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These notes refer to the Social Security Fraud Bill
[HL] Social Security Fraud Bill [HL]
EXPLANATORY NOTESINTRODUCTIONThese explanatory notes relate to the Social Security Fraud Bill [HL] as brought form the House of Lords on 12 March 2001. They have been prepared by the Department of Social Security (DSS) in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.
The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require explanation or comment, none is given.
Structure of the notesThe notes start with a brief overview of the Bill as a whole and outline the four main elements contained within the Bill. The notes are then divided into four parts which reflect the elements of the Bill, and which provide the background to the changes. Each part then finishes with a detailed commentary on the clauses relevant to that part.
Financial effectsFigures are expressed in 1999/2000 price terms. CONTENTSIntroduction Contents Overview Information Sharing Obtaining Information: Clauses 1 to 4 Summary and background Commentary on Clauses 1 to 4 Exchanging Information: Clauses 5 and 6 Summary and background Commentary on Clause 5 Summary and background Commentary on Clause 6 Loss of benefit provisions: Clauses 7 to 13 Summary and background Commentary on clauses 7 to 13 Penalties as an alternative to prosecution: Clauses 14 and 15 Summary and background Commentary on Clause Summary and background
Commentary on Clause 15
Offences: Clauses 16 and 17 Summary and background
Commentary on clause 16 Summary and background
Commentary on clause 17 Financial effects of the Bill
Overview
Summary of Regulatory Impact Assessment European Convention of Human Rights Commencement OVERVIEWBackground to the Bill1. The Government estimates that fraud in social security benefits costs the taxpayer at least £2 billion every year. In March 1999, the Government set out its strategy for reducing fraud and error in the social security system in the Green Paper entitled "A new contract for welfare - Safeguarding Social Security"(Cm 4276).
2. The central principle in the Green Paper was "getting it right, keeping it right and putting it right". The intention is to secure the social security system by limiting the possibility of invalid claims entering it as new claims, ensuring that claims are adjusted when relevant changes of circumstances do occur and detecting those claims already within the system where benefit is being overpaid due to fraud or error.
3. The Government has made a public commitment through the DSS Public Service Agreement to reduce fraud and error in Income Support and Jobseeker's Allowance by 25% by March 2004 and 50% by March 2006. The expectation is that by March 2002 at least a 10% reduction will have been achieved.
4. The most recently published research on Income Support and Jobseeker's Allowance, where levels of fraud and error are measured continuously, estimated losses through fraud and error for the period April 1999 - March 2000 to be in the region of £1.32 billion (8.4% of programme expenditure).
5. In November 1999, Lord Grabiner QC was asked by the Chancellor of the Exchequer to conduct an investigation into the informal economy and produce a report in time for the March 2000 Budget. He was assisted by a taskforce of officials drawn from HM Treasury, the Inland Revenue, Customs and Excise, DSS and the Department for Education and Employment.
6. The final report entitled, "The Informal Economy" (copies available from the Public Enquiry Unit, HM Treasury, Parliament Street, London SW1P 3AG), suggested that every year billions of pounds were being lost to the informal economy. It proposed new measures to tackle the hidden economy and concluded that the Government should introduce new ways to tackle those operating in it. Lord Grabiner estimated that at any one time 120,000 people are fraudulently working and claiming benefits. This fraud costs the taxpayer half a billion pounds every year.
7. In July 2000, the Government published a consultation document "Safeguarding Social Security: Getting the information we need" (copies available from Welfare Reform (Fraud) Freepost (HA 4441) Hayes UB3 1BR), in response to one of Lord Grabiner's recommendations that the Government should examine how to make use of information held by the private sector.
8. This Bill seeks to implement the Government's proposals in response to Lord Grabiner's recommendations on tackling benefit fraud.
The measures in the Bill9. There are four main elements in the Bill:
Obtaining and Sharing Information
Loss of Benefit Provisions
Penalties as an Alternative to Prosecution
Offences
INFORMATION SHARINGObtaining information
Background
The current position
10. Benefit fraud occurs because people lie about their circumstances, or deliberately fail to tell DSS or authorities administering Housing Benefit or Council Tax Benefit about a relevant change. Cross-checking the information that claimants provide against independent sources of information helps to detect benefit fraud.
11. DSS already has powers to check information against that held by other Government Departments - for example, the Inland Revenue - to detect fraud committed by people working whilst claiming means-tested benefits. DSS also has powers to obtain information from employers. However, if a person is working and claiming benefit, he may wish to conceal his earnings from the Inland Revenue as well as DSS, or his employer may be colluding in his benefit fraud. Hence, we need the ability to cross-check information with additional independent sources - for example, with banks.
12. Information can be obtained from independent sources with a claimant's consent but people who lie to obtain benefit are unlikely to give this. Where benefit fraud is suspected, investigating officers can also ask organisations to provide them with any information for the purpose of the prevention and detection of crime under an exemption to data protection legislation set out in section 29 of the Data Protection Act 1998. However, they cannot compel organisations to provide information under the exemption. Many organisations are bound by a duty of confidentiality to their customers and are therefore uncertain whether they should provide information on this basis. Consequently, investigating officers obtain very little information in this way.
Recent developments
13. DSS distributed over 800 copies of the consultation document "Safeguarding Social Security: Getting the information we need" in July 2000 to major utility companies, authorities administering Housing Benefit or Council Tax Benefit, major trade associations, the insurance and banking sectors, claimants' and civil liberties groups, the Information Commissioner and other potentially interested parties including members of the public. The document was also available on the DSS website. DSS received 65 responses to the consultation document. A summary of responses was placed in the libraries of both Houses of Parliament.
The measures in the Bill
14. The measures in the Bill amend and build upon current legislation in sections 109B and 110A of the Social Security Administration Act 1992 as inserted by the Child Support, Pensions and Social Security Act 2000. Section 109B provides for officers authorised under sections 109A and 110A to obtain information in relation to employment and pensions.
Clause 1: Additional powers to obtain information15. The measures in the Bill will provide for officers authorised under sections 109A and 110A of the Social Security Administration Act 1992 to require information about individuals from specified private and public sector organisations. Information may be obtained, about persons identified by name or description, where it is reasonable for the purposes set out at section 109A(2) and 110A(2). The list of specified private and public sector organisations that can be required to provide information can be extended by an order with the affirmative resolution of both Houses of Parliament and amended by an order with a negative resolution.
16. The measures also provide for specifically authorised officers to require general information from utility companies about the quantity of services supplied to residential properties. DSS intends to match this information electronically with benefit records in order to detect fraud. For example, if a person was claiming Income Support at a particular address and was consuming no electricity at that address this could indicate that he does not, in fact, live there and that his claim may be fraudulent. The measures do not provide for the bulk acquisition of individuals' names, only details of utilities supplied to residential addresses.
17. If those from whom information has been requested fail to comply with authorised officers' requests they can be prosecuted under the current section 111 of the Social Security Administration Act 1992. They may be fined up to £1,000 plus £40 for each day after this that they continue to fail to provide the information requested.
Clause 2: Electronic access to information18. This clause provides that the Secretary of State and authorities administering Housing Benefit or Council Tax Benefit can require organisations to enter into arrangements so that the information can be provided electronically on-line where facilities exist to provide such access. For example, credit reference agencies provide direct on-line access to their databases instead of processing enquiries in writing. The clause provides that only those officers especially authorised can use such on-line facilities. This clause enables the Secretary of State and authorities administering Housing Benefit or Council Tax Benefit to require the provision of audit trail information in the arrangements in order to ensure that officers' use of the system can be thoroughly monitored. Authorities administering Housing Benefit or Council Tax Benefit are prevented from requiring an organisation to provide on-line facilities without the consent of the Secretary of State. They are also prevented from entering into a voluntary arrangement for on-line access to private information without the Secretary of State's consent.
Clause 3: Code of practice about use of information powers19. This clause provides for the issue and revision of a statutory code of practice relating to the exercise of powers which would be provided for by clause 1 and 2 of the Bill. That is powers to obtain information from independent sources of information such as banks and building societies. It requires the Secretary of State to publish a draft of the code before issuing or revising it and to consider any representation made to him about the draft. It also enables him to incorporate any proposed modifications to the draft. The Secretary of State must lay the code and any revisions of it before both Houses of Parliament. The code of practice will come into force when it is issued by the Secretary of State, as will any revised codes of practice. The clause requires authorised officers to have regard to the code of practice when exercising powers that would be provided for by clauses 1 and 2 and would make the code admissible as evidence in any civil or criminal proceedings. Failure to comply with any of the provisions of the code would not of itself render the authorised officer liable to prosecution or to any penalty or damages in civil proceedings.
Clause 4: Arrangements for payments in respect of information20. The measures allow the Secretary of State to make payments for the information obtained from credit reference agencies and telecommunications providers. Payments may also be made to utility companies but only for the information they provide about the quantities of services supplied to residential properties. The Secretary of State may make payments where he considers this reasonable, and need not make any payments if he does not think that this is appropriate. Any organisation that is added to the list of those who can be required to provide information may also be paid under the same terms.
COMMENTARY ON CLAUSES 1 TO 4
Clause 1: Additional powers to obtain information
21. This clause amends and adds to the investigator's powers in sections 109A, 109B, 109C and 110A of the Social Security Administration Act 1992.
22. Section 109A provides for the Secretary of State to authorise officers to use powers in sections 109B and 109C for the purposes set out at section 109A(2):
23. Section 110A allows the Chief Executives or Principal Finance Officers of authorities administering Housing Benefit or Council Tax Benefit to authorise officers to use the powers at sections 109B and 109C for purposes set out in section 110A(2):
24. Section 109B provides a power for authorised officers to require those listed at 109B(2) to provide information requested by written notice where this is reasonable in relation to one or more of the purposes set out at section 109A(2).
25. Section 109C provides a power for authorised officers to inspect premises where persons are employed, from which a trade, business or pension fund is being carried on or where information about these is stored, where this is reasonable in relation to one or more of the purposes set out at section 109A(2). This section is not amended by the Bill.
26. Clause 1(1) provides for amendment of section 109B of the Social Security Administration Act 1992.
27. Clause 1(2) inserts a new subsection (2A) after section 109B(2). It lists organisations from which officers authorised under section 109A and 110A of the Social Security Administration Act 1992 can require information. Those organisations include: banks; credit reference agencies; utility providers and education bodies.
28. Clause 1(2) also inserts new subsections (2B) to (2F) into section 109B of the Social Security Administration Act 1992.
29. The new section 109B(2B) provides that, subject to the following provisions of the section, the powers to require information at section 109B shall only be exercisable for making enquiries of persons listed at new section 109B(2A) for the purpose of obtaining information relating to particular persons identified by name or description.
30. New section 109B(2C) provides that an authorised officer shall not exercise those powers to obtain information from persons listed in new section 109B(2A) unless it appears to him that there are reasonable grounds for believing that the identified person who it relates to is:
31. New section 109B(2D) provides that, where an authorised officer is a member of a Government Department and where his authorisation explicitly states that it applies for the purposes of new section 109B(2D), nothing in 109B(2B) or 109B(2C) shall prevent him from obtaining information relating exclusively to whether, and in what quantities, water, gas and electricity are supplied to residential premises.
32. New section 109B(2E) provides that the powers at 109B may only be exercised to obtain information from a telecommunications provider if it is "communications data" but not "traffic data" (as those terms are defined in section 21 of the Regulation of Investigatory Powers Act 2000). Restricting the information to communications data would enable the authorised officer to obtain information about the use made by a person of a telecommunications service or any other information held about subscribers to the service. However it would exclude information about the contents of any communication. The exclusion of traffic data would prevent the authorised officer from obtaining information identifying the person, apparatus or location to or from which a communication is sent.
33. New section 109B(2F) provides a further exception to the requirements in section 109B(2B) and 109B(2C) (that is to exercise the powers only in relation to an identified person and where there is reasonable suspicion that the person has committed, is committing or intends to commit a benefit offence). Nothing in those subsections shall prevent an authorised officer from requiring information from a telecommunications provider, about a person's identity and postal address where the authorised officer has identified the person solely by reference to a telephone number or electronic address.
34. Clause 1(3) amends the existing 109B(5).
Revised 109B(5) sets out two cases where a person is exempt from the requirement to provide information. They are:
For both a) and b) it does not matter whether the information is in documentary form or not. These exemptions would apply to information required from persons listed in sections 109B(2) and 109B(2A). Only the exemption subject to legal privilege is new.
35. Clause 1(4) inserts new section 109B(6) and 7.
36. New section 109B(6) provides that provision may be made by Order:
37. New section 109B(7) gives definitions of the terms "bank" "credit" "residential premises" and "telecommunications service".
38. Clause 1(5) inserts a new paragraph (c) into section 110A(8). Section 110A(8) provides that the powers in sections 109B and 109C may be exercised by officers authorised by authorities administering Housing Benefit and Council Tax Benefit. New paragraph (c) excludes section 109B(2D) from this provision.
39. Clause 1(6) amends section 111(1)(a) of the Act (offence of obstruction) by substituting "authorised officer" for "inspector" for the purposes of consistent terminology.
40. Clause 1(7) amends section 121 DA (5) to re-define benefit offences. The new definition now incorporates attempt, conspiracy and collusion to commit benefit offences.
41. Clause 1(8) amends section 121 DA (7) to define "relevant social security benefit" which is a term used in the re-definition of benefit offences above.
42. Clause 1(9) adds the order making power provided for by new section 109B(6)(a) to the list of the order making powers subject to affirmative Parliamentary procedure set out at section 190(1)(a) of the Social Security Administration Act 1992.
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| © Parliamentary copyright 2001 | Prepared: 13 March 2001 |