendments. I think it would be extremely unwise of me to reach any final decision tonight on whether he has met all or only part of my concerns. Certainly he has met a large part of them.

I was considerably reassured by a number of things that he said, although I am still, I must confess, a little concerned about the European Court of Justice. Clearly I shall not be pressing these amendments tonight but I shall be reading the answers carefully and deciding what to bring back.

On the basic thinking of Clause 27 itself, there is still a great deal that divides us, but granted that the noble and learned Lord still adheres to the basic framework of the clause, he may well have gone as far to meet me within that assumption as he could. I am in any case extremely grateful to him and beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Lord Hardie

moved Amendment No. 78: Page 17, line 34, after ("made") insert ("by the Secretary of State"). The noble and learned Lord said: I beg to move Amendment No. 78 formally.

On Question, amendment agreed to.

The Deputy Chairman of Committees (Viscount Allenby of Megiddo)

Before calling Amendment No. 79, I should inform the Committee that if this amendment is agreed to I cannot call Amendment No. 80.

Lord Hardie

moved Amendment No. 79: Page 17, line 36, leave out from beginning to ("in") in line 37. The noble and learned Lord said: I beg to move Amendment No. 79 formally.

On Question, amendment agreed to.

[Amendment No. 80 not moved.]

Lord Hardie

moved Amendment No. 81: Page 17, line 38, leave out ("by the Secretary of State"). The noble and learned Lord said: I beg leave to move Amendment No. 81 formally.

On Question, amendment agreed to.

[Amendments Nos. 82 to 84 not moved.]

Lord Hardie

moved Amendments Nos. 85 and 85A: Page 17, line 41, leave out ("by the Secretary of State"). Page 17, line 43, at end insert— ("(1A) This section does not apply where the decision of the Secretary of State mentioned in subsection (1)(b) above—

  1. (a) is one which, but for section 25(2) or (3)(a) above, would have been made before the date of the relevant determination; or
  2. (b) is one made in pursuance of section 26(3) or (5) above.").
The noble and learned Lord said: I beg to move these amendments en bloc formally.

On Question, amendments agreed to.

[Amendment No. 86 not moved.]

Lord Hardie

moved Amendment No. 87: Page 18, line 14, at end insert— ("( ) It is immaterial for the purposes of subsection (1) above—

  1. (a) where such a decision as is mentioned in paragraph (b)(i) falls to be made, whether the claim was made before or after the date of the relevant determination;
  2. (b) where such a decision as is mentioned in paragraph (b)(ii) or (iii) falls to be made on an application under section 10 or (as the case may be) 11 above, whether the application was made before or after that date.").
The noble and learned Lord said: I beg to move Amendment No. 87 formally.

On Question, amendment agreed to.

[Amendments Nos. 88 to 90 not moved.]

Clause 27, as amended, agreed to.

Clause 28 agreed to.

Clause 44 [Child support: cases of error]:

Lord Hardie

moved Amendments Nos. 91 to 97: Page 30, line 23, at beginning insert ("Subject to subsection (1A) below,"). Page 30, line 30, after ("made") insert ("by the Secretary of State"). Page 30, line 33, leave out from beginning to ("with") in line 35. Page 30, line 38, leave out ("by the Secretary of State"). Page 30, line 42, leave out ("by the Secretary of State"). Page 30, line 45, at end insert— ("(IA) This section does not apply where the decision of the Secretary of State mentioned in subsection (1)(b) above—

  1. (a) is one which, but for section 28ZA(2)(a), would have been made before the date of the relevant determination; or
  2. (b) is one made in pursuance of section 28ZB(3) or (5)."). Page 31, line 11, at end insert—
("( ) It is immaterial for the purposes of subsection (1) above—
  1. (a) where such a decision as is mentioned in paragraph (b)(i) falls to be made; or
  2. (b) where such a decision as is mentioned in paragraph (b)(ii) or (iii) falls to be made on an application under section 16 or (as the case may be) section 17,
whether the application was made before or after the date of the relevant determination.").
The noble and learned Lord said: I beg to move Amendments Nos. 91 to 97 en bloc formally.

On Question, amendments agreed to. Clause 44, as amended, agreed to.

Clauses 29 to 34, 36, 37 and 39 agreed to.

Clause 45 [Vaccine damage payments: decisions superseding earlier decisions]:

Lord Hardie

moved Amendment No. 98: Page 32, line 25, at end insert— ("( ) Such notice as may be prescribed by regulations shall be given of a decision under this section."). The noble and learned Lord said: In moving Amendment No. 98, I wish to speak also, with the leave of the Committee, to Amendments Nos. 99 and 138.

We now come to a group of amendments of a technical nature relating to the Vaccine Damage Payments Scheme. As such, I hope noble Lords will allow me to present them as a set rather than take each one individually.

Amendment No. 98 is a minor, technical amendment to Clause 45. Clause 45 inserts a new Section 3A into the Vaccine Damage Payments Act 1979. In effect, it replaces the current section—Section 5—which deals with reconsideration of the Secretary of State's decision on a claim for a vaccine damage payment and provides for claimants to be notified of decisions. New Section 3A as currently drafted does not contain provision for notifications. This amendment provides a regulation-making provision to deal with the notification of decisions.

Amendment No. 99 is a technical amendment to Clause 46. It allows the Secretary of State to make regulations on the procedures to be followed by appeal tribunals that hear appeals against vaccine damage payments decisions. Clause 46 replaces Section 4 of the Vaccine Damage Payments Act. That section includes provision for regulations to be made for the procedure to be followed when determining matters referred to tribunals. The power needs to be carried forward and this amendment does no more than that.

The final .amendment is Amendment No. 138. The principle of finality is fundamental to the system of decision-making. A vaccine damage payments decision, once made, should be binding both on the department and on the claimant until it is reversed or changed on appeal. This amendment to Schedule 6 ensures that decisions made by the Secretary of State will be final until reversed under Clause 45 or changed on appeal under Clause 46. This ensures consistency across the parts of the Bill relating to social security benefits, child support and vaccine damage payments. I commend the amendments to your Lordships. I beg to move.

On Question, amendment agreed to.

Clause 45, as amended, agreed to.

Clause 46 [Vaccine damage payments: appeals to appeal tribunals]:

Lord Hardie

moved Amendment No. 99: Page 32, line 38, at end insert ("and (b) such provision with respect to proceedings before appeal tribunals as the Secretary of State considers appropriate. ( ) The regulations may in particular make any provision of a kind mentioned in Schedule 5 to the Social Security Act 1998."). On Question, amendment agreed to.

Clause 46, as amended, agreed to.

Clauses 47 to 58 and 60 to 62 agreed to.

Clause 63 [Recovery of contributions etc.]:

On Question, Whether Clause 63 shall stand part of the Bill?

Lord Goodhart

Just by way of comment, I wish to raise the point that distress is an extremely archaic remedy. I think it is time that we restricted it where it does exist or perhaps abolished it altogether rather than extended it. I am sorry to see it in the Bill as an additional remedy for the recovery of the contributions.

Clause 63 agreed to.

Baroness Hollis of Heigham

moved Amendment No. 100: After Clause 63, insert the following new clause— (". After section 121B of the Administration Act there shall be inserted the following sections— Liability of directors etc. for company's contributions.

121C.—(1) This section applies to contributions which a body corporate is liable to pay, where—

  1. (a) the body corporate has failed to pay the contributions at or within the time prescribed for the purpose; and
  2. (b) the failure appears to the Secretary of State to be attributable to fraud or neglect on the part of one or more individuals who, at the time of the fraud or neglect, were officers of the body corporate ("culpable officers").
(2) The Secretary of State may issue and serve on any culpable officer a notice (a "personal liability notice")—
  1. (a) specifying the amount of the contributions to which this section applies ("the specified amount"); and
  2. (b) requiring the officer to pay to the Secretary of State—
  3. 476
    1. (i) a specified sum in respect of that amount; and
    2. (ii) specified interest on that sum.
(3) The sum specified in the personal liability notice under subsection (2)(b)(i) above shall be—
  1. (a) in a case where there is, in the opinion of the Secretary of State, no other culpable officer, the whole of the specified amount; and
  2. (b) in any other case, such proportion of the specified amount as, in the opinion of the Secretary of State, the officer's culpability for the failure to pay that amount bears to that of all the culpable officers taken together.
(4) In assessing an officer's culpability for the purposes of subsection (3)(b) above, the Secretary of State may have regard both to the gravity of the officer's fraud or neglect and to the consequences of it. (5) The interest specified in the personal liability notice under subsection (2)(b)(ii) above shall be at the prescribed rate and shall run from the date on which the notice is issued. (6) An officer who is served with a personal liability notice shall be liable to pay to the Secretary of State the sum and the interest specified in the notice under subsection (2)(b) above. (7) Where, after the issue of one or more personal liability notices, the amount of contributions to which this section applies is reduced by a payment made by the body corporate—
  1. (a) the amount that each officer who has been served with such a notice is liable to pay under this section shall be reduced accordingly;
  2. (b) the Secretary of State shall serve on each such officer a notice to that effect; and
  3. (c) where the reduced liability of any such officer is less than the amount that he has already paid under this section, the difference shall be repaid to him together with interest on it at the prescribed rate.
(8) Any amount paid under a personal liability notice shall he deducted from the liability of the body corporate in respect of the specified amount. (9) In this section— contributions" includes any interest or penalty in respect of contributions; officer", in relation to a body corporate, means—
  1. (a) any director, manager, secretary or other similar officer of the body corporate, or any person purporting to act as such; and
  2. (b) in a case where the affairs of the body corporate are managed by its members, any member of the body corporate exercising functions of management with respect to it or purporting to do so;
the prescribed rate" means the rate from time to time prescribed by regulations under section 178 of the Finance Act 1989 for the purposes of the corresponding provision of Schedule I to the Contributions and Benefits Act, that is to say—
  1. (a) in relation to subsection (5) above, paragraph 6(2)(a);
  2. (b) in relation to subsection (7) above, paragraph 6(2)(b).
Appeals in relation to personal liability notices. 121D.—(1) No appeal shall lie in relation to a personal liability notice except as provided by this section. (2) An individual who is served with a personal liability notice may appeal to an appeal tribunal against the Secretary of State's decision as to the issue and content of the notice on the ground that—
  1. (a) the failure to pay the amount specified under subsection (2)(a) of section 121C above was not attributable to any fraud or neglect on the part of the individual in question;
  2. (b) the individual was not an officer of the body corporate at the time of the alleged fraud or neglect; or
  3. (c) the opinion formed by the Secretary of State under subsection (3)(a) or (b) of that section was unreasonable.
(3) The Secretary of State shall give a copy of any notice of an appeal under this section, within 28 days of the giving of the notice, to each other individual who has been served with a personal liability notice. (4) Where an appeal under this section—
  1. (a) is brought on the basis of evidence not considered by the Secretary of State, or on the ground mentioned in subsection (2)(c) above; and
  2. (b) is not allowed on some other basis or ground,
the appeal tribunal shall either dismiss the appeal or remit the case to the Secretary of State, with any recommendations it sees fit to make, for him to consider whether to revise his decision as to the issue and content of the personal liability notice.
(5) In this section— appeal tribunal" means an appeal tribunal constituted under Chapter I of Part I of the Social Security Act 1998; officer", in relation to a body corporate, has the same meaning as in section 121C above; personal liability notice" has the meaning given by subsection (2) of that section; revise" means revise under section 10 of the Social Security Act 1998.""). The noble Baroness said: This amendment has already been spoken to. I beg to move.

On Question, amendment agreed to.

Clauses 64 to 66 agreed to.

Clause 67 [Rates of short-term incapacity benefit]:

Baroness Hollis of Heigham

moved Amendment No. 101: Page 46, line 4, leave out ("£62.45") and insert ("£64.70"). The noble Baroness said: Amendments Nos. 101 and 102 change references to rates of benefit in Clause 67 in line with the increased rates of benefit provided by the Social Security Benefits Up-Rating Order 1998. These are simply uplifting arrangements and I am prepared to stop at that point and simply say that I commend the amendments to the House. Obviously, I am very happy to give a very full explanation if the Committee is so minded. I beg to move.

On Question, amendment agreed to.

Baroness Hollis of Heigham

moved Amendment No. 102: Page 46, line 7, leave out ("£59.90") and insert ("£62.05"). The noble Baroness said: I have already spoken to this amendment.

On Question, amendment agreed to.

Clause 67, as amended, agreed to.

Baroness Hollis of Heigham

moved Amendment No. 103: After Clause 67, insert the following new clause— VALIDATION OF CERTAIN HOUSING BENEFIT DETERMINATIONS (" .—(1) Subject to subsections (3) and (4) below, in so far as a housing benefit determination made before 18th August 1997 purported to determine that housing benefit was payable in respect of—

  1. (a) charges for medical care, nursing care or personal care; or
  2. (b) charges for general counselling or any other support services,
it shall be deemed to have been validly made if, on the assumption mentioned in subsection (2) below, it would have been so made. (2) The assumption is that, at all material times, such charges as are mentioned in subsection (1) above were eligible to be met by housing benefit where the claimant's right to occupy the dwelling was conditional on his payment of the charges. (3) Where the effect of a review carried out on or after 18th August 1997 was to revise the amount of housing benefit payable in respect of any validated charges—
  1. (a) the revision shall be deemed not to have been validly made in so far as it had the effect of increasing that amount; and
  2. (b) housing benefit shall cease to be payable in respect of those charges as from the beginning of the period for which the benefit was paid on the first pay day after the review.
(4) Housing benefit shall not be payable in respect of any validated charges for any period falling after—
  1. (a) 5th April 1998 where the rent is payable at intervals of a whole number of weeks; and
  2. (b) 31st March 1998 in any other case.
(5) In this section— the dwelling", in relation to a housing benefit determination, means the dwelling in respect of which the determination was made; housing benefit determination- means a determination under section 130 of the Contributions and Benefits Act or the corresponding provisions of the Social Security Act 1986, or a decision on a review of such a determination; medical care" includes treatment or counselling related to mental disorder, mental handicap, physical disablement or past or present alcohol or drug dependence; pay day" means a day on which housing benefit is paid; personal care" includes assistance at meal-times or with personal appearance or hygiene; validated charges" means charges in respect of which housing benefit is payable only by virtue of subsection (1) above."). The noble Baroness said: We now move on to another subject.

These Amendments Nos. 103 and 161 propose to legitimise, from the date of Royal Assent, most payments of housing benefit where this has incorrectly met charges for general counselling and support or personal care. This will prevent local authorities from having to reassess past housing benefit claims and will ensure that local authorities are not required to refund to the department subsidy for benefit previously incorrectly paid for these services.

This has a long history. Housing benefit is a means-tested benefit that helps people on low incomes pay their rent. It is designed so that it also helps with their accommodation-related service charges. In supported accommodation the rent and service charges often contain an element to cover charges for personal general counselling and support. These can be covered by housing benefit, but only where the so-called 50 per cent. rule is satisfied—that is to say, where the majority of the time spent in providing services is spent in providing other, accommodation-related services which housing benefit is able to meet. For the most part we are talking about warden-supported accommodation.

We understand that the majority of local authorities may have been adopting a wider interpretation of the provision of adequate accommodation than is permitted by case law. They may therefore have been meeting a wider range of charges for general counselling and support than intended. Of these a small minority of local authorities may also have been meeting charges for personal care; for example, counselling for drug-alcohol addiction, or supervising the taking of medication. Housing benefit was never intended to meet such charges. This is why charges for personal care are outside the scope even of the housing benefit primary legislation.

A Divisional Court judgment on 24th July 1997 upheld the department's view and earlier case law, that only those service charges for general counselling and support which relate to the fabric of the building satisfy the basic housing benefit eligibility criteria in that they relate to the provision of adequate accommodation; for example, arranging for adaptations to cope with a disability, or undertaking minor repairs such as unblocking sinks.

Outside commentators have estimated that some 500,000 vulnerable tenants on housing benefit, such as the elderly, people with learning disabilities and those with mental health problems, may have received benefit for a wider range of service charges than permitted under the court ruling. We are conducting a major research project to quantify the extent to which supported housing is dependent on housing benefit. But it is clear that many tenants were getting benefit for charges which were not permitted by the regulations.

The court ruling meant that as of July 1997 there was the danger of a potential crisis in community care. The Secretary of State immediately announced a broadly cost-neutral package of measures to prevent this. As a result, first, interim regulations were introduced on 18th August 1997 to allow housing benefit to meet all reasonable charges for general counselling and support in existing supported accommodation, payable as a condition of occupying the dwelling.

Secondly, a compensation scheme was introduced at the end of December last year to enable local authorities to compensate landlords of such accommodation who had lost income because housing benefit was no longer meeting charges for personal care.

Thirdly, we have actively moved forward consideration of the future funding of supported accommodation, which is subject to an ongoing inter-departmental review, by publishing, and seeking views on, the Government's long-term objectives. Over 200 responses have been received from a wide variety of stakeholders and are helping to inform the debate. We intend to implement a sustainable funding system as soon as possible. But this is an extremely complex area with possible repercussions across the supported housing sector. We want a stable, rational funding regime which protects and maintains this extremely important component of community care.

In the mean while, we have acted quickly to introduce a package of measures to provide stability for tenants and landlords in existing supported accommodation. This new clause now seeks to provide stability for those local authorities which have previously met a wider range of support charges from housing benefit than intended.

The bulk of local authorities' expenditure on housing benefit is subsidised by the department. Lower rates of subsidy are paid for incentive areas where authorities have most scope to control spending; for example, overpayments caused by local authority error attract no subsidy. Outside commentators have further estimated that housing benefit claims assessed on a wider interpretation of the law than intended may have cost up to £500 million a year. The majority of any incorrect expenditure would have been subsidised by, and therefore would otherwise be refundable to, the department. However, those payments have helped to meet support charges which have enabled many thousands of vulnerable people to live independently in the community. We believe therefore that the right course is to legitimise those payments as properly made.

The new clause will, therefore, first, remove from authorities the administrative—and costly—burden of calculating overpayments which may, in some cases, go back to the start of the present housing benefit scheme in April 1988. Secondly, it will ensure that authorities are not required to refund to the department the subsidy previously paid in respect of support charges for either general counselling and support or personal care. Thirdly, it will prevent vulnerable claimants from having to repay benefit overpaid in respect of these support charges where this would otherwise be considered appropriate.

I am sure that the Committee will regard the amendments as entirely benign. I commend them to the Committee and I beg to move Amendment No. 103.

9.30 p.m.

Lord Higgins

I fear that, over time, my Treasury halo may have become somewhat tarnished; nonetheless, I find this an extraordinary proposition. The Minister was kind enough to write to me about it. However, for reasons for which I am sure were not her fault, I received the letter only this evening. I do not know the reason for that, but it matters not. The noble Baroness was kind enough to write to me and I had an opportunity during the dinner hour to look at her letter. I have also listened to what she has had to say.

At this stage, I should like merely to ask some questions. In her earlier remarks, the Minister uttered a throw-away line about the provision being "cost neutral". I am not at all sure about how it is cost neutral other than the fact that the money has been spent and we are now proposing to validate it. Perhaps that is what the noble Baroness has in mind. At all events, that is my first question.

Secondly, given the court case—apparently there is no question of reversing it or of appealing against it; indeed, it seems difficult to appeal against the decision given, that in all the circumstances now described, it seems a most sensible decision—I am not clear about what the basis of any payment has been since July 1997. Perhaps we could be told something about that.

Other complex questions also arise. First—I admit my inexperience here—when the Committee stage begins in another place financial resolutions are provided to the Committee. My understanding is that we do not normally have those resolutions before us; but I am not clear about the financial resolutions which support this proposal. Why was it not raised—the Government knew about it in July 1997—during Committee stage in another place? Given the financial responsibilities of the other place, it would have been much more appropriate for it to have been raised there rather than here. Can the noble Baroness tell the Committee what financial resolutions there are to support the clauses now before the Committee?

Secondly, is it appropriate that the central exchequer should pay? While I admit my ignorance in this matter, presumably this forms part of the grant from the central exchequer to local authorities for housing benefit. Clearly, this money has not been spent on the intended purpose. If so, why is it now proposed to let the burden fall wholly on the Treasury rather than in part on local authorities? I would have thought that to some extent the cost should fall on the council tax payer. I may be quite wrong about that and I am quite prepared to be corrected. But it appears that the distribution of money between one local authority and another has been rather arbitrary, in as much as it depends not on the particular social service needs on which the money has been spent but the allocation of housing benefit between the same local authorities. Therefore, the allocation is somewhat difficult to understand. Is it to come out of the contingency fund? If not, from where is it to come? Given the commitment of the Government to stick to the former government's public expenditure plans, is this in addition to those plans? If so, are there to be savings elsewhere? Perhaps that is what is meant by "cost neutral". If so, I am sure that the Committee would like to know where the savings are to be made. It may well be that one should spend it on something other than the particular items that have been covered.

The noble Baroness has said—I understand why—that these are all highly desirable objectives, such as dealing with the problems of mental handicap, medical care and alcohol and drug dependence, but if Parliament had intended that it should be spent on these matters it would have allocated the money accordingly. It is extraordinary that just because a mistake has been made it is suddenly decided to reallocate expenditure from housing benefit, for which it is intended, to these other admittedly highly desirable matters but not matters on which Parliament has intended the money should be spent. It is now proposed that by these nice, quick amendments to the Social Security Bill £500 million should be reallocated to other quite different purposes.I am not unsympathetic to the need to provide such facilities but, with great respect, this is not the way in which we should be allocating resources between one competing use and another. The case has not been made out. As I understand it, it is an entirely accidental allocation of resources.

In that context, since the decision has apparently been made by local authorities, in the absence of these amendments are the local councillors liable to be surcharged? The noble Baroness has said that a minority of authorities has been meeting charges for other personal care which are specifically precluded from being met by housing benefits. If local councils have been doing this at least someone should question, without nodding this matter through at a late hour, the other place not having considered it, whether it is appropriate that local councillors should effectively be indemnified in this way.

The wording of the amendment is also somewhat curious. It provides that the: charges for general counselling or any other support services"— that is wide wording— shall be deemed to have been validly made if, on the assumption mentioned in subsection (2) below, it would have been so made". It continues: The assumption is that, at all material times, such charges", and so on.

So it is deemed on the one hand on the basis of an assumption. We are apparently being asked to validate that assumption. That, I am afraid, was rather off the top of my head, in the sense that I had not turned my mind to that matter previously. It may well be—I shall well understand it—that the Minister may not be able to answer all those questions this evening. If that is so, we might need to return to the matter on Report.

Let me stress that with my remarks about Treasury halos, I am not in any way saying that that money has not gone on entirely admirable causes. As far as one can see, it has. It seems equally clear that it is not some expenditure which the other place intended it to be spent on.

Finally, if we agree to this clause, and it goes into law, does that mean that the NAO and the PAC will feel that they have no right to inquire into why that happened in the first place? I am not making a partisan point. It has clearly happened, as the Minister said, since 1988. So we can go back to the old Labour government to see what happened then. Perhaps the Minister will give us such information on these points as she can, and we might return to it on Report.

Earl Russell

I thank the Minister for this amendment and for the great clarity with which she expounded it. I shall offer it at least one and a half cheers, but I still have one or two questions to ask. As the noble Lord, Lord Higgins, spoke off the top of his head, perhaps I might make some attempt to respond to him off the top of mine. First, the matter of the financial resolution: we in this place neither have, nor can have, any financial resolutions. We have no authority to do any such thing. Any decisions made in this place which have relevance to expenditure are, in effect, merely recommendations to another place which may act on them or not as it sees fit. So should there be any financial resolution, it would be for another place to make it when it arrives.

Lord Higgins

I entirely take the point that the noble Earl, with his great experience, makes. I fully understand. I am merely asking whether they exist.

Earl Russell

As I understand it, and again speaking off the top of my head, they cannot exist until another place has possession of the Bill, because it cannot make a resolution for a Bill that it does not have. As for why it has not been done earlier, this is a purely speculative point, and I shall be interested to know whether it is correct, but the timing of the appearance of the amendment suggests that it may have something to do with authority derived from the Budget, which, I am sure we all agree, we are not supposed to anticipate. I do not know whether that is the answer, but it is obviously a possibility.

As for the money which has been spent, that has been spent, as was then understood by many people—I have heard the matter discussed in exchanges at Question Time in this place before now—under what were believed to be valid vires. As far as I can understand, Parliament believed that the vires were sufficient to justify the spending of the money as it was being spent. The noble Lord, Lord Higgins, shakes his head. He may wish to respond, and I shall certainly give way to him if he does.

Lord Higgins

As I understand it, that is true of a great deal of the expenditure, but some of it was specifically precluded from being met by housing benefit; that is to say, I assume legislation said, "You must not spend money for housing benefit on these things".

Earl Russell

I am not aware of there being any such legislation. The point is that it was understood to be being spent in the support of housing. But as the Minister explained so lucidly, where one is dealing with supported housing of any sort, inevitably there is an overlap in which one cannot make a precise division between what is spent on the support services and what is spent on the housing. That applies just as much, say, to children's services in a women's refuge as it does to facilities for dealing with disabilities in a retirement home for the aged. That is inevitably the case. As I understand it—I have heard the Minister speaking of it previously—it was believed that Parliament had provided sufficient authority. As to why the matter should not be left to local authorities, the noble Lord, Lord Higgins, hits his own nail on the head: they would be liable to surcharge while we, mercifully, would not.

We have a curious mirror image of the debates we had earlier on the anti-test-case rule. The Government have responded in a way similar to that which I recommended not so long ago. I can and must welcome that with considerable warmth. The action that has been taken in respect of arrears was the easiest way of dealing with what could have been a severe practical problem. I am glad that the Government have done that.

I also understand about the long-term review. I welcome the review in principle, without prejudice to any comments I may make on its findings. But what I do not understand is where the costs are falling now. The costs must fall somewhere and I would like to know whether a study has been made of the effects of the amendment on the financing of women's refuges. There is always a considerable overlap between the housing charges and the support service charges. If the costs do not fall on housing benefit, they do not just disappear or the whole nature of the housing is destroyed and it probably has to close down.

If the costs do not fall on housing benefit, where do they fall? If between now and the review they are supposed to be falling on the local authorities, they are capped and subject to standard spending assessment. The local authorities may well discover that they are in danger of having to find the money by defaulting on some other statutory obligation. That could create even further legal trouble. If the costs are not falling on housing benefit, where are they falling, or is the provision falling instead? Those are questions to which I should be grateful to have some answers.

9.45 p.m.

Baroness Hollis of Heigham

I hope that the Box notes will arrive in time for me to answer in particular some of the later issues raised by the noble Earl. I was much taken aback by the mild ferocity of Treasury assault on what I thought was a benign resolution. I console myself with the fact that the noble Lord, Lord Higgins, has forgotten more than I will ever learn about Treasury finance. But, equally, he is talking to someone who has chaired a local authority finance committee for many years and knows how such finance operates.

I wonder whether the noble Lord, Lord Higgins, is missing a substantive point. Much of the argument has been addressed by the noble Earl, Lord Russell, so perhaps the Committee will forgive me if I repeat what he so elegantly explained. Since the early 1970s, local authorities have been bringing people out of what would otherwise have been long-stay residential care, or avoiding the need for them to go into long-stay residential care, by offering supported housing. I refer primarily to housing for the elderly, in the public and private sectors, and halfway housing for those coming out of refuges for battered women. With increasing generosity, in the late 1970s and early 1980s, local authorities offered accommodation for people with severe learning disabilities. In my city there is such a sheltered housing scheme for people with severe learning difficulties.

Let us examine such a situation. You are a district council, which means that social services are run by a county council of a different political persuasion not necessarily sharing your philosophy of trying to support people in the community. You are a district council and you want to build a sheltered housing scheme for a number of people with severe learning difficulties. They and their families wish them to remain in the community. That means that the housing you build must have, for example, double sound insulation because people with severe learning difficulties can sometimes make a great deal of noise by head-banging or in using their equipment. There is also a need for extra warmth. That is clearly part of the cost of the property, the accommodation, reflected in subsidy and reflected, perhaps, in rent charges and housing benefit that people receive. That is not a problem.

But secondly, one must ensure that the caretaker, warden, good neighbours, on the site also check that the gas taps are turned off regularly every night. Is that an accommodation issue or a care, support, counselling issue? It can probably be argued that it is an accommodation issue but that is beginning to get into the grey area. It is covered by housing benefit.

But thirdly, some of the tenants need to be rounded up, if I may express the matter in that way, to get to the bus for the day centre. Is that covered by housing benefit or not? It is probably not now but until July 1997 it was widely believed that that was a legitimate extension of the sort of housing provision which needed to be made for a group of clients clearly identified as needing those services in order to remain in the community.

The problem was compounded when the social services department was run by one authority and housing services by another. If the housing authority did not provide the services, then the housing could not be provided, because the other authority would not fund the counselling and support services which were needed. Therefore, we were persuaded that that was the right, generous, decent and cost-effective way forward. We took that step and we took it with good grace. Up until July 1997, we all believed that we were operating within the law, although we accepted that, under housing powers, we were running services which were overlapping and could be shared with social services.

In July 1997, the courts ring-fenced very much more tightly and precisely what could be covered by housing benefit. That meant that local authorities which were providing such services needed to have the arrangements put on an interim footing. The matter became ultra vires only after the court had ruled. But, once the court had ruled, there had to be some immediate help available so that councils did not find themselves in the very situation which the noble Lord described of knowingly making payments for which they had no authorisation by law and therefore betraying their fiduciary duty to the ratepayers.

However, it would take time for that to get through to primary legislation. No legislation was coming forward. Therefore, in August 1997, the Government introduced their first tranche of interim measures to legitimise continued payment for those services. However, there was still an area of services left uncovered by those interim regulations which we are addressing this evening; that is, payment for counselling services which local authorities have continued to expend.

We all accept that this is not a permanent basis for funding but it is a holding operation until more permanent and satisfactory arrangements can be made. The noble Lord, Lord Higgins asked me whether or not that £500 million had been misspent. He asked me whether it had been legally misspent, however desirable the spending may have been.

It is not so much a matter of public funds having been misspent. It is more a case that money has come from the wrong pot. It has come via housing benefit moneys into district councils' housing services instead of coming via DoH and DETR funds into the revenue support grant for social services to fund those counselling services to add on to the housing support services offered by district councils. That is what the problem has been. I have no reason to believe that the total money spent would be £1 more or £1 less had it come by different routes. But in future it is clear that it would have to come by different routes to be legal. As that is a much more frail vessel, it is right to legitimise the arrangements that have been made and to seek to make permanent funding arrangements.

Therefore, the amount of money has not been overspent. It has been spent by one public body, thus saving money for another public body—the Department of Health and, through that, the DETR. Therefore, there has been no additional expenditure. It is merely that it has come through the wrong pipeline. We have been seeking to legitimise that and I am sure that that is right. The regulations of 18th August 1997 validated the making of such payments as part of housing benefit. With this measure, we are now introducing the principle into the Bill.

The noble Lord, Lord Higgins, asked about financial provisions. The financial provisions in Clause 76(2) cover that, as do the money resolutions for this Bill. The money resolution has already been taken in the other place. The wording is similar to that of Clause 76. I believe that we are covered in that respect.

I hope the noble Earl, Lord Russell, will allow me to write to him on the specific issue of refuges to see whether the problem that he fears exists. I have no reason to believe that it does, but perhaps I might double check on the situation.

I hope that I have assured the noble Lord that, first, no one was behaving irregularly or improperly before July 1997. It was only then that the law was clarified to limit what local authorities could properly do. Secondly, the powers taken in August 1997 were an immediate and speedy response to legitimise the position of local authorities so that they did not find themselves in ultra vires situations. Today, we are taking that on to the primary face of the Bill and legitimising it in that way. But obviously we need to have a permanent source of authorised funding to allow this to happen. There is no reason to believe that anyone has behaved improperly; indeed, they have not. There is no reason to believe there has been any over-expenditure; there has not been. Moreover, there is no reason to believe that it does not have the full support of the other place. I believe that those were the questions which were addressed to me by the noble Lord.

Lord Higgins

I am most grateful to the noble Baroness. I am mindful of the point which the noble Earl made with regard to financial resolutions and so on. However, it seems to me that the noble Baroness has merely described what happened. Nonetheless, it would seem that money which was allocated by Parliament for one purpose was not used for it and that money which was not allocated, for example to the question of alcohol abuse or whatever, was actually used for such purposes. Indeed, the noble Baroness's letter refers to the fact that certain money—and this was a point that I made in my intervention to the noble Earl—was specifically precluded from being used on housing benefit. I presume that that was in the legislation. Otherwise, I am not clear why the noble Baroness's letter makes that particular point.

Once one says that all this is highly desirable and, "We would have spent the money on it if we had thought to get it authorised, but we have used some other money for that purpose", the whole system of financial control comes unstuck. I ask the Minister: is this something that the NAO or the PAC have looked at, or is it something that they will be precluded from looking at if we pass this amendment tonight? I still have not received an answer to the point about cost neutral, which I did not understand.

In answer to what happens now—the point made by the noble Earl—if I understand the amendment correctly, it says that we can go on spending the money in this way until 5th April 1998 or in other cases 31st March 1998. However, I am not clear what happens afterwards. On the one hand, this seems to be retrospective legislation but, on the other hand, it stops dead at this moment—or, at least more accurately, on 5th April or 31st March. As I said, I am not clear what will happen now. Where will the money come from in the future?

As to the Money Resolution, if indeed the other place did pass it, why was this matter not tabled as an amendment either in Committee or on Report in the Commons? Clearly the other place is better qualified to deal with such matters than we are, given the restraints under which we operate?

Baroness Hollis of Heigham

I shall take, first, the money point because I do not wish to mislead the noble Lord in any sense. On the noble Lord's primary point about being cost neutral, I can tell him that of course it is cost neutral. Indeed, if it had not come through this route, it would have come through another. That is absolutely correct. This sort of expenditure is proper local authority expenditure reimbursed by central government. The only dispute is which bit of central government it should have come from. That is what we have been discussing.

Lord Higgins

I am most grateful to the noble Baroness. She knows infinitely more about local government than I do. However, it is not the case that if it did not come from this route then it would have come through another. If it did not come from this route, Parliament would have needed to authorise it coming from another route.

Baroness Hollis of Heigham

Yes. I do not know what the philosopher's term is for sort of "counter factual" or whatever. But, given that Parliament wished local authorities to provide this kind of housing, it was clear that local authorities had to be reimbursed for the additional costs of providing not just the bricks and mortar, but the service element to enable such people to remain in the community, and to pay for that through their housing benefit costs.

When a local authority produces housing benefit for, say, a private home, 95 per cent. of that money is reimbursed by central government—that is, for private sector housing benefit. If that had not been the way of funding these additional service costs up to July 1997, it would instead have been funded by—as it was in some unitary authorities—the DoH through the revenue support grant being paid by DETR to local authorities through the personal social service element in the revenue support grant, which would then have gone into this form of expenditure. Either way it would have come through that route. However, it went through the housing route rather than through the social services route. The August 1997 decision legitimised as an interim arrangement the expenditure on those support services for local authority services which are covered by housing benefit. This amendment legitimises those local authorities which currently fund those personal counselling services—about 40 local authorities are doing so—in the private sector. That way we ensure that we do not see the unintended collapse of care in the community for the most vulnerable people because a legal judgment in July 1997 has subverted all of our understanding as to the basis on which the housing benefit writ may run.

On the point about housing refuges, I am advised that if the refuges were in existence at the time we are discussing—I refer to the interim arrangements which were introduced in August 1997—housing benefit would continue to meet all reasonable charges for general counselling and support in line with our commitment to maintain the supported housing sector pending implementation of long-term sustainable funding mechanisms. I believe therefore that the point that concerned the noble Lord has been fully addressed.

I am not sure that I can take this much further as we have such fundamentally different perceptions of the nature of public expenditure. I believe that what we are attempting here is a kind of technical adjustment to correct a legal decision to ensure that community sheltered housing does not collapse. It is broadly cost neutral because the money would come from public funds one way or the other. The court ruling has made irregular the funding by one route; in the longer term it will probably have to follow a different route. In the meantime we are trying to keep in place arrangements to legitimise the payments that have been made since July 1997, which otherwise would have been ultra vires. As I said, I am not sure that I can go much beyond that. However, if there are further questions relating to the Treasury aspects I should be happy to try to provide a fuller answer in writing to the noble Lord if he cares to write to me.

10 p.m.

Lord Higgins

I do not wish to detain the Committee any longer. I shall consider carefully the point which the noble Baroness has made about local government finance. Why was this not discussed in the Commons at the appropriate moment? Will the NAO and the PAC be able to consider this?

Earl Russell

Perhaps I can assist the noble Lord, Lord Higgins, on that point. When the Bill returns to another place it will have already approved the Bill. The only things the other place will have power to address will be our amendments. Those are the only things that will properly be before the Commons. If we have no amendment that bears on this subject, the Commons will have nothing to address. Unless we pass this amendment, we shall not give another place the vires to address the issue at all.

Lord Higgins

With respect, that was not the point I made. I asked why the provision was not debated in the Commons at an earlier stage.

Baroness Hollis of Heigham

I wonder whether I should share the joke that my noble friend has just conveyed to me. As I understand it, the provision was not discussed in the Commons because at the time it was not realised that it had to be discussed in the Commons. It was not realised that that was necessary. The Committee will appreciate that I am rather grateful that the hour is late and that the Chamber is as empty as it is before I confess to the failure of all sides in this matter. I include the Opposition's failure to hold us to account and our failure to realise that we had a problem to resolve. At least, I have included us all in the problem.

On Question, amendment agreed to.

Lord Morris of Manchester

had given notice of his intention to move Amendment No. 104: After Clause 67, insert the following new clause— DISABILITY LIVING ALLOWANCE: PROTECTION OF AWARDS FOR LIFE (" . After section 76 of the Contributions and Benefits Act, there shall be inserted the following section— "A wards for life: protection. 76A. No provision of this Act shall be so interpreted as to give the Secretary of State power, by regulation or otherwise, to end the entitlement to disability living allowance, or a component thereof, of any living person to whom that benefit has been awarded for life, except where the Secretary of State can show that the benefit was originally awarded in error."").

Baroness Hollis of Heigham

My noble friend Lord Morris is unwell. That is the reason he has asked me to say that he is not in a position to move the amendment.

[Amendment No. 104 not moved.:]

Clause 68 [Discretionary payments out of social fund]:

Earl Russell

moved Amendment No. 105: Page 46, leave out lines 18 to 34 and insert—("(b) payments of prescribed amounts to meet other needs, in accordance with directions given or guidance issued by the Secretary of State."). The noble Earl said: With the leave of the Committee, it might be convenient if, in addressing Amendment No. 105, I speak also to Clause 69 stand part. The issues overlap considerably, and I do not wish to make the same speech twice.

The Social Fund is divided into a series of different categories. We are particularly concerned with budgeting loans which are repayable, and community care grants which may not be. In the past the situation has been that if an application to the Social Fund was not perfectly fitted to the category for which it was designed, it was possible to consider whether there was an eligibility for another category. I have a copy of a Written Answer in another place on 2nd March. The number of applications for which this was done in the financial year 1996–97 was 13,837. In the current year to the end of January, it was 11,173.

The power to do that, as I understand it, is being limited by the Bill, save for a series of conditions which may be laid down in regulation. It seems to me that this can be a mistake. There are many cases where this ability may meet a very real need. There are cases every year where people are found to be too poor to be eligible for a loan under the Social Fund. There is something rather curious about the idea of being too poor to get help out of the social security system. Therefore the ability to convert from one heading to another where that seems appropriate, in order, and according to conditions and terms of relevance, should be left in place. It should not be controlled and limited to a series of regulations laying down specific exceptions.

The point continues to apply that in drafting regulations we cannot foresee all possible suitable cases. I beg to move.

Baroness Hollis of Heigham

Amendment No. 105 would effectively mean that the current wording of the Social Security Contributions and Benefits Act 1992, as it refers to the Social Fund, would be retained.

In order to explain why we do not support the amendment, it might be helpful to describe the purpose of Clause 68, and thus conjoin, as the noble Earl has done, both the clause stand part discussion and debate on the amendment.

Clause 68 defines in primary legislation for the first time the three separate elements of the discretionary Social Fund: namely, budgeting loans, community care grants and crisis loans. This is a fundamental change from the current legislation, which does not distinguish between the three different types of discretionary payments which the Social Fund provides.

Our purpose in doing this is to enable the Social Fund to be more straightforward for applicants, and for those who deal with their applications. I am sure that many Members of the Committee and the noble Earl will be aware of the difficulties experienced at present by claimants and Benefits Agency staff in relation to the Social Fund.

Under current legislation, each application has to be treated as if it were a request for assistance from any one of the three parts of the discretionary Social Fund. This means that each applicant has to complete a lengthy application form and provide enough information for staff to consider all three types of payment. Yet much of the information would be irrelevant. As a result, applicants find the Social Fund scheme confusing, unclear and time-consuming.

We believe that Clause 68 will improve the Social Fund. By defining it into three separate, parallel funds, we make it possible for people to apply for, and give only the information relevant to, the particular type of payment they are seeking. We shall be able to introduce simple and specific application forms. We will make improved information freely available through forms and leaflets on each type of discretionary payment. Those arrangements will enable people to identify and apply first time for the specific payment which best fits their particular need and circumstances.

The noble Earl has raised questions as to whether people will know which to apply for—particularly, I suspect, people who may have difficulty in understanding or coping with applications as such. Perhaps I may give an example. A single person with literacy or learning difficulties wishes to apply to the Social Fund for replacement bedding but is not sure how to go about it and has difficulty in completing forms. If he or she, or someone on their behalf, contacts the local benefits office, they will be able to obtain advice about the Social Fund from Social Fund staff, either by telephone or by calling at the office. They will also be able to receive help with completion of the appropriate application form. In the event that a person is unable to attend the office due to a medical condition, it will be possible for a visiting officer to attend the applicant's home.

I have myself pressed this point. I understand the fear that has been expressed that claimants will be forced down the route of budgeting loan applications rather than being encouraged to apply for grants where those may be more appropriate; and that they will no longer be able to have loans converted to grants following the review.

These issues also arose during the course of the consultation exercise that we conducted. For example, they were raised by CPAG. We have considered them very carefully. Of course we are concerned to ensure that, where someone's circumstances warrant the award of a grant, they should receive one. But we think the way to improve arrangements is to make more explicit the circumstances for which grants or loans could be paid, and that is exactly what our simpler forms and improved information will do. We shall be consulting welfare rights groups, such as CPAG, NACAB and other interested organisations, on the content and design of the new forms and leaflets.

Another concern expressed was whether people would need to submit all three applications at once, just to be on the safe side. No, that will not be the case. Anyone in doubt can apply to Benefits Agency staff to find out which type of application seems most appropriate. I assure your Lordships that the advice will be genuine and objective, and that there will be no question of staff being instructed to press people towards loans rather than grants. If a grant appears appropriate, that is the advice that will be given. Indeed, where staff are dealing with a budgeting loan application, but know from their previous knowledge of the applicant that a grant may be more appropriate, they will be able to invite a grant application.

To reinforce the noble Earl's point, we will be expanding guidance to Social Fund staff to emphasise the importance of taking into account a particular situation — for instance, someone may apply for a budgeting loan but be refused it because he or she is too poor to pay it back, and that may therefore be a contributory factor in putting the family under exceptional pressure and thereby qualifying them for a community care grant. Thus I hope that, by expanding the guidance to staff, we will also ensure that they, too, have a responsibility to ensure that they seek to help claimants in that way.

Let me briefly give an example of when a loan or grant is appropriate. Let us take a lone parent with two young children who applies for help with bed and bedding for the elder child. The applicant states that the child started wetting the bed several months ago; that bed and bedding are now ruined; that the child is currently having to share the applicant's bed. The applicant also states that the child has developed behavioural problems due to bullying at school and the relevant authorities are involved in trying to resolve the issue. In such circumstances, a community care grant is likely to be appropriate due to it being accepted that the particular circumstances have placed the family under exceptional pressure. However, if the problems relating to the child did not exist and it was merely a case of replacing the bed and bedding due to routine wear, a budgeting loan would be appropriate, as it gives an interest-free source of funding to the parent.

I could give other examples, but it is late and I do not wish to delay the Committee. This clause is crucial to the introduction of the faster method of decision-making for budgeting loans contained in Clause 69. This clause will allow us to improve consistency of treatment, clarity of decision and efficiency in the administration of budgeting loan applications. It reflects our aim of modernising the benefit system through better use of technology.

It will mean that, when it comes to determining the budgeting loan, the considerations that will apply will be the length of time someone has been on benefit and the size of their family. This will allow lone parents in particular who have been on benefit for a long time and therefore have problems of dealing with the wear and tear that affects their goods to be able to get the budgeting loan without any of the questioning and cross-questioning that currently occurs and which may delay or defer their claim.

Our purpose in bringing forward Clause 68 is to enable the discretionary Social Fund application and decision procedure to be simplified for claimants, staff and taxpayers alike. I hope that in that context the noble Earl will feel able to withdraw the amendment.

I now turn to the government amendments with which this amendment has been brigaded. The purpose of Clause 73 of the Bill is to allow discretionary Social Fund payments to be covered by the existing overpayments and adjustments of benefit legislation contained in Section 71 of the Social Security Administration Act 1992. This is the legislation that gives the Secretary of State the power to recover overpayments of benefit where it has been determined that they were obtained by misrepresentation or the failure to disclose material facts. The method and terms of recovery will be the same as those for recovering overpayments of benefit.

Amendments Nos. 105B, 105C and 105E to Clause 38 have been brought forward to make explicit the procedure for dealing with discretionary Social Fund overpayments. As amended, Clause 38 will allow "appropriate officers" in the Benefits Agency to review a discretionary Social Fund determination on the grounds that the person who applied for the payment misrepresented or failed to disclose a material fact. This will enable the officer to determine whether an overpayment has occurred as a result of the customer's misrepresentation or failure to disclose information and, if so, the amount overpaid. The Secretary of State can then recover the amount overpaid, under provisions introduced in Clause 73.

When reviews of Social Fund determinations under Part VIII of the Contributions and Benefits Act are carried out, the current procedure is that the whole of the award is looked at again. However, overpayment reviews are a special case. The "appropriate officer" needs only to consider questions arising as to whether a person obtained a discretionary Social Fund payment by misrepresentation or failure to disclose information. Amendment No. 105C ensures that the "appropriate officer" need only consider circumstances which relate to an overpayment determination. Amendment No. 105E requires the "appropriate officer" to act in accordance with any general directions and guidance issued by the Secretary of State when dealing with overpayments. The amendments also apply to reviews on these grounds by Social Fund inspectors.

There are other, related amendments which I fear I have to explain to the House in order that, given Pepper v. Hart, the understanding outside is complete.

Amendments Nos. 105D, 105F and 105G are consequential technical changes. They ensure that "appropriate officers" and Social Fund inspectors only follow the limited review procedures when reviewing determinations on the grounds that the applicant misrepresented or failed to disclose information. I should like to assure the Committee that nothing in these amendments affects applicants' rights to apply for a review, either of the original determination in their case or of the determination that there has been an overpayment. They have a right of review, first, to a second "appropriate officer" in the Benefits Agency and then, if they wish, a further review to a Social Fund inspector at the Independent Review Service. These are technical but important amendments which enable the powers in Clause 73 to be exercised effectively.

I turn penultimately to Amendments Nos. 105H and 105J. Amendment No. 105H will limit the effect of Clause 73 to overpayments relating to payments made on or after the day on which the clause is commenced. This will make clear the date from which the provisions in Clause 73 will apply. It will ensure that Clause 73 does not apply to all discretionary Social Fund overpayments since 1988, when payments from the fund began. Such retrospection would be administratively difficult and almost impossible to undertake.

Amendment No. 105J is a technical amendment which tidies up the legislation. It removes subsection (2) of Clause 73, as this provision is now included in the schedule before Schedule 6, which contains other transitory provisions.

The Committee may wish to cross-question me on these amendments. Many of them are technical. I commend the amendments to the Committee.

10.15 p.m.

Earl Russell

I should like to thank the Minister warmly for the great lucidity with which she replied to the amendment and introduced her own amendments. It seems that, as she gets more tired, she becomes more lucid. However, I will promise not to drive her too far down that road. I have no objection to any of the government amendments. I welcome several of the things the Minister said in reply to my own. I welcome the point about guidance, drawing attention to the possibility of grants for those who are too poor to get loans. That I welcome very warmly. I also welcome what she said about the length of time people are on benefit. That is a point which could be worth further exploration because it is an extremely interesting one. I am afraid overall though that her answer did not convince me that the Bill as at present drafted has got it right.

I hear a bell—we have alarms and excursions! But I hope we have no need for an excursion, not for a few minutes anyway.

I was reminded many times while I was listening to the Minister just now of what I had said about the excessive pursuit of tidiness. It seems to me that the Bill, with its attempts to classify applications to the Social Fund under three heads, is an attempt to run an orderly filing system. An orderly filing system and an orderly real world do not always go together.

There are two general areas of objection that I have to the Bill as it stands, and one is that it tends to assume a great deal of knowledge in the applicants. A great many people do not even know that it is possible to obtain grants under the Social Fund.

Secondly, it has too much faith in the ability of claimants to get clear answers by ringing up or going to the office and asking. The Minister had faith in the possibility of telephoning, which would have been better justified had the free line not been closed down last summer. Telephoning benefit offices is getting a little difficult. I think there would have been a better case for this ability to rely on the clerks if we had not had in place the change programme, which I understand is now known by the curious euphemism of the "modern services programme". That illustrates the derogatory possibilities in the word "modern". That, as I understand it, is doing far more damage to the administration of benefit offices than most of us are yet aware of. It is something of which we are going to hear a great deal more.

For these among other reasons, I am still not satisfied. I hope to return to this at a later stage of the Bill, but for the time being and before the Minister becomes any more lucid, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Clause 68 agreed to.

Clause 69 agreed to.

House adjourned at twenty-three minutes past ten o'clock.