§ 7.36 p.m.
§ The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham)
rose to move, That the draft order laid before the House on 28th February be approved [22nd Report from the Joint Committee].
The noble Baroness said: My Lords, this draft order is technical in nature so I shall be brief. It makes changes to the list of organisations that will be liable to provide information to the department and to local authorities for the purposes of combating benefit fraud. But it does not add any new categories of organisations to the list. It makes some changes to the definitions of organisations included, to bring them in line with current legislation, and it clears up some uncertainties and omissions from the original list, for the sake of clarity and the avoidance of doubt. An Explanatory Memorandum has been provided to assist your Lordships and I hope it has been of use.
The measures contained in this draft order are: first, to add the "Director of National Savings" to the list of those who may be required to provide information; secondly, to redefine banks and insurers so as to take account of recent changes brought about by the Financial Services and Markets Act 2000; thirdly, to add distributors of gas and electricity to the list of information providers.
I can quickly deal with each of those in turn. First, with regard to the Director of National Savings, it was always our intention that we should be able to obtain information about national savings products using these powers. We believed that by including "any bank" in the original list of information providers—Section 109B(2A) of the Social Security Administration Act as amended by the Social Security Fraud Act—we were also including national savings. However, while the definition of "bank"—in subsection (7) of Section 109B—mbraces the National Savings Bank, it does not extend to cover other national savings products such as premium bonds, national savings certificates, pensioner bonds, deposit bonds or capital bonds. Inserting a reference to the "Director of National Savings" in the list contained in Section 109B(2A) will enable authorised officers to obtain information about the full range of national savings products in line with our original policy intention.
Secondly, in terms of these regulations, the section on banks and insurers was also intended to be a purely technical change. We were aware at the time that the Social Security Fraud Bill was passing through its parliamentary stages, between December 2000 and May last year, that the coming into force of the Financial Services and Markets Act 2000 and the repeal of the Banking Act 1987 and the Insurance Companies Act 1982 would necessitate new definitions of "banks" and "insurers". This took place last year and the new definitions are a consequence of the coming into force of the 2000 Act. This is achieved in Article 2(b) and Article 3(a) and (b) of the draft order.
1541 The third push of these regulations concerns gas and electricity distributors. Over the past few months officials have been having meetings with those organisations affected by the new information gathering powers. In discussion with utility companies it has emerged that some clarification is needed. Following changes brought about by the Utilities Act 2000 there is now a clear demarcation in both the gas and electricity industries between companies who supply gas and electricity and companies who distribute these products. No one company can do both. For example, a distributor of electricity will carry electricity from the national grid to a particular property while a supplier will bill the householder for the electricity consumed.
While the fraud Act will allow for information to be obtained from a gas or electricity supply company, powers do not yet exist to require distribution companies to provide information as to the supplier to a particular household. The draft order provides for that to take place.
To conclude, we are making good progress in tackling fraud. Our latest figures show that in the two and a half years to March 2001 we have reduced the level of fraud and error in income support and jobseeker's allowance by 18 per cent, well ahead of the target we had expected to achieve by then. We expect this good progress to continue, but we need the tools to do the job, in particular access to information.
I repeat that these are technical, tidying up regulations. I shall do my best to answer questions. If not, I shall write to noble Lords. I commend the draft order to the House.
Moved, That the draft order laid before the House on 28th February be approved [22nd Report from the Joint Committee].—(Baroness Hollis of Heigham)
§ Lord Higgins
My Lords, as always, the noble Baroness has been helpful. We on this side of the House, like the Government, are against fraud. The noble Baroness and I spent many long hours improving the Social Security Fraud Act. It was certainly a great deal better when it went back to the Commons.
As she rightly points out, these proposals are essentially technical in nature and cover three main areas. I was puzzled at first as to why, since it was the Social Security Fraud Act 2001, we had not taken into account the changes which took place in the Financial Services and Markets Act 2000. There is no reason why one should not proceed by regulation but I was surprised that the same sdituation existed in relation to the Utilities Act 2000 and the electricity and gas distribution companies. The blame, if there is any, for what appears to be a failure to act, lies as much on this side of the House as on the other. We certainly need to tidy up the matter now.
With regard to banks and insurers, extension is clearly appropriate. As the noble Baroness has pointed out, this concerns a series of organisations where 1542 authorised persons—I gather about 175 of them—are able to obtain information on individuals, which may seek to confirm the firmly held belief by the department that someone is guilty of fraud. I have no points to make at all about banks.
So far as the electricity and gas distribution companies are concerned, the noble Baroness pointed out that the change in the structure means that the distribution companies would not be available, if that is the right expression, for inquiries to be made appropriately. Again, I see no problem with that; similarly as far as the Director of National Savings is concerned. The prospect of someone engaging in fraudulent activity by investing heavily in national savings seems to me a little unlikely. I suppose so far as premium bonds are concerned, to the extent that any gains are outwith the tax system altogether, that may prevent them from falling into the clutches of the Chancellor of the Exchequer and the Inland Revenue.
I have only two other points to make. The boundary between the Department of Social Security and the Treasury gets more and more obscure—
§ Lord Higgins
But, my Lords, as the noble Baroness knows, it seems to me much better title than "Work and Pensions" which sounds rather sordid. Anyway, all of this refers to the Social Security Administration Act which, if the department has disappeared totally, seems a little strange, but I leave that on one side.
I was saying that I have only two points to make. As the boundary gets more and more confused, am I right in thinking—I believe I am—that, for example, working families' tax credit is not caught by the provisions of the Social Security Fraud Act? Perhaps the noble Baroness can tell us how it is to be dealt with.
In our debates on what became the Social Security Fraud Act we gave attention to the issue of credit rating agencies. I have become increasingly concerned about the way they operate. The noble Baroness will recall that it was agreed, rightly in my view on reflection, that the Government would not give information which it had to the credit rating agencies but would use credit rating agencies in the kind of inquiry we are discussing on the order.
My concern, reinforced by a recent article in Which? magazine, relates to the inaccuracy of the information which credit rating agencies provide and, more particularly, the delay in ensuring they give information only on the individual about whom the inquiry is made. At the moment they are still giving information on everyone else at the same address and all the other family members.
To the extent that both the noble Baroness and I were anxious to avoid fishing expeditions, we need to look carefully at the way in which these agencies operate and the action which is taken under the Social Security Fraud Act in making use of their services, no doubt paid for by the taxpayer.
1543 The noble Baroness is absolutely right. These are largely technical measures. We believe they will make the Act more effective and to that extent we support them.
§ Lord Addington
My Lords, I thank the Minister for her clear introduction to the order. Seeing all the regulations worried me at first. Reading through them, I discovered that it is merely a tidying up exercise and what the Minister said has certainly allayed any fears I had.
We have one or two slight moans about basic principles. The idea of needing more tax credits may make more fraud possible overall, but that is probably not a matter best discussed at this point. I am content with the explanation given by the Minister.
§ Baroness Hollis of Heigham
My Lords, I am grateful to your Lordships for the response. In reply to the noble Lord, Lord Higgins, about the Financial Services and Markets Act, I am not sure that I have an entirely persuasive answer but, with the help of my noble friend on my right, reinforced by help from my left, naturally on my left. I am told,—
§ Baroness Hollis of Heigham
My Lords, I carefully did not gloss that statement when I talked about my noble friend. The Financial Services and Markets Act 2000 did not come into force until after the Social Security Fraud Act was passed. It came into force fully on 1st December 2001. That is not an explanation about the drafting but the fact that they were running coterminously was, I suspect, part of the problem.
Obviously, tax credits are not benefits; they are credits. Therefore they do not come under the social security legislation. I realise that the noble Lord, Lord Higgins, has a different view about nomenclature here but, as a temporary member of the nomenklatura, I continue to insist that we are dealing with benefits here, not credits.
The noble Lord talked about credit rating agencies. He is right. He will know, I am sure, that in the last 18 months or so the regulation of these bodies has passed to what was the Data Protection Commissioner, now the Information Commissioner. I find that she herself has produced leaflets on complaints about credit reference file information and what should be done about it.
I do not know whether this is familiar to the noble Lord, Lord Higgins. She says that the most common complaints about credit reference files relate— it seems that the noble Lord, Lord Higgins, is the recipient of all the complaints in that sense—to the amount of data which appears and particularly the fact that there may he information about a person other than the applicant for credit, the accuracy of the entry and the length of time for which the record appears to continue on the file. Therefore, the noble Lord's concerns are absolutely right.
1544 She goes on to specify there what must be done. She has already taken some enforcement action, and she shows how people may complain about the agency and not merely correct their information. I am very happy, if the noble Lord thinks this helpful, to make sure that such a leaflet is put into the Library of the House for general information. I think it is important to draw this to people's attention. I agree that it is a very serious matter.
§ Lord Higgins
My Lords, I am most grateful to the noble Baroness. Yes, I have been in telephone conversation with the office of the commissioner. It has been immensely helpful. If the Government are making use of this information, they should take it with a very considerable pinch of salt. My own experience recently, not necessarily personal but otherwise, is that much of the data is very poor indeed.
§ Baroness Hollis of Heigham
My Lords, I accept that entirely. The noble Lord will recall our discussions during the passage of the fraud legislation. I said, then that we would go to those agencies not only when we had found a discrepancy but also when we had strong grounds to believe that there was an irregularity that we wished, possibly, to clear up with the individual concerned—if he or she were the right person to give us the information. If not, we would consult other legitimate information providers. Therefore, we would only consult Experian, Equifax, or the like, in certain appropriate circumstances. That is only part of the range of materials we might need. Given the known unreliability in some cases of information received, I should be surprised if that was sufficient basis to do anything other than contribute to a jig-saw puzzle, if you like, of information.
The noble Lord is right to give us warnings in that respect. On the basis of what he said, I shall telephone the office tomorrow to see what information is held about me. We shall see whether my experience is the same as that of the noble Lord. Given those points, I hope that noble Lords will be content to pass the order tonight and thereby allow us to proceed on our way. I commend the order to the House.
On Question, Motion agreed to.