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Lord Hunt of Kings Heath: My Lords, I thank the right reverend Prelate for his comments. I confirm his observation about the chapel of rest. As he rightly observed, there are two chapels in Bedford Hospital. I also share his thoughts about the contribution made by mortuary staff who perform an invaluable role and ensure that the dead are accorded appropriate dignity and respect in these circumstances. One of the issues which arises in this particular case, where there was a clear management failure, is that often the contribution of staff as regards such services is not sufficiently recognised. When we have the results of the fuller inquiry into the events in Bedford perhaps there will be some important lessons to be learnt by NHS trusts as a whole in terms of oversight of mortuary services. One matter that I am sure we shall consider is the need to ensure that the staff involved receive the support required and are given sufficient guidance and instruction to know what to do if problems arise, as they clearly arose in relation to the doors of the Bedford mortuary.

Baroness Carnegy of Lour: My Lords, we should not leave this matter without being sure as to the precise

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facts. The Minister told us that the chapel of rest at Bedford had been used for this purpose in the past and perhaps such a photograph might have been taken earlier. Can the Minister say whether the board knew that this was happening? Was the Minister aware of it? Does the Minister regret that he did not know at the time so that he could have done something about it? The shuffling off of responsibility onto chief executives, which under the new structures is happening more than ever before, is worrying. We want to ensure that responsibility is carried right up to Parliament when things go wrong.

Lord Hunt of Kings Heath: My Lords, clearly when we receive the results of the fuller inquiry we shall know more about the events which occurred in Bedford Hospital. I can confirm that Ministers were unaware of what was happening in the hospital until the information came into the public domain. I assure the noble Baroness that if Ministers had become aware of it at an earlier stage they would have taken immediate action. It appears that the trust management, certainly the board, was not aware of this matter until a few days after the problem of the doors arose. In those circumstances, it is entirely appropriate that the chief executive, who is the accountable officer for the trust organisation, should accept responsibility for a clear failure in management action and procedures. However, there is more to be learnt. As a result of the inquiry we shall see whether further action needs to be taken in relation to the specific trust.

Lord Chalfont: My Lords, is the Minister able to say whether it is yet known who took the photographs which have caused such shock and dismay and how they got into the hands of the press?

Lord Hunt of Kings Heath: My Lords, as yet we do not know. I also regard that as a very serious matter. I assure the noble Lord that this matter is being fully investigated.

Baroness Noakes: My Lords, it was said that management failure led to the proper resignation of Mr Williams. I am aware that Mr Williams is a committed NHS manager of long standing. I am concerned about the nature of the management failure which meant that resignation was appropriate. If the impression goes around that relatively minor management failures, for example a problem with doors--clearly, it was much more serious than that--led to the required resignation of chief executives, we shall undermine the morale of a key group in the NHS. Of course the NHS depends on doctors and nurses to deliver patient care, but without a very strong cadre of experienced managers who are committed to the NHS we shall not achieve the necessary results. Can the Minister comment on the precise nature of the management failure which was so serious as to demand the resignation of an experienced NHS manager of long standing?

Lord Hunt of Kings Heath: My Lords, despite the availability of a temporary mortuary purchased by the

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trust some weeks ago, bodies were stored on the floor of the chapel of rest in totally inappropriate conditions. The additional temporary facility was not being used because of a problem with the doors, not because no places were available. The problem had resulted in injury to a porter and at the beginning of last week there was concern as to whether for health and safety reasons the mortuary could be used. It was for that reason that the bodies were transferred to the chapel of rest.

It is clear from the preliminary investigation that there were no procedures in place to ensure that such shortcomings with the doors were dealt with immediately. Also there were concerns about record-keeping in relation to the mortuary. More generally, in a situation which for the people involved is a serious matter, the senior management of the trust were not aware of anything having occurred until Friday, which is four days after the preliminary decision took place. I believe that the inquiry will confirm that those are serious failures in management process and action. In those circumstances, it was the appropriate course of action for the chief executive to step aside.

Having said that, the noble Baroness and I share an interest in ensuring that we have the highest quality managers in the NHS who believe that the NHS is a good place to work and provides them with the right career development and support. Following on from the NHS Plan, we are developing plans for an NHS leadership centre which will have an important role to play in helping us to identify, nurture and support future NHS leaders. That is very important. I want to do that. I want to ensure that we recognise the enormous pressures which chief executives are under to deliver a challenging agenda. However, when management failures take place I believe that the chief executives and the boards of those organisations must accept responsibility.

Social Security Fraud Bill [H.L.]

Second Reading debate resumed.

4.52 p.m.

Baroness Crawley: My Lords, I welcome the Social Security Fraud Bill as a major step forward in the ongoing campaign to eliminate fraud and error from the social security system. We spend over 100 billion each year on social security. It pays for pensions; helps people with illness and disability; and it helps families and those who are out of work. It is a huge amount of money. It is approximately one quarter of the entire government budget.

It is right that it is a huge amount of money because a properly funded social security system is the mark of a healthy redistributive democracy. The people of this country fund the social security system and they have every right to be angry at the estimation that each year 2 billion in benefits is stolen from that system. When the Government came to office in 1997 social security fraud was running at an estimated 2 billion to 4 billion a year. So, despite the scepticism of the noble

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Lord, Lord Higgins, some progress has been made to clamp down on those who defrauded the system in the intervening years.

The entire overseas development budget for the United Kingdom is 4 billion. Turning a blind eye to fraud on that scale is not acceptable. People who work and claim benefits illegally are not loveable rogues; it is theft from the public purse. As my noble friend the Minister stressed, it undermines confidence in the benefit system which is there to help people who are genuinely in need. A social security system that lacks credibility because it is seen as an easy touch is a system that becomes harder and harder for a progressive government to defend because of the huge sums of public money needed to maintain it properly in a healthy democracy. Therefore, great damage is done by fraudsters, not only to the current system but also to its future development.

My noble friend Lord Grabiner in his excellent report The Informal Economy was asked by the Chancellor of the Exchequer to investigate the problem of the hidden economy and to examine ways to move economic activity from illegitimate to legitimate businesses. He estimated that at any one time 120,000 people are fraudulently working and claiming benefits.

The Bill takes up many of the recommendations of my noble friend's report, including urging the Government to consider ways of using information from private sector and public sources as a cross check of the details provided by people. However, the Bill should be examined not only in the context of my noble friend's report but also in the light of the extensive consultation exercise conducted last summer by the Government, entitled Safeguarding Social Security: Getting the information we need.

Other measures that pre-date the Bill include the setting up of the benefit fraud hotline, the targeting fraud website, the framework which specifies minimum standards in verifying housing benefit and council tax benefit claims, and the Royal Mail's "do not redirect" powers to prevent fraudulent claimants using the Royal Mail's postal redirection arrangements to submit benefit claims from false addresses.

The main features of the Bill are to provide powers to reduce, and, in some cases, withdraw benefits from people convicted twice of benefit theft; to increase punishments for benefit fraud; to give new powers to obtain benefit fraud information from private and public sectors; to improve the direction of local authorities on benefit administration, which was a point raised by the noble Lord, Lord Higgins; and it will also tighten the requirements to report changed circumstances that affect benefit entitlement.

The Bill is a serious move by the Government to get to grips with social security fraud after decades of neglect. It is part of a strategy to tighten up the system and make sure that from the first claim the right benefits go to the right people at the right time. To take up the point made

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by the noble Earl, Lord Russell, we must always be vigilant about everyone's civil liberties in their interface with the social security system. I am sure that other noble Lords have also been contacted by groups such as Liberty which are concerned with this issue. But I believe that the Bill finds a balance between the fight against serious fraud and a claimant's right to privacy.

As my noble friend the Minister has stressed, no legitimate claimant has anything to fear from the Bill and should recognise the Bill's role in strengthening the system for us all in the future.

4.58 p.m.

Baroness Strange: My Lords, this is an important and necessary Bill. All taxpayers, which means nearly everyone in this country, have suffered financially from people who have successfully and deliberately set out to defraud the system. As the Minister has said, the frauds have run into billions. She is quite right to try and stop the leak whereby much of our money is whipped away by a massive system of fraud.

I agree with everything she has said. But the words "war pensions" leapt to my eyes. Both war widows and war pensioners tend to be of a different generation from those to whom organised fraud is a way of life. No one is perfect in this world and there may just be the odd case here and there, but I will not have my splendid long-suffering uncomplaining ladies harried for the sake of a few possible rotten apples.

Mr Tom House, who is head of pensions for the Royal British Legion, told me that he has never come across any deliberately fraudulent cases from war widows or war pensioners in the 10 years he has worked there. During that time, he has dealt with 60,000 cases, and he currently has 8,000 to 10,000 war widows on his books. None of them has ever tried to commit fraud.

One of my ladies, who is a regional organiser, allowed a friend of hers who worked on an oil rig to park his car by her house while he was away. Some local informer reported that there was a strange man's car parked by her house for long periods. The pensions officials came to the conclusion that she was cohabiting while still illegally and fraudulently drawing her pension, and it was arbitrarily withdrawn. She herself had to bring a case and prove what in fact had happened; which she did successfully, and had her pension reinstated to the time when it had been removed. But, as your Lordships can imagine, it was all very upsetting for her. Is this the way to treat people who have sacrificed their loved ones for the good of their country? Are we living in a Nazi or communist state of secret informers? I sincerely hope not.

I do hope that the money saved from peering at and spying on innocent ladies and war pensioners will be better spent elsewhere. I very much hope that my noble friend will remove the words "war pensions" from the face of the Bill.

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5.1 p.m.

Baroness Noakes: My Lords, the extent of social security fraud is an unacceptable burden on the British taxpayer and we should support any measures designed to reduce it. As the Minister said, the Government have set a target in their public service agreements to reduce the amount of fraud and error in income support and jobseeker's allowance. That fraud and error alone are estimated to be running at more than 1.3 billion a year, a staggering 8.4 per cent of programme expenditure. We might think that the targets, which were described by the Minister as challenging--merely to halve that amount and taking until March 2006 to do it--are too soft, but I am sure we all agree that the amount must be significantly reduced. Another 600 million, or possibly more, of housing benefit is also thought to be lost, taking the total to more than 2 billion or even more. That 2 billion could buy 18 or 20 new NHS hospitals every year or it could be used to start to reverse the increasing tax burdens imposed by this Government.

There is no magic way to avoid fraud or error. One of the arts of business success is risk management. Businesses have to identify the key risks that affect their operations, including risks from fraud and error. They must install controls to eliminate or minimise those risks and then check that those controls are working. But 8.4 per cent of programme expenditure "lost" certainly indicates that something has to be done to improve the DSS's risk management.

We are told in the Explanatory Notes that the Bill will capture between 200 million and 400 million of benefit savings. That still leaves unaffected at least 1.6 billion of losses. It is therefore a relatively modest Bill in the whole scheme of things and I look forward in due course to hearing of more significant measures to reduce the losses.

I turn to the Bill itself. There are significant new powers for the DSS and others to obtain information. From my experience as an accountant, I am sure that effective controls to minimise losses due to fraud or error do need information. In principle, therefore, I support those parts of the Bill which give additional powers to the DSS and others to obtain information. However, I have significant reservations about the obligations that that will place on others. Clause 1 has a significant list of organisations from which those administering benefits will be able to demand information. That list can be added to by an order made under subsection (3) of Clause 1.

When we look at Clause 3, which deals with the payments to be made for this information, we can see how one-sided the trade will be. The clause gives the Secretary of State the power to require or authorise,

    "in such cases as he thinks fit, the making of such payments as he considers appropriate".

That is a very wide discretion.

This Bill is yet another piece of legislation creating burdens on businesses which have already experienced year-on-year increases in regulatory burdens under this Government. The provision of information will be a burden--it is not cost free. We may decide, reluctantly,

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that it is appropriate to impose this additional burden, but we should at least seek to mitigate the impact on the businesses affected by placing a positive obligation on the Secretary of State to ensure that he compensates those businesses for the costs that they will incur as a result of these new powers being exercised.

I note that the Government's own estimate, as set out in the Explanatory Notes, of the additional costs falling on businesses is in the range of 2.5 million to 7.6 million. I was surprised at the modesty of that figure and tried to look at the regulatory impact assessment to understand the assumptions that the Government have made. Paragraph 190 of the Explanatory Notes refer us to the DSS's website,, but I have to tell the Minister that as of yesterday morning I could find no trace of the regulatory impact assessment on that website, despite several increasingly complicated searches. I believe that the basis for those estimates needs the most careful scrutiny and I know that many organisations have expressed concerns about the potential costs. Whatever the truth about the costs imposed by the Bill, they are certainly greater than zero. I hope that the Government will think again about creating a positive obligation to recompense those on whom they will be imposing these new information requirements.

I hope that the Government will also look again at the list of potential beneficiaries set out in Clause 3, to which my noble friend Lord Higgins has already referred. It seems to me that there should be an alignment between those on whom the burdens may be placed by Clause 1 and those who should be recompensed under Clause 3. At present there is no such alignment. I cannot see why each of the categories of potential information providers should not in equity have the costs of these additional burdens met by the DSS or others. Why is it that banks and insurance companies are less deserving than, say, telecommunications providers?

One other aspect of the Bill concerns me; namely, the provisions in Clause 14 for fixed penalties to be offered to allegedly colluding employers in lieu of prosecution. I have seen the operation of something like that in the form of consent orders which are a part of the disciplinary procedures of my professional institute, the Institute of Chartered Accountants. That experience does not encourage me. Although introduced in the name of efficient administration, there is no doubt that it is seen by many chartered accountants as a weapon with which to beat them. The choice is pay up or go through the time-consuming, expensive and, probably worst of all, emotionally draining experience of the full disciplinary process. They generally pay up, guilty or not, so that they can get on with running their businesses.

I have a very real fear that this new power will be used to beat businesses, and especially small businesses. They will be treated as guilty until proven innocent. If a business believes that it has not committed an offence, it can choose to pay up or go to court to argue its case. The latter will be expensive and time consuming. It will certainly divert attention from running the business. In practical terms, the answer may well be to pay up. That

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might be good for raising revenue, but it is not good if innocent parties are coerced into paying fines in order to avoid the much worse prospect of a court case, which will cost them more in business terms even if they are successful in proving their innocence.

What is there in the Bill to ensure that Clause 14 will be operated reasonably? What is there to restrain the excessive zeal of DSS officials or others in their search for benefit fraud? Should not there be a kind of filtering mechanism to ensure that the Secretary of State makes the decision to offer a penalty only in reasonable and genuine cases?

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