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Earl Russell: My Lords, I am grateful to the noble Lord. No one is alleging that there is any ministerial intent to abuse these powers in this way, but does the noble Lord concede that there is a real Actonian danger that they may nevertheless be so abused?

Lord Grabiner: My Lords, in a sense, that is true whenever powers are granted. One has to have regard to the fact that there is a possibility that powers, when granted, may be abused. However, if the powers are abused, it is to be hoped that that will become apparent and plain and that the appropriate remedies will be made available, either through the process of judicial review or the appeal process to be provided in this legislation. The concern that such an abuse may happen is not a justification for not introducing the provision.

Earl Russell: My Lords, does the noble Lord concede that some powers lead people into more temptation than others?

Lord Grabiner: My Lords, of course they do, as we know. Even then I would suggest that that does not

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provide justification for not assuming the powers and getting on with the job that needs to be undertaken. It is simply not good enough to say that it is too difficult a problem or that there are people out there who may behave in an improper fashion. That is not a good enough answer to the problem. We have to take a bit of courage and have a bit of conviction here because we are confronted with a serious problem.

Perhaps I may now say something about the justification for paragraph (c) and give a couple of practical examples. Investigators might reasonably take the view that someone who has previously committed benefit fraud is more likely to be fraudulent again. Another example might be the discovery of the fact that someone regularly advertises some business activity in a telephone box or in a newsagent's window but pays no tax or VAT and may or may not be claiming benefit at the same time. I suggest that it is reasonable and necessary to have these powers if we want to deal with the problem.

The third important protection is the one mentioned by my noble friend the Minister. There will be a published code of practice which will put some flesh on these provisions and make them precise and accessible. Also the provision will not, as I understand it, be operated until after the code of practice has been published.

Perhaps I may now turn to the subject of data protection. This is an aspect of the debate about human rights under the Bill. I suspect that it will be readily accepted on all sides that the benefit system is under attack from the opportunist and from organised fraudsters. On that assumption, a judgment has to be made as to the extent to which it is necessary for the prevention and detection of crime or the collection of taxes to have these powers. For the reasons that I have already mentioned, I would suggest that there is a pressing need for them.

In the context of data protection, perhaps I may take up the point made by the noble Lord, Lord Higgins--with which I respectfully agree--about the concerns of individuals whose records may be the subject of investigation under the Clause 1 powers. When I was preparing my report, I discussed this matter with one of the principal providers in this territory. I learnt that it is possible, or would be possible, for DSS investigators, for example, to cause inquiries to be made into data knowledge without leaving a footprint. A subsequent inquiry about a particular person by a third party--for example, a supplier of credit to the individual--would not have revealed to him the fact that the DSS had trodden in that territory previously. There is a real prospect of sound protection of the integrity of the position of an individual who may be the subject of an inquiry along these lines. Such inquiries may be made without damaging that person. Undoubtedly it would damage that person if a subsequent provider of credit were to discover that such an investigation had been made.

Perhaps I may next turn to Clauses 6 to 12 of the Bill, which contain the proposal that persons convicted of two benefit offences in the space of three years should be

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disqualified from receiving benefits for a period of 13 weeks. I dealt with this point in paragraphs 7.32 to 7.36 of my report.

My understanding is that this approach is used in some parts of the United States and Canada. The approach adopted in the Bill is consistent with the current rules for jobseekers' allowance, whereby benefit payments can be withheld for a specific period if jobseekers unreasonably cause or prolong their unemployment--for example, if they leave or refuse to take a job without good reasons. The sanction period is between one and 26 weeks under those rules. It is obviously necessary to have safeguards in order to protect the innocent and the vulnerable. We shall, no doubt, examine the details at later stages of the Bill, but there are hardship provisions in the Bill.

The point that I would emphasise is that these disqualification provisions are intended primarily to operate as a deterrent. The hope must be that the legislation will have a full public impact and that would-be wrongdoers will be encouraged into the legitimate economy. The problem is that under the present regime there is no disincentive to re-offend. That is why these provisions are so important.

The third point that I want to highlight is the new proposed procedure that would enable the Secretary of State or, as the case may be, an authority administering housing benefit or council tax benefit to agree a civil penalty with an employer who has, for example, facilitated the commission of a benefit offence by a relevant employee.

The pre-condition for the new procedure is that there are grounds for bringing proceedings against the colluding employer but, by agreement between the parties, an administrative penalty is exacted and there are no criminal proceedings. This is a valuable addition to the investigators' armoury. This machinery is likely to lead to a greater awareness among employers as to the risks they run and, it is to be hoped, an increased respect for the law. The new procedure would bring the point home to employers without the need to invoke the full force of a criminal prosecution. It is also likely to result in cost/benefit efficiencies. I do not accept the points made on this aspect of the matter by the noble Baroness, Lady Noakes, whatever may be the motivation of individual accountants when confronted with complaints about their behaviour. I do not think that we are in that territory. The purpose of this piece of machinery is to impose the quality of the performance and to bring home to people, without the need for full-blown criminal proceedings, that what they are doing is wrongful activity.

In conclusion, perhaps I may mention a point raised by the noble Lord, Lord Higgins, on the question of amnesties. I examined the idea carefully, because I was initially very attracted by it. Indeed, when I was asked by my right honourable friend the Chancellor of the Exchequer to look into the question, he, too, was initially attracted by the thought. I do not think that I am telling any tales out of school.

However, having examined some American research--the idea has been tried in a number of states--I discovered, first, that it was usually

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introduced around election time with a view to securing the right result from electors, there being apparently quite a large number of people who fell into this category, each of whom had a vote--and who may even have had the ability and the strength to press the button hard enough to produce a valid and admissible vote! But also, the impact in America was that this was treated simply as a "free lunch". The expectation was that one amnesty would simply be followed by another. Such a scheme was also rather expensive to administer. So at the end of the day it did not seem an appropriate way forward. There is also some evidence that this approach was tried, and failed, in Italy--but I say that from memory, going back 18 months or so. I certainly examined the idea but did not think it appropriate to recommend it. Indeed, at the end of the day I am fairly strongly opposed to such an idea, but it was given careful consideration.

5.33 p.m.

Baroness Fookes: My Lords, I rise with some diffidence after that masterly exposition by the noble Lord, Lord Grabiner. I noted particularly his vivid example of the restaurateur who was the centre of a web of fraud and deception. But I am concerned to know how the figure of approximately 2 billion of loss--which is obviously a matter of considerable concern--could possibly be arrived at, given that in the nature of things the fraud has been undetected. I presume that there must be some method of so doing. I should be grateful if the Minister could either indicate that in replying or, if there is no time for such a luxury, let me know subsequently.

I rather regret one absence from the Bill, because it is something of a hobby-horse of mine. I refer to the absence of any reference to identity cards. They would be a comparatively simple, easy way of ensuring people's identity. They have a value far beyond anything to do with fraud. If they were extended to everyone, they would have all manner of advantages.

I suspect that the Minister will tell me that this goes far beyond the scope of the Bill. That illustrates perfectly the point made by the noble Earl, Lord Russell, about the disadvantages of single-issue Bills when it is not possible to take wider issues into account. That is also true of the question of preventing loss through error as opposed to fraud. There would be far less error if the social security system were considerably simpler than it is now. Again, the noble Earl's dictum applies; that goes beyond the scope of the Bill. It means that we set out somewhat "hobbled".

Perhaps I may turn to the concern expressed by the noble Baroness, Lady Strange, for war pensioners and war widows. I share that concern, as vice-president of the War Widows Association, of which the noble Baroness is president. I strongly suspect that there will be no way in which the Minister will remove from the Long Title the reference to war pensions. I hope that at the very least there will be considerable delicacy in dealing with these matters.

The pressure that will be put on businesses has been pointed out by several speakers. However, no one has mentioned the issue of small businesses. The pressures

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on them if they are required to provide information will be even greater than it will on big business, which no doubt has the facilities to deal with the matter. It seems to me that likely fraudsters will be employed by small businesses rather than large businesses, because they can pass in and out of employment regularly and simply. I worry about that point in relation to small businesses.

I also note the confident statement in the Explanatory Notes that the Bill will have no impact on charities and voluntary organisations. That seems a somewhat sweeping assertion. I am not sure what the basis for it is, given that many organisations and charities employ people to work professionally for them. I should be interested to know why the statement was made and how confident we can be. Many voluntary organisations and charities work on a shoe-string and may find it difficult to comply without interfering with their genuine, excellent work.

I turn now to the memorandum of the British Bankers' Association. It contains many questions and worries which need to be dealt with. I need not tell the Minister about the devil being in the detail, bearing in mind her responsibility for the Child Support Agency, a brilliant idea which nearly came to grief and caused considerable aggravation because of the way the detail was worked out. I take it seriously when the British Bankers' Association writes to us with its worries. Perhaps I may mention one or two of them.

The association states the importance of having one common channel of approach to the bank from the various organisations such as the Inland Revenue or Customs and Excise, and that the bank should have one particular department or particular people to deal with the matter. It mentions its current, very real worry that even at present some junior bank staff are being approached by authorities such as the Inland Revenue with requests for information. It also presents a security risk in that the wrong information could get out or could get into the wrong hands. The point must be addressed carefully.

The association also raises other questions. Will the provision apply only to personal accounts, or will it be extended to business accounts and single trader accounts? And what about joint accounts? In terms of human rights, that seems to me to be particularly important. If only one of the holders of a joint account is under suspicion, while the other is not, what about the rights of the person who is not under suspicion? Presumably, all the information will have to be given if a proper assessment is to be made of the situation.

Finally, there is the question of electronic banking, which seems to be becoming increasingly important. I am not sure what the position is in relation to the Bill, but I should be grateful if we could be given some indication of what is likely to be an ever-increasing method of banking.

As I say, I have some reservations about the Bill, although no one could quarrel with the intentions behind it. There seems to me to be a number of concerns that I hope we shall consider in more detail during the Committee stage. In the meantime, one cannot but give the Bill a welcome, albeit one tempered by reservations.

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5.40 p.m.

Lord Desai: My Lords, I, too, broadly welcome the Bill because it tries to tackle an important issue. I have lived in this country for 35 years and no year has passed without some government Minister saying, "We must tackle benefit fraud; it is a very serious problem". The number of cases continues to increase. I know exactly how to estimate, though not actually calculate, such numbers. It is not an easy task, but if you have at least some observed fraud you can make an estimate of the unobserved fraud. There are sophisticated techniques in that respect and the people who invented them got the "Nobel prize" in the latest round of economical prizes. I should add that I used to teach these things.

If a certain amount of money is being defrauded it is always a question of knowing the exact number of cases involved. Of course, we have a margin of error around it. However, one way to predict who might cheat is basically to look at what we call "the characteristics"--that is, the personal characteristics of those involved. For example, we may have a sample of people who have cheated which will enable us to classify them in terms of, say, sex, race, occupation, and so on. That is how we can increase the chance of predicting who is likely to cheat. After all, this is information. Incidentally, that is done without any intention of violating any human rights Act. From this information we can assess the probability of someone cheating by considering, for example, whether he is single, the nature of his occupation, or whether or not he is black, as the case may be. Indeed, hundreds of articles have been written on the subject.

That brings me to my major worry about the Bill; namely, the new subsection (2C) to Section 109B of the Social Security Administration Act 1992, as set out in Clause 1. I believe that we are all worried about this subsection. I shall begin with the wording that worries me the most which is to be found in subsection (2C)(c). That paragraph refers to,

    "a person belonging to any description of persons who are more likely than others to fall within paragraph (a) or (b) above".

I know of no way of implementing that provision without using some characteristic profile of that class of persons. When we refer to a class of persons, it is very hard not to start making judgments about Rastafarians, builders, homosexuals--or even fat professors, or whatever!

There is a great danger here. I am sure that people will undertake such assessments with great care, but once consideration is given to,

    "persons who are more likely [to offend] than others",

if they belong to a particular set of persons, that can only be defined by some or other element that will violate Article 14 of the convention on human rights. I am not a lawyer; I am an econometrician. But I believe that people will make such statements without meaning to offend.

I am also worried about paragraphs (a) and (b) of this new subsection, especially where reference is made to a person who "is likely to contravene" or "likely to commit" fraud. Again, this is a matter of forecasting the probability that someone is likely to offend, as

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happened under the football hooligans Bill; and that upset me very much. That legislation gave the police the power to stop someone from travelling, not because he had committed an offence but because he was thought likely to commit an offence abroad. I remember sitting in the Chamber until five o'clock in the morning while we deliberated that Bill. As I say, I was very upset by that provision but, not being a lawyer, there was not very much that I could do about it.

There is a creeping tendency to presume guilt, or to presume the likelihood of committing an offence, before a person has committed an offence. It happened under the football hooligans Bill and it is happening here under this Bill. When we considered the RIP Bill--I always forget what is stands for, though perhaps it was the "repression of internet providers", or whatever--that legislation contained some gross invasions of privacy, which were allowed to stand. It is a worrying tendency.

I know that my noble friend the Minister is a sensitive person and that the Government are equally sensitive. I do not doubt that everyone involved in this is very good. But things happen further down the line. I am especially worried about the leaking of information, whereby matters that are supposed to be confidential are leaked to tabloid newspapers for money. Therefore, even if the intention of the legislation is not to invade people's privacy, we can end up doing so.

Obviously, if someone has contravened or is contravening relevant social security legislation, there is absolutely no problem. Indeed, I have in mind the blood-curdling tales that my noble friend described earlier. I entirely agree with her: those cases relate to evil people and they must be punished. That is not my concern. However, we are dealing with the lower depths of society, as it were, where the criminals and the poor are very hard to distinguish because they are mixed together. It is easy for poorer people to be caught. I am not worried about the fact that race may be an element in this respect, but poor people very often fall foul of the law and are unable to defend themselves.

I am also seriously worried about paragraph (d) of new subsection (2C) which says that someone who,

    "is a member of the family of a person falling within paragraph (a), (b) or (c)",

could be investigated. Because of the way that "the family" is defined so as to include people who are separated--indeed, the case of domestic violence was mentioned whereby a man could shop his wife, whom he has beaten up and who has subsequently left him--we could have considerable problems regarding the likelihood of a gross miscarriage of justice. I put it no stronger.

Those are my main worries about the Bill. On the whole, I believe that it will do its job. However, while doing its job, I believe that it will give the Secretary of State slightly more powers than are strictly necessary. I was heartened when my noble friend told us about the success that the department is having at present at capturing some of the fraudsters without such legislation. I believe that we ought to continue along

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those lines. If this Bill is to be enacted, we really ought to consider most carefully the excessive powers that it is proposed to give to the Secretary of State.

5.48 p.m.

Lord Astor of Hever: My Lords, I welcome the opportunity to wind up the debate for the Opposition after what has been a characteristically well informed debate. We have heard some powerful speeches this afternoon. I agree with my noble friend Lord Higgins and the noble Baroness, Lady Crawley, on the excellence of the report by the noble Lord, Lord Grabiner. Like my noble friend, I found that document very readable. I agree with the noble Lord, Lord Grabiner, that honest citizens are fed up with benefit fraud. We on these Benches are grateful to him for his clarification of his views on amnesties. The noble Baroness, Lady Strange, and my noble friend Lady Fookes both mentioned war widows. I shall return later to that subject.

My noble friend Lady Noakes made a powerful speech. I very much hope that she will pursue her arguments, particularly with regard to the burdens on businesses, at later stages of the Bill.

The Minister told the House that benefit fraud costs taxpayers at least 2 billion per annum and probably more. My noble friend Lord Higgins mentioned an estimate of 7 billion. We all agree that it is far too high. We on these Benches therefore wholeheartedly endorse the principle of tackling benefit fraud in a fair, comprehensive and effective manner.

Where we depart from the Government's approach and, indeed, from major aspects of the Bill, is that their proposals are, yet again, long on rhetoric and short on action. This is, after all, the 43rd, 44th or 45th government announcement on the subject of fraud, yet fraud has got worse. Why will the 45th announcement make any difference? Headline statements are no substitute for genuine reform.

What we need is benefit simplification, not complication, particularly over housing benefit. I have here the 85 regulatory changes to housing benefit dumped on local authorities since May 1997. The Bill does nothing to simplify the complex benefits system. Few DSS officials, excepting, of course, the ones present tonight, understand the system in any detail. According to the Chartered Institute of Taxation, the form for the working families' tax credit is so complicated that fewer than one in 10 tax inspectors are capable of filling it in correctly.

A serious attack on fraud would require not only simplification and more resources, as my noble friend Lord Higgins said, but also restructuring of the benefits system. The CAB is critical that the Bill does not address errors in payment of benefit, or areas where reforms to the benefits system could significantly improve the accuracy of benefit payments.

The Bill contains many subjects which we shall want to scrutinise carefully in Committee and at later stages of the Bill. I shall confine my remarks to three specific areas of concern. These are the impact on business; the human rights aspects of the Bill; and war widows.

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The Bill contains sweeping powers to compel various private sector businesses to share information with both central and local government agencies involved in tackling benefit fraud. Again, the Government continue their tendency to place much of the burden of responsibility on businesses, along with the associated costs.

If relevant information may be obtained securely, without threatening innocent people's privacy and with limited cost to business, we on these Benches welcome that approach. We are concerned, however, that the Government's estimates do not adequately state the situation. In its submission to the Bill, the credit industry fraud avoidance system reported that one High Street bank would require 38 additional staff to handle the labour-intensive production of large volumes of information by DSS staff at a total cost of 14 million per annum. Another bank estimates a requirement for 20 staff.

This concern is, indeed, exacerbated by the total discretion that the Bill gives to the Secretary of State--here I agree with the noble Lord, Lord Desai--on whether costs will be reimbursed at a commercial rate. Can the Minister reassure the House that there has been a meaningful dialogue between the Government and those companies named in the Bill to ensure that the figures anticipated by the Government are credible and agreed by both parties?

Several noble Lords, particularly my noble friend Lady Fookes, mentioned the BBA concerns. As the Bill is currently drafted, any DSS officer, as authorised by the Secretary of State, can approach a bank for information about an individual. This is very different from existing processes. The Government say that there will be a code of practice governing the DSS's actions. The BBA would prefer, particularly as such a code has not yet been drawn up, that safeguards are written on the face of the Bill. It is also concerned about the wide definition of people about whom a DSS officer can require information. This targets groups of people rather than individuals about whom there are real grounds for suspicion. A benefit claimant could be deemed likely to commit a benefit offence, effectively stigmatising an entire group. In our view, bank information should be disclosed only where there are reasonable grounds for suspecting fraud.

The Scottish Law Society is concerned that, if granted, these powers could be used routinely and arbitrarily in circumstances where there is no reasonable suspicion of fraudulent activity or criminal conduct. The noble Earl, Lord Russell, and the noble Lord, Lord Desai, were both concerned that the Bill will allow investigators to investigate people on the basis of their ethnic origin. That concern is shared by Liberty, which points out that the Bill has the potential to be harmful to race relations both because it will allow people to feel that they may be targeted because of their ethnicity and because it will encourage investigators to see ethnicity as a relevant factor in their investigations.

The BBA also argues that banks should be protected against inadvertently disclosing information as a result of inadequate or incorrect identifying data supplied by

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the DSS. The electricity suppliers are concerned at the potential costs and data protection aspects of giving online access to information they hold. Dealing with a huge number of requests for information from both the DSS and local authorities--they expect over 90,000 each year--imposes substantial costs on them. The Bill allows the Secretary of State to make payments to utility companies for the bulk information they provide. The Secretary of State may make payments where he considers that reasonable, but need not do so if he thinks that it is not appropriate. That situation is clearly unsatisfactory.

In practical terms, costs to the electricity suppliers will also be affected by the codes of practice yet to be agreed. It is essential that DSS officers ensure the minimum possible duplication of effort in requests for information both from within the DSS and between the DSS and local authorities.

The telecoms sector alone--this does not include the Internet service providers--expects to receive about 90,000 inquiries each year. The time period during which they store historic data is crucial. Archiving and retrieval costs are very high and the potential threat of the Data Protection and Human Rights Acts is forcing some mobile phone companies to destroy data over six months old.

The loss of that data will have a negative effect on investigations into benefit fraud. It is surely the case that the sheer backlog of work and the time necessary to complete investigations will mean that proposed data will need to be stored for a number of years. Will the Minister tell the House how long the Government believe that the necessary information should be stored?

Furthermore, what dialogue has taken place with the information providers cited in the Bill to meet these requirements? What recompense will the Government make so that they are able to comply with the set-up and ongoing costs of prolonged data warehousing?

The Bill would allow an agency to identify any individual employee as the person to whom it sends a request for information, thus subjecting that person to possible criminal sanctions and a fine of 1,000 plus 40 each day if he or she does not comply. Is that really the Government's intention, particularly if an individual is not in a position to comply?

As regards the telecommunication and ISP companies, to whom do the Government envisage that requests will be made? It will surely speed up and assist the investigatory process if there are certain, named managers to whom requests can be made. We also suggest that there should be a single point of contact--the authorised officer within the DSS or local authority--at a suitably senior level to provide the necessary validation and authorisation of all information requests.

The powers given to benefit fraud inspectors are becoming more and more powerful. If that continues, they will soon have more powers than the police. What concrete provisions will the Government make to ensure that there are stringent safeguards ensuring that

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the required level of training is established and maintained? A quick glance at the Benefit Fraud Inspectorate reveals how under-resourced, under-trained and overburdened are the local authority staff who try to administer benefits. Indeed, the Benefit Fraud Inspectorate annual report said that,

    "in 93 per cent of our inspections we found inadequate staff training".

Among those to whom I have spoken, there is also considerable anxiety that much benefit fraud occurs with the complicity of DSS staff. The survey, Staff Attitudes to Security in the Benefits Agency, revealed the existence of "sleeper rings" where an official joins the agency intending to commit fraud. Once he understands working methods, he defrauds the system with an outside accomplice.

Until the Government can demonstrate that the information they will compel the private sector to provide will be secure, and that the personnel and financial costs will not be excessive, we shall have serious reservations about their approach.

A number of points relate to the human rights aspects of the Bill. The DSS wishes to have extra powers to gain access to various private sector sources. It is, therefore, essential that the Government confirm that the Bill falls within Articles 8 and 14 of the European Convention on Human Rights. The Data Protection Commissioner and Liberty take the view that the Bill does not. Will the Minister confirm that there is no inconsistency? The Data Protection Commissioner has made a number of important observations. Have the Government considered those points, or ignored them?

Having access to highly sensitive personal information, the benefits agencies must ensure that it is used only for the specified purposes of investigation and prosecution. To that end, we regard it as important for there to be a defined code of conduct and stringent guidelines in place for the access and use of information. If those guidelines are breached and data is accidentally or deliberately disclosed, we believe that the perpetrators should be dealt with with the utmost severity.

The Minister mentioned the improper use of information with other countries. Will provisions be put in place to ensure that any misuse of information about UK citizens will result in reciprocity being revoked? Will the DSS ensure that countries with which information is exchanged will have the same regard to human rights and data protection as the UK?

The Minister touched briefly on Scotland. The Scottish Law Society points out that Clauses 13 and 14 appear to have been drafted without taking account of the distinct prosecution system in Scotland. I shall be grateful if the Minister will clarify how the Government envisage the Bill operating in Scotland.

I turn now to the inclusion of war pensions in the Bill. Like the noble Baroness, Lady Strange, I have spoken to the Royal British legion, SSAFA and the War Widows Association. All are concerned and surprised that the Government have yet again made those bodies such a high profile target. The head of the pensions

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department at the Royal British Legion told me that he has never seen a single case that would indicate any form of fraud--not a sniff of it.

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