HL Deb 01 February 2001 vol 621 cc810-65

4.11 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness HON of Heigham)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Baroness Hollis of Heigham.)

On Question, Motion agreed to.

House in Committee accordingly.

[The DEPUTY CHAIRMAN OF COMMITTEES (Baroness Nicol) in the Chair.]

Clause 1 [Additional powers to obtain information]:

Lord Higgins moved Amendment No. 1: Page 1, line 7, leave out from beginning to ("(persons") in line 9 and insert— ("After subsection (1) of section 109B (power to require information,) there shall be inserted— (1A) magistrate may, on an application from an authorised officer who has reasonable grounds for believing that a person—

  1. (a) is a person falling within subsection (2A) below, and
  2. (b) has possession of or access to any information about any matter that is relevant for any one or more of the purposes mentioned in section 109A(2) above,
make an order requiring that person to provide to the authorised officer such information specified in the order as is information of which he has possession, or to which he has access, and which it is reasonable to require for a purpose so mentioned. (2A) After subsection (2) of section 109B").

The noble Lord said: In moving the amendment which stands also in the name of my noble friend Lord Astor of Hever, I point out that it may be convenient for the Committee to consider Amendments Nos. 28, 48 and 49. I thank the Minister for writing on a number of points raised at Second Reading; and for a briefing meeting with officials on what is an extremely technical and complex Bill of great interest to many outside organisations and people.

At Second Reading I stressed that we on this side of the Chamber are keen that social security fraud should be reduced. In that context we support the main contentions of the Bill. None the less, it is important to take into account the considerable representations on the side effects of the Bill, in particular on the protection of data and, related to that, the violation of human rights. No doubt those themes will arise time and again. I hope that we shall be able to avoid undue repetition. We shall come later to a specific amendment on data protection. It may be convenient to deal with the detailed human rights aspect on the Question whether Clause 1 shall stand part.

We dealt with the question of whether the title of the Bill shall be postponed. Governments are enthusiastic about this kind of title. It is difficult to oppose a Bill with such a title. The classic example was Mr Michael Foot's Employment Protection Bill. It had many objectionable features; none the less it was difficult to oppose. How can one oppose a Bill entitled the Social Security Fraud Bill? Perhaps we should change the title to the Data Protection Infringement Bill.

Important issues are raised. It seems likely that a general election will not be long delayed and, therefore, the measure may come into that group of Bills which the Government may nod through on the spur of the moment. If there is any possibility that that may occur, given the title of the Bill, noble Lords must give detailed consideration to the Bill to ensure that it is as good as it can be since discussion in another place may be curtailed.

Amendment No. 48 is a subsidiary amendment. It deals with electronic data. I shall turn to that later.

The amendment provides that the way in which the Government wish to obtain information to prevent social security fraud should be circumscribed in a similar way to that which exists when trying to prevent abuse of drugs, criminal acts generally, tax fraud and so on. Previous governments have always felt it appropriate to protect the position by recourse to the courts in one form or another. That is what the amendment seeks to do.

As the Bill stands, there is virtually unfettered discretion for authorised officers to demand information from many outside bodies. That should be subject to a review, perhaps only briefly, by an outside body. The problems are set out clearly in the correspondence contained in the bundle of responses to the consultation document, kindly provided by the Minister. At Second Reading I pointed out that that was only a summary of a summary. The noble Baroness has now given us the full information. From the response to the consultation process provided by the Data Protection Commissioner, one sees how deeply concerned the commissioner is about the Bill and its side effects. Her letter to the Secretary of State states: As you will see, I have been unable to support the proposals in the form in which they are currently made".

So far as I can see, they are now in the same form in the Bill.

The commissioner makes a number of specific points. She says: The commissioner does not believe that the department has made a convincing case that the proposed interference with the rights of privacy is necessary".

Nor does she believe that the proposed safeguards—a matter to which the European Court of Human Rights has attached considerable importance—are sufficient to protect the rights of benefit claimants and applicants. As the Committee will recognise, those are strong words. The commissioner does not accept that the means by which it is proposed that investigators should obtain information are fair. She is particularly concerned that there will be no prior judicial authorisation of the exercise of the new powers and that too many hopes are invested in the code of practice. We shall come to the code of practice later.

The present legal framework is that private sector information can be released only if a court or judge order disclosure, if the individual has given consent, or if the organisation holding the data is persuaded that not to make the disclosure in an individual case would prejudice the prevention and detection of crime or the apprehension or prosecution of offenders.

It is clear from the comments of the commissioner and other parties that the Bill would significantly weaken the legal safeguards on privacy and probably create the problem of whether there had been discrimination in some respects. We shall come to those issues later.

Another important point is that the information will be disclosed without the knowledge of the person whom it is about. Hitherto we have been anxious to avoid that—witness the way in which one can obtain details of whether a particular credit rating has been affected.

The commissioner finally suggests an alternative approach, which your Lordships may wish to consider, stressing not least the importance of asking people whether they will provide the information voluntarily rather than in the way set out in the Bill.

Amendment No. 48 relates to the bulk provision of information. The explanations are rather naïve, saying that the measures that allow authorised officers to get general information on electricity, gas or telecommunications, for example, relate to the provision of information only on addresses, not on individuals. That is naïve, because, as much of the process outlined in the Bill involves cross-checking of data, it is not difficult to relate an address to the name on the electoral roll and thereby identify the individual to whom the information relates.

There are also concerns about the scale of the operation. As we understand it—no doubt the Minister can give more details—the department envisages a very large operation on bulk information. The department may argue that the main amendment would result in some delay in getting the information, but the points of principle I have addressed are very important. We are proposing the traditional approach that past governments have always adopted on drug trafficking, crime or other actions of fraud, rather than making the department the judge of whether it is reasonable for it to carry out an investigation, with no control exercised by any outside body, except in the limited case of local authorities, which will require the general, but not specific, authorisation of the Secretary of State.

Baroness Hollis of Heigham

The noble Lord uses the word "judge". Does he accept that the authority against which the offence may have been committed is the judge of whether it needs information to establish that? It is not the judge of whether an offence has been committed. That will be for the courts to determine.

Lord Higgins

Of course that is true.

Baroness Hollis of Heigham

It is the substantive point.

Lord Higgins

It is a substantive point, but it is not the only substantive point. The question is whether the so-called authorised person will have complete discretion, without anyone being able to check whether they have a justifiable suspicion or a firm basis for carrying out the investigation. We shall deal with that issue on many other aspects of the Bill. I beg to move.

Earl Russell

I support the amendment, to which I have put my name. I join the noble Lord, Lord Higgins, in offering my thanks to the Minister, and through her to her officials, for their kindness, their capacity for taking pains, their courtesy and their great skill and efficiency in dealing with communications about this and many past Bills. They are a model of what a private office ought to be. It is a pleasure to deal with them.

I also join the noble Lord, Lord Higgins, in his comments about fraud. Fraud is an evil. Where there is gold, there will be claim jumping. Where there is public money, there will be fraud. That must be fought. Fraud is a form of theft and is so recognised in law. The prevention of fraud is prima facie always a good and legitimate public objective. That is common ground between all of us. At the same time, all of us, on whichever side of the argument, feel a certain unease about the arbitrary character of the powers created in the Bill.

The Minister and the noble Lord, Lord Higgins, were arguing a moment ago about the concept of judge and party in their own courts. The Minister is correct that the final judge of whether an offence has been committed is the court. Equally, the noble Lord, Lord Higgins, is correct that the final judge of whether there is a need to get the information about a particular person will be the investigating officer. The Minister may say that that is liable to control by the courts. So it is, but by the time that the courts are called in, the horse will have been stolen.

I, too, have seen the powerful and impressive memorandum from the Data Protection Commissioner, to which the noble Lord, Lord Higgins, referred. She drew attention to the number of people who wish to obtain information for their own private purposes and who are capable of using official procedures to bring it about. I recall one case that concerned the local women's refuge about a quarter of a mile from where I live, sadly now closed. A violent former husband succeeded in getting the address of the refuge through the benevolence of a kindly policewoman in his home town who thought that he wanted it entirely for benevolent purposes. Hope does indeed spring eternal. If the Bill becomes law, with the best will in the world it will encounter such cases.

There is a growing respect in this country for confidentiality and the right to privacy. The problem lies in deciding which is the lesser of two evils. My late noble friend Lady Seear used to say that ethical decisions in politics were always a matter of choosing the lesser of two evils. It will be for the Minister to convince me that the methods that she is proposing are a lesser evil than those that they are designed to prevent. I say that without for one minute wishing to dispute that the evils that the Bill is designed to prevent are very great.

The evil in the proposals in the Bill would be very much diminished by the judicial control proposed in the amendment. The Minister will produce a number of objections along the lines that the amendment will diminish the effectiveness of the proposals in the Bill. I understand that well enough. However, I am asking the Minister to convince me that that is the lesser of two evils. I believe it to be a fair request; and, in the course of setting out to convince me, I ask the Minister to take account of the proposals made in the light of the European Convention on Human Rights.

If the Minister is to show that the proposal does not infringe Article 8.2 of the convention and that, in fact, it enjoys the protection of that article, she must show that what she is proposing is necessary. That, among other things, involves showing that the amendment would not be appropriate. If her proposal can be achieved by the means suggested in the amendment, which, other things being equal, clearly would be preferable, then the proposal itself is not necessary. However, she must show that.

It is necessary to show that the remedy is proportional. It has been suggested, I believe, by the British Bankers' Association that the penalties to be imposed on benefit claimants are harsher than those to be imposed on tax evaders. Were that to be the case, there would be room for an argument that the remedy was not proportional. In order to come within the terms of Article 8.2, it is necessary to show that safeguards are in place. We may address how far that can be done in later amendments. However, it would be prudent for the Government to include safeguards where they are able to do so because that may improve their standing in future court proceedings.

Justice points out that under the convention it is not an absolute requirement for intrusions into private life to be subject to judicial authorisation. However, the European Court of Human Rights said in the case of Klass v. Germany that it is in principle desirable to entrust supervisory control to a judge. Justice argues that that principle should be reflected in the Bill. That would put the Government into a much safer position in any future legal proceedings. Therefore, to that extent, the amendment would be desirable.

If the Minister can put forward reasons which persuade me that, in spite of all those advantages, the amendment is less desirable than the procedure laid out in the Bill, I shall listen. But it remains for her to convince me.

4.30 p.m.

Lord Grabiner

As I understand them, these amendments would render the Clause 1 powers expressly subject to the approval of a magistrates' court. I believe that the practical effect of the amendments, were they to be agreed, would be not simply to diminish—I believe that that was the word used by the noble Earl, Lord Russell, a moment or two ago—those powers but, in my view, to emasculate them to the extent that they would become unworkable. Magistrates' courts are already heavily overworked and Parliament would not be thanked for having unnecessarily increased that workload.

With regard to the question of necessity, I believe that it should be borne in mind that the exercise of the powers will not inevitably or even probably lead to an arrest or prosecution. The powers are intended to enable, for example, DSS investigators to detect and prevent fraud and error. The introduction of what, in effect, would be an additional level of vetting is, I suggest, entirely disproportionate in that it would unreasonably cut down the value of the powers being granted in the first place.

The point can be tested by reference to the drafting of the proposed amendment. First, so far as concerns the language of the existing Bill, the prerequisite for the exercise of the powers in the first place involves the need for the investigator to have reasonable grounds for believing that one or other of the matters currently listed in sub-paragraphs (a), (b), (c) or (d) have in fact happened or, as the case may be, are likely to happen in the future.

I suggest that the presence of that pre-condition is the short answer to the point made by the noble Lord, Lord Higgins, in his opening remarks. He said that the power was unfettered. With great respect, that is not right. The power cannot be exercised absent the satisfaction of the investigating officer to the extent provided for under the terms of the Bill.

The amendment, as drafted, introduces precisely the same test—on this occasion to be operated by the magistrates' court—as the one currently provided by the Bill which is to be operated by the investigating inspector or investigating officer of the DSS. I do not understand what possible advantage there can be in introducing precisely the same test—namely, that the magistrates must be satisfied that there are reasonable grounds, and so on—as the one which must be satisfied by the investigating officer. If the amendment were to be adopted, I believe that inevitably it would result in delay and enormously increased expense. Meanwhile, without over-emphasising that concern, Rome is burning.

I wish to make one other point which has already been raised by the noble Earl, but I emphasise it because it is important. A wrongful exercise of a power—that is, the power specified in the Bill as currently drafted—would be judicially reviewable. I believe that in those circumstances the position of the private individual is adequately protected without the need for these amendments.

Finally, in the course of his opening remarks, the noble Lord, Lord Higgins, drew to the attention of the Committee some observations made by the information commissioner, as I believe she is now called. One point to which he drew attention was that, under these arrangements, a person would not know that he had been the subject of investigation. The information would be sought pursuant to powers without the knowledge of, so to speak, the target of the inquiry.

The comparison was made with the situation relating to credit ratings. However, I suggest that there is a significant difference between the two sets of circumstances. With respect, I agree that substantive criticism can be made of credit ratings, although the current law allows precisely for that to take place. In such a scenario, and to give a clear example, an individual would be refused credit without knowing that the reason for the refusal was that the person deciding whether or not to give the credit was acting on the basis of erroneous information. That would be a very bad case. However, I dare say that, even as I speak, such cases are occurring hundreds of times out there in the real world.

The distinction between that type of case, which, as I say, takes place at present under existing law, and the case with which we are concerned here is simple and obvious. If information is obtained pursuant to the powers that we are now discussing and it leads investigators to the conclusion that there is a case to be answered, inevitably the individual concerned will have to be invited to give an answer to the question. If, on the other hand, the investigators are satisfied that there is no case to be answered, that will be the end of the matter. With respect to the information commissioner, perhaps I may suggest that the point which she has put forward is not a good one.

Lord Goodhart

Before the noble Lord sits down, perhaps I may ask whether the logic of his argument—that it is not necessary to get a magistrates' order in order to obtain this private information—would lead on to the argument that it is quite unnecessary to go to a magistrate in order to obtain a search warrant to search someone's house because the police officer who believes that there is reason to do so is satisfied in his own mind.

Lord Grabiner

The concerns that drive the answer to the question of whether or not the obtaining of a search warrant should be made subject to an order of the court would no doubt depend on the particular context. I know, for example, that such procedures and provisions apply in relation to serious revenue offences, or to the suspicion that there has been a serious revenue offence. However, it does not follow that the investigatory powers that are being sought would operate in a context that should be subject to the same considerations that statutorily will be applied, if that is the decision, in the case of search warrants.

I turn to another important point in this context. We talk a great deal about the infringement of rights, and it is entirely right for us to do so. The Human Rights Act 1998 is an important part of our law. Articles 8 and 14 are critical in this discussion. We shall later discuss that in more detail. In that debate I shall certainly draw attention to the provisions of Section 29 of the current data protection legislation. That section legislates for the permission that is granted in the second paragraph of Article 8 of the convention, and it deals with the fact that it is right and proper to permit an interference with what would otherwise be people's rights under the first paragraph of Article 8 in a suitable case. A suitable case is one that involves the need to detect tax avoidance, or perhaps I should say tax evasion, a subtle distinction, but Members of the Committee will be familiar with it. It also involves the need to detect crime in its early stages. There is little point in closing the gate after the horse has bolted.

The provisions are consistent with the entitlement that is granted under Section 29 and provide an opportunity to detect wrongdoing in advance and without the need to wait until it is too late to do anything about it. If we talk about necessity in this context, I respectfully suggest that Section 29 has to be taken into account. The relationship operates both ways: we need to take into account fairness to the individual and fairness to the community at large.

Earl Russell

The noble Lord, Lord Grabiner, is correct to say that fairness works both ways, but he made a remark that surprised me very much. He said that he could not see that a useful purpose would be served by allowing the test that is currently in the Bill to be used by someone other than the investigating officer. However, it is surely fundamental, as a principle of law, of politics, and of common prudence, that having to consult someone else and rely on his decision before going ahead and doing what one wants to do is a valuable belt-and-braces double check on human judgment, which at all times is necessarily imperfect.

I was also a little surprised by the extent to which the noble Lord relied on the argument that the courts would be overwhelmed by the body of work. However much that argument may have some substance in fact, it is capable of being worked to a dangerous degree of extension. If he relies on that argument I should be grateful if he would indicate what the point is beyond which he would not take it. How great an erosion of reliance on the courts would be allow in order to pursue his objectives?

The trouble is that the DSS and other government departments far too easily think that because something appears to them to be just and expedient they should be free to do what they want without further checks or controls. We all feel that, but it is not always good for us to be able to get away with it. I shall return to that point when we discuss the Bill's regulation-making powers. I detected just a whiff of that approach in the noble Lord's speech. I look forward to his further answers because I have not yet heard enough to persuade me.

4.45 p.m.

Lord Grabiner

I shall try to deal with the two points that the noble Earl made. On the first, I suspect that I was putting my argument inadequately. I pointed to the fact that the investigator has to be satisfied that there are reasonable grounds for forming the judgment that he has prima facie formed, and I discovered in the amendment that a similar test—indeed, precisely the same test—would be deployed. The point I was trying to make was that I find the situation illogical. A complaining individual, so to speak, may be targeted by the exercise of the powers, and it might be said, when the individual investigating officer had formed that judgment, that the individual's behaviour would be susceptible to judicial review; that is, to civil proceedings. However, that approach would disappear if the individual had to satisfy a magistrates' court of precisely the same test because that would involve criminal jurisdiction. The point I was trying to make was that that seemed an unnecessary and illogical confusion. I well understand the belt-and-braces argument, but the real argument is about whether the particular context justifies what I would regard as a rather onerous and burdensome way of going about things.

That brings me to the noble Earl's second point, although I should be happy to give way to him if he would prefer me to do so.

Earl Russell

No, the noble Lord should conclude his speech.

Lord Grabiner

The noble Earl's second point was about how far we should be willing effectively to erode the legal process in favour of the individual. I am not in favour of eroding any legal processes for any individual. Apart from anything else, that would be inconsistent with my professional life. The more legal process there is, the better off I am. I thereby disclose an interest. In a more serious vein, the decision is essentially a matter of judgment. Are we discussing a situation that falls on the side of the line that requires the judicial approval of a magistrate before the matter can be taken any further? Alternatively—I contend that this is the case—are we on the side of the line that involves saying that it is good enough, given the context of a particular case, that the matter need not go to a magistrate because it could be dealt with effectively by an investigating officer who acts bona fide and in accordance with the requirements of the statutory provision?

What persuades me that it is unnecessary to go through the process of a magistrates' court—I appreciate that this may not necessarily persuade the noble Earl—is that if one exercises the powers, one is taken to the continuing process of inquiry. One is not taken to prosecution or conviction. One is taken to a process of further inquiry. If the matter is to go any further, there are adequate safeguards in the system—in the criminal process—for dealing with any complaint that may arise thereafter. I respectfully suggest that in many cases the matter will go no further but if it does there will be adequate safeguards to protect the individual.

Lord Higgins

It may be convenient for me to intervene now rather than later. I want to take up some of the issues raised by the noble Lord, Lord Grabiner. I may not have fully understood his arguments. I am not, as Members of the Committee know, a lawyer. He keeps referring to a magistrates' court. I searched in vain in the amendment for such an expression. That is a relevant consideration. Having said that, the question is whether it is appropriate for a magistrate to take an impartial view on the issue. The noble Lord pointed out that the test is much the same in both cases but that there is a difference between the test being applied by someone who is an authorised officer of a department and by a magistrate who will adopt an impartial view and who may be able to appraise the situation. After all, those authorised officers are not going to be at the level at which decisions are taken; for example, cases in regard to Inland Revenue fraud and so forth, where it is an impartial officer in the department.

Judicial review may arise if the matter comes to court. But all these investigations are going on without the individual's knowledge. It is only if the department eventually decides that there may be a case to answer that the individual is told. None the less, a great deal of this information will start floating around the system and one of the worries I have about the Bill generally—perhaps reflected in the views of the commissioner—is that the information, once it is in the system, will tend to leak from one part to another. Hitherto there have been the most stringent Chinese walls between various government departments, but increasingly those seem to be disappearing.

It is for those reasons, among others, that we feel there is a case for this amendment. The noble Lord, Lord Grabiner, says that the Bill will be emasculated. But such provisions did not emasculate any of the Bills concerned with other offences. As far as I know—perhaps the noble Baroness will tell us if I am wrong—in other instances there is a degree of impartial review of whether or not it is appropriate to go ahead.

Lord Grabiner

Perhaps I may respond briefly to those points. I did say "magistrates' court" and the amendment refers to "a magistrate". I presume that what is intended is that the matter can be dealt with by a single magistrate, and I stand corrected accordingly. However, it does involve the judicial process. I do not know how one goes about that; I have not been in such a place for many years. But I am sure that it takes up valuable time and is expensive. That may not be so for an individual case but, multiplied by the anticipated 900,000 figure, it comes to a lot of time and quite a lot of money.

I did not say that the provision would emasculate the Bill; I said that it would emasculate the Clause 1 powers with which we are concerned in this amendment. My final point—and then I shall sit down—is that we are concerned about investigating officers who will, as I understand it, be nominated persons specially trained for the tasks involved in this legislation. They will be brand new powers, the use of which will require proper training and education.

Earl Russell

I hope that the Committee will forgive me for taking up one more point made by the noble Lord, Lord Grabiner, but if I do not take it up now I shall certainly have to take it up afterwards.

The noble Lord attempted to put on all fours the authorisation by a magistrate and judicial review. But there is a significant difference in that one of them happens before the event and the other happens after the event. Very often by the time information gets into the public domain the damage is already done and any attempt to restore it is too late.

The Data Protection Commissioner mentioned the possibility of bribery. Let me suggest a possible case. It is not likely, but I am sure that the noble Lord will not say that it is impossible. Let us imagine a newspaper, in collusion with an investigating officer whom it has paid, wanting to look at the bank account of a Minister and to discover where he spent a specific night. It finds that he spent the night in a double room at a time when his wife was certainly elsewhere. That would be of considerable interest to the newspaper. It would spread widely around the media and cause a great deal of comment. In such a case judicial review after the event would be otiose and I would be surprised if the Minister resorted to it.

Lord Grabiner

First, the example is a "homely" one. But what was absent was the existence of another party in the double room. By itself it would be entirely innocuous information. But that is beside the point and not much to do with social security fraud.

The noble Earl talks about the information being available at large, but that is not the case. We are dealing with information which will be known, on the examples with which we are concerned, to the investigating officer and to the magistrate to whom the matter has been presented, or simply to the investigating officer alone. If the noble Earl is talking of circumstances where, improperly and through bribery and corruption, the individual investigating officer transfers that information to a third party, with the greatest respect I must point out that this amendment will not help in the slightest. The information will be bribed out of the investigating officer and passed on to a third party and nobody will go anywhere near a magistrates' court. If that is the purpose, or part of the purpose, of the introduction of this provision, it will not prevent that sort of grossly improper behaviour.

Lord Higgins

The person being bribed will not have the information because he would not have managed to obtain a magistrate's order.

Lord Grabiner

As I understand the proposed amendment, the individual seeking to obtain the order has to satisfy the magistrate that he has reasonable grounds for wanting the order. So ex hypothesi he must have the information before he goes to the magistrate. He cannot go to the magistrate with a blank piece of paper. He must say, "These are the facts of the case. I reasonably believe that an offence has been committed by this individual and would like access to", whatever it may be. But he cannot do that unless he has the information to enable him to make the application in order to exercise the powers. That is the point.

In this example, the individual would have the information. He would not need to go to the magistrate in order to exercise the power but, in return for payment, he would sell it to a third party. I believe that was the example posited.

Baroness Noakes

Perhaps I may take the noble Lord, Lord Grabiner, back to an earlier remark he made on the importance of the training and experience of the individuals within the Department of Social Security, or other authorities, exercising these judgments. With respect, that is perhaps a little of a red herring because all public servants engaged in carrying out such activities should first have proper training in them, whatever their level, whether they are making decisions and exercising powers under the clauses of this Bill or undertaking more commonplace activities.

Following on from that, in the light of the noble Lord's great experience and my lack of knowledge, can he say whether he is aware of any precedent of officials having similar powers to ask for information? There are many existing precedents where other authorities—for example, the Commissioners of Inland Revenue—are asked for decisions before those powers are taken.

5 p.m.

Baroness Hollis of Heigham

It may be convenient for the Committee if I seek to address some of the points raised so far.

These amendments seek to require DSS and local authority authorised officers to obtain an order from a magistrates' court, or a magistrate, in order to obtain any information from the organisations listed in new Section 109B(2A). I take this issue seriously and will try to give a careful reply. It is clearly a matter of concern to Members of the Committee. When people claim benefit they know that they are required to tell the truth. We shall make it clear that what we are told may be checked with third parties. If a person tells a lie in the light of all that, we believe that we should have the right to check up on them. We also have a responsibility to the taxpayer to do so.

I want to make three points. First—this point was made by my noble friend Lord Grabiner—if the DSS and local authorities had to obtain a court order every time they wanted to check the information provided by a claimant, it would significantly hamper their investigations. The process would certainly take too long to enable us to check information before we pay claimants. That would mean that we would have to let fraud into the system that could have been prevented. It will lead to serious delays in which relevant information could vanish and financial matters be re-arranged. We would be asking magistrates to judge not whether a fraud had been committed but whether there was sufficient evidence to collect further evidence to establish that a fraud has been committed. The delays could be huge.

Perhaps I may give an example of a simple case. Someone moves to a university town and claims housing benefit. We suspect that that person is a student, but we do not know. Therefore, under the amendment we need to seek an order from a magistrate to enquire of UCAS, the university admission system. We then find that he is also claiming housing benefit at his local address. We check his address and find that it is in Norwich and that there he is an owner/occupier.

In the course of that simple investigation, we need to go to UCAS, because he is a student. We then find that he is claiming housing benefit and need to check that with his landlord. We then need to go back to Norwich, where he is also claiming benefit and where we find that he is an owner/occupier. That would involve four visits to magistrates to process one simple case.

Let us complicate the case and suppose that the claimant has now left Norwich, has moved to Cambridge to be a student and is subletting the house in Norwich to somebody who is also fiddling the benefits system. That would add another two or four visits to magistrates. It would require perhaps eight visits to magistrates for one pretty simple case. We cannot work the system like that. Perfectly properly, the noble Lord pressed my noble friend on how far we could go. However, we cannot neglect this point.

We estimate that we should have to make around 900,000 inquiries per year of the private and public sectors. That would require 3,500 applications to magistrates every working day compared to the police average of around 270, which would be 15 times as many. The increase in workload would be significant. Magistrates have a caseload of about 4 million cases per year. The proposal would add an extra 25 per cent to the caseload of a single magistrate. Inevitably there would be delays in dealing with real cases on the streets of young thugs and so forth, about which we are all rightly concerned. All the cases we investigate are potential frauds. Only 6 per cent of offences recorded by police in March 2000 were fraud or forgery offences. My first point, therefore, is that the amendment would create serious delays.

My second point is that there would be a serious impact on the magistracy to deliver law and order in other areas of its work. My third point, which is a direct response I made to the noble Baroness, is that we do not seek exceptional powers. It is not true that other state bodies can obtain access to a person's bank details only after obtaining a court order. Other government departments have a huge range of powers. I could discuss, for example, Customs and Excise, the Inland Revenue or the DTI. However, I shall take an example which is somewhat closer to the DSS in style; that is the Financial Services Authority and the powers given to it by the Financial Services and Markets Act 2000. That was a general power to require information or documents which may reasonably be required in connection with the discharge of its functions under the Act. The FSA can write to a person asking for the production of information or documents within a reasonable time-scale or it can send an officer to whom it has given written authorisation. That person is required to provide that information or documents without delay and may also be required to take any reasonable steps the authority may specify to verify the information provided.

I chose that example out of 20 I could give because the businesses concerned include banks, building societies, insurance companies, friendly societies, credit unions, Lloyds—I do not know why we have left that out of the DSS—investments and pension advisers, stockbrokers, professional firms, fund managers and derivatives traders. I could produce similar examples, though possibly not as full, of all other government bodies seeking similar powers without first needing to acquire judicial authorisation.

The noble Lord, Lord Goodhart, mentioned the police. He tried to suggest that we are asking for DSS investigators to enjoy greater powers than the police. That misses the point. The police need different powers because they are doing a different job. They have greater powers, certainly, than DSS investigators. They can arrest people on suspicion of committing an offence. With a warrant they can force entry to premises and carry out searches. They can remove goods that appear to be material evidence. DSS investigators do none of that. We have no plans to seek powers for them to be allowed to do so.

The noble Earl, Lord Russell, asked which I thought was the lesser evil. At the end of the day, benefit fraud costs between £2 billion and £4 billion each year. In comparison, credit, debit and charge card fraud losses in 1999 were less than £0.2 billion. The gross loss of cash in transit from armed robbery in 1999 was less than £0.01 billion compared to our £2 billion to £4 billion. Losses of theft and antiques is estimated at £⅓billion to £½ billion per year, and approximately £0.0035 billion worth of counterfeit currency was removed from circulation in 1999.

At Second Reading I mentioned the assessment of benefit fraud by the National Criminal Intelligence Service. That organisation carried out an impact analysis in which it registered benefit fraud as high in the list of high-impact crimes and alongside drug trafficking, intellectual property theft and revenue fraud. Members of the Committee, including the noble Earl, Lord Russell, gave examples of that. As has been said, around 17 per cent of drug traffickers are also involved in social security fraud. The economic cost of all crime in this country is estimated at £50 billion per year. Social security fraud makes up around 4 to 8 per cent of that cost.

I seek to persuade the Committee that the powers we seek are in no way out of the ordinary. They are exercised by other bodies, both government bodies and the Financial Services Authority. To follow the path of the amendment would mean unacceptable delays, with perhaps three, five or 10 visits to the magistracy to collect information before we could prosecute one simple case. The implications for the capacity of the magistracy to deal with other areas of street theft and the like would be seriously impaired.

As my noble friend stated, these powers would not be exercised by anyone. Information will not be "floating around at large". There will be strong safeguards for the use of the powers. Only a handful of staff in each of the 13 areas of the DSS would he authorised to use the powers. They would be able to do so only within the terms of the code of practice, which we shall discuss later. All the staff would be thoroughly trained. Their use of the powers would be checked by senior managers, including their access to electronic information. If they misuse that power, disciplinary proceedings, including dismissal, would follow. As was said at Second Reading, there is the additional protection of the Data Protection Act and the Computer Misuse Act and the like.

We need the powers to assemble the information to establish a case to bring before the courts. We have to go to the courts to get the powers to seek to establish the information. That is, above all, post hoc propter hoc, in which we must already have the information we seek in order to prove the case. That would seriously fetter us. It would produce delays and burdens upon the courts. Above all, we would be asked to produce to the magistracy the evidence we seek to establish. That would make it difficult to eradicate the fraud from the system, which all of us want.

Finally, the powers will be exercised by those who have been professionally trained, and who will be properly supervised, and by a narrow, select group of relatively senior officials. I hope I have persuaded the noble Earl, Lord Russell, that the powers will be exercised properly with discretion. Without those powers, swathes of fraud, of which we may have high suspicion, will go unchecked and unpunished to the cost of us all and to the defrauding of our welfare state.

Lord Higgins

We shall consider carefully the points mentioned by the Minister. I believe there has been confusion about the wording of the amendment. As I pointed out, it does not refer to a court but to convincing a magistrate that it is appropriate I hat such an investigation should go forward. There appeared to be a little confusion in one respect; namely, whether in going to the court the investigating officer had the information necessary to gain further information. Perhaps if the noble Lord, Lord Grabiner, looks at Hansard tomorrow he will find—

Baroness Hollis of Heigham

How would an official persuade a magistrate that he had reasonable grounds unless he already had some of the information he was seeking?

Lord Higgins

We shall come to the question of why he had information which justified investigating a particular individual. Clearly, if an official is going to a magistrate to obtain permission to do so, he will need to have some substantive information. However, if he does not need to go to a magistrate, he may go ahead without a justifiable case. For that reason, we argue that it is appropriate for him to go to a magistrate—not necessarily a magistrates' court because we do not want them to foul up their general procedure.

The Minister added up the number of visits which might be necessary but I was not clear why, if an investigating officer had a reasonable basis for going ahead with inquiries about a particular individual—and she gave the example of the student—he needs to return to the magistrate time and time again. Presumably, he could obtain permission to approach all the various sources—

Baroness Hollis of Heigham

No, not until the investigation had started would he know the knock-on consequences of that investigation and the levels of possible deception involved. When he first went to the magistrate, he merely thought that someone had moved to a university town and might well be a student, even though that person was claiming benefit to which he was not entitled. In obtaining the magistrate's permission to investigate that, in the course of his inquiries he uncovered the fact that there was a home in another town. In order to investigate whether the person was an owner/occupier, he needs a second permission from the magistrate. Then he discovers that the person is subletting and he needs to investigate that.

All that information would be gathered over a period of time. However, under the amendment as posited, the investigating officer would need continually to return to the magistrate to obtain further consent to seek information from a new body because a fresh possibility of fraud had occurred.

Lord Higgins

I am trying to envisage the circumstances which the noble Baroness outlined. It seems to me—I may be wrong—that the investigating official begins by saying, "I want to obtain information from a particular source". The noble Baroness is saying that obtaining that information will direct that he should go to someone else along the line—

Baroness Hollis of Heigham


Lord Higgins

That is not what she is saying. I thought that it was.

Baroness Hollis of Heigham

I am sorry to labour the point. The example I gave was of someone who moves to a university town but is claiming housing benefit. As a result, the investigating officer wishes to discover whether that person is a student. In order to do so, he has to go to UCAS or to the university authorities and under the amendment he receives the authorisation to do so. In the process of searching for that information, the official discovers a home address different from the university town address. That means that he must return to the magistrate to obtain information about that home address. In the process of doing that, he discovers that the person is claiming housing benefit and there may be a suggestion from some source that the person may own the property. In that case, he has to return to the magistrate to discover whether the person owns the house and is therefore illicitly claiming housing benefit. So we go on.

The point is that each of these steps could not have been predicted. The information thrown up at the previous stage set up the next step. One is putting together a jigsaw and does not know what the final shape of the picture will be. One has reasonable grounds for believing in the original offence but, under this amendment, when a simple case of fraud crops up one would have to revisit the magistrate to obtain permission to investigate.

The result is that something which could have been sorted in a couple of days might take a month or more. By that time, the investigating official might have lost the person he was seeking to pin down in terms of fraudulent behaviour. It would be extremely difficult—extremely difficult—ever to pin down someone who was at all adept at manipulating the system.

5.15 p.m.

Lord Higgins

It is difficult to debate the matter in this way. None of the large number of representations we have received has dealt with it. There are two points to be made. First, it might be reasonable to suppose that the highly trained officials would foresee most of the consequences of the case which the Minister mentioned. Alternatively, if they originally had a prima facie case for obtaining approval to go to any of the sources of information specified in Clause 1—

Baroness Hollis of Heigham

Is the noble Lord saying that all they need is reasonable grounds for access to a source, that they then do not need to go back to the magistrate and that they can have a lucky-dip at the rest? If so, he is conceding our argument.

Lord Higgins

No, I do not believe that I am conceding the argument. Perhaps I may think about what the noble Baroness said in that context.

This has been a helpful debate in a number of respects. We shall need to consider carefully the extent to which arguments about delay are justified. We must also consider the Minister's argument about the extent to which such information is already obtained by government departments without the safeguard we are suggesting would be appropriate in this case. I should be surprised if the Inland Revenue could simply ask a bank for the information it required without any form of judicial authority whatever. But perhaps I may check up on that.

I am grateful to the Minister for her reply. No doubt we shall need to consider whether it is appropriate to return to the matter at the Report stage.

Lord Grabiner

Before the noble Lord sits down, perhaps I may clarify one point relating to the exchange which took place between us. It is probably better to have it in Hansard tomorrow rather than not at all. The exchange stemmed out of a point put to me by the noble Earl, Lord Russell. The example given was that of a dishonest investigating officer colluding with a newspaper and selling the information on. The point I was trying to make was that a sufficiently determined dishonest investigating officer would be able to obtain the necessary information without the need to go through the magistrates' court procedure, and effect his dishonest behaviour. I did not, and do not, believe that the proposed amendment could stop such behaviour.

All one can say is that such behaviour is criminal under the existing legal rules and will be dealt with accordingly. However, the positing of that as an example of a case to provide a justification for the amendment is not right and I do not agree with it. I hope that I have sufficiently clarified the position.

Lord Higgins

With great respect, I do not know that it is a particularly helpful example. Be that as it may, if we do not carry the amendment, the corrupt official will not have to go through the magistrates' court.

We shall need to consider the Minister's remarks carefully before the Report stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 2: Page 1, leave out line 12.

The noble Lord said: Amendment No. 2 relates to particular people from whom the department may request information. Amendments Nos. 2 and 3 relate to banks and other similar financial organisations. It is unrelated to our recent broader debate but particular aspects are important as regards the banking industry. Indeed, the banks have made strong representations and expressed concern about the Government's proposals. They point out that they are in a different position from many of the other bodies described in Section 109B(2A) because banking transactions are subject to a duty of confidentiality which does not apply to, say, electricity suppliers. At the other end of the spectrum, lawyers, doctors and so on are subject to a duty of confidentiality. My understanding is that, in the context of the report of the Joint Committee on Statutory Instruments, the Government do not propose that the provisions of the Bill should breach confidentiality as far as concern such professionals.

It may be that in a sense banks fall in the middle of the spectrum between the electricity industry, which, as far as one can see, has no great duty of confidentiality, and lawyers. As I understand the position in law, the leading authority on the subject is Tournier v National Provincial and Union Bank of England [1924] 1 KB 461. That case establishes that a banker is under a contractual duty to keep confidential information gained from a customer's account. There are exceptions to that: where there is a disclosure under compulsion of law, which would clearly arise if we passed the Bill as it stands; where there is a duty to the public to disclose; where it is in the interests of the bank to require disclosure, although that appears to be rather strange; or where the disclosure is made with the express or implied consent of the customer.

Therefore, at present the legal position of the bank is clear cut. If we adopt the Government's present proposals in the Bill without the amendment debated a few moments ago, bank customers will suspect that their information may be disclosed to the department, whether or not there is any wrongdoing on their part.

As I understand it, at present where the police seek information to aid an investigation they must turn to a magistrate under the Police and Criminal Evidence Act 1984 and to a judge in a case involving drug trafficking. I do not quote all the individual citations. They must go to court or to a judge if they are to investigate bank books and so on. In a case of suspected fraud they must go to a judge or general commissioner of the Inland Revenue who is independent of the staff who carry out the investigation. That raises a problem in the context of the earlier remarks of the noble Baroness. The Minister said that the Inland Revenue could obtain bank accounts. Without any judicial authority, my understanding from the banks is that that is not the case. Perhaps the noble Baroness can explain the authority to the Committee.

Baroness Hollis of Heigham

Obviously, if I mislead the noble Lord I shall write to him. I understand that the Inland Revenue can routinely require information from banks about interest earned by a customer's bank account. That information is required by the Inland Revenue in calculating the sums due.

Lord Higgins

Is that only in regard to the interest?

Lord Grabiner

Perhaps I may assist my noble friend and the noble Lord. My understanding—I suspect that the noble Baroness, Lady Noakes, knows more about this than all of us put together—is that any interest earned on any account in excess of £15 a year is information to which the Inland Revenue is entitled by statute without the leave of any court.

Baroness Hollis of Heigham

I also understand that the Inland Revenue can require information about a landlord's properties and tenancies if he earns income from them.

Lord Higgins

I believe that that is the case as far as concerns interest. However, that is rather different from obtaining a copy of an individual's bank statement.

Baroness Hollis of Heigham

With the greatest respect, unless it is a particular kind of account one can work it out.

The Deputy Chairman of Committees (Baroness Nicol)

I remind the Committee that the amendment has not yet been moved.

Lord Higgins

I am grateful to the noble Baroness. We must clarify the situation. I do not believe that the position is as clear as the noble Baroness supposes. Otherwise, I do not see why, if these investigations are on all fours, a judge or general commissioner is required to give approval in the case of suspected tax fraud but not in the case of social security fraud. The two matters are not so different that it is inappropriate to say that the same level of restraint should be imposed. The question that arises is why information about those who are said to be guilty of social security fraud should be freely available but the obtaining of information about those who are involved in what may be a more serious tax fraud must be subject to the judicial process that I have just outlined. No doubt the noble Baroness will write to us in her usual courteous manner if that is not the case.

As I understand it, there will be a considerable number of investigating officers in the 14 departmental areas. I also understand that 409 local authorities concerned with housing benefit will be required to obtain information if the Bill is enacted. Since it is understood that there will be a large number of routine investigations considerable costs will be imposed on the banking community, not only as far as concerns the customer but, in the context of a later debate, his or her family or relatives. The banks have expressed considerable concern in relation to their professional duty of confidentiality.

The banks are also concerned, in the context of related amendments, that they may give false information, If fraudsters have given false information to the department they may well also give false information to the bank. The question is: to what extent are the banks responsible for the validity (if that is the right word) of the information that they are asked to provide? In particular, the banks are concerned that they are themselves subject to fraud on a significant scale in relation to credit cards and banking generally. The question posed is: to what extent are they responsible for the accuracy of such information?

A related question is the electronic communication of information from banks to the department. There is a worry that because of the convenience of obtaining information electronically—some of those involved with the Internet share the concern—it may be that its scope is broader than that which is necessary to carry out the investigation. In this context the question arises whether, if this is carried out by means of electronic communication, there will be an audit trail of the extent to which the investigation carried out by a particular officer has been authorised. My understanding is that it is the intention of the Government that in the case of a specific investigation by an officer there should be an audit trail to enable the department to ensure ex post, as opposed to ex ante, that it has been justified.

I hope that the noble Baroness will be able to reassure us on these points. There are other reactions from the banking association with regard to remarks made at Second Reading, but I do not believe that they are relevant to this particular amendment. I beg to move.

5.30 p.m.

Baroness Crawley

Amendments Nos. 2 and 3 seek to remove banks and building societies from the list of organisations required to provide information. If we start from the proposition that most of the fraud we are talking about today stems from the hiding of income, assets or capital, the consequences of this group of amendments will severely restrict the effectiveness of the campaign that I am sure Members of the Committee are signed up to, which is to tackle the £2 billion fraud bill that the British taxpayer is landed with each year.

As my noble friend Lord Grabiner pointed out in his report, information from banks and loan companies is already required by the DSS, but—and it is a very big "but"—that happens only if the claimant admits to having a bank account in the first place. Staff at the bank are then entitled to call for bank statements to check for any savings or signs of regular payments from a job or whatever financial pattern is relevant. However, if the claimant withholds that information at the start, there is at present no way that the Benefits Agency can know that the account exists.

The Bill allows for information already held to be obtained from banks and other loan and credit companies without the reliance on the claimant's willingness or otherwise to divulge the full picture of his or her financial circumstances. That seems to me, as someone who is not a lawyer, to make a good deal of sense. We should look at the issue from the point of view of enabling the banks and loan companies to have the most effective route of tackling the enormous £2 billion and more annual fraud bill. I support the effective route put forward by the Bill because it is done in the context of a limited kind of inquiry, with many safeguards built into it, that focuses only on the situation of the claim itself.

The noble Lord, Lord Higgins, said that the banks are very concerned about the Bill. They have written to all of us involved in the Bill. But they have also—I am sure the noble Lord, Lord Higgins, will agree with me—stated in their letters to us that they are willing to work with the DSS to tackle the enormous problem of fraud. So it is important that we say also that the banks have been positive in their response to the Bill.

Earl Russell

Before the noble Baroness sits down, without wishing to dispute any of her argument, can she confirm that the figures for the total amount of fraud are estimates rather than facts?

Baroness Crawley

Yes. I confirm that we talk about £2 billion as an estimate, but it is probably far more than that.

Baroness Hollis of Heigham

I am not entirely sure whether that was the point the noble Earl was seeking to establish. I am happy to confirm my noble friend's statement.

The purpose of Clause 1 is to enable the DSS and local authorities administering housing benefit and council tax benefit to check information with independent sources where claimants are suspected of hiding their true circumstances; although of course if all claimants told the truth these provisions would never be necessary. It is precisely because those who have something to hide—hide because they lie—that we need information beyond that which the claimant is willing voluntarily to give us. That is the core of the Bill. It presumes, I suppose, a dose of original sin in those who are fraudulently cheating the system.

The effect of the amendments would be to prevent the DSS and local authorities from obtaining that information we need most from the organisations that are most likely to hold it. The amendments remove banks, building societies, credit unions, organisations that accept deposits of money and organisations whose whole business, or a significant part of it, consists in the provision of secured or unsecured credit, from the proposed list of persons from whom information may be required. They also prevent the authorised officers from obtaining information from organisations whose whole business, or a significant part of it, consists in the provision of secured or unsecured credit.

To amplify the point made by my noble friend, of the £840 million we estimate that the DSS lost last year through fraud in income support and JSA alone, £400 million of that—nearly half a billion pounds—was due to people lying about their earnings, other income, and capital. Other than from the claimant himself, who of course has a vested interest in lying about the matter, how do Members of the Committee propose to help the DSS to find out what the truth is about people's earnings, their other income and capital? Those who propose these amendments, if they accept the broad-brush policy of seeking to nail down fraud and then remove the major source of information from which we can obtain the evidence that someone is committing fraud, have a moral responsibility to tell the Committee how that information can be obtained. I have heard not a word today of where that will come from. If not the banks and building societies, who will tell us what that person's capital, other income and earnings are?

I could go on to talk about the organisations; I shall not. But our definition would enable authorised officers to make inquiries of a full range of organisations, including hire purchase, credit card and cheque-cashing shops. The definition of "organisations listed" would not cover organisations where the provision of credit was not a significant part of their business. I was not pressed on this matter by your Lordships, but it is right to put it on the record. For example, we would not be approaching local shops providing credit to loyal customers or companies that provided season ticket loans. That would be, in the words of the noble Earl on a previous amendment, a step far too far.

Perhaps I may give the noble Lord, Lord Higgins, an assurance that if a bank gave us unknowingly incorrect information on what its responsibility might he in that situation—again I am happy to put it on the record—the bank would not be in any difficulty with the DSS obviously, or the Government, if it complied in good faith with a request made under these powers. It would not be the bank's fault if the customer had lied to it, as seems quite possible.

Members of the Committee may also like some reassurances as to the type of information that we would not require. We only want information that is directly relevant to the circumstances of a benefit claim. So we would not want, for example, any information pertaining to medical history unless it was a medically-based benefit, such as one relating to a disability.

Perhaps I may give an example, as that may help to clarify our thinking on this point. A woman could allege that her ex-partner had been claiming benefit while self-employed for many years. She has no evidence of this income, but we have no reason not to believe that she is giving us this information in good faith, as opposed to malice or whatever. She does know that he has several hire purchase agreements and a credit card. After all, if he was self-employed she might well have done his books for many years. An authorised officer under the Bill could check with the hire purchase and credit card company to find out what income, capital or assets had been declared in the applications for credit, and thereby obtain evidence of the fraud.

If we lost that provision, we would lose a crucial and pivotal source of information. Worse, we could be encouraging a greater use of other services to evade detection. For example, benefit cheats might use a cheque-cashing shop rather than deposit cheques in a bank.

For all these reasons, if a claimant lies—we must presume that someone committing fraud is lying—the only way we can find the correct information is by asking the organisations that the amendment excludes. If Members of the Committee can suggest any other way to deal with the points of other income, other earnings or capital, I should be glad to hear it. But if they do not and are insistent on the amendment, they are suggesting to the taxpayer that the taxpayer should be happy to continue to subsidise at least £500 million worth of fraud per year, because they are denying the investigators the powers that they need. I hope the Committee will not pursue the amendment.

Lord Higgins

Perhaps I may stress—I hope that I do not have to do so on every amendment—that with these amendments we are seeking to establish what is the case for the powers that the Government wish to have. I say at once that that does not mean that we are in any way condoning fraud. On the contrary, we are anxious that it should be prevented and that appropriate action should be taken.

Baroness Hollis of Heigham


Lord Higgins

I am coming to how. As the noble Baronesses, Lady Hollis and Lady Crawley, will know, the banks have made it clear that they are prepared to co-operate with the proposals. However, they are concerned about their duty of confidentiality. That is why they would certainly support the previous amendment. The two issues are related.

I ask the noble Baroness to clarify one point in the example she quoted. Are we to understand that if an investigating officer takes the view, for whatever reason, that an individual may be engaging in social security fraud, he will establish whether that individual has a bank account? If that is so, will he ask every bank and every building society whether that is so?

Baroness Hollis of Heigham

No. As the Bill is currently drafted, an investigating officer has to have reasonable grounds for believing that a benefit fraud or an offence against social security legislation has been committed, is being committed or is likely to be committed. Around £600 million of fraud a year arises primarily because people have undeclared earnings while drawing benefit. But there are other forms of fraud—for example, where someone is drawing money as a lone parent while cohabiting—which would not necessarily involve any interchange with a bank. That would be a different kind of fraud on the benefit system. It would be by virtue of the family relationship.

Lord Higgins

I understand that very well but it does not relate to the point I was making. If the investigating officer suspects, for whatever reason, that someone may have a bank account, will he ask every bank and building society, "Do you have a bank account in the name of", whoever it may be?

I have a second point to make before I seek to withdraw the amendment. The noble Baroness has now assured us that the banks are not liable if they pass to the department information which has been passed to them fraudulently. But what is the position if the bank happens to have inaccurate, incomplete or wrong information and passes it to the department? Is the bank liable for the inconvenience if a prosecution arises as a result of the bank having passed on that inaccurate information?

5.45 p.m.

Baroness Hollis of Heigham

The first port of call would normally be CIFAS or a credit reference agency. It would establish the bank or building society account the individual handles or has access to. That is the route. In the normal course of events, one would not need to track 15, 20 or 40 different kinds of banks to see whether any of them had the individual as a customer.

On the noble Lord's second point, my understanding is that an organisation would be liable under the law only if a fraud had been committed against us; that is, that it knowingly gave us incorrect, incomplete or misleading information.

Lord Higgins

I take the noble Baroness's second point, which she expressed very clearly. As to the first one, we shall need on subsequent amendments to consider the situation with regard to CIFAS. If I understand her correctly, she is saying that if the department's investigator goes to CIFAS, he can simply say, "Does Mr Bloggs have any account with any financial institution?", and CIFAS will be able to say, "Yes, he does have an account with the following financial institutions".

Baroness Hollis of Heigham

It would depend on the situation. We expect that the DSS will make around 250,000 inquiries to banks and building societies in a year and that local authorities may make a further 125,000. We also expect that we will be making around 200,000 inquiries of credit references agencies and that local authorities will make around 100,000. I could go on to refer to other organisations. If, in the example I gave, the woman knew that the bank her former partner normally used was "X", it might well be appropriate for the DSS to go directly to that bank. Where we did not have that information, or where it seemed likely that there was more than one bank, CIFAS might be the appropriate place to go.

Lord Higgins

I was asking a very simple question. Is the noble Baroness saying that if the department goes to CIFAS, CIFAS can tell it whether an individual has any account with a financial institution; or does the department need to go to every individual bank? Does CIFAS have a central data bank of every person who holds an account or is it necessary to go to all the individual institutions?

Baroness Hollis of Heigham

Perhaps I may write to the noble Lord. I am receiving conflicting advice.

Earl Russell

If the Committee could be detained for just a few moments, perhaps that might help the noble Baroness.

Lord Higgins

On the other hand, it may delay the proceedings considerably. I am happy for the noble Baroness to write to me as this is a not unimportant point. We simply do not know the facts. I am happy to await the letter. We can resume the matter on Report. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 3 not moved.]

Lord Astor of Hever moved Amendment No. 4: Page 1, leave out lines 16 and 17.

The noble Lord said: Amendment No. 4 relates to insurance companies. The amendment is very much in the spirit of the previous amendment moved by my noble friend Lord Higgins. It seeks clarification on the concerns expressed by insurance companies. While, like the banking industry, the insurance industry fully supports the purpose behind the Bill, it has some concerns that the DSS has not wholly appreciated the work required to meet requests for information. The regulatory impact assessment assumes that requests are dealt with by individuals. In fact they are almost always dealt with by multiple parties. Although there may be a single initial point of contact, requests will always need to be referred to the legal department to approve release of the information and to establish the validity of the inquirer and his or her authority to ask for the details. In addition, the information needs to be compiled and checked. The view of the insurance industry is that the time which would need to be spent is closer to 60 minutes for simple queries and 90 minutes for more complex ones. In view of that, the RIA seriously underestimates the potential costs.

Since more than one member of staff, some highly qualified, may be involved, the average hourly cost could be over £75 per hour. It is inequitable that insurers should not be compensated for doing the same work as credit reference agencies and others who will be paid. I look forward to the Minister's clarification of the issue of compensation for the essential work that the insurance industry will be expected to undertake for the DSS.

I understand that discussions have taken place between the Minister's department and the insurance industry on the subject of reciprocal co-operation by the DSS in providing information to insurers to help them to combat fraud. It would appear that the DSS is not willing to reciprocate. I should be grateful if the Minister could clarify that point. I beg to move.

Baroness Hollis of Heigham

This amendment seeks to remove insurance companies from the list of organisations which would be required to provide information to help the DSS and local authorities to fight fraud and error. This, too, would be a weakening of the proposed new powers and would leave a serious gap in our new information-gathering resources.

Insurance companies hold a great deal of information about individuals. If individuals are committing benefit fraud, we need to have access to that information. Such information may include, for example, vehicle insurance which might suggest that someone is using a vehicle on a commercial basis, perhaps as a taxi driver. We might also discover that someone owned a high-performance car. How could that person afford to own and run such a vehicle while at the same time being in receipt of benefits? Fire and household insurances could suggest undisclosed assets and a lifestyle not commensurate with living on benefit. We might find employers' liability insurance, which would indicate that someone was running a business while in receipt of benefit.

We might discover policies relating to health or unemployment contingencies. If someone was paying large premiums, we might suspect that they were in receipt of an extremely high income, especially if those payments were disproportionate to their benefit income. One example of where insurance payments should be taken into account is when calculating means-tested benefits. In such cases, we need to cross-check information with insurers where we believe that a person may be receiving undeclared insurance payments.

In other cases, the benefit system and insurers are providing benefits or paying claims for the same contingency. For example, it is possible to insure against loss of earnings due to unemployment, ill health or disability; the benefit system also provides for these contingencies. Again, therefore, sometimes we need to double-check with insurers what we have been told. I hope that noble Lords will agree that this kind of information is entirely relevant to the kind of benefit claims the suitability of which we are seeking to establish. We would not ask about a customer's medical history unless it concerned a disability benefit, because it would not be relevant to the conditions of normal benefit entitlement.

The noble Lord, Lord Astor, asked about costs. He stated that it was his belief that we may have underestimated the costs involved. As regards the published RIA increased costs, as a result of the responses we received to the consultation exercise, we have moved from our original estimate of £16 per hour and have increased it to £30 per hour. He also asked why insurance companies would not be paid. We are asking for companies to provide information which they already hold in the same way as banks and building societies. That point was made by my noble friend Lady Crawley. In our view, that is different from credit reference agencies, which make their living not from the sale of policies and so forth, but from providing information. That is the distinction that we are drawing here.

We know that insurers would also like to obtain information from the DSS because we make payments in respect of the contingencies against which they insure. We discussed this in our consultation paper, but the responses to our consultation did not provide strong support for the proposition. For that reason, we have decided not to proceed with it.

We believe that information provided by insurers is important and that we need to include it in the Bill. We are holding discussions with the financial industry more widely as regards giving government information—for example, confirmation that someone has died or details of a bogus national insurance number—which may be helpful. However, we do not envisage a complete exchange of information. We would not support such a practice. Indeed, we feel that in some cases we might impinge on the terms of the Data Protection Act.

Lord Astor of Hever

Am I right to assume that the door is not closed on this point?

Baroness Hollis of Heigham

That is absolutely correct. The fact that we are continuing to hold discussions and that we will be producing a draft code of practice will allow such areas to be explored further. However, I would not wish to raise the noble Lord's hopes too high We certainly seek to be helpful here, but also we are mindful of our duty to protect information.

For example, someone may have a child from another relationship who may not be known to the partner in their current relationship. If a full exchange of information were in place, the circumstances might then be made known to the insurance company and thus might be circulated back. We, too, have a duty to maintain confidentiality. As I have said, we wish to be helpful. It is not in our interest to see people defrauding the insurance system or the DSS.

In the light of the explanations in relation to a whole array of benefits that I have sought to establish, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Astor of Hever

I am grateful to the noble Baroness for her response, in particular for addressing head on the two questions I put to her. I understand the need for the DSS to check with the insurance industry. Indeed, I made that clear in my opening remarks. The industry accepts this and will co-operate with the DSS.

I was surprised at the figure of £30 per hour quoted by the noble Baroness, with which I believe the insurance would probably disagree. However, in the light of her comments, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 5: Page 1, leave out lines 18 and 19.

The noble Lord said: In moving Amendment No. 5, I believe that it would be appropriate to consider at the same time to Amendment No. 6. This amendment addresses the position of credit agencies and those concerned with fraud detection. We discussed this matter at Second Reading and had an interesting exchange during which I suggested that the fact that a credit agency had received an inquiry from a DSS inspector, presumably convinced that someone was engaged in fraud—they would not otherwise make the inquiry—might not do any good to the credit rating of the individual concerned if he were guilty or, more particularly, if he were innocent.

In subsequent discussions, the noble Baroness was kind enough to say that it was her understanding that this would not arise because the fact that an inquiry had been made would not leave a footprint on the record of the credit rating agency. Quite by chance I came across an individual who, under the terms of the relevant legislation, had recently asked to see what a credit rating agency had been saying about him. He discovered not so much that the odd footprint remained of bodies which had made inquiries, but that the record had been positively trampled to death; in other words, a vast mass of footprints appeared on the information submitted to him by the credit rating agency. Presumably, among the various footprints would be the footprint of the Department for Social Security.

I may have been misinformed on this matter, but I do not believe that to be the case. Perhaps the noble Baroness can confirm whether there is any risk that an individual could be penalised as a result of the department making an inquiry of a credit rating agency.

Given that I am not familiar with this area—possibly that is the case also for other noble Lords—will the noble Baroness put in the Library a copy of a typical response which the department receives in answer to a query regarding a credit rating?

Perhaps I may put one further question to the Minister. If someone has either a bad or a good credit rating, is that supposed to be in some way an indication of fraud? If they are in receipt of income support and they have a magnificent credit rating, at some point a slight suspicion might be aroused about it. However, I am not clear exactly how such inquiries are likely to produce information which the Government believe that inspectors would find helpful.

Another point should be raised here, although perhaps it is not wholly relevant to the amendment. If an individual is entitled to see what a credit rating agency has said about their status, which I understand is the case, will the individual be entitled to see the more comprehensive data which may be obtained by a government department as a result of its inquiries? A further problem that we should consider—we discussed this earlier— that someone who has engaged in fraud may well provide incorrect information to the credit rating agency. Indeed, that is likely to be the case. Given that, the information then received by the Government would not be as accurate as one might hope. I should be grateful if the noble Baroness could clarify these points. I beg to move.

Earl Russell

Amendment No. 6 directs our attention to the words in the Bill entitling the Government to get information from, any body the principal activity of which is to facilitate the exchange of information for the purpose of preventing or detecting fraud". I have two queries about this, not altogether unrelated to each other. First, I am not entirely clear what it means. Secondly, I wonder whether its application is rather too wide. If we know exactly what is intended, it might be rather easier to achieve drafting which clearly expresses the Government's meaning.

6 p.m.

Lord Grabiner

Perhaps I may deal with a point raised by the noble Lord, Lord Higgins. When conducting inquiries which led to the production of my report, I also considered footprints. This is a point we discussed briefly on Second Reading. In the course of preparing the report, I interviewed a senior official from Experian, which is a major provider of the information we are discussing. The point that concerned me—exactly the point mentioned by the noble Lord a moment ago—was whether a subsequent inquiry of, say, Experian would reveal the fact that the DSS had left its heavy footprint. That would obviously have a profound impact upon the decision of the subsequent potential credit provider as to whether or not he gives credit to the individual. It was explained to me—I am sure it can be independently verified, if necessary—that it need not leave a footprint.

I agree that this is an important consideration. If the noble Lord were to view the information that is held by such companies—he should be under no misapprehension as to the quality and quantity of this information; it is fabulous—he would be horrified at how much information is available on a credit card when presented in a simple credit card transaction. For example, I recently presented a credit card to a garage proprietor. He was able to tell me my personal address from the information available on the face of his screen. That rather scared me. This kind of information is vast and is freely available outside. I say "freely"; you have to pay for it.

But, to return to the point, the information held by companies of this kind is like, so to speak, the contents of a black box. The providers of the information have to satisfy the information commissioner that they are behaving in relation to the contents of that black box in a fashion which is entirely consistent with the requirements of the data protection legislation. The commissioner supervises in a very strict way the providers' behaviour and the way that they run their daily business.

One of the things that I was told could be provided was a tailored-made package to meet your requirements. You decide what you want to purchase and you go along to the provider and buy a tailored-made package. Here we are talking about a fairly low level of information—for example, verifying the existence of a bank account, or the name or address of a person. It is possible to negotiate a package which will ensure that a subsequent intruder into the information available in the black box will not be told that on a previous occasion a footfall has been left by the DSS.

This point needs to be absolutely confirmed, but my understanding from inquiries is that such a package is obtainable; that it is possible to preserve the integrity, privacy and confidentiality of the individual by ensuring that that knowledge cannot be transmitted, so to speak, outside the black, box to a third party.

Lord Higgins

Perhaps I may respond on the two points made by the noble Lord before the Minister replies. She can then cover them.

As to the position of the credit card in a petrol station, the noble Baroness, in somewhat exotic terms, said at Second Reading that you would be appalled at the information which people can get if you put up on the screen what is available on the card. I did not mention this during our discussions on the last amendment—it did not seem relevant—but the banks have written back to me, in almost furious terms, pointing out that this is totally wrong. The noble Lord seems to be in the same position. If you put a credit card in at a petrol station, all that should come up is whether the payment is authorised or not. I have it in black and white from the British Banking Association that that is the position.

Lord Grabiner

The BP garage proprietor—I suspect that he was not the proprietor but a mere employee—simply said to me, as I presented him the card and he put it through the machine, "Is your address…"—I do not need to repeat it for the benefit of Hansard—and he gave me my address; it was absolutely correct. That came up on the face of his screen.

Lord Higgins

I am tempted to read out what else the banks said about the noble Baroness's Second Reading speech, but I shall refrain from doing so.

We need to check up on the facts of the matter. There is clearly a considerable difference of opinion between the noble Baroness and the noble Lord on the one hand, and the British Banking Association on the other, as to what actually comes up on a screen in a petrol station when you present your credit card. Short of us all going off to the nearest petrol station and presenting a credit card, I am not sure how we can solve the issue immediately. No doubt we shall manage to do so.

The trouble with this argument is that I have now forgotten the second point made by the noble Lord.

Lord Grabiner

I cannot remember it either, so it does not really matter. But perhaps I may make this point. In a sense, it does not really matter if the address comes up. What has to be appreciated is that probably such transactions are carried out 200,000 or 300,000 times a day. The decision on whether or not to grant credit in respect of a particular transaction is the effect of a positive reaction from having put in the card. That is because a vast amount of information is immediately, in effect, interrogated and a positive or negative response is given. The essential point is that the information is already there, albeit in the private sector, which many of the provisions and amendments we are discussing illustrate. The legislation is designed to allow access to information which is already in the private sector and available at a price.

Lord Higgins

The second point made by the noble Lord was in regard to footprints. Again there seems to be a considerable difference of opinion. I am not clear whether the Government are arguing that there will be no footprints because the footprints are normally not recorded, or whether they are saying that if the DSS makes an inquiry it will ask for the footprint not to be there.

My understanding is that if you ask to see your credit rating, one of the pieces of information you get back is a list of all the people who have inquired as to what is your credit rating.

Baroness Hollis of Heigham

Perhaps I may address that point in a moment. These amendments seek to remove credit reference agencies from the list of organisations who would be required to provide information. As I said on the two previous groups of amendments, this would be a seriously damaging step as we envisage the agencies being our first port of call in many inquiries. If someone has a credit card, then going through the credit reference agency leads us to his bank. If he does not have that, we may need to go to the bank directly.

The amendments also seek to remove, any body the principal activity of which is to facilitate the exchange of information for the purposes of preventing or detecting fraud", from the list of organisations which would be required to provide information.

Perhaps I may deal first with the issue of credit agencies. The noble Lord, Lord Higgins, made two substantive points: first, that a person's credit rating could be harmed by the fact that the DSS had made inquiries about that person—in other words, an assumption about how credit ratings operate; and, secondly, that the DSS in particular would be leaving a footfall and that the situation should be clarified.

As I understand it, credit reference agencies do not award credit ratings; it is the financial institutions using their services who do that. I have assured the House that we will ensure that these organisations—the banks and so on—which use the credit reference agencies cannot identify whether or not the DSS made an inquiry when the department itself, in turn, accessed credit agency data. There is, therefore, no question of a person's credit rating being affected by our using these powers.

There may be some supplementary concerns about whether the information held is incorrect— refer back to our previous discussions—but, again, no one piece of information convicts a person of fraud. Any incorrect information would soon be uncovered—it would be inconsistent—and it would be treated sensitively and securely destroyed.

Again there is a concern about people knowing the information. We debated this point in relation to the previous amendment. Only an authorised officer may obtain on-line information that relates to an identified person where there are reasonable grounds to do so. Any inquiry that would not be allowed in writing under Section 109B will not be allowed under these provisions. Such inquiries will have to be made in accordance with a code of practice that we shall subsequently discuss. Authorised officers will be required to document their grounds for inquiries. That documentation would, in turn, be subject to routine checking by managers.

Concerns have been expressed about the amount of reliable data that agencies may hold. It has been suggested that it could lead us, via the card issuer, to a concealed bank account and so on. We need the help of the agencies to defeat the £2 million or so annual loss to public funds. Credit reference agencies are a useful gateway to information about a claimant's financial circumstances in order to determine the amount of fraud.

As regards the question about leaving a "footprint", banks that go to a credit reference agency leave a footprint behind, so any other bank or organisation would know that Barclays, Lloyds or whichever organisation has interrogated the credit reference agency. We have established with the agencies that their system will not divulge our inquiries to any subsequent inquirer. We shall place an example of a typical credit reference agency in the Library, so that the noble Lord may satisfy himself on the details. Equifax and Experian are the two major ones. I have had a quick look at some of the information provided by one of those. It makes it clear that the credit agencies themselves do not determine credit standing. It is the organisations that do that, on the basis of the information provided by the credit reference agency.

In regard to Amendment No. 6, perhaps I may confirm that we are talking about CIFAS. No other bodies are known at present. However, for procedural reasons it could not be named on the face of the Bill; otherwise, a question of hybridity would arise. That is why the reference in the Bill is worded in this way.

I hope that I have addressed the two main concerns of the noble Lord: whether this provision will affect someone's credit standing and whether, in asking for the information, the department will leave a footprint. The answer is no on both counts. As a result, I hope the noble Lord will feel able to withdraw his amendment.

Lord Higgins

As always, the noble Baroness is very helpful. We look forward to reading the example—no doubt anonymous—which will be placed in the Library to enable us to see what information is received from the credit agencies. Clearly, this is an important point.

It would seem that the Government have done a specific deal with the agencies—the Minister nods and the noble Lord, Lord Grabiner, who is expert in these matters, shakes his head—to the effect that the department's footprints will be "erased from the snow". So the problem that I raised at Second Reading does not arise. The Minister nods to indicate that that is the case.

In exchange for part of this information the department will no doubt make a payment to these organisations. We shall come to the question of payment in relation to subsequent amendments. As I understand it, the Government are making the credit rating agencies and those concerned with fraud a special case: they are to be paid, whereas the Government are treating other organisations which will equally incur costs in the same way as they are treated in other pieces of legislation. It unusual to pay a particular organisation for its services in this way and not to pay others which incur equal cost.

Baroness Hollis of Heigham

I addressed this matter earlier. The point is that banks and insurance companies hold this information anyway for their own use, and we are seeking access to it, whereas the credit reference agencies' reason for existing is the provision of such information. Therefore, such payment does not seem unreasonable. Had we not been willing to pay them, I am sure the noble Lord would have been equally forthright in his criticism.

Lord Higgins

Either you pay them all, or you do not pay them all.

Baroness Hollis of Heigham

They are not the same. Surely the noble Lord can make a distinction between an insurance company or bank and a credit reference agency.

Lord Higgins

Yes, I do not dispute that there is a distinction. I merely wonder whether this approach is justified. Credit rating agencies have all the information readily to hand, in the same way as a bank does.

Baroness Hollis of Heigham

But they provide that information—unlike banks, which hold it as ancillary to other priority purposes.

Lord Higgins

I understand that very well. We look forward to seeing what the noble Baroness's example reveals, and on the point that was raised earlier. Subject to that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 6 not moved.]

6.15 p.m.

Lord Higgins moved Amendment No. 7: Clause 1, page 2, leave out lines 1 to 3.

The noble Lord said: In line with other amendments, this seeks to probe the position with particular regard to, any person carrying on a business the whole or a significant part of which consists in the provision to members of the public of a service for transferring money from place to place".

I am not quite clear what kind of organisation the Government have in mind. Since subsequent clauses make provision for international exchanges of information, is the provision particularly concerned with organisations of that kind? I simply do not recognise the description. Perhaps the noble Baroness can help us.

Baroness Hollis of Heigham

I shall try. The effect of the amendment would be to remove money transfer companies from the list of organisations required to provide information about individuals.

Most people use banks to transfer money and we should be able to obtain information from them. But there are other companies which transmit money and which would not be so covered, such as Western Union. This is a money transmission company that enables a person to send money to someone within the UK or abroad for a service charge. Senders can transfer the money by handing in cash, by credit card or by telephoning the companies. The recipients can collect the funds from the companies' agents by proving their identity.

Given that the noble Lord simply asked about the context of this provision, I hope I have answered his question. We obviously need such information to identify people who are colluding in organised international fraud and to track the movements of stolen benefit in order to recover that money when benefit cheats are prosecuted.

For example, in one operation, people who were involved in making multiple fraudulent benefit claims—including a member of the DSS staff—were observed using money transmission companies to send money abroad. That is why we need to bring them in under this remit. If the amendment were accepted, we should be unable to obtain such information; what is more, if it were an exempt territory, one could see a growth in the use of such services to send money to banks abroad so as to evade detection. I hope that I have answered the noble Lord's question and that he will be able to withdraw his amendment.

Lord Higgins

I am grateful to the Minister for that response. This seems to be a strong case. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Astor of Hever moved Amendment No. 8: Clause 1, page 2, leave out lines 4 to 8.

The noble Lord said: In moving this amendment, I shall, with the leave of the Committee, speak also to Amendments Nos. 9 and 10.

The water, gas and electricity industries also recognise the significance of social security fraud and the potential role to be played by private sector companies, including utility suppliers in efforts to tackle this form of crime. However, they have concerns about some aspects of the Bill—specifically, potential costs, data protection aspects and the impact on customer relations.

Utility companies, and especially electricity companies, as almost every household has an electricity meter, will be affected by the large costs associated with the Bill. Although the Bill allows the Secretary of State to make payments to utility companies for the bulk of information they will be asked to provide, the Secretary of State may make payments only where he considers this reasonable; but he need not do so if he does not think it appropriate. This is very unsatisfactory and unclear. It places these private companies in an uncertain position over the recovery of the costs.

The companies are also concerned about the way in which this will affect relations with their customers. Electricity companies are working extremely hard to introduce initiatives designed to combat fuel poverty. In so doing, they often deal with sensitive customer groups. The industry believes that the requirement for such companies to hand over information to the Government about those customers places a strain on electricity suppliers, who are trying to do their very best for vulnerable customer groups.

On data protection, the industry feels that the Government may be seeking on-line access to information held by the electricity suppliers. Can the noble Baroness tell the Committee whether the Government believe that this will raise specific data protection problems for the electricity industry? I look forward to hearing the Minister's response to those two points. I beg to move.

Baroness Hollis of Heigham

My Lords perhaps I may respond first to the noble Lord's second point relating to data protection. I have received an assurance to the effect that the answer to that question is no. No data protection issues are raised for the electricity companies. However, given that this is the Committee stage, it may be worth outlining why we need this information. These amendments seek to remove the power to obtain information from water companies and gas and electricity suppliers. Fraud is committed by people lying about where they live—for example, claiming housing benefit for a property that is actually empty. Members of the Committee will know from ample discussion in this Chamber about housing benefit fraud how often systematic frauds arise as regards properties where people are not living. Fraud is also committed by people lying about their identity.

Utilities, including water companies, can provide information on levels of consumption. No consumption may mean no resident at a property; for example, if we suspect that a gang of organised criminals are using a number of empty addresses to claim benefit from, information from the utility companies could tell us if it was likely that anyone was living there. Such companies can also provide information on who they think lives in a property which we can cross check with our own records. Therefore, they can help us combat those types of fraud.

Water companies also have information on how bills are paid. For example, if we were to ask about the bank account used to make payments by direct debit, this may lead us to identify undeclared income in those accounts. The type of information that we would require from gas and electric companies would be much the same, and would help us to detect the same types of offence—that is, people not living at the address from which they are claiming benefit; people lying about their identity; people not declaring savings or capital. In the case of gas, we do not see gas suppliers as a major source of information in this respect. However, they may still hold information about bank accounts that would be extremely useful.

Therefore, we can obtain information about residency fraud. We may also get information about what other forms of income people may have. If a utility company tells us that our customer is not the registered user at an address, that might suggest either that he or she is not living at that specific address or that he or she is living with an undeclared partner who is working and paying the domestic bills. Indeed, I could go further.

The noble Lord, Lord, Astor, also said that he thought this provision was unfair because of the bulk issue as regards the utilities. Given the likely cost of extracting the data, it is difficult to see why it is appropriate to make payment. This is just a large amount of bulk information.

With that explanation—namely, that giving the information is not contrary to the Data Protection Act and the fact that we do not believe it is appropriate to make such payments, and bearing in mind that it is information particularly about residency to which these companies have unique access—I hope the noble Lord will feel able to withdraw the amendment.

Lord Astor of Hever

I am grateful to the noble Baroness for her response. I quite accept, as does the industry, the need for the DSS to have such information. I was disappointed with the Minister's response on the recovery of costs, but I am grateful that there will not be any specific data protection problems for the electricity industry. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 9 and 10 not moved.]

Lord Astor of Hever moved Amendment No. 11: Clause I. page 2, leave out lines 13 to 15.

The noble Lord said: Should the Bill receive Royal Assent in its current form, there is concern in the telecommunications industry at the imposition of what it believes to be an unreasonable burden on companies. Although I understand that the Government would be prepared to meet some of the costs to the telecommunications companies when using services, such as directory enquiries, for which companies already charge, these payments would not be sufficient to cover the majority of the costs that would fall on them.

As the companies expect to have to deal with up to 90,000 enquiries per year over the whole sector, they believe that this Bill will have serious resource implications for them. They feel that those implications go beyond any reasonable expenses that they should be obliged to bear as good corporate citizens.

In today's House of Lords Official Report, in a Written Answer to my noble friend Lord Northesk, the Government recognise that Internet service providers (ISPs) and communications service providers (CSPs) do bear substantial costs for providing data to law enforcement agencies and should, therefore, be entitled to enter into cost recovery agreements. The noble Lord, Lord Bassam, has accepted that a requirement to provide communications data places operational and financial burdens on the CSP. In the light of that response, can the noble Baroness clarify the Government's position on compensating the communications sector for the data that it provides?

In particular, I should be grateful if the Minister could clarify why the telecommunications services should be treated differently from the ISPs, if in fact telecommunications services do fall into this category of CSPs mentioned by the noble Lord, Lord Bassam. If they do, it seems extraordinary to allow them to recover their costs under the Regulation of Investigatory Powers Act 2000, only to prevent them from doing so under this Bill, the aim of which is also to facilitate improved law enforcement.

We hope that the Government will eventually agree with themselves that these companies should be entitled to some sort of reimbursement for the prospective costs that they will shoulder as a result of this Bill. It is important that we do not take for granted those British businesses that have legitimate concerns about how such costs will affect their businesses when drafting legislation which will have to rely heavily on their co-operation for its effectiveness. I beg to move.

Baroness Hollis of Heigham

The amendment now before the Committee would have the effect of removing providers of telecommunications services from the list of organisations required to provide information to help combat fraud. I am delighted to, as it were, read into the record that BT said in the consultation exercise that it would wish, to co-operate with legitimate and justified requests from the DSS to supply information". I believe that to be a most helpful and positive response.

Perhaps I may begin by outlining why we need this information. I shall then return to the point raised here, and also to the question of utilities in terms of costs. I realise that that point is of obvious concern to the noble Lord.

Why do we need this information? A telecommunications provider would be able to provide a range of information on an individual. For example, it might have information on the level of usage and on the means by which bills are paid. If the usage was exceptionally high, that might suggest that someone could be operating a business from his or her address. Billing information might also show that someone other than the householder was responsible for the account, which might, in turn, suggest that there was an undeclared person in the household.

All that information might help to establish the true circumstances of a benefit claim and thus ensure that the correct amount of benefit was in payment. However, we would not ask for information that does not help us to do this—for example, information about the content of telephone calls, or of electronic mail. We are not seeking information about what we call "traffic data".

In his report entitled The Informal Economy, the noble Lord, Lord Grabiner, mentioned the value of being able to "reverse search" the telephone directory. On Second Reading, I mentioned the scenario of the window cleaner advertising his services in the newsagent's window and giving only a telephone number. A further benefit of billing information in organised fraud cases would be that we might be able to put together a picture of his activity and, if necessary, that of any others with whom he is working on that basis. Therefore, I hope the noble Lord will agree that the information that telecommunications suppliers hold is vital to our fight against fraud.

The noble Lord, perfectly properly, pressed me on the question of costs. If I mislead him, I shall obviously elucidate my response by way of correspondence. My understanding is that we are not proposing to pay telecommunications companies for every piece of information that they may give us. We propose to pay them only for certain types of information that they already provide for payment; for example, directory enquiries. However, if we ask them for details of what address they hold on their records for a customer, or billing information, we shall not pay for that service. So there is some payment but not for the full range of information that they hold. Similarly, in the case of the utilities, we do not expect to pay them for information about individuals. We will obviously reimburse them for bulk information and such reasonable costs as the Secretary of State may determine.

6.30 p.m.

Lord Astor of Hever

I am grateful for that response. Of course I understand all the reasons for requiring the information. The Minister did not respond to my question why telecommunications services should be treated differently from Internet service providers. Perhaps she will reply to me in a letter as the industry takes that point very seriously.

Baroness Hollis of Heigham

We have no plans at present to obtain information from Internet service providers. However, as this is a complex issue, I shall write to the noble Lord.

Lord Astor of Hever

With the greatest respect, that was not my question. I asked why the telecommunications services should be treated differently from Internet service providers in relation to cost.

Baroness Hollis of Heigham

As the noble Lord rightly identified, this is a complicated issue because BT is also an Internet service provider. These are not separate categories; there is considerable overlap. It may be useful to set that out in a letter to the noble Lord, which I shall also place in the Library.

Lord Astor of Hever

I am grateful for that response, as I am sure will be BT. I have had a series of telephone conversations with BT today on this matter. It is an area that concerns them. In the light of that response, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Astor of Hever moved Amendment No. 12: Page 2, leave out lines 16 and 17.

The noble Lord said: I rise to move Amendment No. 12 and, with the leave of the Committee, to speak to Amendments Nos. 13 and 14. I suppose I should declare an interest as the father of two daughters who are studying, or are meant to be studying, at two separate universities. I understand that they are occasionally there!

We believe that the inclusion of educational establishments in the list of persons who will be bound by law under the Bill to deliver personal information about individuals to the DSS is unnecessary and potentially too intrusive. It will also place an additional workload, and time constraint, on the already pressurised teaching profession and redirect vital educational funds into resources required to meet the demands of inquiries.

It would seem that much of Clause 1 has been designed to allow officials to check whether an individual's expenditure is as they claim when they apply for benefits, or whether, in fact, they are making a fraudulent claim. School and university records, however, have no record of students' income or expenditure and therefore should be exempt from the Bill.

We cannot see how it can be necessary to put an extra burden of responsibility on educational institutions, particularly teachers, to provide the Government with private records on demand, and then refrain from advising that individual that they were under suspicion. Given all the other financial information that will be made available to officials under the Bill, it seems highly intrusive and inappropriate for this particular source of very personal information to be at the Government's fingertips. I beg to move.

Earl Russell

I rise—

Baroness Hollis of Heigham

I hope I may reply before the noble Earl speaks as I may obviate his concerns. There may be a profound misunderstanding here of what we are seeking to do. All we are seeking to establish is whether someone in higher education is a student. If they are a student, they are not eligible to claim benefit. We are not interested in, nor would we be able to seek, nor shall we seek, information about exam grades or tutors' comments, however much the noble Lord, Lord Astor of Hever, as a father might like to know that, and however much I as a former university teacher might feel that it ought to be shared with the parents of students in some cases. All we seek to do with this information is essentially to establish whether someone has the status of a student. The persons who will tell us that are not the universities as such but, primarily, UCAS. That is the reason we seek that information. I could give a much longer reply but that may obviate the need to explore the issue further. If it does not, I shall, of course, seek to help the Committee further.

Earl Russell

I intervene precisely to the point that the Minister has been concerned about; namely, the question whether people are actually students. The Minister who is learned in both languages I think understands something of the difficulties of communication between universities and government agencies, especially the DSS.

I remember on one occasion being called in for help by my departmental secretary to answer a detailed request for information. I forget where it came from; I think it may well have been the CSA. She said, "These questions do not mean anything in our terms. What shall I do with them?". We went over them for about half an hour and I finally said to her, "All you can do is set out the facts of this person's situation and you have to ask them to decide what answer to the question that adds up to". We could not make head or tail of it.

I shall not go into the matter in detail because the noble Baroness, Lady Amos, will remember the debate on the student social security regulations, and most of the points had been made by the Social Security Advisory Committee far better than I could ever make them. The basic difficulty, especially in the humanities, is that the DSS assumes that being a student means being in full-time attendance sitting in classes. In my field a great deal of it—it ought to be up to three-quarters—means sitting at home seriously reading books. Until that is understood, we cannot give meaningful answers to the questions the DSS sends us. Academics can always think of six or seven meanings to a question. So we shall be sending back a great many detailed, lengthy and learned replies which will take up people's time and not give information which we would have been happy to give if it had been asked in a form in which we could answer it.

There is a further problem of intermission and that is so well dealt with by the Social Security Advisory Committee that I do not need to go into it any further. Because the Minister is learned in both languages, perhaps she is the ideal person to provide a solution to a question which in the past has seemed insoluble. If she is able to do anything about this, the university world as a whole would be profoundly grateful.

Baroness Hollis of Heigham

I rather suspect the noble Earl, Lord Russell, seeks to tempt me down the road of social security support for students. I accept that there can be a problem of definition as to what counts as a full-time student and a part-time student given the 16 hours rule and so on. I recognise that where much study may be done at home there can be difficulties of definition. I am happy to refer those queries to my noble friend Lady Blackstone who is the Minister responsible for education. However, I hope that the noble Earl will allow me tonight not to engage in a debate about social security support for students.

What we seek here is simply the power to apply to the Student Loans Company or UCAS, or other relevant bodies, to find out whether someone who is claiming benefit also has the status of a student, or has been drawing student loan income or other incomes in such a way that impinges on his or her benefit claims. I think the Committee will understand the need for that information. We do not seek anything else that is private or confidential. If the noble Earl, Lord Russell, will permit me, I would prefer not to be tempted down the path of a general debate on student support and social security tonight.

Earl Russell

I thank the Minister warmly. She said everything that I hoped to hear. I assure her that I was not tempting her down the path of that general debate. That debate remains to be had but this is neither the time nor the place for it. I thank the Minister warmly.

Lord Astor of Hever

I am grateful to the Minister for her clarification of the point. I am also grateful to the noble Earl, Lord Russell, for the definition of a student. My two daughters are supposedly students although they are not always sitting in a class full-time or, indeed, working at home. In the light of what the Minister said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 13 and 14 not moved.]

Lord Higgins moved Amendment No. 15: Page 2, leave out lines 22 and 23.

The noble Lord said: Amendment No. 15 appears towards the end of the series of amendments which are concerned with individual organisations. Amendment No. 15 is somewhat different in as much as it relates to the part of the Bill which is concerned with getting information from agents or servants of the aforementioned list of persons or organisations.

Our concern is the level at which the information is likely to be obtained. One presumes that the information is being obtained by the inspector from the organisation itself—the electricity or gas industry, or banks—rather than by the servant. That suggests that the obligation on an employee to provide the information to the person in government is different from that of the organisation by which he is employed: that he has some personal responsibility to produce the information. He may run into trouble with the business employing him if it does not want the information disclosed. The Government could have gone to the business rather than to the employee.

I understand that a problem arose with regard to the Electronic Communications Act. It was seen to place an unfair burden on employees to disclose information which they might not have. I understand that the first version of that Bill went back to the draftsman because one of the major objections was that the onus was placed on employees to disclose information to which at junior level they had only partial access. It will be helpful to ensure that we do not run into the same problem. Having recognised that problem, the Government then took a different line.

The problem arises as to whether the agent of a commercial organisation is bound by some contractual or other relationship to the person employing him as an agent not to pass on information when the information can be obtained from the principal. What information is likely to be obtained from the agent which cannot be obtained from the principal? Alternatively, is it in some sense a whistle-blowing operation—the agent knows that the principal is fraudulent and the Government wish to ask whether it is true that his principal is engaged in fraud? It is not entirely clear from the somewhat simple wording of the Bill. In the light of experience of the previous legislation, perhaps the Minister will clarify the position.

6.45 p.m.

Earl Russell

I ask for a clearer definition of what is implied by the words in the Bill. Is there any restriction in the way "agent" is defined which makes it clear who will be covered by the clause? I remember debates on IR35 during the Welfare Reform and Pensions Bill. There seemed a confusion of relationships between people who were or were not agents or employees. Will exactly who is covered by the clause he clear?

My other concern relates to diffusion. In our meeting, the Minister gave me reassurances on diffusion which were extremely welcome. I think that it is agreed that as information spreads among more people, the risk of wider disclosure increases in geometrical progression in line with the number of people who have the information. If more and more agents—related people, people in connected jobs, people who have done a single job on contract for a government—become involved and provide information, a series of "onion layers" may arise. If not, there may be difficulty in getting the requisite information.

It is a difficult problem to get round, but I should like to know exactly what the Bill means.

Baroness Hollis of Heigham

The issue is important for the security of a number of people. Therefore, I shall give a careful answer.

This amendment seeks to prevent authorised officers obtaining information from the servants and agents of the persons and bodies that can be required to provide information about identified individuals under the clause.

Perhaps I may set out who servants and agents are. Servants and agents can be the subcontractors of organisations. If a subcontractor held the information we needed, it would make sense to go to him as the servant or agent of the primary body rather than to the primary body itself. Servants are also the employees of a company. Putting it crudely, servants can be agents but also employees whereas an agent is a person authorised to act on behalf of another. According to Black's legal dictionary—I defer to my noble friend Lord Grabiner—a "servant" is a person employed by another to do work under the control and directions of the employer. In the same legal dictionary, an "agent" is defined as one who is authorised to act for or in place of another; a representative. That tends to be the distinction.

We need this provision to ensure that there is someone in the company to whom we can direct inquiries and make responsible for providing the information needed to identify benefit fraud. Generally, as the noble Lord, Lord Higgins, suggested, we would approach a company for information, and many organisations would want to nominate a central point for such inquiries either within the corporate body or within an organisation that works for them. Where this was the case, we would not direct our inquiries to anyone else. We would make this clear in the code of practice that would be published before implementing these provisions.

However, some organisations will not want to nominate a central point. If we were then unable to identify a way to direct our inquiries to the corporate body, we might need to direct our inquiries to an employee of the organisation who would be able to answer the inquiry.

The noble Lord, Lord Higgins, queried whether it could, therefore, be our intention to prosecute individual employees who do not provide information when required. In other words, how exposed are they? In the vast majority of cases, our inquiries will be made to the corporate body and it would be the corporate body which would be held to account for any failure to comply with the legislation.

There are only two situations in which we would prosecute an individual for failing to provide information under these provisions: where they themselves were the corporate body, or, very exceptionally, if an individual failed to provide information and would not seek a corporate backing to do so, perhaps because they had a personal interest in the case. In these circumstances, it would be right to hold the individual to account and not the corporate body.

I must stress that we do not expect to need to exercise the powers in this way. We are interested in obtaining information to fight fraud, and not in prosecuting those who work in the private and education sectors. But we need this provision to ensure that the powers work and to ensure that people take responsibility for failing to meet any legal obligations they impose. This will usually ensure that any decisions about compliance are taken corporately.

If anyone is worried about their employees being prosecuted for not providing information, the answer is that employees will not be prosecuted if they had the employer's corporate backing when they took the decision to refuse to provide information. I hope that that addresses the noble Lord's concerns. If it does not, it might be sensible to follow this with an exchange of correspondence. It is technical, but it is important to get the matter right and for the situation, including the point about whistle-blowers, to be clarified.

Given the information and the promise to follow up the matter by correspondence if the noble Lord wishes, I hope that he will feel able to withdraw the amendment.

Lord Higgins

I find that a somewhat worrying answer. I did not fully understand the implications. Perhaps one should look back on the arguments deployed in the earlier debates on the e-commerce Bill. Not being a lawyer, I am not clear whether a subcontractor is an agent.

Lord Grabiner

This point is something of a chestnut. It presents itself frequently to courts and tribunals. The whole of our employment legislation rests upon the answer to the question, "Is X an employee?" If X turns out to be an employee, applying the control tests—the point made by the Minister—that person will come within the legislation. The alternative conclusion is that the person will be an independent contractor or sub-contractor.

The essential distinction is that an employee works for somebody, under their control, whereas an independent contractor or agent sells their services for a fee. On the example given by the noble Lord, Lord Higgins, I suspect that a subcontractor would be an independent contractor or agent.

The distinction requires a factual inquiry. The company secretary is almost bound to be an employee of the company and would count as a servant. A subcontractor would sell his services to the company. For example, a contractor who sold employees—in the sense that he was their employer and he provided their services to the company—would be an independent contractor to the company supplying labour only. He would therefore count as an agent rather than a servant.

Lord Higgins

I am sure that the House is most grateful to the noble Lord for that helpful clarification. I wonder whether there is a lacuna in the Bill, because a subcontractor who may have information relevant to an inquiry may not be covered. Perhaps we ought to consider that point, but let us not pursue it now.

It would be helpful to have some elucidation of the position from the Minister. The noble Lord said that some of those points are legal chestnuts. They are not chestnuts that I had previously cooked or consumed, so I am in a bad position on the issue. If the Government approach an individual in a decentralised part of an organisation, they will still be asking for the information from the organisation. The fact that the individual is not on site does not seem necessary. Using the word "servant" opens up the possibility of a particular individual being clobbered by an over-enthusiastic inspector. In its representations, the Bradford and Bingley Building Society quoted the example of an inspector who had demanded information from an individual who was not entitled to give it.

We look forward to receiving the letter that the Minister is going to send us. Let us take it from there.

Baroness Hollis of Heigham

I am happy to clarify the issue through correspondence. To reassure the noble Lord, our solicitors cannot remember a single case in which they have prosecuted an individual under the current powers for refusing to provide information. We are talking about a very rare occurrence, although that does not mean that it should not be clarified.

Baroness Noakes

Why is it necessary to have a power to ask for information from a servant or an agent? The information required is held by the company or other organisation. The request should always be made to the company. The fact that it may be difficult to find the right name to put on the letter is not relevant. The identity of the company or organisation from which the information is required will be known. By inserting this power in the Bill, the Government are suggesting that they might try to get information that is not held corporately. That means that any employee of one of the organisations listed could be asked for information held by them, not in a corporate sense, but in a personal sense. That is a dangerous extension of the Government's ability to get information, when the ability to approach the organisations does not need them to go beyond establishing the right to get the information.

Baroness Hollis of Heigham

I entirely take that point. We shall try to ensure that those issues are covered in the code of practice. We always expect to address our inquiries to the company. Only when we cannot get the information—because the company is decentralised or there are agent arrangements—would we expect to go down to the servant or the agent. The provision is a fallback for cases when the company to which we make the initial inquiry is, perfectly properly, unable to respond to our request for information. Provided that that person has the backing of their company for their action—whether or not they reveal the information—that employee will be protected.

If there are questions beyond that, I shall be happy to seek to answer them in correspondence.

Lord Higgins

We are clear that we need to be a little careful. The Minister has said that the department does not recall any employee being prosecuted for not providing information. On the other hand, it is possible that, for one reason or another, possibly maliciously, employees have provided information that they ought not to have provided. We look forward to receiving the Minister's letter, which will spell that out. Some care in drafting is needed. We may need to consider whether the position of sub-contractors is fully covered by the Bill and whether the word "servant" ought to be in the Bill. Subject to that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 16: Page 2, line 23, at end insert— ("(o) any government department or agency").

The noble Lord said: This is different from the previous amendments, which all had a certain similarity about them. This one would add to the list of organisations that may provide information on fraud to the Department of Social Security.

As a result of tabling the amendment, I have incurred the wrath of Liberty on the ground that it goes much too far, so I propose it with some schizophrenia. It may well go too far in the sense that 20 or 30 years ago there were genuine Chinese walls between one department and another. In particular, the Treasury, the Inland Revenue and Customs and Excise were highly determined that the information that they held on individuals should be treated as confidential and should not be translated to other departments. Alas, those Chinese walls have become less and less effective, particularly since the Treasury has taken over large chunks of the Department of Social Security.

The other side of the amendment—I now put on my other hat, if that is not mixing my metaphors too much—is to ensure that there is, in the ghastly jargon, joined-up government. There needs to be an adequate exchange of information between the DSS and other departments that may have information that is relevant to the detection of fraud. We have to consider that, not least in the context of the exchange of information between computers, given the Department of Social Security's unfortunate record on computers.

Perhaps the Minister could give us an idea of the extent to which the Government intend to exchange information between one department and another in the course of pursuing social security fraud and how much of that is likely to be done electronically. She referred earlier to the question of whether someone had a large car. Will the department ask the DVLA for information about car registrations? If so, will that information be linked in a computerised or electronic form? Similarly, for example, although perhaps unlikely in the context of social security fraud, land registry records may reveal property purchases.

Other than in areas where an exchange of information is not appropriate, it would be helpful to be reasonably clear that the Government believe that information transfers between government departments will enable them to pursue the objectives of the Bill.

7 p.m.

Lord Grabiner

By way of information and in response to the points just raised by the noble Lord, Lord Higgins, perhaps I may say that I dealt with this point very fully in my report. I do not believe that any subsequent relevant statutory amendments have been made. The noble Lord may find it helpful to look at paragraph 5.13 of the report, down to and including paragraph 5.18, which covers less than a page and a half.

That section of the report includes a table showing the current state of the transfer of information in relation to the matters with which we are now concerned between the relevant government departments. Those departments are confined to Customs & Excise, the Inland Revenue and the DSS. Perhaps I may say that the noble Lord will find a full summary of the current position in a form which is rather more clear and less complex than the legislation which produces that result.

My only additional point is that I reached the conclusion that the table reveals that there are no obvious gaps in the current legislation. That is why I did not make a specific recommendation and why, I suspect, the Bill does not contain, for example, the provision which is the subject of the amendment which we are now discussing. I hope that those paragraphs and, in particular, the table will clarify matters.

Earl Russell

I must confess that I share Liberty's misgivings that the amendment is perhaps a little wide in its drafting. I wonder whether it covers, for example, the Probation Service. I can think of circumstances in which I would not want that service to have to disclose such information. I look forward to the Minister's reply.

Baroness Hollis of Heigham

The amendment seeks to add other government departments and agencies to the list of bodies from which authorised officers could require information. I entirely endorse what my noble friend Lord Grabiner said. The DSS already has powers to obtain information from relevant government departments and agencies in order to address social security fraud and error. Those provisions were introduced by the previous administration under the Social Security Administration (Fraud) Act 1997.

Therefore, we work with other departments, including the DVLA, to obtain information in relation to, for example, people starting work, claiming tax credits and entering prison. Information is generally obtained in bulk and data-matched with social security records in order to identify inconsistencies which are to be pursued. In the first three-quarters of this year, those data matches identified nearly 135,000 cases for investigation and almost £24 million of overpaid benefit. The department has the same relationship with local authorities.

Therefore, we do not need the power which the amendment seeks to introduce. Indeed, if the power were granted, it could allow not only the DSS but local authorities to acquire information from the security services, the Foreign Office, the MoD, the Home Office and the Department of Health, all of which have highly sensitive files. Therefore, I do not believe that it would be wise to follow that path. As my noble friend rightly said in his report, we do not need the power. We require information from the private sector, and that is what the Bill seeks to obtain.

Lord Higgins

Liberty will be happier with the response of the noble Baroness to this amendment than it will with her response to the previous one. Once again, we are grateful to the noble Lord, Lord Grabiner, whose excellent report, as he rightly points out, deals with this problem. I was not quite clear to what extent there was compatibility with regard to computers. I believe that the noble Lord, Lord Grabiner, said that his diagram covered the Treasury and the Inland Revenue—that is, the two revenue departments. However, I was not clear from the Minister's reply whether it covered the DVLA.

Baroness Hollis of Heigham

I said that the DVLA was included.

Lord Higgins

However, I gather that it does not cover a number of other areas which the noble Baroness specified. In addition, I am not entirely clear whether the exchange of information on the scale which she mentioned takes place on an electronic basis or whether—

Baroness Hollis of Heigham

It is on a data-matching basis.

Lord Higgins

I understand; it is data matching on an electronic basis. Given the schizophrenic approach which I have taken to this amendment, I rapidly beg leave to withdraw it.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 17: Clause 1, page 2, line 23, at end insert— ("(2AA) Any authorised officer wishing to obtain information under this section shall make an application to the person holding it through that section of the Department of Social Security responsible for the investigation of fraud.").

The noble Lord said: We have also tabled Amendment No. 18, which is the mirror image of Amendment No. 17. I am not sure whether one should call this amendment the "single exit provision" and the other amendment the "single entry provision", or whether it should be the other way round. However, essentially we are saying—I consider it to be important—that inquiries by the department should be made centrally rather than that the department should have a whole range of investigating officers who make inquiries to the increased cost and trouble of the various organisations specified in the earlier amendments which we have been discussing.

I believe that it would be helpful to know exactly what the Minister proposes to do about that. We have already pointed out that the department has a considerable number of regional offices and an even larger number of—

Baroness Hollis of Heigham

Perhaps the noble Lord will allow me to intervene. I confess to having totally misunderstood the push of his amendment. My understanding was that he was anxious to ensure that all local authority inquiries came through the DSS and that, therefore, there would be no direct access.

If that is not what he seeks to achieve through this amendment—certainly, everything that he has said so far suggests that he is not going along that line—I am not sure whether the fault lies with us or with the drafting. However, that was our understanding, and I wonder whether the noble Lord would prefer to return to this issue on Report. We certainly envisaged a push in a very different direction from the one which he has specified. I am happy to explore the issue of local authorities and the DSS, but our lawyers' reading of the amendment took us in a different direction from that which the noble Lord is pursuing.

Lord Higgins

I must confess that the amendment is a poor thing. It was drafted by me and therefore may not meet the high technical standards that the department requires. Having said that, I considered that what it sought to achieve was clear. It states: Any authorised officer we are clear who they are— wishing to obtain information under this section"— that is, Clause 1— shall make an application to the person holding it"— banks, building societies or whatever— through that section of the Department of Social Security responsible for the investigation of fraud". Therefore, the information should be sought through the department. That may be information from the department itself, from one of its regional offices, or, as the noble Baroness supposes, from local authorities.

We seek to suggest through the amendment that the inconvenience caused to the mostly unpaid organisations, with which we dealt earlier, should be as minimal as possible. Clearly, that is likely to be the case if the department has a central organisation which is responsible for the investigation of fraud. That organisation would then put the requests to the individual companies or other organisations from which it wished to obtain the information. That is the amendment's simple purpose.

Clearly, two categories are involved: government departments and local authorities. We might consider whether it was appropriate for local authorities to act in the specified manner; otherwise, the electricity industry, for example, would have a mass of inquiries from 409—I believe that that is the right figure—local authorities seeking to prevent housing benefit fraud which felt that they must approach the industry. Such a shotgun effect on the electricity industry would be likely to cause a great deal more trouble than would otherwise be the case.

If the noble Baroness has a totally different interpretation of the amendment, she will no doubt let us know, and we can take our debate from there. I beg to move.

Baroness Hollis of Heigham

I am afraid to say that I do have a different interpretation. Our understanding is that the amendment would prevent local authorities from making any direct inquiries of the information providers listed in the Bill. Instead, local authorities would be obliged to channel all their inquiries through the Department of Social Security. The noble Lord's opening remarks primarily concerned other government departments and regional offices of government. Our point is not that the amendment is technically defective; it may or may not be. We simply misunderstood where the noble Lord was coming from.

The noble Lord moved on—I should not dream of suggesting whether or not he did so as a result of my prompting—to discuss local authorities. Local authorities need the relevant powers. They have a statutory duty to carry out the secure administration of the housing benefit and council tax benefit schemes. That includes investigating fraud against those benefits. Local authority investigators are properly trained. In its report published today, the Audit Commission acknowledges the progress made by local authorities in combating fraud. It recognises—I stress this is the Audit Commission, not us—that improved fraud prevention measures have led to a 30 per cent reduction in detected fraud.

I understand the noble Lord's argument: he wishes to reduce the implications for those bodies that receive requests for information. However, we are also concerned to track fraud. We estimate that housing benefit fraud costs £600 million a year. That represents an unacceptable drain on the public purse and we must do all that we can to tackle it. We need and want to give powers to the DSS and local authority authorised officers so that we can tackle benefit fraud wherever we find it. Much of that fraud will occur at a local level and will be specific to an individual local authority.

We recognise that there may be concerns about the performance of some local authorities in carrying out those duties, and we have stipulated in Clause 2 that local authorities may have online access to information providers only with the express consent of the Secretary of State. Different requirements apply to the making of a written request, the relevant provisions for which are contained in Clause 1. The provisions in Clause 2 will assure us that proper and acceptable management controls are in place with regard to the use of online access. Inquiries to those information providers that provide their information online through the DSS will have to be routed until they gain the Secretary of State's authority. 'To require them to route all inquiries through the DSS would be an unnecessary administrative burden for both parties.

The effect of the amendment on local authorities would be to create an extra stage in the process of information gathering that would create unnecessary delays in resolving benefit entitlement, especially with regard to housing benefit, which is one of the three major areas of fraud. The other areas involve undeclared earnings although one is working and cohabiting while claiming lone-parent benefits.

There would be a considerable risk of reducing the efficiency of DSS fraud investigators because they would inevitably have to read through the case referred from local authorities to establish the nature of the inquiry and to whom it should be addressed. They would also have to receive and pass back the replies received—somewhat like a post-box—to the local authority, but there would be no parallel saving for local authorities. Local authorities would still generate the same number of inquiries but would simply be prevented from dealing with them in an efficient way.

I suggest to the noble Lord that the amendment would create a substantial duplication of effort and extra cost. Each time there is a hand on, if I may put it that way, the possibility for error and fraud increases, and the amendment might multiply that effect. It would make the task of tackling fraud and error more complex. Moreover, it would not afford any more protection to businesses. I hope that the noble Lord will review the matter and withdraw the amendment.

7.15 p.m.

Lord Higgins

There is no difference between the noble Baroness and myself with regard to the need to combat fraud. The question is simply whether that can be done at minimum cost. I sought to achieve that end in the amendment. The amendment covers both angles; it is neutral about whether the department or local authorities acting through the department should concentrate their efforts in that regard. We shall later discuss relevant amendments on local authorities.

The noble Baroness drew attention to various recent reports on local authorities. Last week, an interesting distinction between Wandsworth and Camden emerged. I make no political point; I merely note the difference between local authorities. We can go into that matter later when we discuss local authorities.

The noble Baroness will know that local authorities are concerned about the fact that the costs of the operation will be borne by local authorities even though the money is that of central government. Again, we shall discuss that in more detail later.

I shall consider the comments of the noble Baroness very carefully. Clearly, one does not want to introduce an extra layer. However, one may be able to achieve economies by concentrating applications. There may be a less close link, if I may put it that way, between the inquiries being made by local authorities and local organisations. I have some concern about confidentiality in that regard.

In view of the reply of the noble Baroness, I shall see what I can do by way of redrafting the amendment to achieve its objective more efficiently. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 18: Page 2, line 23, at end insert— ("(2AB) Requests for information made to any of the persons specified in paragraphs (a) to (m) above shall be made to a central department in the organisation concerned.").

The noble Lord said: The amendment is intended to be the mirror image of that which we have just discussed. Again, I have to confess that I drafted it myself, so it may not achieve its intended objectives. On the other hand, it may do.

A considerable number of the specified organisations referred to in the amendment have expressed the concern that they do not want their various branches and organisations to be constantly diverted from their normal—and, one hopes, profitable—operations by having to respond to requests from the department that may take up time, incur costs and distract them from what they should be doing. Nearly all of those organisations would prefer to have any applications for information put through a central contact point so that its staff would become somewhat expert in the matter and would be able to provide satisfactory answers to the investigations carried out by the department. That is essentially the object of the exercise.

The proposal has considerable and widespread support and appears to be a sensible way forward. It would also avoid the problem that we discussed earlier about whether applications should be made to individuals or servants of a company rather than to the company itself.

The amendment has much to be said for it. It may require a degree of organisation in a company. On the other hand, those dealing with requests would also become much more expert than someone in a branch office who may not be familiar with the matter and who may not even be sure whether he is allowed to divulge the relevant information. He might be worried about the Data Protection Act 1998 and might say to an inspector, "I shall have to check the request with head office". It would be better if the application were made to the head office in the first place. That would avoid any doubts that an individual might have at the local level about whether he should provide the information and what information he was entitled to provide. I hope that the Government will agree to the amendment.

Baroness Hollis of Heigham

If the Government accepted this amendment, the noble Lord would find himself the object of quite a lot of complaint from business. The effect of the amendment is to direct investigators to contact a central point in any organisation from whom they are seeking information. It removes the flexibility for organisations to decide for themselves as to how they would prefer our inquiries to be managed.

We feel it would be foolish of us to stipulate how businesses should organise themselves. In any given case we will contact the organisation and will be happy for them to refer us to whoever they feel is best placed to deal with our inquiries. It may be a central point or it may be someone with local knowledge but, either way, we will be happy to deal with the person or the department that has been specified.

We will seek to be as unobtrusive as possible. We will not ask for anything that is unreasonable or not readily available, as I hope our code of practice makes clear. So though the amendment seeks to place a restriction on investigators, in reality it places a restriction on business. In the light of that, despite the fact that the noble Lord drafted the amendment, he may not wish to pursue its ownership too far.

Lord Higgins

I understand the point the noble Baroness is making. But can we be clear about one thing?

If the organisation concerned—let us say the electricity company, the gas company or, more particularly perhaps, the bank—felt that it would like all the requests for information to be addressed to a specific central point, will that be accepted? My understanding was, despite what the noble Baroness has just said, that a number of organisations would prefer to have a central point approached where those concerned are specialised; they are familiar with the legal position and so forth, rather than local branches dealing with something with which they are not familiar.

If the noble Baroness can give me an assurance that if an organisation asks that all inquiries should be addressed to a central point, that will be accepted and facilitated, then I shall withdraw the amendment. I suspect Hansard does not reflect the nods and winks taking place.

Baroness Hollis of Heigham

I did actually say yes, though I said it from a sedentary position. I am happy to stand up and say yes.

Lord Higgins

On that basis I am happy to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (Lord Lyell)

I must advise the Committee that if Amendment No. 19 is accepted, I cannot call Amendment No. 20.

Lord Astor of Hever moved Amendment No. 19: Page 2, line 24, leave out ("Subject to subsection (2D) below,").

The noble Lord said: In moving Amendment No. 19, I shall speak also to Amendment No. 37. These are probing amendments to clarify an area of concern felt by the utility industries.

The effect of the amendment would be to remove subsection (2D) from the Bill, which places the utility industries in particular in an entirely inconsistent position. A problem for the utility industries occurs in subsection (2D), which exempts the utility industries from the application of the important safeguards in subsections (2B) and (2C).

The reasoning behind this distinction may well be that the Government want to make bulk requests for information from the utility companies which may cover information, for example, on the consumption of electricity from a vast number of addresses within a specific area. The Government want that information, presumably, because it will enable authorising officers to match that information against other data in order to identify potential cases of fraud.

Clearly the safeguards set down in subsections (2B) and (2C) requiring grounds for suspicion against an individual would be difficult to satisfy in respect of requests for bulk information. That is why the Government want to remove utilities from the protection of that section.

The important limitations provided by subsections (2B) and (2C) from widescale requests is thus removed by subsection (2D) and could place an even heavier burden on the utility companies. That burden could fall more heavily on certain companies due to the different areas of the country in which their customers are based and therefore their being subject to a greater number of requests for information. The burden, therefore, could have an effect on the level playing field of competition between utility companies.

An additional concern is that the utilities may still, like other organisations, be subject to individual requests for information relating to specific individuals. Even if the distinction between bulk and individual requests for information can be maintained, it is not clear from the wording of subsection (2D) that it could not also be used to request information relating to the specific premises with which a person is connected. There is thus an inconsistency in respect of information requested from utility companies and that is surely not what the Government intended. I shall be grateful if the Minister could explain why the Government have not addressed that inconsistency.

Finally, authorising officers have been much mentioned tonight. Perhaps I can clarify the Minister's reply to the first amendment when I thought I heard her say that they might only be relatively senior officers. I beg to move.

Baroness Hollis of Heigham

These amendments seek to remove new subsection (2D) from the Bill, which would remove our capacity to obtain information from utility companies about patterns of consumption of water, gas and electricity at domestic premises. We seem to be repeating ourselves. We tried to group some of these amendments, perhaps unsuccessfully.

We know that data matching is a very successful tool in combating fraud and error. An example would be where we found that two different women were claiming for the same child on separate income support claims and that led to uncovering a multiple scam with £1,000 a week being claimed fraudulently.

So data matching is a practice endorsed by the Data Protection Commissioner who provided a foreword to our Data Matching Code of Practice. It has a well-tried history of throwing up the inconsistencies which lead one into further investigation. The new power would enable us to obtain information in bulk from utility companies to match against our social security records, so that abnormal patterns of consumption at addresses where benefit was in payment would be revealed. As I say, we have explored this issue and it should have been grouped with earlier amendments.

When we consider asking a utility company for bulk data, we will do so in order to find addresses with abnormal levels of consumption. We will know what we are looking for. We are not seeking, for example, to harass people who may be using a lot of fuel caring for a sick or elderly relative. We will be consulting a utility company to ensure that our estimates of abnormal consumption are realistic and that will probably change from supplier to supplier. We will then pay the company to search for records that meet the criteria we set, a payment that will cover the cost of writing specialist computer software or the purchase of extra hardware necessary to comply. That data would then be put onto disk and transferred to DSS under secure conditions as set out in data matching codes of practice. When we receive the information we will match it against our own records looking for inconsistencies.

I do not know whether that explanation meets the concerns of the noble Lord. If so, I shall bring my remarks to a close. If he feels I can give him further information, I shall be happy to attempt to do so.

Lord Astor of Hever

I am grateful to the noble Baroness for that explanation. I agree that the amendments should probably have been grouped with the earlier ones concerning utilities. This is a technical point. I shall go back to the utility industries and study what the Minister said. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Amos

I beg to move that the House do now resume. In moving this Motion I suggest that the Committee stage begin again not before 8.30 p.m.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.