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Baroness Hollis of Heigham: Obviously, if I mislead the noble Lord I shall write to him. I understand that the Inland Revenue can routinely require information from banks about interest earned by a customer's bank account. That information is required by the Inland Revenue in calculating the sums due.
Lord Higgins: Is that only in regard to the interest?
Lord Grabiner: Perhaps I may assist my noble friend and the noble Lord. My understanding--I suspect that the noble Baroness, Lady Noakes, knows more about this than all of us put together--is that any interest
earned on any account in excess of £15 a year is information to which the Inland Revenue is entitled by statute without the leave of any court.
Baroness Hollis of Heigham: I also understand that the Inland Revenue can require information about a landlord's properties and tenancies if he earns income from them.
Lord Higgins: I believe that that is the case as far as concerns interest. However, that is rather different from obtaining a copy of an individual's bank statement.
Baroness Hollis of Heigham: With the greatest respect, unless it is a particular kind of account one can work it out.
The Deputy Chairman of Committees (Baroness Nicol): I remind the Committee that the amendment has not yet been moved.
Lord Higgins: I am grateful to the noble Baroness. We must clarify the situation. I do not believe that the position is as clear as the noble Baroness supposes. Otherwise, I do not see why, if these investigations are on all fours, a judge or general commissioner is required to give approval in the case of suspected tax fraud but not in the case of social security fraud. The two matters are not so different that it is inappropriate to say that the same level of restraint should be imposed. The question that arises is why information about those who are said to be guilty of social security fraud should be freely available but the obtaining of information about those who are involved in what may be a more serious tax fraud must be subject to the judicial process that I have just outlined. No doubt the noble Baroness will write to us in her usual courteous manner if that is not the case.
As I understand it, there will be a considerable number of investigating officers in the 14 departmental areas. I also understand that 409 local authorities concerned with housing benefit will be required to obtain information if the Bill is enacted. Since it is understood that there will be a large number of routine investigations considerable costs will be imposed on the banking community, not only as far as concerns the customer but, in the context of a later debate, his or her family or relatives. The banks have expressed considerable concern in relation to their professional duty of confidentiality.
The banks are also concerned, in the context of related amendments, that they may give false information, If fraudsters have given false information to the department they may well also give false information to the bank. The question is: to what extent are the banks responsible for the validity (if that is the right word) of the information that they are asked to provide? In particular, the banks are concerned that they are themselves subject to fraud on a significant scale in relation to credit cards and
banking generally. The question posed is: to what extent are they responsible for the accuracy of such information?A related question is the electronic communication of information from banks to the department. There is a worry that because of the convenience of obtaining information electronically--some of those involved with the Internet share the concern--it may be that its scope is broader than that which is necessary to carry out the investigation. In this context the question arises whether, if this is carried out by means of electronic communication, there will be an audit trail of the extent to which the investigation carried out by a particular officer has been authorised. My understanding is that it is the intention of the Government that in the case of a specific investigation by an officer there should be an audit trail to enable the department to ensure ex post, as opposed to ex ante, that it has been justified.
I hope that the noble Baroness will be able to reassure us on these points. There are other reactions from the banking association with regard to remarks made at Second Reading, but I do not believe that they are relevant to this particular amendment. I beg to move.
5.30 p.m.
Baroness Crawley: Amendments Nos. 2 and 3 seek to remove banks and building societies from the list of organisations required to provide information. If we start from the proposition that most of the fraud we are talking about today stems from the hiding of income, assets or capital, the consequences of this group of amendments will severely restrict the effectiveness of the campaign that I am sure Members of the Committee are signed up to, which is to tackle the £2 billion fraud bill that the British taxpayer is landed with each year.
As my noble friend Lord Grabiner pointed out in his report, information from banks and loan companies is already required by the DSS, but--and it is a very big "but"--that happens only if the claimant admits to having a bank account in the first place. Staff at the bank are then entitled to call for bank statements to check for any savings or signs of regular payments from a job or whatever financial pattern is relevant. However, if the claimant withholds that information at the start, there is at present no way that the Benefits Agency can know that the account exists.
The Bill allows for information already held to be obtained from banks and other loan and credit companies without the reliance on the claimant's willingness or otherwise to divulge the full picture of his or her financial circumstances. That seems to me, as someone who is not a lawyer, to make a good deal of sense. We should look at the issue from the point of view of enabling the banks and loan companies to have the most effective route of tackling the enormous £2 billion and more annual fraud bill. I support the effective route put forward by the Bill because it is done in the context of a limited kind of inquiry, with many safeguards built into it, that focuses only on the situation of the claim itself.
The noble Lord, Lord Higgins, said that the banks are very concerned about the Bill. They have written to all of us involved in the Bill. But they have also--I am sure the noble Lord, Lord Higgins, will agree with me--stated in their letters to us that they are willing to work with the DSS to tackle the enormous problem of fraud. So it is important that we say also that the banks have been positive in their response to the Bill.
Earl Russell: Before the noble Baroness sits down, without wishing to dispute any of her argument, can she confirm that the figures for the total amount of fraud are estimates rather than facts?
Baroness Crawley: Yes. I confirm that we talk about £2 billion as an estimate, but it is probably far more than that.
Baroness Hollis of Heigham: I am not entirely sure whether that was the point the noble Earl was seeking to establish. I am happy to confirm my noble friend's statement.
The purpose of Clause 1 is to enable the DSS and local authorities administering housing benefit and council tax benefit to check information with independent sources where claimants are suspected of hiding their true circumstances; although of course if all claimants told the truth these provisions would never be necessary. It is precisely because those who have something to hide--hide because they lie--that we need information beyond that which the claimant is willing voluntarily to give us. That is the core of the Bill. It presumes, I suppose, a dose of original sin in those who are fraudulently cheating the system.
The effect of the amendments would be to prevent the DSS and local authorities from obtaining that information we need most from the organisations that are most likely to hold it. The amendments remove banks, building societies, credit unions, organisations that accept deposits of money and organisations whose whole business, or a significant part of it, consists in the provision of secured or unsecured credit, from the proposed list of persons from whom information may be required. They also prevent the authorised officers from obtaining information from organisations whose whole business, or a significant part of it, consists in the provision of secured or unsecured credit.
To amplify the point made by my noble friend, of the £840 million we estimate that the DSS lost last year through fraud in income support and JSA alone, £400 million of that--nearly half a billion pounds--was due to people lying about their earnings, other income, and capital. Other than from the claimant himself, who of course has a vested interest in lying about the matter, how do Members of the Committee propose to help the DSS to find out what the truth is about people's earnings, their other income and capital? Those who propose these amendments, if they accept the broad-brush policy of seeking to nail down fraud and then remove the major source of information from which we can obtain the evidence that someone is committing fraud, have a moral responsibility to tell the
Committee how that information can be obtained. I have heard not a word today of where that will come from. If not the banks and building societies, who will tell us what that person's capital, other income and earnings are?I could go on to talk about the organisations; I shall not. But our definition would enable authorised officers to make inquiries of a full range of organisations, including hire purchase, credit card and cheque-cashing shops. The definition of "organisations listed" would not cover organisations where the provision of credit was not a significant part of their business. I was not pressed on this matter by your Lordships, but it is right to put it on the record. For example, we would not be approaching local shops providing credit to loyal customers or companies that provided season ticket loans. That would be, in the words of the noble Earl on a previous amendment, a step far too far.
Perhaps I may give the noble Lord, Lord Higgins, an assurance that if a bank gave us unknowingly incorrect information on what its responsibility might be in that situation--again I am happy to put it on the record--the bank would not be in any difficulty with the DSS obviously, or the Government, if it complied in good faith with a request made under these powers. It would not be the bank's fault if the customer had lied to it, as seems quite possible.
Members of the Committee may also like some reassurances as to the type of information that we would not require. We only want information that is directly relevant to the circumstances of a benefit claim. So we would not want, for example, any information pertaining to medical history unless it was a medically-based benefit, such as one relating to a disability.
Perhaps I may give an example, as that may help to clarify our thinking on this point. A woman could allege that her ex-partner had been claiming benefit while self-employed for many years. She has no evidence of this income, but we have no reason not to believe that she is giving us this information in good faith, as opposed to malice or whatever. She does know that he has several hire purchase agreements and a credit card. After all, if he was self-employed she might well have done his books for many years. An authorised officer under the Bill could check with the hire purchase and credit card company to find out what income, capital or assets had been declared in the applications for credit, and thereby obtain evidence of the fraud.
If we lost that provision, we would lose a crucial and pivotal source of information. Worse, we could be encouraging a greater use of other services to evade detection. For example, benefit cheats might use a cheque-cashing shop rather than deposit cheques in a bank.
For all these reasons, if a claimant lies--we must presume that someone committing fraud is lying--the only way we can find the correct information is by asking the organisations that the amendment excludes. If Members of the Committee can suggest any other
way to deal with the points of other income, other earnings or capital, I should be glad to hear it. But if they do not and are insistent on the amendment, they are suggesting to the taxpayer that the taxpayer should be happy to continue to subsidise at least £500 million worth of fraud per year, because they are denying the investigators the powers that they need. I hope the Committee will not pursue the amendment.
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