Social Security Fraud Bill [H.L.]

HL Deb 27 February 2001 vol 622 cc1082-157

3.34 p.m.

Report received.

Clause 1 [Additional powers to obtain information]:

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham) moved Amendment No. 1: Page 2, line 13, leave out from ("service") to end of line 15.

The noble Baroness said: My Lords, I shall speak also to Amendments Nos. 15, 16, 20 and 21. I hope that noble Lords will feel able to accept the amendments, which would enable investigators to obtain information about the identity of a person solely by reference to their telephone number or electronic address.

Our area benefit reviews show that fraud involving working and claiming cost nearly £300 million 1999–2000. It is the largest cause of fraud against the social security system. Working and claiming is most likely to occur in areas of employment where the hours are sufficiently flexible for a person to be able to attend the job centre to sign on, where a person is in and out of work over short periods, where work is seasonal, where earnings are erratic and where compliance with requirements such as VAT and income tax regulations is also erratic.

As we said in Committee, we already conduct investigations from time to time to flush out people who are committing fraud in such employment. For example, we have teams investigating gangmasters, who organise the employment of casual workers in the agricultural industry, such as pickers and packers. Almost 20 per cent of the agricultural workers investigated in the fraud drives in Lincolnshire had been committing benefit fraud. That is one in five.

Some groups of casual and self-employed workers advertise their services in newspapers and shop windows quoting only a telephone number. They include window cleaners, gardeners, hairdressers and builders. I am mindful that, as the noble Earl, Lord Russell, says, if I keep referring to window cleaners, there will not be any left in the country, so I have tried to find others with similarly erratic modes of employment.

By advertising by telephone number only, such people are able to evade inquiries under existing powers. We have no way of identifying them. We do not have the power to ask a telecommunications provider to tell us who owns a particular telephone number, yet we know from the evidence that we have picked up that quite a high proportion of those people are likely to be committing some form of benefit fraud.

Amendment No. 16 would allow us to do that. I pay tribute to my noble friend Lord Grabiner, who first highlighted the value of obtaining such information in his report on the informal economy. In chapter 5, he said that giving fraud investigators the right to reverse search telephone number databases would be a valuable extension of their powers. It would be a valuable tool for Inland Revenue investigators in particular, who would be able to follow up advertisements for goods and services that gave a contact number but no personal details, for example in local newspapers and newsagents. They could check whether a person who subscribed to a given number was registered for tax or was claiming benefit.

We are not talking about fishing trips. We would still need reasonable grounds for making the inquiries. Although the provisions in new Section 2C would not apply to the amendment, the provisions that already govern inquiries to employers would still apply. The provisions would be inserted in Section 109B of the Social Security Administration Act 1992, which provides that the powers may be used only when it is reasonable in relation to explicitly set out purposes, which can cover whether the benefit is paid, investigating and detecting benefit offences and contravening social security legislation. The Bill would not allow us to check a telephone number simply because it appeared in an advertisement. It would have to be an advertisement for a service that is at risk of fraud. To establish that, we would consider the issues that I mentioned earlier, such as seasonal factors or whether the service provides opportunities to nip out and sign on.

I emphasise that the powers would not allow us to obtain information on the content of communications. They are only reverse search powers to establish the name of the owner of the phone number. Obtaining information on the content of communications would be very intrusive and would not be reasonable, although, given the changing nature of the communications world and the sensitivities around the content of communications, we thought that it would be inappropriate to rely only on the test of reasonableness.

We wish to make it unequivocally clear that the powers could never be used to obtain information about the content of a communication. Amendment No. 15 would achieve that by limiting us to communications data, except for traffic data. I hope that your Lordships will recognise that we are honourably limiting the point to which the powers can be taken. I refer noble Lords to Section 21(4) of the Regulation of Investigatory Powers Act 2000, in which the definition of "communications data" contains the words, which includes none of the contents of a communication". The other amendments—Amendments Nos. 20 and 21—tidy up the references in the Bill to telecommunications.

In conclusion, these amendments will enable us to obtain the identity of persons who advertise their services by telephone. That will enable us to detect and prevent people working and claiming benefit, which constitutes the largest area of fraud. The powers could be used only where we had reasonable grounds. They are akin to the powers which we already have to obtain information from employers. They could not be used to obtain information about the content of telephone calls or about the person to whom a call is made. Therefore, I hope that noble Lords will welcome the amendments, which, as I say, are strictly circumscribed. I beg to move.

Lord Astor of Hever

My Lords, we on these Benches are grateful to the noble Baroness for explaining so clearly this group of amendments. We welcome the amendments, which tidy up the definition of the telecommunications services. We believe them to be practical and useful. However, we wonder whether the Government's zeal for clarity has made the insertion of new subsection (2F) somewhat redundant, given that the phrase "communications data but not traffic data" in new subsection (2E) would in any case provide for new subsection (2F). This is not an important point, but I mention it in passing.

We are pleased that the definition has made it clear that only communications data and not traffic data are to be requested by the DSS for its inquiries. Dispensation of traffic data seems to be an excessive invasion of privacy when evidence of fraud could be obtained in other ways. This new definition assists the balancing act between the privacy of the individual and the need to access information as part of official inquiries.

Earl Russell

My Lords, I believe that Amendment No. 16 has great elegance. It meets a real and genuine need and, so far as I can see at present, it appears to attempt to do so in a constructive way. Next time the Minister has to defend it, she may see fit to quote Sherlock Holmes's maxim that, Honest men do not conceal their place of business". If she wants to give window cleaners a rest, she might try tree fellers.

Baroness Hollis of Heigham

My Lords, I am extremely grateful for that hint, but I am not sure whether tree fellers will be. However, I appreciate it. I am grateful to the House for welcoming the amendment and the reassurances that I have been able to give.

With regard to the algebra quoted by the noble Lord, Lord Astor, I am assured that those words are both appropriate and necessary. However, if he wishes to follow up the matter, that can be done through correspondence. With that, I ask the House to accept the amendment.

On Question, amendment agreed to.

3.45 p.m.

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

The noble Lord said: My Lords, this amendment stands in my name and that of my noble friend Lord Astor of Hever. As your Lordships will see, the amendment seeks to eliminate from the list of people from whom the Government can ask for information, any servant or agent of any person mentioned in any of the preceding paragraphs". We had a brief discussion about this in Committee. As on previous occasions, the noble Lord, Lord Grabiner, was extremely helpful in providing us with definitions of what "servants" or "agents" might be. Indeed, in subsequent correspondence, the noble Baroness gave rather more pedantic definitions which, none the less, are helpful. We are grateful to her for those.

I believe that it may be helpful if at this stage in the proceedings I say a word or two about the other extremely helpful action which the noble Baroness has taken; namely, to provide the House not only with an amendment which incorporates into the Bill the code of practice which will govern many of these clauses but also a draft of the code itself.

We shall come to a later amendment on which we shall be able to debate the code of practice. However, it may be helpful to refer to it at various points during the course of our deliberations this afternoon. I certainly do not intend to weary the House by referring to it both on an amendment to which it is relevant and when we come to debate the code as a whole, but I believe that it will be helpful to proceed in that way.

So far as concerns this amendment, paragraph 4.4 on pages 12 and 13 of the code of practice deals with this particular point. It is a question not only of whether it is appropriate for the Government to be able to ask the principal involved in any transaction for information about an individual who is suspected of fraud but also whether it is appropriate for them to ask for such information from the person's servant or agent.

The only reason that I return to this point at this stage is that I am a little puzzled as to what in practice the Government have in mind. The code of practice states that authorised officers should only address inquiries to an individual directly—that is, to either a servant or an agent—where it is not possible to identify the corporate body. I am not sure whether the officers are clear as to who the corporate body is, how they will know who the agent is or, in particular, who the servant is. If they are clear that the person in question is a servant, presumably they must know who employs that person.

In a helpful letter the noble Baroness said that the person may be an agent; for example, a newsagent may deal with money transactions and would be the agent of another financial organisation. However, again, I should have thought that it would be possible simply to return to the principal. I have a vague feeling at the back of my mind that, given that presumably a relationship of confidentiality exists between the agent and the principal, it would be undesirable for the Government to go to the individual concerned. Certainly, so far as concerns employees, if an employee were being awkward in not providing information, it would seem very odd for the Government to take action against him directly rather than against the company, which they can in any case ask to provide the information. I beg to move.

Lord Grabiner

My Lords, perhaps I may raise one matter in direct response to one of the points made by the noble Lord, Lord Higgins. Sometimes it is not possible to detect whether or not a business is a corporate person. A partnership is not a corporate body in English law. Almost certainly a local newsagent is not a corporate body; it is a one-person business. I believe that in a case of that kind. not only may it not be possible to identify the corporate body but a corporate body may simply not exist. Therefore, one can only talk to someone who may be the principal of the business or who may be an agent or servant of the principal.

Thus, the corner newsagent may simply operate under the rubric of a personal business without having any corporate structure. He may have an employee who works in the shop. That person will be an employee or agent for the purposes of the type of inquiry which we are now discussing. I suggest that that would be an appropriate case to come within the language of the paragraph of the code of practice to which the noble Lord drew attention a moment ago.

In a case where the corporate body exists and can be identified, then, according to the draft of the code, in most circumstances it would not be appropriate to approach the individual; it would be appropriate to go direct to the corporate body.

Baroness Hollis of Heigham

My Lords, I could, if noble Lords wish, present a full argument about the amendment. However, in an effort to save time I shall home in on the concerns that were raised by the noble Lord, Lord Higgins, and add to the helpful points that were made by my noble friend.

The code states that we shall address an inquiry to an individual only when we cannot identify a corporate body. The noble Lord asked about the circumstances in which that would be the case. Some possibilities were outlined by my noble friend, but I shall give a couple of examples that may clarify the situation with regard to possible servants and possible agents. We will need to address a request for information to a servant only when we cannot identify a corporation to which to address the inquiry. For example, a language school operating in the UK may be a small part of a large international organisation and we may have difficulty establishing the legal identity of the UK part of the organisation. If the language school could not or would not provide sufficient information to enable us to address our inquiry to the corporate body, we should address it to the most senior appropriate person in the language school, such as the head of the school in the UK.

In another example, we may want to obtain information from a cheque shop because we believe that a claimant is cashing girocheques but reporting them as stolen. If the cheque shop was not a limited company—this point was made by my noble friend—there would be no corporate body to which to address the inquiry. If the staff in the cheque shop could not or would not provide sufficient information to enable us to identify the person carrying out the business, we would have to address the inquiry to the most senior appropriate person in the cheque shop, such as the manager. One could complicate the example further by suggesting that the manager might tell us that the owner of the company lived abroad.

Similar provisions apply to agents. For example, a large university might contract out its record-keeping duties to a commercial data management company and ask us to direct our inquiries about whether a claimant was one of its students to that company. The data management company would be the university's agent.

I could give other examples but the significant point is that we should go to an individual only when we cannot identify a corporate body. We do not expect that to happen often; it usually happens when complicated histories are associated with an organisation, perhaps because the owners are abroad or responsibilities have been delegated to a body to act as its agent. In such cases, it would be helpful to have those powers. The issue has been raised in discussions on the draft code of practice between business representatives and officials. Businesses generally want corporate liability rather than liability for individual employers and we are confident that our provisions will meet their concerns in that regard. We are happy to continue talking and if we need to strengthen the draft code in that respect, we should be happy to look at the matter. In the light of that, I hope that the noble Lord will feel able to withdraw the amendment.

Lord Higgins

My Lords, we shall certainly need to consider the matter carefully. With the Minister's undertaking, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 3: Page 2, line 23, at end insert— ("( ) 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: My Lords, the amendment, which stands in my name and that of my noble friend, is, in a way, the mirror image of Amendment No. 4. Amendment No. 3 relates to the way in which the department or local authorities will make inquiries of the kind that are described in the Bill. There is a strong case throughout for that being done through a centralised system rather than through a system that allows an authorised person to make a request for information from a bank or other body. Amendment No. 4 relates to what happens at the receiving end of the request, although it is helpful to consider Amendment Nos. 3 and 4 separately.

The provisions in the code of practice relating to structure are helpful in several respects. As we proceed, it may be helpful to try to establish how the code will operate. Paragraph 1.4 of the code, for example, states that people asking for information will be trained and will work either in one of the department's area intelligence units or in the national intelligence unit. I take that to mean that inquires will come from those working in the area intelligence unit or the national intelligence unit. If so, the point that we seek to establish in the amendment—there was some confusion about drafting at an earlier stage of the Bill's passage through the House—would not be pressing. I hope that the Minister will give an assurance that all inquiries will be made, as the draft code states in paragraph 1.4, through the area intelligence unit or the national intelligence unit.

Paragraph 4.19 states that all inquiries will be conducted through centralised intelligence units—I emphasise that that is in the plural. If I understand the situation correctly, the system will be centralised only to the extent that a request comes through a series of units rather than from a single unit. Perhaps the Minister will clarify the situation.

Another point arises in relation to paragraph 4.3, which sets out the information that may be asked for. It seems to suggest that, although the request for information will be made through a relatively— perhaps completely—centralised system, there may be a request to send the information back to a more diffused position, from which the inquiry originated. Later we shall discuss questions arising from the rather complicated structure that the Government seem to have in mind for the relationship between the various classes of official. At this stage, is it the intention that, even though a request has been channelled through a centralised organisation, it may be asked of a request, "Please send back the reply"—that is implied in paragraph 4.3—and that that should be sent to the individual who asked for the information in the first place? If that is the situation, it raises questions that we need to consider. Requests should come from the centralised system and the reply should be channelled back through the same system. When one views together the two paragraphs to which I referred, it is not clear whether that is the Government's intention. It would be helpful if the Minister would clarify exactly what the Government have in mind. I beg to move.

Baroness Hollis of Heigham

My Lords, I hope that I can be relatively brief. The code will be statutory and inquiries can come from only the 14 central points—there is one point in each of our 13 area directorates and one in our national intelligence unit. I confirm the noble Lord's expectations. The provision is in the code, which is statutory, and its provisions will be binding. Business need have no concerns about that.

The address to which the request will be sent back will be that from which it was sent. In other words, it will be sent back to one of the 14 units. We may need to clarify the wording in the code to make it clear that that is our intention. With those assurances, I hope that the noble Lord feels able to withdraw his amendment.

Lord Higgins

My Lords, the Minister is probably right; perhaps we should look at the second of the two paragraphs to which I referred. It gives the impression that replies may go back in a way that is different from that through which it was received. It was good of the Minister to provide the code in the first place. It will be helpful to pick up various points as we proceed, and although doing so may delay our proceedings a little, I hope that it will not do so by very much. No doubt later there will be wide-ranging consultations. The sooner that one picks up points, the earlier they can be corrected. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4 p.m.

Lord Higgins moved Amendment No. 4: Page 2, line 23, at end insert— ("( ) Requests for information made to any of the persons specified in subsection (2A)(a) to (m) above shall be made to a central department in the organisation.").

The noble Lord said: My Lords, Amendment No. 4 is a mirror image of the previous amendment. We are now told that inquiries will be made on a relatively centralised basis, albeit there are some 14 centres. But the question then arises whether they will be directed in some shotgun way to some given organisation—for example, a bank—or whether they will be concentrated on a single point.

This matter was discussed briefly in Committee and the Government were able to say that it will be possible for it to be done through a single part of the organisation from whom the information is being requested. We see again in paragraphs 422 and 423 of the code of practice that that will be done. The noble Baroness pointed out that my original amendment would have been too restrictive; it could only have been done through a single access point. However, she has fulfilled what she said in Committee and the code reflects that. However, perhaps she will once again confirm it. I beg to move.

Baroness Hollis of Heigham

My Lords, I am happy to give that confirmation. I agree with the noble Lord that it is helpful to cross-read amendments against the draft code in order to clarify any possible misunderstandings. We will go to the point to which businesses wish us to go, which will normally be a central department. That is what many organisations request when dealing with the police. Where an organisation does not wish to set up a central point—for example, a school—which may be too elaborate when dealing with a very occasional inquiry, we shall not force them to do so. Were this amendment to be carried, as the noble Lord admitted, the British Bankers' Association said that its effect would be to make the workings potentially inflexible.

I am happy to give the assurances that the noble Lord. Lord Higgins, seeks. We are working very positively with businesses to that effect. We shall do what business wishes. In the light of that assurance, I hope that the noble Lord, Lord Higgins, will feel able to withdraw his amendment.

Lord Higgins

My Lords, in the light of that response, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 5: Page 2, line 24, leave out ("subsections (2C) and (2D) below") and insert ("the following provisions of this section")

The noble Baroness said: My Lords, in moving Amendment No. 5, I shall speak also to Amendments Nos. 8 and 13 and the grouped amendments that stand in my name. They refer to the circumstances in which authorised officers may obtain information—new subsections (2B) and (2C).

My noble friend Lord Grabiner led an extremely helpful debate on these provisions in Committee. During that debate concerns were expressed in the Chamber about the implications of these "unamended" phrases. Your Lordships expressed two concerns. The first was on the provisions to obtain information on persons falling within groups who are more likely than others to commit fraud. The second concern—particularly identified by the noble Earl, Lord Russell—was the concept of obtaining information on an individual who "is likely to" contravene social security legislation or commit a benefit offence. I agreed to consider how we could address those concerns.

Amendment No. 8 is the substantive amendment. It is a rather elegant piece of drafting. On the first of your Lordships' concerns, the amendment removes the provision regarding those in groups more likely than others to commit fraud—the old Section (2C)(c) which now goes. During Committee, I explained that through research we are finding out the characteristics of those people who commit fraud. I took heed of your Lordships' views. We felt that, given the reverse search of the telephone directories—the first amendment that we discussed today—some of our concerns about groups of people that we may wish to pursue (for example, tree fellers) can be met without the possible infringements that subsection (2C) might have opened up. We felt that we could meet the concern of the House and remove subsection (2C)(c).

I turn to the second area of concern and the amendment of the noble Earl, Lord Russell, which replaces the words, "is likely to" with the words, "intended to". I agreed to consider that amendment. As I indicated in Committee, the words "is likely to" were meant to cover circumstances where fraud was intended because we believe it is better to prevent fraud rather than to let it into the system and then have to set about detecting it. I accepted that the words "is likely to" had a more common meaning which might be unacceptable.

The suggestions of the noble Earl, Lord Russell, more or less retain the policy intention while addressing the concerns expressed by the House. Consequently, with the addition of the present tense to the provision—"is committing"—I have returned with an amendment along the lines suggested by the noble Earl. I decided that the suggestion regarding provisions relating to contraventions of social security legislation was in line with our policy intention. I felt that the fact that we could remove those provisions relating to contravention because they were subsumed in the broader category was in line with those statements.

Finally, I was able to go beyond what we agreed in Committee because, in talking subsequently with the noble Lord, Lord Goodhart, I was asked to consider removing the words "or may be" from the test of reasonableness that an authorised officer has to satisfy when considering whether or not to make an inquiry. Thus, an authorised officer would only be able to make an inquiry if it appeared to him that there were reasonable grounds for suspecting that a person "is" a person, as opposed to "may be", who has committed, is committing or intends to commit a benefit offence. It represents a slightly higher test of reasonableness for authorised officers to attain.

That would be sensible and prudent in the light of some of the concerns expressed by your Lordships that there could be ultimately the potential for abuse despite our checks. As a result of that, I accepted the suggestion that we should remove the words—"or may be"—thus tightening the clause even more.

Amendments Nos. 5 and 13 are consequential. So I hope that your Lordships will agree that the Government have listened to the concerns expressed—led by my noble friend Lord Grabiner in Committee—and, as promised, I have brought forward amendments not only to address those concerns but to go slightly further than I promised. I shall be deeply upset if your Lordships feel unable to support my amendments today. I beg to move.

Lord Higgins

My Lords, the Minister and the noble Earl, Lord Russell, on a previous occasion—although not for some years—have heard me quote a dictum by the late lain Macleod that we do not shoot Santa Claus. What he meant was that, if one had a concession from a government in response to representations, one did not then proceed to make a speech for three hours saying what it was all about in the first place. I intend to follow that practice. I learnt my trade at his feet and it always seemed a good dictum.

The Minister has fulfilled the commitment she gave in Committee to consider this matter, both with regard to the objectionable word "likely" and the extremely objectionable part in relation to groups of persons said to be in danger of committing fraud, even window cleaners. The noble Baroness met both those points admirably. I agree that the amendment is elegantly drafted. We are pleased that these amendments have been moved. It is entirely appropriate to leave unasked how the second of them ever entered the Bill in the first place. None the less, it is a great improvement and we are grateful for it.

Earl Russell

My Lords, we have here a model of the way Parliament ought to work—it sometimes does, and it is nice when it happens. I do not think that the Minister expected to be disappointed in this quarter. The Minister will have observed that I put my name to her amendments. The only reason why I have not put my name to the amendments from the noble Lords, Lord Higgins and Lord Astor of Hever—to which I had my name at the previous stage—is that the Minister's amendments have now rendered them redundant.

I thank noble Lords for what has come about; the Minister for master-minding the whole thing and for seeing an opportunity and taking it. The noble Lord, Lord Grabiner, offered more helpful contributions than we are ever likely to know. My noble friend Lord Goodhart makes me rather pleased I was not able to be present previously because he saw an opportunity and took it with his consummate skill. He produced a great improvement as a result. I thank the Minister's officials. We have a model of proceedings as envisaged in the committees chaired by the noble Earl, Lord Jellicoe, and Lord Rippon of Hexham in which a great deal of the work is done before we come into the Chamber. That work is vital. They played a vital part in it and the Bill is very much improved as a result. I welcome it.

On Question, amendment agreed to.

Lord Astor of Hever moved Amendment No. 5A: Page 2, line 29, at end insert ("and shall be exercisable only if there are reasonable grounds for believing that the information is likely to be of substantial value (whether by itself or together with other material) to the inquiry and does not consist of or include items subject to legal privilege").

The noble Lord said: My Lords, in moving Amendment No. 5A, with the leave of the House I shall speak also to the consequential Amendment No. 20A.

Amendment No. 5A ensures that an authorised officer can only require information which is likely to be of substantial value to the inquiry, and does not consist of items subject to legal privilege. Sufficient safeguards should be put in place to ensure that the new powers are proportionate to the intended outcome. Amendment No. 5A recognises the importance of an individual's right to privacy by ensuring that information will only be disclosed in circumstances where the information sought will be of substantial value to the investigation and does not consist of or include items which are subject to legal professional privilege. That will ensure that the same criteria as must be fulfilled before a court will grant production orders under other measures, will apply before a notice can be issued.

Article 8 of the European Convention on Human Rights enshrines the right to privacy. The law has shown a willingness to acknowledge that right through, inter alia, the doctrine of legal, professional privilege. To preserve that doctrine and ensure that communications between a solicitor and client are privileged, provision should be made on the face of the Bill to the effect that the power to require information under these provisions will not extend to disclosure of information subject to legal privilege. I beg to move.

Earl Russell

My Lords, these amendments cover similar ground to Amendments Nos. 17 to 19 tabled in my name and that of my noble friend Lord Goodhart.

The underlying issue here is that of privilege; under what circumstances privilege may justify the withholding of information and under what circumstances, without any government recognition that it so justifies, it may nevertheless be allowed quietly to do so.

People need professional advice of many kinds. That is not always recognised in law. For example, there is, I believe, no legal privilege attaching to confession to a Roman Catholic confessor. Yet I cannot in all my political experience recall a case of a confessor being subpoenaed to give evidence on the confessions of his penitent. Were such a case ever to arise, I might be found here standing shoulder to shoulder with Cardinal Winning in defence of the liberties of the Church. While that may be of great entertainment to the House, I doubt it would be quite so entertaining to the Minister. So if the Minister could indicate whether or not there are some cases where a government may be prepared to hold its hand—such indication of the most imprecise kind, as is the nature of the case—it may assist us.

However, the question arises whether, as one is entitled to take advice from a lawyer with privilege, one may be entitled to take advice under some circumstances from a financial expert with perhaps some qualified form of privilege. The way the financial services industry is developing now, the boundary between those two categories is not quite as definite as it used to be. Where exactly the boundary comes between a tax lawyer and a tax adviser is something on which I do not believe there is any clear legal ruling. People even of the greatest innocence—in fact, most often people of the greatest innocence—may wish to ask their financial adviser, "Am I legally entitled to do this or will I be accidentally evading some obligation to which I am subject?"

I am sure very few of us are aware of all the obligations to which we are subject. We try, but success is not particularly common. So were we to discourage people from taking expert advice, we might, as with being faced with litigants in person in court, be letting ourselves in for a great deal of extra work.

A problem certainly exists. I do not pretend to see my way through it to a solution, but were we by any miracle able to bring to it the same sort of constructive thought we brought to the last group of amendments, we might possibly do some good.

4.15 p.m.

Baroness Hollis of Heigham

My Lords, Amendments Nos. 5A, 17, 18, 19 and 20A, all seek to place restrictions on the types and sources of information available to authorised officers. They seek to prevent us adding people that provide advice or professional assistance to the list of organisations that could be required to provide information.

I turn to Amendments Nos. 17 and 19 first. The noble Earl, Lord Russell, accepts that the broader amendment—I shall come to the narrower one in relation to legal privilege in a moment—contains a grey area of difficulty. Advice and professional assistance are rather wide terms. Their use in this amendment would restrict our power to add new organisations to the list at new subsection (2A). I shall not seek to provide examples because we do not intend to add anything further to the list; in any case, such additions would have to come before your Lordships' House. However, I can give the House examples of why that might be difficult.

As drafted, the amendment would cover the information given in order to receive advice from a building society in response to a mortgage application. Information given in respect of mortgage applications could include details of income and capital. It could also include information on properties already held and, of course, the property for which the mortgage was requested. A frequent source of social security fraud is that people claim housing benefit as though they were renting, whilst actually owning the property, and they mislead about their income and capital. I am sure the House can see therefore that information given to a building society in order to receive mortgage advice would be extremely pertinent to that area of crime.

As I say, there are grey areas. The term "advice" could also include advice that a bank might provide on investing income or transferring it overseas. We would similarly want to be able to obtain details of the information that somebody had supplied to receive that advice as that information might include details of money stolen from the benefit system, or income that was being hidden from the benefit system.

So following the amendment of the noble Earl, Lord Russell, if banks and building societies were not already on the list, they could not be added to it because, under certain circumstances, those organisations could be in the position of giving advice, even though the bulk of their activity relates to the giving of straightforward information.

Those are hypothetical examples. My point is that organisations which give advice to their customers may also have information which could assist us to detect fraud. But I share some of the noble Earl's concerns. There is a difference between asking an adviser what to do to avoid tax and asking a lawyer what is legally acceptable. I shall come to that in a moment.

I have already given an assurance in Committee; I am happy to give it again. We will not add organisations such as the CAB or lawyers to the list of those from whom we may require information. Should we seek to add any other organisations to that list, we shall of course bring them back before the House in any case and the House can decide whether or not it is appropriate to proceed.

I return to the core of the amendments. Since Committee I have been wondering whether we could do anything further to meet the concerns expressed, particularly those in relation to legal privilege, which is perhaps the one that really matters. Information subject to legal privilege can be argued to be a special case. We have made clear in paragraph 2.9 of the code that no information will be requested that is the subject of legal privilege. However, I am willing to consider tabling a government amendment at Third Reading specifically to exclude information subject to legal privilege from that which can be obtained under these powers because I accept that it is a particular case. I hope that that meets the issue.

Amendment No. 18 seeks to limit the organisations that we can add to the list of those required to provide information to those organisations that collect and store only financial information. The Bill does not restrict itself to only financial information. If we did that, again we would be unreasonably narrowing our ability to combat fraud. Much of the information that we seek is financial, but not all. The composition of a household is not financial information. The noble Earl, Lord Russell, will know that above all we need to have that information. The details of where the claimant lives is not financial information. The details of any employment may not be wholly financial information. The information provided to substantiate a person's identity is not financial. Whether or not someone is in education is relevant to benefit but it is not financial information. We need all that information and more in order to combat fraud.

With that explanation, I hope that the noble Lord will feel able not to pursue his amendment. I hope that my response to Amendments Nos. 17 and 19 addresses the point raised by the noble Lord, Lord Astor, on legal privilege embodied in Amendment No. 5A. In the expectation that I shall table an amendment at Third Reading to meet a concern which I accept may need more belt and braces than just the code of guidance, I hope that the noble Earl, Lord Russell, and the noble Lord, Lord Astor, will feel able to withdraw their amendment.

Earl Russell

My Lords, before the Minister sits down, I take the point she makes about Amendment No. 18 and give a limited but warm welcome to her comments on the forthcoming government amendment. She knows that it does not meet the whole problem. I suspect that it is all any of us could do in her shoes and I shall welcome it.

Lord Astor of Hever

My Lords, we on these Benches are grateful for the positive way in which the Minister reacted to this group of amendments and specifically to Amendment No. 5A. We feel that the issue of legal privilege is a special case. We look forward to seeing the amendment that she proposes to table at Third Reading. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 6: Page 2, line 29, at end insert— ("( ) No investigation or inquiry under this section shall be made until the validity of the National Insurance number held by the individual concerned has been checked.").

The noble Lord said: My Lords, in moving Amendment No. 6 it may be helpful if I speak also to Amendments Nos. 46 and 49 which, in effect, seek to impose penalties for those who have an invalid or fraudulent national insurance number. This is an important area of the Bill, which we have not previously debated in Committee. The figures for national insurance numbers are, indeed, remarkable. I understand from a Written Answer on 13th March 2000 to a Question asked by my right honourable friend Mr Willetts in another place, that the number of national insurance numbers currently in issue is over 81 million, whereas the population is around 60 million.

There is a huge surplus of national insurance numbers floating round the system. Part of the reason for that is the fact that the number which are withdrawn as a result of death is relatively small. Clearly, there must be an initial assumption that if someone is using a false national insurance number, that in itself is a matter for concern and should be subject to penalties. Moreover, it is likely that the individual concerned will be engaging in fraud of one sort of another.

The amendment suggests, therefore, that the first step should be to check whether the national insurance number held by an individual is genuine. We think that that would be an efficient way to do it because at present the return which the department gets from carrying out investigations into fraud is far in excess of the cost. The Government have not pushed to the point where the cut in fraud is equal to the cost of ensuring that fraud does not take place. This would seem, therefore, to be an easy way to begin the search. Long before one gets to all the other questions of taking information from the whole list of bodies set out in Clause 1, the first step should be to check on the national insurance number.

Part of the situation is shrouded in mystery. It would be helpful if the Minister could clarify a number of points. I understand that information is held on two different computers, NIRS2 and the DSS computer, but no doubt she can clarify where the information is held. None the less, I assume that somewhere in government—she will no doubt tell us where—there is a list of national insurance numbers and against that list the name of the person to whom they were issued.

There seems to be some doubt as to the stage at which a national insurance number comes into existence. The noble Lord, Lord Grabiner, in his report, to which I shall shortly refer in detail, thought that it happened at the age of 16. Others say that it happens at birth. No doubt the noble Baroness can help, but I believe that the child benefit number is converted into a national insurance number at a later stage. However, at all events the number should have a clear relationship to a specific name. That should give us a lead.

The overall situation is rather confused, but all one must ask is whether the national insurance number which a given individual has is one which is related to the name. It may well be that there is extensive organised fraud in this area where people can have tailor-made national insurance numbers which fit their name precisely. However, I suspect that some such transactions in themselves may be somewhat fraudulent and perhaps the fit is not as good, as reference to the Government's records would immediately reveal. That is the first point that we need to clarify.

The noble Lord, Lord Grabiner, states in his summary of recommendations at (ii) that to combat identity fraud, which is the way he conveniently describes it, the procedures for issuing national insurance numbers should be tightened up in line with the regime already piloted by the Benefits Agency. He does not concern himself with tightening up those existing numbers. He is concerned in that summary with the issuance of new numbers.

The previous Conservative government introduced a series of measures to cut down on the prevalence of national insurance records, the most important of which was the data cleaning project, which was designed to identify anomalies and duplicate records. It began in November 1995 and will apparently end in March 2001, which is now. Can the Government confirm that that is the intention? It would seem to be a strange thing to do at this time, given that the Bill is now going through the House. Perhaps the Government can tell us exactly what their intentions are.

The noble Lord, Lord Grabiner, in his normal thorough way, goes into these matters of national insurance fraud in rather more detail. Indeed. he refers to the pilot study carried out in Balham—nothing to do with the late Tony Hancock who is, alas, no longer with us—and I believe an extremely high percentage of false national insurance numbers are located in the greater London area. At all events, the Balham study would seem to help in dealing with this. Again, before we get to Clause 1 of this Bill and from the point of view of rights and data protection measures, these measures would seem to be a better way, in the first instance, of dealing with the problem. That is what this amendment seeks to do.

The noble Lord, Lord Grabiner, goes into more elaborate matters. For instance, The Day of the Jackal fraud system is perpetrated by means of false birth certificates of people who have died, and so on. This needs to be cleaned up. Outsiders can go and look at people's birth certificates, but it is not at all clear whether the person recorded on the certificate as having been born is also recorded as having died. Here again we think, as the noble Lord recommended, that there should be stricter control over the issue of birth certificates as a proof of identity. This is a problem that needs to be tackled.

Overall, it seems to us clear that to write into the Bill the first part of our proposal, namely, Amendment No. 6, would be an efficient and probably more cost-effective way of checking up on national insurance numbers. It would be helpful if the noble Baroness would clarify for us the factual situation and comment on Amendments Nos. 46 and 49, which seek to impose an immediate penalty on someone with fraudulent intent who is in possession of a false national insurance number. I beg to move.

4.30 p.m.

Earl Russell

My Lords, I think we have here a serious problem to which the noble Lord, Lord Higgins, is right to call our attention. Also, of course, we have a need for balance. On the one hand, we must try to track down and pursue the fraudulent use of national insurance numbers. On the other hand, perfectly genuine law-abiding people—many of them the victims of theft, as of credit cards—continue to have legitimate needs and a legitimate right to build up a pension entitlement. The two things need to be kept in balance somehow.

Will the noble Baroness confirm, as I am sure she will, that so long as people have surviving dependants there may be an interest in maintaining national insurance numbers of people who are now dead? Secondly, can she tell us of the procedure which is followed when a national insurance card is reported to have been stolen? I appreciate this is a technical question, and apologise for not having given notice of it. If she would prefer to write to me, I would entirely understand.

Baroness Hollis of Heigham

My Lords, I accept that your Lordships are concerned about the issue of national insurance numbers, of which there have been significant reports. Perhaps I may start with the point made by the noble Earl, Lord Russell, partly in response to the noble Lord, Lord Higgins, as to the apparent discrepancy between the size of the population, which he estimates as around 60 million, and national insurance numbers, of which over 80 million are in circulation. The noble Earl is absolutely right in saying that not only are numbers given to individual citizens but that numbers are allocated to children at the child benefit point. When someone dies, his national insurance number needs to continue to exist; in other words, to be a live number, because widows' benefits depend on it. Also, an EC national for example, who has come to this country, worked only for 12 months and then gone back to, say, Spain or Germany, none the less maintains a live number even though not a UK citizen and a member of our population base, because at some point he or she may return to the UK and wish to resume national insurance. Equally, foreign students who are permitted to work part-time have a national insurance number, although not part of the home population.

There may be UK nationals who are entitled to retirement or winter fuel payments even though they may be living abroad. There are even extreme examples of people, like Gurkhas, who are entitled to claim working families' tax credit, or the foreign wives of UK servicemen. Given all that, your Lordships will see that there is an understandable gap between the live population and the number of necessary national insurance numbers in circulation.

Regarding the cleaning project, yes, we identified about 200,000 mis-matched, unacceptable dead numbers which have been cleaned from the system. We have completed that exercise. May I say that the numbers of national insurance numbers being issued each year have not changed since the early nineties: there is not some sudden crisis identified with national insurance numbers. If a number is suspected to have been stolen, it is marked on the computer and checks are carried out to verify this. I hope I have brought the matter into perspective.

The noble Lord, Lord Higgins, also asked about the computers. The basic information is held on the department's central index but there is also additional information, such as the amount of contribution which is held on NIRS2, as he said. Given that background information, I hope I may persuade your Lordships that these amendments, though they may be pegs on which to express wider concern about national insurance numbers, really do nothing at all to help us. They are redundant and may even make the situation worse.

The first amendment would place a statutory duty on officers to check the validity of a person's national insurance number before initiating any enquiries under the powers of Clause 1; that is Amendment No. 6. We do this already. It is one of the basic building blocks before any further investigation into fraud can continue and therefore putting this on to the face of the Bill would achieve nothing at all. It is already absolutely standard practice. It is imperative that we establish at the outset the identity of the person suspected. I would ask the noble Lord to accept from me that this amendment is redundant, despite being useful as a peg on which to explain that we always do it. We do this already, and checking the national insurance number before we start on any serious investigation is an absolute requirement.

Turning now to Amendments Nos. 46 and 49, I would say to the noble Lord, Lord Higgins, that they would achieve nothing new. It is already an offence to make a false statement in order to obtain benefit. That is what happens when a false insurance number is used. Of course, there may be a genuine error. A person may have been allocated a number as a child, perhaps when living abroad with their parents who were UK nationals, and stayed abroad before returning home perhaps 30 years later and has then innocently sought another national insurance number when starting work here, without realising that a number had been already allocated to them. There will be occasions when people innocently but erroneously hold two national insurance numbers. The issue is whether they use those numbers to perpetuate fraud. That was part of the debate we had earlier. It is already an offence, so once again this amendment is redundant.

The proposal would create a penalty specific to that offence which would tie the hands of the magistrates to a maximum penalty of £500. However, the existing offence attracts a penalty of up to £5,000 or six months' imprisonment. Therefore the noble Lord—I am sure unwittingly, innocently and in error—seeks to weaken the effect of the offence and the punishment which already exists by law.

I hope that I have addressed the point about the gap between the population and the numbers in circulation. I hope that I have covered the point about computers. I hope that I have addressed the issue raised by the noble Earl, Lord Russell, about what happens if the number is stolen. I hope that I have addressed the issues underlying the amendment by suggesting not only that they are already part of departmental procedure but that they are already offences and the amendment would weaken the ability of the department to handle those offences. In the light of all that, I hope that the noble Lord will not wish to pursue the amendment.

Lord Higgins

My Lords, before the Minister sits down, can she confirm whether the cleaning project is continuing; and whether there is any extension of the Balham project?

Baroness Hollis of Heigham

My Lords, I thought that I had mentioned the cleaning project. We have identified something like 220,000 mismatched numbers. We have completed the exercise; it was finite. Perhaps I may write to the noble Lord on the Balham exercise. I can give him information about the local project.

However, on the basis of that exercise we have found significant areas of benefit fraud. It is not all associated with national insurance numbers. The project was set up in 1997. We have had validation trace units at seven of the sites within the offices. We have been looking at the allocation of ninos. As a result, there have been something like 166 arrests for identity fraud; a further six deportations; and by extending the initiative to neighbouring Benefits Agency offices in 1999 there were a further 46 arrests. We seek to make use nationally of the lessons learned from Balham. We now have specialist teams to combat identity fraud and the fraudulent use of ninos. From 1st April 2000 we are not only continuing the work in Balham but extending it nationally. We are going live across London inside the M.25 corridor and Wales from 1st April 2000 where 70 per cent of all nino applications are handled. We have gone live in the rest of the country from 1st October 2000. So, yes, we are continuing the Balham project. We extended it to the M.25 and Wales last summer. Last autumn we went live to the rest of the country. I hope that I have answered the noble Lord's point on Balham.

Lord Higgins

My Lords, I am grateful to the noble Baroness for the points she made. I understand what she says about some national insurance numbers continuing in operation with regard to widows' benefits and so on. Clearly that is necessary. None the less the extent of the surplus seems to be very large—80 million people as against 60 million would scarcely be covered by that. It could surely be argued that we withdraw the number with regard to the owner but perpetuate it as regards the widow or other related claimant.

None of these matters covers the basic point which the Balham project—I am glad to hear that it is being extended—seems to confirm: that it will be a relatively simple exercise, albeit large scale, to check up on the extent to which the national insurance numbers held by an individual coincide with those which appear on the Government's records. There is the feeling that a large number of invalid national insurance numbers are being held. Therefore, to clean up the matter by making the initial inquiry on a national basis has much to be said for it in terms of reducing benefit fraud.

The Minister's other points are very fair. I take the point that inquiries are already made at the first stage on national insurance numbers. But that is the present situation before the Bill comes into operation as an Act. We were concerned that this should be an upfront part of the exercise.

I concede the point the Minister makes on penalties. It merely demonstrates how important the issue has been considered in the past. The report of the noble Lord. Lord Grabiner, seems to bear out that point. It gives considerable cause for concern with regard to surplus numbers and the stringency with which new numbers are issued.

I shall study carefully the point the noble Baroness makes. Clearly I shall need to amend the second set of amendments, if not the first, and return to the matter at Third Reading. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.45 p.m.

Lord Higgins moved Amendment No. 7: Page 2, line 29, at end insert— ("( ) Prior to the exercise of the power conferred on an authorised officer to obtain information under this section, that officer shall obtain in writing the consent to carry out an investigation. ( ) Consent shall be obtained from an official of seniority of "Band B" or above from the relevant department.").

The noble Lord said: My Lords, the amendment is concerned with the way in which the powers conferred on authorised officers to obtain information under the clause shall be authorised and the level at which the investigations take place.

There is still considerable concern about the way in which the investigations will be carried out, despite the excellent amendments moved by the noble Baroness earlier, with no external check on whether it is reasonable to investigate an individual. The British Bankers Association still feels that independent external checks should be made on the way in which the Government operate. It remains of the view that one should have independent judicial authorisations for specific inquiries. It stresses that it does not understand why those suspected of benefit fraud should have a lower standard of protection against the invasion of their privacy than those suspected of tax fraud or criminal offences.

The Minister has been kind enough to write to me and to others on this point. No doubt the noble Baroness will wish to put on record her arguments. The code of practice gives us more reassurance than we had in Committee. The protections which are built in seem to be more substantial than we had at first realised. On the other hand, it is not entirely clear how the system will operate in practice. We had understood that there were to be authorised officers. On page 10 of the code of practice we find a reference to a selection of individuals. There is reference to authorised officers; and we are clear about them. However, there will also be fraud investigators, decision makers, fraud specialists, responsible officers and accredited fraud officers. The relationship between each of these is not entirely clear.

Baroness Hollis of Heigham

My Lords, I thought that the example given at the bottom of page 10 clarified the relationship between them extremely well.

Lord Higgins:

My Lords, the example given is: A Fraud Investigator is investigating a suspicion of undeclared savings. He considers all the relevant facts surrounding the case and decides that the information from a building society is necessary. He refers the matter to the Authorised Officer, together with the reasons for the request. The Authorised Officer makes sure these are valid reasons and, if so, makes the request of the Building Society and, upon receipt, passes the reply to the Fraud Investigator". What gives cause for concern is that the whole argument turns upon whether it is reasonable to carry out the investigation. The initiative of the matter comes from the fraud investigator and then goes up to the fraud officer. The amendment seeks to establish at what level these decisions, which clearly involve an invasion of privacy and raise issues on human rights and so on, are likely to be carried out.

One of the other examples given is that the information is given on the basis of an anonymous tip-off. Perhaps the Minister can comment on that. If the tip-off received is anonymous rather than backed up by any further indication as to the source of the allegation or what has prompted it, do the Government regard that as a reasonable basis for carrying out an investigation. There may be all kinds of reasons why individuals make anonymous tip-offs; for example, they may not like the person.

If we look at that particular case, it appears that the person who has the ultimate say is not the authorised officer but the investigating officer. If that is so, it gives us some cause for concern.

Baroness Hollis of Heigham

My Lords, I do not see an investigating officer. I have "fraud specialist", I have "decision maker", who actually makes the benefit decision, and the "authorised officer". Where is the investigating officer?

Lord Higgins

My Lords, doing this on one's feet is not perhaps the easiest thing to do. I have a list. I have authorised officers, fraud investigators, decision makers, who, as the Minister has said, are related to the decision on the actual benefit question. I have a responsible officer who turned up at some point and an accredited fraud officer.

Baroness Hollis of Heigham

My Lords, but where is the investigating officer?

Lord Higgins

My Lords, it would have been easier perhaps in Committee to have found one, but then we did not have the draft code of practice. He is a fraud investigator. However, I am not clear whether sufficient protection is being given to ensure that the investigation is reasonable.

I turn to the related points on this matter. The code of practice at paragraph 4.7 sets out what reasonable grounds are. It states: An Authorised Officer can require information only where he has reasonable grounds for doing so. Reasonable grounds are where an officer has good reason to believe a person is either committing fraud (or is intending to do so). What is reasonable would vary, depending upon the circumstances of the case, and each case should be considered on its own merits". That is a most extraordinarily circular paragraph. I am not clear how that answers the question, what are reasonable grounds, although the code of practice goes on to give further examples.

What we are really concerned about here is whether, given that there is apparently to be no external approval as to whether or not an inquiry is justified, the level at which these inquiries are carried out is appropriate. Therefore, perhaps, given the various categories which we have now summarised, the Minister could tell us at what level in the Civil Service these particular offices will be filled. I beg to move.

Earl Russell

My Lords, this provides me with my first opportunity to thank the Minister for providing us with the draft code of practice. That was extremely helpful. It is an extremely well-drafted code. It shows all the typical excellence of the Department of Social Security at putting itself under restraint coming from its own good judgment, while at the same time maintaining a vehement objection to any restraint placed upon it from any other quarter.

Lord Higgins

My Lords, will the noble Earl allow me to respond on that point? In fact he will find that "fraud investigators" appears in paragraph 3.2, but that apparently has not been drawn to the attention of the noble Baroness. So the drafting is somewhat strange.

Earl Russell

My Lords, I thank the noble Lord, Lord Higgins. I thought that I remembered the phrase, but I did not succeed in finding it while he was speaking. I am sorry to have been so slow.

I return to the point. As a member of an institution, I sympathise with the objection to restraint from an outside quarter. On the other hand, most of us are subject to restraint and probably have to put up with it here and there. But although the draft code of practice tries to diminish the misgivings considerably, I agree with the noble Lord, Lord Higgins, that misgivings still remain. What, therefore, is the best thing to do is not necessarily a simple question.

Incidentally, I share the noble Lord's misgivings on the subject of anonymous tip-offs. They have been relied on in law enforcement in a variety of contexts at least since the Heresy Act of 1401, but they have led to a considerable number of miscarriages of justice. Having said that, I might remind the noble Lord, Lord Higgins, that the person who put anonymous tip-offs centre stage when he was Secretary of State was none other than Mr Peter Lilley. I expressed misgivings about it at the time. I express misgivings about it now. Those are no party misgivings; they are simply a matter of concern for justice.

However, I come back to the point that I made at Second Reading about proportion between legitimate objectives. The Minister was not entirely pleased with the point I made. If I remember her words right, she said that the proportions did not always appear to her as they appeared to me. Fair enough, I do not expect it. But on this occasion perhaps the point about proportion may tell in the Minister's favour. It is often essential for the prosecution of fraud that the fraudster or potential suspect fraudster should not know that he is being investigated until fairly late on in the proceedings. Fraudsters have a capacity sometimes, not merely for disappearing but for evaporating. If their identity is fictitious they can collapse it and may never be found again. So there may be a strong case indeed for making approaches under cover quietly.

It may be in terms of priority that the need for justice and the need for control justifies the use of a superior officer in the way that the amendment of the noble Lord, Lord Higgins, demands. I am capable of being persuaded of that point. However, I must say that the noble Lord has not yet so persuaded me.

Baroness Hollis of Heigham

My Lords, perhaps I may respond first to the point about the anonymous tip-offs. I understand noble Lords' concerns. I was asked whether anonymous tip-offs alone would be reasonable grounds for an investigation. The answer is no.

An example may be where someone is understood to be a lone parent but a tip-off says that she actually has a live-in partner. That may be the kind of tip-off that one gets from a neighbour when they do not have a good relationship. Tip-offs of that kind would usually be raised with the claimant. Occasionally, very detailed tip-offs might be regarded as reasonable grounds, but in all cases they would be checked against our records on the claimant.

As I have said, the general presumption would be to check first with the claimant. Only detailed and serious allegations might trigger the need to go under cover. I hope that this gives the noble Lord some reassurance on that point.

Secondly, the noble Lord asked about the relationship between the fraud specialist and the authorised official. At present, fraud specialists carry out investigations on the ground. Something in the order of half a million such investigations are carried out each year using current powers. Only a small number of authorised officials will be attached to each of the 13 units, usually between 10 and 50 officers. To use the additional, sensitive powers conferred by the Act, the fraud investigator would have to approach the authorised official in order that that official could make the inquiries on behalf of the fraud investigator. Given that many people are in the field carrying out work, we would not want such information "floating around the system", to borrow the phrase used by the noble Lord, Lord Higgins, when we discussed this matter in Committee. Sensitive inquiries utilising the new powers contained in the Act must be carried out by the authorised official, who, in turn, must have "reasonable grounds" to investigate, which in turn must be clarified with the fraud investigator. I hope that that has clarified our slightly teasing exchange on this matter.

The third question raised by the noble Lord concerned whether authorised officials will be sufficiently senior to have such powers entrusted to them. In Committee I said that such officials will be appointed at executive officer grade, grade B3 or its equivalent in a local authority. They will be authorised to act on behalf of the Secretary of State only once they have been given full professional training. I could give details of that training but I shall not take up the time of the House unless noble Lords would like me to do so.

The grade is a management grade equivalent to that of a flight lieutenant in the Royal Air Force or a second lieutenant in the Army. It would rank between a police sergeant and a police inspector, who similarly carry high levels of responsibility. The grade is the same as that required for officers who currently use departmental powers to inspect the records of employers about their employees. Most noble Lords would regard that work as equally sensitive. I have already indicated that management controls will be put in place to be implemented by sector managers.

Finally, if an individual or an information provider has a complaint or question about the manner in which these powers have been applied by the authorised official, they may direct their inquiry to the senior officer in the central intelligence unit or the investigation manager in the case of local authorities. The address will be included in all requests for information.

I have sought to establish that, first, anonymous tip-offs would not, as they stand, provide reasonable grounds for investigation. They would need to be checked with the claimant, although occasionally exceptions may be made. Secondly, the fraud specialist will carry out the day-to-day work on the ground of checking the integrity of benefits but the exercise of powers as regards data information conferred by the Bill must be handed to an authorised official who must demonstrate reasonable grounds so to act. Such authorised officials will be relatively senior members of staff, in the top quarter in terms of hierarchy of staff in the Benefits Agency. Thirdly, if a complaint is received about the inappropriate use of these powers, relevant information will be made widely available by the authorised officials.

I hope that, with those points, the noble Lord will feel that I have addressed his concerns.

5 p.m.

Lord Higgins

My Lords, I am grateful to the noble Baroness. I am not sure that I am impressed by the level at which these decisions are to be taken. Paragraph 3.7 of the code states that, Authorised Officers will receive their authorisation from the Fraud Area Manager acting on behalf of the Secretary of State. Authorised Officers will be of management grades not below that of Executive Officer. They will be managed by officers not below the grade of Higher Executive Officer". It would seem that a person acting "on behalf of the Secretary of State" will not be below the rank of higher executive officer. The noble Baroness compared the grades with ranks in the Army and the Royal Air Force. However, they do not seem to be at a particularly high level. We shall need to consider that between now and Third Reading. We shall also need to consider the continuing concerns expressed by the banks and other organisations on the lack of external supervision.

However, we have made considerable progress and the code of practice represents a substantial step forward. But, as the noble Earl, Lord Russell, pointed out, ultimately this is a matter of balance. We need to weigh the degree of power conferred on officials on the one hand and the lack of external supervision on the other. Nonetheless, I am grateful to the noble Baroness for her reassurances as regards anonymous tip-offs.

Baroness Hollis of Heigham

My Lords, I am happy to say that we shall review these procedures. The last thing the DSS wants to see is criticism from banks and building societies of the actions of its authorised officials. If we receive complaints, we shall either review the managerial supervision element or we shall review the training. If the fears expressed by the noble Lord turn out to be legitimate—I do not think that they will, because officers are already working with equal levels of responsibility in parallel fields; their behaviour is almost always exemplary—then we shall find that out. The code of practice offers plenty of opportunities to make adjustments through training and complaints procedures. Having said that, I should point out that, based on the body of experience from complaints officers currently working in the field, we believe that we have set these processes at the right level.

Lord Higgins

My Lords, I understand the point. Again, although I am reassured by the noble Baroness's comments on training and so forth, if someone is carrying out an investigation which is not reasonable, that is far more a question of an individual's attitude to the issues than it is a question of training. I shall bear in mind the points made by the noble Baroness. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Speaker (Lord Elton)

My Lords, if Amendment No. 8 is agreed to, I shall not be able to call Amendments Nos. 9 to 11.

Baroness Hollis of Heigham moved Amendment No. 8: Page 2, line 34, leave out from ("is") to end of line 41 and insert— ("(a) a person who has committed, is committing or intends to commit a benefit offence; or").

On Question, amendment agreed to.

[Amendments Nos. 9 to 11 not moved.]

Lord Higgins moved Amendment No. 12: Page 2, leave out lines 42 to 44.

The noble Lord said: My Lords, this amendment relates to the provisions as regards members of the family of a suspect. Again, the code of practice has proved to be extremely helpful. In Committee I raised the question of whether it was appropriate to include in the list of those who might be investigated people who were simply members of the family of someone who was otherwise suspect. That part of the Bill has now been radically changed. This is the only section which, in effect, has survived the helpful innovations introduced by the noble Baroness.

The relevant paragraphs in the code of practice are paragraphs 2.11 and 2.12. That part of the code does seem to restrict the provision to inquiries about family members whose circumstances are directly relevant to the claim under investigation. For example, if a man is claiming a means-tested benefit but is not declaring his wife's earnings, inquiries may be made about her bank account in order to establish the truth. I have some doubts about the precise wording of paragraphs 2.11 and 2.12, but I think it would be helpful to discuss that when we discuss the code of practice as a whole.

This issue was raised in Committee. However, perhaps the Minister will state for the record precisely why she believes that the members of a family—defined precisely in the code of practice—may need to be investigated. Also, is she satisfied that there are adequate restraints on going beyond the particular cases where the fraudulent benefit claim immediately raises the question of family relationships?

Baroness Hollis of Heigham

My Lords, again I am happy to give the assurance that the noble Lord seeks. I explained in Committee that information about a person's family—the tightly defined nuclear family; in other words, the dependants who are covered by benefit—is needed by the department. People claim benefit not only for themselves but for their dependants.

The crucial point is that income-related benefits are based on household assessment; therefore, we need to know about the household. It is as simple as that. For example, people may be fraudulently claiming for children that they do not have; they may claim that they are single when they are a couple; or a man may be claiming a benefit when the woman is in work. The implication of the noble Lord's amendment is that if a single man were working and claiming benefit he would be prosecuted, but if a married man were claiming benefit when his wife was working—the same offence but within the household—we could not prosecute him. I am sure that that is not the noble Lord's intention.

So I am happy to give the noble Lord the assurance that he seeks. The notion of "family members" is tightly drawn. Because income-related benefits are household based, any claim is on behalf of the whole household; therefore, it is necessary to ensure that the information is correct and valid. That is why we need to retain the provision in paragraph (d).

Lord Higgins

My Lords, that is a helpful explanation. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 13: Page 2, line 44, leave out ("(b) or (c)").

On Question, amendment agreed to.

Lord Astor of Hever moved Amendment No. 14: Page 2, line 44, at end insert— ("( ) Nothing in this Act shall authorise an inquiry which contravenes any provision of the Data Protection Act 1998.").

The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendment No. 38.

Amendment No. 14 seeks to ensure that any inquiry initiated as a result of the Bill is pursued with the full knowledge of the data protection regulations and that the concerns expressed by the Information Commissioner about some provisions in the Bill have been taken into account.

The Minister assured us in Committee that if the Information Commissioner believed the Bill to be in breach of the Data Protection Act, she could issue the department with an enforcement notice. Would it not be preferable to smooth over any potential areas of conflict before the Bill becomes law and subject to the provisions of the Data Protection Act?

Although safeguards exist in the Bill and in the draft code of practice, as the noble Earl, Lord Russell, said in Committee, it is questionable whether the action can be proved to be necessary and, therefore, whether any inquiry is or will be within the bounds of the Data Protection Act. Will the Minister give the House an assurance that knowledge of the data protection regulations will be required as part of the training of the authorised officers who will exercise the powers provided under the Bill?

Turning to Amendment No. 38, the Minister was kind enough to say that she would confirm whether or not an individual could request information held on him by the DSS and under what circumstances there would be an opportunity to do so. We are grateful to the Minister for the confirmation set out within the code of practice that an individual will be able to access personal data in accordance with the Data Protection Act. However, although the draft code of practice has established that an individual has the right to subject access, and would be eligible without our amendment to access personal data held on him by the DSS, it does not confirm at what stage, if any, individuals may access that information if they are under investigation in accordance with the provisions of the Bill. I beg to move.

5.15 p.m.

Lord Grabiner

My Lords, I shall speak to Amendment No. 14. We examined this amendment on the first day of the Committee stage. My instinctive reaction then was that the amendment was unnecessary and that that is still my view.

I think that the source of the problem is that the Data Protection Act 1998 is widely misunderstood and that even experienced lawyers are a little nervous of it. I include myself in that category. The obscurities of the 1998 Act are driven by the fact that it has its origins in the human rights convention, and the legal concepts in the convention were then very novel, and still are quite novel, to English lawyers and legislators.

The relevant provision of the convention is Article 8. The first paragraph of the article spells out the right to respect for private and family life, home and correspondence. Obviously, the right is not absolute or unlimited. The convention is carefully structured and makes a sensible balance. Accordingly, paragraph 2 of Article 8 makes it plain that a public authority may be entirely justified in interfering with that right provided that the interference, is in accordance with the law and is necessary … [for] the economic well-being of the country, for the prevention of… crime … or for the protection of the rights and freedoms of others". Those two aspects of Article 8 are perfectly mirrored in the Data Protection Act. The right in paragraph 1 is covered by the so-called Data Protection Principles, especially the first principle. The limitation on the right is set out in Section 29 of the Act, which expressly exempts from the first data protection principle cases where personal data is processed for the purpose of preventing or detecting crime or for the purpose of apprehending or prosecuting offenders. It follows that in this context Article 8 of the convention is made effective in our domestic law by the Data Protection Act.

The next step in the argument is the Human Rights Act 1998. Section 3(1) of the Act requires that, so far as it is possible to do so, primary legislation must be read and given effect in a way which is compatible with the convention rights. The obligation to construe all legislation in this way is, therefore, cast squarely on the court.

It will immediately be obvious that it is entirely unnecessary and indeed circular to introduce any provision into this Bill of the kind that we are now discussing. In the first place, it adds nothing to the Data Protection Act, which cannot be excluded or side-stepped. Secondly, Section 3(1) of the Human Rights Act means that, if and when the Bill becomes law, it must be read and given effect in a way which is compatible with the convention rights.

I should like to emphasise one further point that I believe is sometimes under-rated in our debates, and, for the most part, ignored in the representations from some of the outside bodies, or pressure groups, that have given their views on this particular subject. The purpose of Clause 1 of the Bill is to enable the DSS to detect or prevent crime and to apprehend and prosecute benefit fraudsters. That is an entirely legitimate object in any civilised society. It is specifically authorised by the convention. That is especially the case where these powers are necessary as a check on whether a particular benefit claimant has, on a previous occasion, given honest answers to questions properly put to him or her and where the answers are to be relied upon for the purpose of deciding whether or not the claimant qualifies for the relevant benefit. We must always take full account of the convention right in paragraph 1 of Article 8, but there is absolutely no justification for disregarding or watering down the limits on that right that we find in paragraph 2 of Article 8.

In the result, I believe that this amendment is unnecessary for at least two reasons. First, if and when these powers in Clause I are enacted, they will be exercisable only in accordance with the requirements of the Data Protection Act 1998; and, secondly, the provision will have to be construed by the court compatibly with the convention because Section 3 of the Human Rights Act 1998 says so.

Earl Russell

My Lords, that was an extremely helpful intervention, for which I am most grateful to the noble Lord, Lord Grabiner. If the noble Lord will forgive me, I should like to probe one or two of his assertions. First, I do not have the text of the Human Rights Act with me today, but it is my recollection that the requirement to construe existing statutes in the light of the convention is a requirement to do so as far as possible. It must be so, otherwise the whole provision for a certificate of incompatibility would be unnecessary.

Secondly, the noble Lord is clearly persuasive in arguing that Clause 1 of the Bill is a legitimate object within the terms of the convention. However, it has been argued by the Data Protection Registrar that this object is subject to the requirement of proportionality. That is a fairly major argument. There is probably some obligation on this House to consider how far that requirement of proportionality is met. We know that the registrar has had some fairly significant misgivings at earlier stages of the Bill. I understand that discussions have taken place since then. I have heard in the most general terms only about the results of those discussions. However, before we leave this amendment, perhaps we could be enlightened on how far the registrar is currently reassured. That would be extremely helpful to the House.

Lord Grabiner

My Lords, I shall respond briefly to the noble Earl's observations. He is absolutely right to draw attention to the opening words of Section 3(1), which read: So far as it is possible to do so". Indeed, I believe that I referred to those words when I drew attention to the provision. However, if it is not possible to do so, the possible consequence is that there would have to be a certificate of, so to speak, non-compatibility. In that event, there would be a potential problem.

The noble Earl also referred to the issue of proportionality. The amendment now before us is one that would have the effect of making the operation of the powers contained in Clause 1 of the Bill expressly subject to the Data Protection Act 1998. The proportionality point does not arise by virtue of the Data Protection Act. It arises under that Act in any event, but it will also arise under this Bill, if and when it becomes law. Therefore, there is no need for this Bill to incorporate a provision that would make it in its operation subject to the Data Protection Act 1998, because the proportionality obligation will have to be satisfied under this legislation standing alone.

We discussed this issue previously. I entirely agree that it must be necessary; and that means proportionate. The mere process of going through these proceedings—indeed, as we have done in previous debates—reveals most clearly that the product at which we are arriving is a proportionate response to a serious social and criminal problem.

Baroness Hollis of Heigham

My Lords, I am indebted to both my noble friend Lord Grabiner and to the noble Earl, Lord Russell, for expanding the point about the proportionality issue and the degree to which all legislation is subject to the Data Protection Act. That brings me to the first point raised by the noble Lord, Lord Astor. There is no need for amendment No. 14. There is nothing in the Bill that can enable us to contravene the Data Protection Act 1998. The noble Lord asked why we have not placed such a provision on the face of the Bill. I could respond and say that, equally, the Bill must not contravene the Human Rights Act 1998, the Race Relations Act 1976, the Sex Discrimination Act 1975, the Disability Discrimination Act 1995, the Police and Criminal Evidence Act 1984 or the freedom of information legislation. However, we do not seek to place them on the face of the Bill. The law is the law; and, by law, we cannot contravene the law. The Data Protection Act 1998 is the law. Therefore, putting a provision on the face of the Bill to the effect that we cannot contravene it would not change the fact that we cannot contravene it; in other words, the suggested provision would be otiose. Indeed, I believe that my noble friend Lord Grabiner put the case most succinctly.

The question was also raised as to whether the Data Protection Act and its obligations and responsibilities should form part of the training of authorised officers, which I believe to be a most helpful and pertinent question. Yes, indeed, it is important that they should understand that their actions must fall within that framework.

I turn now to Amendment No. 38, and the question of data. As I believe we made clear in Committee, we generally keep data for 14 months, unless it is needed for prosecution purposes. Anyone can ask for the data that is held upon himself at any stage, so long as that request would not jeopardise any investigation. For my own interest, I asked to have sight of a typical print-out of what might be held on a real but anonymised individual in the social security computers. This gives information about national insurance numbers, family, employment, and so on.

In the light of that, I was also asked whether it would be reasonable to reduce the time limit of 40 days down to 21. The reference in the amendment to, the relevant agencies or bodies". which would include the DSS and local authorities, would also, presumably, include banks and other organisations listed in subsection (2A), as set out in Clause 1. That would mean that the noble Lord's amendment to restrict the time available to make such enquiries to 21 days would not only apply to the DSS but would also apply to banks, building societies, credit reference agencies, and everyone else. As a result, I believe that those organisations would be extremely unhappy. They are currently subject to the same 40-day requirement as applies to the DSS. However, as the amendment is framed, they, too, would be brought within the 21-day requirement. I am sure that they would find this very hobbling in terms of their ability to respond, because the time limit would be halved and could be seen as unreasonable.

Finally, I was asked whether the Data Protection Registrar was reassured in terms of what we propose. The truth is that we have not heard from the registrar recently on the subject. I understand that she has been sent the draft code of practice, but has not responded. I believe that it is fair to say that her original concerns have been addressed in part by the amendments that we have proposed, especially Amendment No. 8 that the House accepted earlier, and by the publication of a code of practice, which will be a statutory code of practice. If the registrar has other concerns, she will no doubt communicate them to us. However, I have checked the position. That was certainly the situation yesterday. I rechecked to confirm whether or not we had heard anything further today, but we had not. That is the best information that I can give to the House.

Having addressed some of the concerns that your Lordships expressed—one about the code of practice and the other about subsection (2A)(a), (b) and (c), which was dealt with by way of Amendment No. 8—I hope that my response will also allay the concerns that the Data Protection Registrar gave in response when the Bill was originally published.

5.30 p.m.

Lord Astor of Hever

My Lords, I am grateful for that clarification from the Minister. I cannot recollect saying anything in my short speech to either amendment about putting anything on the face of the Bill. I have checked my notes and I cannot recollect saying that.

The points made by the noble Lord, Lord Grabiner, were helpful, particularly as regards clarifying the Data Protection Act and the Human Rights Act as they relate to the two amendments.

Baroness Hollis of Heigham

My Lords, perhaps I have misunderstood the noble Lord. However, Amendment No. 14 states: Nothing in this Act shall authorise an inquiry which contravenes any provision of the Data Protection Act 1998". In other words, the noble Lord asks for a provision on the face of the Bill that nothing we do can contravene any provision of the Data Protection Act. As I said, that cannot happen. We cannot contravene the provisions of the Data Protection Act because that is law, in the same way as we cannot contravene the Sex Discrimination Act, the Disability Discrimination Act and so on. As I say, perhaps I have misunderstood the noble Lord.

Lord Astor of Hever

My Lords, I accept the points that the noble Baroness makes. These are probing amendments to clarify points which we are grateful to have explained. On the subject of the Human Rights Act, normally there are various additional measures in the Bill. However, they are missing. Is there any specific reason for that?

Baroness Hollis of Heigham

My Lords, I do not know what additional measures the noble Lord has in mind. Perhaps he can help me.

Lord Astor of Hever

My Lords, normally the Bill states that it is in conformity with the convention. Is there any reason why that statement is missing?

Baroness Hollis of Heigham

My Lords, that statement was signed originally before the Second Reading. I believe that it was signed at the First Reading of the Bill. I signed that the Bill was compatible with human rights. I believe that on a couple of occasions the noble Lord, Lord Higgins, told me that I had signed that measure and that he held me personally responsible for that. It was certainly signed.

Lord Astor of Hever

My Lords, I take the Minister's word that it does not matter that the measure is not on the face of the Bill at all the other stages.

I return to the amendments. I am grateful for the detailed clarification both from the noble Lord, Lord Grabiner, and from the Minister. It is helpful that we have that detailed clarification. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendments Nos. 15 and 16: Page 3, leave out lines 18 to 20 and insert ("any information other than information which (within the meaning of section 2I of the Regulation of Investigatory Powers Act 2000) is communications data but not traffic data." "). Page 3, line 20, at end insert— ("(2F) Nothing in subsection (2B) or (2C) above shall prevent an authorised officer from exercising the powers contem,c1 by this section for requiring information, from a person who provides a telecommunications service, about the identity and postal address of a person identified by the authorised officer solely by reference to a telephone number or electronic address used in connection with the provision of such a service.").

On Question, amendments agreed to.

[Amendments Nos. 17 to 19 not moved.]

Baroness Hollis of Heigham moved Amendment No. 20: Page 3, line 42, leave out ("and").

On Question, amendment agreed to.

[Amendment No. 20A not moved.]

Baroness Hollis of Heigham moved Amendment No. 21: Page 4, line 2, at end insert (", and 'telecommunications service' has the same meaning as in the Regulation of Investigatory Powers Act 2000." ").

On Question, amendment agreed to.

Clause 2 [Electronic access to information]:

Lord Astor of Hever moved Amendment No. 21A: Page 7, line 9, after ("refuses") insert ("without reasonable excuse").

The noble Lord said: My Lords, this amendment inserts a defence of reasonable excuse into the offence provision under Clause 2.

There may be a number of valid reasons that a person cannot comply with a requirement under new Sections 109BA or 110AA. As currently drafted, the Bill takes no account of this and creates an offence of strict liability regardless of the circumstances of the particular case. We are of the view that every case should be considered on its own merits and that only wilful refusal to comply with a requirement under the Bill should be culpable. I beg to move.

Baroness Hollis of Heigham

My Lords, I am slightly puzzled as I had hoped that the noble Lord, Lord Astor, would have agreed that we had addressed this issue in paragraph 4.5 of the draft code of practice which has statutory weight. We inserted that measure in response to the concerns that the noble Lord expressed in Committee. Therefore I feel slightly miffed that we responded to those concerns in the draft code of practice but he has failed to acknowledge that. Paragraph 4.5 of the draft code of practice states: If information is not provided the Authorised Officer should explain the DSS statutory powers. and the potential consequences of non-compliance. Information providers will be expected to comply with reasonable requests and the DSS will take the matter further if an individual employee is being obstructive"— I refer to the point about wilful refusal that the noble Lord, Lord Astor, made— Authorised officers must consider any reasonable excuse that a person may have for not providing the information. Examples may include industrial action, staff shortages or unforeseen sickness. The list is not exhaustive". The example I gave in Committee was the breakdown of a computer. The code also refers to evidence that does not incriminate someone. I hope that I have addressed the concerns of the noble Lord, Lord Astor.

Earl Russell

My Lords, before the Minister sits down could she give us a little more clarification of the word "consider" in paragraph 4.5 of the code of practice? Is it fanciful of me or does that wording imply that an official could consider and turn down a reasonable excuse?

Baroness Hollis of Heigham

My Lords, in that case he would not be acting reasonably and the whole of the legislation is framed within the context of reasonableness. If it would be helpful, I am happy to strengthen the wording in the draft code to make it clear that authorised officers must not press for information where the information provider has a reasonable excuse and to cite more examples of what we would consider reasonable in the context of electronic access to data. We have a further meeting on 15th March with representatives of the information providers so we could review the code of practice that I quoted in the light of that meeting. I want to be helpful so that everyone understands exactly what we count as good cause, so to speak, and what would be reasonably regarded as wilful refusal. I hope that noble Lords will be content with those assurances.

Lord Astor of Hever

My Lords, in the light of the Minister's helpful and positive remarks I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 22: After Clause 2, insert the following new clause—

CODE OF PRACTICE ABOUT USE OF INFORMATION POWERS

(".—(1) The Secretary of State shall issue a code of practice relating to the exercise of—

1. (a) the powers that are exercisable by an authorised officer under section 109B of the Administration Act in relation to the persons mentioned in subsection (2A) of that section; and
2. (b) the powers conferred on an authorised officer by sections 109BA and 110AA of that Act.

(2) The Secretary of State may from time to time—

1. (a) revise the whole or any part of the code for the time being in force under this section; and
2. (b) issue a revised code.

(3) Before issuing or revising the code of practice under this section, the Secretary of State shall—

1. (a) prepare and publish a draft of the code, or of the revised code; and
2. (b) consider any representations made to him about the draft;

and the Secretary of State may incorporate in the code he issues any modifications made by him to his proposals after their publication.

(4) The Secretary of State shall lay before each House of Parliament the code of practice, and every revised code, issued by him under this section.

(5) The code of practice issued under this section and any revisions of the code shall come into force at the time at which the code or, as the case may be, the revised code is issued by the Secretary of State.

(6) An authorised officer exercising any power in relation to which provision must be made by the code of practice under this section shall have regard, in doing so, to the provisions (so far as they are applicable) of the code for the time being in force under this section.

(7) A failure on the part of any person to comply with any provision of the code of practice for the time being in force under this section shall not of itself render him liable to any civil or criminal proceedings.

(8) The code of practice for the time being in force under this section shall be admissible in evidence in any civil or criminal proceedings.

(9) In this section "authorised officer" has the same meaning as in Part VI of the Administration Act.").

The noble Baroness said: My Lords, I should like to speak to Amendments Nos. 22 and 54 which are pivotal. They concern the matter of the code of practice governing the provisions of Clauses 1 and 2 of the Bill.

We had a lengthy debate in Committee regarding whether or not the Bill should make provision for a code of practice. I explained that it had always been the Government's intention to have a code of practice regarding the use of provisions under Clauses 1 and 2 of the Bill—the powers to obtain information. I also explained that we did not intend to commence using those provisions until the code had been published. I recognised, however, that the House, and organisations in the private sector, wanted greater certainty on this point, and I agreed to consider whether we could bring forward a government amendment to make provision on the face of the Bill for a code of practice, which is what we have done. The detail of the proposed provision is in Amendment No. 22.

This amendment provides that the Secretary of State must consult on a draft of the code before it is published. We have already met with representatives from business and local authorities to discuss what should be in it and we shall continue to hold dialogue with them further to develop the draft code which has already been provided to your Lordships. Additionally, this provision provides for formal consultation both on a first draft after the Bill receives Roy al Assent and on subsequent revisions of the code following its publication.

This amendment provides that the Secretary of State shall issue a code of practice relating to the provisions at Clauses I and 2. The House can thus be certain that the powers in Clauses I and 2 will always be exercised within its framework.

The amendment provides that the Secretary of State may revise the code of practice from time to time. The private sector organisations have suggested to us that they would find it helpful if the code of practice were regularly reviewed. A suggestion of three years has been made. We think that that might be beneficial to all concerned. It would enable private sector organisations to provide feedback—the sort of research that we discussed earlier as regards any complaints about how things were working. It would give both the private sector organisations and authorised officers in both DSS and local authorities an opportunity to say whether or not they find the code helpful. Consequently, I give an assurance to the House that we would review the code of practice within three years of its publication and that the code would be revised, if necessary, in accordance with that review.

The amendment also provides that the final version of the code of practice be laid before both Houses of Parliament and, above all, that authorised officers must have regard to the code, where it is relevant, when they exercise the powers in Clauses 1 and 2. The code of practice shall be admissible in criminal and civil proceedings. So if an authorised officer fails to comply with the code of practice that could be taken into account by a court of law.

Amendment No. 54 amends the commencement provisions of the Bill. It provides that Clauses 1 and 2 may not be commenced until the code of practice has been published. Our discussions with the Information Commissioner, which is the Data Protection Registrar, and representatives from business indicate that this would be a welcome addition to the Bill's provisions.

Perhaps I may say a word or two about the code of practice. I emphasise that the work is in draft. Negotiations are ongoing. A document may go through many stages before it is published. At the moment it makes no reference to local authorities because we are currently in consultation. We had a helpful meeting last week, but we still have to do further work with them as to what shape the code will take. We plan to provide the next draft before the Bill reaches the Committee Stage in another place, subject to the rest of the consultations, particularly with the local authorities, proceeding satisfactorily.

I believe that in the code we have addressed the key issues of what the powers are, who will use them and how they will be used. There is an introductory chapter setting out its purposes and a specific chapter setting out the various safeguards pertaining to the use of the powers. We have tried to include examples as we have proceeded as to how the powers might be exercised.

It is a code which is primarily aimed at authorised officers. It is designed to instruct them on how they must use the powers. But we also want it to be intelligible and legible to business and to any private individual who wishes to find out more. We have endeavoured to set out what is and what is not reasonable in the exercise of the information powers. For example, we have stated that authorised officers should always consider the option of making a direct approach to the customer if they need information about them. Unless there are grounds for thinking that an investigation would be compromised by approaching the customers direct, this would be our immediate route for obtaining information. We would only make an approach to the information provider if there is no other feasible option available. At paragraph 2.9 the code makes clear that information subject to legal privilege may not be obtained under these powers. I have given a commitment that I shall return to this matter at Third Reading with an amendment to that effect because it is such an important and sensitive issue.

I hope that your Lordships will find the draft code helpful. I will, of course, take on board your Lordships' comments including those made in correspondence, if that might be helpful subsequently because, as I say, such a draft code goes through many stages of revision before it is laid before Parliament. These amendments make provision on the face of the Bill for a code of practice governing the use of provisions in Clauses 1 and 2. They also ensure that the measures in those two clauses cannot begin until the code of practice has been published and laid before both Houses of Parliament and that, before publishing the code, the Secretary of State must consult on a draft of it. We shall have further consultations in order to review the draft within three years. I hope that your Lordships will welcome these amendments. I beg to move.

5.45 p.m.

Lord Higgins

My Lords, I believe that the whole House will be very grateful for the extremely constructive and flexible attitude which the Minister has adopted throughout our proceedings on this Bill. We certainly welcome the amendment which puts the code of practice on a statutory basis. Already in the course of our debates we have picked up various points in the draft code of practice. At this stage of the proceedings I do not intend to repeat them.

However, there are one or two points which are worth questioning. The first arises from an exchange which took place a moment or two ago between the noble Baroness and my noble friend Lord Astor of Hever. I had not previously noticed that the Bill, as printed at Report stage, does not include, as it did when published at Committee stage, an assurance by the Minister that the Bill conforms to the European Convention. It is possible, although unlikely, that the form of the Bill may change during the course of its proceedings through this House and the other place in such a way that it is inconsistent with the convention.

Baroness Hollis of Heigham

My Lords, was it on the original Bill as published for the Committee stage?

Lord Higgins

My Lords, the original Bill has an undertaking from the noble Baroness giving an assurance that it is in conformity with the convention. Suddenly, it has disappeared.

Baroness Hollis of Heigham

My Lords, I am sure that it has already been given. It may well be a printing error which has been well spotted for its omission. The crucial issue is the undertaking that was given in writing when the Bill was originally published and that stands.

Lord Higgins

My Lords, I understand that very well. I have never noticed it before. It is possible that an amendment has been made which is not in conformity with the convention. However, the noble Baroness says that that is not so, but it is possible. What is relevant to the present debate is that it seems possible now that we are putting the matter on a statutory basis, that there is something in the code of practice which does not conform. I do not believe that that is stretching the matter too much. The assurance that has been given needs to be considered by the House. Perhaps in a more general sense—and it is not appropriate to discuss it at this point—the House should consider whether the way in which we handle this particular issue is the best way of doing so.

Perhaps I may return to one other point as regards the amendment before making one or two general points on the draft code of practice. I am not quite clear how subsections (7) and (8)in the new clause interact. Subsection (7) states, A failure on the part of any person to comply with any provision of the code of practice for the time being in force under this section shall not of itself render him liable to any civil or criminal proceedings". Subsection (8) states, The code of practice for the time being in force under this section shall be admissible in evidence in any civil or criminal proceedings". If those subsections interact in any way, and if we are going to make a statutory code, then if someone has failed to do something which is in the code there is an argument for saying that that should not render them liable to civil or criminal proceedings. The fact that such matters can be used in evidence in respect of another offence not related to the code does not appear to be right. Obviously, this is a highly technical matter. It would be helpful if we could have an indication as to how those two subsections interact.

I have covered most of the points that I need to make. As regards the pure drafting of the code, it appears that no-one has read it straight through. For example, I refer to paragraph 2.4 which begins, However, any authorised officer shall not ask for information and so forth. Then it states, For example, we will not ask a utility company to obtain a current meter reading". There appears to be a change from first to third person. There are similar examples in paragraphs 2.11 and 2.12.

As regards the local government code of practice, in correspondence the noble Baroness has indicated that it will be available in March. Will we have it before Third Reading?

Baroness Hollis of Heigham

My Lords, I thought I had made that point clear in my original remarks, but perhaps I was speaking too rapidly. I said that we were still in discussion with local authorities. That code will be incorporated into the other and we hope that it will be in place, subject to discussion and agreement, in time for the Committee stage in another place. We have gone further and faster in our discussions with business than with local authorities, although they are in parallel track.

Lord Higgins

My Lords, I am grateful for that information. Because of the imminence of a general election it is very important that the code is available before then.

I have one extremely important point which arises at paragraph 4.13. It states that, Authorised officers will not make enquiries in person by means of a visit. The power to inspect promises only relates to enquiries made to an organisation about their employees". I believe the word should be "premises".

Lord Mackay of Clashfern

My Lords, I welcome the amendment, which provides for a statutory code. I think that I am right in saying that the provisions to which my noble friend Lord Higgins has drawn attention are very similar to, if not exactly the same as, the provisions about the Highway Code, which have existed for some considerable time. The important thing is that the definition of offences has to be in the Bill. I wondered whether that was absolutely plain when the Minister was responding to the previous amendment. It must be right that the definition of offences has to be in the Bill. The code cannot create offences.

On the other hand, a failure to comply with the provisions of the code might be evidence that an offence defined under the statute has been committed. It is important that the statute defines the offences. One cannot use the code to modify or reduce the scope of the statutory provision for offences. I should be glad to have that confirmed.

Earl Russell

My Lords, I listened to that intervention with great interest. I shall re-read the code of practice with that question in mind between now and Third Reading, as I am sure the Minister and many others will also do.

On the whole, it seemed to me that the code was concerned with creating defences rather than offences. In the very short time available to me, I have not seen anything in the wording of the code to which I wish to object. I warmly congratulate the Minister on the work that she has done on the subject. In our preliminary meeting, she made encouraging noises about the code of practice and its time of appearance. She has performed a great deal more than she has promised. That is entirely the right way round. I take her point that consultation is still in progress. We saw it in progress a few minutes ago and I very much welcomed its operation. I am in no position to complain about that.

It is highly unlikely that we have done anything contrary to the European Convention on Human Rights that was observed by neither the noble Lord, Lord Grabiner, nor my noble friend Lord Goodhart. I am inclined to fall back on Locke's remark when he saw the proofs of his Second Treatise of Civil Government—that printers have ways all their own, not united by the general fairness that cements mankind.

Lord Grabiner

My Lords, on the point about the certificate of endorsement, for the sake of the record the first version of the Bill carried the endorsement by my noble friend the Minister to the effect that the provisions of the Bill were compatible with the convention rights. The current version, produced after Committee stage, does not carry that endorsement. Section 19(1) of the Human Rights Act 1998, which contains the obligation to produce the statement, provides that before Second Reading the Minister must, make a statement to the effect that in his view the provisions of the Bill are compatible with the Convention rights". That obligation has been complied with. The Act also says: The statement must be in writing and be published in such manner as the Minister making it considers appropriate". The statutory obligation has been satisfied.

Baroness Hollis of Heigham

Yes, my Lords. I have had similar advice from the Table, which is that the endorsement appears after the First Reading and only once in each House and does not have to be repeated at each stage of the Bill. I was wrongfooted and thought that maybe it had been left off accidentally. The basic point is that the original certification casts its halo over all subsequent proceedings and does not need to be repeated. I am intrigued that we have spent longer on that today than on many of the other issues in the Bill.

The second point that has been raised was on the code. I welcome the welcome that has been given around the House to the code. The noble Lord, Lord Higgins, referred to an apparent incompatibility between subsections (7) and (8) on what was liable. Subsection (7) says that a failure to comply with the provision will not render a person liable to civil or criminal proceedings. That is a standard in statute providing for codes of practice. It ensures that the authorised officer will not incur personal liability merely for breaching the code. It will not prevent him being prosecuted for an offence committed in connection with his duties. Subsection (8) provides that the code shall be admissible as evidence in any civil or criminal proceedings. In other words, a court may have regard to the code when considering whether an authorised officer has acted properly in his exercise of the information powers set out in the Bill. If the noble Lord wants further elaboration, I shall be happy to write to him.

On the point about "premises" and "promises", all that I can say is, "Promises, promises, thank you very much".

Finally, in response to the thoughtful speech of the noble and learned Lord, Lord Mackay of Clashfern—we would expect nothing less—I shall re-read his comments and see whether we need to take any further action, but we agree with what he said.

In the light of that, I hope that your Lordships will again feel able to withdraw the amendment.

Noble Lords

It is your amendment.

Baroness Hollis of Heigham

Ouch! I hope that your Lordships will be able to withdraw any objections and will accept my amendments.

On Question, amendment agreed to.

Clause 3 [Arrangements for payments in respect of information]:

The Deputy Speaker (Lord Murton of Lindisfarne)

My Lords, before I call Amendment No. 23, I remind noble Lords that if it is agreed to, I shall be unable to call Amendment No. 24, owing to pre-emption.

Baroness Noakes moved Amendment No. 23: Page 7, line 18, leave out from ("authorising") to the end of line 38 and insert ("payments to be made to any person for information obtained by virtue of the powers contained in subsection (2A) of section 109B.").

The noble Baroness said: My Lords, I shall speak also to Amendment No. 25. Amendment No. 23 has two objectives. First, it would widen the categories of persons who may be recompensed by the Secretary of State in return for providing information under the new powers. Secondly, it would remove the Secretary of State's discretion on who is to be paid and the amount of such payment.

Clause 3 restricts the potential recipients of payment to credit reference agencies, telecommunications providers and, to a limited extent, water, gas and electricity suppliers. It therefore excludes a number of other organisations from the possibility of payment, notably banks and insurance companies. It also restricts the amount that can be paid to utility companies. Those organisations will bear the majority of the inquiries as a consequence of the Bill—around 55 per cent on the department's estimate.

This is fundamentally a question of equity. The Bill would create a large number of potential information providers to help in the fight against social security fraud. That has not been challenged. The issue is the fairness of the burden of compliance. The Government, who will be the beneficiary of the inquiries, hope to save at least £200 million through lower benefit payments.

In Committee, the Minister explained that there was a general principle that the Government do not pay for information that they are authorised by law to collect. Past practice does not necessarily make that a good principle when we consider the burdens on business. We also know that the general principle is not absolute. It was ignored in the Regulation of Investigatory Powers Act 2000 and is ignored again to an extent in this Bill in relation to credit reference agencies and telecoms providers.

The Minister also argued in Committee that businesses could afford to pay. She read out some profit figures from some major banks. I am troubled by that. If businesses have legitimately made profits in the UK or elsewhere and paid tax on them, that does not create a reservoir into which the Government can dip as they choose.

Those net profits belong to the shareholders. We should not assume that strong profits are made by all the companies that the Government intend to bring within these new information powers. I cite Equitable Life as an example of an insurance company where extra costs would impact on policy holders. The banking sector is also diverse in scale and profitability. We can not assume ability to pay.

I accept that if Government estimates of up to £7.6 million in additional costs are correct, that would not be a large burden on business; but those estimates may be incorrect. Against the background of increasing regulatory burdens on businesses, we should draw a line somewhere.

I hope noble Lords will agree that with this small amendment we can send a positive message about regulatory burdens to the business community.

Amendment No.23 removes the discretion to pay whatever the Secretary of State thinks fit. Amendment No.25 defines that in terms of the costs that are reasonably incurred. Costs will need to be defined, and I hope that they will include the opportunity cost of capital, so that the ability to pay a profit-inclusive price to the credit references agencies, which is a matter that concerned the Minister at Committee stage, would not be affected.

I do not believe that this provision would plunge the Department of Social Security into an administrative quagmire, nor do I believe that businesses would haggle and thereby delay the use of the powers, as suggested by the Minister in Committee. It is unlikely to be in their interests to do so.

I note that the department is prepared to negotiate constructively with credit reference agencies and telecommunications providers, and I hope that the same spirit would prevail in relation to other information providers. I am confident that their representative bodies could present practical solutions that would not create an excessive burden as a result of the amendment.

The amendment requires fair payment to be made to those drawn within the net of information providers.

I hope that noble Lords will therefore support the amendment.

6 p.m.

Earl Russell

My Lords, the noble Baroness, Lady Noakes, has raised an issue that goes way beyond the confines of the Bill. It is a big and an important issue. Therefore, it is not entirely proper to seek resolution tonight because we can only resolve a small part of it. Nevertheless, she has placed noble Lords in her debt by raising the issue, and I hope that the thought she has provoked will spread beyond those here present.

There is an ongoing general argument about the division of cost between government and business. It not only arises in the context of administration undertaken by business on behalf of the Government but it arises constantly in all the debates on social costs and regulation. I should like to see all those issues considered together in a process of negotiation in which we might be able to work out, on some intelligent general principles, who pays for what.

What I would not be so happy with is a process of slow, administrative creep, in which, bit by bit, administration is passed over to private companies and private bodies and carried out on behalf of the department. It began in the Student Loans Bill 1990, when universities were required to take on the day-to-day administration of student loans. That involved taking on a considerable number of staff, running an office, and paying costs that in many cases could have been used to employ one member of teaching staff, and probably two. During the passage of that Bill the Government, purely voluntarily, chose to make a concession. It was not, of course, the full cost—it never is—but it was extremely welcome.

In Committee the Minister resisted the idea that the full cost should be met. She said that the Secretary of State should pay what appeared to him to be appropriate, a power that could be curbed or curtailed, where necessary, by judicial review. I am not aware that the Treasury is as easily controlled by judicial review as perhaps some other departments of state.

The principle that public funds are adequate for the purpose for which they are voted seems to be regarded in certain Whitehall quarters as a tautology. This is an issue that should be considered in a wider context than the Bill.

I read the Minister's arguments in Committee because I was unable to be present. She argued that the Government do not pay for information that people are required to supply by law, but do pay firms that make their living out of supplying information for money. That approach has a coherence and an intelligibility in the short term, as a stop-gap measure, and is not an inadequate resolution of the problem. However, in saying that, I do not suggest that we should happily leave the situation as it is.

I remember the protests of British Airways against the charges imposed on it under carriers' liability. It seemed to me that those points were very well taken. An enormous administrative burden was being placed on a body that was not particularly well trained for it, and not equipped with the necessary powers of interpretation and knowledge of immigration law. The idea that administration is part of the majesty of the state., and should be so taken, is not one lightly to be lost sight of.

I hope that, after the little local business outside Westminster is over some time in the next few months, whoever is then in office will be prepared to sit down with representatives of finance and business and enter into a genuine, serious process of consultation about how the general issue of who pays for what should be resolved. It is in that hope that I am prepared in the short term to see the Bill remain as it is.

Lord Astor of Hever

My Lords, I also support the amendment tabled by the noble Baroness, Lady Noakes. Businesses today already face a torrent of red tape, while at the same time trying to remain enterprising and thriving. On their shoulders lie the responsibility of creating the wealth of the nation, and they are competing with foreign companies.

In responding to the two amendments, can the Minister clarify the position of mutuals and other non profit-making organisations?

Baroness Hollis of Heigham

My Lords, Amendment No.23 strikes out the categories of organisation that receive payment for supplying information and substitute a duty on the Secretary of State to ensure that arrangements are in place, as he thinks appropriate, for requiring authorised payments to be made to any persons in the list in Clause 109B(2A) in respect of information obtained under the new powers.

Amendment No.25 inserts a new subsection requiring that payments made to information providers should be equivalent to their costs.

We debated the amendments in Committee. Our starting point, as stated so elegantly by the noble Earl, Lord Russell, is that where organisations are required by law to provide information to Government, we do not pay for it. I gave the Committee various examples. Committees have to provide extensive information to Inland Revenue and Companies House, for example, but they are not reimbursed.

The Information Commissioner—Data Protection Registrar—requires organisations to complete detailed registrations of their data holdings, purposes, suppliers and recipients, but she does not pay them for this information. Banks are required to report suspicions of money laundering to the National Criminal Intelligence Service. Utilities are required to provide information to the regulator to enable him to carry out his statutory duties. I do not wish to labour the point, but I simply repeat what I said in Committee: the DSS has had powers since the 1940s to require information from employers about their employees. Again, we do not pay for this, and it was not something that was proposed by the preceding government in the previous 20 years.

This is a good country in which to do business. Multi-national companies are setting up in business in the UK because of our stable economy and benevolent regulatory regime. At the other end of the scale, as I am sure the noble Baroness will know, small French companies are relocating to Kent because the regulatory burden is less and the incentives greater. I could go on to expand on what the Government have done to reduce burdens on business.

With regard to regulation, we have the lowest level of product market regulation of any OECD country. The labour market is less heavily regulated than in other EU countries. The non-wage ongoing labour costs are among the lowest in the OECD and the European Union. The Regulatory Reform Bill will allow us to enact important reforms that otherwise would not take place because of pressure on parliamentary time. Those reforms will be beneficial to business. Each department now has a Minister who is responsible for regulatory reform. We have cut taxes on business. We have cut corporation taxes by a full 3 per cent, and the main rate is now the lowest ever in the UK.

Lord Higgins

My Lords, what is product market regulation?

Baroness Hollis of Heigham

My Lords, it is an attempt to control standards and the like, as opposed to labour regulation.

The main rate of corporation tax is now the lowest ever in the UK and the lowest in any major industrialised country. We have cut the small companies' rate by 3 percentage points from 23p to 20p. We have introduced a 10p starter rate of corporation tax, and so on. The Chancellor announced in the pre-Budget report that the Government are considering other ways in which to provide a more competitive environment for business, including the abolition of outdated requirements for withholding tax on intra-UK interest and royalty payments, reform of the tax treatment of intellectual property, goodwill and other intangible assets, regimes for the tax treatment of gains on the disposal of substantial shareholdings, and extending the on-shore pooling rules for double taxation relief. I should be glad not to be pressed further on what that might entail. I could go on, but I hope that the noble Baroness will accept that in relation to all those dimensions the Government are committed to establishing a regime in which business can thrive and be competitive.

Essentially, the noble Baroness is arguing that businesses should not incur any costs in helping the Government to fight benefit fraud. That is where we part company. Fraud is theft from the taxpayer. Businesses which operate in the UK enjoy an environment and infrastructure paid for by the UK taxpayer. The police, who protect businesses from crime, are funded by the taxpayer. The courts, where businesses defend their rights, are funded by the taxpayer. And businesses are taxpayers, too.

However, the fact remains that businesses enjoy the many benefits of trading in this country and, in so doing, make strong and handsome profits. The share of the cost of enacting these proposals in the case of, for example, Barclays would amount to approximately 75 minutes' profit for the whole year.

I have heard the argument that the costs would be passed on to customers in the form of higher charges. I do not accept that for one moment. The debates which we had in Committee about profits speak for themselves. I understand why businesses would seek not to carry that responsibility, but I believe that it is right that businesses should meet the costs for the greater good of the country.

Amendment No. 25 seeks to require the Secretary of State to pay information providers an amount equivalent to the costs that they have reasonably incurred rather than an amount which he considers appropriate. The point that I wish to make in this respect is that this amendment undermines the whole logic of paying credit reference agencies. As a result of this amendment, they would be worse off than they would be under the Government's proposals.

Credit reference agencies accumulate information in order to sell it. I believe that that point was made by the noble Earl, Lord Russell, in discussing where we should draw the line. That is their business and it is how they make their profit. We believe that it is only right for the DSS to pay them the market rate—

Baroness Noakes

My Lords, perhaps the Minister did not hear what I said when I talked about profit. I said that there was no reason why it should not include the opportunity cost of capital, which in ordinary accountancy language translates into profit when the books are made up at the end of the year. I did not say that using costs would deprive businesses of the ability to pay a profit-inclusive price. Indeed, that would be a possibility.

Baroness Hollis of Heigham

My Lords, I believe that the noble Baroness is saying that it would be a possibility, not an inevitability. Am I right?

Baroness Noakes

My Lords, I am saying that if the Government wanted to, they could do that.

6.15 p.m.

Baroness Hollis of Heigham

My Lords, certainly I would not wish to put words into the noble Baroness's speech which she did not intend to use.

I return to my substantive point. We are trying to distinguish organisations to which we seek to pay the going rate because they make their profit from that activity. This amendment, as pressed by the noble Baroness, would limit us to paying only their costs. The credit reference agencies might be surprised at that suggestion, particularly given the noble Baroness's experience in the business world and their expectation that she might speak on their behalf.

Although the noble Baroness says otherwise, we believe that the amendment would plunge the department into complex negotiations and renegotiations with specified suppliers of information about what they consider to be the reasonable costs of providing each and every piece of information. As I said, while that was happening the system would continue to be defrauded. I believe that the better way forward, as provided in the Bill, is for the Secretary of State to be able to meet the costs which he considers appropriate. Businesses can rely on the fact that the unreasonable use of the power would be curbed by judicial review.

I do not doubt that the utilities, the credit reference agencies and the telecommunications companies could afford to meet the costs of compliance. However, that is not the issue. We are seeking to make a distinction in paying those categories of business for those types of information. We were not motivated by whether or not they could afford to help us. It was a question of whether or not it was their task or job to help us.

The job of credit reference agencies is to sell information. If that information were made available free of charge, they would have no business. In the case of the utilities and telecommunications companies, in Committee I explained in detail why we considered it right to pay them for some of the information that they would provide—that is, for the purposes of electronic matching. Again, we consider that approach to be fully in line with the department's approach to the Royal Mail, which we also pay for providing electronic data for matching.

We included telecommunications companies because, for the purposes of data matching, they have invested in special technology to help to meet government inquiries. The House will note that those powers do not allow us to require organisations to alter their procedures or invest in special technology, and so on. That is why we believe that they are in a special position.

We do not believe that we are making unreasonable demands. We are seeking to make our inquiries in such a way that the costs are minimised. I have given commitments that businesses will not be required to invest in special software. They will not be required to obtain information especially in order to meet inquiries. They will not be required to store information differently or to store it for longer. Businesses need not fear these powers.

I hope that I have reaffirmed the distinction that I tried to draw in Committee between paying for information which, on the one hand, it is the sole purpose of an organisation, such as a credit reference agency, to provide, or to pay for the additional costs that we may impose on telecommunications companies for the technology required for data matching. We consider it reasonable to meet those costs. However, we do not believe that we should pay banks and insurance companies and the like for information which we can reasonably expect them to provide in our combined effort to fight fraud, particularly financial fraud, of which they are almost as much the victim as is the DSS.

Finally, the noble Lord asked me a question about mutual companies. Mutuals and non-profit organisations are also liable to respond to our requests for help without payment. If they have information, we shall seek to pursue it.

In the light of those assurances, apart from the broader debate about regulatory burdens on industry, which may indeed be the subject of a proper Wednesday afternoon debate on some occasion, as the noble Earl, Lord Russell, suggested, I hope that the noble Baroness will feel able to withdraw her amendment.

Earl Russell

My Lords, before the Minister sits down, does she accept and share with her right honourable friend the view that this is not simply a particular problem but one part of a rather more general problem?

Baroness Hollis of Heigham

My Lords, I do not wish to trespass on debates that have already taken place on the Regulatory Reform Bill, in which these issues were addressed on a wider front. However, I certainly agree that the interaction of government with business takes place across a wide front of government activity. Therefore, it is important that there is an overview and that these interventions and interactions are coherent and reasonable. I believe that I am right in saying that my noble and learned friend Lord Falconer has responsibility in the Cabinet Office for that function. That is why in each department a Minister is appointed to ensure that the burdens are reasonable. They are overviewed by the Cabinet Office. Therefore, I hope that the noble Earl will accept that the Government are acting to ensure that an oversight of this information is held at a most senior level.

Baroness Noakes

My Lords, I thank the Minister for her response. It disappoints me but perhaps does not surprise me. Perhaps I may state for the record that I was not trying to propose an amendment which would have deprived the department of the ability to pay the credit reference agencies a price which included their normal profit. Indeed, if the words that I proposed were deemed to be seeking that, I should have considered amending them. That was not what I sought. I was seeking to make a general point about the increasing regulatory burdens and the need to draw the line as to when those burdens should be more fairly shared out. I accept that that is a bigger issue.

The Minister recited many details to establish the competitiveness of the UK economy, including lower regulatory burdens compared with those In other countries. I do not deny that, but that advantage has been eroded in recent years. All of the surveys carried out by the Institute of Chartered Accountants, the Institute of Directors, the Confederation of British Industry and the British Chambers of Commerce constantly refer to the rising tide of regulation and the associated increasing costs. That was the motive behind my amendment. However, I accept that it is part of a larger issue and I shall not test the opinion of the House. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 24: Page 7, line 38, at end insert— ("( ) any local authority").

The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendment No. 26.

Amendment No. 24 seeks to establish whether local authorities should be paid for operating the Bill's proposals and, if so, how much they should be paid. In Committee, the Minister discussed that and was courteous enough to write to me subsequently setting out details of the Government's weekly benefits savings anti-fraud incentive scheme and of the new anti-fraud incentive scheme. The first of those schemes involves a sliding scale, which changes depending on how much fraud the local authority prevented. However, it also imposes penalties on local authorities if they fail to meet individual thresholds by 75 per cent.

Our debate in Committee revealed considerable differences between the position of central government and that of the Local Government Association as regards the extent of the payment. The LGA has also written to me since the Bill's Committee stage. It continues to maintain that the support that central government give to local authorities in terms of housing benefit administration is inadequate and meets less than two-thirds of actual costs. It also points out that "the current incentive regimes" are not "sufficient" to meet the costs of tackling fraud and are ineffective. It states: Resources are insufficient and notice of funding is frequently given far too late to meet the local authority's budget cycle". That is obviously an important consideration because it affects whether the scheme is likely to be operated with the degree of determination that noble Lords would wish. The LGA also states that the shortfall that results from the way in which central government allocate funds to local authorities means that any funding has to be made up through council tax Those are the reasons why it feels that the Bill's proposals are not compatible with a reasonable and equitable approach to the problem that the Bill seeks to address. The LGA is also concerned about the extent to which the so-called "two strikes and you're out" provisions might within three years have important implications for local authorities if specific benefits were withdrawn and the burden fell on local authorities.

Baroness Hollis of Heigham

My Lords, I take the noble Lord's first point about subsidy arrangements and I shall return to it. His second point was that local authorities feel that a burden will fall on them if benefits are withdrawn. Which bodies does he have in mind? People for whom a local authority has responsibility under housing legislation because they are vulnerable will have, almost by definition, only a partial arrangement involving either 20 per cent or 40 per cent of their personal allowance. They cannot therefore be left without benefit. The same definition of vulnerability applies to local authorities that have the relevant responsibilities and to those who are protected by the hardship regime under the DSS. I hope that the noble Lord can help me—I absolutely do not understand this point.

Lord Higgins

My Lords, that may make two of us!

My understanding is that the view of local authorities is that if a benefit is withdrawn under the "two strikes and you're out" principle, as set out in the provisions, the costs would have to be covered in another way. Unfortunately, the noble Earl, Lord Russell, who is expert in these matters, is no longer in the Chamber.

Baroness Hollis of Heigham

My Lords, the noble Lord's argument is not possible. Local authorities have responsibility under housing legislation and under social services legislation. Under housing legislation they have an obligation to house someone if he or she becomes homeless only if he or she is vulnerable. Anyone who is vulnerable is also protected by the hardship schemes that operate under the "two strikes and you're out" principle. In terms of social services, local authorities have a responsibility to intervene only when people are vulnerable through ill-health or disability—they may be an ex-prisoner—or if there are dependants and children. Those people are protected by the hardship clauses. There is not an overriding responsibility on local authorities; a path by which local authorities can pay money to single individuals who have no benefit does not exist. If people are vulnerable, they are protected under the DSS and the vulnerable are the responsibility of local authorities. I do not understand this point.

Lord Higgins

My Lords, I am stuck between two groups, both of which are obviously expert. As I understand it, local authorities argue that in some cases the local authority may have a homeless duty. If the applicant is deemed to be vulnerable, the local authority will not be able to recover the costs of rehousing the applicant. If the applicant has dependants who are likely to suffer hardship, social services authorities may also have to provide assistance. The Government have given no indication of the fact that they will reimburse local authorities for those additional costs.

Baroness Hollis of Heigham

My Lords, housing benefit is not affected by the Bill; it is not a sanctionable benefit. People cannot therefore become homeless in this regard even if they were cheating with regard to their housing benefit. The deductions would come from JSA or income support, not housing benefit. Therefore, people cannot become homeless because housing benefit would not have been withdrawn. There may be a profound misunderstanding in this context.

Lord Higgins

My Lords, local authorities will doubtless read our exchanges and the Minister's arguments and we shall see whether they come back to us. A similar situation arose in Committee, when the view of local authorities seemed to be at variance with that expressed by the Minister. They have come back to us about the extent to which there is a deficit with regard to meeting the relevant costs. Members of the House and local authorities should consider the Minister's comments. In the light of those further considerations we should carry out further consultations. I shall go into the matter in greater depth and consider how we might resolve what appears to be a conflict of understanding in this regard between the Minister and local authorities. Having said that, if she would spell out her response to my other points, we could take the matter further at a later stage. I beg to move.

Baroness Hollis of Heigham

My Lords, I am baffled by the noble Lord's argument. The concept of vulnerability, for which, as I said, local authorities take responsibility, affects precisely those groups of people for whom a hardship scheme is in place under the DSS. The relevant situation should not therefore arise. Housing benefit cannot be taken away if someone is on income support or JSA, which is a hardship benefit. It can be touched only if a person is not on income support or JSA, in which case he or she would have other sources of income. I do not understand this part of the argument.

I return to the first part of the noble Lord's argument. Essentially, the basis of his case was that the level of subsidy provided to local authorities was insufficient. We may have to disagree in this regard. I understand that local authorities may seek additional funding. In their place, I did exactly the same. However, they could not say that we have behaved unreasonably. We have increased the sums available to local authorities for the next three years.

The increase for 2000 to 2001 is 2.5 per cent in line with inflation, but the housing benefit case-load has decreased by approximately 6 per cent. That recognises that local authorities have transferred some of the housing stock to housing associations and that housing benefit cases now may be more complex. Local authorities have received increased resources in line with inflation to meet a reduced case- load. This can be probed further with the local authorities. I agree that it will not be even across the country. I have the statistics for each local authority's subsidy arrangements should the noble Lord wish to pursue it, including that for Wandsworth. From my knowledge of local government, these seem reasonable.

It was mentioned that local authorities may be under pressure because we are changing the subsidy arrangements which provide an incentive for them to detect fraud. We are changing the arrangement from the weekly verification scheme to the new verification framework. The changes will increase the emphasis on awareness, prevention and prosecution as well as detection and increase the incentive to prevent and detect fraud. The change is from April 2001. Precisely because local authorities said that they were under pressure to make these changes in the time-scale envisaged, we have agreed that they can continue to use their current scheme until April 2002 if they wish. We have a one-year transitional period that they can choose. Many local authorities are seeking to start the new scheme straightaway because they agree with us that in the long term it will be more advantageous for them to do so. Those local authorities not fully geared up have another year.

I believe that we have met the concerns of the local authorities. I realise that these concerns were raised by the noble Lord in Committee. I thought that I had replied by letter and sought to address them. Understandably, local authorities have come to him and said that they are not satisfied.

On the point about local authorities' responsibilities for those who might become homeless, I do not understand that argument from my experience. They are welcome to come back to us on the subsidy arrangement. It may be that we have to agree to disagree. I can understand local authorities wishing to augment their revenues. From the information I have it seems that they have been treated reasonably and fairly, particularly in terms of the overlap of one year in moving on to the new verification framework. I hope that in the light of that the noble Lord, Lord Higgins, will feel able to withdraw his amendment.

Lord Higgins

My Lords, I shall look at Hansard with interest because normally I propose the amendment at the beginning. I have found from experience that if I do not propose then, I forget to do so at the end. We will see what transpired. The amendment is still before us.

As far as concerns a difference of opinion on whether the finance provided by central government is adequate for local authorities, that may be a matter that is not wholly reconcilable. As regards the point about a possible misunderstanding, certainly we will have to go into matters further at Third Reading. That may be illuminating for the Minister or the local authorities but not both. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 25 and 26 not moved.]

Clause 5 [Exchange of information by authorities administering benefit]:

Lord Higgins moved Amendment No. 27: Page 10, line II. at end insert— ("(2) Any directions given by the Secretary of State under this section shall include such directions which place a duty on authorities to which this section applies to adopt a code of practice as the Secretary of State shall from time to time provide.").

The noble Lord said: My Lords, effectively this amendment argues that local authorities should have a standardised code of practice between them. In the light of what the noble Baroness, Lady Hollis, has said about this, it may be that we will have to wait until the matter arrives in another place at least as far as concerns the local authority aspects of the code of practice.

My understanding is that some local authorities farm out responsibility for some of these matters to organisations—one called Capita has been brought to my attention. It may be that they appear under the earlier debate on agents and servants, but I ask whether they will be required to provide information or whether information will only be required in the context of the local authorities themselves. I beg to move.

Baroness Hollis of Heigham

My Lords, I am pleased that the noble Lord, Lord Higgins, agrees given the earlier discussion on the code of practice and the fact that the terms or conditions under which local authorities handle their concerns on housing benefit will be shaped by the code. There will be ample opportunity to discuss that with those bodies.

Clause 5 deals with the manner and form in which information is obtained from authorities administering housing benefit. We use this information to make decisions about the administration and design of the housing benefit scheme. I was a little baffled as to how we could put this into the Bill or into the code or practice as laid out.

Did the noble Lord have any further concerns? It is the case that Capita is an agent. The noble Lord is right to assume that Capita would be required to supply information as shaped by our previous discussion. Those were the points that he raised, and I hope that I have addressed them.

Lord Higgins

My Lords, on that basis I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 28 not moved.]

Lord Higgins moved Amendment No. 28A: After Clause 5, insert the following new clause—

HOUSING BENEFIT DOCUMENTATION

(". The Secretary of State, or the relevant Minister, shall revise and review the current documentation for an application to be made for housing benefit to ensure that the information provided will facilitate any inquiry to detect fraud, and following consultation with such relevant bodies as he thinks fit, issue a draft document which shall be used by each relevant administering authority.").

The noble Lord said: My Lords, I have pursued this matter with the noble Baroness, Lady Hollis, for some years. It relates to the documentation that local authorities use for housing benefit claims and operations in the housing benefit scheme. It seems to be extraordinarily diverse. Some documentation is a great deal better and more helpful in preventing fraud than other kinds. There does not seem to be any argument for different local authorities using significantly different forms. This amendment suggests that the Secretary of State, or relevant Minister, shall revise and review the current documentation and that a standard system should be employed which is specifically designed by the department to ensure that the commitments and statements made, perhaps with reference to national insurance numbers, may be as appropriate as possible for this purpose. I do not understand why there is diversity. No doubt, the noble Baroness, Lady Hollis, can tell us why or alternatively accept the amendment. I beg to move.

Baroness Hollis of Heigham

My Lords, the short answer as to why there is diversity is history. The amendment seeks to introduce a standard claim form for housing benefit to be used by all authorities. Currently, local authorities have some freedom to produce forms to suit their own circumstances within the framework of legal requirements. They are also expected to follow good practice guidelines issued by the department. This freedom has some advantages.

We accept that the forms used could be improved. We have already done something about it. It was clear that my right honourable friend, the Secretary of State for Social Security, was aware of the noble Lord's amendment even though I was not until this morning. The Secretary of State was very concerned about it and it has dominated his thoughts over the recent Recess. The Secretary of State is issuing a new model claim form today. It has been developed by the Benefits Fraud Inspectorate as part of its work to help local authorities improve administration. It gives local authorities a standard from which to work and a bench-mark of good practice both in terms of design and content. We believe that this model will help local authorities to produce better claim forms that will be more efficient for them and easier for tenants to complete.

So we share the spirit of the remarks of the noble Lord, Lord Higgins. But we do not go as far as his amendment, which seeks to impose this form on local authorities. Let me explain why.

First, the cost of doing so would he considerable. In order to comply, every local authority would need to reprogram their computer systems—they all have different computer systems—so that the information could be input in the order and in the format set out on the model. In many cases that would be an unnecessary diversion of resources and wasteful.

Secondly, there is of course the interrelationship with council tax benefit. In some authorities housing and council tax benefits are administered separately and in others they are administered together. That determines whether or not the claim form is designed to capture information for both benefits at the same time. We can therefore respect the need for some local flexibility to cater for that.

Thirdly, many local authorities add additional sections to the housing benefit claim forms to gather extra information for other benefits for poorer residents—for example, for school uniforms or council nursery places. A national claim form would mean that local authorities would have to issue supplementary forms either with the housing benefit form or after receiving the housing benefit form back. That again could lead to delays or waste of costs.

For those reasons we do not believe that a statutory standard claim form is the way forward at the moment. As I said, the Benefit Fraud Inspectorate developed a model claim form which is in the process of being issued to local authorities along with general guidance on good design of claim forms. That has been developed in full consultation with those authorities and we fully expect it to be used as the minimum standard. Of course the Benefit Fraud Inspectorate will continue to monitor the standard of claim forms in its visits.

Finally, we are making further and much needed changes to the claims process. As part of our modernisation programme we are developing a single claims process for income support, JSA allowance and incapacity benefit, which will also capture and transfer to local authorities information for assessing housing benefit claims. For people of working age it is intended that initial information for claims be gathered over the phone; any evidence subsequently provided will be verified for the purposes of all related claims, and that should prevent some of the duplication which is at the moment taking place and which is wasteful.

I hope as a result that those people who need to claim a variety of benefits will receive an integrated service because they will be using integrated claims forms in the procedures. For those people claiming just housing benefit, our model claim form will enable local authorities to improve and enhance the service they give. It may be, as local authorities re-tool their computer systems, so they will gradually take over the model claim form and it will become a common basis of usage across the wide range of local authorities.

I hope in the light of that response we indicate that we are addressing some of the concerns raised by the noble Lord—issuing a model claim form and encouraging local authorities, where appropriate, to take it up. However, we do not believe it is appropriate at this stage to deny them the flexibility that they have to use the forms for other purposes as well, such as council tax benefit and take-up campaigns of various sorts to identify various forms of need such as council nursery places.

We are therefore treading a line with the consent and support of local authorities, which I hope the noble Lord, Lord Higgins, will feel he is able to respect and which will enable him to withdraw his amendment.

Lord Higgins

My Lords, I am grateful for that illuminating reply. I do not propose to go into the business of managing local authorities' housing benefit—I suspect I am not well qualified to do that.

Nonetheless, it is important that we go as far as possible towards standardisation. As the noble Baroness said, it may be that a specific local authority wants to acquire other information and retain a degree of flexibility. I felt that that could have been met by having a standardised first part of the form and a less standardised part for a degree of flexibility. At any rate, the fact that a model form is being produced is a step forward. I find it extraordinary that the situation was allowed to develop in the first place.

Computerisation raises some issues with regard to the extent to which it will be possible to cross-reference to detect whether some of the other data we have been discussing on the earlier clauses can be checked against the local authority organisation if, as I understand the Minister correctly, there are a vast variety of different computer systems. However, I understand the Minister's reply reflects a realistic appraisal of the problems involved in this area and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.45 p.m.

Clause 6 [Loss of benefit for commission of benefit offences]:

Earl Russell moved Amendment No. 29: Page 10, line 42, at end insert ("provided always that no such reduction shall exceed 10 per cent.").

The noble Earl said: My Lords, I hope the Minister will confirm that I have today, on the whole, tried to be helpful where I can. One cannot do it everywhere. Unfortunately what is for us the major issue of the Bill has arisen rather too late in the day to be given the treatment to which at other times it might have been appropriate. That is the question of Clause 6 and the benefit sanctions.

It is clear to everybody, no matter from which point of view they approach the issue, that where there is a prohibition there must be a penalty; where there must be a penalty, that penalty must be made as effective as can appropriately be possible. But the word "appropriately" cannot altogether be left out. One wants the penalty to be sufficient to deter. But there are penalties—one reads of such things in other places—which are not merely of a level to deter, but of a far greater level.

It is an assumption that legislators tend to make rather too easily that there is a level of penalty which is sufficient to deter which nevertheless stops short of real savagery. It is not in all cases axiomatic that that is necessarily so. One tries to make it the case where possible. But one should not take it for granted, a priori, that it will be.

The level of sanctions here, we are told, is not to be above 40 per cent and is to exclude housing benefit. But careful questioning by the Delegated Powers and Deregulation Committee brought out that in a limited number of cases, where there are overlapping sanctions, the level of sanction could reach as high as 80 per cent. That is a quite draconian level of significance.

The noble Lord, Lord Grabiner, commented on this matter in his report and in Committee—I have read everything that was said there; I apologise for being unable to be present. I found I was answered fairly thoroughly long before I was able to make an appearance and was therefore able to do a degree of preparation I might not otherwise have been able to do. The noble Lord, Lord Grabiner, said that these sanctions are well established in social security law. As I remember, he quoted the Jobseekers Act. He is correct. He may not know that all those he mentioned I opposed when they were introduced, and most of them the Minister equally opposed when they were introduced. The Minister remembers the Jobseekers Act well enough.

The fact that it has been done before, does not mean in my case at least that there is any continuing consent; in fact there is a continuing dissent. A large number of issues are involved which have never been argued out; have never been resolved; and no evidence has been brought to bear on them. The Minister, speaking in Committee, clearly found my view of the effect of sanctions altogether incredible. Indeed, to borrow her phrase, she said that, on the effect of sanctions on those who suffer them, we are living in different worlds.

The virtue I will claim here is that I am prepared to have a commission to research and ascertain which of us is living in the real world; or indeed if neither of us is—which is always a possibility—and in what proportions our worlds are mixed when we come to reality. That seems to me to be a perfectly proper academic curiosity. I have not yet seen in anything done, either by this Government or the last, an equal curiosity to arrive at the truth.

The Minister's difficulty here—indeed, the difficulty of the whole of the Department of Social Security—is that when we consider the existing levels of benefit, particularly of income support, they are suffering from delusions of adequacy. I have already quoted the assumption of most public bodies that any public money voted for a specific purpose is tautologically adequate to the purpose for which it is voted. That is not necessarily so. The levels of social security benefit were calculated by Beveridge in 1948 off research dating from pre-war sources. The chance that that level, uprated automatically in line with inflation between now and 1948, will meet what it genuinely costs to subsist in safe poverty is astronomically small. Prices go up but they do not go up in a uniform scale, so the effect on different points in the social security scale can be very different.

Many people in rural England now spend 10 per cent of their benefit simply travelling to the necessary place to collect it. That is largely a result of bus deregulation. That is only one example; I do not believe that it is unique. As a matter of urgency we need to arrive at a new picture of how much benefit is necessary to support good health. The view of the Acheson report that the level of income support is too low to be compatible with good health is not by itself conclusive but I believe that it is one to which we should pay a good deal of attention. We should put some effort into finding how true that is. If the whole level is insufficient to maintain good health and we start shaving off parts from something which already risks being below a minimum, we may create considerable difficulties.

That is my basic reasoning for thinking that the effects of benefit disentitlement on the scale we are considering here are likely to be a good deal more severe than the Minister thinks. The Minister shakes her head; I am sure I shall hear why. I shall listen with a great deal of interest. We need to take seriously the arguments for finding a level of minimum income. My party policy, on which we shall go into the next election, is that we believe we should commission research to find out what is now a minimum income necessary to maintain good health.

I recall when that proposition was put in an amendment to the Welfare Reform and Pensions Bill by the noble Lord, Lord Morris of Manchester. He made an extremely powerful and persuasive case. It ruffled a good many administrative feathers in government circles. To me, that suggests the word "bull's-eye". I think that the noble Lord was right, and the irritation he caused was evidence of his rightness.

When we have a benefit level which is clearly sufficient to maintain good health, we would be in a position to have sanctions which take it down to the level that will maintain good health and no lower. It is when we start to take benefits below that level that we get into trouble. That would either provoke ill health, which is not conducive to returning to work, or would create a temptation to illegal action, which may be serious.

Part of my complaint about the whole regime of benefit sanctions is that we have absolutely no idea on what scale either of those processes operates, if, indeed, at all. If the problem is as trivial as the Minister believes, the research would surely show that I am wrong. I am prepared to take that risk. Is the Minister prepared to take it equally?

The Minister argues that the sample arrived at under the Bill would be too small for serious research. That is a point which can be taken perfectly seriously. On the other hand, I am sure that she does not think I would object if she were to enlarge the research sample to take in people deprived of benefit under other benefit sanctions. At present I do not see any prima facie reason for supposing that benefit sanctions for one reason are likely to create more hardship than equally severe benefit sanctions for another reason.

If I were to see any reason to suspect that, I would be perfectly ready to investigate it. If a larger sample were to show one sanction causing more hardship than another, I would be prepared to look at it further, as I am sure the department would also. But enlarging the sample—I have not demanded that in Amendment No. 39, to which I think we might with convenience speak in this group—would not create severe problems. If that is the Minister's problem, I do not see why she should not do it.

If we are to have a sanctions regime—there has to be some way of punishing people on benefit and we have not yet found a satisfactory one—minimum income entitlement would necessarily be part and parcel of the same package. But if we do not have one, I do not see how we shall justify the other. I beg to move.

Lord Davies of Coity

My Lords, I have no difficulty in supporting about 90 per cent of the comments made by the noble Earl, Lord Russell. He has been addressing the question of the level of social security benefits and a minimum income level, which I could probably argue about a great deal. However, the Bill is about social security fraud. Whatever level the social security benefits are at, fraud would still be a problem which we would have to tackle.

It seems to me that we are all opposed to social security fraud and each and every one of us would want to see it reduced, if not totally eliminated. Perhaps the best way to do that is to prevent fraud taking place, but we know that that is not possible; nothing whatever is perfect. What happens here is that anyone who deliberately commits a social security fraud will be subjected to sanction. However, the Government recognise that there are vulnerable people in that respect. Therefore, measures are being taken. There is an opportunity to receive reduced benefit in such circumstances. The sanction will last for only 13 weeks.

This attack is on the people who commit the abuse deliberately. Although we might talk of measures being draconian, the people who commit the abuse and bring about fraud need sanctions which they have to observe. They must be ones which they can feel; ones which will be a deterrent and may prevent them from attempting the fraud in the first place. It does not seem to me that the amendments do anything like that. I think that the Government have it just about right, if we are to punish people who commit fraud deliberately. We know that fraud involving billions of pounds takes place every year.

Baroness Hollis of Heigham

My Lords, I very much agree with my noble friend Lord Davies of Coity. Last year around 10,000 people were prosecuted for benefit fraud. The vast majority of those who were caught did not go on to re-offend, but there is a small minority who do, despite being punished by the courts. It is those persistent benefit offenders who are being targeted by this sanction.

I think that the noble Earl was running two arguments. One is that if benefits were sufficiently generous, or certainly far more generous than they are currently, he would have less difficulty with sanctions because sanctions would then only reduce those benefits to a more acceptable level. That is an argument about the relativity of benefits to wages and the like. We can discuss that on other occasions. The other implication of his remarks was that these are people who have fallen into hardship, for whom it is not unreasonable to commit benefit fraud and therefore any sanction that follows alongside it should be as light as possible but noticeable.

7 p.m.

Earl Russell

My Lords, did the Minister hear me at any moment say anything that suggested it was not unreasonable that they should commit benefit fraud?

Baroness Hollis of Heigham

No, my Lords, but given their straitened circumstances it was suggested that the sanctions should be as light as humanly possible, because otherwise they might get into further hardship. All requirements to see the effect of the sanctions are posited on the belief that the sanctions will produce such states of hardship, and so on, as would be unacceptable in the eyes of the noble Earl. That is as I understand it.

Under the current system—though people may disbelieve this outside—this hard core of repeat offenders can continue to receive benefit as if nothing had happened and, if they were stealing from the till and were discovered, as if nevertheless they could continue to work as a cashier. Everyone would think this was inappropriate and wrong.

We estimate that about 5 per cent of those who are successfully prosecuted end up back in court for benefit fraud. These are not inadequate people; they are not people who have a disability, a learning difficulty or other problems. They are people who are deliberately, knowingly and fraudulently cheating the system, as established by the courts, not once but more than that. We are talking, for example, of people like the disc jockey who fraudulently claimed incapacity benefit for two separate periods at a cost of £9,000. There was also the man who was prosecuted once for working while claiming and then again for stealing and cashing a relative's child benefit book. Undeterred, he was prosecuted yet again for attempting to claim JSA to which he was not entitled.

These people are claiming benefit to which they are not entitled, primarily because they have other sources of income already, such as being in work. One claimant was successfully prosecuted in February 1994 for two offences related to girocheque fraud and sentenced to three months in prison. He was prosecuted a second time in September 1996, again for cashing girocheques belonging to other people, and again received a custodial sentence. He was prosecuted a third time in December 1998, this time for working while in receipt of incapacity benefit. The overpayment was about £130, and so he had to serve a period of community service.

This is what we are dealing with. We are not dealing with inadequate people in straitened circumstances; we are dealing with people who have more than once been found guilty by the courts of deliberately and knowingly—not innocently or erroneously—cheating the system. The noble Earl, Lord Russell, will accept that for as long as there has been a benefit system provision has been made to stop or reduce benefit where a claimant does not comply with the rules. As far back as the early 'sixties the standard amount by which supplementary benefit—the forerunner of income support—was sanctioned was 40 per cent of the personal allowance. There was the same provision for 40 per cent of the single person's allowance. and for 20 per cent where pregnancy or serious illness was involved.

I understand the concern of the noble Earl, Lord Russell, about basic minimum standards, below which there may be difficulties for the person concerned. Therefore, this sanction has a safety net for the vulnerable, which provides a minimal level of support for the offender and any dependant, where they have no other resources to fall back on. There could be a reduction of benefit, as I have described, which works out at £10 or nearly £21, according to whether a family is involved and to their degree of vulnerability. If the claimant or any one within an assessment unit is seriously ill or pregnant the reduction of £10, the lower rate, would apply.

In the case of JSA, hardship payments would be made from day one to any family falling into a vulnerable group, which includes those responsible for a child or a young person, where someone is disabled or where the claimant or partner is pregnant, is a carer, or suffers from a chronic medical condition. In other cases anyone on JSA would be able to claim hardship payments not from day one but from the 15th day. For those on income support the same rules relating to the seriously ill or pregnant would apply to the amount of deduction.

Obviously the sanction does not remove an underlying entitlement to JSA or income support, and housing benefit and council tax benefit remain in full payment. This mirrors the hardship payment and benefit reduction schemes that are already in place in other sanction regimes.

By restricting, as the amendment would do, the level of any benefit sanction to just 10 per cent of the single person's allowance—£5.25 rather than £10.50—I believe we would be saying that we view this offence of twice knowingly and deliberately committing fraud as certified by the courts to be less serious than those who are currently sanctioned with 20–40 per cent for failing to attend a job interview, or for giving up work voluntarily and who do not appear to be seeking work. In other words, at the moment we sanction 20 per cent or 40 per cent failures or offences done for the first time in some cases which, in most people's eyes, are far less serious than the persistent, knowing and continued fraud that are sanctioned here. That cannot be right.

For any sanction to be effective, we have to combine our concern for those who may be vulnerable with the need to protect the system from those who fail to meet their responsibilities. I do not believe that the amendment would do that. The sanction would last for 13 weeks, after which the benefit would be restored to the rates that would otherwise apply, and throughout this period no reduction would normally apply to housing benefit or council tax benefit.

This would mean that for a family of four with two adults and two children they would have £128.50 a week to live on, and the housing costs would be met. For a fit single person aged 25 or more the amount would be £31.30 and the housing costs would be met. I do not think this implies destitution, homelessness and debt. At Committee stage the noble Lord, Lord Goodhart, spoke eloquently on behalf of the noble Earl, Lord Russell, and I said that we would monitor the effects of the sanction, including its use as a deterrent, together with the effect on an individual's life, including the adequacy and accessibility of hardship payments and together with the effect on specific claimant groups. I also said that we could not pursue the sort of detailed research that the noble Earl has again proposed tonight.

To do so, it would be necessary to see the effect of taking away £10 a week from the benefit level of £200 a week over 13 weeks. One would need to appraise the health of each member of the family before the sanction was imposed; and one would need to check diaries of their food, expenditure and leisure consumption. It would certainly be necessary to survey their housing and the effects of the weather and also intrude on their privacy to find out the resources of family and friends as regards possible subsidy and other sources of support. One would have to work out whether serious illness in one parent or in a child or perhaps in a third member of the family could be attributed to that deduction of £10 from a benefit of £200 over a period of 13 weeks. Other factors would have to be taken into account, such as the length of time the family had already spent on benefit, and also the amount of savings they had. I do not believe that this research, as outlined by the noble Earl, Lord Russell, is possible.

I come back to my basic argument. These are sanctions imposed only when somebody has knowingly, fraudulently and persistently defrauded the benefits system, and that has been established by the courts. They are in line with the sanctions imposed on offences against the benefits system since the early 1960s and with the rest of other benefit sanctions. We have in play hardship regimes that we think are in line with all the other hardship and benefit regimes that are in place, which have been shown by research on JSA and incapacity benefit to support people while making them realise that we expect the conditions of those benefits to be respected as part of the entitlement to them.

I know that the noble Earl will not accept my argument but I would say that at the end of the day, under these conditions, IS or JSA would normally be sanctioned either by 20 per cent or 40 per cent of the personal allowance and the benefit for the rest of the family would remain undisturbed. Child benefit will never be withdrawn. Housing benefit and council tax benefit will remain in payment, even when JSA or IS is sanctioned. Premiums payable for the family will not be reduced: only the personal allowance. Free prescriptions and free school meals will remain available, even when a benefit may be sanctioned.

Where a claimant might deny payments to the rest of their family, arrangements can be made to pay the residual benefit to other members of the family. Access to the social fund will still remain and, in the event of a successful appeal, any payments that should have been made will be paid in full.

If people defraud knowingly the benefit system over a period of time, as established by the courts, they must know that there will be a sanction. We believe that the sanctions are proportionate and have proper legal safeguards. We believe that we have decent hardship arrangements in place, and that they have a proper read-across to the benefit sanctions that have existed since the 1960s and to sanctions applied to other forms of benefit.

Although I may not have persuaded the noble Earl, Lord Russell, I hope that I have persuaded the House that our proposal is proportionate, reasonable and appropriate given the offence of persistent, consistent and knowing benefit fraud.

Earl Russell

My Lords, I suppose that the amendment was bound to tempt the Minister into trying to argue that she is against sin and I am not. She has not resisted the temptation. To cut a long argument short, perhaps I may say that where the Bill proposes a six months' sentence of imprisonment, provided I were assured that it was not mandatory I would not oppose it. I believe that we are proposing a somewhat more severe penalty. I know that the Minister does not agree. The noble Baroness heard my arguments about delusion of adequacy as regards the level of income support. I shall repeat them if necessary, but I suspect that the House would rather I did not do so.

Baroness Hollis of Heigham

My Lords, did I hear the noble Earl correctly? Does he think that 13 weeks' loss of £10 on a benefit of £220, reducing the amount to £210, is harsher than a six months' prison sentence?

Earl Russell

My Lords, yes, and I am prepared to consider research to see whether I am wrong, is the Minister prepared to do the same?

Baroness Hollis of Heigham

My Lords, I wonder how many noble Lords in this House believe that a £10 sanction on a benefit of over £200 over 13 weeks is harsher than six months in prison. I do not believe that the proposition deserves substantial research.

Earl Russell

My Lords, the Minister shows a remarkable lack of curiosity. One of us is wrong. I would rather like to know which of us it is. I am prepared to take the risk of finding out.

The next trap that the Minister fell into was that she listed, very properly, cases of social security fraud which are clearly grossly credible. They were almost all people who were already working—for example, a disc jockey. Those people in law, properly, have no benefit entitlement anyway. So a social security benefit sanction takes away from them what they should never have had in the first place. As Gibbon would put it, it robs them of a superfluous treasure. It is a most inappropriate sanction because it bites on something that those individuals should not have anyway.

If we are dealing with real criminals, people to whom benefit should never have been awarded—even if we are thinking in the pure, narrow terms of deterrence—benefit sanctions are not the appropriate penalty. Some more ordinary criminal penalty would in those cases be a good deal more appropriate.

The Minister trotted through a great deal of material about hardship payments to vulnerable people. If one is on a means-tested benefit and that benefit is rightly awarded—we must assume that that benefit is not allowed by the Treasury to be significantly above what is needed to live on—how can one then be deprived of any substantial part of it without being in hardship? I have asked this House before why single people can never be presumed under benefit rules to be in hardship. I have never had an answer. I shall continue to ask the question because one day I should like to hear an answer. It sounds like a somewhat perverse form of family values.

Any punishment must create hardship. I would like that hardship to be such that it does not leave the person beyond the point of recovery—it does not drive him into either illegal courses which may leave him with a long-term drug dependency or in the grip of a drug dealer, or in a state of ill health such that he cannot return to work. That is a degree of moderation which one may legitimately expect of the criminal law in any circumstances. Beyond that point, it becomes self defeating.

I turn to the Minister's difficulties about research. We all know that when the Whitehall machine sets out to prove that some matter is difficult it can do so very well indeed. If we have a sufficient control group with which to compare these people, I do not envisage that every single detail about the area and the weather for which the Minister asks will be necessary. The Minister seeks to make matters more difficult than they need be. It is an art in which any good Minister—as the noble Baroness is—is skilled. I do not take the argument that seriously. But meanwhile the clock is ticking away. We have had the argument previously; we shall have it again. We shall hear the argument during the election. So, ready for the next round, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 30 to 32 not moved.]

The Deputy Speaker (Viscount Allenby of Megiddo)

My Lords, before calling Amendment No. 33 I should tell the House that if the amendment were agreed to I should be unable to call Amendment No. 34.

[Amendment No. 33 not moved.]

7.15 P.m.

Baroness Hollis of Heigham moved Amendment No. 34: Page 12, line 24, after ("discharge") insert ("or a court in Scotland makes a probation order").

The noble Baroness said: My Lords, Amendment No. 33 had originally been grouped with Amendment No. 34.

In Committee I undertook to consider further the point raised by the noble Lord, Lord Astor, regarding the treatment under these provisions of an absolute discharge or probation order in Scotland. As the noble Lord will recall, the legal system in Scotland and in England and Wales differs somewhat on the labelling of offences. But I am sure the House will agree that social security legislation has to be consistent across both countries.

As I said in Committee, the key point at issue here is whether or not a court has found a person guilty of fraud against the benefit system. The purpose of this amendment is to put that principle beyond doubt. The effect of the amendment is to specify that any case where a court in Scotland makes a probation order is treated as a conviction as regards these provisions.

The noble Lord, Lord Astor, was correct in saying that where a court in Scotland grants an absolute discharge or makes a probation order it is not treated as a conviction because this is what the Criminal Procedure (Scotland) Act 1995 provides. However, the position in England and Wales differs in that while the granting of an absolute discharge is similarly deemed not to be a conviction, any case where a court makes a probation order is a conviction.

The social security system applies to Great Britain as a whole. I am sure that your Lordships would agree that claimants should be able to expect the same treatment whether they live in Scotland or in the rest of Great Britain. It would be unfair to sanction a person in England or Wales on the basis that he had committed two benefit frauds, one of which had attracted a probation order, but not to sanction a person who had committed identical frauds in Scotland and received identical sentences.

I hope that the amendment, which ensures that the sanctions are applied even handedly across the whole of Great Britain, will be accepted by the House. I beg to move.

Lord Astor of Hever

My Lords, I am grateful to the Minister for explaining in detail the amendment. Of course, we welcome it.

On Question, amendment agreed to.

[Amendments Nos. 34A to 35 not moved.]

Clause 7 [Effect of offence on joint-claim jobseeker's allowance]:

[Amendment No. 36 not moved.]

Clause 8 [Effect of offence on benefits for members of offender's family]:

[Amendment No. 37 not moved.]

[Amendments Nos. 38 and 39 not moved.]

Clause 12 [Interpretation of sections 6 to 11]:

[Amendment No. 40 not moved.]

Clause 13 [Delegation of functions]:

[Amendment No. 41 not moved.]

Clause 14 [Colluding employers]:

Lord Higgins moved Amendment No. 42: Page 18, line 29, at end insert ("and, in addition, an amount which is 32 times the weekly cost of the benefit which was defrauded by each employee").

The noble Lord said: My Lords, in Committee we debated the question of what penalties should be imposed on colluding employers whose actions resulted in social security fraud. Generally speaking, the feeling on this side of the House is that the proposals with regard to measures to combat organised fraud are significantly less and less effective than proposals to combat individual fraud.

In Committee we suggested that the penalty on employers who were colluding in fraud with their employees should reflect the fact that substantial amounts of money might have been lost to the Exchequer, in particular in relation to employees drawing benefits to which they were not entitled. Somewhat to my astonishment, the Minister expressed horror that any colluding employer should suddenly become liable for the consequences of his action. She suggested that that might put the employer out of business and was unduly severe. Therefore, taking, as always, the views of the Minister into account, I have tabled a more moderate amendment.

Amendment No. 42 suggests that the penalty that a colluding employer should incur, in addition to that set out in the Bill, should be 32 times the weekly cost of the benefit defrauded by each employee. Your Lordships may be puzzled why the figure is 32 times the weekly cost of the benefit defrauded. It is based on the proposal which applies to local government when it adopts an incentive scheme to stop fraud. That seems a not unreasonable proposal. It may be the case that a particular employer employs perhaps 20 or 30 individuals, all of whom are drawing benefits fraudulently. If that is so, the penalty of 32 times the amount of money lost to the Exchequer as a result of the fraud is not an unreasonable penalty to impose.

So I have taken into account the views, and, indeed, the reaction, which the Minister put forward, but it seems to us that a significant penalty should be imposed on employers. The overall effect of the collusion between employers and employees may be significant but both groups of people have an option. They do not have to commit the fraud. Furthermore, the employer does not have to go along with a situation where his employees can defraud the taxpayer. I beg to move.

Lord Grabiner

My Lords, perhaps I may make one or two observations about the proposed amendment. The particular attraction about the provision as drafted is its simplicity. It is clearly drafted. It contains nice round figures that would constitute the penalty to be extracted from the offending employer. I suspect that one of the reasons for the simplicity is to encourage employers who are charged or accused of collusion to come to a deal—for want of a better word—pursuant to these provisions. These provisions are designed to achieve a voluntary deal on a civil basis without the need to invoke the criminal process.

The first criticism I make of the proposal is that it simply introduces mathematical complication, albeit that the mathematical complication can be explained as it was by the noble Lord, Lord Higgins.

The second point is that the noble Lord need not be concerned that the underlying irritation that drives his amendment cannot already be dealt with under the existing common law. In the kind of fraud we are now discussing, if an employer knowingly participates in a benefit fraud which produces the result that money is stolen or has disappeared in an illegal way and it can be demonstrated that he has the appropriate guilty knowledge, he can be made personally liable as a constructive trustee in the civil courts. There the full extent of the loss sustained by the Exchequer can be recovered. Therefore, the imposition of the penalty, which as I understand it is the real driving force that sits behind the amendment, is not necessary because in a suitable case the DSS could bring proceedings against a colluding employer and recover that money in the civil courts. The proposed amendment therefore is not necessary.

The third point is that the amendment unnecessarily introduces into the existing provision the additional concept of the benefit which was defrauded by each employee. At the moment, the provisions in Clause 14 do not require proof of fraud against an employee. It requires a colluding employer who has done one or other of the things identified in the provision. The introduction of the amendment would mean that proof of a fraud by each employee would be necessary in order to recover the 32 times figure. That is not currently required in order to operate Clause 14. The amendment adds an unnecessary complication. That goes back to my first point about simplicity. It would make it unmanageable and complex. I believe that the existing common law position protects the position adequately.

Earl Russell

My Lords, would I be right in thinking that calculating the amount of benefit defrauded when some of the attendant circumstances cease to be the case might be a good deal of work?

Baroness Hollis of Heigham

I believe so, my Lords. The purpose of Clause 14 is to streamline the lengthy and expensive process of prosecuting collusive employers. It introduces a single fixed penalty for the small-time offender, thereby enabling the department to focus limited prosecution resources on the more serious cases.

As my noble friend Lord Grabiner explained, the effect of the amendment would be to increase the amount of the penalty in circumstances where the employer's act of collusion results in an overpayment of benefit. In addition to the fixed penalty of between £1,000 and £5,000 already provided in the clause, the penalty would also include an amount equivalent to 32 times the weekly cost of the benefit which was defrauded by each employee. As the noble Earl, Lord Russell, said, the amendment would not only be extremely complicated but would hike up the amount of the penalty considerably, depending on the type of benefits stolen.

The clause already reflects the maximum penalty that a court might impose were the employer prosecuted and convicted. As I said in Committee, the majority of small time offenders at which the penalty is aimed are currently prosecuted for giving false information. In those circumstances, the maximum fine a court could impose would be at level 3 or level 5, which carry maximum penalties of £1,000 and £5,000 respectively.

An additional amount suggested by these amendments, which relates to the amount of putative benefit lost, would be likely to take the total amount of the penalty above that which a court could apply. This would essentially remove any incentive for an employer to agree to the penalty, undermining the purpose of the clause, which is to punish small time offenders without going through the process of a lengthy and expensive prosecution. It would also mean that the penalty agreed under such a process by administrative arrangement could and would be higher than the maximum amount that the court would be entitled to impose. Again, I do not think that that necessarily would be appropriate.

I understand the concerns expressed by the noble Lord, Lord Higgins, that any penalty should include a means of recovering the amount of funds that have been defrauded. However, we already do this. Where there is an overpayment of benefit that is attributable to the claimant, we recover the loss directly from that individual, which is in line with the Scampion report. We do not seek to change that.

However, linking it to the size of the overpayment would be unreasonable in that the weekly amount of benefit defrauded is not determined by the employer's action—although I accept that he may have contributed to it—but by the personal circumstances of the employees involved. Although the employer may have assisted in the fraud, he cannot be held responsible for an employee's age—certain benefits are age related—or his domestic situation—he may be claiming on behalf of a partner and children—which could result in certain benefits being claimed. For example, based on the benefit rates from April 2001, it could mean that an employer alleged to have colluded in fraud with a 25 year-old employee who is single and claiming JSA would be offered a penalty of £1,000 and an additional amount of £1,697. The total amount of the penalty would be a little under £3,000. However, if the same individual had a partner and two children, the total amount of the penalty would amount to £4,800. The amount of penalty would fluctuate not according to what the employer had done, but according to the circumstances of the employee, over whom the employer has no control.

The employer's offence is to tell a lie at a specific point in time in relation to his employees. We will get at that, so to speak, by offering a penalty in lieu of a court case. It is very difficult to tie the individual employee's overpayment to the employer because the employer is unlikely to know what benefit they receive. The employer may lie to fraud investigators in respect of one employee's hours of work or amount of wages, which would constitute an offence, but that does not mean that the employer is responsible for the size of the employee's family, for the length of time that the employee has been making claims, or even the rate at which benefits were paid.

While I agree that the employer is culpable because he colluded in the fraud in the first instance, the amount of benefit defrauded is not a direct responsibility of his action, although it is consequential on it. The benefits stolen and particularly the total amount defrauded are linked to the claimant's age, his domestic circumstances, for how long he claims and what benefits he claims.

I hope that, on reflection, the noble Lord will agree that this is unfair. The same offence committed by an employer would result in very different penalties being imposed, according to the circumstances of the employee. It could also lead the employer to being vulnerable or liable to administrative penalties higher than those which the courts could impose. Again, that would be unfair. Finally, it would be perfectly reasonable for the employer to choose not to opt for the process of negotiating an administrative penalty—out of a preference not to have a criminal conviction on his record—but would instead revert to the old court system, which would introduce the familiar delays and difficulties of establishing guilt. We would not achieve our aim; namely, to take smaller offences out of court proceedings. In the light of this explanation, I hope that the noble Lord will feel able to withdraw his amendment.

7.30 p.m.

Lord Higgins

My Lords, the amendment seems to have provoked a lively set of arguments, which I should like to take fully into account, in particular the points made by the noble Lord, Lord Grabiner. It is true to say that if such cases go through the normal legal process, they are likely to incur far heavier penalties. We are concerned here with the alternative form of penalty. I take also the point that it might be complicated and difficult to show exactly how much money the Exchequer has lost as a result of various employees seeking to exploit the collusion of the employer.

Having said that, I am not sure, from a purely logical point of view, that I agree entirely with what has been said by the noble Baroness. While it is true to say that the loss to the Exchequer will depend on how many employees engage in the fraud and which benefits they seek to claim, it is nevertheless the case that, if the employer had not colluded, the fraud would not have taken place and the amount, however much it may be, would not have been lost to the Exchequer. I have a little difficulty in agreeing with the argument that the amount lost is somehow independent of the fact that collusion had taken place. If there had been no collusion, then no loss would have been incurred.

However, I should like to consider the matter further. I remain unhappy at the balance struck between the main criminal penalty and the alternative penalty. I should like to think on that between now and Third Reading.

Amendment, by leave, withdrawn.

[Amendments Nos. 43 and 44 not moved.]

Clause 15 [Offence of failing to notify a change of circumstances]:

Baroness Hollis of Heigham: moved Amendment No. 45: Page 20, line 3, leave out from ("(4)") to end of line 4 and insert ("for "subsection (1)" there shall be substituted "subsections (1) to (1BC)" ").

The noble Baroness said: My Lords, I beg to move Amendment No. 45 and to speak also to the amendments grouped with it. The amendments deal with two separate issues. The first amendment has been introduced after discussions with Scottish lawyers. I hope that I shall receive a beaming smile from the noble Lord, Lord Astor of Hever, on the grounds that we are doing our best to be helpful. The intention is simply to ensure that the offences are comparable both north and south of the Border, allowing for the differences between our respective legislatures.

The second issue is to ensure that the responsibilities in Clause 15 to report changes of circumstances extend to those who receive benefit on behalf of benefit claimants as well as to claimants themselves and to third parties. In doing this, we have taken the opportunity to make clear the particular responsibilities placed on landlords who receive rent direct in the form of housing benefit to which their tenant is entitled. Their responsibilities are related to changes pertaining to the claimant's occupation of the dwelling for which the housing benefit is paid.

Clause 15 provides for two separate offences. One is the summary offence of failing to notify a change of circumstances which the individual knows will affect his benefit. The other is more serious and attracts a greater penalty commensurate with the offence. I could set out the detail of these differences but, given the hour, perhaps noble Lords will accept that originally, Scottish lawyers thought that we might be able to rely on the existing drafting. On further reflection, it was considered better to use the term "knowingly". The terms "dishonestly" and "knowingly" are used in the present versions of these offences in order to respond to the concerns expressed by the Scottish Law Society and to reflect the different approaches of the two criminal law systems.

This amendment seeks to "tidy up" the legislation in response to consultation and correspondence.

Perhaps I may turn now to the subsequent amendments. The purpose of these amendments is to ensure that those who receive benefit on behalf of claimants are held responsible for reporting changes, as are claimants themselves. We are dealing with two main groups here: appointees and landlords. Because of their different positions in relation to the claimant, the Government consider that different conditions should apply and this is reflected in the amendments.

I shall deal first with appointees. These are individuals and organisations who, because of the mental inability of the claimant to act for themselves, are appointed by the Secretary of State to act in the claimant's place. They make the claim, receive the payments and take responsibility for notifying changes of circumstances. Because they are standing in place of claimants, if they act fraudulently, we think that they should be treated in a similar way. For example, if an elderly, incapable lady is admitted into a nursing home and a relative acts for them and then acts fraudulently, we believe that they should be caught by the legislation in the same way.

The second group is landlords who receive their rent in the form of housing benefit paid direct to them, instead of the claimant, by a local authority. If the claimant leaves the address, the claimant himself has a responsibility to notify the local authority and so, too, does the landlord. However, if there is no incentive to do so, then the dishonest landlord could continue to pocket the housing benefit. The existing legislation is vaguely worded and has caused disquiet, in particular among landlords in social housing—for example some housing associations—who are not sure where their liability for "policing" their tenants begins and ends. The amendment aims to make their responsibilities absolutely clear. The changes that the landlord is responsible for reporting are those connected with the tenancy: the tenant's occupancy of the property for which housing benefit is being paid, and his liability to pay rent. I am sure that this will reassure honest social landlords as to what their responsibilities are. I hope that it will also send a clear message to landlords who receive rent direct that, if they continue to enjoy it when they should not, they too are liable for prosecution.

Finally, let me point out once more for the record that the offence in Clause 15 relating to "causing or allowing" a claimant to fail to notify a change of circumstances does not include third parties who merely learn of a change. To become guilty of an offence, a third party would have to be active in some way in the failure. This comes back to the CAB point that some knowledge of that failure is not in itself an offence.

I hope noble Lords will agree that, despite the apparent complexity of these amendments, they are in essence a simple replication of the offences so that they apply to third parties under an existing obligation to notify relevant changes in the claimant's circumstances. I hope that the law will now be clarified. I commend the amendments to the House.

Lord Astor of Hever

My Lords, I am grateful to the Minister for explaining the amendments. I have no doubt that the Scottish Law Society will be very happy with the first groupings.

I should also like to thank the noble Baroness for her letter following on from our amendment to Clause 15 at Committee stage. We welcome these amendments, which remove our concerns by placing the responsibility that landlords have in relation to their tenants on the face of the Bill. This includes details of the requirement to report changes in circumstances.

We believe that it is right that landlords and agencies should not be required to be the watchdogs of their tenants. They should have only a duty to report any change of circumstances that relate to the tenancy. The amendments will be welcomed both by landlords and by agencies which work in a confidential way with tenants and those receiving benefit.

On Question, amendment agreed to.

[Amendment No. 46 not moved.]

Baroness Hollis of Heigham moved Amendments Nos. 47 and 48:

Page 20, line 28, at end insert— (1BA) This subsection applies where—

1. (a) there has been a change of circumstances affecting any entitlement of a person ('the claimant') to any benefit or other payment or advantage under any provision of the relevant social security legislation;
2. (b) the benefit, payment or advantage is one in respect of which there is another person ('the recipient') who for the time being has a right to receive payments to which the claimant has, or (but for the arrangements under which they are payable to the recipient) would have, an entitlement; and
3. (c) the change is not a change that is excluded by regulations from the changes that are required to be notified.

(1BB) In a case where subsection (1BA) above applies, the recipient is guilty of an offence if—

1. (a) he knows that the change affects an entitlement of the claimant to a benefit or other payment or advantage under a provision of the relevant social security legislation;
2. (b) the entitlement is one in respect of which he has a right to receive payments to which the claimant has, or (but for the arrangements under which they are payable to the recipient) would have, an entitlement; and
3. (c) he dishonestly fails to give a prompt notification of that change in the prescribed manner to the prescribed person.

(1BC) In a case where that subsection applies, a person other than the recipient is guilty of an offence if—

1. (a) he knows that the change affects an entitlement of the claimant to a benefit or other payment or advantage under a provision of the relevant social security legislation;
2. (b) the entitlement is one in respect of which the recipient has a right to receive payments to which the claimant has, or (but for the arrangements under which they are payable to the recipient) would have, an entitlement; and
3. (c) he dishonestly causes or allows the recipient to fail to give a prompt notification of that change in the prescribed manner to the prescribed person.

(1BD) In any case where subsection (1BA) above applies but the right of the recipient is confined to a right, by reason of his being a person to whom the claimant is required to make payments in respect of a dwelling, to receive payments of housing benefit—

1. (a) a person shall not be guilty of an offence under subsection (1BB) or (1BC) above unless the change is one relating to one or both of the following—
1. (i) the claimant's occupation of that dwelling;
2. (ii) the claimant's liability to make payments in respect of that dwelling; but
2. (b) subsections (1BB)(a) and (1BC)(a) above shall each have effect as if after 'knows' there were inserted 'or could reasonably be expected to know'.").

Page 20, line 29, leave out ("and (1B)") and insert ("to (1BC)").

On Question, amendments agreed to.

[Amendment No. 49 not moved.]

Baroness Hollis of Heigham moved Amendments Nos. 50 and 51:

Page 21, line 9, at end insert—

("(1BA) In a case where subsection (1BA) of section 111A above applies, the recipient is guilty of an offence if—

1. (a) he knows that the change affects an entitlement of the claimant to a benefit or other payment or advantage under a provision of the relevant social security legislation;
2. (b) the entitlement is one in respect of which he has a right to receive payments to which the claimant has, or (but for the arrangements under which they are payable to the recipient) would have, an entitlement; and
3. (c) he fails to give a prompt notification of that change in the prescribed manner to the prescribed person.

(1BB) In a case where that subsection applies, a person other than the recipient is guilty of an offence if—

1. (a) he knows that the change affects an entitlement of the claimant to a benefit or other payment or advantage under a provision of the relevant social security legislation;
2. (b) the entitlement is one in respect of which the recipient has a right to receive payments to which the claimant has, or (but for the arrangements under which they are payable to the recipient) would have, an entitlement; and
3. (c) causes or allows the recipient to fail to give a prompt notification of that change in the prescribed Intoner to the prescribed person.

(1BC) Subsection (1BD) of section 111A above applies in relation to subsections (1BA) and (1BB) above as it applies in relation to subsections (1BB) and (1BC) of that section.").

Page 21, line 10, leave out ("and (1B)") and insert ("to (1BB)").

On Question, amendments agreed to.

Lord Higgins moved Amendment No. 52: After Clause 16, insert the following new clause—

("Quarterly reports

QUARTERLY REPORT BY AUTHORITY

."(1) Each authority administering housing benefit or council tax benefit shall prepare a quarterly report in respect of—

1. (a) the number of investigations aborted during the period of the report;
2. (b) the number of investigations under way during the period of the report; and
3. (c) the number of penalties, prosecutions and their outcomes during the period of the report, as a result of the powers conferred on it by this Act.

(2) Each authority shall make the reports referred to in subsection (1) available to the public at large in a mariner it thinks fit.").

The noble Lord said: My Lords, this amendment, unlike the following one, which is concerned with other benefits, relates particularly to housing benefit and council tax benefit.

I note that detected fraud in local government exceeded £100 million for the first time in 1998–99, and that detected fraud increased by 22 per cent in the same period. Of course, one never knows whether the increase in detected fraud reflects the fact that there is more fraud or the fact that more is detected.

The purpose of the amendment is simple. Concern has been expressed throughout our debates on the Bill regarding the extent to which the proposals will be operated in a reasonable manner. Concerns remain that there is no external check on that. The amendment seeks to make available an indication of the extent to which the operation of the proposals has turned out to be reasonable.

The crucial item out of the three listed in the amendment is the number of investigations aborted. Clearly, if an enormous percentage of investigations undertaken turn out to be abortive, there is some implication that the reasonableness of the inquiries being started in the first place is in doubt. It would be helpful for us to see how, when the Bill becomes an Act, as I hope and believe it will, it operates in practice. I beg to move.

7.45 p.m.

Baroness Hollis of Heigham

My Lords, the amendment seeks to place a statutory duty on each local authority to publish a quarterly report on the numbers of investigations it carries out on the basis of the powers in the Bill, and the proportion of those which are aborted and those which result in some form of punishment.

I take the noble Lord's point that this information would provide a form of public accountability on how well local authorities were making use of the powers, and whether they were using them properly. However, I hope to persuade the noble Lord that the amendment is unnecessary.

I should first point out that he is in error in his assumption that these data would provide a meaningful picture. Local authorities do not "abort" investigations. In line with the Criminal Procedure and Investigations Act 1996, they carry them through to conclusion, even where the indications are that the investigation is leading to a negative outcome. In that process we would expect there to be a proportion of cases where investigation established that there was no fraud. We would also expect a proportion of cases—though hopefully diminishing with the use of powers in the Bill—where there was insufficient evidence to prove fraud. That is the nature of investigation. Obviously, if we limited ourselves to investigating only those cases where fraud was pretty much a foregone conclusion, we should not make much of a dent in the levels of fraud that we know exist.

We share the understanding that it is very hard to know what counts as success. If a local authority identifies a large amount of fraud, is it because it has let in a large amount earlier in the system which it subsequently detects? If an authority detects a low level of fraud, is it because it has "built out" fraud at early stages? There is no way of knowing from the noble Lord's amendment. Therefore, there is no means of identifying whether a local authority is performing to "best value" standards by nature of the amendment, because we do not know what would count as success or failure. I suggest that that is why, at its core, the amendment is not appropriate. We simply cannot use the number of prosecutions or penalties compared with the number of investigations to indicate either success or failure in terms of the Bill.

It is also the case that investigators may use any of the full range of powers at their disposal in any one case. While it would obviously be possible to distinguish cases where the new powers were used from those where they were not, it would be hard to draw meaningful conclusions about the effectiveness of the particular powers in which the noble Lord is interested and the powers that already exist—many of them introduced by the previous administration—and which were being used in addition.

A further point of substance is that we already collect a great deal of information about local authorities' anti-fraud performance for management purposes, which might be a more proper use of such statistics. More generally, I believe that adherence to the code of practice and the commitment on the face of the Bill agreed by your Lordships this evening will ensure that we use the powers properly.

We cannot know whether detecting more fraud or detecting less fraud is a priori evidence that the Bill is satisfactory or not as regards local authorities—because that must be balanced against the amount of fraud that we have built out of the system by other parts of our relationship to local authorities in the handling of housing benefit. It therefore seems to me that what we should rightly be focusing on is whether local authorities observe the code of practice. As we discussed earlier, the paragraphs affecting local authorities will come as a result of consultation with them over the next few weeks. We should also focus on a review of that in the light of complaints that we may receive about the effectiveness of local authorities' performance and the appropriateness of the behaviour of their officials.

We have already given your Lordships a commitment that we shall be reviewing the code within three years to ensure that both we and our information providers are happy with the operation of the powers in practice. We plan to do this by means of a report for consultation, which will cover our performance and that of local authorities against the requirements of the code. Plainly this will include information on how we and local authorities have used the powers and how productive they have been compared with expectations. The report will be widely valued and publicly available.

Local authorities are subject to a best value performance indicator on security and accuracy. Reports of performance under best value are already made available to the public. We intend to review that performance indicator to make it more robust. We expect to link it to the new anti-fraud incentive scheme for local authorities that will be phased in from April 2001.

For all those arguments, we cannot meet the noble Lord's request; namely, to determine whether more or fewer prosecutions, more or fewer abortive prosecutions, are an indicator of success or failure. However, we can get to the substantive point and reward local authorities for detecting fraud and for building fraud out of their system, as well as reviewing the conduct of their officials in how they handle fraud in the light of complaints or any concern and embody that in the code of practice and its reviews over the next three years. In the light of my explanation, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Higgins

My Lords, I entirely take the point that if there is an increase in the detection of fraud one is not sure whether that means there is more fraud or more detection. Indeed, I made that point in my opening remarks. I was well aware of the problem when I was Minister with responsibility for Customs & Excise as regards the detection of drugs: one never knew whether it was more drugs coming in or more detection of drugs taking place. The only observation to be made in that context is what is happening to the street price. Unfortunately, there is no corresponding indicator in that respect that one could use as far as concerns the matters now under discussion.

I am seeking to establish to what extent certain enquiries were started which, in the event, ought not to have been instigated. It is possible that the noble Baroness is right in her contention that this is not the ideal way to set about the task. However, the very broad-brush approach that the Minister suggests in terms of a code of conduct, and so on, is perhaps not sufficiently precise an indication of the extent to which those operating the system are, or are not, acting reasonably in initiating particular enquiries. I should like further to consider the matter between now and Third Reading. Clearly it would not be appropriate at this stage to move Amendment No. 53, which adopts the same arguments. Indeed, it would merely delay our proceedings. I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendment No. 53 not moved.]

Clause 19 [Commencement]:

Baroness Hollis of Heigham moved Amendment No. 54:

Page 21, line 25, leave out from ("as") to end of line 26 and insert ("the Secretary of State may by order made by statutory instrument appoint.

(2) Subject to subsection (3), different days may be appointed under this section for different purposes.

(3) The power under this section to appoint a day for the coming into force of the provisions of sections 1 and 2 shall not authorise the appointment for those purposes of any day before the issue of the code of practice that must be issued under section (Code of practice about use of information powers).").

On Question, amendment agreed to.