House of Lords - Explanatory Note
Social Security Fraud Bill [H.L.] - continued          House of Lords

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Exchanging Information

Clause 4: Exchange of information with overseas authorities

Background

The current position

59.     People are not entitled to means-tested benefits if they are claiming similar benefits in another country or working abroad. In some cases benefits cannot be paid to people living in other countries. Other countries have similar rules. Some people fraudulently claim benefit in more than one country at a time or use false, borrowed or stolen overseas identities to claim benefit fraudulently in the UK.

60.     Sharing information with another country about people claiming benefit and living abroad could help both countries prevent and detect benefit fraud. Some limited information is already exchanged with other countries under the regulations that co-ordinate social security provision within the EU and under reciprocal agreements for payment of social security benefits with countries outside the EU. However, these do not provide for the exchange of all the information needed to prevent and detect social security fraud and error.

Recent developments

61.     A Memorandum of Understanding between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Ireland concerning co-operation and mutual assistance in the administration of social security programmes (the Memorandum of Understanding) was signed on 9 October 2000. It will enable both countries to improve the administrative efficiency, cost effectiveness and integrity of their social security systems

The measures in the Bill

62.     The measures in the Bill will provide for social security information to be supplied to authorities in other countries that carry out functions relating to social security to facilitate the carrying out of those functions. Information may only be supplied where the Secretary of State is content that arrangements have been made with those countries to exchange information and that the country in question has adequate safeguards in place against the improper use of any information disclosed. As these measures involve international relations, with the agreement of the Northern Ireland Executive, the equivalent powers for the Northern Ireland Department of Social Development to supply social security information to authorities in other countries are provided in this Bill.

COMMENTARY ON CLAUSE 4

Exchange of information with overseas authorities

63.      Clause 4(1) inserts a new section 179A after section 179 of the Social Security Administration Act 1992. Section 179 provides for reciprocal agreements relating to social security with countries outside the UK to be given effect by Order in Council.

64.      The new section 179A provides for the Secretary of State to disclose any relevant information to authorities in countries outside of the UK under agreed arrangements for the exchange of relevant information, where those countries have adequate safeguards against improper use of that information.

65.      New section 179A(1) provides that the provisions of new section 179A to supply information to authorities in countries outside the UK will only apply where:

     (a) it appears to the Secretary of State that there is an arrangement in force between him and the other country for the exchange of relevant information; and

     (b) in the Secretary of State's view, the law and arrangements in the other country provide adequate safeguards against any improper use of information disclosed under this section.

66.      New section 179A(2) provides that the Secretary of State may disclose relevant information where this is necessary to give effect to the arrangements mentioned in section 179A(1)(a). The information must be supplied for the purposes of helping the other country carry out functions relating to anything corresponding to, or in the nature of, social security benefits.

67.      New section 179A(3) provides that the Secretary of State shall be under a duty to take reasonable steps to ensure that any information received under an arrangement mentioned in section 179A(1)(a) is not used for any purpose that is not covered expressly or impliedly in that arrangement. For example, the Memorandum of Understanding with the Government of Ireland contains an agreement that the Secretary of State will not pass information to the security services.

68.      New section 179A(4) provides that this section does not apply where section 179 gives effect to any arrangements.

69.      New section 179A(5) extends the purposes for which the Secretary of State may require information in respect of Housing Benefit and Council Tax Benefit from the authorities administering Housing Benefit or Council Tax Benefit under section 122D of the Social Security Administration Act 1992 or section 116D of the Northern Ireland Administration Act to include disclosure to other countries in accordance with this section.

70.     New section 179A(6) provides a definition of relevant information for the purpose of this section as information held by the Secretary of State or any authorities in a country outside the UK for the purposes of any function relating to a social security benefit or anything corresponding to, or in the nature of, a social security benefit.

71.      Clause 4(2) inserts a new section 155A after section 155 in Part XIII of the Social Security Administration (Northern Ireland) Act 1992. It provides the same measures for the Northern Ireland Department which administers social security benefits as the new section 179A provides for the Secretary of State.

Clause 5: Exchange of information by authorities administering benefit

The measures in the Bill

72.     The clause amends the provisions under which an authority administering Housing Benefit or Council Tax Benefit can be required to provide information to DSS or to another authority.

73.      Section 122D of the Social Security Administration Act 1992 enables the Secretary of State to require an authority administering Housing Benefit or Council Tax Benefit to supply information to him. But, if the Secretary of State wishes to impose requirements relating to the manner and form in which the information is provided he must make regulations under subsection (3). This measure will allow the Secretary of State to specify both the details of the information to be provided and the manner and form in which it is to be provided (and any other requirements) in directions.

74.     Section 122E of the Social Security Administration Act 1992 provides for the exchange of information between authorities administering Housing Benefit or Council Tax Benefit. Subsections (3) and (4) enable the Secretary of State to require information to be supplied by one authority to another. Those subsections have not yet been commenced. However, as subsection (4) mirrors section 122D(3), it is also being amended for the sake of consistency.

COMMENTARY ON CLAUSE 5

Exchange of information by authorities administering benefit

75.      This clause amends sections 122D and 122E of the Social Security Administration Act 1992 by replacing the word "prescribed" with "specified in directions given by the Secretary of State or, as the case may be, the Northern Ireland Department". This means the Secretary of State or the Northern Ireland Department can specify the manner and form in which information is to be supplied under those sections (or any other requirements relating to the supply of information) by way of directions rather than by regulations.      

LOSS OF BENEFIT PROVISIONS

Clauses 6 to 12

Background

76.     The report by Lord Grabiner concluded that the Government should consider introducing new ways to tackle those who are involved in the hidden economy, including a 'two strikes and you're out' approach for people convicted twice of social security benefit fraud.

77.     The report spelt out how Lord Grabiner saw a 'two strikes' sanction working. He indicated that a tough approach for persistent offenders would be to simply deny them benefit altogether as in parts of the United States and Canada. However, any measure of this kind must have safeguards to protect the innocent and the vulnerable. There are already arrangements in place to allow people to claim reduced-rate payments of benefit while they are subject to benefit sanctions provided they can show that they or their dependants would otherwise suffer hardship.

78.     The report concluded that persistent offenders should, in Lord Grabiner's view, not lose their right to benefit in the same way as people who have failed to meet other responsibilities under the social security system. The existing sanctions regime provided a precedent, and many of the details of how such a scheme might work in practice are already established. Furthermore, if the sanction were restricted to a hard core of convicted cheats it could act as a deterrent even if it were infrequently used.

The measures in the Bill

79.     The measures in the Bill provide that certain specified benefits shall be reduced or withdrawn where a person is convicted twice of committing offences in relation to specified benefits within the space of three years. The sanction will be for a fixed period of 13 weeks and will begin after conviction for the second offence where benefit is in payment or, if benefit is not in payment, when entitlement first arises in the three-year period following the second conviction. The decision that the sanction applies will carry with it the right of appeal to an appeal tribunal on a question of fact and law.

80.     The measures will apply to offences involving fraud against all social security benefits and War Pensions with the exception of Statutory Sick Pay, Statutory Maternity Pay, and Maternity Allowance. Tax Credits are also excluded. Offences relating to Retirement Pension, Graduated Retirement Benefit, Disability Living Allowance, Attendance Allowance, Child Benefit, and Guardian's Allowance will activate benefit loss but these benefits will not be subject to sanction by removal of payment. Also exempt as sanctionable "benefits" are Social Fund payments and Christmas bonuses. All other benefits will be withdrawn or reduced as a result of a second conviction.

81.     The intention is that while relevant benefits will be sanctioned, an underlying entitlement will remain to ensure that the link between benefits and other entitlements such as free prescriptions and school meals remain. For recipients of both contributory and income-based Jobseeker's Allowance, the benefit will be withdrawn for the period of the sanction. Jobseeker's Allowance claimants will also have their Housing Benefit and Council Tax Benefit withdrawn during this period. It is intended that regulations under the powers for which this Bill provides will mirror current provisions for hardship payments arising from employment condition sanctions. If a Jobseeker's Allowance claimant falls into a vulnerable group they could apply for hardship payments from the first day of the sanction. The term "vulnerable group" refers to the group of people specified in regulation 140(1) of the Jobseeker's Allowance Regulations 1996. Those who do not fall into a vulnerable group will be eligible to apply for hardship payments from the 15th day of the sanction.

82.     Claimants will retain an underlying entitlement to Jobseeker's Allowance throughout the period of the sanction whether or not they are entitled to hardship payments, ensuring that the "passporting" to Housing Benefit and Council Tax Benefit is maintained. If hardship is established under the regulations, and the claimant satisfies the other conditions of entitlement, they will be awarded a reduced payment of income-based Jobseeker's Allowance. The rate of reduction will be prescribed in regulations, but the intention is that the reduction will normally be 40 per cent of the single person's allowance, although where someone in the family is seriously ill or pregnant, the reduction will be 20 per cent.

83.     Joint-claim Jobseeker's Allowance is dealt with in a different manner. Joint- claim Jobseeker's Allowance was introduced by section 59 of, and Schedule 7 to, the Welfare Reform and Pensions Act 1999. These provisions are to be commenced on 19 March 2001. The requirement to make a joint claim for Jobseeker's Allowance will impact on couples without children where one or both of the partners is in the 18-24 years age range on the date when the measure is introduced. Coverage will apply to those born on or after a certain date, so older couples without children will be included as time passes. Under joint claims, both members of the couple will have to claim Jobseeker's Allowance and both will have to meet Jobseeker's Allowance labour market conditions.

84.     It is intended to prescribe in regulations that in cases where couples without dependants are in receipt of joint-claim Jobseeker's Allowance, and one member of the couple is subject to the sanction, the non-convicted member will continue to receive the equivalent of the rate of Jobseeker's Allowance which is applicable to a single person during the period of the sanction.

85.     For Income Support claimants the effect of the sanction will be to reduce the amount of benefit in payment, rather than withdraw the benefit in its entirety. It is intended that the effect of this measure will be to reduce benefits in line with the calculation of Jobseeker's Allowance payments i.e. by 40 per cent of the single person's allowance, or 20 pert cent where a member of the family is pregnant or seriously ill. The reduction will always leave a minimum of 10p Income Support in payment to enable Housing Benefit and Council Tax Benefit as well as other "passported" benefit entitlements to remain.

86.     Where the sanctioned benefit is neither Income Support nor income-based Jobseeker's Allowance, a claimant may claim such benefits under normal rules. Such benefits will be subject to sanctions but the claimant may still be entitled to payments of these benefits under the hardship regime. Entitlement to a hardship payment will also provide entitlement to Housing Benefit and Council Tax Benefit (even where these have been sanctioned).

87.     In any case where a claimant is neither eligible for Income Support nor income-based Jobseeker's Allowance under normal rules (e.g. if their income, capital or hours worked excludes them from these benefits), it is intended to prescribe in regulations that Housing Benefit and Council Tax Benefit entitlement will be reduced by a specified amount similar to that used in Income Support cases. This would be by 20 per cent of the Income Support personal allowance where a member of the family is pregnant or seriously ill and 40 per cent in all other cases. The decision whether to award hardship payments and the amount of the award will in all cases each carry the right of appeal to an appeal tribunal on a question of fact and law.

88. To prevent cases where a couple attempt to avoid the sanction by swapping which of them makes the claim, regulations will enable the Secretary of State to reduce the amount of benefit paid to the partner or any dependent of the "offender" by a specified amount for the duration of the sanction.

89.     The provisions for members of an offender's family only apply when one of the specified income-related benefits is to be sanctioned - Income Support, income-based Jobseeker's Allowance, Housing Benefit and Council Tax Benefit as these are the only benefits where it is possible for a couple to choose which of them makes the claim.

90.     With Jobseeker's Allowance, the effect of the sanction, as prescribed in regulations, would be to reduce the level of Jobseeker's Allowance by removing the element of personal allowance paid in respect of the offender. The partner may receive any allowances and premiums in respect of themselves and their dependants. Hardship provisions similar to those which currently apply with joint-claim Jobseeker's Allowance will also be put in place to protect families in vulnerable circumstances.

91.     There will be a number of occasions when a claimant will have deductions taken from their benefit to pay for items such as fuel arrears, court fines, and Social Fund loans. Under current arrangements, a claimant has to agree with the Secretary of State which payments to third parties should remain 'deductible' during a period of sanction. There will be times when it is either in the claimant's best interests to continue third party payments (i.e. where money is being deducted to pay for essential fuel costs), or where it is in an innocent third party's interest to have the payments maintained (i.e. child maintenance deductions introduced by the Child Support, Pensions and Social Security Act 2000). The provisions will allow a certain amount of flexibility to the current system and the powers in clause 9(2) allow the Secretary of State to prescribe in regulations which circumstances this may apply to.

COMMENTARY ON CLAUSES 6 TO 12

Clause 6: Loss of benefit for commission of benefit offences

92.      This clause contains provisions to remove or reduce benefit from offenders who have been convicted twice of benefit fraud within a period of three years.

93.      Subsection (1) provides for benefit to be reduced or withdrawn where an offender is convicted on more than one occasion of specified benefit offences. Benefit withdrawal or reduction is triggered when an offender is convicted of one or more benefit offences in each of two separate sets of proceedings. The offence for which the second set of proceedings has been brought must occur within a period of three years of the date on which the offender was convicted for the first offence. Where this happens the offender will have all sanctionable benefits in payment withdrawn or reduced for the period of the sanction.

94.      Subsection (2) introduces a "disqualification period", which is the time for which the benefit will be reduced or withdrawn. Subsection (6) further prescribes the period as beginning at a prescribed time after conviction for the second offence.

95.      Subsection (3) provides for Income Support to be paid at a reduced rate for the prescribed period rather than withdrawn completely. Details of the reduction will be prescribed in regulations. The broad intention is that the reduction will be similar to that which will apply in Jobseeker's Allowance cases where hardship is established.

96.      Subsection (4) enables regulations to be made to provide that Jobseeker's Allowance claimants may be eligible for a reduced rate of benefit during the prescribed period providing they satisfy certain conditions. The intention is that these conditions will be similar to the hardship provisions that currently apply with Jobseeker's Allowance.

97.      Subsection (5) enables regulations to be made to provide that Housing Benefit and Council Tax Benefit claimants will be eligible for a reduced rate of benefit during all or part of any disqualifying period. The intention is that a person entitled to Housing Benefit or Council Tax Benefit who becomes subject to sanction under the new clauses should, if any Income Support or Jobseeker's Allowance remains payable under subsections (3) and (4), remain entitled to full Housing Benefit and Council Tax Benefit. Where these benefits are not payable, the Housing Benefit and Council Tax Benefit entitlement will be reduced by a sum specified in regulations.

98.      Subsection (6) provides that where an offender has been convicted twice of benefit fraud within the period specified within subsection (1), the sanction will be a period of 13 weeks commencing at the prescribed time after conviction for the second offence.

99.      Subsection (7) provides that in the event if a successful appeal against either of the convictions that resulted in the imposition of a sanction, then all payments that would have been made but for the sanction are to be made as if no restriction had been imposed.

100.      Subsection (8) sets out definitions of the terms used within this provision.

101.     Subsection (9) provides further definition of the meaning of conviction as used within this provision.

102.      Subsection (10) provides that the sanction shall not take effect under this clause where it has already taken effect for the same convictions under the equivalent Northern Ireland legislation. It also allows a sanction to be imposed where a previous sanction took effect for a period within the same disqualifying period (e.g. where it has taken effect for part of that period in relation to a relative under clause 8 and then takes effect in relation to the offender himself for the rest of the period).

103.      Subsection (11) provides that for the extent that the clause applies in Northern Ireland, the only sanctionable benefit that this clause will apply to is a War Pension.

Clause 7: Effect of offence on joint-claim Jobseeker's Allowance

104.      This clause sets out how the fraud sanction provisions will apply to joint-claim Jobseeker's Allowance as introduced by section 59 of, and Schedule 7 to, the Welfare Reform and Pensions Act 1999. These provisions are to be commenced on 19 March 2001.

105.      Subsection (1) provides for the provisions of subsections (2) and (3) to apply where a joint-claim couple are entitled, or become entitled to joint-claim Jobseeker's Allowance and the fraud sanction is applicable to at least one of the couple.

106.      Subsection (2) provides that no joint claim Jobseeker's Allowance will be payable where both members of the couple are subject to a fraud sanction, or where one member is subject to a fraud sanction and the other is already subject to a sanction pursuant to section 20A of the Jobseeker's Act 1995, or to a community sentence sanction as detailed in subsection (2) of section 62 of the Child Support, Pensions and Social Security Act 2000.

107.      Subsection (3) provides that where only one member of a couple is subject to a fraud sanction and the other member is not subject to any sanction, the amount of Jobseeker's Allowance payable will be reduced to an amount calculated in a prescribed way and will be paid to the other member of the couple who is not subject to the sanction.

108.     Subsection (4) provides for hardship payments to be made in cases where both members of a joint-claim couple for Jobseeker's Allowance are subject to a fraud sanction, or where one member is subject to a fraud sanction and the other is sanctioned for employment-related reasons imposed under section 19 of the Jobseeker's Act 1995, or the restriction introduced in subsection (2) of section 62 of the Child Support, Pensions and Social Security Act 2000.

109.     Subsection (5) prescribes that the reduced amount payable, referred to in subsection (3), will be calculated in the same way as prescribed in section 20A of the Jobseeker's Act 1995.

110.     Subsection (6) provides that in the event if a successful appeal against either of the convictions that resulted in the imposition of a sanction, then all payments that would have been made but for the sanction are to be made as if no restriction had been imposed.

Clause 8: Effect of offence on benefits for members of offender's family

111.      This clause allows the Secretary of State to prescribe in regulations that certain benefits shall be lost or reduced where a member of an offender's family claims benefit in respect of the offender during the period of disqualification.

112.      Subsection (1) prescribes the income-related benefits to which the clause relates.

113.      Subsection (2) prescribes the cases in respect of which such regulations may be made under this clause. These are cases where a member of the offender's family becomes entitled to, and would be paid, one of the benefits listed in subsection (1) during the disqualification period and entitlement to, or the amount of that benefit, is determined by reference to the offender.

114.      Subsection (3), as in clause 6(3), prescribes that where the offender's family member is entitled to Income Support, regulations may be made reducing his applicable amount in the prescribed manner. The intention is that the reduction will be similar to that which will apply in Jobseeker's Allowance cases where hardship is established.

115.      Subsection (4) prescribes that where the offender's family member is entitled to Jobseeker's Allowance, regulations may be made reducing the rate of the allowance providing that it shall only be payable on compliance with certain obligations or the provision of certain information. The broad intent is that the partner may receive any allowances in respect of themselves and their dependants but any personal allowance payable for the offender will be withdrawn during the prescribed period.

116.      Subsection (5), as in clause 6(5), prescribes that where the offender's family member is entitled to Housing Benefit or Council Tax Benefit, regulations may be made reducing the rate of the benefit and providing that benefit shall only be payable in prescribed circumstances. The intention is that where an underlying entitlement to Jobseeker's Allowance or Income Support remains, either for the offender, partner or any dependants, full Housing Benefit or Council Tax Benefit will remain payable. Where these benefits are not payable, the Housing Benefit or Council Tax Benefit entitlement will be reduced by a sum specified in regulations.

117.      Subsection (6) provides that in the event if a successful appeal against either of the convictions that resulted in the imposition of a sanction, then all payments that would have been made but for the sanction are to be made.

Clause 9: Power to supplement and mitigate loss of benefit provisions

118.      This clause contains definitions and further regulation-making powers enabling the scheme of benefit offence sanctions to be modified.

119.     Subsection (1) allows the Secretary of State to prescribe in regulations for further social security benefits to be included as disqualifying benefits, or for disqualifying benefits to be included as sanctionable benefits. It also provides the power to include by regulations benefits as disqualifying but not sanctionable, or to exclude benefits from the scheme altogether by specifying them as neither disqualifying nor sanctionable benefits. It is intended to provide the Secretary of State with the flexibility to increase or reduce the scope of the scheme where it is appropriate to do so.

120.      Subsection (2) allows the Secretary of State to prescribe regulations for certain parts of a claimant's benefit to be exempted from restriction, where that part is already being deducted from benefit and paid to a third party. For example, the Child Support reforms brought in under the Child Support, Pensions and Social Security Act 2000 introduced compulsory deductions from the benefits of absent parents. These are then passed on to the parent with care. In circumstances such as these the intention is that benefit payment is withdrawn or reduced apart from amounts subject to the amount of compulsory maintenance deductions which are to be paid over to the parents with care in the normal way.

121.      Subsection (3) sets out definitions of the terms used within this provision.

122.      As these provisions only apply to Northern Ireland subsection (4) prohibits any of the powers in this section from being used to make any other benefits apart from War Pensions sanctionable for Northern Ireland purposes.

 
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Prepared: 19 December 2000