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House of Lords

Wednesday, 23rd November 1994.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers—Read by

the Lord Bishop of Chelmsford.

Pyramid Selling

Lord Campbell of Croy asked Her Majesty's Government:

    Whether they propose to increase restrictions on those forms of direct selling, involving pyramids or chain letters, which are likely to mislead the public about their effects.

Lord Lucas: My Lords, we shall be consulting soon over changes to the legislation controlling pyramid selling and similar trading schemes. We want to ensure that potential and actual participants in trading schemes are protected from abuses which are peculiar to schemes with a pyramid recruitment structure.

Lord Campbell of Croy: My Lords, I am grateful to my noble friend for that very satisfactory Answer. While members of the public cannot be protected from any foolishness of their own, are the Government concerned to deter the launching of apparently attractive and safe schemes which claim respectability, but which in practice can benefit only a small proportion of those who take part in them while losing money for the others, yet which are not presented as lotteries?

Lord Lucas: My Lords, yes. There is no end to the ingenuity of such criminals, but we have found a remedy for the worst of the current abuses. We have closed the three major funds and are in hot pursuit of the others. However, the law as it stands is clearly inadequate. We need to update it and to consult widely on how it should be updated.

Lord Haskel: My Lords, we are all convinced of the need to protect the public from the perils of pyramid selling and chain letters, but can the Minister tell us whether the Government regret that because it curbs free enterprise or because it means more regulation?

Lord Lucas: My Lords, I do not believe that we regret it one bit.

The Benefits Agency: Administrative Errors

2.38 p.m.

Lord Benson asked Her Majesty's Government:

    Having regard to the report by the National Audit Office that the social security department paid approximately £600 million in error last year, for how many years has this state of affairs existed; and what

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    changes of staff have been made and what other reorganisations are in progress in the department to prevent a recurrence.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish(: My Lords, the value of error represented 4.1 per cent. of expenditure and is a reduction from the 4.8 per cent. of the previous year. Improvement in payment accuracy is a top priority for the Benefits Agency and actions to reduce error include improvements to the computer system and to checking arrangements, extended staff training and a detailed review of all mortgage cases.

Lord Benson: My Lords, am I correct in thinking that the responsibility for that horrible state of affairs rests squarely on the shoulders of the Secretary of State and the accounting officer in the department? Is it not now essential to make changes in both those appointments?

Lord Mackay of Ardbrecknish: My Lords, both my right honourable friend the Secretary of State and the Permanent Secretary at the department are very concerned about the report from the National Audit Office. As I have said, steps are being taken by Michael Bichard, the chief executive of the Benefits Agency, to improve performance. Indeed, the agency has set up a project steering committee to establish the cause of the inaccuracies and to ensure that steps are taken, both along the lines that I have mentioned and others, to reduce the level of inaccuracy and its cost.

Lord Archer of Sandwell: My Lords, since we know from the recent annual report of the chief adjudication officer that in relation to some benefits over 90 per cent. of adjudications attract adverse comment at a later stage, and since a substantial number of them represent not overpayments but underpayments, can the Minister give us any indication of the proportion of mistakes that are rectified at review stage?

Lord Mackay of Ardbrecknish: My Lords, no. I am sorry but I cannot give that answer off the top of my head. I would need notice of such a question. There is no doubt, however, that mistakes cause both overpayment and underpayment. We are concerned about both —on the one hand, from the point of view of the public purse and, on the other hand, from the point of view of the recipient.

Lord Peyton of Yeovil: My Lords, to return to the Question, is not something more than a registration of concern now required?

Lord Mackay of Ardbrecknish: My Lords, I thought that I had made it clear that I have done more than register concern. I have explained what the Benefits Agency has done since the National Audit Office drew this issue to its attention and spelt out to us the number of administrative errors that are made, as opposed to other errors that are made because the clients (either accidentally or deliberately) give Benefits Agency officers the wrong information. I do not want to sound too optimistic about it, but I think that there are some grounds for confidence about improvement. The

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National Audit Office report shows that about two-thirds of such cases occurred in the first half of the year and that only one-third arose in the second half, by which time some of the improvements that I have mentioned had begun to feed through. I am informed that internal preliminary results from the Benefits Agency suggest that that improvement has been continued.

Lord Cledwyn of Penrhos: My Lords, can the Minister say precisely where that £600 million has gone? Can he tell the House who, generally, were the recipients of that money? Does not a responsibility rest with those who were responsible for paying out those moneys?

Lord Mackay of Ardbrecknish: My Lords, the overpayments are received by the claimants, but the errors are made by officials of the Benefits Agency. We should not be in any doubt that income support is a complex system to operate and those operating it do the best that they can. As I have said, through better training and the use of computers, we very much hope to reduce that figure.

Lord Cledwyn of Penrhos: My Lords, is there any record of the claimants who receive those moneys in error then taking the money back?

Lord Mackay of Ardbrecknish: My Lords, if we make an overpayment which is not the administrative fault of the department, we seek to have it repaid. In mortgage cases, in recent months we have recovered some £30 million paid as a result of mistakes in the mortgage payment system which is a complex system to operate. We hope that by the end of the exercise on mortgage payments that figure will have risen to £50 million.

Baroness Hollis of Heigham: My Lords, I am sure that the Minister is right when he says that the system is complex, but does not the problem lie in that? There are about 30 social security benefits. Is he aware that since the 1988 major legislative changes, which were supposed to stabilise social security for a generation, there have been about 10 Bills or major legislative changes to the social security system on average each and every year? Is it surprising that local staff do not have time to digest the detail and that mistakes are made? Is it not therefore understandable, but regrettable, that about 85 per cent. of all child maintenance orders have been found to be wrong and that on appeal over 40 per cent. of DLA assessments have been found to be wrong? Is it not time that the Government gave social security legislation a chance to bed down and for staff to learn its detail?

Lord Mackay of Ardbrecknish: My Lords, the noble Baroness has widened her question considerably from the Benefits Agency and income support to other matters. I shall be happy to discuss them when the appropriate Question is put down. I fully agree with her that the income support system is complex. One of the reasons for that, as she well knows, is that we are trying to do our best to bring help to people in various circumstances. The system will inevitably be complex

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unless of course the noble Baroness wishes to suggest ways to cut some of the devices that we have put in place to improve the system and bring more benefits to people.

Lord Barnett: My Lords, perhaps I may follow the questions put by the noble Lords, Lord Peyton and Lord Benson. Is there any level of error over which the Minister thinks that there should be resignation?

Lord Mackay of Ardbrecknish: My Lords, the errors here have occurred over a wide field. There are 70,000 employees in the system. I know that it makes a nice debating point to say that someone should be sacked, which I think is what the noble Lord is saying, but through the chief executive of the Benefits Agency we have taken some serious steps to attack the problem. I suggest that we await the NAO's report for next year to see whether those improvements have come through, as I suggested that they would.


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