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Lord Higgins: Perhaps I may stress--I hope that I do not have to do so on every amendment--that with these amendments we are seeking to establish what is the case for the powers that the Government wish to have. I say at once that that does not mean that we are in any way condoning fraud. On the contrary, we are anxious that it should be prevented and that appropriate action should be taken.
Lord Higgins: I am coming to how. As the noble Baronesses, Lady Hollis and Lady Crawley, will know, the banks have made it clear that they are prepared to co-operate with the proposals. However, they are concerned about their duty of confidentiality. That is why they would certainly support the previous amendment. The two issues are related.
I ask the noble Baroness to clarify one point in the example she quoted. Are we to understand that if an investigating officer takes the view, for whatever reason, that an individual may be engaging in social security fraud, he will establish whether that individual has a bank account? If that is so, will he ask every bank and every building society whether that is so?
Baroness Hollis of Heigham: No. As the Bill is currently drafted, an investigating officer has to have reasonable grounds for believing that a benefit fraud or an offence against social security legislation has been committed, is being committed or is likely to be committed. Around £600 million of fraud a year arises primarily because people have undeclared earnings while drawing benefit. But there are other forms of fraud--for example, where someone is drawing money as a lone parent while cohabiting--which would not necessarily involve any interchange with a bank. That would be a different kind of fraud on the benefit system. It would be by virtue of the family relationship.
Lord Higgins: I understand that very well but it does not relate to the point I was making. If the investigating officer suspects, for whatever reason, that someone may have a bank account, will he ask every bank and building society, "Do you have a bank account in the name of", whoever it may be?
I have a second point to make before I seek to withdraw the amendment. The noble Baroness has now assured us that the banks are not liable if they pass to the department information which has been passed to them fraudulently. But what is the position if the bank happens to have inaccurate, incomplete or wrong
Baroness Hollis of Heigham : The first port of call would normally be CIFAS or a credit reference agency. It would establish the bank or building society account the individual handles or has access to. That is the route. In the normal course of events, one would not need to track 15, 20 or 40 different kinds of banks to see whether any of them had the individual as a customer.
On the noble Lord's second point, my understanding is that an organisation would be liable under the law only if a fraud had been committed against us; that is, that it knowingly gave us incorrect, incomplete or misleading information.
Lord Higgins: I take the noble Baroness's second point, which she expressed very clearly. As to the first one, we shall need on subsequent amendments to consider the situation with regard to CIFAS. If I understand her correctly, she is saying that if the department's investigator goes to CIFAS, he can simply say, "Does Mr Bloggs have any account with any financial institution?", and CIFAS will be able to say, "Yes, he does have an account with the following financial institutions".
Baroness Hollis of Heigham: It would depend on the situation. We expect that the DSS will make around 250,000 inquiries to banks and building societies in a year and that local authorities may make a further 125,000. We also expect that we will be making around 200,000 inquiries of credit references agencies and that local authorities will make around 100,000. I could go on to refer to other organisations. If, in the example I gave, the woman knew that the bank her former partner normally used was "X", it might well be appropriate for the DSS to go directly to that bank. Where we did not have that information, or where it seemed likely that there was more than one bank, CIFAS might be the appropriate place to go.
Lord Higgins: I was asking a very simple question. Is the noble Baroness saying that if the department goes to CIFAS, CIFAS can tell it whether an individual has any account with a financial institution; or does the department need to go to every individual bank? Does CIFAS have a central data bank of every person who holds an account or is it necessary to go to all the individual institutions?
The noble Lord said: Amendment No. 4 relates to insurance companies. The amendment is very much in the spirit of the previous amendment moved by my noble friend Lord Higgins. It seeks clarification on the concerns expressed by insurance companies. While, like the banking industry, the insurance industry fully supports the purpose behind the Bill, it has some concerns that the DSS has not wholly appreciated the work required to meet requests for information. The regulatory impact assessment assumes that requests are dealt with by individuals. In fact they are almost always dealt with by multiple parties. Although there may be a single initial point of contact, requests will always need to be referred to the legal department to approve release of the information and to establish the validity of the inquirer and his or her authority to ask for the details. In addition, the information needs to be compiled and checked. The view of the insurance industry is that the time which would need to be spent is closer to 60 minutes for simple queries and 90 minutes for more complex ones. In view of that, the RIA seriously underestimates the potential costs.
Since more than one member of staff, some highly qualified, may be involved, the average hourly cost could be over £75 per hour. It is inequitable that insurers should not be compensated for doing the same work as credit reference agencies and others who will be paid. I look forward to the Minister's clarification of the issue of compensation for the essential work that the insurance industry will be expected to undertake for the DSS.
I understand that discussions have taken place between the Minister's department and the insurance industry on the subject of reciprocal co-operation by the DSS in providing information to insurers to help them to combat fraud. It would appear that the DSS is not willing to reciprocate. I should be grateful if the Minister could clarify that point. I beg to move.
Baroness Hollis of Heigham: This amendment seeks to remove insurance companies from the list of organisations which would be required to provide information to help the DSS and local authorities to fight fraud and error. This, too, would be a weakening of the proposed new powers and would leave a serious gap in our new information-gathering resources.
Insurance companies hold a great deal of information about individuals. If individuals are committing benefit fraud, we need to have access to that information. Such information may include, for example, vehicle insurance which might suggest that someone is using a vehicle on a commercial basis, perhaps as a taxi driver. We might also discover that
We might discover policies relating to health or unemployment contingencies. If someone was paying large premiums, we might suspect that they were in receipt of an extremely high income, especially if those payments were disproportionate to their benefit income. One example of where insurance payments should be taken into account is when calculating means-tested benefits. In such cases, we need to cross-check information with insurers where we believe that a person may be receiving undeclared insurance payments.
In other cases, the benefit system and insurers are providing benefits or paying claims for the same contingency. For example, it is possible to insure against loss of earnings due to unemployment, ill health or disability; the benefit system also provides for these contingencies. Again, therefore, sometimes we need to double-check with insurers what we have been told. I hope that noble Lords will agree that this kind of information is entirely relevant to the kind of benefit claims the suitability of which we are seeking to establish. We would not ask about a customer's medical history unless it concerned a disability benefit, because it would not be relevant to the conditions of normal benefit entitlement.
The noble Lord, Lord Astor, asked about costs. He stated that it was his belief that we may have underestimated the costs involved. As regards the published RIA increased costs, as a result of the responses we received to the consultation exercise, we have moved from our original estimate of £16 per hour and have increased it to £30 per hour. He also asked why insurance companies would not be paid. We are asking for companies to provide information which they already hold in the same way as banks and building societies. That point was made by my noble friend Lady Crawley. In our view, that is different from credit reference agencies, which make their living not from the sale of policies and so forth, but from providing information. That is the distinction that we are drawing here.
We know that insurers would also like to obtain information from the DSS because we make payments in respect of the contingencies against which they insure. We discussed this in our consultation paper, but the responses to our consultation did not provide strong support for the proposition. For that reason, we have decided not to proceed with it.
We believe that information provided by insurers is important and that we need to include it in the Bill. We are holding discussions with the financial industry more widely as regards giving government information--for example, confirmation that someone has died or details of a bogus national
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