COMMENTARY ON CLAUSE 16

179. Clause 16(1) and (2) omit paragraphs (c) and (d) from section 111A(1) and insert new subsections (1A) to (1G).

180. Subsection (1A) defines the new offence of "dishonestly" failing to give prompt notification of a change of circumstances in relation to the claimant himself. Subsection (1B) defines the offence in relation to a third party who dishonestly causes or allows another person to fail to give prompt notification of a change in circumstances. This would apply, for example, in the case of a woman whose part-time earnings increase in circumstances where her husband is claiming income support. If she knows that this particular change affects his entitlement to benefit and does not inform him, thereby causing him to fail to notify the change, she is guilty of an offence.

181.     Subsections (1C) and (1D) provide that the offence of dishonestly failing to give a prompt notification of a change in the circumstances of the claimant extends to third parties who have a right to receive payments on behalf of the claimant. This would, for instance, apply in cases where the claimant is unable for the time being to act for himself and, in the absence of any person having been legally appointed to act for him, the Secretary of State appoints a person to exercise on behalf of the claimant, any right to which that person may be entitled and to receive and deal on his behalf with any sums payable to him. If the person so appointed dishonestly fails to notify a change in the claimant's circumstances, knowing that the change in question affects benefit, he is guilty of an offence.

182.     Subsection (1E) provides that it is an offence if a third party, knowing that a particular change in circumstances affects the claimant's entitlement to benefit, dishonestly causes or allows a person with the right to receive payments on behalf of the claimant to fail to make a prompt notification of that change. This extends the third party offence of dishonestly causing or allowing a failure on the part of the claimant whose responsibility it is to notify a relevant change in circumstances. It means that the offence applies equally if another person has been granted the right to receive payments on behalf of the claimant and is caused or allowed, by a third party, to fail to make a prompt notification of a change in the claimant's circumstances.

183.     Subsection (1F) qualifies the extent to which subsections (1C), (1D) and (1E) can be applied to the landlord of a tenant entitled to housing benefit. It ensures that a landlord cannot be guilty of an offence under these provisions unless the change in circumstances that the landlord has failed to notify promptly are those which relate to the claimant's occupation of the dwelling or to his liability to pay rent. The subsection further provides that the landlord must either know that the change in question is one that affects the claimant's benefit, or be one which he could reasonably be expected to know would do so.

184.     Subsection (1G) provides that a notification is "prompt" if it given as soon as reasonably practicable after the change occurs.

185.     Clause 16(1) also amends section 111A(4) so that, the offences set out in subsections (1) to (1E), should, for the purposes of applying them to Scotland, be read as though the word "knowingly" replaced the word "dishonestly" wherever it occurs.

186.     Clause 16(3) makes changes to the summary offence in section 112, which mirror those made to section 111A.

OFFENCES

Clause 17

Time Limit for Proceedings in Scotland

Background

187.     Part VI (Inspection and Offences) of the Social Security Administration Act 1992 makes provisions for enforcement, and contains a number of specific offences relating to benefit fraud. Section 111A of the Social Security Administration Act 1992 (dishonest representations for obtaining benefit) was inserted by section 13 of the Social Security Administration (Fraud) Act 1997. At the same time, paragraph 5 of Schedule 1 to the 1997 Act amended section 116 of the Social Security Administration Act 1992 (legal proceedings) to disapply provisions concerning limitation for the purposes of prosecutions under section 111A of the Social Security Administration Act 1992.

188.     Subsection (2) of section 116 provides that proceedings for an offence under the Social Security Administration Act 1992 may be begun at any time within a period of three months from the date on which evidence sufficient to justify a prosecution for the offence comes to the Secretary of State's knowledge (or that of the relevant authority in the case of Housing Benefit or Council Tax Benefit cases), or within a period of 12 months from the commission of the offence, whichever is the later date. The Social Security Administration (Fraud) Act 1997 modified this general rule by inserting subsection (2A) which provides that subsection (2) shall not be taken to impose any restriction on the time when proceedings may be begun for an offence under section 111A above.

189.     Subsection (7) of section 116 of the Social Security Administration Act 1992 modifies the application of that section as it applies to Scotland, and remained unamended by the Social Security Administration (Fraud) Act 1997. It provides limitations as to the time in which a prosecution must be brought in relation to proceedings under the Social Security Administration Act 1992.

190.     No provision equivalent to subsection (2A) of section 116 was made in the 1997 Act for the purposes of prosecutions in Scotland.

The measures in the Bill

191.     This measure corrects the omission by disapplying the time limitations specified in subsection (7) of section 116 of the Social Security Administration Act 1992 in relation to prosecutions under section 111A of that Act in Scotland.

COMMENTARY ON CLAUSE 17

192.     The clause amends section 116 (7) of the Social Security Administration Act 1992 which provides time limits for the commencement of proceedings in Scotland. The effect of the amendment is to prevent those time limits from applying in relation to offences under section 111A of that Act.

FINANCIAL EFFECTS OF THE BILL

Overview

193.     The financial implications of the Bill are set out below. In summary, the Bill is expected to lead to a significant increase in the detection of fraud. Reductions are expected in benefit expenditure. The measures within the Bill are expected to result in gross savings of between £180m and £360m per annum. The measures in this Bill are primarily expected to improve our ability to detect and investigate fraud and error in means-tested benefits. Therefore, there will be a minimal effect on contributory benefits and the National Insurance Fund.

194.     The measures in the Bill are expected to result in a cost to business of between £2.3 and £7m per annum. The cost to authorities administering Housing Benefit or Council Tax Benefit is expected to be approximately £1.5m per annum, and the cost to Government is expected to be approximately £3.35m per annum with additional one-off set-up costs of £0.68m.

195.     The measures set out within this Bill are not expected to have any significant effect on public sector manpower.

Obtaining and sharing information

Additional powers to obtain information (clause 1)

196.     This measure allows DSS to require information from the private sector which will enable DSS to identify benefit frauds currently undetected. This measure will affect around 200,000 people who are fraudulently obtaining benefit. Savings will be in the range of £180m - £360m per annum. Mainly means-tested benefits will be effected and so there will be no significant effect on the National Insurance Fund.

197.     It is estimated that the cost of these measures to business will be between £2.3m and £7m per annum, the cost to authorities administering Housing Benefit or Council Tax Benefit is estimated to be £1.5m per annum and the cost to Government is estimated at £3.3m per annum (with initial set-up costs of £0.6m). The effect on public service manpower is thought to be negligible.

Obtaining information from overseas authorities- clause 5

198.     There will be no immediate financial effects as a result of this clause as effects will only be measurable when other countries have taken similar measures to allow the mutual exchange of information. Any amounts in terms of savings or expenditure would depend on the agreements reached with those countries. Although fraud investigations have uncovered instances of transnational fraud, we are unable to provide estimates of the overall level. We hope to be able to investigate fraud and error in both means-tested and contributory benefits. We anticipate that the split between the Consolidated and the National Insurance Fund will be approximately 90:10.

Exchange of information by authorities administering benefit - clause 6

199.     This proposal concerns the manner in which authorities administering Housing Benefit or Council Tax Benefit supply information to the Secretary of State and to other authorities administering Housing Benefit or Council Tax Benefit. It does not effect individual claimants and there will be no administrative or financial effects

Loss of benefit provisions - clauses 7 to 13

200.     This measure concerning loss of benefit provision will produce savings to the extent that it will deter fraud. It is difficult to quantify such savings in advance of the actual implementation of the measure. As the measure is concerned with mainly means-tested benefits, the vast majority of savings will fall to the Consolidated Fund. The administrative cost of this measure is expected to be £0.05m per annum from 2002/2003 with initial set up costs of a further £0.05m in 2001/2002. We do not anticipate any effect on public services manpower.

Penalties as an alternative to prosecution

Colluding employers - clause15

201.     The colluding employers measure, in the same way as loss of benefit provisions, will act as a deterrent against fraud and so produce savings. The amount of such savings is difficult to quantify in advance of the actual implementation of the measure. All savings will fall to the Consolidated Fund. Employers who have been colluding with employees in order that employees can fraudulently obtain benefit will be subject to a fine of £1,000. Initial set-up costs for the implementation of this measure will be approximately £0.03m due to necessary IT enhancements.

Offences

Offence of failing to notify a change of circumstances - clause 16

202.     The Social Security Administration (Fraud) Act 1997 amended the Social Security Administration Act 1992 creating two new offences in relation to failing to notify a change of circumstance which would effect benefit entitlement. The purpose of this new measure is to amend sections 111A and 112(1A) of the Social Security Administration Act 1992 to ensure that the new offences complement properly the Department's move towards more modern methods of paying benefit, such as automatic credit transfer. As this measure is, therefore, essentially corrective in nature, it is not anticipated that it will result in increased costs to the public sector.

203.     Where no financial effects have been cited in connection with a clause in the Bill, none have been identified.

SUMMARY OF THE REGULATORY IMPACT ASSESSMENT

204.     Only one of the measures in the Bill is expected to have an impact on businesses and this is the "Additional powers to obtain information" clause. This is expected to result in an annual cost to business of between £2.3m and £7m. No direct impact on charities or voluntary bodies has been identified.

205.     The measures in the Bill are designed to prevent losses due to fraud and error within the social security system by assisting the Government achieve the targets stated in the DSS's Public Service Agreement to reduce fraud and error in Income Support and Jobseeker's Allowance by 25% by the end of the Spending Review 2000 period (April 2001 to March 2004), and by 50% by 2006.

206.     It is anticipated that the measures within the Bill will bring about (gross) total savings in the range of £180m to £360m per annum. The vast majority of this total savings figure will be achieved through the additional powers to obtain information (£180m). Other measures within the Bill have no expected costs or savings figures attached to them either because they are corrective measures (change of circumstances, delegation of functions) or because future savings are as yet unquantifiable (exchange of information with overseas authorities, benefit loss provisions, colluding employers).

207.     Total costs to Government and authorities administering Housing Benefit or Council Tax Benefit are estimated to be:

• set-up costs of £0.68m (£0.6m for additional powers to obtain information, £0.05m for loss of benefit provisions and indicative figures suggest £0.03m associated with measures concerning colluding employers). These will be met by Government.

• on-going annual costs to Government of £3.35m; and

• on-going annual costs to authorities administering Housing Benefit or Council Tax Benefit of £1.5m.

A full Regulatory Impact Assessment for the Bill is available in the library of each House of Parliament and on the DSS website, www.dss.gov.uk.

EUROPEAN CONVENTION OF HUMAN RIGHTS

208.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The Secretary of State for Social Security, the Rt. Hon. Alistair Darling MP, has made the following statement:

"In my view the provisions of the Social Security Fraud Bill are compatible with the Convention rights."

COMMENCEMENT

209.     All provisions are to come into force by commencement orders.