Lords Sitting of 16 January 2001

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of St Albans.

Baroness Boothroyd
The Right Honourable Betty Boothroyd, having been created Baroness Boothroyd, of Sandwell in the County of West Midlands, for life—Was, in her robes, introduced between the Baroness Castle of Blackburn and the Lord Healey.

Care Homes
2.43 p.m.
Lord Clement-Jones Lord Clement-Jones asked Her Majesty's Government:
When they plan to publish regulations on the standards to be observed in care homes.
The Parliamentary Under-Secretary of State, Department of Health (Lord Hunt of Kings Heath): My Lords, we will be consulting on regulations for care homes under the Care Standards Act 2000 shortly. Following earlier consultation, we also intend to publish soon the finalised standards for older people. The standards for care homes for adults will be published for consultation at the same time as the regulations.
Lord Clement-Jones: My Lords, I thank the Minister for that reply. The Government have given ground relentlessly since the White Paper, Fit fin. the Future, was published in December 1999. They gave ground, first, on room dimensions and, secondly, on the phasing out of shared rooms, which is not now intended to take place until 2007. Is the reason for the delay in the publication of the draft regulations that the Government plan further concessions; namely, on training and staff?
Lord Hunt of Kings Heath: No, my Lords. The preparation of draft guidelines and regulations must be undertaken very carefully. Thorough groundwork is being completed to ensure that we get them as right as we possibly can. The noble Lord spoke of "giving ground", yet during debates on the Bill as it passed through your Lordships' House many noble Lords urged the Government to be flexible in their response to the consultation we had with the care home industry to ensure that the regulations and standards were right. I believe that we have been flexible. We are giving time to care homes to enable them to come up to the standards we require. Ultimately, we will produce higher quality homes.
Lord Roberts of Conwy: My Lords, bearing in mind the increasing proportion of older people in the population and their vulnerability. what consideration have the Government given to the need for a special commissioner with responsibility for the vulnerable elderly?
Lord Hunt of Kings Heath: My Lords, perhaps I may make two comments. First, the commission itself will have a general obligation to report to and advise government on the matters for which they are responsible. As a body and through its regulation function, it will bring to itself a deep understanding of the issues relating to older people who are living in homes or are being helped by other services that are regulated. Through this, it will be able to give government careful and powerful advice. Secondly, important work is being undertaken through the national service framework for older people which is being prepared at the moment. This will ensure a high standard and consistency of service for older people across the whole of the NHS and, indeed, in personal social care.
Lord Laming: My Lords, will the Minister give an assurance to the House that, when drawing up these standards, equal emphasis will be placed on the quality of life for and personal dignity of residents as well as to physical standards?
Lord Hunt of Kings Heath: My Lords, yes, I very much agree with that observation. A criticism that could be made of the existing provisions as regards the registration of care homes is that they focus too closely on physical standards and not sufficiently on the quality of care outcome and dignity. We shall ensure that the new commission, once it is established, takes fully into account the points raised by the noble Lord.
Baroness Platt of Writtle: My Lords, while paying attention to the standards for older people, which is extremely important, will the Government take care that the introduction of these standards does not result in more homes being closed? That is the experience locally and could result in bed blocking in hospitals, which would certainly not be to the advantage of elderly people.
Lord Hunt of Kings Heath: My Lords, I take the point that, when looking at the wholesale provision of services for older people across the NHS, personal social services and the independent care sector, we must ensure that an integrated approach is adopted. I believe that the developments we are making in intermediate care will be extremely important to the aim of ensuring that, in the future, many more people will be able to stay in their own homes and live independently rather than needing to move into care homes. As regards the issues surrounding the number of places in homes, the fact is that at present

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occupancy of care home beds is running at 88 per cent. Throughout the country as a whole there is sufficient provision, but I accept that such provision can be patchy and that there may be some areas where shortages can occur.
Lord Ashley of Stoke: My Lords, does the Minister agree that the establishment of a commission represents a major step forward in improving the standard of care for older people throughout the country? This matter is something about which many Members of this House have rightly complained over many years. Will the Government accept my congratulations on this development? Will the Minister also tell the House when the commission is to be fully operational?
Lord Hunt of Kings Heath: My Lords, I am always happy to accept the congratulations of noble Lords and in particular from my noble friend. I agree with the criticism that the current regulatory activities of health and local authorities have been inconsistent. I believe that the appointment of a commission will lead to a higher consistency and standard of regulation. We hope that the new commission will operate in shadow form from April 2001. It will take over its legal duties in April 2002.
Lord Avebury: My Lords, in the further consultations on the regulations which the Minister mentioned in his Answer, will he seek the opinion of the Advisory Group on National Required Standards? Will he publish any recommendations that it makes?
Lord Hunt of Kings Heath: My Lords, I imagine that it will be for that body itself to publish any recommendations it may make. I shall certainly draw the noble Lord's suggestion to the attention of the people concerned with the consultations.
Earl Howe: My Lords, can the Minister say how care homes are expected to finance the higher physical standards that will be introduced, bearing in mind that many of them cannot make ends meet on the current fee rates paid by local authorities?
Lord Hunt of Kings Heath: My Lords, there is a mixed picture throughout the country. Certainly, some homes feel that local authorities do not pay them sufficient fees; local authorities would argue that there is a market situation. We would encourage the closest possible partnership and relationship between care homes and local authorities. At a national level we are encouraging a concordat. Decisions in relation to funding will be taken by local authorities in the context of the overall increase in resources that is being given to them to fund social services generally. They will need to take that into account when agreeing fees with care homes. Generally, we must remember that while some homes
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will have to find extra resources, many homes are up to the standards that we expect the commission to recommend.

Nice Summit: Tax Veto
2.51 p.m.
Lord Barnett Lord Barnett asked Her Majesty's Government:
Following the Nice European Council, whether the United Kingdom tax veto will necessarily be used on all issues.
Lord McIntosh of Haringey: My Lords, the Government were right to insist at the Nice European Council that tax proposals must remain subject to unanimity. We shall continue to judge every tax proposal on its merits and according to the national interest.
Lord Barnett: My Lords, it may be that my noble friend did not notice that he has not answered my Question. Perhaps I may revert to my specific Question. Suppose, for example, that every European Union state agreed with a measure that would eliminate to a large extent tax evasion and tax fraud. Can I take it that my noble friend and the Government would support such a measure and not veto it?
Lord McIntosh of Haringey: My Lords, I think my Answer was a precise reply to my noble friend's Question. Clearly we try to avoid vetoes wherever we can. We try to achieve the national interest by agreement rather than by veto. If a proposal such as that suggested by my noble friend—and, of course, it is only a supposition on his part—were to be an unalloyed improvement in combating tax fraud, we would not need to veto it; we would approve it on its own merits.
Lord Marlesford: My Lords, will the Minister accept my congratulations on the Government allowing the British people to enjoy their 13th year with a top tax rate of 40 per cent, a rate which was introduced as a result of a radical move by my noble friend Lord Lawson in his 1988 Budget? Does the Minister recognise that in European terms Britain is now something of a tax haven? Does he agree that we must retain the veto because the French constantly call for a level playing field on tax, by which they mean that our tax rates should rise to their levels?
Lord McIntosh of Haringey: My Lords, the noble Lord is merely congratulating the Government on fulfilling their election manifesto, which we have done not only in this case but in many other cases.

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As to the suggestion that the French, or any other European country, are seeking equal levels of taxation throughout Europe, I can say only that: that position was not seriously put forward at Nice and was not a result of Nice.
Lord Peston: My Lords, is it not a commonplace of economics that if there is to be a single market—and, as I understand it, everyone agrees, whatever their other views of the European Union, that there should be a single market—it must be beneficial largely to harmonise taxes? Do the Government accept that, at least, as a minimal proposition of tax policy?
Lord McIntosh of Haringey: My Lords, the Government have never been opposed to tax harmonisation when it is in the interests of this country. There has never been a blanket opposition to any move towards tax harmonisation. What we have opposed is any suggestion that the European Commission or the European Union should have control over our tax policy in this country. That position was sustained and upheld at Nice.
Lord Brittan of Spennithorne: My Lords, does the Minister agree that it will be widely welcomed that he has accepted that there is a distinction to be made between the existence of a veto, which is welcome, and its exercise, which is not always desirable? Does he further agree that the existence of the single market, and even more so the existence of the euro, makes diversity of taxes rather than harmonisation more desirable? Does he further agree that sometimes it may be desirable to join, or even help create, a consensus in favour of measures such as have been suggested for dealing on a European basis with tax avoidance or evasion, and even a common policy in regard to using fiscal measures to encourage the protection of the environment and public health?
Lord McIntosh of Haringey: My Lords, I think I can agree with the first and third of the propositions of the noble Lord, Lord Brittan. As to the question of whether the euro will increase the necessity for diversity in taxation levels or taxation policies—I am not quite sure which he is suggesting—that remains to be seen.
Lord Shore of Stepney: My Lords, is it not the case that the Government have, in the course of the Nice negotiations, surrendered the veto which we previously had over measures to secure so-called enhanced co-operation? Is it not further the case that, as a result, a vanguard group of European countries can now go ahead with tax harmonisation and other measures, whether or not we like it? Was it not
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foolish of us to have abandoned so important a bargaining power without having gained any thing worth while in return?
Lord McIntosh of Haringey: My Lords, I am afraid the first premise on which my noble friend bases his argument is simply untrue. There was no surrender of tax powers of any kind at the Nice Summit.
Lord Shore of Stepney: My Lords, I really must correct that. My noble friend has got it wrong.
Lord Saatchi: My Lords, the noble Lord, Lord Barnett, asked a hypothetical question of the Minister. Perhaps I may ask him a practical question concerning events this week in Strasbourg. Is he familiar with, and can he shed some light on, the so-called RETT Committee, which is the committee on regional policy, transport and tourism? That committee decided on 22nd November, under procedure A5-0345/2000, by a vote of 48 to eight, that member states should impose a new taxing and charging system for public transport, the result of which will be new taxes on the use of cars, motor insurance, parking, roads, railways, stations. air transport and airports, shipping arid ferries, ports, bridges and so on? Will the Government veto this set of new taxes? If so, why did the Labour members of the committee vote for the new tax?
Lord McIntosh of Haringey: My Lords, the Question on the Order Paper refers to matters considered at the Nice European Council. I am not aware that the matter raised by the noble Lord was considered at that summit. I shall be happy to write to him on the subject and place a copy of my reply in the Library.

Clubs: Discriminatory Practices
2.59 p.m.
Lord Faulkner of Worcester Lord Faulkner of Worcester asked Her Majesty's Government:
Whether they plan to amend the Sex Discrimination Act 1975 in the light of the recent continued refusal of the Carlton Club to admit women as full members.
The Minister of State, Department for Education and Employment (Baroness Blackstone): My Lords, our expectation is that private clubs which allow access to membership to both men and women would want voluntarily to put a stop to any discriminatory practices they may have. We recognise that they may need time to do this.
Lord Faulkner of Worcester: My Lords, I thank my noble friend for that Answer. Does she not agree that if a West End club, a golf club or, indeed, a working

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man's club were to exclude people from membership or access to membership because they were black, Jewish or had some kind of disability, there would be a public outcry? It would, of course, be illegal. Is it not even more offensive that private clubs are able to discriminate against people solely because they are women? Is this not a matter of civilised behaviour rather than a matter of political correctness? Will my noble friend join me in commending those members of the Carlton Club who have resigned their membership in protest against this decision? Can she say whether the Leader of the Opposition has joined them, as he said he would?
Baroness Blackstone: My Lords, I have no idea of the intentions of the Leader of the Opposition; nor do I know what standing Mr William Hague has in the Carlton Club or whether his threat to resign will lead those who want change to vote for it or to his persuading more people to do so. Members on the Opposition Benches may be able to answer that question. The Carlton Club was started in 1832 by those who were appalled at the Reform Act, which extended the franchise. So reactionaries started it, and reactionaries may win against progress today.
My noble friend referred to the difference between the Sex Discrimination Act and the Acts covering disability and race relations. Neither the SDA nor the DDA extend to private clubs, whereas the Race Relations Act extends to clubs with more than 25 members. These provisions reflect what Parliament thought appropriate at the time. Attitudes have since changed, and we believe that they will increasingly lead to change on a voluntary basis.
Lord Waddington: My Lords, I am not a member of the Carlton Club and cannot vote on this issue—but why does not the noble Lord join, so that he can? Such a demonstration that he has learnt the error of his ways might go down very well.
Baroness Blackstone: My Lords, I cannot answer for my noble friend.
Lord Molyneaux of Killead: My Lords, can the Minister report any progress within the Women's Institute, given that certain experiments in that regard have not been terribly successful?
Baroness Blackstone: My Lords, it is my belief that most of the activities of women's institutes should be joined by men. I am sure that they would make excellent jam makers, and the more members they can recruit, the better.
Lord Peston: My Lords, would my noble friend care to reflect on the Marxian view on this matter?
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I refer, of course, to Groucho Marx, who said that he would never join a club that would have him as a member. Surely, any woman offered membership of the Carlton Club should simply view the offer with contempt and do something much more useful.
Baroness Blackstone: My Lords, I do not expect to be offered membership of the Carlton Club, so I do not think that I shall be placed in that dilemma.
Earl Ferrers: My Lords, I congratulate the noble Baroness on her original Answer, in which she indicated that the Government are—unusually—prepared to leave people alone for once to do what they want.
Baroness Blackstone: My Lords, I am grateful for the noble Earl's congratulations.
Earl Russell: My Lords, without prejudice to the issue of private clubs—which is a thorny one—does the Minister agree that if legislation were to be triggered by a political club, particularly one with a specific association with Her Majesty's Opposition, the impression given might be unfortunate? Is this a matter that can safely be left to the voters?
Baroness Blackstone: Yes, my Lords.
Baroness Blatch: My Lords, in the light of the Minister's answers, what plans does she have for the "women only" room set aside in this House for women Peers? Secondly, will the Minister be pressing the noble and learned Lord the Lord Chancellor to relinquish his membership of the Garrick Club?
Baroness Blackstone: My Lords, I do not have responsibility for decisions regarding rooms allocated in this House either for women or for men. So far as concerns my noble and learned friend's membership of the Garrick Club, I shall work on him!
Lord Richard: My Lords, is my noble friend aware—I was not, until I had it on the impeccable authority of my noble friend the Chief Whip—that the Farmers' Club has admitted women since its inception in 1842? If those bucolic attitudes are correct for farmers, should they not apply to other clubs as well?
Baroness Blackstone: My Lords, the government view is that this is a matter for voluntary change.Personally—and I think that many of my noble friends agree with me—I prefer mixed membership.

Jobseeker's Allowance: Literacy Testing
3.5 p.m.
Earl Russell Earl Russell asked Her Majesty's Government:
What they expect to be the consequence of their proposed measure to force claimants for the jobseeker's allowance to take a literacy test under pain of benefit sanction; and how they intend to monitor those consequences.
Baroness Blackstone: My Lords, on 5th December my right honourable friend issued Skills for Life, a statement for consultation on how the Government intend to improve the poor levels of adult basic skills in England by bringing about a sea change in the quality of adult learning. The statement set out how we shall pilot aspects of our approach among key target groups, such as the unemployed, by giving them incentives—but not compelling them—to improve their reading and writing. After considering partners' views, we shall launch the full strategy next month.
Earl Russell: My Lords, I did not expect an answer to my Question. Is the Minister aware that most adult illiterates will go to excessive lengths to conceal the fact of their illiteracy and that, therefore, many of them are likely to avoid the tests and suffer the sanctions? It is, therefore, the more important to ask the Minister, not for the first time, what monitoring the Government intend to do of the effect of sanctions. We were reminded recently by Professor Richard Baker that it is possible to conduct an extremely sophisticated study even of a small sample of death rates and to compare it with a balanced sample of similar age and social composition. Does the Minister share my curiosity to know whether being deprived of benefit is more dangerous or less dangerous than being a patient of Dr Harold Shipman?
Baroness Blackstone: My Lords, I am slightly puzzled by the noble Earl's remarks. I am surprised in particular that he has not recognised how important it is to help adult illiterates and to help those with poor basic skills to improve them. That is the thrust of the Government's policy. Perhaps I may remind the noble Earl that in the South East some 60 per cent of those with poor basic skills are in work; they are not unemployed. The Government recently launched a new strategy setting out proposals for pilot schemes to try to find ways of helping adult illiterates to come forward. The noble Earl was far too defeatist in his suggestion that people will not do so—they are coming forward, and the Government are doing far more to help them to come forward.
To return to my initial Answer, we do not have plans to compel people; however, we do have plans to find ways to provide incentives to unemployed people to
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come forward. The Government's intention is to find ways of testing people so that they can be helped and be given opportunities to attend appropriate courses.
Baroness Blatch: My Lords, however well intentioned the Government's plans, given the present crisis in teacher numbers where will the teachers come from to provide literacy classes?
Baroness Blackstone: My Lords, the people involved in providing classes in adult literacy are quite different from those who are employed in our schools. There is no shortage of people wanting to work with adults who have literacy problems. There is a problem in regard to improving their training, and the Government are addressing that.
Baroness Carnegy of Lour: My Lords, the suggestion that literacy training should be linked to application for benefit was originally made when the noble Lord, Lord Young of Graffham, was at the Dispatch Box opposite. If I remember correctly, the reason that it did not work very well was that the approach suggested then was precisely that proposed by the noble Baroness this time; namely, people will be expected to attend classes. Does the Minister appreciate that many of those who suffer in this way will not have the confidence to do so? Does she agree that what is needed is person-to-person tuition—very likely by volunteers? Will the Minister learn the lesson of the past and approach this important matter in that way?
Baroness Blackstone: My Lords, it is not entirely true to say that this rather skilled and difficult work can be undertaken by volunteers. On the whole, I believe that it is necessary for people to be professionally qualified to carry out such work effectively. The noble Baroness is quite right to point out that some adults do not wish to join classes to improve their literacy, but she is perhaps not sufficiently aware of the developments that are taking place in IT. Large numbers of adults can be helped through IT programmes, where they can sit in front of a PC with interactive help from tutors, and where they are not exposed to ridicule or to feelings of inadequacy, as might be the case in a classroom.
Lord Renton: My Lords, bearing in mind that there are mentally handicapped people with such severe learning difficulties that they will always be illiterate but who, nevertheless, are capable of carrying out strenuous manual work, can the Minister say what the Government propose to do to help them?
Baroness Blackstone: My Lords, in responding to this question, we really ought to focus rather more on the nearly 6 million adults who have poor levels of skills in both literacy and numeracy. A small number of people have learning disabilities such that they may never learn to read, and they need to be helped in many other ways. The Government are doing this both through the provision of improved special educational

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needs assistance in our schools and through making more help available to those with learning difficulties when they become adults.
Lord Avebury: My Lords, can the Minister say whether these literacy tests will be applied to former prisoners? Indeed, considering all the emphasis that has been placed over the past few years on trying to teach prisoners to read and write, would not the Government have knowledge of the standard of literacy of former prisoners?
Baroness Blackstone: Yes, my Lords. The Government are doing very much more to develop prison education, especially in basic skills. We shall ensure that all prison entrants are screened. That may—and should—mean that when people come out of prison their levels of literacy are higher. They will then need to be given more help and guidance about how to carry on improving their skills which will, in turn, help them to obtain jobs and prevent reoffending.
Baroness Byford: My Lords, perhaps I may press the Minister a little further on this point. I was slightly mystified by her earlier response on the question of adult literacy teaching by volunteers. Was the noble Baroness suggesting that those who have done this work in the past will not be qualified to do it in the future? Alternatively, does the noble Baroness not see this as part of this project of trying to encourage more people to improve their literacy?
Baroness Blackstone: My Lords, perhaps I did not make myself clear on this point. It is the Government's view that this is very highly skilled work. Therefore, it cannot easily be undertaken by volunteers without the extensive involvement of professionally trained people. The Government intend to ensure that the vast majority of people involved in teaching adult literacy are trained.

Business
Lord Carter: My Lords, immediately after the speech of the noble Earl, Lord Russell, in the Second Reading debate on the Social Security Fraud Bill, my noble friend Lord Hunt of Kings Heath will, with the leave of the House, repeat in the form of a Statement the answer to a Private Notice Question tabled in the other place on the inquiry regarding recently deceased patients in Bedford Hospital.

Social Security Fraud Bill [H.L.]
3.13 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, I beg to move that this Bill be now read a second time.
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We spend over £100 billion each year on social security. It is our duty to make sure that the system is secure from both fraud and error so that the right money goes to the right people. This duty is reflected in the department's Public Service Agreement, which includes a challenging objective to reduce losses from fraud and error in income support and jobseeker's allowance by 25 per cent by 2004 and by 50 per cent by 2006.
Social security fraud costs at least £2 billion a year—and probably far more. To put that in perspective, I can tell the House that this year we plan to spend £1.7 billion on running the entire Benefits Agency. This level of loss is clearly unacceptable and we are determined to stem the flow. The vast majority of people who claim benefit are honest and it is unfair on both them and the taxpayers who foot the bill that a minority is cheating the benefit system.
A wide variety of frauds are perpetrated against the benefit system ranging from the opportunistic—such as the person who does not tell the Job Centre that he or she has started work—to the highly organised criminal gangs involved in counterfeiting or stealing instruments of payment and running false identity frauds. In just one investigation into the counterfeiting of giro cheques over 50 people have been arrested. Another investigation revealed that a gang had hijacked the identities of 171 people from the Irish Republic. The ring leaders received prison sentences of between three-and-a-half and four years. The fact that one of the gang was also sentenced for possessing a firearm shows that we are not up against amateurs but hardened criminals. Indeed, the latest report by the National Criminal Intelligence Service, whose role it is to assess the threat posed by organised crime, puts benefit fraud, along with drug trafficking, in the high impact category of criminal activities.
The report makes the point that organised crime exploits many illicit markets. Something like 17 per cent of the gangs involved in drug trafficking are also involved in benefit fraud. The two activities may, in some instances, be inextricably linked with the proceeds of benefit fraud going towards the ever larger wholesale purchases of drugs. Along with benefit fraud, the list of other activities such gangs are involved in makes chilling reading. I shall not go through it in its entirety, but it includes arms dealing, extortion, kidnapping, prostitution and child pornography.
I mention those facts not to be sensational, but to make the very serious point that every time we catch one of the gangs involved in benefit fraud and its members end up behind bars we are often putting a stop to a wide range of other serious criminal activities.
The system that we inherited in 1997 had four key weaknesses. Prior to 1995 there was no measurement of the amount of fraud in the system, so the scale of the problem was not understood. That meant that there was no overall strategy for safeguarding the system and, therefore, no meaningful targets which, in turn, meant that there was no objective measure of success. Secondly, the amount of fraud detected was the only

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measure of success. As a result, those paying benefits had the perverse incentive not to worry about preventing fraud because the more that entered the system the easier it was to find it and be rewarded for having found it.
The third weakness was inadequate investment in information technology, resulting in a failure to draw together all the information held on an individual's claims so as to guard against fraud and avoid error. For example, a local authority worker processing a claim for housing benefit did not have automatic access to details of an existing or previous award of income support. Finally, the fourth weakness was a culture throughout the organisation that too often regarded security as a bolt-on extra rather than an integral part of the everyday running of the social security system. There was not enough focus on delivery at the front end; for example, in 1997 two out of five income support claims were paid without enough evidence.
We are determined to secure the system from fraud and error. This is a huge task but we have made a good start. We set out our strategy in Safeguarding Social Security, published March 1999. For the first time we have a plan to secure the system from the first claim to the final payment. We have established a system that provides continuous measurement of levels of fraud and error in income support and jobseeker's allowance. For the first time, we have set a tough target for reducing the amount of fraud and error in the system so that people can judge our success for themselves. As I said, we seek to eradicate fraud and error in income support and jobseeker's allowance by 25 per cent by March 2004 and by half by March 2006. Those are tough, challenging targets.
The National Audit Office supports the approach of setting targets for reducing fraud and error based on regular measurement. We have introduced tighter checks at the gateway to income support before money is paid out, and have already halved the number of income support claims that were paid without enough supporting evidence. That will save over £1 billion during the course of this Parliament.
Putting the system right will take time, but we are already seeing results from the new approach. Figures released at the end of November for benefit paid between April 1999 and March 2000 showed that losses from fraud and error in income support and jobseeker's allowance had dropped by 6.5 per cent. More than 20,000 people were sanctioned or prosecuted in 1999–2000, which represented an increase of nearly 60 per cent on the previous year.
Specialist identity checks, which have been piloted in the Balham area since June 1997 (where there have been over 200 arrests), will operate across the country this year. Cross-checking DSS records and other state records has already saved over £150 million. We have introduced stronger powers to inspect employers' records to check on people who are working while claiming benefit as unemployed which we shall start using this year. Through tighter checks, targeted plans
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and better use of information we are continuing to turn the corner in the battle against fraud. But more needs to be done if we are to meet those challenging targets.
We need to make better use of IT. As a result of the Spending Review 2000, we have secured almost £2 billion for modernising our services. One of those aims is significantly to reduce fraud and error. We currently have the ability to check what claimants tell us with information held by other parts of government. We need to extend this to allow us to check information with new sources. We need to create a strong deterrent for people who are persistently fraudulent.
My noble friend Lord Grabiner, who will speak later this afternoon, was asked in November 1999 to investigate the informal economy. His report was published in March 2000 and it contained a series of recommendations to combat benefit fraud. This Bill carries forward the Government's commitment to combating benefit fraud by turning many of those recommendations into action.
Before turning to the detail of the Bill's proposals, and in case any noble Lords believe that we are talking about ignorance rather than fraud and about the kind of thing that anyone might stumble into and that therefore the DSS response is disproportionate—that is a view that I can understand noble Lords may hold—I wish to give a flavour of the kind of situations we are dealing with on a day-to-day basis.
Fraud takes place when people knowingly lie—I am not talking about accidental error—about their circumstances in order to gain benefit. The main types of fraud include someone who is working but not declaring earnings (including those of a partner). I give the example of a couple who had acquired sufficient funds through working and claiming to build themselves a brand new house. The man claimed he was sick and disabled and his wife received invalid care allowance for looking after him. It transpired that although she was caring for an invalid it was not her husband who was in work. She was in fact working at the local nursing home.
In another investigation, in an attempt to avoid detection, a man set up business as an IT consultant in a town nearly 40 miles away and by pretending to be homeless managed to obtain a local authority flat there. Meanwhile his wife and family stayed in the family home for which he was receiving mortgage assistance along with jobseeker's allowance.
The National Audit Commission has discovered a case of a local authority employee who worked for one local authority while on long-term sick leave from another. This is not a case of innocent error; it is deliberate and knowing fraud. We estimate that this type of error and fraud in income support and jobseeker's allowance costs at least £350 million a year.
A second example of this type of fraud concerns undeclared capital. In one case an income support claimant had failed to tell the department that she had received a large sum by way of damages following an accident. She claimed to have received only £4,000. In

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fact the true amount was well into six figures and had been invested for growth on the advice of a financial consultant who stated in his letter,
"since you do not need the additional income from this capital as your current sources of income by way of your benefits adequately cover your normal living expenses".
We estimate that this type of fraud costs £34 million each year.
Further, there is undeclared income from other sources. I refer to a man who claimed income support but failed to declare that he was receiving an army pension. He was overpaid by £4,000. We estimate that this type of fraud costs £36 million a year.
I refer to family circumstances where people fail to tell us that someone is living with them. It may be hard to establish that because even if a partner is discovered living with them, and they have not declared that partner in terms of their income support claims, the standard response may well be that that person moved in the day before. However, I have come across other family circumstances in the Audit Commission's report. A widow received a pension of £3,000 a year and she died in 1988. Before her death her son had power of attorney over her affairs and continued for 10 years after her death to draw her pension. He also submitted three fraudulent life certificates and obtained £30,000. He went to prison for 15 months.
In another case on the positive side, if I may put it that way, the Contributions Agency recorded a widow as dead even though she received a work's pension and was alive and well but did not receive the DSS pension. In that case we were happy to ensure that she received £40,000 in back payments as a result of data matching.
I refer to residency fraud which involves a person claiming to be living at an address when they are actually living elsewhere. Further, there is identity fraud. The registrar's office referred a case after an application for three "dead" birth certificates from one address. Following investigation five non-UK citizens were prosecuted and convicted. They admitted using false identities. The loss was £42,000.
On top of that we have housing benefit fraud which costs us something like—
Lord Campbell of Croy: My Lords, on the question of identity fraud, I tabled a Question a few months ago asking whether former senior members of MI5 were being brought in to help detect fraud. Will the noble Baroness confirm that that is still the situation? Is MI5 itself now being brought in?
Baroness Hollis of Heigham: My Lords, it is certainly the case that we have been using specialist advice from MI5 to train our own professional investigators. However, as the noble Lord will understand, at the end of the day, the investigation has to be carried out by people who know the social security rules and some of the techniques for evasion.
I return to housing benefit fraud where we are losing through local authorities something like £600 million a year of taxpayers' money. The Audit Commission
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reported a case where someone who worked for a local authority for a number of years claimed income support and housing benefit from an adjacent authority. That resulted in an overpayment of £50,000. Further investigation revealed tenancy fraud as the person was no longer living in the council house for which he received rebate, leaving an unauthorised tenant in occupation. The unauthorised tenant was also committing housing benefit fraud. So it goes on. Fraud corrupts the system. I repeat that we are not talking about the innocent, the ignorant, the illiterate or people who have difficulty with languages stumbling into error. In all of the cases I have mentioned we are talking about knowing and deliberate fraud in which people are working and claiming or have undeclared capital or income which they knowingly and wilfully refuse to declare. This is for the most part, or can be, organised, continuous and systematic fraud that corrupts the system and destroys people's confidence in the integrity of our welfare state.
We estimate that the amount lost to fraud—the figure bears repetition—is at least £2 billion. I hope that I have demonstrated that this fraud is not small time and is not a victimless crime. It is often planned, calculated and costly. It can be widespread and pervasive and it can corrupt. No one in this House would argue that the kind of fraud that I have mentioned would and should be tolerated. However, to cut fraud, we must have the means to do so; hence the Bill.
For every fraud case that we end—the cases I have mentioned are the fraud cases that have come to light and which we have been able to follow up—there are half a dozen others where we lack the powers to determine that fraud has occurred because we lack the powers to collect the appropriate information.
I give just one example of highly likely fraud which we could not determine because we lack the powers until—I hope with your Lordships' consent—this Bill becomes law. We suspected that a claimant was working in the building industry, as he had done frequently in the past. But despite numerous visits scattered between 8.30 in the morning and five o'clock at night, he was never at home. When we finally caught up with him he said that he was vaguely looking for work but could not account for the fact that he was not in on the occasion of a dozen or so visits. No information was given to us as to where he had been that we could check. When we asked to see his bank statements, we saw that there were regular and substantial cheques deposited which the claimant said were there because he was doing a favour for a friend who did not have a bank account. When we asked, however, if he would allow us to check with his bank to confirm the story—if it were true, there should be no problem in checking—he refused. Had we had the powers under the Bill, we might have been able to stop what I think most of us would be pretty sure was fraud. As it was, we could do nothing and he went on his merry way.

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The powers we seek in this Bill help us to reduce that loss through prevention and earlier detection, using the powers to acquire data from the private sector and to secure deterrence, through the powers to remove benefit from persistent benefit offenders and the swift, effective punishment of collusive employers.
Turning now to measures proposed by this Bill, one of the key recommendations in the report of my noble friend Lord Grabiner on the informal economy was a power to take benefits away from people who persistently abused the benefit system. For the vast majority of benefit cheats, their first conviction is their last because the whole process of being interviewed under caution, appearing in court, being sentenced and perhaps finding themselves in their local paper is salutary. However, there are some who continue to offend. They must be made to realise that they cannot abuse the benefit system with impunity.
This Bill provides that those convicted of benefit fraud by the courts will be warned that a further conviction by the courts within three years would mean that they could lose benefits for a period of 13 weeks. This would happen when they defraud virtually any social security benefit. These are known as disqualifying benefits. But the sanction itself will apply to a smaller range, the sanctionable benefits. We will not apply the sanction to benefits which are specifically for children (child benefit and guardian's allowance) nor to those which meet the extra costs of disability (DLA or attendance allowance). Nor will we sanction retirement pension, as research has shown this benefit to be virtually free of fraud by retirement pensioners.
The measures are intended to be tough but, as with other sanctions in the social security system, they include fall-back provisions, and rightly so, to protect the vulnerable and those dependent on them, in particular the families of those who rely on income-related benefits. They will be able to apply for help under a hardship scheme if their other resources are insufficient to prevent hardship. They will be paid at a rate which reduces the offender's personal allowance by 40 per cent—or 20 per cent for cases of particular risk; for example, where a member of the household is seriously ill. Benefit levels for the rest of the household would be unaffected. For people on income support, access to such a scheme would be automatic. Housing benefit would remain in payment, as would access to other benefits such as milk tokens and free school meals.
The scheme is a close reflection of the hardship scheme which already operates for labour market sanctions, which has been tried and tested. We believe this scheme is fair, in that it strikes the right balance between, on the one hand, a punishment which brings home the point that fraud will not be tolerated, and on the other, ensures that offenders, and their families in particular, do not suffer unduly.
I should stress that the main aim of this measure is deterrence. We do not want to see it applied to large numbers of people; indeed, quite the reverse. The fewer people who are subject to the sanction, the better because that means it is working.
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Over and beyond the deterrent sentence, a second key to cracking benefit fraud identified by my noble friend's report is the need for access to independent information about a claimant's financial and other circumstances. Fraud is committed by people deliberately telling lies or concealing the facts about their circumstances. If we are to succeed in rooting fraud out of the system, we need to be able to check with third parties what people tell us. I referred to the man who said that the money in his bank account was there on behalf of a friend. We could not check that out. If we suspect that a person is claiming benefit and is concealing his earnings from work, cross-checking that information with banks would help to establish the fraud.
The Bill includes measures to allow authorised officers in the DSS and local authorities to require information from specified private and public sector organisations, including banks, building societies and credit reference agencies where we have reasonable grounds. It does not provide powers to pry carte blanche into people's bank accounts and go on fishing trips. The Bill is clear on this point, and the point will also be made clearly in a publicly available code of practice—discussions on that begin next week—which will set out how the powers will be used for all to see.
I should like to make clear to your Lordships what is meant by the phrase "reasonable grounds for suspicion"; otherwise I imagine that noble Lords will seek to press me on that. First, it is important to say that what constitutes reasonable grounds will vary and it is not appropriate to put specific conditions into legislation. But there would be reasonable grounds for suspicion where there were cogent reasons to believe that a person was receiving or claiming benefit fraudulently. Staff authorised to use these powers will need to analyse and record their grounds for the suspicion and they will always consider whether there could be an innocent explanation for any circumstances. We might take into account tip-offs from members of the public, suspicious behaviour on the part of a claimant, or unsatisfactory identity documents.
Objective statistical evidence that a person was disproportionately likely to be fraudulent would also provide reasonable grounds. We know that people who have committed benefit fraud before are more likely to be fraudulent. I stress that the evidence would need to be objective and that it would not be lawful to use these powers to discriminate on grounds such as race or sex.
I appreciate that some of your Lordships may have concerns on the extent to which these new powers would give the department access to what in the normal course of events is confidential information. These powers would not be unique in Europe—indeed, Sweden has wider powers in its legislation. Many other countries do not have the same difficulty because they have national ID cards. One of our difficulties is precisely because we do not.
The department estimates that it loses up to a quarter of a billion pounds each year through housing benefit being paid on empty properties. In some cases

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this will be a calculated fraud in that the address is being used to support a claim, for example, to income support or jobseeker's allowance under a false identity—known in the trade as a "giro drop"; in other words, the fraud is committed by the landlord who does not tell the local authority that the tenant has moved out but continues to collect the giro. In other instances the tenant simply abandons the property without bothering to tell the landlord or local authority. For that kind of fraud, it will help us if we can obtain information from the utility companies about abnormal levels of consumption which may indicate benefit fraud. If, for example, there is no consumption but the giro cheque is being sent out, one could have reasonable grounds for believing that the house is unoccupied and, therefore, that the person has no right to a housing benefit giro.
The social security system is also subject to attack from overseas where people fraudulently claim benefit in more than one country at a time or use false, borrowed or stolen foreign identities to claim benefit fraudulently in the UK. I gave an example earlier of 171 identities hijacked by one gang. In order to combat the growth of transnational benefit fraud, we need to have more routine exchange of information with overseas social security administrations. That will be of mutual assistance. Those powers in the Bill would allow the DSS to supply information to other countries and, where another country had a similar power, would allow exchange back to us. We would establish arrangements to exchange information with other countries only where we are content that the country in question has adequate safeguards in place against the improper use of any information disclosed.
As I have said, people working and claiming benefit—including housing benefit—to which they are not entitled cost the department, we estimate, up to half a billion pounds a year. We have looked beyond the problem itself to one of its major facilitators: too often employers are more than happy to have the state subsidise their wage and national insurance bills by colluding with their employees in committing this type of benefit fraud. They are taking advantage of their workforce by denying them proper terms of employment and they gain unfair advantage in the market place by paying low wages. This is unfair competition against honest employers.
The prosecution of employers who have colluded in benefit fraud can be lengthy and costly and is not always the most effective way of tackling this problem. Obviously we will continue to prosecute the more serious cases, but for the less serious cases the Bill for the first time allows the application of a swift civil penalty that will bring home the message that operating in the informal economy by the employer carries a high price and will not be tolerated. The Bill will strengthen our ability to reach out to employers who collude with employees in such fraud.
The measures provide that an administrative penalty of between £1,000 and £5,000 would be offered to a colluding employer as an alternative to prosecution. The penalty would be subject to the same
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safeguards as currently apply to administrative penalties for claimants. The employer will have the option of having the court decide the case; if an employer accepts the penalty as an alternative to going to court, he will have up to 28 days to change his mind but he may prefer the fine to the court prosecution; and it would be quicker and more efficacious from the department's point of view.
A great deal of fraud, estimated as up to 70 per cent, occurs not at the start of a claim but afterwards when changes of circumstance—the claimant has gone back to work or "repartnered"—which affect benefit entitlement go unreported. Current legislation fails to impose a watertight duty on claimants to report changes and is therefore inadequate. We are reforming those powers to ensure that they are effective, and to make it clear that there is a duty on the part of claimants to report such major changes of circumstance.
Finally, the Bill contains three tidying-up measures. First, it will clarify the legislation which enables prosecution when claimants deliberately fail to report changes of circumstance. Secondly, it enables the DSS and local authorities to act together in offering administrative penalties in place of prosecution in cases involving housing benefit and council tax benefit as well as a DSS administered benefit. Thirdly, the Bill will strengthen arrangements for the supply of information by local authorities to the DSS by specifying in directions rather than regulations what information is required from local authorities. It will also bring Scottish legislation on the timing of prosecutions into line with that for England and Wales.
Those are important measures. They are not directed against the innocent, the erroneous or people who could reasonably not have understood that some change in their circumstances makes them open to fraud. We are talking about serious, persistent, knowing, collusive fraud, so certified by magistrates in court. If such a person repeats the offence after that, the benefit penalty will kick in.
I am sure that your Lordships agree that it is not unreasonable that someone who defrauds the system not just once, but twice, as established by law, should not continue to receive benefit. I therefore hope for the support of your Lordships.
Lord Mishcon: My Lords, before my noble friend sits down, I wonder whether she will excuse my ignorance, if ignorance it be, but are the documents that a person is required to sign before benefit is granted, giving details of their assets, their income and other vital information, made subject to a declaration under the Statutory Declarations Act 1835? If they are, a charge of perjury is also relevant. That would also be a deterrent for people who may be wobbling on the edge of doing something fraudulent and may persuade them that the penalties are much too serious.
Baroness Hollis of Heigham: My Lords, applicants certainly have to sign documents testifying that the information that they have given is correct. I shall ask

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my officials whether we can strengthen the point that my noble friend has suggested. If people sign a document that they know to be incorrect, they may risk a charge of perjury. It would be useful to strengthen the provisions to discourage people back to the side of virtue.
Lord Goodhart: My Lords, following on from that, would not the statutory declaration have to be made in front of a solicitor? That is inconceivable for most applications. We are talking about fraud, but not perjury.
Baroness Hollis of Heigham: My Lords, that may well be the case, but at the moment an applicant has to sign the documents stating that the information given is correct. In that sense they can be said to have given false information if it is not correct. One of our difficulties is that when people do so, we have no definable offence with which to charge them.
Moved, That the Bill be now read a second time.—(Baroness Hollis of Heigham.)
3.43 p.m.
Lord Higgins: My Lords, in 1997, the Labour Party manifesto promised tough action to combat benefit fraud. In 1998, those objectives were repeated in a Green Paper on welfare. In 1999, the Government launched a formal strategy for tackling the problem and in July 2000 more consultative documents were issued. In all, more than 40 statements have been made on the subject since the Government came to office. In the meantime, a large and important problem that the Government should tackle has remained.
As the Minister has pointed out, it is difficult to estimate the size of the problem. The Government's estimated cost to the taxpayer of £2 billion a year is probably the minimum. The figure may be as high as £7 billion. It is clearly a major problem.
With their repeated statements but little action, the Government have failed to make effective use of the considerable powers that they already have. One has only to look at the report of the Public Accounts Committee on housing benefit fraud to see that. One official from the Department of Social Security said that only 700 out of 200,000 detected cases were successfully prosecuted. I understand that the housing benefit form used by local authorities has never been standardised. There must be one version that would be best for all. Many issues have not been effectively pursued. I shall come to a much more important example in a moment.
We are anxious that effective action should be taken. The timing of the Bill may be unfortunate in two respects. It is true that the consultative exercise was on the measures that the Bill now contains, but the wording of the Bill was published only on 18th December and we are debating it on the second day back after the Recess. It has been difficult for outside organisations to respond on the details. I am still receiving representations and no doubt will continue to do so for some days to come.
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There is also a timing problem because of the speculation that there is likely to be a general election in April or May. Even if the election is on a longer time-scale, we shall be up against time pressures. That puts a heavy responsibility on your Lordships. If Parliament is curtailed, there may be very little time for another place to consider the matter, in which case the Government may then use their massive majority to force the Bill through on a guillotine. We have a difficult task ahead of us to consider the details of the Bill.
While we understand and support the objective of the Bill, we share the considerable reservations that some outside bodies have expressed on a number of important aspects relating to human rights, the effect on the Data Protection Acts, the burden on business, the costs and efficiency of the operation and the sanctions and penalties to which the Minister referred at the end of her speech. We shall need to examine all those issues in great detail in Committee and at subsequent stages.
We have been helped by two important reports. The Scampion report was set up by the Government and published in February 2000. The other report was produced by the noble Lord, Lord Grabiner, whom I am glad to see in his place. The Minister referred to the noble Lord's report, but not to the Scampion report. The only comment that I can find on the Government's attitude to its recommendations is a response by Mr Rooker in another place to a parliamentary Question by Mr Willetts. The Answer says that the Government will strengthen the central organised fraud investigation service. Am I right in thinking that that means that the Government are setting up a single benefits investigation agency combining the present Benefits Agency security investigative service and the benefits fraud investigative service? It would also be helpful to know whether any of the other proposals in the Scampion report that the Government propose to accept require legislation. If so, it would be convenient to incorporate them in the Bill rather than wait for another occasion.
The report by the noble Lord, Lord Grabiner, was very cogent and, in some ways, easy to read, given the subject matter. If I may presume to say so, it was a very elegant report. That is not to say that I agree with everything in it. Personally, I am a little less dismissive of the idea of an amnesty, which he considered and dismissed. The Government have resorted to amnesties in various ways in Northern Ireland and there was also a national amnesty for firearms. As the noble Lord's report says, we need to get people out of the informal, illegal economy and into the legitimate economy. An amnesty may be one way of securing a rapid improvement among people who have drifted into fraud one way or another, perhaps by continuing to draw the same benefit after they start living with someone else. As I say, it is a personal view, but I believe that we should perhaps give the matter a little more consideration.
In his report the noble Lord makes a number of important recommendations. By and large the Government have accepted them and incorporated

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them in the Bill. I shall turn to the details in a moment. However, I want to query whether the existing measures are being used efficiently. In his report, the noble Lord, Lord Grabiner, quotes a figure which suggests that for every pound expended on trying to deal with benefit fraud, the return may be £1.20. He says that one must place that against the priorities of the Government. With regard to other questions of fraud in relation to large business, the return may be as high as £1.57 for every pound expended.
Leaving the law on one side and turning to economics, it is a well established principle that if one wants to maximise one's returns, one carries out an activity until the margin of cost is equal to the margin of revenue. Apart from the provisions in this Bill, clearly that is not happening. The Government are simply not making available the resources which, as we understand it, will lead to a net gain to the Exchequer. Before we examine the further measures in the Bill, I believe that we need to consider most carefully the noble Lord's suggestion that the Government should concentrate on big business rather than the minor frauds with which the Bill deals primarily. As I said, we have misgivings and I believe that outside bodies have also expressed misgivings about the proposals.
The Government placed in the Library a summary of the responses to their consultative document on these issues, which reflected the noble Lord's report. Perhaps I may say that it is a very "summary" summary. It would have been—and still will be—extremely helpful for us to know the exact responses of those bodies, not least when we reach Committee stage, which I understand is to take place shortly. The noble Baroness raises her eyebrows. We shall leave it to the usual channels.
However, the point that I make is that the whole of the reports should be placed in the Library without delay. That will provide the basis for considering in Committee the considerable misgivings which have been expressed by a large number of outside bodies. Obviously, on this occasion I do not have time to go into great detail about the various representations which have been and, indeed, are being made. However, we need to know not the summary of the responses but the precise misgivings which outside bodies may have, particularly those affected by the various organisations mentioned in Clause 1.
Considerable concerns exist in relation to the human rights aspect of the matter and, indeed, in relation to the more narrow question of the way in which the Government effectively are knocking a large hole in the existing protections so far as concerns data protection. Effectively, the Government are providing cover for the various bodies set out in Clause 1, if I may express it that way, for revealing information, which, under existing law, they would not be entitled to do.
I believe that in particular concern has been expressed by the British Bankers' Association and others about the scope which the Bill now gives for fishing expeditions. Rather than genuinely believing that a particular individual or group of people is committing fraud, information will simply be obtained
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under a broadly based system. I believe that we shall need to consider the issue of such fishing expeditions and rule them out. Perhaps we shall need to make an amendment on the face of the Bill. The Minister said that a code of conduct is about to be produced. We should like to see it. However, as she well knows, a code of conduct is not the same as a provision written into the legislation.
Perhaps I may refer to one or two representations which have been received so far. I received one only this morning from the local authorities organisation. That body is concerned that the cost of operating the provisions of the Bill will fall on local authorities, whereas the benefit of stopping the fraud will go directly to the Exchequer. No doubt that is a point that we shall need to consider. I believe that the whole relationship between central government and local authorities in tackling this problem requires most careful review.
Perhaps I may also pick up on a point made by the National Association of Citizens Advice Bureaux. That organisation is concerned about confidentiality and has noted with pleasure the fact that it is not covered by the Bill. However, it is worried that that may become the case by statutory instrument subsequently. I believe that a clear assurance needs to be made on that point.
Baroness Hollis of Heigham: My Lords, I can give the noble Lord that assurance.
Lord Higgins: My Lords, I am most grateful for that rapid reply. As we well know, the citizens advice bureaux do a magnificent job in the field of social security and it would be sad if their activities were to be inhibited.
The banks are concerned about various aspects of the Bill; for example, in relation to the civil liberties of their customers. It is rather like the famous after-dinner joke of Lord Denning, who used to say that he once appeared before a judge and said that he represented a God-fearing limited liability company. I believe that when the banks say that they are concerned about their customers' civil liberties, that may be a little ultra mires.
There are other areas of concern; for example, in relation to credit agencies. I believe that it is not beyond the realms of possibility that if the Department of Social Security says to a credit agency, "We are suspicious about Mr Bloggs", that is unlikely to improve Mr Bloggs' future rating with the credit agency. A similar concern has been expressed by a group called CIFAS, which is anxious to be treated on a reciprocal basis: if it provides information to the Government, the Government should provide it with information. Again, that raises difficult questions and we begin to enter something of a minefield so far as concerns safeguards.
Leaving to one side the point that I have just made, I believe that the banks have a real cause for concern not only as regards the disclosure of information but also as regards the position of their staff; for example,

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where an individual may be held responsible for giving information wrongly or perhaps giving wrong information. The banks stress that they currently have safeguards in place which protect them. They are worried that they will no longer be protected as fully under this Bill as they might wish to be.
I turn to the question of the burden on business. Paragraph 187 of the Explanatory Notes—and, indeed, the regulatory impact memorandum—suggests that the annual cost to business will be between £2.5 million and £7.6 million. I am not clear whether that is the net cost after the reimbursement of costs for which provision is made in the Bill. Perhaps the Minister could confirm whether that cost is net or gross.
In any event, it issues rather strange that the organisations which may be reimbursed are not the same as those which appear in Clause 1. The clause which relates to reimbursement covers rather fewer organisations and it appears that some of the burden will fall on individual companies. The regulatory assessment states that the Government do not normally pay for costs which are imposed on business by statute. That may be so, but it does not make the costs any less so far as concerns business. That is, perhaps, yet another form of stealth tax. It may involve immediate costs and the general disruption of a business, if the Government make many applications about numerous individual cases or about collective cases, if that more organised form of fraud is committed.
Outside bodies have made the important point that the request for information should be centralised in the sense that they should not receive requests for information from half a dozen different government departments, such as the Inland Revenue, Customs and Excise and the Benefits Agency; requests should be made through only one route. Similarly, a request should be made only to a particular part of the organisation from which the information is requested. That would not permit an official from the relevant local authority who is concerned with housing benefit to go to a local bank and say, "I should like to know about Mr Bloggs". That would be dangerous in many ways.
I am rather concerned about the extent to which the information will be available in a wider field. We know that such matters are not necessarily water-tight. The regulatory assessment suggests that one might state, "We might just ask for a copy of your latest bank statement". I should not be happy if my bank statement were to start floating around a local authority office. We need to consider the serious issues of security that are raised. From the point of view of the government department and the individual organisation of which information is asked, there appears to be a strong case for centralising the request for information. We need a one-channel system if we are to deal with the matter effectively.
I am conscious of the time and of the fact that other noble Lords wish to speak. In her closing remarks, the Minister discussed the question of penalties. Those of
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us who were involved with the passage of the Child Support, Pensions and Social Security Act 2000 and with previous relevant legislation know that several problems are associated with the withdrawal of benefit. That involves the so-called Windlesham amendment. The Minister is clearly sensitive to that issue, as are Members on the Liberal Benches and on these Benches. Clearly, the Government have gone to considerable lengths to safeguard their position. For example, they said that if the penalty involved reducing income support to only 10p a week, the relevant sum would not fall below that. That means that the related passported benefits would not also be withdrawn—that would be a draconian step. On the other hand, the more that one softens the benefit penalties in the manner prescribed in the Bill, the less effective those penalties are likely to be. A balance needs to be struck, and we shall consider it when we come to the Committee stage.
This is an important Bill. I believe that all noble Lords share its objective, but it has to be viewed in a wider context. Much more can be done outside the Bill, in terms of tackling benefit fraud. Too little has been done until now, and more must be done. We must also ensure that the Bill's balance between achieving its objective and avoiding the dangers that are implicit in several of its proposals are carefully considered. I am sure that we shall do that when we come to the Bill's later stages.
4.3 p.m.
Earl Russell: My Lords, perhaps I may first congratulate the Minister on her opening speech. She spoke with great balance, discretion and care.
The points that the Minister made through her examples are well taken. I accept that, although error and fraud may be confused at the margins, we are dealing with a considerable quantity of real fraud involving malice aforethought. I have encountered most of the types of fraud that she described. Through our business in the House, I have read or heard about many cases. I have also come across one or two examples that are rather worse than any that she mentioned. I recently heard of someone who was using social security fraud to raise capital to run his business as a drug dealer. That is worse than anything that the Minister mentioned.
The problem is not particularly new. I know of the case of a half-pay captain who retired on half pay in 1709. The pension remained in payment until 1812. It is possible that that was not fraudulent, but I find it exceedingly improbable. On the other hand, I am rather sceptical about any attempt to estimate the amount of fraud. I have not forgotten Lord Boyd-Carpenter asking the then Minister, the noble Viscount, Lord Astor, how the government can know the amount of undetected fraud. I have not heard an answer to that question, and I do not expect to.
Clearly, something has to be done about the problem, which is a crime and a sin. We are all against it, and we all want to see the problem reduced. All

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fraud is committed at someone else's expense. However, a balance needs to be struck. We want to fight fraud, to preserve confidentiality and to secure the delivery of benefit to those in need as fast as possible. Those are three good objectives, but we must admit that they are capable of conflicting with one another. When they do, striking a balance is a delicate and sometimes rather difficult operation.
The Minister will be aware that I have a growing reservation about the usefulness of single-purpose Bills. When we consider such Bills, it is extremely easy for the single purpose to become the only matter that is in our minds. The striking of the balance is therefore addressed with a great deal less care than it would be in a Bill that reformed the law on social security in general.
I was a great deal more sympathetic to the Bill before I read it in detail. It addresses real problems but, in practice, it creates many difficulties. On the code of practice, incidentally, to which the noble Lord, Lord Higgins, referred, it would be of material assistance to us if the code could be made available to us before we go into Committee. That would save us a good deal of time.
I thank the Minister and her office for the memorandum I received this morning addressing the way in which the Bill was drafted. It interpolated the Bill and related it to 2,000 amendments to the Social Security Administration Act 1992. That was most welcome and most appreciated. However, those in the world at large who have to construe the Bill will not have the benefit of advice from the Minister's private office explaining how that should be done. We should think about the difficulties we create by such an acrostic method of legislation.
We should consider the many questions that are raised by the use of such powers. First, we should consider to whom the information is to be made available. Misgivings have been expressed about how widely disseminated within the Department of Social Security the information will be. Clearly, the more widely disseminated it is, the more risk there will be of its spreading outside its proper circle and being used for something other than its proper purposes. That relates again to the question of the purpose for which the information can be used.
In common with other noble Lords, I have recently been reading obituaries of the late George Carman. The name of Gillian Taylforth comes to mind. She supplied information in good faith, as by law bound, to the police but found that information on the front page of the Sun. I remember a case during the previous Parliament of a Member of Parliament who was found unconscious and drunk in Great Smith Street. The police took no action and laid no charges, but details of the episode were found in the pages of the Daily Mail. Clearly, there is always the possibility of information, especially if it is scandalous, being disseminated in quarters and for purposes for which it was not designed. I should be happier if there were a
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reservation in the Bill banning the use of the information for purposes other than that of fighting benefit fraud.
On what grounds will the information be required, and of whom? I have no objection to the phrase, "reasonable ground for suspicion", and take the Minister's points on that. But when we look at page 2 of the Bill, the question arises, suspicion of what? That needs a little more thought than has so far been given to the matter. If we look at what will be new subsection (2C) on page 2, we see that it says that information may be required if there are reasonable grounds for suspicion that,
"a person … has contravened, is contravening or is likely to contravene provisions of the relevant legislation [or] … has committed, is committing or is likely to commit a benefit offence".
That reminds me of my old childhood example of the children before a juvenile court who were prosecuted for loitering with intent to press button B. The magistrates very properly threw it out. We cannot get the proof of something that is in the future. The criminal law is not in the business of weather forecasting, and as soon as it goes into it, it becomes as unreliable as the weather forecasts are already. That is no fault of the weather forecasters; we live in an unpredictable climate, politically as well as meteorologically.
But what worries me most is paragraph (c) of the new subsection. Information may be required of,
"a person belonging to any description of persons who are more likely than others to fall within paragraph (a) or (b) above".
I heard the Minister say that that cannot be used on grounds of race or gender. She is correct and I am glad she said that. But I imagine the Minister will agree that, though it is illegal so to use it, there is little doubt that it will be so used in practice. Those doing it may be unaware that they are doing it, which is part of the problem of institutional racism, or will dress it up so that it does not appear that they are so doing. It happens in all quarters. As I heard Commander Grieve admitting on "Newsnight" last night—he is a man whom I would treat as an extremely good, reliable and responsible source—it would not be illegal to use that paragraph on grounds, for example, of sexual orientation.
The Minister mentioned previous offences. But that offends the basic common law principle of presumption of innocence. If we go after people because they have committed previous offences, we get into the area of hunting people because of what they have done in the past, and there is then the real danger of a vendetta. I hope that the Minister will think for herself and take that out voluntarily before I have to table an amendment on it. She has a great deal of sense; I think she may.
Liberty raised the question of compatibility with the European Convention on Human Rights. I am not a lawyer. I shall not give a verdict on that. But it appears to me to be the case that under Article 8.2 of the convention, the question to be addressed is whether the remedy is proportional to the mischief. It seems to me possible that the greater the degree of safeguards in

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the Bill, the greater the likelihood that the court will find that the remedy should be proportional to the problem. That is an amateur opinion. The Minister will no doubt be able to obtain expert advice, from behind her as well as from other quarters, and I shall listen to that with interest.
Again, the question arises as to who may be added to the list of those from whom information may be required. Under subsection (3) on page 3, we see that "any person" may be added. That is a little sweeping. I heard the Minister's reassurance about the CAB and was extremely grateful for it. But the Minister must realise that, like the Pope, she cannot bind her successors. Any future Minister in her position may well give a different answer. That is the trouble with leaving unexploded vires lying about in statutes. As far as I can see, that provision could perfectly well be used if a paper ran a story on social security fraud—as papers do from time to time—to require an editor to reveal his sources. If that is not so, I shall be extremely grateful to be told that it is not; and to be told why it is not. The question may be worth pursuing.
Some practical points arise from the Bill. It has been alleged in the press that the Data Protection Registrar has misgivings about this Bill. I shall be glad to know whether that is actually the case. If it is, on what grounds? And what efforts have been made to allay those misgivings?
I am interested in the point made by the National Housing Federation on the question of how far the landlord is responsible for reporting change of circumstance. That is, as I understand it, a complicated "horses for courses" situation depending largely on who receives the housing benefit. But clarification is needed and, since it is not clearly understood by those who will be affected by it, such clarification will be extremely welcome. The whole question of treatment of change of circumstances in housing benefit law needs much thought.
Then we come to the remedies suggested by the Minister under this Bill: first, disentitlement to benefit. Clearly there must be punishment for fraud and that punishment must be sufficient to deter. But in my scale of consequences, disentitlement is arguably a more severe punishment than imprisonment. I wonder therefore whether it is exactly proportional. I can see a strong case for imprisonment. But leaving people with no visible means of subsistence is something which the Minister knows, and has known for a long time, gives me profound misgivings.
What if the person concerned belongs to a category which is in no good position to do anything about it? Suppose it is a woman who left home because of domestic violence. Women in that situation often do not have their records in particularly good order. Or suppose it is a recent ex-prisoner, immediately discharged; a person with a criminal record—that is tautological—and therefore knowing, if they are destitute, where they can go to do something about it. It is not a good idea to draft legislation with the purpose of leading us into temptation. That is done enough by the forced circumstances anyway. We do not need to do it any more.
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We also need to consider—the Minister knows it is crucial to us on these Benches—what monitoring will be done of the consequence of depriving people of benefit; in particular, whether the Government will monitor, first, conviction rates of those disentitled to benefit against those of others in a similar economic position; secondly, the death rates of those disentitled against those in a similar economic position; and, thirdly, the rates of hospital admission against those in a similar economic position. We need to consider how far that may be properly done by delegated powers.
I leave the Minister with one final point relating to the exchange of information with overseas governments. I would welcome a categorical assurance that under no circumstances will anybody who has applied for political asylum have information about them made available to the governments from which they asked that asylum. We have a great deal of work in front of us. But that is all I wish to say at the moment.

Bedford Hospital: Storage of Corpses
4.19 p.m.
Lord Hunt of Kings Heath: My Lords, with the leave of the House, I shall repeat as a Statement the Answer given this afternoon by my right honourable friend the Secretary of State for Health to a Private Notice Question in another place. The Answer is as follows:
"Mr Speaker, as Members of the House are aware, last week the bodies of deceased patients were inappropriately kept in a chapel of rest at Bedford Hospital.
"Let me say at the outset that what happened in Bedford Hospital was totally and utterly unacceptable. Patients and their relatives have a right to be treated with dignity and respect at all times in the NHS. In this case they were not.
"We have a responsibility to get to the bottom of what went wrong in Bedford. Over the weekend an investigation was begun by the Eastern Regional Office of the NHS Executive. An initial report has been made verbally to the NHS Chief Executive, Mr Nigel Crisp. The final report of the full investigation will be published. I will ensure it is placed in the Library of the House.
"I am advised by Mr Crisp that the initial findings in respect of this incident found a failure of management within the trust. The trust's chief executive, Mr Ken Williams, has now stepped down. In the circumstances that was the right thing to do.
"In the past there were no clear guidelines about how dignity and respect for deceased patients should be ensured. The NHS now has guidelines that emphasise the need for standards to respect patients' dignity. They were issued by my department to every hospital in May last year. The guidance was repeated in November last year. In Bedford that guidance was not adequately implemented.

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"The preliminary inquiries appear to show that in the past when the mortuary facility was full, the deceased were kept in the chapel of rest. Following the issuing of guidance in May, an extra purpose-built mortuary facility was purchased at a cost of £20,000. I am advised that the additional facility was at no stage full. It was functioning normally apart from a minor problem with the doors. The problem was reported on Monday of last week but final action was not taken until Thursday. During that period last week bodies were placed inappropriately in the chapel of rest. There were no policies or procedures in place in the hospital to ensure that the bodies of deceased patients were treated with respect and dignity at all times.
"This was not a cash problem in the hospital. It was not a capacity problem in the hospital. It was a management problem in the hospital: a failure to implement clear national guidance and a failure to resolve immediately a clear local problem. The issue should and could have been sorted out on the spot.
"Instead, deceased patients were denied their dignity. That should never happen in any part of the NHS. Those who say that what happened in one part of Bedford Hospital is a reflection of what happens across NHS hospitals are wrong. They do not do justice to the efforts of the 1 million people who work in the health service who strive day in, day out to maintain and raise standards of care for patients.
"It is deeply regrettable that in Bedford decisions taken inside the hospital prevented deceased patients receiving the respect that their relatives have every right to expect from an NHS hospital.
"Yesterday the NHS Chief Executive wrote to all trusts reminding them of their duty to treat the deceased with dignity and sensitivity in line with the guidance issued last year. The Health and Safety Executive will be visiting Bedford Hospital on 18th January. The independent inspectorate for the NHS, the Commission for Health Improvement, will begin its inspection on 29th January. The inspection will now cover this matter as part of its wider inspection of the hospital.
"The events in Bedford last week should never have happened. They need never have happened. I am deeply sorry that they did".
My Lords, that concludes the Answer.
4.23 p.m.
Earl Howe: My Lords, I thank the Minister for repeating that Answer. Since the weekend the press reports about the treatment of dead bodies in Bedford Hospital have shocked the country. I am sure that all noble Lords would wish to sympathise with the relatives of the deceased patients involved. It is not simply the photographic images that have distressed us, nor, indeed, the fact that dead patients could be treated with such indignity or apparent lack of respect, but what these incidents appear to tell us about the workings of this hospital and about the NHS in general.
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I have a number of questions for the Minister. Is it true that the practice of storing bodies in the hospital chapel has been going on for months and that NHS guidance issued last May has been consistently ignored? Can the Minister confirm what he repeated in the Answer; namely, that the chief executive of the trust, Mr Ken Williams, has resigned? I ask that because although the resignation of Mr Williams has been extensively reported, it is also alleged that at a hospital staff meeting last night Mr Williams was described as having "stepped aside". Stepping aside does not sound quite the same as resigning. I should be grateful for clarification.
When the Commission for Health Improvement looks at Bedford Hospital, will Ministers take steps to satisfy themselves that the board of the trust is competent to meet its responsibilities? The scandal has been attributed to the failure of the trust's management in general. However, is it the case that the chairman of the trust was asked to resign and declined? In asking that, I intend no personal slight on Professor Blowers, the trust chairman. However, it is striking that not only he but two of the other four members of the board are declared activists of the Labour Party and were appointed in the latter part of 1997; in other words, a majority of the board are openly Labour Party supporters. The Labour Party document entitled Renewing the NHS:Labour's Agenda for a Healthier Britain, published in June 1995 states:
"Health authorities and hospital boards will not be stuffed full of party political placemen".
As the Minister will recall, Dame Rennie Fritchie, the Commissioner for Public Appointments, published a report last year in which she stated:
"candidates who declare political activity on behalf of the Labour Party—
Lord Shepherd: My Lords, I thank the noble Earl for giving way. Perhaps I may ask him the relevance of what he now says to the Statement which has been given? I cannot see any relevance.
Earl Howe: My Lords, I think that the words of Dame Rennie Fritchie will answer the noble Lord's question. I have already asked the Minister whether he and his fellow Ministers will examine the competence of the board of the hospital. The point made by Dame Rennie was that:
"Less successful candidates have been brought forward to replace those identified on merit".
She also stated that before 1997 there were fewer political appointments, and that those that were made were far more equally balanced between the two major parties. I prejudge nothing, but I suggest to the Minister that the Government would be wise to look again at that report. I ask the Minister what steps the Government are taking to make the appointment process less politically skewed in favour of the Labour Party.
However depressing the incident, the other sad part of this event is its wider message. Can the Minister confirm that much of the effort of trust boards up and down the country is still being directed towards meeting

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centrally-imposed waiting list targets, and that hospitals run the risk of being financially penalised if those targets are not met?
Is it also not the case that many hospitals are having to cut non-clinical services in order to find the efficiency savings laid down by Ministers centrally? If that is so, is it not central Government, as well as the management of the hospital, which should accept responsibility for what happened at Bedford Hospital? Are not the incidents also eloquent testimony to the view expressed by Sir Alan Langlands, the outgoing NHS Chief Executive who said last year at the NHS Confederation Conference:
"people don't have the space to reflect on the work they are doing. They don't have enough time—given the torrent of instructions from the centre—to work through the needs of their local communities and to manage them in a way that makes sense locally"?
I put it to the Minister that it is that syndrome, one that his party specifically pledged to banish, that lies behind the shocking events in Bedford.
4.29 p.m.
Lord Clement-Jones: My Lords, I too welcome the Answer repeated by the Minister. Clearly, this has been a deplorable lapse of management at Bedford Hospital. However, the chief executive has done the honourable thing; he has resigned, whether willingly or not. It is worth expressing regret about his going. The hospital was, by repute, a good hospital. Indeed, in view of its track record, the incident is somewhat surprising. As a nation we expect proper respect for deceased patients and I welcome the steps taken by Nigel Crisp, Chief Executive of the NHS, and by the Secretary of State, in moving swiftly to deal with the situation in a particular hospital. However, I do not believe in "micro-management" by either House of Parliament. I certainly do not believe in mounting a case about the nature of the hospital trust in these circumstances, based on a pretty flimsy case.
The question which we as a House should be addressing is whether wider lessons can be learnt from what happened in the hospital. We know that guidelines are not always enforced and we want to know whether there is a failure to enforce them in other hospitals. Is this a one-off problem or does it apply to other hospitals? Are there adequate mortuary facilities across the country? What happens when mortuary facilities are not useable or when they are full? Are the proper reporting-up procedures set out in guidelines so that people responsible are automatically bound to report problems to the chief executive or the medical director? Do the guidelines need changing? Are they adequate in the circumstances of this case?
I note what the Minister says about resources and I accept it, but the question whether there is a resource issue remains. We have heard that a 2 per cent cash economy is expected within the NHS and want to know whether that is a factor in these circumstances?
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Finally, as regards the review of the work of hospitals conducted by the Commission for Health Improvement, can the Minister undertake that elements of it which relate to mortuary services and this case will be published?
4.31 p.m.
Lord Hunt of Kings Heath: My Lords, I am grateful to the noble Earl, Lord Howe, and the noble Lord, Lord Clement-Jones, for joining me in expressing sympathy in relation to the events at Bedford Hospital, particularly about the lack of dignity and respect which were afforded to the bodies and to relatives of the patients who died in the hospital. I can confirm to the noble Earl that the chapel was used once between 9th and 11th January. It is my understanding that it was also used last winter and in previous winters.
The chief executive of the trust has "stepped down". Those are the words which are used. He is no longer carrying out the responsibilities and duties of the chief executive, but noble Lords will understand that contractual issues must be resolved by the trust board. The important point is that in practical terms he has stepped down as the accountable officer, the chief executive, of the trust.
The noble Earl raised a wider issue in relation to the performance of the trust board. From the preliminary results of the inquiry which the chief executive of the NHS received, there is no doubt that the core problem was a failure of management within the trust. However, ultimately the boards of trusts must accept responsibility for what occurs in their name. When we receive a fuller report from the director of the regional office we shall look at guidance and at the performance of the board as a whole.
Furthermore, I have no information or indication that the chairman of the trust board was asked I o resign. I understand that in the light of yesterday's review of all the events the chief executive decided it was appropriate to stand down from that position.
The noble Earl, Lord Howe, asked about board appointments. I must say to him that having spent 25 happy years representing the members of those boards, I do not believe that his government had an entirely impartial approach to their appointment. This Government have taken great care to ensure that people appointed are of the highest calibre. As regards the future, he will recall that we are in the process of establishing an independent appointments commission which will begin work in April this year. The whole appointments process will be undertaken by that commission. I fully accept that boards have a great leadership role to play in the NHS. We want to ensure that they do so effectively and we want the highest possible calibre of people to serve as chairs and non-executives.
The noble Earl, Lord Howe, asked about the Government's priorities for the NHS and suggested that waiting list targets and other such initiatives were in some way distorting the management effort of NHS trusts. I absolutely refute that suggestion. I believe it is

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right that tackling waiting is an essential priority for the NHS and that it is right for the Government to identify that as one of their key priorities.
I am a great believer in an effective approach to efficiency savings where they produce savings brought about by efficiency rather than simply by taking money off budgets. Our focus is to ensure that we improve efficiency and we are making good progress in two areas. The first is in shared services in a whole health community where services can be shared between different NHS organisations. There are enormous benefits to be made in terms of quality and financial savings. The second area is procurement because more effective procurement can save large sums of money for the NHS. That is where we want the focus to be in efficiency savings.
I turn to the general issue raised by Sir Alan Langlands, former chief executive of the NHS whom I have always held in the highest regard. There is no doubt that since the NHS began there has been within it a balance, an argument and a tension between central direction and local autonomy. Again, I say to the noble Earl, Lord Howe, that from time to time his Government were not beyond sending out a circular or two to the health service.
The concept that we have developed of earned autonomy is the right one. We are saying to NHS organisations that those who are shown to be effective, those who meet the targets, and those who can show that they can provide an excellent service to the public will be given greater autonomy. Those trusts which are not doing so well can expect greater intervention. I am sure that that is the way to ensure that there is a consistent approach within the NHS while allowing sufficient freedom and autonomy at local level. That will enable the leaders of those organisations to develop them in the most effective way possible.
I believe that I have answered the points raised by the noble Lord, Lord Clement-Jones, about the chief executive and micro-management. As regards the wider lessons to be learnt, following the incident at Bedford the chief executive wrote to every trust in the country reminding them of the guidance which had been issued on 23rd May 2000 in relation to mortuary facilities. It stated:
"NHS organisations should work with local councils to ensure that all services involved in the disposal of bodies, medical certification, registration, coroners, funeral directors and burial/cremation services are in place and adequate out-of-hour services are available. The NHS should ensure that mortuary capacity is adequate to meet peaks in winter deaths and take steps to provide additional facilities where this is likely to be required. Temporary mortuary facilities must meet minimum standards to respect patients' dignity. Refrigerated vehicles or trailers must not be used".
The chief executive has asked all trusts to confirm through regional offices that they are providing mortuary facilities in line with those guidelines, and it is my understanding that assurances have been received from all trusts. In view of that, it is clear that the Bedford incident is very much an isolated one.
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I do not believe that resources is an issue in this case. Bedford Hospital was able to purchase additional mortuary facilities a few weeks ago. The wider issue of whether this country has sufficient mortuary facilities must be seen in the context of our drive to improve the quality of services generally. Under the modernisation programme we have injected a considerable sum of money to help improve facilities. We have required regional offices to pull together the plans of every trust at the end of this financial year, from which we shall be able to see any shortcomings in pathology services and ensure that there is a strategy to improve them.
4.41 p.m.
The Lord Bishop of St Albans: My Lords, there are two chapels in Bedford hospital. Having heard the debate, one could easily gain the impression that the chapel for normal worship or contemplation by patients or families was the building used for the storage of the deceased. That is not so. For the purposes of a number of reports and the Statement in this House, it is more accurate to refer to "chapel of rest". The chapel of rest in Bedford, which I am informed is carpeted, is attached to the mortuary and is the place to which some people are taken if they wish to view the deceased.
All of us deplore a situation in which the deceased are not treated with dignity and respect. However, in my experience mortuary attendants do one of the most difficult jobs in the health service. They carry out their task with enormous care, well beyond the call of duty. One mortuary attendant whom I saw recently after a major accident acted well beyond the call of duty in caring not only for those who had been killed but the mourners and bereaved who came to visit the deceased. Let us ensure that those who do some of the most difficult jobs in our society, in particular mortuary attendants, are given the dignity and respect that they deserve, and that that message is sent to them.
Lord Hunt of Kings Heath: My Lords, I thank the right reverend Prelate for his comments. I confirm his observation about the chapel of rest. As he rightly observed, there are two chapels in Bedford Hospital. I also share his thoughts about the contribution made by mortuary staff who perform an invaluable role and ensure that the dead are accorded appropriate dignity and respect in these circumstances. One of the issues which arises in this particular case, where there was a clear management failure, is that often the contribution of staff as regards such services is not sufficiently recognised. When we have the results of the fuller inquiry into the events in Bedford perhaps there will be some important lessons to be learnt by NHS trusts as a whole in terms of oversight of mortuary services. One matter that I am sure we shall consider is the need to ensure that the staff involved receive the support required and are given sufficient guidance and instruction to know what to do if problems arise, as they clearly arose in relation to the doors of the Bedford mortuary.
Baroness Carnegy of Lour: My Lords, we should not leave this matter without being sure as to the precise

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facts. The Minister told us that the chapel of rest at Bedford had been used for this purpose in the past and perhaps such a photograph might have been taken earlier. Can the Minister say whether the board knew that this was happening? Was the Minister aware of it? Does the Minister regret that he did not know at the time so that he could have done something about it? The shuffling off of responsibility onto chief executives, which under the new structures is happening more than ever before, is worrying. We want to ensure that responsibility is carried right up to Parliament when things go wrong.
Lord Hunt of Kings Heath: My Lords, clearly when we receive the results of the fuller inquiry we shall know more about the events which occurred in Bedford Hospital. I can confirm that Ministers were unaware of what was happening in the hospital until the information came into the public domain. I assure the noble Baroness that if Ministers had become aware of it at an earlier stage they would have taken immediate action. It appears that the trust management, certainly the board, was not aware of this matter until a few days after the problem of the doors arose. In those circumstances, it is entirely appropriate that the chief executive, who is the accountable officer for the trust organisation, should accept responsibility for a clear failure in management action and procedures. However, there is more to be learnt. As a result of the inquiry we shall see whether further action needs to be taken in relation to the specific trust.
Lord Chalfont: My Lords, is the Minister able to say whether it is yet known who took the photographs which have caused such shock and dismay and how they got into the hands of the press?
Lord Hunt of Kings Heath: My Lords, as yet we do not know. I also regard that as a very serious matter. I assure the noble Lord that this matter is being fully investigated.
Baroness Noakes: My Lords, it was said that management failure led to the proper resignation of Mr Williams. I am aware that Mr Williams is a committed NHS manager of long standing. I am concerned about the nature of the management failure which meant that resignation was appropriate. If the impression goes around that relatively minor management failures, for example a problem with doors—clearly, it was much more serious than that—led to the required resignation of chief executives, we shall undermine the morale of a key group in the NHS. Of course the NHS depends on doctors and nurses to deliver patient care, but without a very strong cadre of experienced managers who are committed to the NHS we shall not achieve the necessary results. Can the Minister comment on the precise nature of the management failure which was so serious as to demand the resignation of an experienced NHS manager of long standing?
Lord Hunt of Kings Heath: My Lords, despite the availability of a temporary mortuary purchased by the
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trust some weeks ago, bodies were stored on the floor of the chapel of rest in totally inappropriate conditions. The additional temporary facility was not being used because of a problem with the doors, not because no places were available. The problem had resulted in injury to a porter and at the beginning of last week there was concern as to whether for health and safety reasons the mortuary could be used. It was for that reason that the bodies were transferred to the chapel of rest.
It is clear from the preliminary investigation that there were no procedures in place to ensure that such shortcomings with the doors were dealt with immediately. Also there were concerns about record-keeping in relation to the mortuary. More generally, in a situation which for the people involved is a serious matter, the senior management of the trust were not aware of anything having occurred until Friday, which is four days after the preliminary decision took place. I believe that the inquiry will confirm that those are serious failures in management process and action. In those circumstances, it was the appropriate course of action for the chief executive to step aside.
Having said that, the noble Baroness and I share an interest in ensuring that we have the highest quality managers in the NHS who believe ghat the NHS is a good place to work and provides them with the right career development and support. Following on from the NHS Plan, we are developing plans for an NHS leadership centre which will have an important role to play in helping us to identify, nurture and support future NHS leaders. That is very important. I want to do that. I want to ensure that we recognise the enormous pressures which chief executives are under to deliver a challenging agenda. However, when management failures take place I believe that the chief executives and the boards of those organisations must accept responsibility.

Social Security Fraud Bill [H.L.]
Second Reading debate resumed.
4.52 p.m.
Baroness Crawley: My Lords, I welcome the Social Security Fraud Bill as a major step forward in the ongoing campaign to eliminate fraud and error from the social security system. We spend over £100 billion each year on social security. It pays for pensions; helps people with illness and disability; and it helps families and those who are out of work. It is a huge amount of money. It is approximately one quarter of the entire government budget.
It is right that it is a huge amount of money because a properly funded social security system is the mark of a healthy redistributive democracy. The people of this country fund the social security system and they have every right to be angry at the estimation that each year £2 billion in benefits is stolen from that system. When the Government came to office in 1997 social security fraud was running at an estimated £2 billion to £4 billion a year. So, despite the scepticism of the noble

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Lord, Lord Higgins, some progress has been made to clamp down on those who defrauded the system in the intervening years.
The entire overseas development budget for the United Kingdom is £4 billion. Turning a blind eye to fraud on that scale is not acceptable. People who work and claim benefits illegally are not loveable rogues; it is theft from the public purse. As my noble friend the Minister stressed, it undermines confidence in the benefit system which is there to help people who are genuinely in need. A social security system that lacks credibility because it is seen as an easy touch is a system that becomes harder and harder for a progressive government to defend because of the huge sums of public money needed to maintain it properly in a healthy democracy. Therefore, great damage is done by fraudsters, not only to the current system but also to its future development.
My noble friend Lord Grabiner in his excellent report The Informal Economy was asked by the Chancellor of the Exchequer to investigate the problem of the hidden economy and to examine ways to move economic activity from illegitimate to legitimate businesses. He estimated that at any one time 120,000 people are fraudulently working and claiming benefits.
The Bill takes up many of the recommendations of my noble friend's report, including urging the Government to consider ways of using information from private sector and public sources as a cross check of the details provided by people. However, the Bill should be examined not only in the context of my noble friend's report but also in the light of the extensive consultation exercise conducted last summer by the Government, entitled Safeguarding Social Security: Getting the information we need.
Other measures that pre-date the Bill include the setting up of the benefit fraud hotline, the targeting fraud website, the framework which specifies minimum standards in verifying housing benefit and council tax benefit claims, and the Royal Mail's "do not redirect" powers to prevent fraudulent claimants using the Royal Mail's postal redirection arrangements to submit benefit claims from false addresses.
The main features of the Bill are to provide powers to reduce, and, in some cases, withdraw benefits from people convicted twice of benefit theft; to increase punishments for benefit fraud; to give new powers to obtain benefit fraud information from private and public sectors; to improve the direction of local authorities on benefit administration, which was a point raised by the noble Lord, Lord Higgins; and it will also tighten the requirements to report changed circumstances that affect benefit entitlement.
The Bill is a serious move by the Government to get to grips with social security fraud after decades of neglect. It is part of a strategy to tighten up the system and make sure that from the first claim the right benefits go to the right people at the right time. To take up the point made
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by the noble Earl, Lord Russell, we must always be vigilant about everyone's civil liberties in their interface with the social security system. I am sure that other noble Lords have also been contacted by groups such as Liberty which are concerned with this issue. But I believe that the Bill finds a balance between the fight against serious fraud and a claimant's right to privacy.
As my noble friend the Minister has stressed, no legitimate claimant has anything to fear from the Bill and should recognise the Bill's role in strengthening the system for us all in the future.
4.58 p.m.
Baroness Strange: My Lords, this is an important and necessary Bill. All taxpayers, which means nearly everyone in this country, have suffered financially from people who have successfully and deliberately set out to defraud the system. As the Minister has said, the frauds have run into billions. She is quite right to try and stop the leak whereby much of our money is whipped away by a massive system of fraud.
I agree with everything she has said. But the words "war pensions" leapt to my eyes. Both war widows and war pensioners tend to be of a different generation from those to whom organised fraud is a way of life. No one is perfect in this world and there may just be the odd case here and there, but I will not have my splendid long-suffering uncomplaining ladies harried for the sake of a few possible rotten apples.
Mr Tom House, who is head of pensions for the Royal British Legion, told me that he has never come across any deliberately fraudulent cases from war widows or war pensioners in the 10 years he has worked there. During that time, he has dealt with 60,000 cases, and he currently has 8,000 to 10,000 war widows on his books. None of them has ever tried to commit fraud.
One of my ladies, who is a regional organiser, allowed a friend of hers who worked on an oil rig to park his car by her house while he was away. Some local informer reported that there was a strange man's car parked by her house for long periods. The pensions officials came to the conclusion that she was cohabiting while still illegally and fraudulently drawing her pension, and it was arbitrarily withdrawn. She herself had to bring a case and prove what in fact had happened; which she did successfully, and had her pension reinstated to the time when it had been removed. But, as your Lordships can imagine, it was all very upsetting for her. Is this the way to treat people who have sacrificed their loved ones for the good of their country? Are we living in a Nazi or communist state of secret informers? I sincerely hope not.
I do hope that the money saved from peering at and spying on innocent ladies and war pensioners will be better spent elsewhere. I very much hope that my noble friend will remove the words "war pensions" from the face of the Bill.
5.1 p.m.
Baroness Noakes: My Lords, the extent of social security fraud is an unacceptable burden on the British taxpayer and we should support any measures designed to reduce it. As the Minister said, the Government have set a target in their public service agreements to reduce the amount of fraud and error in income support and jobseeker's allowance. That fraud and error alone are estimated to be running at more than £1.3 billion a year, a staggering 8.4 per cent of programme expenditure. We might think that the targets, which were described by the Minister as challenging—merely to halve that amount and taking until March 2006 to do it—are too soft, but I am sure we all agree that the amount must be significantly reduced. Another £600 million, or possibly more, of housing benefit is also thought to be lost, taking the total to more than £2 billion or even more. That £2 billion could buy 18 or 20 new NHS hospitals every year or it could be used to start to reverse the increasing tax burdens imposed by this Government.
There is no magic way to avoid fraud or error. One of the arts of business success is risk management. Businesses have to identify the key risks that affect their operations, including risks from fraud and error. They must install controls to eliminate or minimise those risks and then check that those controls are working. But 8.4 per cent of programme expenditure "lost" certainly indicates that something has to be done to improve the DSS's risk management.
We are told in the Explanatory Notes that the Bill will capture between £200 million and £400 million of benefit savings. That still leaves unaffected at least £1.6 billion of losses. It is therefore a relatively modest Bill in the whole scheme of things and I look forward in due course to hearing of more significant measures to reduce the losses.
I turn to the Bill itself. There are significant new powers for the DSS and others to obtain information. From my experience as an accountant, I am sure that effective controls to minimise losses due to fraud or error do need information. In principle, therefore, I support those parts of the Bill which give additional powers to the DSS and others to obtain information. However, I have significant reservations about the obligations that that will place on others. Clause 1 has a significant list of organisations from which those administering benefits will be able to demand information. That list can be added to by an order made under subsection (3) of Clause 1.
When we look at Clause 3, which deals with the payments to be made for this information, we can see how one-sided the trade will be. The clause gives the Secretary of State the power to require or authorise,
"in such cases as he thinks fit, the making of such payments as he considers appropriate".
That is a very wide discretion.
This Bill is yet another piece of legislation creating burdens on businesses which have already experienced year-on-year increases in regulatory burdens under this Government. The provision of information will be a burde—it is not cost free. We may decide, reluctantly,
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that it is appropriate to impose this additional burden, but we should at least seek to mitigate the impact on the businesses affected by placing a positive obligation on the Secretary of State to ensure that he compensates those businesses for the costs that they will incur as a result of these new powers being exercised.
I note that the Government's own estimate, as set out in the Explanatory Notes, of the additional costs falling on businesses is in the range of £2.5 million to £7.6 million. I was surprised at the modesty of that figure and tried to look at the regulatory impact assessment to understand the assumptions that the Government have made. Paragraph 190 of the Explanatory Notes refer us to the DSS's website, www.dss.gov.uk, but I have to tell the Minister that as of yesterday morning I could find no trace of the regulatory impact assessment on that website, despite several increasingly complicated searches. I believe that the basis for those estimates needs the most careful scrutiny and I know that many organisations have expressed concerns about the potential costs. Whatever the truth about the costs imposed by the Bill, they are certainly greater than zero. I hope that the Government will think again about creating a positive obligation to recompense those on whom they will be imposing these new information requirements.
I hope that the Government will also look again at the list of potential beneficiaries set out in Clause 3, to which my noble friend Lord Higgins has already referred. It seems to me that there should be an alignment between those on whom the burdens may be placed by Clause 1 and those who should be recompensed under Clause 3. At present there is no such alignment. I cannot see why each of the categories of potential information providers should not in equity have the costs of these additional burdens met by the DSS or others. Why is it that banks and insurance companies are less deserving than, say, telecommunications providers?
One other aspect of the Bill concerns me; namely, the provisions in Clause 14 for fixed penalties to be offered to allegedly colluding employers in lieu of prosecution. I have seen the operation of something like that in the form of consent orders which are a part of the disciplinary procedures of my professional institute, the Institute of Chartered Accountants. That experience does not encourage me. Although introduced in the name of efficient administration, there is no doubt that it is seen by many chartered accountants as a weapon with which to beat them. The choice is pay up or go through the time-consuming, expensive and, probably worst of all, emotionally draining experience of the full disciplinary process. They generally pay up, guilty or not, so that they can get on with running their businesses.
I have a very real fear that this new power will be used to beat businesses, and especially small businesses. They will be treated as guilty until proven innocent. If a business believes that it has not committed an offence, it can choose to pay up or go to court to argue its case. The latter will be expensive and time consuming. It will certainly divert attention from running the business. In practical terms, the answer may well be to pay up. That

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might be good for raising revenue, but it is not good if innocent parties are coerced into paying fines in order to avoid the much worse prospect of a court case, which will cost them more in business terms even if they are successful in proving their innocence.
What is there in the Bill to ensure that Clause 14 will be operated reasonably? What is there to restrain the excessive zeal of DSS officials or others in their search for benefit fraud? Should not there be a kind of filtering mechanism to ensure that the Secretary of State makes the decision to offer a penalty only in reasonable and genuine cases?
Baroness Hollis of Heigham: My Lords, I wonder whether it would help the noble Baroness if I told her that the Federation of Small Businesses stands behind these proposals. The notion that we are taking blackmail money so that businesses can avoid court cases ought not to be proposed in this way.
Baroness Noakes: My Lords, I shall leave the point. All that I am saying is that there should be included within the legislation a counterbalance to ensure that the scales are not automatically tipped against business; otherwise this provision has the potential to be used as a severe power against small businessmen who have relatively few resources with which to defend themselves.
Tackling fraud and error in the administration of public finances is a positive duty of all governments. We should not resist sensible measures designed to make that task more effective. I look forward to discussing the Bill in more detail in Committee and I hope that the Government will ensure that their understandable desire to eliminate fraud will not result in an undesirable increase in burdens on business.
5.11 p.m.
Lord Grabiner: My Lords, the purpose of the Bill is to introduce powers which would significantly improve the ability of the relevant departments of government to tackle benefit fraud and error. There are good grounds for believing that the amounts of money involved are substantial and that the increased powers which are proposed would, in a balanced way, have the effect of deterring fraudulent behaviour, while at the same time enhancing the detection rates for both fraud and error.
I should like to address three particular aspects of the Bill. However, before doing so I should like to mention a real life example which I came across when preparing my report for my right honourable friend the Chancellor of the Exchequer. My understanding is that this is a typical example. It illustrates some of the problems at which the Bill is directed. Furthermore, I think that the example will assist noble Lords in the process of developing a feel for the practical application of this proposed legislation.
What happened was this. DSS investigators began a surveillance exercise in relation to an individual whom they suspected of working and fraudulently claiming benefit. At around six o'clock in the evening, they
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followed him to what turned out to be one or other of half a dozen restaurants in the West End of London in or near Leicester Square. In the event, he turned out to be one of around 30 people, all of whom were obviously working for a single employer in the restaurant business. As the investigation developed, it became clear that many of the individuals were here illegally. They were not registered for PAYE and were paid in cash. Most, if not all of them, were claiming benefits. This was a classic example of collusion on the part of the employer, who was able to take account of the amount of benefits being received by his employees when deciding how much money he would pay them on top in the form of wages.
When challenged, the employer had the effrontery to show the investigators a software program on his office computer system which purported to confirm that all the people who worked for him were his employees and that he was properly accounting for PAYE and NICs to the Inland Revenue. The software was pure fabrication and had been designed to satisfy the possibility of a very cursory inquiry.
In my opinion, these facts reveal a shocking state of affairs. Here we have an employer who is obviously not disclosing his full profits, which means that corporation tax or business revenue tax is lost. VAT is lost. The VAT point is especially unattractive because it will have been collected by the employer through the food bills paid by his customers, but the proper amounts never reached Customs and Excise.
The employees were working and claiming benefit, which is simply fraudulent. The employees were also being exploited. They fell through the basic floor of rights provided by our employment protection legislation, which is designed to give them all the advantages which are associated with lawful employment, including the right to redundancy benefits, the right not to be unfairly dismissed, the minimum wage legislation and a whole host of other elements. In addition, no national insurance contributions were being made in respect of these people.
I was surprised to discover that the penalty imposed on the employer was a paltry fine of £750. That is not because the sentencing court made a hash of it. It is because the employer, who pleaded guilty, was charged only with a single, sample offence of making a false statement to DSS officials.
A few points can be made about this example. First, the employer was at the centre of the web. Without the collusive employer, this type of case could not happen. Secondly, the activities have a cross-departmental impact. The facts would be of interest to the Treasury, Customs and Excise, the DfEE, including the Employment Service, the DSS and the Benefits Agency, the Inland Revenue and the Home Office. It brings out the importance of ensuring, so far as is possible, that this problem is examined at a focal point at the departmental end of the story, otherwise it may fall between departments. It also emphasises the need to share information, which is an important part of the record-keeping and detection process.

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Thirdly, I believe that this example—there are plenty more—should give rise to concern in all parts of the House. I believe that every noble Lord who has spoken so far has been in agreement on this point. It seems to me that this is not at all a party political issue, but rather that honest citizens are rightly fed up with fraudsters and fiddlers who get a free ride and, for the most part, are perceived to be getting away with it.
Fourthly, it is also a matter of great concern that many people and their dependent families who get into this murky world find themselves unable to obtain regular, lawful employment simply because they are not able to provide any employment track record to a potential genuine employer.
I should now like to say a few words about three aspects of the Bill; namely, the proposal to increase the powers of obtaining and sharing information, the proposal to disqualify for a period of 13 weeks persons convicted of two benefits offences in the space of three years and the separate proposal to introduce an administrative penalty as an alternative to criminal prosecution.
As regards the first point, Clause 1 of the Bill would give increased powers to obtain information from the private sector, such as banks and credit card companies about particular individuals. The fraudulent activity at which the Bill is aimed necessarily involves someone telling a lie; for example, as regards whether they have a job, whether they have savings, whether they have a partner who is working, where they live, who they are or whether they are in education.
These proposed powers are designed to enable fraud investigators to get to the truth. They will provide an independent method of checking or verifying the facts which have already been provided by the claimant. This type of legislation must obviously comply with the requirements of the Human Rights Act. In particular, the new powers must be compatible with Article 8 of the convention. This is always a question of balance, fairness and common sense. Every citizen has the right to respect for his private and family life, his home and his correspondence. The convention does, however, permit that right to be interfered with in an appropriate case.
In order to be justified, Article 8 requires that the interference must be in accordance with the law. It must also be necessary in the sense that it is the minimum interference necessary having regard to the economic well-being of the country, or the need to prevent crime, or the protection of the rights and freedoms of others. I have, in effect, summarised the provisions of the second paragraph of Article 8.
The legal basis for the interference would, of course, be the Bill, if and when it becomes law. It seems to me that all of the other justifications to which I have referred apply here. My noble friend the Minister has given a number of real life examples, in addition to the one that I have mentioned, which emphasise the seriousness of these matters and the need for this legislation. The Bill contains provisions which will, I believe, ensure fair play and make a reasonable balance
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between, on the one hand, the protection of private liberty and, on the other hand, the protection of the public purse.
First, these new powers are to be conferred only on an authorised officer, which means a DSS fraud investigator acting with the authority of the Secretary of State. Secondly, information about specific individuals can be sought only where there are reasonable grounds for believing any of the matters which are specified in subsection (2C) on page 2 of the Bill. The noble Earl, Lord Russell, adverted to those provisions in his speech.
The expression "reasonable grounds for believing" is a well-established formula. It means that suspicious or discriminatory motives, such as sex, race, colour, language, religion and all the other matters listed in Article 14 of the European Convention on Human Rights, could never justify the use of these powers.
In regard to that issue, I should like to pick up the point made by the noble Lord, Lord Higgins. He told the House that the British Bankers Association had expressed concern that the provisions may be used for the purpose of fishing expeditions. If they were so used, that would be entirely inappropriate and unlawful.
We shall obviously be studying the detail at later stages of the Bill, but it is worth making reference to the ground given in paragraph (c)—the provision specifically referred to by the noble Earl—which concerns a person belonging to any description of persons who are more likely than others to fall within the earlier paragraphs (a) or (b).
The pressure group Liberty, in its Second Reading briefing paper, has expressed some concern about this provision. Perhaps I may say that I do not, with respect, accept Liberty's substantive criticism, which is that this provision would be used in a way which is inconsistent with Article 14. For the reasons that I have already given, I do not believe that there is any justification for this expressed concern.
The justification for paragraph (c)—
Earl Russell: My Lords, I am grateful to the noble Lord. No one is alleging that there is any ministerial intent to abuse these powers in this way, but does the noble Lord concede that there is a real Actonian danger that they may nevertheless be so abused?
Lord Grabiner: My Lords, in a sense, that is true whenever powers are granted. One has to have regard to the fact that there is a possibility that powers, when granted, may be abused. However, if the powers are abused, it is to be hoped that that will become apparent and plain and that the appropriate remedies will be made available, either through the process of judicial review or the appeal process to be provided in this legislation. The concern that such an abuse may happen is not a justification for not introducing the provision.
Earl Russell: My Lords, does the noble Lord concede that some powers lead people into more temptation than others?
Lord Grabiner: My Lords, of course they do, as we know. Even then I would suggest that that does not

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provide justification for not assuming the powers and getting on with the job that needs to be undertaken. It is simply not good enough to say that it is too difficult a problem or that there are people out there who may behave in an improper fashion. That is not a good enough answer to the problem. We have to take a bit of courage and have a bit of conviction here because we are confronted with a serious problem.
Perhaps I may now say something about the justification for paragraph (c) and give a couple of practical examples. Investigators might reasonably take the view that someone who has previously committed benefit fraud is more likely to be fraudulent again. Another example might be the discovery of the fact that someone regularly advertises some business activity in a telephone box or in a newsagent's window but pays no tax or VAT and may or may not be claiming benefit at the same time. I suggest that it is reasonable and necessary to have these powers if we want to deal with the problem.
The third important protection is the one mentioned by my noble friend the Minister. There will be a published code of practice which will put some flesh on these provisions and make them precise and accessible. Also the provision will not, as I understand it, be operated until after the code of practice has been published.
Perhaps I may now turn to the subject of data protection. This is an aspect of the debate about human rights under the Bill. I suspect that it will be readily accepted on all sides that the benefit system is under attack from the opportunist and from organised fraudsters. On that assumption, a judgment has to be made as to the extent to which it is necessary for the prevention and detection of crime or the collection of taxes to have these powers. For the reasons that I have already mentioned, I would suggest that there is a pressing need for them.
In the context of data protection, perhaps I may take up the point made by the noble Lord, Lord Higgins—with which I respectfully agree—about the concerns of individuals whose records may be the subject of investigation under the Clause 1 powers. When I was preparing my report, I discussed this matter with one of the principal providers in this territory. I learnt that it is possible, or would be possible, for DSS investigators, for example, to cause inquiries to be made into data knowledge without leaving a footprint. A subsequent inquiry about a particular person by a third party—for example, a supplier of credit to the individual—would not have revealed to him the fact that the DSS had trodden in that territory previously. There is a real prospect of sound protection of the integrity of the position of an individual who may be the subject of an inquiry along these lines. Such inquiries may be made without damaging that person. Undoubtedly it would damage that person if a subsequent provider of credit were to discover that such an investigation had been made.
Perhaps I may next turn to Clauses 6 to 12 of the Bill, which contain the proposal that persons convicted of two benefit offences in the space of three years should be
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disqualified from receiving benefits for a period of 13 weeks. I dealt with this point in paragraphs 7.32 to 7.36 of my report.
My understanding is that this approach is used in some parts of the United States and Canada. The approach adopted in the Bill is consistent with the current rules for jobseekers' allowance, whereby benefit payments can be withheld for a specific period if jobseekers unreasonably cause or prolong their unemployment—for example, if they leave or refuse to take a job without good reasons. The sanction period is between one and 26 weeks under those rules. It is obviously necessary to have safeguards in order to protect the innocent and the vulnerable. We shall, no doubt, examine the details at later stages of the Bill, but there are hardship provisions in the Bill.
The point that I would emphasise is that these disqualification provisions are intended primarily to operate as a deterrent. The hope must be that the legislation will have a full public impact and that would-be wrongdoers will be encouraged into the legitimate economy. The problem is that under the present regime there is no disincentive to re-offend. That is why these provisions are so important.
The third point that I want to highlight is the new proposed procedure that would enable the Secretary of State or, as the case may be, an authority administering housing benefit or council tax benefit to agree a civil penalty with an employer who has, for example, facilitated the commission of a benefit offence by a relevant employee.
The pre-condition for the new procedure is that there are grounds for bringing proceedings against the colluding employer but, by agreement between the parties, an administrative penalty is exacted and there are no criminal proceedings. This is a valuable addition to the investigators' armoury. This machinery is likely to lead to a greater awareness among employers as to the risks they run and, it is to be hoped, an increased respect for the law. The new procedure would bring the point home to employers without the need to invoke the full force of a criminal prosecution. It is also likely to result in cost/benefit efficiencies. I do not accept the points made on this aspect of the matter by the noble Baroness, Lady Noakes, whatever may be the motivation of individual accountants when confronted with complaints about their behaviour. I do not think that we are in that territory. The purpose of this piece of machinery is to impose the quality of the performance and to bring home to people, without the need for full-blown criminal proceedings, that what they are doing is wrongful activity.
In conclusion, perhaps I may mention a point raised by the noble Lord, Lord Higgins, on the question of amnesties. I examined the idea carefully, because I was initially very attracted by it. Indeed, when I was asked by my right honourable friend the Chancellor of the Exchequer to look into the question, he, too, was initially attracted by the thought. I do not think that I am telling any tales out of school.
However, having examined some American research—the idea has been tried in a number of states—I discovered, first, that it was usually

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introduced around election time with a view to securing the right result from electors, there being apparently quite a large number of people who fell into this category, each of whom had a vote—and who may even have had the ability and the strength to press the button hard enough to produce a valid and admissible vote! But also, the impact in America was that this was treated simply as a "free lunch". The expectation was that one amnesty would simply be followed by another. Such a scheme was also rather expensive to administer. So at the end of the day it did not seem an appropriate way forward. There is also some evidence that this approach was tried, and failed, in Italy—but I say that from memory, going back 18 months or so. I certainly examined the idea but did not think it appropriate to recommend it. Indeed, at the end of the day I am fairly strongly opposed to such an idea, but it was given careful consideration.
5.33 p.m.
Baroness Fookes: My Lords, I rise with some diffidence after that masterly exposition by the noble Lord, Lord Grabiner. I noted particularly his vivid example of the restaurateur who was the centre of a web of fraud and deception. But I am concerned to know how the figure of approximately £2 billion of loss—which is obviously a matter of considerable concern—could possibly be arrived at, given that in the nature of things the fraud has been undetected. I presume that there must be some method of so doing. I should be grateful if the Minister could either indicate that in replying or, if there is no time for such a luxury, let me know subsequently.
I rather regret one absence from the Bill, because it is something of a hobby-horse of mine. I refer to the absence of any reference to identity cards. They would be a comparatively simple, easy way of ensuring people's identity. They have a value far beyond anything to do with fraud. If they were extended to everyone, they would have all manner of advantages.
I suspect that the Minister will tell me that this goes far beyond the scope of the Bill. That illustrates perfectly the point made by the noble Earl, Lord Russell, about the disadvantages of single-issue Bills when it is not possible to take wider issues into account. That is also true of the question of preventing loss through error as opposed to fraud. There would be far less error if the social security system were considerably simpler than it is now. Again, the noble Earl's dictum applies; that goes beyond the scope of the Bill. It means that we set out somewhat "hobbled".
Perhaps I may turn to the concern expressed by the noble Baroness, Lady Strange, for war pensioners and war widows. I share that concern, as vice-president of the War Widows Association, of which the noble Baroness is president. I strongly suspect that there will be no way in which the Minister will remove from the Long Title the reference to war pensions. I hope that at the very least there will be considerable delicacy in dealing with these matters.
The pressure that will be put on businesses has been pointed out by several speakers. However, no one has mentioned the issue of small businesses. The pressures
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on them if they are required to provide information will be even greater than it will on big business, which no doubt has the facilities to deal with the matter. It seems to me that likely fraudsters will be employed by small businesses rather than large businesses, because they can pass in and out of employment regularly and simply. I worry about that point in relation to small businesses.
I also note the confident statement in the Explanatory Notes that the Bill will have no impact on charities and voluntary organisations. That seems a somewhat sweeping assertion. I am not sure what the basis for it is, given that many organisations and charities employ people to work professionally for them. I should be interested to know why the statement was made and how confident we can he. Many voluntary organisations and charities work on a shoestring and may find it difficult to comply without interfering with their genuine, excellent work.
I turn now to the memorandum of the British Bankers' Association. It contains many questions and worries which need to be dealt with. I need not tell the Minister about the devil being in the detail, hearing in mind her responsibility for the Child Support Agency, a brilliant idea which nearly came to grief and ca used considerable aggravation because of the way the detail was worked out. I take it seriously when the British Bankers' Association writes to us with its worries. Perhaps I may mention one or two of them.
The association states the importance of having one common channel of approach to the bank from the various organisations such as the Inland Revenue or Customs and Excise, and that the bank should have one particular department or particular people to deal with the matter. It mentions its current, very real worry that even at present some junior bank staff are being approached by authorities such as the Inland Revenue with requests for information. It also presents a security risk in that the wrong information could get out or could get into the wrong hands. The point must be addressed carefully.
The association also raises other questions. Will the provision apply only to personal accounts, or will it be extended to business accounts and single trader accounts? And what about joint accounts? In terms of human rights, that seems to me to be particularly important. If only one of the holders of a joint account is under suspicion, while the other is not, what about the rights of the person who is not under suspicion? Presumably, all the information will have to be given if a proper assessment is to be made of the situation.
Finally, there is the question of electronic banking, which seems to be becoming increasingly important. I am not sure what the position is in relation to the Bill, but I should be grateful if we could be given some indication of what is likely to be an ever-increasing method of banking.
As I say, I have some reservations about the Bill, although no one could quarrel with the intentions behind it. There seems to me to be a number of concerns that I hope we shall consider in more detail during the Committee stage. In the meantime, one cannot but give the Bill a welcome, albeit one tempered by reservations.
5.40 p.m.
Lord Desai: My Lords, I, too, broadly welcome the Bill because it tries to tackle an important issue. I have lived in this country for 35 years and no year has passed without some government Minister saying, "We must tackle benefit fraud; it is a very serious problem". The number of cases continues to increase. I know exactly how to estimate, though not actually calculate, such numbers. It is not an easy task, but if you have at least some observed fraud you can make an estimate of the unobserved fraud. There are sophisticated techniques in that respect and the people who invented them got the "Nobel prize" in the latest round of economical prizes. I should add that I used to teach these things.
If a certain amount of money is being defrauded it is always a question of knowing the exact number of cases involved. Of course, we have a margin of error around it. However, one way to predict who might cheat is basically to look at what we call "the characteristics"—that is, the personal characteristics of those involved. For example, we may have a sample of people who have cheated which will enable us to classify them in terms of, say, sex, race, occupation, and so on. That is how we can increase the chance of predicting who is likely to cheat. After all, this is information. Incidentally, that is done without any intention of violating any human rights Act. From this information we can assess the probability of someone cheating by considering, for example, whether he is single, the nature of his occupation, or whether or not he is black, as the case may be. Indeed, hundreds of articles have been written on the subject.
That brings me to my major worry about the Bill; namely, the new subsection (2C) to Section 109B of the Social Security Administration Act 1992, as set out in Clause 1. I believe that we are all worried about this subsection. I shall begin with the wording that worries me the most which is to be found in subsection (2C)(c). That paragraph refers to,
"a person belonging to any description of persons who are more likely than others to fall within paragraph (a) or (b) above".
I know of no way of implementing that provision without using some characteristic profile of that class of persons. When we refer to a class of persons, it is very hard not to start making judgments about Rastafarians, builders, homosexuals—or even fat professors, or whatever!
There is a great danger here. I am sure that people will undertake such assessments with great care, but once consideration is given to,
"persons who are more likely [to offend] than others",
if they belong to a particular set of persons, that can only be defined by some or other element that will violate Article 14 of the convention on human rights. I am not a lawyer; I am an econometrician. But I believe that people will make such statements without meaning to offend.
I am also worried about paragraphs (a) and (b) of this new subsection, especially where reference is made to a person who "is likely to contravene" or "likely to commit" fraud. Again, this is a matter of forecasting the probability that someone is likely to offend, as
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happened under the football hooligans Bill; and that upset me very much. That legislation gave the police the power to stop someone from travelling, not because he had committed an offence but because he was thought likely to commit an offence abroad. I remember sitting in the Chamber until five o'clock in the morning while we deliberated that Bill. As I say, I was very upset by that provision but, not being a lawyer, there was not very much that I could do about it.
There is a creeping tendency to presume guilt, or to presume the likelihood of committing an offence, before a person has committed an offence. It happened under the football hooligans Bill and it is happening here under this Bill. When we considered the RIP Bill—I always forget what is stands for, though perhaps it was the "repression of internet providers", or whatever—that legislation contained some gross invasions of privacy, which were allowed to stand. It is a worrying tendency.
I know that my noble friend the Minister is a sensitive person and that the Government are equally sensitive. I do not doubt that everyone involved in this is very good. But things happen further down the line. I am especially worried about the leaking of information, whereby matters that are supposed to be confidential are leaked to tabloid newspapers for money. Therefore, even if the intention of the legislation is not to invade people's privacy, we can end up doing so.
Obviously, if someone has contravened or is contravening relevant social security legislation, there is absolutely no problem. Indeed, I have in mind the blood-curdling tales that my noble friend described earlier. I entirely agree with her: those cases relate to evil people and they must be punished. That is not my concern. However, we are dealing with the lower depths of society, as it were, where the criminals and the poor are very hard to distinguish because they are mixed together. It is easy for poorer people to be caught. I am not worried about the fact that race may be an element in this respect, but poor people very often fall foul of the law and are unable to defend themselves.
I am also seriously worried about paragraph (d) of new subsection (2C) which says that someone who,
"is a member of the family of a person falling within paragraph (a), (b) or (c)",
could be investigated. Because of the way that "the family" is defined so as to include people who are separated—indeed, the case of domestic violence was mentioned whereby a man could shop his wife, whom he has beaten up and who has subsequently left him—we could have considerable problems regarding the likelihood of a gross miscarriage of justice. I put it no stronger.
Those are my main worries about the Bill. On the whole, I believe that it will do its job. However, while doing its job, I believe that it will give the Secretary of State slightly more powers than are strictly necessary. I was heartened when my noble friend told us about the success that the department is having at present at capturing some of the fraudsters without such legislation. I believe that we ought to continue along

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those lines. If this Bill is to be enacted, we really ought to consider most carefully the excessive powers that it is proposed to give to the Secretary of State.
5.48 p.m.
Lord Astor of Hever: My Lords, I welcome the opportunity to wind up the debate for the Opposition after what has been a characteristically well informed debate. We have heard some powerful speeches this afternoon. I agree with my noble friend Lord Higgins and the noble Baroness, Lady Crawley, on the excellence of the report by the noble Lord, Lord Grabiner. Like my noble friend, I found that document very readable. I agree with the noble Lord, Lord Grabiner, that honest citizens are fed up with benefit fraud. We on these Benches are grateful to him for his clarification of his views on amnesties. The noble Baroness, Lady Strange, and my noble friend Lady Fookes both mentioned war widows. I shall return later to that subject.
My noble friend Lady Noakes made a powerful speech. I very much hope that she will pursue her arguments, particularly with regard to the burdens on businesses, at later stages of the Bill.
The Minister told the House that benefit fraud costs taxpayers at least £2 billion per annum and probably more. My noble friend Lord Higgins mentioned an estimate of —7 billion. We all agree that it is far too high. We on these Benches therefore wholeheartedly endorse the principle of tackling benefit fraud in a fair, comprehensive and effective manner.
Where we depart from the Government's approach and, indeed, from major aspects of the Bill, is that their proposals are, yet again, long on rhetoric and short on action. This is, after all, the 43rd, 44th or 45th government announcement on the subject of fraud, yet fraud has got worse. Why will the 45th announcement make any difference? Headline statements are no substitute for genuine reform.
What we need is benefit simplification, not complication, particularly over housing benefit. I have here the 85 regulatory changes to housing benefit dumped on local authorities since May 1997. The Bill does nothing to simplify the complex benefits system. Few DSS officials, excepting, of course, the ones present tonight, understand the system in any detail. According to the Chartered Institute of Taxation, the form for the working families' tax credit is so complicated that fewer than one in 10 tax inspectors are capable of filling it in correctly.
A serious attack on fraud would require not only simplification and more resources, as my noble friend Lord Higgins said, but also restructuring of the benefits system. The CAB is critical that the Bill does not address errors in payment of benefit, or areas where reforms to the benefits system could significantly improve the accuracy of benefit payments.
The Bill contains many subjects which we shall want to scrutinise carefully in Committee and at later stages of the Bill. I shall confine my remarks to three specific areas of concern. These are the impact on business; the human rights aspects of the Bill; and war widows.
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The Bill contains sweeping powers to compel various private sector businesses to share information with both central and local government agencies involved in tackling benefit fraud. Again, the Government continue their tendency to place much of the burden of responsibility on businesses, along with the associated costs.
If relevant information may be obtained securely, without threatening innocent people's privacy and with limited cost to business, we on these Benches welcome that approach. We are concerned, however, that the Government's estimates do not adequately state the situation. In its submission to the Bill, the credit industry fraud avoidance system reported that one High Street bank would require 38 additional staff to handle the labour-intensive production of large volumes of information by DSS staff at a total cost of £14 million per annum. Another bank estimates a requirement for 20 staff.
This concern is, indeed, exacerbated by the total discretion that the Bill gives to the Secretary of State—here I agree with the noble Lord, Lord Desai—on whether costs will be reimbursed at a commercial rate. Can the Minister reassure the House that there has been a meaningful dialogue between the Government and those companies named in the Bill to ensure that the figures anticipated by the Government are credible and agreed by both parties?
Several noble Lords, particularly my noble friend Lady Fookes, mentioned the BBA concerns. As the Bill is currently drafted, any DSS officer, as authorised by the Secretary of State, can approach a bank for information about an individual. This is very different from existing processes. The Government say that there will be a code of practice governing the DSS's actions. The BBA would prefer, particularly as such a code has not yet been drawn up, that safeguards are written on the face of the Bill. It is also concerned about the wide definition of people about whom a DSS officer can require information. This targets groups of people rather than individuals about whom there are real grounds for suspicion. A benefit claimant could be deemed likely to commit a benefit offence, effectively stigmatising an entire group. In our view, bank information should be disclosed only where there are reasonable grounds for suspecting fraud.
The Scottish Law Society is concerned that, if granted, these powers could be used routinely and arbitrarily in circumstances where there is no reasonable suspicion of fraudulent activity or criminal conduct. The noble Earl, Lord Russell, and the noble Lord, Lord Desai, were both concerned that the Bill will allow investigators to investigate people on the basis of their ethnic origin. That concern is shared by Liberty, which points out that the Bill has the potential to be harmful to race relations both because it will allow people to feel that they may be targeted because of their ethnicity and because it will encourage investigators to see ethnicity as a relevant factor in their investigations.
The BBA also argues that banks should be protected against inadvertently disclosing information as a result of inadequate or incorrect identifying data supplied by

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the DSS. The electricity suppliers are concerned at the potential costs and data protection aspects of giving online access to information they hold. Dealing with a huge number of requests for information from both the DSS and local authorities—they expect over 90,000 each year—imposes substantial costs on them. The Bill allows the Secretary of State to make payments to utility companies for the bulk information they provide. The Secretary of State may make payments where he considers that reasonable, but need not do so if he thinks that it is not appropriate. That situation is clearly unsatisfactory.
In practical terms, costs to the electricity suppliers will also be affected by the codes of practice yet to be agreed. It is essential that DSS officers ensure the minimum possible duplication of effort in requests for information both from within the DSS and between the DSS and local authorities.
The telecoms sector alone—this does not include the Internet service providers—expects to receive about 90,000 inquiries each year. The time period during which they store historic data is crucial. Archiving and retrieval costs are very high and the potential threat of the Data Protection and Human Rights Acts is forcing some mobile phone companies to destroy data over six months old.
The loss of that data will have a negative effect on investigations into benefit fraud. It is surely the case that the sheer backlog of work and the time necessary to complete investigations will mean that proposed data will need to be stored for a number of years. Will the Minister tell the House how long the Government believe that the necessary information should be stored?
Furthermore, what dialogue has taken place with the information providers cited in the Bill to meet these requirements? What recompense will the Government make so that they are able to comply with the set-up and ongoing costs of prolonged data warehousing?
The Bill would allow an agency to identify any individual employee as the person to whom it sends a request for information, thus subjecting that person to possible criminal sanctions and a fine of £1,000 plus £40 each day if he or she does not comply. Is that really the Government's intention, particularly if an individual is not in a position to comply?
As regards the telecommunication and ISP companies, to whom do the Government envisage that requests will be made? It will surely speed up and assist the investigatory process if there are certain, named managers to whom requests can be made. We also suggest that there should be a single point of contact—the authorised officer within the DSS or local authority—at a suitably senior level to provide the necessary validation and authorisation of all information requests.
The powers given to benefit fraud inspectors are becoming more and more powerful. If that continues, they will soon have more powers than the police. What concrete provisions will the Government make to ensure that there are stringent safeguards ensuring that
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the required level of training is established and maintained? A quick glance at the Benefit Fraud Inspectorate reveals how under-resourced, under-trained and overburdened are the local authority staff who try to administer benefits. Indeed, the Benefit Fraud Inspectorate annual report said that,
"in 93 per cent of our inspections we found inadequate staff training".
Among those to whom I have spoken, there is also considerable anxiety that much benefit fraud occurs with the complicity of DSS staff. The survey, Staff Attitudes to Security in the Benefits Agency, revealed the existence of "sleeper rings" where an official joins the agency intending to commit fraud. Once he understands working methods, he defrauds the system with an outside accomplice.
Until the Government can demonstrate that the information they will compel the private sector to provide will be secure, and that the personnel and financial costs will not be excessive, we shall have serious reservations about their approach.
A number of points relate to the human rights aspects of the Bill. The DSS wishes to have extra powers to gain access to various private sector sources. It is, therefore, essential that the Government confirm that the Bill falls within Articles 8 and 14 of the European Convention on Human Rights. The Data Protection Commissioner and Liberty take the view that the Bill does not. Will the Minister confirm that there is no inconsistency? The Data Protection Commissioner has made a number of important observations. Have the Government considered those points, or ignored them?
Having access to highly sensitive personal information, the benefits agencies must ensure that it is used only for the specified purposes of investigation and prosecution. To that end, we regard it as important for there to be a defined code of conduct and stringent guidelines in place for the access and use of information. If those guidelines are breached and data is accidentally or deliberately disclosed, we believe that the perpetrators should be dealt with with the utmost severity.
The Minister mentioned the improper use of information with other countries. Will provisions be put in place to ensure that any misuse of information about UK citizens will result in reciprocity being revoked? Will the DSS ensure that countries with which information is exchanged will have the same regard to human rights and data protection as the UK?
The Minister touched briefly on Scotland. The Scottish Law Society points out that Clauses 13 and 14 appear to have been drafted without taking account of the distinct prosecution system in Scotland. I shall be grateful if the Minister will clarify how the Government envisage the Bill operating in Scotland.
I turn now to the inclusion of war pensions in the Bill. Like the noble Baroness, Lady Strange, I have spoken to the Royal British legion, SSAFA and the War Widows Association. All are concerned and surprised that the Government have yet again made those bodies such a high profile target. The head of the pensions

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department at the Royal British Legion told me that he has never seen a single case that would indicate any form of fraud—not a sniff of it.
Baroness Hollis of Heigham: My Lords, I am sure the noble Lord does not wish to overstate the position. I take issue with the phrase that we have made them a "high profile target". We have merely not omitted them from the list of all the other recipients of benefits from whom proper controls, inspections and information are required.
Lord Astor of Hever: My Lords, I take the noble Baroness's point. However, the numbers must be minuscule. Perhaps the Minister can give the House an idea of the number of fraudulent war widows. On the War Pensions Agency's own figures, from June to December 2000 there was evidence of abuse in only 114 cases from around 100,000 pensioners in receipt of a war pension.
I reiterate that we on these Benches are fully behind real attempts to tackle the growing menace of benefit fraud. With each year such fraud is costing hard-pressed British taxpayers many billions of pounds which could be used elsewhere. This diverts much needed resources and attention from those who are most in need. What indicators of success, therefore, will the Government introduce for the Bill?
There is much still to be debated in the Bill. We on these Benches look forward to returning to it in detail in Committee and at later stages.
6.7 p.m.
Baroness Hollis of Heigham: My Lords, this is an important issue although it is a small Bill. It is important because, as my noble friend Lady Crawley said, the amount lost for taxpayers by fraud could well exceed the amount we spend on overseas development. The figure is substantial. I was pleased, as I am sure were other noble Lords, to hear the thoughtful and well-informed debate from around the Chamber, for which I am grateful. I am also grateful that the need to deal with fraud and its pervasiveness attracts such wide support. I always pale when phrases such as "getting the balance right" are used. No one disagrees with the phrase, it is the meaning that we dispute, although I am confident, as always, that the Government have got the balance right.
In seeking to wind up, I make the usual disclaimer. If I inadvertently omit any point, or run out of time—that is the more likely—I shall write to noble Lords. For example, I hope that the noble Lord, Lord Astor, will allow me to write to him on Scotland. I have all the information here but it is elaborate. It might be better to write to him and I am happy to put a copy of the letter in the Library so that other noble Lords may take advantage of that.
I shall respond to three general points: timetable, responses and the scale of fraud. I shall refer to the four major points raised: the use of powers, safeguards, human rights issues and the burdens on business. If time permits, I shall deal with some of the more specific one-off points which have arisen in the debate.
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The first general point related to the timetable. The noble Lord, Lord Higgins, said that there was not time to comment on the Bill. The main measures of the Bill were set out in the White Paper, Safeguarding Social Security, which was published last July. Organisations and members of the public were given three months to comment. The report of my noble friend Lord Grabiner was published as long ago as March 2000. I accept that this debate comes immediately after the vacation but I do not think that organisations could argue reasonably that they have been short changed on consultation time.
The noble Lord also asked whether we intended to put copies of the consultation responses in the Libraries. We have published a summary—although I take the point that it is a summary of a summary—and, in addition, anyone who wants copies of the responses may apply and will receive them from the department. We do not normally place copies of all responses in the Libraries because the bulk of them can become a storage problem, but I shall ensure that the noble Lord and any others who are interested are sent a full set of the responses to work on.
The noble Earl, Lord Russell, also asked whether we could see the draft code of practice. We have promised to involve the organisations affected by the Bill in the drafting of the code. The first meeting to discuss the code will take place next week. A draft will then be prepared for further discussion.
The third general point, raised by the noble Earl, Lord Russell, and the noble Baroness, Lady Fookes, was the scale of fraud and how we arrived at our estimate of £2 billion of fraud. We estimated the figure through our programme of benefit reviews, which take a random sample of claimants who are subjected to a detailed investigation, including home visits. The number and volume of frauds identified are grossed up to produce a total national estimate. That is supported by area studies, sampling and covert activities. We cannot have firm figures, but, as my noble friend Lord Desai said, we use the best methods that we have, with sampling, detailed follow-up surveys and area-based studies. However, the noble Baroness is right that the figure remains approximate.
The first major point of issue embodied in the Bill, as opposed to process points, was the use that we expect to make of the powers. Many of your Lordships asked about that. The measures could in no way be used to permit discrimination. A person's race, sex or disability do not predetermine whether they are more likely to commit fraud and the Bill does not provide for inquiries on that basis. The powers can be used only when there is statistical evidence to support targeted inquiries. I have two examples. First, we know from our area benefit reviews that income support claimants who have committed fraud before are 70 per cent more likely than other income support claimants to commit fraud. Such a differential surely justifies targeting those who have committed fraud in the past.
Secondly, we know from experience that local areas may have activities or occupations that are particular to them. Window cleaners and gardeners sometimes advertise their services by telephone number only in the

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local press. If the local fraud investigation service noticed an increase in fraud among such groups in its locality, the powers could be used to identify the subscribers to those telephone numbers, cross-check them against benefit records and investigate anyone who was claiming benefit while advertising such a service. Those are the issues that we are concerned about.
Earl Russell: My Lords, does the Minister see any danger that that approach might reduce the number of window cleaners?
Baroness Hollis of Heigham: My Lords, I hope that the measure will ensure that window cleaners do not simultaneously ask for cash in hand and draw benefit. Instead, they should charge their customers, including the noble Earl, Lord Russell, the going rate for the job so that they do not need to milk the informal economy.
The noble Earl asked a serious question about other forms of discrimination, including on the grounds of sexual orientation. I took that point. Inquiries on that basis are not provided for and they would be unlawful. We shall make that plain in the code of practice that will govern the operation of the powers. Given the concern of the noble Earl and others, it is right that we should make that transparent in the code of practice.
The noble Lord, Lord Higgins, asked whether DSS inquiries would affect credit ratings. My noble friend Lord Grabiner said that we can now do that with credit agencies without leaving a footprint that could affect someone's credit rating.
Lord Higgins: My Lords, I was slightly puzzled by the response of the noble Lord, Lord Grabiner, on that point. Clearly the credit agency will know and the footprint of the inquiry will be all over its documents.
Baroness Hollis of Heigham: My Lords, we shall make arrangements with the credit reference agencies to ensure that nobody accessing their records will be able to detect that the DSS has looked at a person's credit record. In that sense, the information should not go on to other, inappropriate sources.
Lord Higgins: But, my Lords, the credit agency will know that someone is suspect and will therefore adjust its rating of the person's credit.
Baroness Hollis of Heigham: My Lords, there are two points here. First, maybe they should. Secondly, the broader point is that we are talking about individual staff members of the credit reference agency. They will not be able to detect the footfall, because the DSS will not leave it behind after interrogating the records.
That brings me to a related point that the noble Lord raised about the banks' concerns for the civil liberties of their customers. I think that I detected a tongue-in-cheek response from the noble Lord when he made the point. Obviously, banks have a proper concern, although they may be more concerned to retain their customers' trust in their probity. That is an honourable
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and decent thing to wish to do. Many bank customers might be a little surprised if they ever got round to reading the tiny print—smaller than telephone directory print—that usually goes with bank statements encouraging people to open new accounts, which allows banks and credit reference agencies to exchange information far beyond what most of us imagine. In some cases, that exchange of information is even beyond what the DSS is seeking. That concern may be a little curious when the banks already exchange information affecting their clients as part of protecting the security of their business.
The noble Lord also asked whether local authority staff could wander off and interrogate individual bank staff—the problem of centralised information. DSS and local authority staff will make arrangements to obtain information in writing. We are talking to those from whom the information will be sought to agree appropriate administrative arrangements for requiring information using the powers.
The second point was about safeguards. We already provide strong safeguards against a person obtaining or disclosing information unlawfully. We have a Data Protection Act that makes it an offence knowingly or recklessly to obtain or disclose information, with fines of up to £5,000 and an unlimited fine in the Crown Court. Secondly, Section 123 of the Social Security Administration Act 1992 provides for the specific offence of unlawfully disclosing information obtained during social security administration. That covers staff who are working or have worked on social security administration in the DSS and local authorities. It provides for severe penalties, including imprisonment. Finally, the Computer Misuse Act 1990 contains offences relating specifically to the misuse of computers to obtain information. It provides for a maximum of five years in prison. I do not think that we need additional provisions.
However, as the noble Lord, Lord Astor, said, we also have additional administrative safeguards in the quality and training of our staff. Only authorised staff can use the powers. We anticipate authorising only a handful of staff in each of the 13 administrative areas to ensure that the powers are used only by specialists. The detailed code of practice will bind investigators and can be obtained by organisations and members of the public, who can then hold them accountable against it. DSS staff authorised to use the powers will be trained by our professionalism and security programme, which is also available to local authorities. The staff will be securely chosen, checked and trained. If the system breaks down, tough disciplinary procedures will follow. If any of your Lordships have any further worries, I shall be happy to respond in correspondence.
The noble Earl, Lord Russell, asked whether we could guarantee that the information would not be given to anyone else. The only obvious recipient that we can think of is the Inland Revenue, which is already permitted. Unlawful disclosure of information is an offence punishable by imprisonment for up to two years.

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I was also asked how long the DSS would hold on to its records. We normally destroy such records after about 18 months, but if a fraud prosecution was under way, we would hang on to them until it had concluded. Finally, on the point about information, the noble Baroness, Lady Fookes, asked about charities. The provisions relate only to information about customers, not the relationship between employers and employees.
The third issue of substance was human rights and interaction with data protection. My noble friend Lord Grabiner dealt with that powerfully. His arguments were unanswerable. The Data Protection Commissioner has questioned whether the powers to obtain information are necessary and whether they are sufficiently precise and accessible in order to comply with the European Convention on Human Rights. I would argue, as did my noble friend, that so long as some claimants lie to us, as they do—that is the definition of "fraud"—those powers are necessary.
If benefits cheats did not lie to us and were not fraudulent, I would agree with the Data Protection Commissioner that we could obtain the information that we need from the claimant. However, by definition, if the claimant is fraudulent, he will lie to us or refuse us access to information. I gave an example in which we suspected someone in the building trade who had large sums of money going into his bank account. He refused us access. If the Data Protection Commissioner's concerns were upheld, we would not be able to obtain information about such a fraud because the person concerned could refuse us access to his bank account. That fraud, which may involve a sum of £10,000 or £50,000, could go unchecked because those powers would be denied us.
A question of balance arises, and I respect that. However, I believe that your Lordships will understand our difficulties. If claimants have sole control over the information which we can obtain about them, by definition the very people whom we suspect will be those who deny us access to that information. It is very difficult to square that circle in good faith. That does not mean that the powers should not be exercised properly according to a code of guidance by staff who are properly trained and managed. However, it is a circle that we cannot otherwise square.
Earl Russell: My Lords, perhaps I may narrow an area of difference. I did not hear any noble Lord today suggest that no such powers should exist. The argument concerned whether the powers are defined correctly.
Baroness Hollis of Heigham: My Lords, I suspect that I may have a slightly different reading of this matter. I was being pressed as to whether the Data Protection Commissioner believed that the powers were compatible with Articles 8 and 14 of the Human Rights Act. That is what I was seeking to address.
I was going on to say that, together with the Secretary of State, I shall be meeting the Data Protection Commissioner shortly to explain why in our judgment and following our legal advice we believe that the powers comply with the European Convention on Human Rights and to discuss her concerns. However, I
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can assure the House that my understanding is that the powers meet the convention's tests of being precise and accessible because we would not use them until a detailed code of practice had been published. The Data Protection Commissioner would be consulted on the draft code of practice and claimants would also be informed that their information may be checked with third parties.
Lord Higgins: My Lords, I apologise for intervening again and am grateful to the noble Baroness. Will she give us an indication about timing so far as concerns the code of practice; that is, will this House have an opportunity to examine the code before the Bill makes much further progress?
Baroness Hollis of Heigham: No, my Lords. We have already started to hold negotiations and discussions with bodies about the draft code. However, I understand that the draft code will be published well before any of this Bill comes into effect.
Perhaps I may now move to the final substantive point raised by several noble Lords in relation to burdens on business. The noble Baroness, Lady Noakes, said that it was unreasonable that the Bill should place a burden on employers. It is intended that such a burden should be placed where employers have colluded with their employees to commit benefit fraud; for example, by paying lower wages, as in the example described by my noble friend Lord Grabiner, thereby giving themselves an unfair competitive advantage over lawful employers. In those cases, we mean precisely for the Bill to be burdensome.
Business organisations support our view and not that of the noble Baroness, Lady Noakes. The Federation of Small Businesses, for example, told us that it supports Clause 14 because it will help it to deter the collusive employer and thus give greater protection to the lawful employer. The notion that the DSS is intending to run a protection racket by extracting £1,000 fines as an alternative to taking a case to court because it wants to increase its coffers seems to me to suggest a degree of fancy that one would not expect from a noble Baroness who commands such high esteem in her profession of accountancy.
I was asked whether the estimated costs to businesses in the regulatory impact assessment were net or gross. They are gross. I am sorry that that information is not on the website. The RIA should be included by the end of this month.
In relation to payments, the noble Baroness, Lady Fookes, asked me in particular whether the legislation would affect disproportionately small businesses and whether that would be unfair. We expect the measures to impinge primarily upon larger businesses. The only small businesses—as opposed to collusive employers, who, I agree, are likely to run smaller businesses—which we believe will be affected in terms of the costs of provision of information are, I suspect, cheque cashing shops. The Cheque Cashiers' Association supported our proposals in its response to our consultative document.

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Having dealt with the big points—that is, the use of the powers, the safeguards, the human rights issues and the burdens on business—I should like to spend one or two minutes running through some of the more specific and detailed points, which are no less important but perhaps less thematic.
First, the noble Lord, Lord Higgins, asked what response we had received to the Scampion report. We have taken on board the report's general recommendations by setting up the national benefit intelligence unit, headed by a former deputy director of MI5. We have strengthened the organised benefit fraud investigation service, now headed by the former head of investigations at Customs & Excise. The two units will work well together in an intelligence-led approach to tackling fraud. We are setting up a joint working group with local authorities and, as a result, are replacing the weekly benefit savings scheme for them.
I move to a totally different point. As I said, this is "shopping list" time; therefore, I hope that your Lordships will forgive me. The noble Earl, Lord Russell, asked why we needed the words "or likely to" in new Section (2C) in relation to obtaining information. He was worried that that indicated a fishing trip and wondered whether we were assuming guilt before having reasonable grounds to do so. The reason why we require powers to investigate is that, for example, a person may well not have committed an offence but may have two national insurance numbers. We would want to know why. Another example is that a person may be found with a large number of order books which he is about to encash but has not yet done so. It is that type of example—
Earl Russell: My Lords, I am most grateful to the Minister. I take her point about those cases. However, would they not be covered by the words "reasonable grounds to suspect fraud" without invoking the words "are likely to"?
Baroness Hollis of Heigham: My Lords, I shall certainly look at the legislation to discover whether the word "reasonable" is preferable to the words "likely to". However, at present where we have reasonable grounds and believe that the action may occur reasonably precipitously, that is the basis on which we have statutory authority for our actions. However, I shall see whether the wording should be clarified or, indeed, whether any guidance would make it clear.
The noble Lord, Lord Higgins, also asked about CIFAS—the central service for financial organisations—and how information swapping was progressing. Department officials will meet CIFAS and the finance organisations next week. They will discuss what information we hold which may be made available to banks and insurance companies.
However, clearly we must also be careful about what information we give them because information accessed through credit reference agencies is sometimes less secure than is information held by the DSS. The noble Lord may be somewhat surprised at the
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information which flashes up on the screen each time he pays for his petrol bill with a credit card. We must take care that certain information is not passed on which then goes to the local small garage which is processing the card. We want to be constructive and reasonable but we also have a duty of care, as the noble Lord will understand, particularly when one is dealing with sensitive questions about, for example, family relationships and so on.
Both the noble Earl, Lord Russell, and the noble Baroness, Lady Noakes, asked whether the power to add to the list of organisations that can be required to provide information gave us carte blanche powers by regulation. First, this is an affirmative order. I know that the noble Earl, Lord Russell, will be delighted about that. We could deal with such a power only by returning to this House for authority. Its main purpose concerns the fact that types of organisation change. We need to be able to have access to those organisations because they have changed without having to come back for primary legislation. However, that would be carried out by affirmative order and therefore proper parliamentary scrutiny would take place.
I turn to a point which I take most seriously. The noble Earl, Lord Russell, asked whether we would guarantee that information that we hold about asylum seekers would not be given to their—I was about to say "host"—enemy government, if I may express it in that manner. I give a categorical assurance that that would absolutely not be the case.
The noble Baroness, Lady Fookes, asked about identity cards. She was absolutely right—that is beyond the scope of the Bill, and not, I may say, for entirely accidental reasons. Other countries that have identity cards have found that such cards can be forged. When there is a single gateway—the identity card—that is forged, a whole array of services opens up. Oddly, our rather more bumbling approach, which has several different gateways, may in those cases serve to act as some protection against fraud. However, that is not a simple issue, and having an identity card would not necessarily hugely increase our security arrangements, although it would alter the way in which we approached the issue.
The noble Baroness, Lady Fookes, also asked about joint bank accounts. I take her point, especially in relation to women. In my experience, joint bank accounts are normally held between family members. One of the major areas of fraud tends to affect family members. For example, one family member may be working and the other claiming benefit. If she has other worries about that matter which do not involve family members, perhaps she would let me know and I shall seek to address her concerns. I shall give my response about Scotland in a letter.
The noble Lord, Lord Higgins, asked about funding local authority investigations. An authority will receive a subsidy for the fraud that it detects and should see financial benefit from the outcome.

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Finally, I turn to the last substantive item; that is, war pensioners. It was raised by several noble Lords, including my noble friend Lady Strange—I persist in calling her my noble friend although she sits on the Cross Benches. It was also raised by the noble Baroness, Lady Fookes, and the noble Lord, Lord Astor. I emphasise the fact that war pensioners seldom, if ever, commit fraud. So far as I am aware, we have detected only six frauds during the past six months involving war pensions. That rate is far lower than for mainstream benefits. The areas in which fraud is likely to occur are not necessarily because the war pensioner is fraudulent—someone else may be making false claims on his behalf. Occasionally, with regard to treatment allowance, there are false claims about attendance for treatment. There can also be a failure to declare an increase in earnings or to declare employment. Previously—I am delighted to say that, as a result of the activity of my noble friend Lady Strange, this is now almost unheard of—there had also been a failure to declare that people were living as husband and wife. That is now no longer an issue, because one may retain the benefit.
We have not brought a prosecution for war pensions fraud, although that has been considered in some cases. There has to be a good reason for excluding that from the shopping list that we are looking at. What are we saying? That for someone to lose his benefit, he had to commit a fraudulent offence knowingly, willingly and maliciously, as certified by the courts, not once but twice. Does any noble Lord really suggest that a war pensioner who knowingly, willingly and maliciously committed a fraud—I agree that it is extremely unlikely—and if he lied and cheated and was found guilty not once but twice by the courts, should continue to enjoy a high level of benefit? I do not think so. It is inconceivable that that would happen, but, nonetheless, in the very rare case that it does, I do not think that the noble Lord, Lord Astor, would want the benefit to continue. That would bring into disrepute war pensions that were honourably and properly earned, deserved, held and cashed by other war pensioners. I hope that no noble Lord believes that there is an issue in this context; there is not. I cannot conceive of any reason why the case should be excluded.
I shall close on that last point. I have used enough of your Lordships' time. I shall write to noble Lords about any points that I have not dealt with. I thank noble Lords for our well-informed, courteous and interesting debate, and I seek their co-operation in trying to improve the Bill. What matters at the end of the day is that we eradicate fraud not just to save money for the taxpayer but to re-build confidence in the welfare system, especially for pensioners, who are often reluctant to claim. I shall seek the help of noble Lords in so doing. I commend the Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Child Support (Variations) Regulations 2000
6.34 p.m.
Baroness Hollis of Heighamrose to move, That the draft regulations laid before the House on 6th December be approved [1st Report from the Joint Committee].
The noble Baroness said: My Lords, for the purposes of this debate, I shall refer to the draft Child Support (Information, Evidence and Disclosure and Maintenance Arrangements and Jurisdiction) (Amendment) Regulations 2000 using the number three, because they are the third main item on the Order Paper. I shall refer to the Child Support (Collection and Enforcement and Miscellaneous Amendments) Regulations 2000 using the number four, to the Child Support (Maintenance Calculation Procedure) Regulations 2000 using the number five, to the Child Support (Maintenance Calculations and Special Cases) Regulations 2000 using the number six and to the Child Support (Variations) Regulations 2000 using the number seven. I hope that the regulations, which were laid before Parliament on 6th December 2000, will be approved.
All children are entitled to the financial and emotional support of their parents. All parents are responsible for supporting their children, whether they live together or apart.
The current child support scheme was established, with the agreement of all parties in this House and in another place, to ensure that children benefited from the financial support of both parents and to make it easier for non-resident parents to provide that support.
We know that the current system has failed and is in need of radical reform. Our proposals for a new and simpler system, which is focused on the need to ensure that maintenance due becomes maintenance paid, have won widespread support. The Act that forms the foundation for the reform received Royal Assent last July.

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If your Lordships wish, I am willing to explain why we needed to reform the legislation, but I suspect that it is not necessary to repeat the Second Reading debate of a Bill that we have already discussed at great length. However, I am happy to revisit those arguments if that is what noble Lords wish.
The Act sets out the general principles on which the new child support scheme will be based, but, inevitably, much of the detail was left to secondary legislation. The regulations before the House, and several negative measures, which were made in December, provide that detail.
Before I explain the effect of each regulation package, I shall briefly discuss the way in which we shall bring the reforms and, consequently, the regulations, into effect. We believe that the new child support scheme will be better for children and their parents and we want to bring it into effect as soon as possible. However, there is a great deal of work to do to prepare the agency for the new scheme, including the development of completely new computer systems. We cannot rush that work, so we have set out to ensure that the new scheme will be introduced for new cases by April 2002, with existing cases transferring over from a later date, once we are sure that the systems are working well.
That phased introduction means that the regulations must also be introduced in a phased way. This is why the regulations in the packages before the House are, on the whole, designed to come into force when relevant sections of the Child Support, Pensions and Social Security Act 2000 are commenced in respect of specific cases. However, as my right honourable friend the Secretary of State said, there are some provisions in the new legislation which will improve the effectiveness of the current scheme, paving the way for reform.
It is for that reason that we are bringing the following provisions in the 2000 Act into effect on 31st January 2001: Section 13, which makes provision for two new criminal offences of failing to provide information to the agency when required to do so, or for providing false information; Section 14, which streamlines the appointment of child support inspectors to gather the information required for assessing and collecting child support; Section 15, which will help the agency to collect maintenance in cases of disputed paternity; and Section 22, which will allow the Child Support Agency to collect maintenance from certain non-resident parents working abroad for employers based in the UK.
Those provisions will help to address two key weaknesses in the current system, the first of which is the lack of information. The new criminal penalties will provide all who have contact with the agency with a clear incentive for frank and open disclosure. On conviction, those who continue to provide false information, or who refuse to provide the information required, will face a fine of up to £1,000. That penalty is intended as a deterrent but, wherever possible, the agency will attempt to avoid bringing prosecutions by
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encouraging clients to provide the correct information. However, we do not want clients to think that they can string the agency along.
Those incentives will be supported by the new streamlined appointment of child support inspectors. Currently, inspectors can be appointed, absurdly, only on a case-by-case basis, which prevents the establishment of the necessary core of expertise. The new provision will allow the agency to appoint teams of inspectors to deal with complex cases, such as establishing the income of self-employed parents, and thus to build up appropriate expertise.
The second weakness involves disputed paternity. Too often, non-resident parents are able to delay the process of collecting maintenance for their children by denying paternity even when they have no reason to doubt it. About 200,000 cases a year involve the denial of paternity, but only 20,000 are subsequently tested and in only 2,000 cases is the claim upheld. The new provision will extend the circumstances in which the agency can presume paternity where an alleged parent is likely to be the child's parent. The agency will also be able to assume that an alleged parent who refuses to take or accept the result of a DNA test is, in fact, the parent of the child.
In addition, from April this year we are commencing Section 16 of the 2000 Act, which provides for magistrates, exercising their civil powers, to make orders for the disqualification of non-resident parents who have persistently failed to meet their child support responsibilities from holding a driving licence. That provision, which offers an alternative to committal to prison for the most unco-operative non-resident parents, was debated at length during the passage of the Bill. Section 17 of the 2000 Act applies to Scotland.
The first two packages of regulations before the House today, therefore, will, in part, support those early changes.
The Child Support (Information, Evidence and Disclosure and Maintenance Arrangements and Jurisdiction) Regulations amend existing provisions governing the collection and disclosure of information for child support purposes. Amendments made by Regulations 5(2)(b), (d) and (e) provide access to records held by the DVLA, the Prison Service and accountants. Regulation 6(3) amends existing legislation to ensure that people providing information to the agency are aware of the new criminal offences. Those provisions will be brought into effect on 31st January.
Those regulations also cover the jurisdiction of the CSA to calculate and collect maintenance. Amendments made by Regulation 8(3) support the extension of agency jurisdiction to certain non-resident parents working abroad for employers based in the UK by virtue of Section 22 of the 2000 Act. That provision will also come into effect on 31st January.
The Child Support (Collection and Enforcement and Miscellaneous Amendments) Regulations also amend existing regulations. Provisions include those relating to withdrawal by the courts of driving licences as an alternative to an order for committal to prison.

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Amendments made by Regulation 2(6) and the schedule to those regulations provide for a disqualification from driving order and for the way in which such an order may be executed. Those provisions will come into effect on 2nd April. These regulations also make detailed provision for the imposition of financial penalties for late payment of maintenance.
The Child Support (Maintenance Calculation Procedures) Regulations will govern the processes in relation to applications for maintenance and cases where a parent with care claiming IS or JSA(IB) opts out of child support. In particular, these regulations provide for the date on which an application for child support will be treated as made (Regulation 3); determining, in cases where there is more than one application in relation to the same parents and child, which application will be proceeded with (Regulation 4 and Schedule 2); giving notice of an application for child support to the non-resident parent (Regulation 5); the rate of maintenance liability to be set by a default maintenance decision (Regulation 7); the procedure for making a reduced benefit decision when a parent with care on IS or ISA(IB) opts out of child support without good cause and the penalty which will apply (Regulations 8 to 20); and, finally, the date from which maintenance calculations take effect (Regulations 25 to 29).
I am happy to enlarge on any aspect of the provisions, but noble Lords may wish me to move on to the next package of regulations. However, I am happy to respond, if I can, to any questions as they arise.
The Child Support (Maintenance Calculations and Special Cases) Regulations provide in detail for the calculation of child support liability and for determining which parent is to be treated as a nonresident parent in certain special cases. Noble Lords will recall that the Act provides for liability to be determined using one of four rates: the basic rate where the non-resident parent's net weekly income is £200 or more; the modified rate where net weekly income is less than £200 but more than £100; the flat rate where net weekly income is £100 or less or the non-resident parent or his partner is receiving a prescribed benefit; or the nil rate, which will apply to prescribed groups including prisoners and students. Regulations 2 to 5 provide the basic rules for working out child support liability. They specify the information on which the calculation is to be based and provide rounding rules and the like.
Regulations 6 and 14 provide for working out the apportionment of liability between a number of parents with care. Regulations 7, 9 and 11 provide detailed rules for working out reductions in liability to reflect shared care arrangements, care of the child by a local authority and the non-resident parent's responsibility to maintain other children under a court order.
The more generous shared-care arrangements under the new scheme will ensure that the child support scheme gives proper recognition to those who take on the important job of providing day-to-day care for their children. The remainder of the regulations deal with special cases, such as where a child is in hospital, and the schedule provides for the calculation of net weekly income.
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I turn finally to the Child Support (Variations) Regulations. These regulations make detailed provision for the variation of the maintenance calculation to reflect exceptional circumstances, including child-related special expenses and income not taken into account in making the maintenance calculation.
Part II of this set provides the detailed rules relating to an application for a variation, including, in Regulation 4, how to apply and, in Regulation 9, the process for determining an application which has not been rejected on a preliminary sift.
Parts III, IV, V and VII of the regulations set out in detail the cases in which a variation can be allowed and provide for the resulting maintenance calculation. We have not provided for any cases additional to those listed in Schedule 4B to the 1991 Act as amended by the 2000 Act. As I explained in earlier debates, we are determined to keep the variations scheme tightly focused. While I understand the arguments for recognising other expenses, we concluded that for most parents the child support rates provide a fair liability. All parents have special expenses. The rates are intended to allow non-resident parents to retain sufficient income to meet most of them. We do not seek to re-introduce the complexity of the current scheme which will move them from the assessment back into the variation system.
In conclusion, taxpayers, parents and, most importantly, children deserve better than the current confusing, slow and above all ineffective child support arrangements, which mean that 1 million children go without the money to which they are entitled. Our reforms will ensure that parents meet their responsibilities; that maintenance can be sorted out quickly; and that many children will for the first time see the benefit of maintenance payments. These regulations are an important part of the reform. I commend them to the House.
Moved, that the draft regulations laid before the House on 6th December be approved [1st Report front the Joint Committee].—(Baroness Hollis of Heighani.)
6.45 p.m.
Lord Higgins: My Lords, in listening to the noble Baroness on this subject, I am not sure whether I was overcome with a sense of déjà vu or nostalgia. Almost all those present in the Chamber recall the long series of elaborate debates on this matter—one which in a real sense the Minister has made her own. She has been very much involved in trying to reform the system of which, when introduced, everyone was in favour but which subsequently turned out to raise extremely large difficulties. Hopefully it is now settling down.
When we discussed this matter previously, we were concerned about various aspects; for example, the upper limits on maintenance payments, which I understand appears in the orders and that we welcome; the sole emphasis on the income of a non-resident parent; and the provision for the CSA to intervene in private agreements, which was the other aspect of what was in effect a deal which the noble Baroness did. We

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were also concerned about the disqualification from driving as an alternative penalty. That was debated at great length. Alas, it still comes within the regulations. We still regard it as being—I was going to say "stupid"—not a sensible provision.
What is frightening is the sheer volume of detail in the regulations. The part of the Bill concerned with child support appears to be roughly the same size as the main legislation.
I was slightly puzzled by the debate in another place on 18th December, which concerned the shift from one system to another and the way in which the existing and new cases were to be dealt with. My understanding was that existing cases would be dealt with on the old formula and the new cases under the new formula. That seems likely to produce considerable problems.
Baroness Hollis of Heigham: My Lords, I am happy to respond to the noble Lord now.
We are saying that from April 2002 new cases, as they come through the system week by week and month by month, will go on to the new formula. We will bring existing cases over on to the new formula when we are confident that the IT system is running smoothly. In other words, we are avoiding bringing existing cases over at the same time as the new cases and the "big bang" argument. Therefore, it is true that existing cases will be on the old formula for a period of time—I hope a fairly short period of time—as the new cases come on. However, as soon as we are confident that the system is robust—I have every faith that it will be—the existing cases will come on to the new formula. I hope that that assists the noble Lord.
Lord Higgins: My Lords, I am grateful for that clarification. I had misunderstood the situation. We shall obviously go through a transitional period on the basis described by the noble Baroness, but the sooner that happens the better. I presume that means that when some people who are on the old formula change to the new formula they will pay less than before.
Baroness Hollis of Heigham: My Lords, I believe that we explored this issue in the course of debates, but that was some time ago. Yes, some NRPs will be better off and some parents with care will be worse off, and vice versa. The noble Lord will recall that that is why we are introducing phasing arrangements, so that nobody on a relatively similar income will find their situation sharply affected and therefore be unable to cope with properly entered into other responsibilities. First, we are bringing the existing caseload in after the new cases have settled in, so that people have plenty of advance notice as to when they will come in. Secondly, the noble Lord will recall that when they do come in, there will be a £5 per year change for those in receipt of under £200 and a £10 per year change for those in receipt of above £200 if they have a substantive fall or gain in their maintenance calculation because we are trying to protect their financial situation.
Lord Higgins: My Lords, once again, I am grateful to the Minister for that clarification. That being so, and
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because we have certainly debated the four issues I mentioned at considerable length, I shall not detain the House further. I am sorry about the driving licences, but I hope that the reforms which are now being introduced will result in a much better system in which the parents pay for their children in a sensible way. The noble Baroness should be congratulated on the way in which she has dealt with this matter. We hope that the system will work and that the transitional period will be short.
Earl Russell: My Lords, I thoroughly share the Minister's sentiment about Second Reading debates. I do not want to engage in one and I hope that I do not. However, perhaps I may ask in return that the Minister will not say again that the measure, either now or in the past, was brought in with the assent of all parties. Mr Peter Lilley, who I believe knows something about this, said in the debate on the football Bill last year that most of the worst mistakes he knew of had been made by collusion between the Front Benches. Therefore, one should be a little careful about such a claim.
I shall pay attention to the detail of the regulations. I assure the Minister that I shall not mention them all or we would be here all night. My first point concerns the collection and enforcement regulations. I refer to the penalty payment for being in arrears. The Minister knows my sentiment on the "can't pay won't pay" point. I shall not repeat that. However, perhaps I may ask the noble Baroness to consider the possibility that there might be one single case in future which is genuinely a case of "can't pay". Is there any discretion about requiring the payments for being in arrears? Would I be justified in inducing encouragement on that point from the use in the regulation of the words,
"The Secretary of State may require"?
Does he have to impose the penalty or is there any discretion? If he does have to impose it, do the Act and the regulations exclude the prerogative of mercy? That is a real question to which I should rather like the answer.
I refer to the variations regulations. Regulation 10(1) lists allowable special expenses. I notice in Regulation 10(1)(c) that transport by taxi to visit one's child is to be allowed only in cases of disability or long-term illness.
Baroness Hollis of Heigham: My Lords, I thank the noble Earl for giving way. Perhaps he would be kind enough always to repeat his cross-references. By the time I have identified the correct set of regulations I have forgotten the particular line to which he refers.
Earl Russell: My Lords, I beg the Minister's pardon. I have probably not helped by taking these out of order because it was the order in which they came to me in my pile. From the collection and enforcement regulations I quoted Regulation 7A(3) which contains the words,
"The Secretary of State may require"
and that gave rise to the question about the prerogative of mercy. In the variations regulations I referred to Regulation 10(1)(c). What of the case where the taxi is the only means of available transport? Sadly, there are

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many more such cases, in rural areas in particular, than one would like to think. It is a weakness in the system that special expenses can be allowed only if they have been prescribed in the past. So, if they have not been foreseen they cannot be recognised.
I gave the Minister's office notice that I wanted to raise a point from one of the negative regulations on this subject. I refer to Regulation 3186. Regulation 7 states that the Secretary of State's use of information shall be intraversable. That caused me concern. I should be glad to know why it is there and what it means.
I refer to the maintenance calculation procedure regulations and wish to raise a point from Schedule 1, Regulation 3. This is another case of the interface between the education system and the social security system not really being carried out with proper understanding on both sides.
The problem the regulation addresses is that of deciding when people of 16 and 17 are still in full-time education. The attempt is made to define "full-time education" by the number of hours concerned minus meal breaks. I am sure that the Minister knows as well as I that that will not work where one is dealing with people who are doing an A-level course in humanities and who spend a great deal of time at home reading books. It simply cannot be done in that way; it will not work. Perhaps the noble Baroness, Lady Amos, remembers the exchanges we had about the students regulations and social security. There is a real problem here which needs to be addressed. Perhaps I may look back a moment because this also relates to the power in the Social Security Fraud Bill to require information from educational institutions. It would be helpful to such institutions if the questions could be designed in a format which is capable of an answer.
However, as I am sure the Minister anticipated, my main concern is over the reduced benefit directions in the maintenance calculation procedure regulations. I should like first to mention a small point on the time limit for supplying information on good cause for not supplying the father's name. There is a time limit of four weeks which, if I understand correctly, is not discretionary. However, I would be reassured if I were told that there could be discretion about that.
I think, for example, of cases of domestic violence where sometimes the trauma is such that for a long time the person cannot bring themselves to say in public what has happened; or the case, which is sadly common, of people suffering from depression. From my experience as a tutor I know to my cost that it can be dreadfully difficult to get people to take any kind of action. That is a symptom of the disease and as such must be treated with understanding, however much one may at times wish otherwise.
However, my main concern is Regulation 11(2) which raises the duration of the reduced benefit decision; that is the length of time during which the woman who will not supply the father's name to the CSA can be without benefit. That is now increased to 156 weeks, which is three years. It is beginning to sound like 18th century criminal legislation. In interpreting legislation, a good rule is that constantly increasing
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penalties imposed for a particular offence suggests that something about the definition of the offence makes it difficult to enforce. In fact, the escalation of the penalties is a legislator's confession of failure. The situation needs reading in that light.
There is also a serious question about the consequence of any such reduction for this length of time. Perhaps I may again revert to an exchange we had during the previous business. The Minister, replying on the issue of war pensions, said that she did not believe that anyone would maintain that in the case of two such serious offences the person concerned might still receive benefit.
This is not only a moral issue; it is a practical issue, too. In any legislation, one must always ask whether the mischief created by the legislation is greater or lesser than the mischief it is designed to avoid. One cannot even so much as answer that question if one does not know the consequences of the measure one is introducing.
That is why monitoring what happens to people who are deprived of social security benefits is so vital to any serious argument about whether the sanction should be imposed. One cannot know whether a sanction is justified if one cannot know the consequences.
I have taken the Minister through the matter once today so she is familiar with my arguments. Until she can give coherent information on the consequences, she will continue to hear those arguments and, from time to time, find divisions, some possibly unexpected, on the benefit sanctions.
This is the third time I have raised the matter today. Occasionally, I can claim to be a bellman and I believe that this is such an occasion. I hope that one day I shall receive an answer.
Baroness Hollis of Heigham: My Lords, I did not expect to be let off so gently by the Liberal Democrat Benches—not as gently as the Conservative Benches because there is a meeting of minds between Labour and Conservative Benches. However, the noble Earl, Lord Russell, was sincere in making his points. He asked whether there was any discretion in penalty payments, saying that if I could assure him that there was, he would be content. I am happy to say that I look forward to the noble Earl being content because the penalty will be totally discretionary. The agency will use its powers to encourage compliance and will not automatically impose a penalty whenever a payment is late. I do not know whether the noble Earl will be satisfied with the remaining answers, but I hope that he will regard that as a reasonable start.
He went on to ask whether we have a reasonable definition of "full-time" education, given the hours of study and reading. As a former academic, I take his point, but the provision reflects the position in other legislation; for instance, the child benefit provisions. Therefore, we are being consistent.
The noble Earl asked a substantive question about the reduced benefit directions about which he has been concerned over the years. He asked about the increase to 156 weeks of reduced benefit decisions. There may be

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a misunderstanding because that duration was last increased in 1996 and there is no change as a result of these regulations. Therefore, the Act has not worsened the benefit penalty.
He then went on to ask whether the Government have a coherent, informed position of what happens to women in that situation. As I knew the noble Earl would be properly concerned about the issue, and because we wanted to have the information, we undertook research as the Bill progressed. We know that of the 70 per cent of people who lose their reduced benefit direction within a few months of its imposition one-third will have started work, one-third will have cooperated with the agency, and one-third will have repartnered. We undertook, first, a sample survey to discover how many people were being affected and then, secondly, a detailed qualitative survey following what happened to the women who had been sanctioned. The survey was small and quick but seems to confirm our other evidence.
As I said, we understand that of the 70 per cent, one-third start work, one-third co-operate and one-third repartner. Of the remaining 30 per cent, approximately two-thirds lose their reduced benefit direction within the year because they are co-operating, and we suspect that where claims to benefit are withdrawn, there may be fraud. I do not know whether that helps the noble Earl but I assure him that I would not want to be party to any such scheme of sanctions if I did not feel it was decent and appropriate under the circumstances. A child is entitled to the support of both parents. The noble Earl is entitled to press me on whether the definition of "good cause" is adequate, but if there is no good cause the woman has no right to expect the taxpayer rather than the child's natural father to act as the father of the child. That is why we have such sanctions.
Earl Russell: My Lords, I am grateful to the Minister for undertaking the research and I note her information. First, will the research be published? Secondly, does it contain information on the means of subsistence which are open to the women concerned while they are not receiving benefit?
Baroness Hollis of Heigham: My Lords, no, it will not be published because it was undertaken quickly, based on a qualitative sample, by the analytical services divisions of the DSS and the CSA. We shall in any event monitor the effect of our policies but will not publish the research.
The noble Earl asked whether we know what happens to those who have no means of subsistence. I suggested that of the 70 per cent of those exposed to reduced benefit direction, one-third repartner and are then no longer of lone parent status and entitled to income support; one-third return to work and are not entitled to income support; and one-third go on to cooperate with the agency and receive their benefit. The 30 per cent who do not end their RBDs lose their income support. I do not want to malign lone parents, but our evidence—it is speculative because there is no way of
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detecting this undetected fraud—suggests that someone may be cohabiting and therefore unwilling to have her income support claims further exposed. In that situation, such women tend to come off benefit.
We have done the best we can. We have reached the point where women are refusing to provide the information we can use in order to discover the consequences of their behaviour.
Earl Russell: My Lords, in future research questions, will the Minister include those which show whether benefit sanctions encourage fraud?
Baroness Hollis of Heigham: My Lords, if the noble Earl would like to write to me with the counterfactual evidence which would prove that, I should be pleased to consider it. However, you cannot have as a question for research whether benefit sanctions include fraud. The question is not answerable in that form. If the noble Earl would break it down into sub-questions to which numbers can be attached so that they could be quantified, I should be pleased to ensure that they would be counted. However, in all humility I suggest that as he phrases the question, it is not answerable because it is a qualitative statement about cultures. One can count only those questions which have numbers attached.
However, at the end of the day the noble Earl must stand behind it and ask why we are doing this. It is not the intention to be nasty to lone parents, but there may be a point at which the perceived interests of the lone parent diverge from those of the child. We believe that the child is entitled to the support of his natural parents, including, for the most part, the non-resident father. We also believe that because of the pain and anguish of divorce sometimes the mother may wish to have a clean break. However, she is not entitled to project that onto the child. Therefore, she should be required to cooperate. Alternatively, she may take the consequences of not co-operating and accept a benefit penalty.
As a result of the system that we have developed, which means that we work with the Benefits Agency so that at the point at which the lone parent first comes onto income support she is encouraged to fill in the form, we have moved from the inherited situation in which only 20 to 30 per cent of lone parents co-operated with the CSA to one where over 80 per cent co-operate with good grace to the benefit of the child. Obviously, I should like to see all lone parents co-operate. We know that where reduced benefit directions kick in most lone parents either co-operate or have alternative sources of income. At the end of the day, those who do not cooperate may be operating within the informal economy and do not wish to expose themselves in that way. I hope the noble Earl accepts that we are not doing this to get at lone parents but to ensure that children receive from their fathers the support to which they are entitled. The taxpayer should not provide that support in lieu simply because the lone parent prefers a clean break.
I shall write to the noble Earl about "untraversable". He was kind enough to notify me of the point. However, because we were tied up with the earlier Bill I was unable to provide a satisfactory answer. I shall also deal with

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the noble Earl's point about taxis. I believe that that exhausts the specific points that he made about the regulations.
On Question, Motion agreed to.

Social Security Benefits Up-rating (No.2) Order 2000
7.12 p.m.
Baroness Hollis of Heighamrose to move, That the draft order laid before the House on 30th November be approved [2nd Report from the Joint Committee].
The noble Baroness said: My Lords, I can blame only the Opposition Benches for insisting that we deal with a long series of social security measures. Obviously, the Government do their best to accommodate the wishes of the Opposition. That all of these matters should be dealt with in one day, which requires that we move from one topic to another, was, as I understand it, the wish of the Opposition rather than the Government. I apologise to the House for moving to yet another subject.
As noble Lords are aware, this annual order and the other standing in my name on the Order Paper are a routine but vital part of DSS business. The original uprating order contained a minor drafting error which has been corrected in the measure before the House today. The order will increase most income-related benefits by the Rossi Index, which is 1.6 per cent. Most national insurance benefits will rise in the usual way in line with the Retail Prices Index, which is 3.3 per cent. As usual, the increases are based on changes to the relevant price indicators over the 12 months ending in September.
But there are areas of social security where we want to provide more than price protection. For families with children, people with disabilities, carers and pensioners we want to provide more help. First, we want to do more to help children. As your Lordships know, when we came into office we were faced with the unacceptable situation in which one in three children in this country lived in very poor households. We are determined to right that wrong. As a result of our Budget measures, thus far 1 million children will be lifted out of poverty. As part of our programme to eliminate the scourge of child poverty from this country, we shall introduce further measures from April of this year. The increase in child benefit, the new children's tax credit and increases in WFTC mean that a single earner family with two children on half average earnings (£12,500) will see their standard of living rise by 20 per cent this year, which is the biggest annual rise for 25 years.
By the end of the Parliament we shall be spending almost £6 billion extra a year on support for families with children. Most of that help will be directed at the poorest families. These cash measures, initiatives to tackle social exclusion, such as Sure Start, and improvements in education standards will ensure that all of our children get the start in life that they deserve.
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The second area where we want to do more is to provide help to people with disabilities and carers. From April we shall for the first time extend benefits to severely disabled three and four year-olds. Some 6,000 disabled children and their families will be better off by over £38 a week. We are also raising the disabled child premium by £7.40 a week above inflation. Around 80,000 children will see a rise in the disabled child premium from £22.25 to £30 a week which is a real increase for some of the neediest families in the country.
We also want to do more for adults with severe disabilities. In April the new disability income guarantee will be introduced, but not at the original rate of £128. The guarantee will be £142, which is an extra £14 a week. For couples, the guarantee will he £186.80. In addition, young adults disabled early in life will, as a result of the changes we made two years ago, benefit from an extra £27.60 a week.
We are also doing more to recognise the enormous contribution made by carers. The carer's prernium will be increased by £10 a week on top of the normal uprating. That means the premium will rise in April from £14.15 to £24.40. This measure will help over 200,000 carers on low incomes. We are also increasing the earnings threshold for invalid carer's allowance from £50 to £72, which is the rate of the lower earnings limit in national insurance. That will allow carers realistically to retain contact with the world of work and bring them within the contributory benefits system of the national insurance scheme. This package of measures will ensure that nearly £200 million extra will be spent annually on helping people with disabilities and carers.
The third area where we want to do more is pensioners. The order introduces measures to tackle pensioner poverty, ensure that every pensioner shares in the rising prosperity of our country and. reward pensioners for their saving. Our first priority for pensioners was to get more help quickly to the poorest. That was why we introduced the minimum income guarantee and made a commitment to increase it by the level of earnings for the rest of this Parliament. But in this order we shall raise the minimum income guarantee to £92.15, not just for those pensioners on the highest rate but all pensioners on the guarantee.
The second priority is that as we move towards the pension credit from 2003 we shall increase the basic state pension. We believe that that should be the foundation of pension provision as part of the partnership between state and funded pensions, and it is essential if people are to retire on a decent incorne in the future. This order will increase the basic state pension by £5 for single pensioners and £8 for married couples. Widow's and bereavement benefits will rise by the same amounts.
As a further part of the transition to the pension credit, the order will double the lower capital limit for the minimum income guarantee from £3,000 to £6,000 and increase the higher capital limit from £8,000 to £12,000 in April. That will benefit half a million pensioners who will find that modest savings no longer exclude them from entitlement to MIG.

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In total, we are spending more than £8.5 billion extra on pensioners this Parliament. As I mentioned earlier, we are spending £6 billion on children. We can do this only because we are delivering stable economic growth and reforming social security. We now see the results of our reforms. By moving people from benefits into jobs we are spending £4 billion less this year. Social security spending would be falling in real terms if we had not deliberately chosen to target more money on families with children, people with disabilities and pensioners; in other words, we are spending it on those who need it, not on propping up economic failure. By cutting the bills for economic and social failure we can provide help where it is most needed, giving greater security to pensioners and people who cannot work. The orders that we shall debate tonight deliver that additional spending, and I commend them to the House.
Moved, That the draft order laid before the House on 30th November be approved [2nd Report from the Joint Committee].—(Baroness Hollis of Heigham.)
Lord Higgins: My Lords, we are debating a considerable number of social security matters on the same day. Without going into the mysterious workings of the usual channels, there is perhaps some convenience in proceeding in this way. This particular order uprates a large number of benefits, and I am sure that the recipients appreciate that. In a more general sense, it is rather worrying that government policy has been erratic. For example, there has been an increase of 75 pence in the basic pension in one year followed by a £5 increase in the next. Who knows what will happen next year? Having for many years represented a constituency which has more pensioners than any other, I believe that that kind of erratic measure will be viewed with considerable concern. People are still worried that the RPI used for pensions is not the same as that used for fuel and so on. But I do not think it is appropriate at this stage in the proceedings to make a large number of partisan points in response to what the Minister has said.
However, I make one particular point. We appear to be in a situation where debates on these matters divorce the increase in benefits from the increase in contributions. That is a reflection of the structural changes introduced by the Government. When I raised the issue of contributions on an earlier matter, the Minister replied that it was a matter for the Treasury. But, as she well knows, she and other Ministers in this House answer for all departments and the Government as a whole, not just their own department. Therefore, it is legitimate to say that here are these increases which take place, but what is the effect on contributions? Considerable concern was expressed at the way in which the Government, in announcing these changes—more particularly the Chancellor of the Exchequer—sought to take much credit for the increase in the benefits, but they did not point out that the contribution increase was something like three times the rate of inflation for a substantial number of people. Perhaps I may restrict my question on this occasion to
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asking the Minister to tell us what are the implications in terms of the contributions which are necessary to finance the increase in benefit to which she has referred.
Earl Russell: My Lords, by convention this debate is used for a review of the general feel of social security. I shall use it to that effect as briefly as I can at this time of night. I appreciate that we are coming to the end of a marathon debate. But we are also coming to the end of a Parliament. In those circumstances, it is legitimate to review what has and has not been achieved.
Perhaps I may say to the Minister that she is a trooper and an old hand. She will not take anything that I may say personally. She has been a distinguished and excellent Minister. Unless what I say refers directly to her words or actions, I do not intend to imply any criticism of her personally.
The Government's overall record on social security is probably worse than their record in any other field except possibly the Home Office. I shall not say that I am disappointed about that. I read the Prime Minister's Amsterdam speech of February 1997 very carefully indeed. I expected nothing else.
First, I came into this Parliament with a long shopping list of things which I hoped to see reversed by the Government. I shall not rattle through that list. I am sure the Minister knows perfectly well what is on it. Most of them have not been touched. The single parent case is worse. The CSA case is worse in many ways. I remember everything that the Minister said when the legislation relating to the JSA was before the House. As Lord Henderson of Brompton put the issue at the time, it was the introduction of measures designed for the policing of the unemployed. No change there.
I am not sure of this judgment, but, with regard to asylum seekers, were I an asylum seeker I would rather try to run the gauntlet of Michael Howard's Bill of 1996 than penetrate the ring of steel set up by Jack Straw in 1999. I know what the Minister will say against that. It has substance; but so do the points on the other side—and the balance is difficult.
I shall not say "all is forgiven", but I do say to representatives of the previous government that we are not that much better off, if indeed we are at all. It is true that from the Government we do not have the hacking out of large slices from the safety net, like cutting a cake. Instead what we have through the use of benefit sanctions—I shall not repeat what I have just said—is pushing individuals out like pushing mashed vegetables through a sieve. The amount that goes out is probably about the same in both cases.
I know that there are remedies for poverty on offer. But what we find over and over again is that the Government always believe that they know best what is in the interest of the person who hopes to escape from poverty. They do not merely believe that their own judgment is better than that of the claimant but that they are entitled to enforce it by compulsion. Perhaps I may refer to the exchanges that we had a few moments ago on CSA reduced benefit penalties. The Minister was quite certain that she knew what was in the best

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interests of the child better than the child's mother. That is a question on which just a little doubt might well he becoming.
Baroness Hollis of Heigham: My Lords, that is a somewhat unfair summary. I was making the point that there are occasions when the interests of the mother seeking a clean-break divorce and the interests of the child, because they can never divorce their parents, do not coincide but diverge. When that happens, decisions need to be made, and in that situation, they are difficult. I believe that the Government's primary responsibility is to children because they are the dependent ones.
Earl Russell: My Lords, I thank the Minister for that explanation. I agree there are circumstances in which interests may diverge. What I am querying is the certainty the Minister feels that the interests diverge in this case. A little bit of hesitation about whether the mother's or the Minister's judgment is right is something I should be glad to hear.
We should remember that in dealing with the administration of the benefit system we have a gross inequality of power between the system and the claimant. Where we have that gross inequality, and that inequality is backed by the power to take benefits away altogether, we have a situation which may easily be perceived as oppressive on the receiving end.
We also have the constant repetition of the mantra, "Work for those who can; security for those who cannot". I previously suggested to the Minister that that has led to a denigration of benefits. Last night I looked at the use of the phrase "cash handouts" in the Green Paper on welfare reform. The Minister perfectly well remembers the passages to which I refer. That links up with the problem of uprating only by prices. That is not consignment of pensions. The Minister knows very well that I am not taking refuge behind the walls of the castle. I am not recommending a return to the earnings link. But, from time to time, as resources allow, it is necessary to uprate above prices.
The Acheson report pointed out that benefits were at a level inconsistent with preserving health. But on that point at least I am beginning to think that the Acheson report has gone the way of the Black report. No action on this point has followed. The problem is regularly perceived by the Government as one of getting people to want to work rather than of there not being any work. I have said this many times before, but it was clearly confirmed by an article by the Secretary of State for Education and Employment writing in the Observer as recently as last Sunday. He expressed the matter in these words:
"Jobs are there for the taking in most parts of the country".
He is not particularly impressed by any shortage of jobs. He said:
"It used to be thought that the number ofjobs in the economy was finite … The more people available to work with the right skills, the more jobs that are created".
If there is any research that sustains that proposition, I should be glad to see it.
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As for jobs being there for the taking, I looked at last January's figures for unemployment by constituency. I admit that they are a year out of date, and if the Minister has the information to bring me up to date, I should welcome and listen to it. A year ago, 34 constituencies had unemployment above 10 per cent overall. Constituencies where male unemployment was above 10 per cent numbered 84 in England and 15 in Scotland, including a rate of male unemployment in Sheffield Brightside of 12.9 per cent.
In his maiden speech in 1987 Mr Blunkett said he believed that he was the only Labour Member who woke up the day after the election looking on the "Brightside". Perhaps he should do it a little more often. It is because of the belief that jobs are there for the taking and that the number of jobs expands with the number of skilled people that we get addiction to compulsion and to thrusting people out of the safety net. I know that they may say that yesterday's announcement on neighbourhood renewal is getting away from the top-down approach, but I listened to the discussion of this issue on last night's "Newsnight". John Holman, who works in Glasgow Easterhouse, said:
"This is not really the case. The Government sets the targets and whatever power is devolved, it is still dominated by the targets. So in the end the Government makes the decisions".
I am even more concerned by what the Secretary of State said at the end of his article. He said:
"Our intention now is to make full employment a reality too".
That is fine if it is to be done by creating additional jobs. But if it is to be done by redefining the workless so that fewer of them are classified as unemployed, that could be a cause of very grave anxiety. When I look forward to the possibility of a Labour second term and I think of all that I have heard said in this Chamber and elsewhere on the theme of rights and responsibilities, I view a future Labour Government after the next election with dread.
Baroness Hollis of Heigham: Oh dear, my Lords! I shall try to respond to the specific point made by the noble Lord, Lord Higgins. He asked about Contributions Agency issues, which are a matter for the Inland Revenue and are not part of the regulations under discussion. However, I shall have a go, basing my remarks on the Government Actuary's report, which I just happen to have in my back pocket. Perhaps I may respond in two ways. I shall talk about the implications for the National Insurance Fund and then talk about the baseline figure for national insurance contributions. If the noble Lord wants additional information beyond what is in the Government Actuary's report, I shall have to write to him. He will understand that.
The surplus balance in the fund over the minimum recommended level is projected to remain at its current level of £11 billion until 2005 or 2006. Thereafter, it will fall. By 2009 or 2010 it will need either a Treasury grant or an increase in national insurance contributions to bring it back up again. That is under a prices uprating scenario, which is the one on which we are currently operating.

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In terms of the baseline figures on national insurance contributions, the joint employer/employee national insurance rates are currently 20.25 per cent, excluding the 1.95 per cent in respect of the NHS. In 2001–02, that will fall to 19.95 per cent, because the employer rate is due to fall by 0.3 per cent. In 2002–03, it will be 19.85 per cent, because the employer contribution rate is due to fall by a further 0.1 per cent. With price upratings in 2010–11, the joint employer/employee rate would have to be approximately 21 per cent as opposed to the baseline rate of 19.85 per cent; that is with price upratings. I could go on into 2030 but that is too far ahead. I have not given our assumptions about earnings because we are not intending to earnings link benefits, but I can give that information if the noble Lord wishes. I hope the noble Lord thinks that I have met my point and that he can see the size of the fund, what the baseline figure would be, and therefore what the potential shortfall could be.
Lord Higgins: My Lords, I was really making a much simpler point. The effect of paying higher benefits is to lead to an increase in contributions. At the same time as the Chancellor announced an increase in benefits, he did not refer to the increase in contributions but left it to other people in a more obscure way. What happened this year is that the increase in contributions for a substantial number of people, as a result of the way in which the system works, was about three times the rate of inflation. I am still not clear why the Government did that. It is a cause for concern for those people. I have not yet heard any justification for it.
Baroness Hollis of Heigham: My Lords, is the noble Lord referring to the contributions of the self-employed?
Lord Higgins: My Lords, I am referring to employee contributions.
Baroness Hollis of Heigham: My Lords, it is no longer a DSS matter but I shall follow up the noble Lord's question and seek to answer it in writing. If he finds that unsatisfactory, perhaps he will put down a Question for Written Answer. The information I have is what I might call the global information because this matter is now one for the Treasury and the Inland Revenue.
I turn to the election speech of the noble Earl, Lord Russell. He said that after looking at the record of the existing Labour Government the prospect of a future Labour Government filled him with dread because the CSA was worse as a result of our reforms. I have to say that the noble Earl cuts me to the quick. When we took over, only about 65 per cent of parents received what they should have been receiving. The figure is now well over 70 per cent. As a result of these reforms I hope to push the figure beyond 85 per cent. There are 1 million kids out there not getting money basically because some fathers do not wish to pay, even though, by any test or formula, they can pay. I have been responsible for trying to change the system, as your Lordships have been kind enough to acknowledge, in order to ensure
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that children who are poor and needy are not denied the money. The noble Earl suggests that making any change to that system is somehow to worsen the CSA. I just think that we are living in different worlds.
I am concerned about the wellbeing of the child and not about fathers who, in their anger, want their day in court. That may be the difference between the noble Earl and myself. We shall have to disagree on this issue, but the record of 1 million children denied on average £30 a week of the money they should be receiving, which would make all the difference in floating them out of quite severe hardship into a higher degree of comfort, is deplorable. I had hoped that the noble Earl would be joining us in fighting for the child against some fathers—some non-resident parents, including women—who have sought in the past to walk away from those responsibilities. We are making it easy for them to pay in future and therefore there should be no problems about the obscurity of the formula as a device or alibi by which to avoid responsibility.
The noble Earl's second charge was that the lone parent situation is worse. Again, I do not know where the noble Earl has been in terms of what we have been doing on the New Deal. Around 200,000 lone parents have joined the New Deal. One lone parent said to me the other day, "I am off to work and free at last". She now feels that no longer is life happening to her; she is running her life. The combination of the New Deal, the working families' tax credit, the childcare arrangements, the national childcare strategy and the training and skilling opportunities we are offering means that no longer will lone parents be given a giro cheque, be asked to endure on that amount for 16 years and then be kicked out into the labour market. We are seeking to work with their choices as to what they do. We are seeking to make those choices deliverable for them and on the terms they want.
The noble Earl said that the JSA is worse because of our policy of policing the unemployed. The number of jobs available is up and unemployment is at its lowest since the late 1970s. Youth unemployment has fallen by 75 per cent since 1997 and is at its lowest rate since 1974. I know that if youngsters have not had a job by the age of 21 they find it very difficult to enter the labour market. Long-term unemployment, particularly of older men, is down by 50 per cent. The noble Earl says that the situation of the Child Support Agency and of lone parents is worse. I say that we do not live in the same world—either the same mental world or the same practical world. I see people out there, going into work, increasing their income and taking control of their lives to the benefit of themselves and their families.
The noble Earl made a second major point and I understand his approach here. We need uprating above prices, not to deal only with poverty on benefits, but also to reduce inequality, a point which the noble Earl perhaps did not spell out in exactly those terms. I accept that argument. However, again, I would ask the noble Earl to look at the record. In practice, our increases for pensioners, our benefits increases for children, in particular younger children, our increases for disabled people who are entitled to the disability income guarantee and our increases for those with children who

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are in low paid work, receiving WFTC, have well exceeded even the increases that would have accrued from an earnings link. In practice, although we have had uprating by prices as the baseline, those groups which, in my view, are those most in need, have received increases in their real incomes not only well above prices but, in many cases, well above the levels that would have accrued had their benefits been earnings related. I dispute the noble Earl's assertion to the contrary.
The noble Earl went on to make the distinction—which I would accept—between those who are economically inactive as opposed to the claimant count. He is right to say that the problem facing all of us—including taxpayers—is not those people who are on benefit and seeking work and thus part of the claimant count, but those who have not been brought into the labour market. This comprises a large number of people—those with disabilities, in some cases lone parents and those on income support. These groups have been beached on to benefits which are low in comparison with wages in today's society. Obviously, people fare better in work. However, some are beached on benefits and can see no way of getting off that beach. What we are seeking to do is to provide the opportunities, support and skills for those who can and who wish to work to be able to do so. That includes disabled people, 1 million of whom say that they wish to work but are unable to do so. It applies also to lone parents, 90 per cent of whom have told us that they wish to work as and when they have child support arrangements in place.
I believe that, as a government, we are working with the grain of what people want. I refer not only to taxpayers, but those who are themselves the recipients of benefits. If I am wrong in that judgment, then the electorate will tell us as and when we come to the election. If the electorate believes instead the noble Lord's reading that the next Labour Government would fill them with dread, he will be vindicated at the ballot box. However, this is a record with which I am proud to be associated and one as regards which I hope to have the support and confidence of my department as well as my government in a forthcoming general election.
On Question, Motion agreed to.

Guaranteed Minimum Pensions Increase (No.2) Order 2000
7.42 p.m.
Baroness Hollis of Heighamrose to move, That the draft order laid before the House on 30th November be approved [1st Report from the Joint Committee].—(Baroness Hollis of Heigham.)
The noble Baroness said: My Lords, I have already spoken to this order with the previous order that referred to pensions.
Lord Higgins: My Lords, I have to confess that I had not realised that. As I understand it, this order is
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concerned with occupational pensions. That is not what we were discussing earlier. Perhaps the noble Baroness could tell me if I am right about that.
I believe that we are now referring to the order covering the guaranteed minimum pension increase. Is that not right?
Baroness Hollis of Heigham: My Lords, yes.
Lord Higgins: My Lords, this does not concern MIG or MFR, but rather GMP, which refers to occupational pensions contracted out of SERPS. I may be quite mistaken. Perhaps I should give the noble Baroness a moment to think about the matter. I shall declare an interest, as I have done on many previous occasions, as the chairman of an occupational pension scheme. I am puzzled by what the noble Baroness has just said.
Baroness Hollis of Heigham: My Lords, my understanding is that this is always taken together with the uprating statement and forms a part of the general debate. However, if the noble Lord wishes to raise any particular points, I shall do my best to answer them. If I am unable to do so, I shall write to him.
Lord Higgins: My Lords, we may be totally at loggerheads on this. I believe that this order is quite different from the other order. A few moments ago we were discussing the government uprating of state pensions and benefits of one kind or another. This order is not concerned with the uprating of government pensions, but rather concerns the uprating imposed by the Government on schemes which operated before 1997. These are occupational schemes and the order concerns the extent to which the occupational pension has to pay an increase and thus is only tenuously related to what the Government are doing. Indeed, the rates are quite different as well.
Baroness Hollis of Heigham: My Lords, I am slightly baffled about this. Perhaps I should read into the record the Guaranteed Minimum Pensions Increase Order:
"Whereas the Secretary of State has reviewed the general level of prices obtaining in Great Britain for the period of 12 months commencing on 1st October 1999;
And whereas it appears to him that the general level of prices was greater by 3.3% at the end of that period than it was at the beginning of that period;
And whereas the draft of the following Order was laid before Parliament and approved by resolution of each House, now therefore the Secretary of State for Social Security … makes the following Order";
namely, that pensions will be raised by that amount as a part of the general uprating. These have always been taken together.

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I am a little wrong-footed by the noble Lord. The uprating by 3.3 per cent applies across the board and is therefore included.
Earl Russell: My Lords, perhaps I may say that my recollection on this subject is the same as that of the Minister. On this point, we live in the same world.
Lord Higgins: My Lords, the Minister may be right in saying that this is the way in which this matter has been debated previously, but it seems to me that somewhat different issues are raised here. Perhaps I may put this question to her: who will pay for this increase?
Baroness Hollis of Heigham: My Lords, my understanding is that this will ensure that the core of an occupational scheme will contain a guaranteed minimum no less than a specified amount; effectively, it will be brought into line with the RPI. In that sense, it would depend on whether it was a money purchase scheme, but these would normally apply to a scheme which was a defined salary benefit. That means that there is a minimum standard of pension which it must meet in order to be eligible for the opted-out rebates from a private scheme, SERPS or any other scheme.
I do not see what is the issue here. Each year, guaranteed pensions better than SERPS must be uprated to reflect the standard of living, otherwise they would deteriorate in value. That is what the uprating order achieves: it ensures the core such that the national insurance rebates fund that guaranteed minimum core so that the occupational scheme is a valid and appropriate scheme. It is raised so that it does not lose its value. For that reason, it is uprated across the board. I am not sure what the noble Lord seeks to press me on here.
Lord Higgins: My Lords, I understand what the noble Baroness and the noble Earl have said; namely, that on previous occasions this has been taken together with the previous order. That may be the tradition. Nonetheless, it is somewhat different, in as much as the previous order is concerned with government pensions. In effect, as the noble Baroness pointed out in our previous debate, it comes out of the national
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insurance fund. However, this order is a burden placed by the Government on occupational pension schemes It uprates not a government scheme, but an opted-out scheme. That, I believe, raises different issues. For example, how is that to be dealt with? What other burdens, in particular the change in advance corporation tax and so forth, have been imposed on occupational schemes? Given those questions, it seemed to me appropriate to deal with the order separately. That is why I was puzzled by what the noble Baroness said.
Perhaps the noble Baroness would answer only the simple question I put to her. We can then let it go at that and consider the matter later. Who will pay the 3 per cent? Let us deal only with that simple question.
Baroness Hollis of Heigham: My Lords, if I am wrong on this then I shall write to the noble Lord, but my understanding is it is a question of whether a pension is backed by the pension promise. If it is backed by the pension promise—which is what a defined final salary scheme would constitute—then clearly the employer must pay. If it is a money purchase scheme, then that is the responsibility of the individual to ensure that his scheme is adequate. What this order does is interlock the level of national insurance rebates and the grounds on which they may be recyclable into the schemes, into personal pensions and occupational pensions, and obviously this interacts with SERPS. Where the commitment to delivering the pension promise lies will depend on the type of scheme, whether it is money purchase or final salary. If it is a defined salary scheme it will ultimately lie with the employer. When I last looked at this, more than half of all occupational pension schemes were in surplus—in many of them they were enjoying a holiday—and this would not be difficult to achieve.
Lord Higgins: My Lords, I intervene briefly. We can take the matter no further today. As the noble Baroness said, it depends on the extent to which a particular scheme is in surplus. That, in turn, has been radically affected by the change which has been made in corporation tax. But let us leave it there and pursue it, if necessary, by way of oral questions or whatever.
On Question, Motion agreed to.
House adjourned at nine minutes before eight o'clock.