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Baroness Hollis of Heigham: My Lords, they are not the same people.

Lord Higgins: My Lords, in that case, I am now completely confused, as will be anyone who reads the code of practice. We need to be clear about whether decision makers are separate from the other individuals to whom I have referred.

It might also be helpful at this stage, in preparation for the Bill's imminent translation to another place, to be told a little more precisely how the Bill is to operate. We understand that the fraud investigator will carry out an initial inquiry and then, provided that he has convinced himself under the terms set out in paragraph 3.6 that the inquiries he proposes to make are "legitimate and necessary", he will then approach the authorised officer and state, "Now I should like you to obtain for me the information from the banks, the credit rating offices and so forth". However, the decision on whether to pursue that course rests solely with the authorised officer. It does not rest with the investigating inspector, under any of his pseudonyms.

Baroness Hollis of Heigham: My Lords, we do not have an investigating inspector.

Lord Higgins: My Lords, if the noble Baroness looks through our earlier deliberations in Hansard, she may find references to that title. Can the noble Baroness outline briefly the process here, in particular in the light of the points made in our previous debate as regards the level of competence at which different functions are to be carried out?

Having made those points, I acknowledge that it has been helpful to have seen the first part of the draft code. We look forward to seeing the remainder in due

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course. I imagine that we shall then have an opportunity to consider it further if the Bill comes back to us. I beg to move.

4.15 p.m.

Earl Russell: My Lords, the Minister will be aware that the Local Government Association has expressed concern about this matter which I think may be appropriately repeated in this House. Yesterday, local authorities were not particularly conspicuous among the recipients of something that might be described as a little smaller than "largesse". One might refer to it as "medium-sizedess".

Local authorities have experienced a bad 15 to 20 years and are now under considerable financial pressure. The Local Government Association has said that:

    "Any additional cost of administration should, however, be borne by national not local government as it is central government that will gain from the reduction in social security expenditure (estimated at between £200m and £400m per annum)".

Prima facie, that sounds like a fair point. I am sure that the Minister will say that a certain amount of additional money has been made available in line with inflation. However, she will be equally aware that a number of other tasks, which add considerably to the daily work of local authority housing benefit departments, have come in at the same time. Most notable among those are: the verification framework, which provides a much more backbreaking burden of work for local authority housing benefit departments; the change in housing benefit to payments in arrears; the single room rent; the local reference rent and a good deal more. All these changes have made the conditions covering benefit entitlement rather more onerous.

To add to this a further burden of work which will fall on local authorities and to expect them to pay for it, in a situation where, unlike a private business, they cannot increase their own prices or turnover and where they operate subject to fairly strict central government control, might, at the receiving end, look a little like a vice.

I hope that the Minister might take account of this situation and, before we go into local elections, that she will think about providing us with local authorities which are a bit more financially viable than some of them, in London and elsewhere, are at the moment.

Baroness Hollis of Heigham: My Lords, I do not think that I need to say much in terms of explaining how the code of practice will operate because the noble Lord, Lord Higgins, has clarified his position on this and he is right. It is precisely because we want the training and powers of authorised officials, whether in the DSS or local authorities, and the way that they exercise those powers to be absolutely the same and to common standards that we are going for a common code of practice. This has the support of the Local Authority Association. Its view is that where DSS and local authority staff are governed by the same powers,

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it would prefer them to be governed by the same code. It supports us in drafting one code to cover both the DSS and local authorities.

The noble Lord is absolutely right in his understanding of how this system will operate. It is not yet in the draft because we are still in continuous negotiations with those bodies. The draft which embodies their views and how it will reflect on local authorities will be available, I fear, not at Second Reading but at Committee stage in the other place. None the less, it will be available in good enough time.

As to the second question of the noble Lord, Lord Higgins, as regards language, I take his point. Indeed, our officials have taken his point and they will be going through the code to clarify the language and to ensure that we do not scatter words around. The noble Lord is right, for example, that "fraud investigators" and "fraud specialists" are the same people.

Perhaps I may explain how the system will operate. As in the DSS, there are in local authorities specialist fraud teams which carry out the day-to-day work of checking whether a person is living at the address from which he or she is claiming housing benefit--that is now current practice within local authorities--in the same way that we make approximately 500,000 visits every year to check on the validity of income support and JSA claims and so on. These are the fraud investigators or the fraud specialists; we need a common language.

However, in order to obtain information beyond that which they are normally empowered to gather, under the additional information powers in the Bill they will have to have authorisation from authorised officers, as the noble Lord rightly identified. Those authorised officers, in turn, are managed by the managers of the regional intelligence units in which they are grouped, who will be HEOs, SEOs or more senior.

The decision makers are those people who make the determination of benefit following this information. It is extremely important that, as with the Inland Revenue, you have a Chinese wall between the people making inquiries, the fraud investigators and so on, on the ground--and, indeed, even the authorised officials who authorise the right to pursue certain kinds of information--and the decision makers who will determine whether a benefit is to be altered or continued following receipt of the information. This is a crucial piece of independence throughout the social security system. That is their function.

The noble Earl, Lord Russell, raised a third point. He will forgive me if I do not respond to his bait for a general debate on the local authority financial settlement as reflected in the Budget during the consideration of an amendment on a code of practice at Third Reading.

As the noble Earl will know, local authorities will have a settlement in line with inflation in terms of housing benefits management. They will also, of course, be enjoying a reduced caseload. They will receive an increase of 2.5 per cent to handle a reduced caseload. In that sense, there should be an

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improvement in real terms in their situation. I am sure that many local authorities will not consider this adequate, but that, I am afraid, is part of an on-going debate between another government department and local authorities when determining the annual financial settlement. I cannot help the noble Earl beyond that.

In the light of my explanation, I hope that the noble Lord, Lord Higgins, will feel able to withdraw his amendment. I hope that I have been able to clarify the points he raised.

Lord Higgins: My Lords, the Minister has been typically helpful in her reply. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 [Loss of benefit for commission of benefit offences]:

Earl Russell moved Amendment No. 7:

    Page 11, line 26, leave out ("shall") and insert ("may").

The noble Earl said: My Lords, in terms of wording, this is a very familiar amendment; it seeks to delete the word "shall" and to replace it with the word "may". The effect of the amendment is to make the benefit disentitlement in what is now Clause 7 no longer a mandatory sentence. We on these Benches are opposed in principle to mandatory sentences. This is a mandatory sentence; therefore we object to it as we do to the others.

I remember very vividly the noble and learned Lord, Lord Bingham of Cornhill, speaking on the Second Reading of the Crime (Sentences) Bill in 1996, pointing out that when you try to exclude discretion in one place it has the effect of making it creep in somewhere else. I doubt whether this will be an exception.

If the Minister looks at her reply to me on Report on Clause 6, she will see that she was herself admitting that some offences of benefit fraud are of much greater gravity than others. As soon as you admit that while at the same time giving an equal punishment to all cases of benefit fraud, you invite the response that you might as well be hung for a sheep as lamb--which, of course, was originally a response to a mandatory sentence. So a certain amount of discretion in this area could be valuable.

It is also fairly clear that between fraud and error there is a very wide grey area. Within that grey area there are a great many shades, some of them very dark indeed and some of them very pale indeed. To deprive the courts of the power to respond to these differences between shades of grey is something which, among other consequences, may have the effect of reducing the rate of conviction, which, I think, is not what the Minister intends.

Thinking again today about Clause 7 and about the appropriate penalties under this Bill, I wonder why the Government have not provided any penalty as an alternative to loss of benefit. The Minister will remember that she gave me a lot of examples on Report of social security fraudsters who never had any

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benefit entitlement in the first place; who, by losing their benefit entitlement are losing something that they will not particularly mind losing. I would rather see the Government with something else up their sleeve to use in such cases. I have not ventured to suggest any particular alternative because of some doubt about what the Minister would regard as an appropriate level of gravity on which to base it.

The Bill is not yet concluded. The Government have time to think about providing an alternative if they think that is appropriate. Meanwhile, the arguments about the mandatory sentence are familiar and I believe they stand. I beg to move.

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