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Baroness Hollis of Heigham: I am sorry, it is possibly my fault but, in introducing the group, I spoke only to Amendments Nos. 65 and 68. I was expecting my noble friend Lady Turner to move Amendment No. 66, and no doubt the noble Earl, Lord Russell, wishes to speak to Amendment No. 67. If I have caused any inconvenience to the Minister, I apologise, but I thought that perhaps he had registered that.

9.15 p.m.

Lord Mackay of Ardbrecknish: I am afraid I had not registered that, but if in fact the noble Baroness is saying that she is speaking only to Amendments Nos. 65 and 68, I have probably already dealt with them.

Earl Russell: I am grateful to the Minister. Amendment No. 67 is grouped with these amendments. The points I made were intended to relate to Amendment No. 67 as well as to Amendment No. 66. So if the Minister has a reply to Amendment No. 67, I would be grateful to hear it.

Lord Mackay of Ardbrecknish: I thank the noble Earl for that. The effect of Amendment No. 67 would be to remove some but not all of the Secretary of State's power to pay additional subsidy. In particular it seeks to remove the power for the Secretary of State to reward success in preventing or detecting fraud. The provisions that the noble Lord seeks to amend enable the Secretary of State to invite applications for additional subsidy specifically for the purposes of prevention and detection of fraud. I am sure the Committee agrees that the Secretary of State should, if he deems it appropriate, be able either to reward local authorities that have been particularly successful in their fight against fraud or invite local authorities to consider new and cost-effective approaches to tackling fraud; moreover, he should be able to provide any such funding for these new measures on a statutory basis. The powers provided within Clause 10 provide just that.

The noble Baroness asked about the deduction power on administration costs. The power is not purely an administration cost. The amendment removes all powers to deduct, so all the provisions dealing with improper expenditure would be struck down. That is the point.

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The noble Earl mentioned challenge funding being top-sliced. The challenge fund this year and next year includes new money, so it is not all top-sliced from the overall local authority administrative budget. But, of course, it remains within the total budget which the Government have set out and the total public expenditure plans we have already set out and which, I understand, at least the party sitting exactly opposite me--although, I accept, not the party of the noble Earl--have said will be more than sufficient for them for the next two years. I am not entirely sure that I was hearing the noble Baroness correctly. I am sure that she did not mean to make her original remarks sound like a promise to increase the funding going from central government because, of course, that would be incompatible with the views of her right honourable friend Mr. Gordon Brown, who has said that he will stick to the Government's spending plans.

Baroness Hollis of Heigham: That should cheer up the Minister enormously.

Lord Mackay of Ardbrecknish: It does cheer me up enormously, as indeed it cheers up my right honourable friend the Chancellor to have such endorsement of the Government's spending plans for the next two years. We are deeply grateful for the approval of the shadow Chancellor. If the shadow Chancellor agrees that our spending plans are perfectly all right, there does not seem to be any point in changing the person who holds the office of Chancellor of the Exchequer in the events which are about to happen in the next month or so. However, I must not be drawn into that because, as I have reminded myself--the noble Earl will remind me if I do not--we do not have a vote and therefore there is no point in electioneering here.

Earl Russell: I was merely asking the Minister to qualify what he said about there not being a case for changing the Chancellorship. What his words logically imply is that there is no point in changing it in that direction. That is all that they imply.

Lord Mackay of Ardbrecknish: I must always be careful about the noble Earl. I am happy to say that I have no little stories to tell about a man going to Ipswich or coming from Ipswich. What I meant--I am sure everyone understood--is that I thought my right honourable friend the Chancellor was doing such a splendid job, endorsed by Mr. Gordon Brown, that my right honourable friend should continue in office after the general election. However, as I said, there is no point in electioneering in this Chamber.

Over recent years the adjustments to subsidy have had a dramatic effect in influencing local authorities' attitude to anti-fraud work. The ability to adjust subsidy has led to greater effectiveness but there is still much to be done. The noble Baroness never ceases to tell me about the amount of fraud she thinks is going on as regards housing benefit. While I think the figure is about £1 billion, she thinks it is double that. If she is more correct than I am, that is all the more reason why we

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should take the powers which exist in this Bill to tackle the matter, and it is all the less reason to believe that somewhere there is an authority which is so virtuous that it has no fraud at all perpetrated against it. I do not believe that such an authority exists.

I think that the general administration subsidy of local authorities is intended to cover the actions for which they are responsible in assessing benefit and preventing and detecting fraud. It is worth noting that incentive payments for fraud detection are also available for detection at the outset of claims; in other words, the prevention point to which the noble Baroness referred. Challenge funding can be made available for prevention measures. Therefore the measure is not just related to the amount of fraud that is detected. I hope that I have answered the various points that have been made. I invite the noble Baroness and the noble Earl not to pursue their amendments.

Earl Russell: With respect I do not think the Minister has quite answered my question about the local authority without enough fraud. I agree it is difficult to imagine an area with no fraud but it is not quite impossible. Also, we have here something which is quantified. If one local authority detects less fraud than another, is it not just possible that it might be because there is less fraud being committed in the area of that local authority? Can the Minister eliminate that possibility? I do not know whether he was in the Chamber when the noble Lord, Lord Boyd-Carpenter, asked the noble Viscount, Lord Astor, who was then speaking from the Dispatch Box, how the Government knew the total of undetected fraud. That question deserves an answer and the noble Lord, Lord Boyd-Carpenter, did not get one. I should be glad if I were luckier.

Lord Mackay of Ardbrecknish: I referred to a figure of £1 billion worth of fraud and the noble Baroness thinks the figure is £2 billion. Against that background it is a little academic to believe that there is one local authority in the country which does not suffer any fraud perpetrated against it. It would be fortunate if that were the case; but I have indicated that incentive payments for detection are available for effective prevention. Clearly, such an authority would be effectively preventing fraud. If the steps it has taken lead to extra costs, it would be eligible for consideration for incentive payments and for challenge fund payments.

I can see that some way down the road, once we have managed to reduce the fraud considerably, we may have to look at other ways. But for the moment I see no reason why the incentive arrangements need adjustment. If they need adjustment, that can be taken into account when we look at the verification standards a local authority has in place which are succeeding, as the noble Earl prophesied, in bringing down fraud and preventing it. Those verification standards and verification procedures will be eligible for assistance to keep them in place, because clearly it is in our interests to keep them in place. We have also to guard against an

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authority which says, "There is no fraud here". Why there is no fraud there is because it is not looking very hard.

Earl Russell: But does the Minister understand that those incentives may be--in the words of the first Lord Burghley about the High Commission:

"Rather a device to seek for offenders than to reform any"?

Is that not a financial inducement to find fraud regardless of how good is the evidence? Is it not very near partaking of the character of a corrupt payment?

Lord Mackay of Ardbrecknish: I do not believe that it is. The noble Earl is perhaps just pushing his argument a little too far. The fraud inspector's report on an authority would be one source of information, and if that report showed that that authority was running a splendid system and keeping on top of fraud, some of the procedures it had in place could be eligible for the payments I have mentioned--either the challenge fund payments or the other incentive payments. I can see the noble Earl's point. I should like to think--and I shall certainly check it--that an authority in that halcyon state will not find that the Government are not giving it any money to continue in the halcyon state.

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