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Baroness Hollis of Heigham: My Lords, I wonder whether it would help the noble Baroness if I told her that the Federation of Small Businesses stands behind these proposals. The notion that we are taking blackmail money so that businesses can avoid court cases ought not to be proposed in this way.
Baroness Noakes: My Lords, I shall leave the point. All that I am saying is that there should be included within the legislation a counterbalance to ensure that the scales are not automatically tipped against business; otherwise this provision has the potential to be used as a severe power against small businessmen who have relatively few resources with which to defend themselves.
Tackling fraud and error in the administration of public finances is a positive duty of all governments. We should not resist sensible measures designed to make that task more effective. I look forward to discussing the Bill in more detail in Committee and I hope that the Government will ensure that their understandable desire to eliminate fraud will not result in an undesirable increase in burdens on business.
Lord Grabiner: My Lords, the purpose of the Bill is to introduce powers which would significantly improve the ability of the relevant departments of government to tackle benefit fraud and error. There are good grounds for believing that the amounts of money involved are substantial and that the increased powers which are proposed would, in a balanced way, have the effect of deterring fraudulent behaviour, while at the same time enhancing the detection rates for both fraud and error.
I should like to address three particular aspects of the Bill. However, before doing so I should like to mention a real life example which I came across when preparing my report for my right honourable friend the Chancellor of the Exchequer. My understanding is that this is a typical example. It illustrates some of the problems at which the Bill is directed. Furthermore, I think that the example will assist noble Lords in the process of developing a feel for the practical application of this proposed legislation.
What happened was this. DSS investigators began a surveillance exercise in relation to an individual whom they suspected of working and fraudulently claiming benefit. At around six o'clock in the evening, they
When challenged, the employer had the effrontery to show the investigators a software program on his office computer system which purported to confirm that all the people who worked for him were his employees and that he was properly accounting for PAYE and NICs to the Inland Revenue. The software was pure fabrication and had been designed to satisfy the possibility of a very cursory inquiry.
In my opinion, these facts reveal a shocking state of affairs. Here we have an employer who is obviously not disclosing his full profits, which means that corporation tax or business revenue tax is lost. VAT is lost. The VAT point is especially unattractive because it will have been collected by the employer through the food bills paid by his customers, but the proper amounts never reached Customs and Excise.
The employees were working and claiming benefit, which is simply fraudulent. The employees were also being exploited. They fell through the basic floor of rights provided by our employment protection legislation, which is designed to give them all the advantages which are associated with lawful employment, including the right to redundancy benefits, the right not to be unfairly dismissed, the minimum wage legislation and a whole host of other elements. In addition, no national insurance contributions were being made in respect of these people.
I was surprised to discover that the penalty imposed on the employer was a paltry fine of £750. That is not because the sentencing court made a hash of it. It is because the employer, who pleaded guilty, was charged only with a single, sample offence of making a false statement to DSS officials.
A few points can be made about this example. First, the employer was at the centre of the web. Without the collusive employer, this type of case could not happen. Secondly, the activities have a cross-departmental impact. The facts would be of interest to the Treasury, Customs and Excise, the DfEE, including the Employment Service, the DSS and the Benefits Agency, the Inland Revenue and the Home Office. It brings out the importance of ensuring, so far as is possible, that this problem is examined at a focal point at the departmental end of the story, otherwise it may fall between departments. It also emphasises the need to share information, which is an important part of the record-keeping and detection process.
Thirdly, I believe that this example--there are plenty more--should give rise to concern in all parts of the House. I believe that every noble Lord who has spoken so far has been in agreement on this point. It seems to me that this is not at all a party political issue, but rather that honest citizens are rightly fed up with fraudsters and fiddlers who get a free ride and, for the most part, are perceived to be getting away with it.
Fourthly, it is also a matter of great concern that many people and their dependent families who get into this murky world find themselves unable to obtain regular, lawful employment simply because they are not able to provide any employment track record to a potential genuine employer.
I should now like to say a few words about three aspects of the Bill; namely, the proposal to increase the powers of obtaining and sharing information, the proposal to disqualify for a period of 13 weeks persons convicted of two benefits offences in the space of three years and the separate proposal to introduce an administrative penalty as an alternative to criminal prosecution.
As regards the first point, Clause 1 of the Bill would give increased powers to obtain information from the private sector, such as banks and credit card companies about particular individuals. The fraudulent activity at which the Bill is aimed necessarily involves someone telling a lie; for example, as regards whether they have a job, whether they have savings, whether they have a partner who is working, where they live, who they are or whether they are in education.
These proposed powers are designed to enable fraud investigators to get to the truth. They will provide an independent method of checking or verifying the facts which have already been provided by the claimant. This type of legislation must obviously comply with the requirements of the Human Rights Act. In particular, the new powers must be compatible with Article 8 of the convention. This is always a question of balance, fairness and common sense. Every citizen has the right to respect for his private and family life, his home and his correspondence. The convention does, however, permit that right to be interfered with in an appropriate case.
In order to be justified, Article 8 requires that the interference must be in accordance with the law. It must also be necessary in the sense that it is the minimum interference necessary having regard to the economic well-being of the country, or the need to prevent crime, or the protection of the rights and freedoms of others. I have, in effect, summarised the provisions of the second paragraph of Article 8.
The legal basis for the interference would, of course, be the Bill, if and when it becomes law. It seems to me that all of the other justifications to which I have referred apply here. My noble friend the Minister has given a number of real life examples, in addition to the one that I have mentioned, which emphasise the seriousness of these matters and the need for this legislation. The Bill contains provisions which will, I believe, ensure fair play and make a reasonable balance
First, these new powers are to be conferred only on an authorised officer, which means a DSS fraud investigator acting with the authority of the Secretary of State. Secondly, information about specific individuals can be sought only where there are reasonable grounds for believing any of the matters which are specified in subsection (2C) on page 2 of the Bill. The noble Earl, Lord Russell, adverted to those provisions in his speech.
The expression "reasonable grounds for believing" is a well-established formula. It means that suspicious or discriminatory motives, such as sex, race, colour, language, religion and all the other matters listed in Article 14 of the European Convention on Human Rights, could never justify the use of these powers.
In regard to that issue, I should like to pick up the point made by the noble Lord, Lord Higgins. He told the House that the British Bankers Association had expressed concern that the provisions may be used for the purpose of fishing expeditions. If they were so used, that would be entirely inappropriate and unlawful.
We shall obviously be studying the detail at later stages of the Bill, but it is worth making reference to the ground given in paragraph (c)--the provision specifically referred to by the noble Earl--which concerns a person belonging to any description of persons who are more likely than others to fall within the earlier paragraphs (a) or (b).
The pressure group Liberty, in its Second Reading briefing paper, has expressed some concern about this provision. Perhaps I may say that I do not, with respect, accept Liberty's substantive criticism, which is that this provision would be used in a way which is inconsistent with Article 14. For the reasons that I have already given, I do not believe that there is any justification for this expressed concern.