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Division No. 4


Addington, L.
Alderdice, L.
Carlisle, E.
Carter, L. [Teller.]
Clancarty, E.
Dubs, L.
Ezra, L.
Falkland, V.
Gould of Potternewton, B.
Grey, E.
Hollis of Heigham, B.
Kilbracken, L.
Redesdale, L.
Richard, L.
Russell, E. [Teller.]
Turner of Camden, B.
Whitty, L.


Allenby of Megiddo, V.
Anelay of St. Johns, B.
Astor of Hever, L.
Attlee, E.
Balfour, E.
Belstead, L.
Berners, B.
Biddulph, L.
Blatch, B.
Brabazon of Tara, L.
Brigstocke, B.
Brougham and Vaux, L.
Cadman, L.
Chesham, L. [Teller.]
Clitheroe, L.
Coleridge, L.
Courtown, E.
Cumberlege, B.
Denton of Wakefield, B.
Dixon-Smith, L.
Downshire, M.
Feldman, L.
Ferrers, E.
Goschen, V.
Haddington, E.
Hardwicke, E.
Harlech, L.
Harris of Peckham, L.
Henley, L.
HolmPatrick, L.
Kingsland, L.
Lindsay, E.
Long, V.
Lucas, L.
Lucas of Chilworth, L.
Luke, L.
Lyell, L.
Mackay of Ardbrecknish, L.
Mackay of Clashfern, L. [Lord Chancellor.] Mackay of Drumadoon, L.
Marlesford, L.
Miller of Hendon, B.
Monk Bretton, L.
Mountevans, L.
Munster, E.
Onslow, E.
Oppenheim-Barnes, B.
Park of Monmouth, B.
Pearson of Rannoch, L.
Renton, L.
Shaw of Northstead, L.
Skelmersdale, L.
Strathclyde, L. [Teller.]
Trumpington, B.
Ullswater, V.
Vivian, L.
Wharton, B.
Wilcox, B.
Willoughby de Broke, L.
Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

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9.7 p.m.

[Amendment No. 64 not moved.]

Clause 9 agreed to.

Clause 10 [Adjustment of subsidy]:

Baroness Hollis of Heigham moved Amendment No. 65:

Page 18, line 6, leave out from ("order") to end of line 9.

The noble Baroness said: We are hoping for the usual answers of sweetness and light which until recently we had come to expect from the Minister. In moving Amendment No. 65, I shall speak also to Amendment No. 68. They would remove the power of the Secretary of State to deduct amounts from the subsidy paid to local authorities for the cost of housing benefit and council tax benefit administration. We are concerned about the gradual withdrawal of government subsidy for benefits administration. We also doubt whether the deduction of subsidy is a sensible way to improve local authority anti-fraud performance.

We believe that local authorities' attempts to tackle fraud are hampered by inadequate levels of benefit subsidy paid by government. When local authorities took over the administration of housing benefit and council tax benefit from the DSS it was on the understanding that the cost of local authority administration would be fully met. However, over the period 1991-92 to 1995-96 total central government subsidy provision for the administration of costs for English authorities has averaged only two-thirds-- 65 per cent. or thereabouts--of actual costs. In 1996-97, the provision of £261 million from central government

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compares with local authorities' estimates of actual costs of £419 million. Accordingly, local authorities now meet £160 million of the administration of those benefits from the general fund compared with just £32 million in 1988-89. Only half of the subsidy provided is distributed direct to authorities in the form of a specific grant. The other half is fed into revenue support grant.

The effect is that authorities as a whole receive only one-third of their costs in specific grant. As many local authorities are close to their capping levels, a matter we explored in the previous amendment, any additional spend on administration must be at the expense of other services. The answer to that under-funding is to implement the Audit Commission recommendation, made in 1993 in its report on housing benefit, that all support for local authority benefit administration costs should be distributed by a specific grant. That would be neutral in terms of public expenditure. However, we still do not know why--and perhaps the Minister in his new sweetness and light mood will tell us--there has been a consistent refusal to make that change.

The second concern is that the anti-fraud incentive scheme allows authorities to earn additional subsidy by meeting government-set targets for the detection of fraud. The problem with that is that it concentrates on the amount of fraud actually detected. Therefore, it acts as a disincentive for authorities to take preventive measures to avoid fraud in the first place. Indeed, local authorities which have good preventive measures in place, and therefore less fraud to detect, may very well face a subsidy penalty for not detecting fraud that does not exist.

The DSS has established an anti-fraud challenge fund which allows authorities to compete for funds to finance anti-fraud initiatives. The problem is that the £5 million allocated to that has merely been top-sliced from existing funds. That adds to the difficulties of local authorities. The local authority associations are particularly concerned about the power in the Bill for the Secretary of State to make deductions from subsidy payments to local authorities for poor performance. Deducting subsidy from poorly performing authorities will serve only to make it more difficult for them to make improvements. The Minister really must not treat local authorities like delinquent teenagers who, they believe, need a short sharp shock to bring them up to scratch.

We await the Minister's reply. However, we believe that if central government want local authorities to respond, this is an area in which the carrot is infinitely more valuable than the stick because we share a common objective. The Government are in danger of subverting their own ends. I beg to move.

Earl Russell: I have two questions for the Minister. First, will he confirm that the Audit Commission is correct in believing that if all the money to local authorities for administering housing and council tax benefits were paid via a specific grant, that would be cost neutral? Is that the view of the Treasury as well as that of the Audit Commission? Secondly, what is to

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happen to a local authority with exceptionally honest citizens which does not have enough fraudsters to meet its target?

Lord Mackay of Ardbrecknish: Clause 10 re-states and makes additions to the Secretary of State's powers to adjust the subsidy paid to local authorities for housing and council tax benefit by introducing amendments to Section 140B of the Social Security Administration Act 1992. In particular, it qualifies the circumstances and manner in which deductions from subsidy must be made.

Perhaps I may describe briefly the existing power relating to deductions from subsidy and its application and the intention of the additional power introduced by Clause 10, additional powers which the noble Baroness's amendment seeks to remove. The Social Security Administration Act contains a long-standing provision for the Secretary of State to deduct from the subsidy which would otherwise be payable to an authority any amounts which he considers it unreasonable to pay. The power has been used administratively over the years to claw back from local authorities amounts of subsidy which have been or would otherwise be overpaid. Examples are where there has been an error in an earlier subsidy claim and it comes to light that the authority has incurred unlawful expenditure or has claimed subsidy twice on the same expenditure. This general power is restated in the proposed new subsection (5)(b) of Section 140B of the Social Security Administration Act, which is inserted by Clause 10. It would be removed, of course, by the second of these amendments.

The new powers relating to deductions are intended to clarify the existing general power. New subsection (4)(b) of Section 140B inserted by Clause 10 provides for deductions to be made in the annual subsidy in respect of matters other than expenditure on benefits; for example, incentive schemes. The proposed new subsection (5A) makes it clear that the powers to deduct are general and include instances where an authority has failed to comply with a direction or has failed in some other way to prevent and detect fraud.

Amendments Nos. 65 and 68 would together remove not only the Secretary of State's power to make deductions from subsidy in the case of poor fraud performance but also the general power to make deductions which is fundamental to the housing and council tax benefit subsidy regime. The removal of the power to make deductions would leave the Secretary of State powerless to provide in the subsidy order for deduction of subsidy in specified circumstances or to recoup questionably paid subsidy or to decline to pay dubious claims. I am sure that it is not the intention of the noble Baroness to remove an essential safeguard to the public purse, but this would be one of the effects.

Amendment No. 66 seeks to add a further example of circumstances in which additional subsidy may be paid; that is, for success in meeting performance targets for clearance and accuracy in administration of benefits. However, it is not necessary to include these further examples. Local authorities can and do receive additional subsidy in these circumstances and that will

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continue. The amendment would not permit any payment to local authorities by the Secretary of State that he cannot already make under the existing powers.

In addition, the Committee may be aware that my department is currently conducting research and carrying out tests in a range of local authorities on the feasibility of introducing a framework of minimum standards for verification, accuracy and clearance times. In the light of the research and test results we shall consider what adjustments may be needed to current funding arrangements to take account of the introduction of such a framework. Any extra subsidy that might be payable as a result of authorities meeting the standards could be paid under provisions in this Bill or provisions already in existence.

Amendment No. 67 seeks to remove some, but not all, of the Secretary of State's powers to pay additional subsidy.

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