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Delegated Legislation Committee Debates

Draft Social Security Administration Act 1992 (Amendment) Order 2002

Fifth Standing Committee on Delegated Legislation

Thursday 14 March 2002

[Mr. Nigel Beard in the Chair]

Draft Social Security Administration Act 1992 (Amendment) Order 2002

4.30 pm

The Parliamentary Under-Secretary of State for Work and Pensions (Malcolm Wicks): I beg to move,

    That the Committee has considered the draft Social Security Administration Act 1992 (Amendment) Order 2002.

Welcome to the Committee, Mr. Beard. It is the first time that I have served under your chairmanship. I am sure that it will be a good, but—depending on the Committee—not long experience.

We estimate that £2 billion is lost annually to confirmable fraud across all benefits. Fraud is a serious problem, but we are making progress. The latest results show that in the two and a half years to March 2001, we reduced fraud and error in income support and jobseeker's allowance by 18 per cent., but to sustain good practice, as we must, we need the tools to do the job.

Fraud is a covert activity, with no smoking gun, no physical injuries, and no sign of forced entry. The key to tackling fraud is access to information. Lord Grabiner QC recognised that in his report, ''The Informal Economy'' in which he made a series of recommendations, including one that the Government take steps to obtain information from private sector sources.

We responded by including measures in last Session's Social Security Fraud Bill, which received Royal Assent in May last year. The Social Security Fraud Act 2001 enables authorised officers of the Department of Work and Pensions and of local authorities to require specified organisations to provide information if we have reasonable grounds to suspect fraud by an individual. The 2001 Act inserted a new section 109B(2A) into the Social Security Administration Act 1992, which listed organisations that would be liable to supply information.

The draft order makes some minor technical changes to that list. 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 organisation to the list. It makes some changes to the definitions of organisations included, to bring them in line with current legislation, and for the sake of clarity and the avoidance of doubt it clears up some uncertainties and some omissions from the original list.

An explanatory memorandum has been provided to assist hon. Members, in line with the new procedure announced by my right hon. Friend the Leader of the House, and I trust that the Committee will find it

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useful. The measures contained in the 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 to take account of recent changes brought about by the Financial Services and Markets Act 2000; and thirdly, to add distributors of gas and electricity to the list of information providers.

Let me deal briefly with each in turn. First, it was always our intention that we should be able to obtain information about National Savings products using these powers. By including ''any bank'' in the original list of information providers—found in section 109B(2A) of the 1992 Act as amended by the 2001 Act—we included the National Savings bank; but although the definition of ''bank'' in section 109B(7)—both now and as anticipated in the draft order—embraces 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 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 intentions.

In relation to banks and insurers. The change is intended to be purely technical. When the Social Security Fraud Bill was passing through its parliamentary stages—between December 2000 and May last year—we were aware 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. The new definitions, which are a consequence of the coming into force of the 2000 Act, are achieved via articles 2(b), 3(a) and 3(b) of the draft order.

Turning to gas and electricity distributors, over the past few months, my officials have been having meetings with those organisations affected by the new information-gathering powers. In discussion with utilities companies it emerged that some clarification was needed. Following changes brought about by the Utilities Act 2000, a clear demarcation is made in both gas and electricity industries between companies that supply gas and electricity and companies that distribute those products. No single company can do both: for example, a distributor of electricity carries electricity from the national grid to a particular property, while a supplier bills the householder for the electricity consumed.

Although the 2001 Act allows information to be obtained from a gas or electricity supply company, powers do not yet exist to require distribution companies to provide information about the supplier to a particular household. As I said, it is a technical matter and the draft order rectifies the problem, enabling such information to be obtained. The order is a tidying-up measure, which should require little debate. I commend it to the Committee.

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4.36 pm

Mr. James Clappison (Hertsmere): I associate myself with the Minister's comments on how pleasurable it is to serve under your chairmanship this afternoon, Mr. Beard. It has been my pleasure in the past to serve under you, and it is again this afternoon.

I am unsure whether to take the Minister's concluding remark about ''little debate'' as an injunction or an invitation. I do not know what he means, but we have some issues to raise. I recognise that the draft order is largely technical, but it is often interesting to debate what counts as technical and what does not. I acknowledge that no great issue of substance exists between the parties, but some questions need to be asked.

As the Minister confirmed in his opening remarks, the order relates to powers to require information under the provisions of the Social Security Fraud Act 2001, which confers powers on authorised officers to require information about certain individuals from specified private or public sector organisations for the purpose of investigating suspected benefit fraud. The order modifies the list of organisations set out in the legislation.

The order comes before the Committee by way of the affirmative procedure, and neither the Opposition nor anyone else has prayed against it. We share the objective of tackling fraud and support the granting of adequate and appropriate powers to those investigating it, but we believe that such powers must be used properly and be subject to safeguards. Safeguards are important, so it is worthwhile having a debate, if only a short one.

It was originally contemplated that the power would be subject to the affirmative procedure by virtue of that being one of the safeguards. Having said that, the Opposition share the objective of tackling fraud. That was the spirit in which the official Opposition approached the 2001 Act—the parent Act of the order.

We note the explanations in the explanatory memorandum about why the changes are being made, and I shall not question them. It shows some gall for someone to defraud the taxpayer through the benefits system while having a holding in National Savings, or even investing the proceeds of the fraud in National Savings. We accept that the wording must be appropriate and cover every possible avenue through which fraud could be committed, and that we must identify every way in which it can be brought to light.

The Minister said in his opening comments, but it is important to have confirmation, that the powers can be exercised in the case of a specific person only when there are reasonable grounds to believe that that person has committed, is committing, or intends to commit a benefits offence, or is a member of the family of such a person. Will he confirm that the power cannot be triggered on a fishing expedition, but must be used properly and be triggered by an appropriate suspicion in respect of a specific individual?

It would be interesting to know the extent to which

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the power to obtain information has already been used. In how many cases have the relevant powers conferred by the Social Security Administration Act 1992 been exercised? Have there been occasions on which the exercise of the powers has been subject to challenge? I ask the Minister those questions in the light of concerns expressed by hon. Members on both sides of the House when the 1992 legislation was passing through the House, about the absence of a need for prior judicial authorisation before the powers could be used. It would be useful to have that information in the light of that concern.

Will the Minister confirm that Lord Grabiner, who has played a large part in these measures, said that the only way in which the powers could be challenged was through judicial review? If that is so, have there been any cases in which exercise of the powers has been made the subject of judicial review?

Another point of concern about the powers in the order—one that was also voiced when the 1992 legislation was passing through the House—is the number of officers who are authorised to exercise them. Committee members who have studied the documents will know that the powers in question can be exercised only by a properly authorised officer. In debates in the other place the Under-Secretary of State for Work and Pensions, Baroness Hollis, said that only a handful of staff in each of the 13 areas of the Department of Social Security—as the Department then was—would be authorised to use the powers. How many staff have been so authorised? Have any staff of local authorities been authorised to use the powers?

The matter is important, so we would like to know to what extent the powers have been exercised in respect of investigations into housing benefit fraud and council tax benefit fraud. The Minister knows that such frauds are a substantial burden on taxpayers and must be investigated thoroughly.

While on the subject of the benefits covered by the provisions, can the powers contained in the order be used in investigations into working families tax credit fraud? We suspect that the provisions do not cover working families tax credit and so cannot be used to investigate possible fraudulent claims for that tax credit. Does working families tax credit fall within the scope of the benefits covered by the powers, and if not, is there any reason why it should not be so covered? Is not fraud in respect of that tax credit as much a fraud against taxpayers as fraud in respect of income support, jobseeker's allowance and any other benefits covered by the order?

Working families tax credit comes within the domain of the Inland Revenue, not the Department of Work and Pensions. As the Minister knows, that originated in the transfer of family credit, as it was then known, to the Inland Revenue. Does the Inland Revenue have the same power to require information from specified organisations as that conferred by the provisions of the draft order? We need assurance that there are no gaps in the scope of investigations into fraud, and that cases of fraud involving all types of

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benefit are thoroughly investigated. We want to root out fraud wherever it occurs.

The exercise of the powers in the order is governed by the code of practice, under the terms of which authorised officers may be investigated if they obtain or disclose information unlawfully. Have there been any such investigations, and if so, what has been their outcome? More generally, have there been any complaints about the exercise of the powers by authorised officers? We are concerned that the powers should be used subject to appropriate safeguards, but we also want suspicions and fraud investigated properly and effectively. When suspicions prove well founded, we want fraud to be prosecuted.

In their 1998 Green Paper on fraud, published at the beginning of their term in office, the Government complained that

    ''an average of only 12,000 cases were taken to court by the Department of Social Security''

under the Conservative Government. Will the Minister confirm that in the years after 1998 the number of prosecutions fell? According to the latest figures that I have seen, which appear in a written answer from 9 January, the number of prosecutions remains less than 12,000, having fallen substantially below that figure in 1997. Is the number of prosecutions still less than 12,000 a year?

We are discussing the investigation of fraud—giving authorised officers adequate powers to require information in order to investigate fraud. Does the Minister accept that investigation needs to be followed up by prosecution when the investigation confirms suspicions? Prosecution must happen in appropriate cases, especially cases that involve persistence and organisation. Members of the public expect us to bring to book serious fraudsters, who will face prosecution and condign punishment.

We should take fraud seriously. As the Minister says, it represents a substantial burden on the taxpayer: on the lowest quote—the one given by the Minister—fraud accounts for at least £2 billion a year, but Ministers who have preceded the hon. Gentleman in his position have admitted that the true figure may be significantly greater. That money is going to waste. Fraud annoys taxpayers and is a wrongful use of public money, and the taxpayer expects the problem to be taken seriously. The Opposition take it seriously, and we intend to hold the Government to account for the way in which they deal with it.

4.48 pm


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