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The noble Lord said: In some ways, this amendment is not dissimilar to the matter that we debated a few moments ago. Under paragraph 2 of the schedule it seems that premises may be inspected,
Baroness Hollis of Heigham: Section 110 of the Social Security Administration Act permits the Secretary of State to enter into arrangements with any other government department. Under those arrangements the officers of the latter may act on behalf of the DSS, using DSS powers to enter premises, inspect them and obtain information there for DSS purposes. The only condition is that the premises in question must either be subject to inspection by officers of the other department under their own powers, or be under the control of that other department.
Currently officers in the Contributions Agency may be asked by their colleagues in the Benefits Agency to visit employers to check on the earnings of employees who have made income-related benefits claims. No special power is needed to permit co-operation of this nature as both agencies are part of the same department.
After the staff of the Contributions Agency move to the Revenue, co-operation of this kind remains as desirable as ever to counter potential fraud. But once the staff involved belong to different departments, special provisions are needed to enable those of one department to gather information for the purposes of the other. The purpose of this measure (paragraph 2 of Schedule 4) is to enable that co-operation to continue.
However, I can see why some Members of the Committee, particularly the noble Lord, Lord Higgins, might be concerned that paragraph 2 goes beyond what is needed for the purposes I have just described. For example, officers of the Inland Revenue expert in the valuation of property have for many years had the power to inspect premises for the limited purpose of making valuations needed in connection with those taxes for which the Revenue is responsible, for business rates or for council tax. I accept that an argument could be constructed whereby all such premises could be regarded as liable to inspection by any Revenue official on behalf of the DSS. This is not our intention. I am therefore happy to accept Amendment No. 20, as Inland Revenue officers will still be able to inspect premises on behalf of the DSS where the Inland Revenue controls those premises, or where its officers have reason to inspect them for the purposes of NICs or other transferred functions, which fulfils our intentions. As I said, we are therefore happy to accept Amendment No. 20.
I now turn to Amendment No. 21 which is grouped with Amendment No. 20. The proposed new subsection (5)(a)(ii) in Section 110 simply
The Committee may be concerned that the new subsection (5) would mean that Inland Revenue officers could be authorised to inspect premises on behalf of the DSS to which Revenue staff had no rights of access, but others, such as safety inspectors did. If so, I can assure the Committee that this is not our intention; nor do we think it is the proper construction of this provision.
The proposed wording of Section 110(5) would provide for two types of arrangement: first, with Inland Revenue staff authorised to inspect premises for contributions purposes; and, secondly, with non-Revenue staff authorised under non-tax and non-contributions legislation. The amendment would remove that second link. Even if that were right as a policy, it is not obviously something to be done in a Bill merely transferring contributions functions. Furthermore, I suggest seriously to the noble Lord that tying the hands of the DSS like this goes against the concept of joined-up government and could damage the fight against benefit fraud. I am sure that that is not his intention. As I say, we have taken his amendments seriously and we are happy to accept Amendment No. 20. However, we do not think it is appropriate to accept Amendment No. 21. I hope therefore that the noble Lord will withdraw that amendment.
Lord Higgins: Christmas presents, however late, are always welcome! As I understand it, the effect of what the noble Baroness has just said also encompasses Amendment No. 22 which stands in the name of my noble friend Lady Anelay of St. Johns and myself. Therefore the amendment will not be moved at the appropriate moment.
On Question, amendment agreed to.
The Deputy Chairman of Committees (Lord Elton): Before I call Amendment No. 22, I must inform the Committee that, if it is agreed to, I shall not be able to call Amendments Nos. 23 to 27. However, I gather that that is superfluous information.
Lord Higgins moved Amendment No. 23:
The noble Lord said: There is a rather curious provision in the Bill as regards the powers exercisable by officers of the Inland Revenue. The Bill states that an officer can conduct an examination,
Earl Russell: I hope the Committee will pay some attention to this point because it requires a little thought. We should never legislate on the assumption that "it cannot happen here". Some 999 times out of a thousand it cannot. However, in this of all years one should not think of that as an absolute bar on it ever happening. One must construe vires strictly. As I understand the position, in this case it would be possible for an inspector to inspect a business in the presence of the leading competitor of that business. Would it perhaps be better to state instead of,
Lord Higgins: Perhaps I might add just one postscript to the point the noble Earl has just made. There have been occasions in the past--I shall not go into them now as they were extremely controversial--when sometimes visits by the Inland Revenue have been accompanied by the media. I presume it is certainly not the intention of the Government to include that kind of provision at this stage.
Baroness Hollis of Heigham: I am slightly baffled by this concern because it is not the same concern as I believe the noble Lord expressed at Second Reading. However, I shall try to develop this point because we are trying to protect the situation of employees, not to add extra people to accompany the inspector. I wonder whether there is some fundamental misunderstanding between us as regards what the clause and its addendums seek to achieve. I shall spell out what it
I remind the Committee that the powers in new Section 110ZA are merely copying inspection powers which have existed unchallenged for 50 years. They attack the careful attempt made in the Bill to preserve the current balance between inspectors' powers and citizens' rights. The exercise of those powers--I take account of everything the noble Earl has said on that point--has been almost wholly uncontentious. We have no reason to expect that to change as a result of the transfer. In other words, experience would suggest that this is not a problem.
Turning to Amendment No. 23, inspectors have the power to question persons that they find on an employer's premises, or others reasonably believed to be liable to pay contributions. When doing so, inspectors can choose whether to question a person alone or with others. Amendment No. 23 would remove that power.
This power is extremely useful in finding the facts where an employer is suspected of defrauding the National Insurance Fund--for example, by paying employees in cash, which does not go through the books of the business. Such employers, particularly if they were present when the employee was being interviewed, would be in a position to put pressure on employees not to reveal the facts to the inspectors visiting the employer's premises--for example, by threatening to dismiss the employee if he tells the truth or asks the inspector for a private word. Giving the inspector the power to require the interview to be carried on in private overcomes that inhibition. I can assure the Committee that it is not the intention that the power should ever be used to deny a suspect employer the right to have his lawyer or other professional adviser present at an interview. On the one hand we obviously want the employer to have any additional support he may need; on the other hand, we do not wish to have the employee feeling that, because he may have the employer present he must do so, and therefore there is the possibility that intimidation may result.
Amendment No. 24 attacks the right of inspectors to visit any employer's premises to check that NIC rules are being applied properly. Such checks are much more effectively carried out on the spot where records are kept rather than remotely. They can also be concluded much more quickly, and that is to the advantage of the employer. Paradoxically, the power to visit the premises of employment agencies and the offices where pension schemes are administered has been left intact by this amendment. I am not sure of the logic behind the distinction. I cannot believe that it has anything to do with the noble Lord's declared financial interest.
Amendment No. 25 seeks to reposition the borderline between those premises which can be visited to check on the operation of the NIC rules by an employer or self-employed person and those which cannot. At present premises, a house or flat, used wholly as a private residence are not subject to inspection visits; premises used partly for that purpose and partly for trade
As a result of the amendment, there will be no explicit right to make an inspection visit to the office accommodation of a person carrying on a perhaps substantial business if the office is a room at his home. But if that person takes office accommodation elsewhere, an inspection becomes possible. There is no sense in that distinction.
I surmise that the thinking behind this amendment is that the present rule could lead to an unreasonable encroachment into a person's privacy as, once domestic accommodation is used for a trade or business, theoretically the whole premises become subject to an inspection visit even though only a small part is used commercially. But inspectors have no interest in the parts of a house which are used for purely private purposes.
I turn now to Amendments Nos. 26 and 27. At present, Contributions Agency inspectors make 60,000 visits to employers a year, in almost all cases with co-operation, without the need to threaten use of legal powers. The need to obtain a magistrate's warrant for each visit would be quite inappropriate and a major burden on the courts. I am not aware of any evidence that NIC inspectors have ever abused their powers by visiting premises where there were no reasonable grounds for supposing that people were employed. If the noble Lord has any evidence, of course I shall take it seriously.
Perhaps I may sketch in some background about these visits. The fact that an employer has been chosen for an inspection visit carries no implication that irregularities are suspected. The great number of visits--60,000 of them a year--illustrates that they are largely of a routine nature. Furthermore, inspectors have no right to force entry if their way is barred. In practice, of course, the timing of visits is agreed with an employer beforehand in order that they are as convenient as possible. As the noble Lord said when ironically quoting himself, we are not talking about dawn raids.
If these amendments were accepted, what would a magistrate have to consider when deciding whether or not to grant warrants for up to 60,000 visits? He would have to consider only whether there were reasonable grounds for supposing that somebody was employed, or that there was an employment agency or pension scheme run from the premises. That is not a sensible use of magistrate's time.
It may be that the amendment is intended to require a magistrate to impose a tougher test before granting a warrant; for example, that there must be reasonable grounds for suspecting irregularities. Such a test would be consistent only with a much reduced inspection programme and, inevitably, a far less effective one. Incidentally, such an inspection programme would alter the whole basis of the current inspection programme, rather than the dipstick-like regime that we have at the moment.
The Committee will be aware that it is not generally true that Customs officials need a magistrate's warrant for entering a premises. For example, a routine visit to check on a trader's compliance with VAT rules requires no search warrant. Such visits are analogous to the routine visits that NIC inspectors make. A magistrate's warrant is required in cases where the power to enter by force is sought. In that case--perfectly reasonably--the magistrate must be satisfied that there are reasonable grounds for suspecting serious fraud.
If it were to be suggested that the Inland Revenue should be entitled to enter premises by force, I would fully agree that at least a warrant from a magistrate, if not a county court, should be required. While I see some attractions in such a suggestion, I do not think that such an extension of powers would be appropriate to this Bill. I do not think that the noble Lord is proposing that any more than a reduction in the existing powers. On all these grounds, I would ask your Lordships to withdraw these amendments.
Earl Russell: Before we leave this matter, perhaps I may ask for some further clarification about Amendment No. 23. The Minister and I appear to have been at complete cross purposes about the meaning of line 48, especially the words "as he thinks fit". The Minister is arguing that those words refer to the inspector's choice of whether he thinks fit to bring another person or to do it alone. I would have no objection at all to that understanding. My understanding had been that he had the option of bringing in any other person he thought fit. Would it not be a good idea to clarify this matter before a court gets hung up on the same misunderstanding that we have had?
Page 37, line 18, leave out ("or any other enactment").
"by an officer of the Inland Revenue under section 110ZA below or any other enactment".
It seems possible that that provision might confer powers which are not at the moment enjoyed by the Department of Social Security. The purpose of the amendment is to establish whether that is likely to be the case. Perhaps the Minister can reassure us on that point. I beg to move.
Page 37, line 47, leave out from ("examine,") to ("in") in line 48.
"alone or in the presence of any other person, as he thinks fit".
14 Jan 1999 : Column 309
It appears that the Revenue may make what I believe the noble Baroness, Lady Hollis, at Second Reading insisted was a visit rather than anything else. On that occasion I referred to a raid, which may have been a little over the top. In the correspondence--which has been referred to on a number of occasions--I believe she specified how many such controversial visits (if I may put it that way) had been made by the Department of Social Security in any given year. It was certainly a small number. However, on the other hand, I imagine that the number of visits made by the Inland Revenue would be considerably greater. One is concerned that the tendency of the Inland Revenue to make such visits--as compared with the small number of visits by the DSS--might encourage more visits of a controversial nature to be made in the future. Be that as it may. However, to return to the amendment, I am still not clear why the Inland Revenue may wish to be accompanied by "any other person" and whether that is appropriate if the individual in the premises concerned does not wish to see the "other person". I beg to move.
"any other person, as he thinks fit"
something like,
"any other appropriate person"?
That would give the court the power to review whether the person was appropriate. It may be that this power--like the power of this House to throw out Acts to prolong the life of a parliament--may not be necessary in many hundred years. One could perhaps argue that it is not necessary because it is there. This is a small change and I hope that the Minister may consider it.
5.30 p.m.
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