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Earl Russell: If I might save the time of the Committee, data matching is not in issue. The question is whether it is undertaken for a legally acceptable purpose.

Lord Mackay of Ardbrecknish: That is exactly what the Bill does. It states clearly for what purpose data matching will be allowed; namely, the search for social security fraud. I should have thought that that would come well within any European legislation.

I turn to new Section 122, which will allow the Inland Revenue and HM Customs and Excise to supply information to the Department of Social Security for use in the prevention, detection, investigation and prosecution of social security offences and for use in checking the accuracy of social security records. The Government have made it clear that we intend to use this power, and similar ones elsewhere in the Bill, to conduct a data matching exercise to identify inconsistencies between the information already held by the DSS and that held by other government departments.

In data matching, it is the identification of an inconsistency which will constitute the first indication of potential fraud, and which will lead to further investigation. It is inherent in the concept of data matching that these inconsistencies are not known in advance of the exercise taking place: each set of data about an individual may be consistent within itself; but it is only by comparing individual sets of data that indications of fraud can be found.

But in order for the DSS to perform the data matching exercise the relevant information must first have been disclosed by the tax authorities to the DSS. That disclosure and the first comparison of data will take place under highly secure conditions, in a single site using specially trained staff and well-defined criteria for identifying inconsistencies. The computer system will be programmed to compare the two sets of information looking for cases where specific relevant information about the same person is in both sets of information and where there is a discrepancy between them--in other

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words, the information on one database appears to contradict the information on the other. However, it is only inconsistencies which are referred for further checking and investigation. Where an individual's data is consistent, or where data about the individual is held in only one of the sets, then quite clearly no further action would be needed.

The importance of data matching is that it will allow the detection of frauds in cases which have not otherwise aroused suspicion. The effect of the noble Earl's amendment would appear to be to restrict disclosure of information, and so the input to the data matching process, to information where there was already suspicion. But these are the very cases which we do not need data matching to find--they have already been found, and they are probably already under investigation.

The second amendment affects the new Section 122A of the Social Security Administration Act. It largely re-enacts, with some amendment and for uses relating to national insurance contributions, the provisions in the existing Section 122 for the Inland Revenue to supply information to the Department of Social Security, to the Northern Ireland department and to those providing services to them. The continuation of this power is necessary to allow the Inland Revenue and the Contributions Agency to share responsibility for the administration and collection of employees' national insurance contributions. The Contributions Agency also collects Class 2 contributions from self-employed people and the Inland Revenue collects their Class 4 contributions. The provision is also used in other areas (for example, certain child benefit cases which involve earned income which is not subject to UK income tax) to authorise the disclosure of Inland Revenue information.

Limiting this power to cases where there was a suspicion of benefit fraud would mean, in practice, that the Inland Revenue could not inform the DSS of national insurance contributions which had been collected with income tax. There would have to be separate assessment and collection systems for income tax and national insurance. We should have to separate the collection systems currently operated by the Inland Revenue for Class 4 contributions. For many employers and most employees that would double the number of forms they had to complete and need several thousand extra civil servants in order to set up an entirely different system. It would be a nonsensical "double whammy" for business--more forms and more public expenditure.

I hope we can all agree on the need for new approaches in our fight against social security fraud, and I hope that we can also all agree that data matching is of enormous potential value as a weapon in that war. The very fact that would-be fraudsters know that they can no longer tell different stories to different parts of government with impunity will deter many; and we hope to catch many of those who are not deterred.

I hope that explains what data matching would do. I hope that it explains what these amendments would do. They would not in fact allow us to data match. The very essence of data matching is that there are no

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suspicions. Even worse, we should have to dismantle the whole relationship between the Contributions Agency and the Inland Revenue. I am sure that that was not the noble Earl's intention; however, it would be the unintended consequence of his amendment. I hope that with those explanations the noble Earl will be able to withdraw his amendment.

Earl Russell: Before I respond to the Minister's arguments, I wonder whether I might ask him to clear up one matter which I hope is a misunderstanding. It is a point that I may have misunderstood or, I hope, may have misheard. If I heard the Minister aright, he said of the possibility of the European Court of Human Rights finding against us that if that were to happen Parliament might as well pack up and go home. The Minister may perhaps remember that our adherence to that convention was largely the work of the late Lord Kilmuir, whose respect for our sovereignty has been a matter of a good deal of recent exchange in the national press. He was a good Conservative and a loyal British subject. The House was recently reminded--

Lord Mackay of Ardbrecknish: I do not want the noble Earl to go on about this matter. I jest. I am sorry that the noble Earl does not even see the laughter on my face sometimes.

Earl Russell: I am extremely relieved to hear it. However, I do not think it is awfully good idea to jest about the law. As for the rest of the Minister's reply, it reminds me of an exchange I once had with a senior colleague, who proved a number of things using an extremely dicey series of data. I proved that the data did not prove his point. He sent in a reply and I asked the editor of the journal what it said. He answered: "How do these pernickety people ever expect me to prove anything?" That is roughly the gist of the Minister's reply to me.

The Minister argued the virtues of the technique he is using and said how inconvenient it would be if he were not able to do what he wanted. That is the reply of the driver caught driving at 50 miles an hour in a built-up area. I must confess to having once made such a reply myself--the only conviction on my record, I may say. I was late for work. If the Minister feels like that, I can understand it. But we have subscribed to the convention. The Minister says he has a good defence, and I am prepared to believe it, but perhaps he could tell me, before I decide what to do with the amendment, under which head of Article 8(2) that defence is to be offered. It would materially assist me in deciding how the Bill needs amending in order to bring it into line with our international legal obligations.

There are, of course, a great many other data which will come from social security, as well as benefit data. Data from the CSA may come up which may disclose all kinds of things about a public figure which that figure may not wish to have disclosed. (The Minister is obviously consulting the ceiling in the hope of finding an answer.) I want an answer to the question and I hope the Committee will forgive me for delaying proceedings a little while until we get it, because it will materially assist our debate.

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I do not believe that it is the work of any serious legislature to accept that we have international obligations and then to make no attempt to keep them. If it is inconvenient to the Minister, I can understand and even sympathise with it to a material degree. But if it is the law, it is the law; and if it is the law, we must keep it. If the Minister has an answer, I should like to hear it.

5.30 p.m.

Lord Mackay of Ardbrecknish: I have said about three times that we believe that what the Bill does is totally consistent with the EU directive. I also indicated--and, indeed, it was one of my defences against having a statutory code--that a non-statutory code would allow us to make any changes to the code we may need to make when we come to consider the legislation necessary to enact the directive. That is the position.

However, we are talking about the amendments. The point I make is that, if the noble Earl means his amendments, then they prevent data matching. That is the essential point I was trying to make. If he also means his second amendment, we shall have to dismantle the whole current relationship between the Inland Revenue and the Contributions Agency. I have heard nothing from the noble Earl to suggest that that is not what he means, but it is what would happen if he were to put the amendment to a vote and if the Committee were to accept it. As Members of the Committee have clearly indicated that they approve of data matching, I do not believe that the amendments can be allowed to pass because they would make data matching, as it is understood and as I have explained it, quite impossible. I hope that helps the noble Earl.

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