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Baroness Hollis of Heigham moved Amendment No. 49:

Page 10, line 34, at end insert (", and with compliance with the data protection principles (as set out Schedule 1 to the Data Protection Act 1984).").

The noble Baroness said: The Secretary of State will authorise people to report to him on local authorities' administration of housing benefit and council tax benefit and their performance in detecting fraud. This amendment would ensure that at the same time they would also report not just on their performance in detecting fraud but also on their observance of the principles of data protection as laid down in the 1984 Act. I am sure the Committee is acquainted with those principles but I shall summarise them briefly.

The principles are as follows. Data will be obtained and processed fairly and lawfully. Data may be held only for lawful purposes which are described in the register entry. Data should be used or disclosed only for those or compatible purposes. Data must be adequate, relevant and not excessive in relation to the purpose for which they are held. Data should be accurate and, where necessary, kept up to date. Data should be held no longer than is necessary for the purpose. Individuals should be allowed to access information held about them and, where appropriate, correct or erase it. Data must be surrounded by proper security.

Asking local authorities, in their report to the Secretary of State on their performance in eradicating fraud, also to report on their observance of the above eight principles is an essential safeguard to ensure that not just the end--eradicating fraud--but also the means--the observance of proper procedures in so doing--is respected. I should like to see local authorities being required to name a specified local authority officer, for example the city solicitor or the electoral registration officer, who has designated responsibility. His or her job would be made more straightforward if he or she not only conformed to those principles but also was guided by what we hope will be in the code of practice. It is essential that a proper balance is maintained between being tough on fraud and respecting the rights of the individual to privacy and confidential handling of sensitive material, for example on issues such as immigration status, cohabitation, financial and health status.

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I have no doubt that most local authorities will observe these principles but there is the possibility of abuse, perhaps where an authority is facing a subsidy penalty for not uncovering sufficient fraud and seeks to cut corners. There is also the possibility of abuse where some of this work has been contracted out to private companies which would like to exploit some of the information for commercial gain, perhaps to promote medical insurance or to inform clients of people's credit ratings. We hope that that will not happen but this amendment would construct a local authority mindset that it must observe the ethic of data protection while being vigorous in attacking fraud. The Minister's proposed code of practice, which he conceded in Tuesday's discussions, may cover these points. We should like confirmation from the Minister that that will indeed be the case. If not, we shall obviously want to press him further. I beg to move.

Earl Russell: Ministers do not run well in blinkers. For that reason, I am happy to support the amendment. The Minister may recall--I shall not rehearse it in detail--that I said on Second Reading that getting the Bill right was going to be a matter of observing balance. Whenever one sets an administration to pursue a single objective in isolation, that sense of balance goes. One gets a single-minded blinkered concentration upon a single subject. That way injustice happens. There is nothing new about it. It has always been true.

The Minister knows--or at least he has good cause to know--that the need to report on something tends to concentrate one's mind heavily on that one thing. Whoever is carrying out functions under the Bill will have to report on fraud. As the Bill stands, it risks focusing their minds in a single-minded, obsessive way on fraud. Making them think that what results in the apparent--I stress the word "apparent"--detection of fraud is always good, and that that is the only criterion of good. That way injustices are likely to happen and probably will happen. But if the amendment is accepted, then in the course of reporting upon something else as well, having another priority they wish to satisfy, another thing that is marked as good, they will, as the noble Baroness persuasively put it, have something which influences their mindset in a much more constructive direction. That is a good thing indeed. Good is not a single thing, and the better we appreciate that, the better we shall do it.

Lord Mackay of Ardbrecknish: The amendment seeks to place a statutory requirement upon the Benefit Fraud Inspectorate to monitor local compliance with the Data Protection Act 1984. It merely adds the words of the amendment to the first subsection of Section 139A, which states:

    "The Secretary of State may authorise persons to consider and report to him on the administration by authorities of housing benefit and council tax benefit and, in particular, their performance in the prevention and detection of fraud relating to those benefits".
That is why it is called the Benefit Fraud Inspectorate. The amendment would add to its role the duty to look for compliance with the data protection principles as set out in Schedule 1 of the Data Protection Act.

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The protection of individual privacy is an important responsibility of those in charge of local authorities. Quite rightly, each local authority holding relevant personal data is under an obligation to comply with the Data Protection Act. It is the proper role of the Data Protection Registrar to enforce that legislation. It would not be appropriate to usurp the registrar's position by giving a completely unrelated organisation a partial responsibility for policing data protection. To do so could only cause confusion.

The amendment would considerably alter the role of the inspectorate. We envisage the inspectorate as a dedicated unit set up specifically to examine, and report on, the administration of social security benefits. Its staff will be experts on social security matters. To give them other responsibilities, unrelated to the social security system, will inevitably dissipate the impact of the inspectorate and its effectiveness.

Baroness Hollis of Heigham: I am grateful to the Minister for giving way. He said that the inspectorate is being asked to pursue functions unrelated--"unrelated" is the word that he used--to the purposes of whatever system. The point about this is that how that fraud is pursued--that is the data protection issue--is integral to the purposes for which the Bill is being addressed. The Minister has tried to make a separation between means and ends, which we are trying to keep firmly integrated.

Lord Mackay of Ardbrecknish: I do not think it is integration, I think that it is addition. When it is looking at how the local authority may be running its system, the inspectorate may well have to look into the computer systems; but it will be doing so specifically on the basis of checking on how it is running its anti-fraud systems. Priority must be given to reducing the £1 billion of housing benefit fraud. I am sure that that is agreed between us.

If we were to place this additional burden on the inspectorate, then clearly it would have another function placed upon it, and that would add to the cost of running it. This extension of the inspectorate's role would lead to an increase in its running costs. It is hard to justify an additional role and additional expenditure to duplicate functions which are already, under other Acts, the proper responsibility of others.

I do not believe that it would be appropriate to extend the Benefit Fraud Inspectorate's remit in the way suggested. Neither do I believe that such a change would achieve any additional protection of the individual's right to privacy. Indeed, there is a risk that by confusing the responsibilities for those important issues, the amendment will achieve an effect quite the opposite of that intended.

I should point out that under Section 5 of the Local Government and Housing Act 1989 every authority is required to appoint a monitoring officer specifically to deal with contravention of any rule of law, or statutory code of practice, by that authority's members, officers, or employees. The monitoring

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officer has, in turn, duties to report to the members of the authority who are themselves accountable to their electorate.

If any information comes to light during an inspection which casts doubt upon the legality of an authority's data protection procedures, then that will be reported to the monitoring officer concerned in that specific local authority.

I hope that with that explanation of why I do not believe that that additional burden should be placed on the fraud inspectorate and the explanation of what the fraud inspectorate will do if it comes across an abuse of the Data Protection Act or misuse under the Act, the noble Baroness can withdraw the amendment.

Earl Russell: When the Minister talked about a dedicated unit and about the first priority, he entirely illustrated the ground of my misgivings. There is not a moment's dispute between us that the elimination or substantial reduction of the cost of fraud must be a high priority, but we are always going around in debate--I am sure that I am as guilty as anyone else--saying that this must be the first priority, this is the highest priority, this is the top priority. Priorities, like boxers, cannot all be the greatest. Priorities have to jostle with one another. Among priorities, just as much as in the market, there is a great deal of health in competition. The Minister is proposing here to set up a priority which is immune to competition. That is indeed dedication. It is the voice of the heresy hunter; it frightens me.

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