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Lord Mackay of Ardbrecknish: This amendment seeks to allow local authorities, as the noble Lord, Lord Whitty, has just explained, to refuse or stop payments of housing benefit being made directly to a person other than the claimant, the landlord or indeed, I assume, his agent in certain circumstances. The circumstances are: that the proposed recipient of the direct payment has no title to let the property; that there is no such tenancy; or that the proposed recipient is or has at any time been in receipt of benefit as a result of fraud. For many of those housing benefit at present cannot be paid. Moreover, any current recipient of direct payments could have such payments discontinued if the authority is satisfied that he is in receipt of payment of housing benefit as a result of a fraud.

I understand the intentions behind the amendments. Equally, I myself was not able to be present last night when the London Local Authorities Bill was discussed, as I had another engagement. But I know that there is similarity between some of the provisions in some amendments that we have been discussing and some of the provisions in that Bill. So I understand the intentions.

Direct payments can cause difficulties. They can make it easier for landlords, and indeed for both landlords and claimants, to commit fraud. My officials have consulted representatives of the local authority associations to identify specific problems with the direct payment provision and to see how they can be put right. We have found that most of the problems that they raised with us can be tackled by amending current

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secondary legislation. Indeed, as the noble Lord, Lord Whitty, acknowledged and as was indicated by my honourable friends in another place, we propose to amend that secondary legislation and to issue circulars to make the situation clear to the local authorities.

But I want to make it clear, if I can, that in almost all cases there is no obligation on local authorities to make direct payments. A major factor contributing to the difficulties that local authorities have with direct payments is that many believe that they are under such an obligation. The department will issue clear guidance to the effect that local authorities are not generally under any obligation to make direct payments to landlords unless claimants are substantially in arrears with their rents. In addition, my right honourable friend the Secretary of State is currently consulting with local authority associations with a view to proposing amending regulations to deal with three specific issues.

Baroness Hollis of Heigham: I wonder whether the Minister will mind my interrupting him at this point. I take the point that he has just made that the department intends to issue clear guidance showing that local authorities are not obliged to make direct payments. But the research commissioned by his own department, undertaken, I think, by Dr. Kemp, which I have read and studied, makes it clear that increasingly landlords require direct payments as a condition of accepting a DSS tenant. What would be the Minister's advice in such a situation?

Lord Mackay of Ardbrecknish: It would rather depend on the suspicions that the local authorities might have. For example, the local authorities must in law be satisfied that the landlord is indeed the landlord and that the tenancy does indeed exist, before they pay any housing benefit. If they are not satisfied that the tenancy does exist, they should not pay anybody--either landlord or, obviously, tenant. That is a very clear provision.

So far as concerns direct payments--I believe it will certainly answer the point of the noble Lord, Lord Whitty, and I hope that it will help the noble Baroness--a circular has been drafted. I understand that it is now with the local authorities association as part of the statutory consultation that we have to undertake. That consultation is planned to end on 15th April 1997.

But I mentioned three specific issues at which we are looking. The first proposal will enable an authority to require a landlord to produce any necessary information in connection with the specific benefit claim. That might include evidence of his legal right to let the property.

The second proposal is for a discretionary power to refuse or terminate direct payments where an authority is satisfied that the recipient is not a fit and proper person. For example, an authority could refuse to make a direct payment to a landlord who had a record of obtaining benefit by deliberate fraud. It could equally decide to exercise its discretion to make a direct payment where, despite the landlord's history, such an arrangement was the only means of safeguarding the tenancy, although in such a case the authority would be

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expected to introduce safeguards to minimise the risk. That may go a little way to answer what I thought was the question posed by the noble Baroness.

The third proposal we are discussing would require local authorities to ignore rent arrears which are incurred while a claim or a change of circumstances is being determined. This would mean that authorities would not be obliged to make direct payments in such cases, removing what amounts to a perverse incentive to a fraudulent landlord to force a delay in the determination of a claim.

All the proposals I have outlined are being brought forward under existing legislation--and I hope answer satisfactorily the points raised by the amendment--without requiring a new primary power or producing the counterproductive results of the proposed amendment. We are discussing some of these matters with the local authorities. Others are in the circular which has been drafted and which is with the local authorities for consultation.

I hope that those assurances and indications of progress will help the noble Lord, Lord Whitty, to withdraw his amendment in the confidence that we are taking serious steps along with the local authorities in order to help the local authorities deal with the question of landlord fraud.

9.45 p.m.

Lord Whitty: I am grateful to the Minister for his reply. It goes some way towards reassuring me that these issues are being tackled. However, his reply does not deal with the central point. I am well aware, as I am sure are most local authorities, that they are not obliged to make direct payments to landlords in any circumstances. They have the discretion not to. However, the reality is that local authorities are faced with the fact that landlords are telling their tenants or potential tenants that unless they are given direct payments the tenants will not get the lodgings. In those circumstances it would be a serious problem for local authorities to insist on payment to a tenant if the landlord said that he would not then take him on. The question of the power relationship between a tenant and the landlord is involved here and is perhaps best dealt with by the subsequent clause.

However, I am more pleased than I expected to be that some progress has been made since the deliberations in another place on the redrafting of these regulations and consultation with the local authorities. In the spirit of goodwill and understanding, I am prepared at this stage to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Whitty moved Amendment No. 70:

Before Clause 11, insert the following new clause--

Offence of fraud by landlord

(".--(1) If a person--
(a) dishonestly produces or furnishes or causes or allows to be produced or furnished to any authority administering housing benefit or council tax benefit or to a person authorised to exercise any function of such an authority

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relating to such a benefit, any document or information which is false in a material particular as to persons resident in accommodation owned, managed or controlled by him or in which he has any form of proprietary interest; or
(b) fails to notify or causes or allows another person to fail to notify any authority administering housing benefit or council tax benefit, or a person authorised to exercise any function of such an authority relating to such a benefit, of any change of circumstances as to persons resident in accommodation owned, managed or controlled by him or in which he has any form of proprietary interest,
with a view to obtaining any benefit or other payment or advantage (whether for himself or for some other person) derived as a result of more than one claim to benefit, he shall be guilty of an offence.
(2) A person guilty of an offence under this section shall be liable on conviction on indictment to imprisonment for a term not exceeding 10 years, or to an unlimited fine, or to both.").

The noble Lord said: I apologise to the Committee as I may have to take some time in explaining the amendment. We found in another place that Ministers have not taken the point on this issue. I therefore have to restate the arguments. We on these Benches have given strong support to the objectives of the Bill. We have not always shared the rhetoric that surrounds it but we are determined to play our part in bringing an end to fraud in the social security system. However, if the Government are so keen to tighten up on payment fraud, I cannot understand why Ministers are resisting the obvious parallel but separate problem of tackling criminal landlord fraud, which creams off both the welfare state and genuine claimants. Indeed, it often goes beyond that and exploits vulnerable people who for one reason or another are outside the national insurance system.

I have read carefully the report of the Select Committee of another place on these issues. It concludes that a large proportion of fraud in the housing benefit area is located in landlord fraud in the private rented sector. It quotes numerous examples. The sample survey carried out by the London Borough of Haringey revealed that no fewer than 21 per cent. of such claims were fraudulent in one way or another. Lest the Committee assumes that this is a problem of Labour local authorities, perhaps I may also draw attention to a submission to the Select Committee by the fair City of Westminster, which gave a trenchant analysis of the problems in its area, particularly with fraud by hoteliers.

I have also read carefully the proceedings on the Floor and in Committee in the other place on this Bill. There seems to be an extraordinary defensiveness about Ministers' responses here. That suggests that they, and maybe civil servants at drafting level, are being a little complacent or maybe they are living in a world of ignorance as to what is going on. We have already been warned that we should not electioneer in this Chamber. There is no point in doing so, which is rather a different matter. I do not want to undermine the efforts of my colleagues in other places to make sure that the Labour Party is seen as a party which represents the whole of the country.

But I am forced to be a little bit "classist" and "regionalist" about this. There seems to be a feeling that this is a problem only of the inner cities. In fact, the Select Committee report proves exactly the opposite. It is a problem for small towns and the shires which for at

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least another couple of weeks the party opposite purports to represent. Some of the worst examples are in those areas. Some of the criminals engaged in these activities are moving out of London and other cities because they are finding that life is too tough for them because of the way in which London local authorities and others are beginning to tackle these problems.

But even if we concentrate on the inner cities, this is a crime which is well understood. The DSS civil servants in the offices down the line understand it; the benefits staff of the local authorities understand it and are horrified by their inability to tackle the problem effectively. The police know of it and it is often a problem for them. The social services know of it and the general public also know it.

Until recently I lived for 20 to 25 years in south London. There is just as much tittle-tattle in the shops and pubs of south London about the existence of criminal fraud by landlords as there is about individual claimants who cream off the system. Moreover, there is also recognition at that level that the crimes are different. Ministers in the other place argued that far from there being only one clause in this Bill dealing with landlord fraud, in fact there are eight separate powers in it to tackle the problem because it is caught by the provisions in the Bill for individual fraud.

That is erroneous. It seems that the only rationale for the Government's position is that they regard landlord fraud as a secondary offence. By that I do not mean that they do not regard it seriously, but they see it as a connivance at individual fraud rather than fraud of itself. In fact, it is a massive conspiracy and often an organised one against the public purse and often against claimants. It is massive exploitation both of genuine claimants and by people who are used in these scams who purport to be claimants. At the Second Reading debate I used the term "scam" and then I corrected myself because that was too cosy a term.

Some landlord fraud deals in petty connivance and individual deception; but we are often dealing with something which is far more sinister. The police understand that they are dealing with a continuum of crime here, such as immigration rackets, overcrowding and unsafe dwellings and protection rackets. These are crimes of the unofficial economy and therefore they are quite difficult to catch up with. But in this Bill we are dealing with the point where we should most easily be able to catch up with it; namely, the point where criminals gain their money directly from the state.

These facts are known from the cases reported, from anecdotes and statistics. They were revealed very clearly in the report of the Select Committee. They all show that this is a rapidly growing problem. We can all have views as to why that is happening. There are some underlying social problems which go towards it. In many of the inner city areas and in our smaller towns, the housing market has become seriously distorted. There has been no new building for public housing and availability is limited and inadequate. There has been family break up, migration and the atomisation of households. Owner-occupation is not an option for a very large number of these people. Even the jerry-built

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flats built in the 1980s are beyond their purse. The private rented sector has been deregulated and now has rents which are often beyond the purse of the people we are talking about. This is a potential recipe for disaster and is already occurring.

When direct payment to landlords of housing benefit was first introduced, the assumption was that the bulk of such payment would be to public sector landlords or social landlords like housing associations. However, with the decline in public sector housing and the rise in rents in the private as well as the public sector, that is no longer entirely the case. Direct payments now account for over one-third of all payments, and that proportion is estimated to rise to one-half, yet that one-third of payments accounts for two-thirds of the fraud. Direct payments have been growing as a proportion of all housing benefit and the share to private landlords is growing. Control and monitoring are therefore primarily problems in the private sector. However, there have been a few instances of local authority officials being involved in organising and/or conniving at organised housing benefit fraud. Obviously, such individuals should be ruthlessly prosecuted; but the main issue is how to control fraud in the private sector.

What form do the scams take? The amendment partly reflects this. Landlords claim for tenants who do not exist, often using national insurance numbers which have been obtained from non-claimants by illegal purposes or deception. Tales were even told in the Select Committee and are recorded in the proceedings of another place of dossers in one part of London being paid £10 for their national insurance numbers which were then used in another area. It is clear from the Select Committee report that national insurance numbers alone do not offer sufficient protection against such fraud. There are cases of where the alleged tenant exists, but there is no dwelling--or of where there is a dwelling, but no tenant. There are cases of where the alleged tenant once existed and once lived at that property but moved out a long time ago. There are cases of where the alleged tenants exist but claim for dependants who do not exist, or who do not live there, or who have not lived there for some time.

There are also hotel frauds. I have already referred to the very telling report from the City of Westminster, which shows how hoteliers in such areas take advantage not only of potential claimants and others, but also of the social security system.

There are also cases of cheques being made out to genuine claimants but going in practice to the landlords, as a result of extortion or planned redirection. Such cheques are often cashed without recourse to a bank account by means of the growing phenomenon of slightly dubious cheque shops. I have seen some evidence from the relatively small town of Northampton of £400,000-worth of benefit cheques, the bulk of which is paid to landlords, being cashed at dubious cheque shops. There is an estimated commission on that of £30,000 which is going to somebody. Surely that was not the intention of housing benefit. It is also a way of avoiding tax. If the Bill is using data matching to check

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on claimants, surely we must make greater use of data matching with Inland Revenue declarations on landlords who receive benefit directly.

This is a different sort of crime. It requires separate powers. In determining the sanctions, we have accepted some of the arguments of Ministers in another place that the maximum sanction should not be too out of line with that in parallel legislation such as the Theft Act. This amendment therefore reduces the maximum penalty from the 12 years suggested by my colleagues in another place to 10 years.

The central issue here is that we need powers to identify such fraud as a crime that is separate from the individual crimes of individual claimants. The new clause would provide such powers. If the Committee were to accept the amendment, we would not only save the public purse, but take steps which would help to put a few very evil men behind bars and which would protect genuine claimants and decent legitimate landlords who suffer from the implication that so much is wrong with the sector; we would also protect a lot of very vulnerable people from being used in such conspiracies. I beg to move.

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