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Social Security Bill

Volume 588: debated on Monday 30 March 1998

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4.27 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security
(Baroness Hollis of Heigham)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Baroness Hollis of Heigham.)

On Question, Motion agreed to.

House in Committee accordingly.

[The PRINCIPAL DEPUTY CHAIRMAN OF COMMITTEES (Lord Tordoff) in the Chair.]

Clause 1 [ Transfer of functions to Secretary of State]:

moved Amendment No. 1:

Page 1, line 10, leave out ("are hereby") and insert ("shall from the relevant date be").
The noble Lord said: In moving Amendment No. 1 I wish to speak also to Amendments Nos. 2 and 5. I have no doubt that elements of this Bill will cause son-le controversy and arouse some discussion, and probably some division. However, I trust that the amendments that I move today will not be the subject of division or argument, or even much debate.

Part I of the Bill is about decisions and repeals. Under Clause 1 decisions about benefit claims, child support assessments and the discretionary social fund which are currently made by adjudication officers, child support officers and social fund officers respectively will pass to the Secretary of State. Clause 9 covers decisions already exercised by the Secretary of State. There is considerable support for creating a status of single decision in all these areas. In the past there has been some confusion about who was and who was not making decisions.

The thrust of the amendments is that the Secretary of State should report to Parliament on the standards of decision-making. The arguments for the amendments that I have tabled were made in another place both at Committee and at Report stages. I hope that those who supported the principle on those occasions will support it now.

As drafted. Clause 1 creates the status of single decision-maker and abolishes the current distinction between the Secretary of State's largely administrative decisions and the decisions by independent adjudication officers which are made at arm's length and can have a great impact on individuals and groups of individuals. Such decisions can be the subject of an appeal to a tribunal.

The decisions previously made by these officers were the subject of annual reports. In the interests of open government, under this Bill it is essential that Parliament is kept fully informed of what has happened and what decisions have been made for which the Secretary of State is answerable. We appreciate that the Secretary of State will not be sitting in her office continually looking at such issues and arriving at decisions on them. Decisions will of course be made by senior officers on her behalf. But, nevertheless, she is answerable to Parliament for those decisions.

The amendment would require the Secretary of State to report to Parliament on the functions that would he transferred to her under Clause 1—decisions on social security benefits, Social Fund payments and child support assessments. The duty to report would commence from the date on which the new functions are transferred to the Secretary of State under Clause 1. Amendments Nos. 1 and 2 take the scheme of the Bill for transferring these functions and link it to the duty to report. Under Amendment No. 5 each 12-month period would run from the anniversary of that date and the report would be laid before each House of Parliament in the month in which it was published. The amendments would provide a means for Parliament to monitor the effect on the standard of decision-making in the proposals in Clause 1.

I lay the amendments before the Committee to improve and strengthen the Bill and not as a criticism of the Government's current drafting. I am not a parliamentary draftsman; I recognise that there is a danger that amendments of this nature may be flawed. If they are, I trust that that will not be a reason for not accepting them and that my noble friend will accept the principle of the amendments. I heartily commend them to the House. I beg to move.

4.30 p.m.

I have put my name to these amendments moved by my noble friend Lord Evans of Parkside. I hope that the Minister will be able to accept them.

As my noble friend rightly says, in putting down these amendments we are not being critical of the general thrust of the Bill but seeking to improve it. Many Members of the Committee will have received a substantial briefing from the National Association of Citizens Advice Bureaux on the whole of the Bill. I noticed in the material I received from it this morning that it is in favour of what is proposed in these amendments. That is important because it has the job of handling claims at grass-roots level on behalf of people who often have little support unless they get it from the local CAB.

Evidence suggests that the present quality of initial decision-making within a number of the agencies—the Benefits Agency, the Employment Service and the Child Support Agency—is unacceptably low. The CAB believes that if there is the change that we have suggested, with the Secretary of State having the responsibility to report to Parliament, and thus introducing some element of parliamentary accountability, that will have the effect of generally improving decision-making throughout the service. That could save a lot of time and trouble over appeals etc, at later stages in the claim.

I hope that my noble friend will feel that these amendments are intended to be helpful to ensure that the Bill is a good one and that the people who will be affected by it will have the additional support and protection of a system with a high degree of parliamentary accountability. I support the amendment.

It will be convenient to link discussion of Amendment No. 4 with the two amendments referred to by the noble Lord, Lord Evans of Parkside, and the noble Baroness, Lady Turner of Camden. These are variations on what is essentially the same point.

As we begin on what may be a rather long and tortuous journey through the Bill because the order of the clauses is somewhat confusing, perhaps I might make one or two general remarks. The comments by the Minister last week were helpful in pointing out the way in which the amendments have now been grouped.

The Bill was referred to earlier as the Peter Lilley Memorial Bill. I have increasing doubts about that. Certainly in some of the later stages of the Bill there are elements which were not in the Bill envisaged by the previous government. In many ways those elements will turn out to be highly objectionable.

The first part of this Bill is technical in nature. We would not wish in any way to be partisan about this—nor indeed would any Member of the Committee—but we are anxious that the Bill is drafted in the best possible way so that it is of the greatest help to those affected by social security decisions.

I am pleased to have the assistance of my noble friend Lady Anelay of St. Johns, who has served on many tribunals of this kind and has considerable experience. My experience is limited to the way decisions are reached at grass-roots level and the distress which may be caused if they are not correctly arrived at at the initial stage. We shall turn to the question of appeals etc, later. But it is important that we get matters right at the earlier stages.

Amendment No. 4 states:
"'relevant bodies and organisations' means such bodies and organisations as are prescribed by regulations".
In recent weeks there has been a great deal of discussion as to the extent to which the use of regulations is appropriate. In the context of this amendment it is entirely appropriate that one should be able to adjust without any great trouble—certainly not by primary legislation—the names of particular organisations which may reasonably consider the reports we are advocating in our amendment. However, there are many other provisions in the Bill which are dealt with by regulations and where the use of this power is open to objection.

From time to time I may have promoted measures which involve legislation by regulation. But one cannot amend regulations. The Bill refers to regulations but we have no chance at the first stage—the Government must surely be aware of what they have in mind—to amend those provisions. If we put the provision in primary legislation, we are able to amend it subsequently. But Parliament has a responsibility to consider the issue in the earlier stages of the Bill when it can be amended. The House—in particular the Opposition—cannot do so at later stages.

I am reinforced in this view by convention. I understand that in this House we do not normally vote against regulations, although I believe that the Liberal Democrat Party has adopted a different view. Nonetheless, the case for not legislating by regulation is all the stronger if the House is not able to vote against such regulations.

Having said that, we recognise and support the need for streamlining the procedures. The problem with the clause is that in effect the Secretary of State will become judge and jury in the matter rather than some other independent body. For that reason, the noble Lord who moved the amendment and I believe that it would be appropriate for the Secretary of State to report in writing annually to Parliament on the standards of adjudication. While we have drafted another amendment somewhat differently, we divide this amendment, as the Bill is divided, between child support, the jobseeker's allowance and other social security benefits.

Our strong view is that there is a case for such reports. I do not know how the Minister will reply to the debate. I do not believe that it would be adequate for such reports to be included in the general reports of the agencies concerned. They need to be free-standing. The general reports of the agencies cover a huge range of different subjects. I fear that the report would become lost if it were merely included in an agency's normal annual report.

The report should be differentiated for the reason mentioned by the noble Baroness, Lady Turner. The CAB has made representations. It has put forward some frightening figures. They can be borne out by one's own experience of the extent to which the system has failed at the initial stage. We must all hope that when we finally agree on the new arrangements, they lead to better decision taking. However, the figures quoted in the representations of the chief adjudication officer's annual report for 1996–97, to which the noble Baroness referred, indicate that, of the 45 per cent. of income support cases examined, 40 per cent. result either in incorrect amounts being paid or the amounts are in doubt. The adjudication deficiency rate in family credit was 37 per cent., with payments either incorrect or in doubt in 35 per cent. of cases. In child support, the adjudication decision in 57 per cent. of cases was deficient. A number of statistics are cited which are worrying. Instead of the individual having the right decision at the first stage—whether favourable or unfavourable—the lengthy process of appeal, and so on, has to be gone through.

It is clearly appropriate to seek to achieve a provision to ensure that the new arrangements work properly. It has been pointed out that, for example, the National Audit Office already carries out some degree of supervision. But that is a very narrow field and not adequate in this context. I hope that in the light of this debate we can agree that we should have an annual report of this kind, and that it should be a specific report.

Perhaps we may turn to a number of detailed points at later stages of the debate. However, finally at this stage, perhaps I may make this point. We are putting forward the idea of an annual report which can be scrutinised by Parliament. But we should consider, perhaps at a later stage of the Bill, whether, if the level of decision taking is as bad as the figures to which and the noble Baroness referred indicate, there should be some form of sanction on those making the decisions. I do not refer to mere parliamentary debate. Saying how bad the situation has been would not be adequate. It is a point that we should consider later. In the meantime, I hope that the Government will consider carefully and sympathetically what seems an overwhelming case for having a report of this kind. I hope that either in the form proposed by the noble Lord, or that suggested in the amendment, the measure will be acceptable to the Government.

4.45 p.m.

The amendments appear to be driving at much the same point. I am encouraged to think that the Minister will not have "resist" at the top of her brief because there is a government amendment on much the same lines. If I am wrong and I am to be disappointed, no doubt the noble Baroness will say so when she replies.

Before dealing with the amendment, perhaps I may say a brief word about the order in which the clauses are being debated. I am not getting at the Minister. The order is probably the best that can possibly be achieved in the light of the way in which the Bill is drafted. But anyone who spent time over the weekend, as no doubt many of us have, trying to make head or tail of the amendments, have found it very difficult to make a proper assessment while jumping from one part of the Bill to another. As a Minister at the old Department of Health and Social Security, I was used to these Bills being complex. Social security Bills always are complex. But it is more difficult when clauses are not taken in sequence. This Bill has been drafted in the interests of the department rather than of Parliament. I hope that the point will be taken on board.

The main problem with which we are dealing is the poor quality of initial decisions. If all the initial decisions were right, there would be little cause for appeal and therefore the system would not be gummed up, as it is. These poor initial decisions mean that those individuals who feel that they have not been accorded the right level of benefit are anxious. They have to wait for decisions eventually to be made. So there are very human factors involved when the initial decisions are incorrect.

There are a number of strong reasons for one or other of the amendments. First, I understand that the annual reports of the chief adjudication officer, and of the chief child support officer, will disappear. Therefore there is a need for something to be put in their place. My preference would be for the suggestion made by my noble friend Lord Higgins.

Another important point—I am sure that the Minister understands it well—is that it is of great importance that decisions should be seen to be independent and free from political interference. It is a matter that has always been stressed. It might appear on the face of it, unless some safeguards are made, that Clause I would to some degree undermine the very long and honourable tradition operated by the Department of Health and Social Security, and now the Department of Social Security.

I am not very keen on annual reports. They often mean civil servants having to devote a great deal of time to preparing them rather than getting on with the main job in hand in their department. Furthermore, annual reports very often gather dust; they are read by very few people. However, in this instance there is a strong case for an annual report. After all, we are dealing with very substantial sums of money—something like £100 billion a year—of benefits paid out and, of course, money which has to be paid in by the taxpayer and national insurance contributor. We are dealing with well over half of government expenditure. So in a sense it is of a very different order to many other items of public expenditure.

I therefore hope that the noble Baroness will feel able, if not to accept the precise wording of these amendments, at least to recognise that for the principle of Clause 1 to be acceptable, there should be an effective report to Parliament on an annual basis.

Amendments Nos. 1, 2, 4 and 5 require the Secretary of State to make and publish annual reports on standards in decision-making. That is a proposal that we on these Benches support, certainly so far as these amendments go. I do not agree with the noble Lord, Lord Dean of Harptree, that annual reports serve no useful purpose: they serve a very valuable purpose. Even if they are not widely read, they are there, and the need to make and publish the annual report concentrates the mind of any Secretary of State.

However, the proposals in these amendments lack any element of independent monitoring. It is proposed that the Secretary of State should report on the performance of her own department and officials. For that reason, we on these Benches prefer our own version in Amendment No. 3, which I shall move shortly.

Amendment No. 39, to be moved by the noble Baroness on behalf of the Government, is much more limited. It gives the president the duty of making a report which is based only on the decisions that go to appeal. That is not a proper cross-section of the cases that come before the department. It is as important to monitor the cases which do not go to appeal as it is to monitor those which do. In those circumstances, while we do not seek to oppose Amendment No. 39, we feel unable to give it any positive support.

In speaking to these amendments, it is right to begin by stating that, by the proposals in the Bill on decision-making appeals, we want to change the current complex system so that it is easier for customers and staff. As the noble Lord, Lord Dean of Harptree, rightly said, we want to get more decisions right first time. Then, when matters go wrong, we want to be able to put them right more quickly. We want to use the system to help more people and not just passively pay the money.

The proposals in the Bill on decision-making and appeals are designed to provide the framework needed for a new, active modern delivery system for social security. However, in achieving such a system, we will also take care to ensure that the fundamental basis of current arrangements will be maintained. Decisions will continue to be taken on the basis of the facts of the case and the application of the law. There will continue to be an independent right of appeal, as there is now. The proposals are about flexibility and achievability, not about reducing rights.

Before I go on to comment on the particular amendments, perhaps I may first express my appreciation that so many of the amendments both from the Official Opposition and from the Liberal Front Bench were tabled early enough to give us a generous amount of time to examine them. That is much appreciated. I wish to express my thanks for that.

Secondly, the noble Lord, Lord Dean of Harptree, raised a point about the confusing order of the Bill. That concern was expressed by the House when I had to move this as a formal amendment. I tried to explain why; namely, that the topics were to some extent at odds with the issues—in other words, there were two ways of organising the matter. I will certainly do my best to ensure that we are not faced with such a confusing order in future. I take that reprimand.

In this group of amendments we are discussing some very important issues about the way the effectiveness of the new system of decision-making proposed in the Bill will be monitored and reported on to Parliament and the public.

I now turn to Amendments Nos. 1, 2 and 5, moved by my noble friends Lord Evans of Parkside and Lady Turner of Camden. I thank my noble friends for tabling the amendments. They are similar to ones previously tabled in Committee and on Report in another place.

Speakers to those earlier amendments in the other place argued that it was imperative that detailed reports were provided on the success or otherwise of the transfer of decision-making functions to the Secretary of State, and on the quality of decision-making under the new arrangements.

It has always been the intention to do just that, as my honourable friend the Parliamentary Under-Secretary of State for Social Security, Mr. Keith Bradley, made clear during those earlier debates. We will continue to monitor the quality of decision-making, and the Secretary of State and agency chief executives will issue annual reports on quality standards and the operation of the system.

We had previously taken the view that there was no need for reporting arrangements to be set out on the face of the Bill. However, it is now clear that noble Lords on all sides of the Chamber would welcome a requirement to report to be included on the face of the Bill. We have reflected on this matter and I am happy to give that commitment—namely, that the requirement to have an annual report from the Secretary of State be included on the face of the Bill.

I am therefore pleased to accept in principle the amendment tabled by my noble friends Lord Evans of Parkside and Lady Turner of Camden, together with support given by noble Lords on all sides of the Chamber, including the noble Lords, Lord Higgins and Lord Dean of Harptree. With the permission of your Lordships, however, we should like to consider further the precise drafting of the amendment, and table a government amendment on Report. In drawing up that amendment, I will of course take full account of your Lordships' views.

It may be helpful at this point if I describe in a little more detail our proposals for monitoring and reporting on the quality of decision-making, so that your Lordships can see how comprehensive our plans are. The Bill introduces a new decision-making system which streamlines the current processes; it is our clear aim that the quality of decisions should improve. As noble Lords have cited, there is some need for improvement to be made. We will monitor the new system to ensure that we achieve improvements in quality, and we will report fully on our efforts to Parliament and to the public.

First, there will be systems in place locally to double-check a sample of first-instance decisions. There will also be central quality assurance teams within the agencies who will be fully independent of local checkers—who will, as it were, check the checkers—and who will report on the standards of the monitoring process to agency chief executives. Those teams will also take a broader view on the standard of decision-making agency-wide.

Monitoring criteria will be important for both local and central checking teams and will be fully agreed with the National Audit Office. That is therefore a further safeguard.

Agencies will set up standards committees which will include external representatives. Those standards committees will consider the results of checking by quality control teams and will prompt any remedial action.

Finally, agencies will have clear performance and quality standards to achieve and will be held firmly to account by the Secretary of State.

I should like to make it clear to the House that it has always been our intention that there should be comprehensive reporting arrangements. In addition to the reports from the Secretary of State—which will, as I say, be on the face of the Bill—and by agency chief executives, there will be the report made annually by the president of the appeals tribunals to the Secretary of State, in accordance with the provisions in Schedule 1, paragraph 9 of the Bill. This will include a section on the quality of decisions made in agencies in cases which subsequently go to appeal, as is made clear in government Amendment No. 39, to which I shall turn shortly.

The National Audit Office, the Government's independent watchdog, will also be fully involved. We are discussing with it how its role might be enhanced, particularly in the early stages of the new scheme. It will, where necessary, publish reports or bring matters to the attention of the Public Accounts Committee.

With annual reports from the agency chief executives, an annual report from the Secretary of State on the face of the Bill, annual reports by the president of the appeal tribunals and regular reports by the National Audit Office, I believe there are many assurances in place and that together these will amount to a comprehensive monitoring and reporting structure.

I hope that the firm commitments I have made about monitoring and my proposal to bring forward a government amendment at Report stage on annual reports on quality standards demonstrate that we are determined to improve quality and that we take our accountability to this House and to the public very seriously indeed.

With those assurances and my commitment to return to the House with a government amendment which meets the principle raised, I trust that my noble friend Lord Evans will feel able to withdraw the amendment.

My proposal to return with an amendment at Report will, I trust, meet the concerns which prompted the noble Lord, Lord Higgins, and the noble Baroness, Lady Anelay, to table the first paragraph of their amendment.

The second paragraph of the amendment is designed to probe our intentions with regard to consultation with outside bodies and other organisations on the monitoring criteria to be employed in preparing reports on quality standards. The amendment would require the Secretary of State to consult relevant outside bodies. As I said a moment ago when outlining our detailed proposals, in setting up monitoring criteria we do intend to consult with relevant bodies. Monitoring criteria will be agreed with the National Audit Office; and the remit of the agency standards committees will be to advise on all aspects of monitoring, including the criteria to be employed. We shall also discuss monitoring arrangements with welfare rights groups. I do not believe that there is need for this commitment to be on the face of the Bill, with lists of bodies set out in regulations.

I believe that the point was made for me by the noble Lord, Lord Higgins. We cannot amend regulations, and there is not just a convention but an undertaking—at least, from the official Opposition—not to vote against regulations. Such regulations would have to be displaced by new regulations every time we wished to discuss an issue with a new group which might have come into being since the previous amendments and regulations had been laid. Given the difficulties, I hope that the undertaking we have given to consult—while not wishing to tie our hands to a specified list which cannot be amended because it is through regulations—will enable the Opposition to decide not to proceed with their amendment. The first part is met in the substantive amendment moved by my noble friend and the second part would take us into the area of difficulties explored by the noble Lord. Lord Higgins.

I now turn to the government amendment in this group, Amendment No. 39. This amendment puts on the face of the Bill a requirement for the president of appeal tribunals to make a written annual report to the Secretary of State on the standard of appealable Secretary of State decisions coming before the tribunal. It also provides that the Secretary of State shall publish the report. This report will be in addition to, and will complement, the annual report that the Secretary of State will make on quality standards, which is the subject of the amendment we have just discussed.

During the Second Reading debate, the noble Baroness, Lady Anelay, asked why there was no provision in the Bill for the Secretary of State to report to Parliament on appeals and standards of decision making in the agencies. I subsequently wrote to the noble Baroness suggesting that paragraph 9 of Schedule 1 to the Bill provides for the president of appeal tribunals to supply the Secretary of State with such reports and information as she may require on the functioning of appeal tribunals. This would include information on the quality of those agency decisions seen by tribunals. However, I agreed to consider whether it might be helpful to specify this on the face of the Bill. With this amendment we are responding to the concerns raised at Second Reading.

I am grateful to my noble friend for giving way. For the record, does she appreciate that the presidents of the ITS publish an annual report each year?

Yes. I believe that that is why the Liberal Democrat Front Bench was not persuaded that this was the earth-moving amendment that Members of the Committee might otherwise have believed it to be.

I have outlined the ways in which we intend to ensure thorough monitoring and reporting. We see reports from the presidents of appeal tribunals as a valuable contribution to ensuring that high standards are met. The amendment specifies, on the face of the Bill, in response to a request from the official Opposition, that the president should report on the standards of agency decisions in cases going to tribunals and that the report should be published. That has always been our intention; it continues present practice; and the amendment puts the matter beyond any possible doubt.

We are delighted to respond to Amendment No. 1 and its related amendments proposed by my noble friends Lord Evans and Lady Turner, which have been warmly supported in the Chamber. I hope that, with the reassurances and explanations on other amendments, together with Amendment No. 39 which meets concerns raised at Second Reading by the noble Baroness on the Opposition Front Bench, noble Lords will be happy not to pursue their amendments.

I was brought up in the House of Commons where, in matters of procedure, the late lain Macleod made the memorable remark, when commenting on a government concession to the opposition, that one should never shoot Santa Claus. Apart from it being unseasonable in any case I certainly would not wish to do that. What one should do, however, is look very carefully at the wording on the wrapping paper. We shall study what the Minister said. Certainly, it seems a very significant move which we would welcome. We shall wish, in particular, to consider between now and Report stage the point she made about consultation with outside bodies. As she said, our amendment was more specific.

Perhaps I may make a final point, given the forthcoming attitude of the noble Baroness. Last week we had a Statement on the Government's proposals for reform of the welfare system and in particular a number of success measures. There was some dispute between the noble Baroness and myself as to the extent to which those could be quantified in particular cases. Will she consider adding to the proposals in the Green Paper the suggestion of quantifying as a success measure the kind of statistic referred to by the noble Baroness who supported this amendment and to which I myself referred? It might be a good idea to adopt the process which the Government have suggested in terms of success measures but to have a quantitative measure against which we could judge the reports which the Minister has kindly said she intends shall be produced by the Secretary of State and the heads of agencies.

That is a very interesting point. It will not have escaped the noble Lord that, as the Green Paper has already been published, I can hardly add to it at this late stage. I shall consider whether it might be appropriate for the annual reports to have benchmark targets to be aimed at. However, I know from some areas of my experience—for example, in disability benefits—that because of the length of time between the first decision and an appeal, during which time someone may have become physically much worse, a decision on appeal may overturn the decision made at the first tier of decision-making and yet both decisions may be right. The fact that the appeal went against the department in favour of the complainant should not mean that there is an easy read-across to suggest that there was therefore a faulty decision at the point of the adjudication officer's judgment. The issue is clearly more black and white where one is dealing with, say, income support or JSA where a decision may have been faulty. It is not always the case that, when an appeal decision is substituted for an AO's decision, the AO's decision was necessarily wrong. The decision may have been correct at the time and other considerations may come into play.

I shall reflect on the point. There is no intention by government to back away from setting ourselves challenging targets by which we seek to improve the quality of the original decision-making and to measure that improvement.

At the outset of what may be a long voyage to examine this important Social Security Bill, which will affect hundreds of thousands of families in this country in a variety of ways, I am pleased to find considerable support for the broad principle of the amendment tabled by my noble friend and myself. In my experience over many years in the other place I was taught never to look a gift horse in the mouth when the Minister was offering a concession. I therefore thank the Minister for her assurances and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[ Amendment No. 2 not moved.]

Clause 1 agreed to.

5.15 p.m.

moved Amendment No. 3:

After Clause 1, insert the following new clause—
ADJUDICATION STANDARDS COMMISSIONER
(".—(1) The Secretary of State shall appoint an Adjudication Standards Commissioner.
(2) The Adjudication Standards Commissioner shall keep under review the exercise by the Secretary of State of the functions transferred to him by paragraph (a) of section I above and in particular the accuracy of decisions made by him or on his behalf under sections 9, 10 and 11 below, and the time within Which such decisions are made.
(3) The Adjudication Standards Commissioner shall report annually to the Secretary of State in the light of the review referred to in subsection (2) above and the Secretary of State shall lay a copy of his report before Parliament.
(4) The Adjudication Standards Commissioner shall issue guidance on the law relevant to decisions referred to in subsection (2) above.
(5) The guidance referred to in subsection (4) above shall he available to any person who requests it.
(6) The Adjudication Standards Commissioner shall ensure that officers acting on behalf of the Secretary of State in the discharge of his functions under section I above receive suitable training.").
The noble Lord said: This is the first of a series of amendments tabled by my noble friend Lord Russell and others as well as myself. As everybody knows, the Bill is based on Conservative proposals being implemented by a Labour Government. Not surprisingly therefore it has the broad support of both the Government and the official Opposition Front Benches. However, if I may say so, it is none the better for that. As the presidents of the Independent Tribunal Services for Great Britain and Northern Ireland said in their joint comments on the Bill,
"a Bill which enjoys such hi-partisan support paradoxically needs to be challenged more strenuously in order to test its effects".
I do not in any way belittle the amendments tabled by the noble Lord, Lord Higgins, and the noble Baroness, Lady Anelay, on behalf of the official Opposition; the great majority of them are well thought out and will be supported by us. Also, I welcome and support the amendments tabled by the noble and learned Lord, Lord Archer of Sandwell, and other noble Lords. However, the burden of challenging the details of this Bill rests mainly on these Benches and with a Bill as complicated and technical as this one, that burden is a heavy one.

Public criticism of this Bill mainly concentrated on Clauses 70—the abolition of the higher rate for lone parent child benefit—and 72 on the reduction in the period of backdating. In this Committee stage those clauses are a long way down the road. Today we start with Part I which creates major changes in the system of decisions and appeals. Cumulatively, it is fair to say that those changes are at least as important as those in Clauses 70 and 72.

The Government's stated aim is to produce a less complex, more accurate and cost-effective system for making and changing decisions. That is a proposition with which I agree—and one might say: who would not? But in fact many of the proposals seem to us to be unsatisfactory. Some are simply unlikely to achieve the Government's aims; some achieve one aim at undue cost to another; for example, cost-effectiveness may be achieved to the detriment of accuracy. That is illustrated by the proposals on appeal procedures. Some proposals may achieve the aims stated by the Government, but at the cost of other aims which are not included in the list but which everybody recognises as valid. That includes transparency and fairness. A claimant whose claim is refused is entitled to an explanation that he or she can understand and to feel that that claim has been treated and looked at fairly, either at first tier or on appeal.

We are concerned with the proposed removal of the independent oversight of the first-tier decision-making process. We want to ensure that the claimant is given a proper explanation and decision; that at all levels of decision-making all proper factors are taken into account by the decision-maker, whether or not those factors are raised by the claimant; and we want to see a proper complaints procedure.

We are concerned with many of the alterations to the tribunal procedure such as the shortening of the period for appeals, the ending of the requirement for three-person tribunals and the ending of the requirement that one member of the tribunal be legally qualified. We are concerned with enshrining in statute the current practice that an appellant will not be given an oral hearing before the tribunal without a specific request.

The Government propose in Clause 1 to abolish the statutory offices of the adjudication officer or the child support officer. That is an extremely important change. There are arguments with some force in its favour and we do not object to that proposal. We accept it as a proper decision that the Secretary of State, through the agencies which administer benefits or child support, should he directly responsible for first-tier decisions. But the Bill, in removing the statutory offices of adjudication officer or child support officer, abolishes the offices necessarily of chief adjudication officer or chief child support officer. The responsibilities of those officers are transferred to the Secretary of State. In practice, those responsibilities will fall on the chief executive of the agencies which administer benefits or child support.

That increases the importance of having an independent monitoring officer who is not under the control of the Secretary of State or the chief executive. There can be no doubt that adjudication standards are now unacceptably low. The chief adjudication officer's report for 1996–97 found that there were adjudication deficiencies in 45 per cent. of income support cases examined and 37 per cent. of family credit cases. In 40 per cent. of income support cases and 35 per cent. of family credit cases examined, the amount paid was incorrect or doubtfully correct. The chief child support officer reported deficiencies in 57 per cent. of child support cases examined.

It is possible that bringing first-tier decisions in-house will itself improve those standards. We hope so. It is essential to get first-tier decisions right as far as possible. Reviews and appeals cost money, take time and—an important factor—increase the stress on claimants. However, we believe it is wrong to transfer to the agencies both the responsibility for adjudication and for monitoring that adjudication.

The reports of the chief adjudication officer and the chief child support officer have done a great deal to reveal the weaknesses of the existing systems. They also reported on matters such as the effectiveness of the management arrangements for adjudication, on training and on access to advice for adjudication. We believe it is essential that there should be independent monitoring. There is an obvious risk in the agencies monitoring their own standards of adjudication. That was pointed out by the Council on Tribunals in its annual report for 1996–97.

Amendment No. 3 requires the Secretary of State to appoint an adjudication standards commissioner. That commissioner will hold a statutory office independent of the agencies. The adjudication standards commissioner will be concerned to see that decisions are accurate and timely; will be available, as the chief adjudication officer is now, to give guidance on the law and to oversee the training of adjudicators. To quote again from the comments of the presidents of the Independent Tribunal Service:
"once the Chief Adjudication Officer … ceases to exist, there will he no independent means of assessing consistency and reliability of decision-making. If such a system is not established, and it is left to the Chief Executives of the relevant agencies, we fear that it may not achieve the priority it deserves when competing for funds in a pressured business environment. The absence of such a system may actually threaten achievable efficiency at first-tier level".
That is a very powerful criticism and the amendment is intended to meet it.

We warmly welcome the undertakings and explanations given by the Government but their proposals still lack the essential element that the report and standards should be made by someone outside the structure of the Department of Social Security. The noble Baroness referred to annual reports by chief executives, the Secretary of State, the president of the appeal tribunals and the Audit Office. But the first two of those are in-house reports and the last two do not report in either case on the whole picture. We believe that there should be a single officer who can do so. That is why we propose Amendment No. 3. I beg to move.

I listened with great care to the points made by the noble Lord in proposing the amendment. As I understand it, the basic object of this part of the Bill is to streamline the proceedings. There is always a trade-off between, on the one hand, streamlining and, on the other hand, achieving an effective system. Whatever the merits or otherwise of the clause, it could not reasonably be regarded as streamlining. What the amendment seeks to do is to introduce an additional tier of decision-taking for assessment of the standard of adjudication.

Having said that, certainly there are points here of considerable importance. In particular there may be some argument on the lines which have been mentioned. If I understand the position correctly, the arrangements announced in the Budget, about which the noble Baroness has written to some of us, will transfer the procedures in some cases from the Contributions Agency to the Inland Revenue. So one of the points with which we are concerned and to which this amendment would be relevant is the extent to which the Inland Revenue can go ahead correctly. I may have misunderstood the precise point here; if so, I am happy to be corrected. I am not sure whether the Inland Revenue, in its new role as envisaged in the Chancellor's Budget, will come within this process.

I am somewhat surprised by the wording of the amendment. It states:
"The Adjudication Standards Commissioner shall report annually to the Secretary of State in the light of the review referred to in subsection (2) above and the Secretary of State shall lay a copy of his report before Parliament".
That is straightforward enough. However, subsection (4) goes on to state:
"The Adjudication Standards Commissioner shall issue guidance on the law relevant to decisions".
I can understand it if the commissioner issued guidance on the law in relation to the reports which had been produced and said that this or that was appropriate in the legal context. But subsection (5) states:
"The guidance referred to in subsection (4) above shall be available to any person who requests it".
My experience with the Child Support Agency at grass roots level suggests that very often someone will be disputing fiercely the decision made in a child support case. If he is suddenly able to go to the adjudication standards commissioner and get legal advice, that, I am sure, would be welcomed by some of my former constituents. But it seems to me to open up an enormous range of problems and probably very considerable expense. Presumably it means that the adjudication commissioner will have to be a lawyer, as I do not see how else he will be able to give legal advice,
"to any person who requests it".
So I hope that in the course of the debate the exact point of this provision will be clarified. It may be that I have totally misunderstood what the noble Lord has in mind.

Overall, my feeling is that the amendment does not introduce sanctions of the kind to which I referred in relation to a previous amendment and it does not seem to take the matter very much further forward. It may well be that, despite the suggestions made by the noble Baroness in response to an earlier amendment, we are making progress and that we may need to make further progress. However, it does not seem to me that this amendment takes us very much further forward.

I assure the Minister that I am not going to shoot Santa Claus. What she said about bringing in a new amendment was extremely welcome, especially since this is the second sack of unexpected gifts she has brought to us within a week. However, what the noble Lord, Lord Higgins, said about reading the wrapping paper is also extremely relevant. I have never forgotten the day on which I discovered that both my mother and Father Christmas used wrapping paper that came from W. H. Smith. So, with that remark in mind, I should like to scrutinise these issues a little further.

In this country we do not have separation of powers. The Woolsack, even in the absence of its distinguished occupant, is sufficient testimony to that. But one element of the doctrine of separation of powers which we have always had, and to which we have rightly given very great importance, is the independence of the judiciary. Adjudication is, of its essence, a judicial function. The outward form of Clause 1, directing that the Secretary of State, who is an executive officer, shall be responsible for adjudication, bears an outward appearance of threatening to infringe that principle. We are assured that that is not so. I listened carefully to the noble Baroness at Second Reading. The understanding, as I see it, is that the administration rests with the Secretary of State but the judicial responsibility rests elsewhere. That is why it is crucial that the word "independent" in my noble friend's speech should be somewhere in the amendment which the Minister brings back to us on Report.

There is a strong case which executives have always made for influence on the judicial process. The Star Chamber was not actually an inefficient court. On many occasions it did do justice. There was a powerful case to be made for it, roughly along the lines of the speech of the noble Lord, Lord Higgins. However, because it allowed an executive presence in judicial decisions, a very few bad decisions in a distinguished record discredited the whole court. One can see why that should have been so.

The Secretary of State here is standing at the very top of a slippery slope. When you are standing at the top of a slippery slope, it is generally considered wise to be roped and belayed. That is why the presence of an independent adjudication standards commissioner who can issue guidance on the law is important. Perhaps I may say to the noble Lord, Lord Higgins, that this is not so very different from the law reports in The Times, which are available to everyone who wants them and which do not cause very profound administrative problems and have even in the past caused considerable amusement.

This is not such a very startling proposal and it may save us from a good deal of difficulty with the courts later. In fact, a great deal of the Bill is likely to cause problems with the courts not only in this country through judicial review but under the European Convention on Human Rights and through the European Court of Justice. I hope that the Government will think extremely carefully all the way through the passage of this Bill about the way in which the courts may take some of its provisions and that they will not lead the courts into temptation. Taking on board some of the proposals of the amendment in a welcome undertaking to come back with a further amendment on Report would be one way in which the Government could do something to meet us. I hope that the Minister will consider it.

5.30 p.m.

I am grateful to the noble Lord, Lord Goodhart, and the noble Earl, Lord Russell, for tabling this amendment, as it gives me the opportunity to explain how we will ensure that decision-making under the new system is of the highest quality. Our proposals will ensure that there are proper arrangements for training decision-makers; for producing clear guidance; for monitoring decisions made under the new arrangements; and for reporting on the quality of decision-making.

Before I continue with the rest of the answer, perhaps I may say as an aside that no decision has yet been made in response to the request from the noble Lord, Lord Higgins, for information about the Contributions Agency. No decision has yet been made about the implications of moving the agency over to the Inland Revenue, but later this afternoon my noble friend Lord Haskel will be making a statement on that, which may help to address some of the questions.

This new clause seeks to introduce a statutory office-holder—an adjudication standards commissioner. The office-holder would keep the new decision-making process under review and report on the operation of the scheme; issue published guidance on decision-making; and ensure that decision-makers receive suitable training. We aim to ensure that the public have confidence in the integrity and quality of the decision-making system. It may be helpful if I say a little more on the arrangements that we have in hand to meet that aim.

We are all agreed that decisions must be taken fairly and impartially in accordance with the facts and the law. We believe that the best way of ensuring high quality decisions is for agency chief executives to be accountable to the Secretary of State for the decision-making system, and for the individual decisions generated in their agency. Whilst the Secretary of State will remain accountable and responsible for all decisions made on her behalf, I believe that effective decision-making can only be achieved if agency chief executives are given autonomy for all components of the decision-making system.

Agencies have given considerable thought as to how they are to meet their new responsibilities. Decision-makers, first and foremost, need access to accurate guidance that reflects the law. There can be no question of this guidance being written in such a way as to favour administrative convenience. Chief executives will look for impartial advice to the department's professional legal advisers who are experts in administrative and social security law. Agencies will draft guidance based on that legal advice. Agencies will publish the legal guidance together with operational guidance. It will, as now, be available to anyone who wants to see it.

Agency chief executives will also be responsible for monitoring and general oversight of the system. They will have clear performance and quality standards to achieve.

We are absolutely committed to ensuring that these internal arrangements provide for quality decisions. There is no question of the quality or integrity of decisions being influenced by operational or financial considerations. The decision-making system and associated monitoring structures will be devised and operated in consultation with outside bodies, and the results will be published for all to see.

There will also be external monitoring of the decision-making system. The Government's external auditor, the National Audit Office, will continue to audit the department's accounts. This will include checking the accuracy of decisions. Decision-making could also, if appropriate, feature as an NAO value for money study. We are talking to the National Audit Office about how its role could be enhanced, particularly in the early stages of running the new system. The president of appeal tribunals will report on the quality of decisions made by agencies for those cases which subsequently go to appeal; and we will be placing this requirement on the face of the Bill.

This new clause seeks to give an adjudication standards commissioner the responsibility for ensuring that decision-makers receive suitable training. I have to say that it would be administratively difficult, in practice, for an independent adjudication standards commissioner, with no direct responsibility for management within the agencies, to adopt such a role, but even if the noble Lords' intention is that their role should be advisory, I still do not believe it is necessary. We already recognise that decision-makers need to be supported by quality training. Agency line managers will have responsibility for both identifying and meeting training needs; and central quality support teams will have a role in commenting on the overall quality of training. We therefore see no need for a separate check of training arrangements.

The new clause also proposes that the adjudication standards commissioner should report annually to the Secretary of State. My honourable friend, the Parliamentary Under-Secretary of State, Mr. Bradley, has already given assurances in another place that we will publish information on quality standards, and I am happy to reaffirm this. However, we do not believe that it is necessary for details such as reporting arrangements to appear on the face of the Bill.

We are committed to giving customers accurate, speedy decisions. We will put in place comprehensive training and guidance and will monitor and report on the quality of decisions. We have an impressive battery of measures which will command public confidence. I hope that with these assurances the noble Lord, Lord Goodhart, and the noble Earl, Lord Russell, will feel able to withdraw their amendment.

I do not think that the Minister has met the force of the argument, which is not just mine but that of the president of the tribunals, that the present arrangements lack an adequate independent element of monitoring. However, in the circumstances, perhaps the best thing that I can do is to wait and see the form of the amendments which the Minister will be tabling later on the subject of the reporting obligations of the Secretary of State and other persons. Therefore, on this occasion, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[ Amendments Nos. 4 and 5 not moved.]

Clause 2 [ Use of computers]:

moved Amendment No. 6:

Page 1, line 21, leave out from ("made") to end of line 4 on page 2 and insert—
  • ("(a) by an officer of his acting under his authority employing for the purposes of relevant calculations a computer for the operation of which such an officer is responsible: and
  • (b) in the case of a decision, determination or assessment that may be made or a certificate that may he issued by a person providing services to the Secretary of State, by such a person employing for the purposes of relevant calculations a computer for the operation of which such a person is responsible.").
  • The noble Baroness said: Clause 2 introduces new powers about how decisions on social security benefits and other business areas are to be made. It allows decisions to be taken not only by officers acting on behalf of the Secretary of State, but also by computers for which such officers are responsible. It also allows for decisions made by a private sector service provider to be similarly made by computers.

    The amendment seeks to remove from the clause the phrase that relates to the making of a decision by a computer and introduces a phrase which allows a computer to be used by persons who are themselves responsible for the decisions taken.

    Clause 2, as currently drafted, raises questions of both practice and principle with regard to the use of computers. I am decidedly not trying to be a stick-in-the-mud; nor am I afraid of technical innovation—far from it, I am most glad to exploit all the advantages offered by IT at every turn. Particularly now that we are in opposition, for however short a time that may be, one is very much aware of the need to be able to get at all sources of information. I am one of those Members of this House whose first job when they arrive here is to turn to the Internet, particularly to "Farmers' Weekly Interactive", and to discover, in my guise as spokesman on agriculture, what I ought to know on any particular day. I have no fears about using IT and, as I have said, I am most glad to exploit it.

    I believe that we can use information technology effectively in streamlining the welfare system, but that we must do so with caution. If the use of computers can release staff to concentrate their efforts on improving the service to the public, that should be encouraged, but only if we then fully understand—perhaps one should say "compute"—the risks we may be taking along the Way.

    When I served as a member of the Social Security Advisory Committee, I was fortunate enough to have the opportunity to visit local offices during the years in which information technology was introduced to the service on a rolling programme, benefit by benefit. I pay tribute to the staff who made so many adjustments over such a relatively short period. There was much training and heartache because of problems with both hardware and software. They moved from the paper processing of every single change made by the stroke of a pen to the use of screens. My visit to the local office in Toxteth took place on the very day that it went live on the Social Fund computation and the whole system crashed. I hope that it had nothing to do with my visit! We were lucky that the staff were able to cope by reverting to pens and making their own calculations.

    I am reminded of a recent visit to Northern Ireland when one of those whose responsibility it was to manage the system commented that to manage it was difficult because the staff simply would not be able to perform the tasks now performed by officers using the screens. Such is the advance that staff in the local DSS offices and benefit agencies have had to achieve in a short time.

    I am aware that today the Prime Minister makes speeches about the problems that we may face here and around the world with the arrival of the millennium bug. Press reports have said that he will be referring to potential problems about the payment of benefit in the year 2000 and that that may be disrupted. All of us have read predictions about what may happen at that stage.

    Can the noble Baroness provide an assurance that the provisions of Clause 2 will not be enacted until all DSS, and the relevant agency, computers, including all those with which they may be networked—for example, on housing benefit interchange of information—are guaranteed to be millennium compliant and will not fall sick of the millennium bug at the appropriate time?

    Clause 2 also raises serious questions of principle. Should a wedge be driven between the concepts of decision and responsibility? One of the achievements of English law is to find means of dealing with decision and responsibility in such a way as always to be able to identify one with the other. Where a decision is made, there the responsibility lies.

    The computer can in some extended sense make a decision. We are all aware of that from the number of leaflets that pour through the door reminding us that we may wish to renew a subscription to a particular newspaper or magazine. Certainly, decisions can he made as to when to trip in reminders, but it is only when the computer is correctly programmed that it can carry out a series of calculations or issue forms or reminders at pre-programmed points. A computer cannot be held responsible in layman's terms in a legal sense.

    Have the Government fully taken into account the impact that the divorce of decision from responsibility could have on English law? I was interested to read the comments of Mr. Tony Lynes in his paper The End of Independent Adjudication. He says that it may appear unreasonable to object to computer-made decisions. He goes on to ask:
    "after all, what could be more independent than a computer?".
    I notice that the Minister laughs. I agree with her scepticism on this matter. I am glad to see that she exhibits such scepticism. He goes on to say:
    "But, of course, someone has to give the computer its instructions".
    If I give my computer instructions, when it goes wrong I know that it is my mistake. Who is responsible for programming the computer, and what redress does anyone have if the programme itself is wrong?

    Clause 2 does not answer that question but merely provides that an officer of the Secretary of State must be responsible for the operation of the computer, whatever that may mean. How far will the computer's responsibilities extend? Under Clause 10 the Secretary of State may revise her own decisions. Does this mean that one computer will be able to revise the decision of another or even of the same computer? What are the implications of allowing a computer to revise a decision on its own initiative? Where is all of this leading us? Could a future social security Bill provide for appeals to be heard by computer? All of these questions deserve serious consideration in the course of this Bill and will need to be resolved at some stage.

    My amendment would not militate against the greater use of computers; far from it. I do not wish it to do so. It specifically permits and encourages such use but seeks to do so in such a way that we do not have to lose either the concept or the reality of having a person involved in the decision who can be held to be responsible for that decision. I beg to move.

    5.45 p.m.

    I intend to be brief. We fully support the amendment which raises an important matter of principle. We agree with the noble Baroness that computers should be treated as a tool of decision-making and not as the decision-maker itself. I also read and was persuaded by the article written by Tony Lynes to which the noble Baroness has referred. I am very happy to support the amendment.

    Clause 2 introduces new provisions for how decisions on social security benefits and other business areas may be made. It allows decisions to be made not only by officers acting on behalf of the Secretary of State but also by computers for which such officers are responsible. Furthermore, where decisions are to be made by a private sector service provider, these may similarly be made by computers.

    It is important to consider the provision in this clause in context. Currently, automated decision-making in the private sector is not unlawful; indeed, it is commonplace in the financial sector where it was pioneered by credit reference agencies. However, in relation to this department the law requires that social security and child support decisions are made by particular officers or by the Secretary of State or by officers acting on her behalf. This has the practical effect of excluding automated decision-making by computer unless the decisions are approved by officials. Hence the need for this clause which removes the anomaly by stating explicitly that decisions may be made by computer.

    The question is: which decisions? Clearly, there are some kinds of decisions which are not suitable to be made by a computer process. I can reassure the Committee that decisions which require the exercise of discretion or judgment will continue to be made by the department's trained staff. Examples of decisions requiring the exercise of discretion may be where there is a question whether for benefit purposes a couple are living together as husband and wife, or whether a claimant has deprived himself or herself of capital, or whether a 16 or 17 year-old would suffer hardship if refused benefit.

    However, there are significant benefits to be gained for customers and staff from greater automation where computers can be programmed to apply a series of tests to factual data in order to produce a consistent result: in other words, the clause enables us to make the best use of new technology. At present staff working in the various agencies have access to central computer systems via terminals on their desks. Staff make decisions and input information to the computer. However, modern computer systems are capable of using information already held and once programmed with the rules are capable of applying those rules automatically without the need for human intervention. They cannot make discretionary decisions: they will he made by staff.

    I give some examples where computers will appropriately make a decision. I take the field of child benefit. At present, for most child benefit and one-parent benefit applications, information is input to the computer. The system calculates awards and generates payments. The computer produces a schedule listing all of the awards that have been calculated over a given period of time and the adjudication officer signs to authorise all the awards on the schedule. While in theory the adjudication officer is deemed to be making a decision on each individual case, the reality is that there is no individual consideration in the vast majority of cases, of which there are nearly I million every year. The computer system calculates and awards benefit without any human consideration.

    Making provision in the Bill for automated decision-making will legitimise what happens at present. They will be able to calculate and award benefit in such straightforward cases without the need for human intervention.

    Clearly the initial factual data need to be accurately complete, and checks will be made to ensure that. With greater support from IT, agency staff will he able to concentrate on ensuring that all the necessary information and evidence which the claimant has supplied is collated and checked. That will lead to improvements in speed and quality, and should allow staff to refocus their efforts on overall customer services.

    Where decisions are made by an automated decision-making process, they will still be made in accordance with the facts and the law, and the customer's appeal rights will not be affected. The Secretary of State and departmental accounting officers will continue to be accountable to Parliament for all decisions made on their behalf, including those made by a computer. It is people, not machines or processes, which have responsibility and accountability for outputs and outcomes. Neither agency staff nor Ministers will hide behind any excuse which suggests that it was the computer's fault, and has nothing to do with them.

    I understand the concerns that lie behind the amendment and that it is novel for this Committee to be asked to endorse the specific use of technical equipment which we all take for granted in many other spheres of activity. However, I am sure that, on reflection, the Committee will appreciate the extent to which the amendment would inhibit the agencies in their objective of improving service delivery. It would substantially hinder our programme to modernise social security by retaining unnecessary breaks in our business processes.

    The amendment would mean a missed opportunity. It would prevent us from taking the organisation forward to a new level of efficiency and customer service. I can assure the noble Baroness that the system will not be brought into use until it is millennium compliant. For those reasons, I ask the noble Baroness to withdraw the amendment.

    The only part of that answer by which I was somewhat reassured was the very last part. I am grateful to the Minister for pointing out that the provisions of the clause will not be introduced until the equipment is proved to be millennium compliant.

    I hope that the DSS and the agencies will lead the way, because I am aware that other government departments are having difficulty in meeting the requirements. The Department of Health medical services have already said that there could be severe breakdown problems for their services in 2000.

    I am grateful to the Minister for defining the different areas in which computers will be used to make decisions and other areas where those decisions will be left to the officers. I shall obviously wish to read carefully her remarks in Hansard to see how far her answers meet my concerns. She was almost beginning to persuade me but I was somewhat wary when she referred to the success rate of the private sector with reference to credit reference agencies. I have had long service with the CAB and I have seen some of the heart-breaking, heart-rending results of the misapplication of information through those agencies. So I was a little put off at that stage from my initial welcome for what she said. As I said, I shall of course read most carefully in Hansard what she said. At this stage, I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Clause 2 agreed to.

    Clause 3 [ Use of information]:

    On Question, Whether Clause 3 shall stand part of the Bill?

    Before we part with Clause 3, will the Minister clarify some points? The clause relates to the use of information. As I understand it, information held by the department in relation to its social security, child support or war pensions functions can be used for other purposes. Will the Minister tell the Committee what those other purposes might be? I realise that the Minister probably cannot answer that question off the cuff, but I wonder what those other purposes might be.

    May I also have an assurance that the clause would relate only to functions within the department, and that it would not stretch, for example, to the Inland Revenue? I realise that those are detailed points of which the Minister has had no notice. If she cannot answer off the cuff, perhaps she would be good enough to write.

    If I mislead the noble Lord, I shall of course write to him, and the official spokesmen. However, my understanding is that this builds on the provisions of the previous Social Security Act which was brought forward by the Opposition when they were in government, which allows for data matching to ensure that information is not fraudulent or erroneous. It is data matching which would allow us successfully, I hope, to increase our efforts to combat fraud, which we all want to see.

    The question of the Inland Revenue may be one to which we should want to return on some future occasion when we may be introducing legislation associated with the CSA, when obviously such questions will be discussed. My understanding is that at the moment the provision applies, on the one hand, within the DSS, and the DSS and local authorities on the other. If I have any additional information to give to the noble Lord, I shall of course write to him.

    Clause 3 agreed to.

    Clause 9 [ Decisions by Secretary of State]:

    moved Amendment No. 7:

    Page 5, line 15, at end insert—
    ("(1A) The Secretary of State shall provide an explanation in writing, or other medium if that is more appropriate, of a decision which he makes under subsection (1) to any person who is directly affected by it, including a claimant for a relevant benefit.
    (1B) For the avoidance of doubt. the explanations provided under subsection (1A) shall be sufficiently full to enable a person affected by it to decide whether to apply for a review under section 10, 11 or 38 below, or make an appeal under section 13 below.").
    The noble Earl said: The purport of the amendment is to require that reasons shall be given for judicial decisions. The giving of intelligible reasons is a vital part of the doing of justice. There was once a judge who had the same facts before him at an interval of 20 years. Counsel, who was aware of that, had unwisely advised his client that he was certain of success. Of course he lost the case. Counsel, white in the face and stammering, said, "But these facts have been before you before, my Lord". The judge said, "I know, but they do not appear to me now as they appeared to appear to me then".

    If the judge did not have good reasons for that change of opinion, he is likely to have attracted a considerable amount of interest in the Court of Appeal. The giving of reasons is of course essential for discovering whether there is any ground for the laying of an appeal. It is therefore essential to the controlling of judicial power.

    It is also of course essential in making the thing intelligible to the claimant, because if the claimant does not understand what is going on, as is sadly too often the case, it encourages precisely that atmosphere of passivity in the face of an omnipotent welfare system, which the Green Paper expressed the Government's desire to bring to an end. That is a laudable ambition, but making the judicial processes intelligible to those who are subject to them is an essential part of doing that.

    I have a great deal of material here that I am sorry not to have been able to introduce on the previous amendment, but one cannot really say the same things twice, because of course reasons for decisions are often conveyed in the form of a computer-generated letter. That letter is itself often extremely hard to understand and extremely short on information.

    I have a few examples. One is of someone who was told four different levels of benefit over a period of four months. The communication said only:
    "This is to do with other money which you have coming in".
    That is a statement not of sufficient precision to be particularly verifiable. The local CAB tried to work out what was going on and was told by a Benefits Agency official that one of the items was probably due to someone pressing the wrong key in the office—that is the computer again—and that she did not have enough information to verify the rest.

    In another case someone was told that they could not have a jobseeker's allowance because:
    "the law says we cannot pay you".
    That is a case of we are here, because we are here, because we are here. I cannot see how that decision could have been verified, checked, or examined on the information available.

    Perhaps I may give another example that is equally confusing. The letter states:
    "I am sorry to tell you that we cannot pay you jobseeker's allowance from 3/10/97. This is because there is a change in the contribution information that we used to assess your claim. We have used the tax years ending 5th April 1992 and 5th April 1993 to assess your claim".
    I do not know whether the Minister got to the bottom of that—she possibly did—but I doubt that many other people did. The purpose of the letter was to inform the contributor that his entitlement to contributory jobseeker's allowance had run out and that he was going on to income-jobseeker's allowance. However, there is nothing in the letter from which that could have been deduced by the claimant or anyone else. Therefore, as a reason, it falls short.

    My final example is the computer-generated letter. It relates to someone being told that she had been overpaid £295.80 but was also entitled to arrears of £373.50. The letter stated:
    "We will owe you £77.70".
    But the computer ran and the letter continued:
    "Please pay hack the £295.80 as soon as you can. If we do not hear from you within 28 days we may begin civil proceedings".
    Computers really do need controlling. If I had received that letter I should have been in some doubt about what to do with it. We need proper, intelligible reasons both for the citizen's rights of the claimants and for the judicial accountability at appeal of those who made the decisions. This is a vital part of the controlling of power. I beg to move.

    6 p.m.

    I support the amendment which also stands in the name of my noble friend Lord Higgins. I do not wish to pre-empt what may be said by the noble and learned Lord, Lord Archer of Sandwell. The amendment seeks to establish a minimum standard which all notifications of decisions must reach. It requires that the explanations must be comprehensive enough to enable the claimant to decide whether to apply for a review or to appeal. The noble Earl, Lord Russell, gave us prime examples of where things can go wrong. I shall take a leaf out of his book and will not seek to repeat all that has been said. I merely endorse his comments.

    It seems right that on grounds of natural justice someone who is refused benefit should then be entitled to know exactly why it has been refused. It sounds exactly like the kind of amendment which the noble Baroness, Lady Hollis, would have supported when she was on these Benches. Indeed, I heard the noble Baroness say just that on many occasions. I am sure that it is fair to quote exactly what a Minister said, as a noble Lord or noble Baroness would quote Members on these Benches, too.

    When the matter was debated in Committee in another place, the Minister claimed that the Government will specify in regulations that claimants must he notified fully and properly of decisions regarding their claims and that regulations will specify how that should be done. The Minister in another place acknowledged that the Government have an extra duty with regard to that because the Bill imposes on claimants a much greater responsibility to provide evidence and information before their claims will be processed and before the date from which benefit may be paid is to he established. That is exactly the point I am making. The Bill requires extra diligence on the part of the claimant; extra diligence which I do not oppose. However, that extra diligence is specified on the face of the Bill. Why should we then not put on the face of the Bill the quid pro quo; the extra diligence of the Government in explaining decisions to the claimants?

    In Committee in another place, my honourable friend Mr. Burns pointed out the great difference between primary and secondary legislation. Today, my noble friend Lord Higgins referred to that matter. We need to keep it at the forefront of our minds when determining whether to relegate certain decision to secondary legislation. Secondary legislation by its very nature cannot properly be scrutinised by either House. Indeed, in another place some secondary legislation may be taken on the Floor of the House, hut, as noble Lords will be aware, as a proportion of the number of statutory instruments taken in any one year that is minimal. We in this House may discuss such matters, but there are some self-imposed inhibitions on these Benches as to what we do about them in regard to voting.

    I hope that the Minister will not tell us that the best way forward is simply to plough ahead with regulations on this matter because that would be contrary to what every Opposition spokesman from the noble Baroness's party has been telling the country and this House for the past 18 years. My views on the matter have been consistent. When I was a member of the Social Security Advisory Committee, when my party was in Government I expressed concern about the use of regulations. I do so now and I shall continue to do so.

    The report of the Delegated Powers and Deregulation Committee makes it clear that the large number of delegated powers in the Bill means that we should approach it with caution. In paragraph 1, the committee points out that:
    "The Bill constitutes an overhauling of much of the social security system, and the consequence is that arrangements which are well known and seen as fair will come to an end. For this reason, it is important to consider in some detail the regulation-making powers which will result in new and as yet untested arrangements".
    I hope that the Minister will be able to reaffirm the fact that she recognises the difference between primary and secondary legislation, as clearly as she did in Opposition, and that she will accept the amendment.

    I would not presume to embellish a case which has been made by the noble Earl, Lord Russell, or by the noble Baroness, Lady Anelay. I venture to support it. There are three reasons why there is much to be said for having to give reasons. First, as a discipline, it assists those who have to take the decision. If you have to give reasons why you are doing something you have to think your way through the problem. You have to ensure that the conclusions follow from the premises and that the whole thing hangs together.

    Furthermore, it is extremely good discipline to find yourself explaining an issue in a way which can be followed by those who do not necessarily share your technical knowledge. For 26 years in another place, I tried to test everything that I did by asking myself the question, "Can I explain this at ten o'clock on a Saturday evening in Rowley Labour Club?". Frequently I would have to do so and if I could not I thought about it again. That is the first reason why I believe that the amendment will improve the quality of decisions if we require those who make them to explain them.

    Secondly, reasons help the claimant to understand what is happening. If the decision is right it is much better that the claimant should know clearly that it is right and why, if only because that may prevent many totally unmeritorious appeals. One of the difficulties which the ITS must cope with relates to appeals which have no prospect of success, but which are brought because the right decision has not been explained to the claimant. If the decision is wrong the claimant and those advising him will be able to see the reasoning. They will be able to see that the argument is wrong and point to where it is wrong. That will save them and everyone else a great deal of time and enable them clearly to present a letter of appeal and the case.

    Thirdly, it is a great advantage for those who finally have to adjudicate on the appeal. Those who adjudicate frequently have the papers beforehand, although not invariably these days, and that is a matter which we may debate on some other occasion. But if you have the papers before the hearing of an appeal and you have before you set out clearly the reasons for the decision, you can see whether it seems persuasive. You will obviously have to hear the arguments. Someone may point out something that you have overlooked. But you may say, "That looks right to me", or you may say, "No, they have gone wrong here and I can put my finger on precisely where they have gone wrong". That will save an enormous amount of time at the hearing.

    As I understand it, the whole purpose of the Bill is to try to save time and resources at the appeal hearings. Therefore I hope that when my noble friend replies she will at least agree with the principle behind the amendment and that those who take decisions should give clear and comprehensive reasons for those decisions. I hope that she will go on to say—although I see that it is a separate argument—that that should appear on the face of the Bill.

    Those of us who have been in government know that when you are in government you tend to be rather more resistant to things appearing on the face of Bills and prefer to reserve them to secondary legislation than is the case when you are on the Back Benches or Opposition Benches. However, I hope my noble friend is persuaded also in that regard.

    6.15 p.m.

    This amendment seeks to place on the face of the Bill a requirement for the Secretary of State to provide an explanation, in writing or by some other means, of a decision to any person directly affected by it. It also requires the explanation to be sufficiently full to enable the recipient to decide whether to apply for a revision, supersession, or Social Fund review, or an appeal.

    I agree entirely with the comments made by my noble and learned friend Lord Archer of Sandwell when he set out the three reasons behind this amendment. It is important to improve the quality of decisions. It is important—indeed, essential—that claimants understand decisions. I accept that it is a clear advantage to those who are charged with the burden of adjudicating on appeals.

    It will be apparent from what I have just said that, while I understand and sympathise with the thinking behind the amendment, I hope that I can explain why I do not believe that this is the right way forward. In other words, there is not an objection to the concept behind the amendment but rather an objection to the means of achieving it. It is the last point made by my noble and learned friend which I address as to whether it should be on the face of the Bill or dealt with in regulations.

    Clause 13(5) of the Bill requires that persons with a right of appeal be given such notice of their decision and right of appeal as prescribed in regulations. It is our intention to use the regulation-making power in that subsection to ensure that customers are notified fully and properly of decisions on their claim. If we have not made that sufficiently clear up to now then I accept that that was remiss of us, but that issue has never been in doubt. Of course, customers must understand why decisions have been taken and what their responsibilities are. We want them to be able to play a more active role in future. So our side of the equation is that we must do more to ensure that the way in which we notify customers is clear and informative.

    I pause there to comment on the examples given by the noble Earl, Lord Russell. It is accepted that we have been inadequate on occasions in the past and it is accepted that improvements are essential, particularly if this new regime is to achieve its objective. There is no doubt that there is definite room for improvement, and single-status decision-makers and outcome decisions provide the opportunity for those improvements.

    Outcome decisions will place the onus on clients to dispute an aspect or aspects of a decision which they believe to be wrong. However, to enable them to do that they must have better, clearer explanations of decisions. The explanation which they receive will make it clear what factors were considered in reaching the decision, thereby enabling them to identify whether there is truly something which would justify taking further action.

    As I said, it is essential that we notify customers in a clear and informative way of the decision which has been taken. We must also tailor the way in which we explain matters to the needs of particular customers.

    We shall need to give explanations in a permanent medium and the majority will continue to receive explanations in writing. But there may be issues, for example about non-Braille reading blind people, where another medium would be more appropriate. As we look to the future we shall wish to make greater use of new technology in all our communications.

    By offering an improved service and improving the structure and content of our written notices, we shall aim to help customers to be better able to exercise their choices; to seek a revision of a decision from the agency; or to pursue an appeal to an independent tribunal.

    As I have said, I accept that there is room for improvement, as the noble Earl has clearly illustrated. But we believe that all those provisions are more appropriate to secondary legislation. Perhaps I might take up the point made by the noble Baroness, Lady Anelay, about why there are such wide-ranging regulation-making powers in the Bill. The aim of the proposals is to introduce further flexibility in handling social security matters. That would be limited if the detailed proposals were set out in primary legislation. The regulation-making proposals have been scrutinised by the Delegated Powers and Deregulation Committee and it has commented on them. My noble friend Lady Hollis will deal later with some aspects of those comments.

    In drafting the new legislation, we have tried to strike a balance by setting out a framework of rights and responsibilities in the Bill and leaving the detail to secondary legislation and guidance so that the department is in a position to respond to change over time and to incorporate lessons gained from practical experience. I hope that I have explained the position to the noble Earl, the noble Baroness and my noble and learned friend Lord Archer. With those explanations, I invite the noble Earl to withdraw the amendment.

    I am grateful to the noble and learned Lord for a great deal of what he said. I am grateful to him for what he said about Braille and I am grateful to him in particular for his admission that things have been going wrong. There rests between us only the final point touched on by the noble and learned Lord, Lord Archer of Sandwell, in a speech which I thought had very great force; that is, the question of the face of the Bill.

    I wonder quite how well every person who works in a benefit office knows every regulation which comes out of the Department of Social Security. I am sure that there are not many who do. I wonder also whether the method of regulation-making which tends to go for a process of total enumeration and always forgets some categories is precisely the right vehicle for an obligation which should be expressed in general terms and be capable of being applied to situations which have not been foreseen.

    But since I shall be returning to the regulation-making power and its limitations on Amendment No. 9, I beg leave to withdraw the amendment now and return to the issue of regulations on Amendment No. 9 and no doubt on many other occasions.

    Amendment, by leave, withdrawn.

    moved Amendment No. 8:

    Page 5, line 29, after ("138(1)(a)") insert ("or (2)").
    The noble and learned Lord said: This amendment simply ensures that the current rights of appeal against decisions about cold weather payments and winter fuel payments are maintained. Unfortunately, reference to those payments was omitted from the list of relevant benefits in Clause 9. Indeed, that may be an illustration to the noble Earl, Lord Russell, that it is not only in regulations that omissions are made. Clause 13 uses the list to define which decisions may be appealed. Without the amendment, appeal rights would be lost for these payments. The amendment will correct that error and preserve the appeal rights. I trust that Members of the Committee will agree to the amendment. I beg to move.

    On Question, amendment agreed to.

    Clause 9, as amended, agreed to.

    moved Amendment No. 9:

    After Clause 9, insert the following new clause—
    DECISIONS BY SECRETARY OF STATE: SUPPLEMENTARY
    (" .—(1) The Secretary of State shall, in such manner as is prescribed, inform with sufficient particularity a person wishing to make a claim for a relevant benefit what information and evidence is required to support the claim.
    (2) Where the Secretary of State makes a decision awarding a relevant benefit, the claimant shall he entitled to payment from no later than the date when the claim for it was made.
    (3) For the purpose of subsections (1) and (2) above, "relevant benefit" has the same meaning as in section 9 above.").
    The noble Earl said: I promised to return to the issue of regulations. The amendment now before the Committee says that the Secretary of State must tell any person who is making a claim what information and evidence is required to support such a claim. It also stipulates that when the Secretary of State,
    "makes a decision awarding a relevant benefit".
    the payment should begin from a date,
    "no later than the date when the claim for it was made".
    The amendment would reverse the onus of proof regulations which came into force in October 1997. The effect of those regulations was that, if evidence was supplied within one month, the claimant got the benefit from the date of the claim. However, if the evidence took longer to come in than one month, the benefit started from the date when the evidence was submitted. It was held that the purpose of this was to give claimants an incentive to submit information rapidly.

    The point about benefits is that if a person has no other means of support—and normally that applies to a claimant for means-tested benefit—he or she needs that money urgently and instantly. People do not need any further incentive to submit a claim urgently. In those regulations, which this amendment would revoke, it was recognised that there were certain cases in which this requirement would apply unjustly. So the regulations attempted, by the usual regulation method of total enumeration, to list all the cases in which exemption from the requirement to supply information within one month would be justified. There was an exemption for those who had a physical, mental, learning or communication difficulty in cases where it was not reasonably practical for someone else to assist them. However, the list left out a possibility which is quite likely to arise: namely, that people in such a situation might not know that they require assistance. I have in mind, for example, the person who did not put in a claim for a very long time because she was in a mental hospital, under another name and in another part of the country. How could she possibly have known that she required assistance? Indeed, that is an actual case which comes from the CAB in Richmond.

    The list also leaves out, for example, ordinary illness. It leaves out undiagnosed depression, which is one of the commonest reasons for people who should have done something not doing anything about it. Above all, it leaves out the one thing that the department always claims for itself when it is taking powers by regulation—the final category of, "some other reason why". I have never known a regulation from the Department of Social Security regarding taking powers which it did not specify at the end of the reasons why it might use such powers, the phrase: "some other reason why".

    What is sauce for the goose is sauce for the gander. If the department can take powers which it may need for, "some other reason why", claimants may be entitled to make a late claim for, "some other reason why". For example, someone may have been staying with relatives at the other end of the country; or, indeed, there may have been a strike in the local post office. I have received practically no post for a week now for that very reason. That is why it is on my mind.

    I believe that a general entitlement would be rather better than this attempt to enumerate every possible reason in regulations and, necessarily, missing a great many of them. That is why regulations are always capped by regulations and by other regulations on top of them. Therefore, Ministers become, as I once put it, "piddlers" as garages would say: always topping up the radiator with a little bit of water. One cannot possibly enumerate all the cases. As one cannot do so, regulation is often not the best method. So I believe that a general entitlement would work a great deal better. I beg to move.

    The proposed new clause seeks to place new statutory obligations on the Secretary of State to inform claimants of evidence requirements and to award benefit from the date when benefit was claimed, regardless of when supporting evidence is provided. However, before addressing the amendment, I hope that I am not seen as a "piddler"; indeed, I have never been described as one until today. Like the noble Earl. Lord Russell, we do not want people to lose benefit to which they are entitled. However, we believe that customers should have clear responsibility for making claims and providing basic information in support of them. They should be able to understand what is expected of them and the implications of their failure to do what is necessary. We believe that the best way to achieve this is through agency communications and procedures, not through regulations.

    Perhaps I may pause here and deal with one of the points made by the noble Earl about people who are suffering from incapacity and who are, therefore, unable to provide the necessary information. The measures that we propose will not penalise those who cannot provide the necessary information—for example, because they have physical or learning difficulties or because the information is unavailable. The claim forms have been simplified and clarified so as to ensure that those who are able to help themselves do so.

    We do ensure that customers know what is expected of them. Income support and jobseeker's allowance claim forms have been revised to show what evidence is required and when it should be provided. These changes are important to clarify roles and responsibilities for clients and staff alike. Claim forms for other benefits already request the required information, and we will be looking to improve these forms further to reflect the changes made to the income support and jobseeker's allowance claim forms. There are exemptions in the current regulations, as referred to by the noble Earl, to protect vulnerable groups. In particular, certain people who have genuine difficulty in obtaining information are not required to do so. That will continue under the new arrangements.

    I believe it is right that people play an active role in enabling their benefit to be correctly determined. But, importantly, without the right evidence it is simply not possible to reach proper decisions and put the right payments into effect. It is more helpful to make customers aware of what is needed of them so that they can get their entitlement paid promptly.

    I turn to the drafting of the amendment now before the Committee. Subsection (2) of the amendment could lead to anomalies. There are many circumstances in which we encourage people to apply for benefits early. For example, retirement pension can be claimed up to three months before retirement age is reached, although it is not paid until the date of retirement. If this amendment were adopted and the date of claim were always the date of payment, we might find that payment of benefit is allowed where there is no entitlement. Similarly, claims are often made in advance by people who have left work and have received wages in lieu of notice, so that benefit can be paid promptly when the period covered by their wages ends.

    Under this amendment benefit would appear to be payable at once, although there would be no entitlement. If this amendment were passed, the only practical solution would be to stop taking claims early, which could in turn result in delaying payments to customers and cause potential hardship. I am sure that that is the last thing the Committee would wish. There are already provisions to ensure that people receive benefit from the appropriate date of their entitlement. I assure the Committee that we shall not disturb those in any way. I invite the noble Earl—with such assurances that he takes from these comments—to withdraw the amendment.

    6.30 p.m.

    I thank the noble and learned Lord for that reply. Had I been minded to press this amendment his comments on the proposed new subsection (2) of the amendment and its drafting would have persuaded me not to do so. Nevertheless I think there is a case here to be considered. I was, of course, aware of the exceptions that he outlined. However, the difficulty with these exceptions for vulnerable people is that they must be claimed, which means of course that it is precisely those people who most need to do so who are least likely to be able to claim an exception. Let us consider, for example, a schizophrenic who fails to take his or her medicine. It is almost impossible to persuade such a person to do anything whatsoever.

    Let us consider also the case to which I referred of undiagnosed mental illness, especially depression, and the possibility of other serious impediments which are not mentioned. For example, there is no mention of having to attend funerals perhaps in other parts of the country or even in other countries. There will be many more reasons for late claims than any regulation can possibly allow for. Putting the burden on the claimant to make a claim who is already vulnerable and already in difficulties, will mean that those who are least entitled to the exception are most likely to get it. I wonder whether that is quite just or particularly effective. I hope the Government may think further about this. For the time being I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Clause 10 [ Revision of decisions]:

    moved Amendment No. 10:

    Page 6. line 14, leave out subsection (2) and insert—
    ("(2) When considering whether to make a decision under subsection (1) above, the Secretary of State shall consider any issue which appears to him to be relevant to the claim, so however that he shall not revise the decision in question so as to terminate an award of benefit or reduce its amount unless he is satisfied that it was given in ignorance of, or was based on a mistake as to, some material fact, or was erroneous in point of law.
    (2A) For the purposes of subsection (2), "relevant benefit" has the same meaning as in section 9 above.").
    The noble Lord said: At present Clause 10(2) provides that in making a decision to revise an earlier decision,
    "the Secretary of State need not consider any issue that is not raised by the application".
    We have tabled this amendment to seek to remove that exemption for the Secretary of State—or, in practice of course, the adjudicator—to make sure that the adjudicator is bound to take into account any relevant issues whether or not they are raised on the application. It is surely a basic principle that decisions should be correct as far as possible. If there is an application for revision of an earlier decision, surely it should be the duty of the adjudicator to take into account any issue which he or she thinks is relevant.

    I recognise that there may be some problems if the adjudicator is a computer. Nevertheless it is surely not beyond the ability of computer programmers nowadays to programme the computer to identify circumstances where relevant issues that might be raised on the application have not been raised, and therefore alert the computer's "minder" to the need to look into further aspects of the case. There is a principle of civil law that an appellate court is not bound to consider a point of law raised for the first time on appeal, but has a discretion whether or not to do so. But this of course is not an appeal; it is a revision of the original decision. In those circumstances all the circumstances which gave rise to the original decision, or which might indicate that it is wrong, should surely be considered. It is wrong to apply to the adjudication procedures the strict rules governing appeals in civil actions where both parties are likely to be represented.

    Applicants are unlikely to know much about social security law. They will certainly know less than the adjudicator, whether or not the adjudicator is a computer. No doubt if there is a serious relevant issue of which the adjudicator is aware, the adjudicator will raise it. But why should the adjudicator not be bound to do so? Why should it simply be left to the adjudicator's discretion, recognising, of course, that the adjudicator cannot raise an issue of which he or she is not aware?

    The amendment also proposes that, first, a downward revision of the original award should be possible only where the earlier decision is plainly incorrect; that is, based on a wrong view of the facts or law, and, secondly, that it should not be possible to revise a decision downwards just on the exercise of a discretion where the revising adjudicator disagrees with the original adjudicator's exercise of that discretion. It is entirely wrong that in such cases there should be any question of the recovery of an over-payment made on the basis of the original decision. This might arise unless there is a regulation to prevent that happening.

    In those circumstances I hope that the Minister will explain why it is thought necessary that the adjudicator should be given the power not to take into account relevant issues simply on the grounds that they are not raised on the application. For my part I find it extremely difficult to see why there should not be such a duty. I beg to move.

    I welcome the opportunity presented by the noble Lord, Lord Goodhart, in setting down this amendment as it enables me to explain our thinking in an area where the Government's intentions are clearly causing concern, not only to the noble Lord. I am aware that other members of the public have expressed similar concerns about this matter.

    As the noble Lord has pointed out, the amendment would do two things. First, it would reintroduce, in statute, the concept of formal grounds for revision where an award was to be terminated or reduced. It would also move away from concentration on that part of a decision which is disputed or which appears to be wrong to the position where undisputed aspects of a decision must be revisited.

    The amendment goes to the heart of our proposals on improving customer services. Services which simplify complicated, bureaucratic processes, which reduce delays and which cut out waste are central to the Government's welfare proposals and result in more efficient, customer focused services. Clause 10 is a key component of those proposals. It is about revising decisions which appear to be wrong. I think we would all agree that this should be a simple, easily understood process. Yet current law requires customers to seek review by means of an application in writing to an adjudication officer, stating the grounds of the application. That is neither simple nor easily understood. Customers are constrained by a complex legal framework set out in statute and with rules which differ from benefit to benefit and from agency to agency.

    In future our approach will achieve two things. First, it will make the claimants' task easier. They will need only to say in their own terms what it is they do not like about a decision. They will not have to translate their objection into one of the more formal grounds. Members of the Committee with experience of these matters will agree that the requirement to set out grounds for a review can cause problems at present. For example, when does a change of medical opinion amount to a relevant change of circumstances? Sometimes it is not easy for the expert to interpret these matters and it is certainly not easy for the average claimant.

    Secondly, our approach makes the best use of limited resources. By focusing on the issue that is being queried cases will be dealt with more efficiently. When a claimant writes in to query a decision, agency staff will not have to look at every aspect of a claim. Their time will be better spent by focusing on the issue that has been raised and moving quickly on to the next case.

    In the long run, the time saved should lead to a more comprehensive and better service for all claimants.

    When reconsidering a decision under this clause it is entirely reasonable that there should be no obligation for the decision-maker to consider the entire matter afresh. Customers should play an active part in identifying and voicing their concerns. This will enable decision-makers to focus on the issues raised by the customer and place the responsibility for reporting changes and disputing decisions firmly with customers. I stress that there is nothing in our proposals to prevent the investigation and correction of errors which have not been raised by the claimant.

    Dealing with the point raised by the noble Lord, it could be argued that every aspect of the decision was relevant. It would be a waste of time and effort to re-address every single aspect of a decision, even where there was no question of it being likely to change.

    Clause 10(2) allows the decision-maker to take a wider look at any decision where he or she thinks it is appropriate. In other words, decision-makers will be free to reconsider any aspect of the application, whether or not it is raised by the customer, if they believe there are other errors. It would be unreasonable to ignore a clear error solely because it had not been raised by the customer—this would simply create problems for the future—but what we do not want is an automatic opening up of every aspect of the dispute in every case. Your Lordships would find that equally imprudent.

    In the second part of the amendment the noble Lord appears to want the more straightforward approach to revising decisions to be used only when it results in an increase in benefit—not where the benefit is reduced or terminated. I fully appreciate the noble Lord's concerns. Changing benefit awards—whether upwards or downwards—must not be done at the whim of decision-makers; there must be good reasons. Customers and other users of the benefit system would quickly lose confidence in it if decisions were seen to be taken in an arbitrary manner.

    That will not be the case. As now, all decisions will continue to be made on the basis of the facts and the law. Regulations will contain the grounds for a decision to be changed, and detailed guidance, which will be published, will include examples to help agency staff, claimants and their advisers alike.

    Customers can be assured that before any decision is revised there will have been a thorough examination of all the relevant issues. Constraints against "whimsical" or arbitrary decisions will continue to be an integral part of the legal framework for revising decisions. Our approach simply allows that process to be easier for claimants and staff alike to understand.

    I hope with this explanation that the noble Lord will understand why the amendment cannot be accepted and I would invite him to withdraw it.

    I am grateful to the noble and learned Lord for his explanation.

    We do not oppose Clause 10 and give a warm welcome to any proposal for simplification. In particular, we are pleased to hear that the claimants will be entitled to have a decision revised simply on the basis of saying that they do not like that decision.

    The noble Lord then went on to say that "customers"—an expression which I do not like—should focus their own application. That is inconsistent with the idea that they only have to say that they do not like the decision. Another problem is that the claimant or customer might be unable to focus the application without help, which is difficult to obtain.

    I do not intend to press the matter further this evening and I will ask leave to withdraw the amendment. I am not altogether happy with the answer of the noble and learned Lord. We do not propose that there should be anything in the nature of a total re-investigation every time there is a revision. It should be the duty of the adjudicator not simply to take an application at face value but to think as far as possible whether there are issues which are likely to arise and have not been raised. We are only asking that the adjudicator considers an issue which appears to him to be relevant to the claim. So he must be aware of the issue and must think it relevant. If those two conditions are satisfied, there is a case for saying that the adjudicator "must" and not merely "may" take those things into account.

    I shall read in Hansard what the noble and learned Lord has said. For the time being, I ask leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    6.45 p.m.

    moved Amendment No. 11:

    Page 6, line 23, leave out subsection (5) and insert—
    ("(5) Where an application has been made under subsection (1), for the purpose of any rule as to the time allowed for bringing an appeal, the decision in question shall he treated as made on the date it is revised or the date the Secretary of State notifies the claimant of his refusal to revise.").
    The noble Lord said: Here again we are looking at a matter under Clause 10. Subsection (5) says:
    "Where a decision is revised under this section, for the purpose of any rule as to the time allowed for bringing an appeal, the decision shall be regarded as made on the date on which it is so revised".
    So far so good, but that leaves a lacuna because what is to happen if the decision is that the original decision is not to be revised? We seek to clarify when the time limit for appeal starts running where the original decision is not revised.

    The time limit should run from the date of the Secretary of State's decision on the application to revise, whether the decision is to revise or not to revise. In another place the Government said that this was unnecessary because, if a decision was not revised, a claimant would still have one month to appeal from the date of that decision. It is not clear that that is in fact the effect of Clause 10(5) as it stands. As a lawyer, I would expect a judge to hold that subsection (5) does not apply where the original decision is not revised and that the time in those cases runs from the original decision. That point needs clarification.

    The time should run also from the date of notification, not from the date of the decision. The regulations should provide for a presumption, in the usual way that notification has been received on the next working day after posting if the notification is sent by post. That is a technical matter.

    I hope that the point about the running of time for an appeal, or where there is an application for revision which is rejected, can be clarified.

    As the noble Lord has said, he is rightly concerned about the claimant's right of appeal once the Secretary of State has dealt with an application for a decision to be revised.

    There are three possible situations. The first is where the Secretary of State actually refuses to act on the application because she considers that it is without foundation—that is, that the reasons provided are such that there is no question of the decision being revised. A ludicrous example would be where someone applied for extra benefit for their pet cat or budgerigar. Clearly this is meaningless in benefit terms and the applicant should not expect to receive consideration. This refusal to act on the customer's application will not be a decision under Clause 10(1). Therefore it will not carry a right of appeal under Clause 13(1). Of course, I can reassure the Committee that the claimant will still have the right of appeal against the original decision. Some claimants may have less time in which to appeal because of the time that has to be taken to notify them of the Secretary of State's refusal to act on their application. We intend to make provision in regulations to allow such claimants a reasonable time to lodge an appeal.

    The second situation is where the Secretary of State acts on the application but does not change the award. This would happen where the claimant raises a point of substance which requires the Secretary of State to reconsider her decision, but it transpires that it does not affect the amount of the award. This action would generate a new outcome decision, and the claimant would have a month to dispute or appeal against the new decision. For example, a claimant may notify the agency of the birth of a child. This would result in an increase in income support. At the same time, the claimant's part-time earnings increase, which would result in a reduction in income support. If those changes cancel each other out, the net result would be that the benefit remains the same. But there would have been two changes of circumstances which would have required the Secretary of State to reconsider and revise her decision.

    The third situation is where the Secretary of State acts on the application and changes the award. Again, this would generate a new outcome decision with a new dispute period with a fresh month in which to lodge an appeal.

    The amendment seeks to ensure that where a decision is reconsidered but the award is not changed, the customer not only retains a right of appeal but has the time to exercise that right. As I hope that I have explained, this will be the case.

    More importantly in terms of the amendment, this is already catered for on the face of the Bill by Clauses 10(5) and 13(6). With that explanation, I hope that the noble Lord will withdraw the amendment by virtue of it being unnecessary.

    My Lords, I still have some difficulty with the provision. Clause 10(5) states,

    "Where a decision is revised … the decision shall he regarded as made on the date on which it is so revised".
    Clause 13(1), the appeal section, states:
    "This section applies to any decision of the Secretary of State … (whether as originally made or as revised under section 10 above)".
    It is clear that, where the matter is considered again but the decision is taken not to alter the original decision, the relevant decision against which the appeal is to be made is the original decision because it has not been revised under Section 10.

    I accept that the matter could be covered in regulations. However, I am not clear whether the noble and learned Lord the Lord Advocate is giving an undertaking to do so or whether the matter has not yet been considered. I wonder whether I can ask for his response.

    As I said earlier, we intend to make provision in regulations to allow claimants a reasonable time to appeal if the period has been delayed by virtue of the application to the Secretary of State and the notification has caused further delay.

    I accept that it is an appropriate matter for regulations. On the basis of that statement, I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Clause 10 agreed to.

    Clause 40 agreed to.

    Clause 11 [ Decisions superseding earlier decisions]:

    moved Amendment No. 12:

    Page 6, line 29, leave out ("subsection (3)") and insert ("subsections (3) and (3A)").
    The noble Lord said: Before I move the group of amendments and the new clause concerning directors' liability for national insurance, I think that it would be helpful to give the Committee some information about how the Chancellor of the Exchequer's announcement in his Budget on changes to the national insurance regime could affect this Bill.

    Noble Lords on the Front Bench opposite have been consulted about this and have agreed that I should clarify matters in advance of more detailed discussion on those aspects of the Bill which might be affected. I beg the indulgence of noble Lords.

    The Chancellor of the Exchequer announced a number of significant changes in national insurance as part of his strategy to reduce the barriers to lower paid employment and further to align the tax and contributions regimes so as to streamline administration, and thereby help businesses.

    Some of these changes require primary legislation, and must be brought forward urgently so as to allow time for them to be implemented by April 1999. We therefore propose to bring forward new clauses to this Bill in the following two areas only: first, alteration of the structure of some of the earnings bands and rates used to calculate national insurance contributions. Essentially, the new clauses will provide for three changes: first, the abolition of employees' national insurance contributions on earnings up to the lower earnings limit—the so called entry fee for employees; secondly, the abolition of employers' contributions on earnings up to the single person's tax allowance—the employers' entry fee; and, thirdly, the replacement of multiple "earnings bands" and contribution rates for employers' contributions with a new single rate payable on all earnings above the single person's tax allowance. The present system of contracted out rebates will be maintained.

    While these measures will simplify national insurance, the legislative changes themselves are more complex. It will unfortunately not be possible to bring forward amendments until Report stage. There will be an opportunity for full consideration of the changes at that stage. I am sure noble Lords will be pleased to learn that these changes command widespread support from business. Secondly, we will also introduce a new clause to mirror in national insurance, changes to the income tax treatment of shares which are subject to the risk of forfeiture or that are convertible.

    It is essential that we should take action now to ensure that the tax and contributions regimes are consistent in their treatment of different types of earnings. The income tax change will be introduced in another place through the Finance Bill and will take effect from 6th April. We therefore need to take this opportunity to ensure that our national insurance changes can be made within a similar timescale. To keep to a minimum the period over which income tax and national insurance positions are out of step, the clause will apply to shares awarded from the date that the clause is tabled for Report.

    The Chancellor of the Exchequer also announced that, in line with the Taylor recommendations, administration of national insurance carried out by the Contributions Agency would be transferred to the Inland Revenue from April 1999.

    There are two key areas of this Bill which are potentially affected by this: the arrangements for appeals against national insurance decisions; and the new penalties and distraints regime for the Contributions Agency. Noble Lords will be aware that there are amendments relating to the appeals arrangements for national insurance which my noble and learned friend the Lord Advocate will be speaking about later on in this Committee. I do not wish to open that debate now; but I can advise noble Lords that we will be considering carefully the implications of the planned transfer of responsibilities for appeal arrangements on contributions issues. Much complex detail needs to be considered. We do not therefore propose to bring forward any amendments to appeals arrangements in this Bill as a consequence of the planned transfer, but we will be looking carefully at the options. The Government will bring forward legislation in due course to make necessary changes flowing from the transfer of responsibilities to the Inland Revenue, and conclusions on the appeals arrangements will be reflected as necessary in that legislation. That will give Parliament the necessary time to scrutinise the implications in appropriate depth.

    Similar considerations and a similar approach will apply to the measures on penalties and distraint for national insurance which also form part of the current Bill, and where some adjustments to the legislative structure are likely to be needed to support administration of these arrangements within a single organisation.

    I mention now an issue on which we might need to return to the House. To ensure continuity of service to contributors and employers, some preparatory expenditure may need to be incurred in advance of Royal Assent of the transfer legislation itself. It is possible that the Government may need some additional powers to permit that. We are addressing the issue urgently and, if it seems that a further amendment to the current Bill is necessary, we will bring it forward at a later stage. I am grateful for the opportunity to make that announcement. I hope that noble Lords will find it helpful.

    I should now like to return to the amendments standing in the name of my noble friend—

    7 p.m.

    Perhaps the noble Lord will allow me to intervene. We are already engaged on a Bill of which a number of clauses are being taken in a very complex sequence. That in itself presents some difficulties. The noble Lord's statement is in one sense helpful. I must confess that I am suffering some culture shock. There is little doubt that in another place it would have been out of order to make the announcement at this point; but clearly in this House we have a more flexible arrangement, which is perhaps a great advantage. However, I suggest to the noble Lord that it might be better if we discuss the points that he has made up to now without mixing them up with the amendment to which he is speaking, which is concerned with the responsibilities of company directors and, with great respect, has absolutely nothing to do with what he has said up to now. It would be slightly less confusing—I will not say disorderly—if we were to comment on what he has now said before going on to debate the amendments themselves. Perhaps the noble Lord will consider whether that would be a better way of doing things.

    Certainly, if noble Lords would like to make any points regarding what I have just said, we could take them now.

    If we could proceed in that way. I think it would be for the general convenience of the Committee.

    Perhaps I may therefore refer to a number of points arising from the noble Lord's remarks. I am not quite clear to what extent the changes that he now proposes as a result of the Chancellor's Budget will require an amendment to the Long Title—as I understand it, it is possible to make such an amendment in this Chamber. These matters would seem to be somewhat outwith the title as it stands.

    As I understand it, the noble Lord proposes to make some further changes involving amendment of the financial resolutions that will appear in another place. In Committee in the other place those were made available. Is the noble Lord saying that these changes in the financial resolutions will eventually appear, I suppose, when the Bill returns to another place, on the basis of the amendments that have been made?

    The confusion arises since, to a considerable extent, the Government now propose to introduce into the Bill a number of changes which might be regarded as budgetary matters. They may not, strictly speaking, be budgetary matters—although almost everyone now regards national insurance contributions as a tax, technically speaking that is not the case.

    That said, it would seem that the Government propose to introduce at a later stage a number of amendments which are fairly wide of the Bill as it stands, but do not propose to introduce corresponding amendments in relation to the appeals procedure; they are apparently to be introduced in some other legislation. Will the Minister say whether that will be primary legislation or by order? By what means will these repercussions from the Budget changes, which have been announced, be subsequently introduced? They are not to be introduced in this Bill, although they affect appeals. I think I got that right; it is a little complicated.

    It may well be that a number of people outside have studied carefully the changes made in the Budget and are producing highly sophisticated and complicated suggestions; and it might be to the general good that they are accepted. However, they were not expecting to have the measures introduced along with this Bill immediately after Easter. Have the Government already put out a press release about these matters which will at least alert the outside interests, some of which may be affected quite significantly and may have sensible suggestions to make with regard to the way in which the proposals might be implemented—under this Bill or otherwise? If the Government have not issued such a press release, are they considering whether to do so?

    The Committee will appreciate that I am saying all of this straight off the top of my head, apart from a brief letter which the noble Baroness courteously sent me. However, I had not quite realised what the Government were going to say this afternoon. As I say, I am suffering slightly from culture shock, but will endeavour to adjust myself to the circumstances.

    Perhaps I may express my sympathy with the noble Lord, Lord Higgins, in relation to the culture shock that he is experiencing, both as a recent Member of the other place and as a former Treasury Minister. But there is a clear procedural distinction between taxation and national insurance. I think it is understood that national insurance, right back to 1911, is treated in this Chamber just like any other legislation. I should have thought, subject to correction, that it is therefore within the words of the Long Title:

    "to make further provision with respect to social security".
    I take the noble Lord's point about a press release, and hope that that may be done. My noble friend Lord Thurso, for example, might well have wished to be present had he known that this matter was coming forward. While I thank the Minister and her department for their great care in keeping us notified as to what was being done, inevitably they could not send that notification to every Member of this place, any more than I was able to send it to every Member on my Benches. Therefore, a press release might be useful.

    The procedure obviously is confusing, though I believe it to be for the convenience of the Committee. Because this House is sovereign over its own procedure, it can do things, if there is general agreement, that it is for the convenience of the House that it should. I believe that it is, but I have listened extremely carefully and taken note of the points made by the noble Lord, Lord Higgins.

    Of course I understand the distinction that the noble Earl makes between taxation and national insurance contributions, although I was making the point that that distinction is becoming increasingly blurred. We also have to take into account the fact that the Inland Revenue will now be involved in supervising the collection of contributions.

    That is a point of substance, on which I hope we may collectively take advice.

    Perhaps I might add to what my noble friend Lord Russell said but from a substantive rather than a procedural position. We do not welcome everything in the Budget, but we strongly welcome the proposals for changing national insurance contributions. Indeed, they move in the direction of proposals which we have made in the past. We shall therefore support them when they are introduced into the Bill at a later stage.

    I have not had a chance to consider in any detail the income tax treatment of shares liable to forfeiture, but I suspect that we shall also support that proposal.

    As far as concerns contribution appeals, this matter is raised by the amendments in my name, Amendments Nos. 21, 22, 30, 42 and 52 which have been grouped together for discussion later this evening. It may be convenient to discuss those matters at that time because they will clearly be extremely relevant to those amendments.

    I thank Members of the Committee for their comments. This is an unusual procedure. We are trying to carry this out in a way which gives noble Lords the maximum amount of warning. These matters can be discussed at Report and Third Reading when the appropriate amendments are brought forward.

    The press release was part of the Budget package and this proposal was announced in that press release. It may be helpful to identify that part of the Budget package which is relevant.

    I am grateful to the noble Lord. What he says is absolutely right, but I do not believe that it was said in the press release that the proposal would be incorporated in this Bill. Perhaps it did; if so, I am unaware of it. It is the shortness of notice which is the problem. Outside interests will suddenly find in a couple of weeks' time that this has appeared in legislation. I fear that this may not receive much publicity unless some formal statement is made to alert people to what is happening.

    7.15 p.m.

    We shall look into the question of a formal statement. Some of these points will go out for consultation. The fact that consultation takes place alerts outside interests to what is happening.

    As the noble Lord said, some amendments regarding appeals are down for consideration later this evening and my noble and learned friend the Lord Advocate will discuss the matter at that time.

    The noble Lord asked whether we expect primary legislation. We are exploring what is needed. Although it was said in the Budget Statement that the Government wish to align tax and national insurance collections as far as possible in order to reduce the load on employers and to reduce administration costs, the detail of how that will be done is currently being worked out. When that is done, the appropriate amendments will be brought forward. The Inland Revenue will be involved in the collection, and that changes the position. They will take over full responsibility from April 1999.

    No change is required in the Long Title of the Bill, which takes care of these amendments.

    Most of the issues raised by Members of the Committee will be discussed when these points are brought forward at Report or Third Reading. Noble Lords may benefit from reading the Statement in Hansard, because it was rather complex.

    Perhaps I may move on to speak to Amendments Nos. 12, 15, 55 and 100. Amendment No. 100 introduces a new clause on directors' liability for national insurance contributions. Amendments Nos. 12, 15 and 55 are consequential to the introduction of the new clause.

    The Government are determined to act against the problems caused by directors and others who abuse the national insurance system. Clause 61 introduces one measure in the new penalty regime to be operated by the Contributions Agency, a new criminal offence of fraudulent evasion of national insurance with a maximum penalty of seven years' imprisonment. This will be used only in the most serious cases, where tens of thousands of pounds of national insurance contributions have been deliberately misappropriated. But this alone is not enough.

    The National Insurance Fund loses about £150 million per year when companies go into insolvency with national insurance debts. A good portion of these are related to the so-called phoenix set-ups, where one company is put into insolvency only for a replacement company to rise from the ashes almost immediately. A recent analysis by the Contributions Agency of company directors who have been associated with three or more insolvent companies identified some 850 individuals. The loss to the National Insurance Fund as a direct result of the actions of these 850 directors alone is at least £26 million. The end result is that employees may have problems claiming their benefits. Contributions which have been collected from employees' pay have to be credited and benefits paid out on the strength of contributions which the fund never receives. The Government propose to take action to make culpable directors personally liable for national insurance debts where the failure of their company to pay is due to serious negligence or fraud on their part.

    Let me offer an example of the type of rogue we are determined to pursue. "A" Ltd. was a one-man company which invested in land and buildings. Its director had other companies, as well as running a farm in a self-employed capacity. Funds appeared to circulate between the businesses on loan. On successfully completing a property deal, "A" Ltd. had sufficient funds to vote this director £1 million as remuneration. He took £600,000 out of the company immediately and in the company's records reflected a provision of £400,000 for tax and national insurance contributions. This amount was never paid over to the collector. The money was apparently used for other purposes. "A" Ltd. then went into creditors' voluntary liquidation and there were no funds available to pay any dividend to the creditors. I am sure that the Committee will agree that this is the kind of abuse which must be dealt with.

    This is how the measure will work. Where a company owes a national insurance debt which it fails to pay in full, and the failure to pay is due to the negligent or fraudulent behaviour of any or all of the directors, it will be possible for the debt to be transferred to those directors personally.

    A small, specialised, highly trained body of staff will fully investigate the facts. They will decide whether negligence or fraud is involved and, if so, which of the directors are culpable. A decision as to the degree of culpability in each case will be made.

    The total debt, which includes any associated penalty and interest, will be apportioned between the culpable directors in proportion to their degree of culpability without taking account of each individual's ability to pay. Thus no "innocent" director will be pursued simply because he has not disposed of his assets.

    There will be a full right of appeal both against the decision that a director has behaved negligently or fraudulently and whether the apportionment was reasonable. That is the purpose of Amendment No. 100. As it is a new clause and quite complicated, my noble friend Lady Hollis arranged for an additional note to be made available from today in the Printed Paper Office.

    Amendments Nos. 12 and 15 prevent a decision to transfer a debt to a director under the new Section 120A from being "supersedable" under Clause 11. By "supersedable" I mean a decision which replaces a previous decision. Superseding is not appropriate as it operates in a different way from the review provisions of Clause 10. The review provisions operate to replace the earlier decision in its entirety from the date of that earlier decision whereas the superseding provisions are designed to take account of a change in circumstances so that the later decision supersedes the earlier one from a given date rather than replaces it in total from the date it was originally made. In superseding there is the possibility of two valid decisions existing side by side. That is not appropriate in these cases.

    I hope that both this Committee and legitimate businesses will welcome a measure aimed at dealing with the unscrupulous minority of directors who abuse their positions and ignore their responsibilities. This measure poses no threat to honest, hard-working businessmen. I beg to move.

    I can well understand the Government's motivation in this respect having had a number of individual cases in my earlier incarnation of people being defrauded by double-glazing companies and finding that, somehow or other, the companies had arisen from the ashes and, though their double glazing was not provided, the individuals engaged in selling it had again set up in business.

    I am also well aware of the problems which may arise if a specific company engages in the practices described by the noble Lord and the employees find that, though they paid the national insurance contributions to the employer, the employer has not passed them on to the National Insurance Fund. In cases of the kind that I have pursued, the department has been quite good at immediately ensuring that the individual who paid the contributions received credit for them. I do not know therefore that in practice it is a tremendous problem.

    The question is whether the director concerned should pay for the contributions which he collected and did not remit. It would be rather optimistic in such cases to suppose that the funds which the Government propose to collect under these amendments will necessarily he sufficient to pay the contributions which were not remitted. I shall return to that point in a moment.

    Having said that, one cannot but have a slight sense of unease in regard to these measures since the principle of limited liability is extremely important and it would seem in these circumstances to be overridden. Therefore, those who set up a limited liability company may suddenly find that they are liable for national insurance contributions, even though the company formally ceases to exist. I do not know how many other similar cases there are where limited liability is overridden by legislation. However, this gives one a slightly odd feeling, even though one can well understand the motivation behind it.

    Clearly, these are pretty draconian powers which the Government are proposing to take, even though the provision substitutes civil for criminal liability in some cases and in other cases introduces a Draconian criminal liability. I accept that it has been going on a long while and I therefore make an entirely non-partisan point. Why have those directors not been disqualified, all 850 of them, if they are known to be engaging in this practice?

    The noble Baroness was kind enough to write to some of us in this regard. Apparently it is to be decided by a small, specialised, highly trained body of Contributions Agency staff liaising with the Inland Revenue over whether negligence or fraudulence is involved and, if so, which of the directors is culpable. A decision will be made on the degree of culpability in each case. That seems an extraordinarily onerous task to place upon the officials concerned. It may be that we should have a preliminary run over the amendment at this stage and return to it at Report stage.

    It seems an extremely unusual exercise which the Government are proposing to undertake. We are told that there will be a full right of appeal against the decision, but I am not at all clear to whom the directors involved will appeal. It also seems that these measures are only to be imposed if someone makes a habit of it, if I may put it that way. Some directors certainly do make a habit of it. Am I to understand that there will be less stringent measures imposed on a first offence? I say that with great hesitation because I am not a lawyer, as the Committee will know. I therefore venture into this territory with many other more expert Members of the Committee. However, these are relevant questions which at this stage we should at least probe.

    I am a lawyer and I have some experience in this area. I am absolutely in support of the principle behind the amendment and strongly opposed to the way in which it is suggested it should be carried out. There is no doubt that serious abuses are being practised by these phoenix companies. Directors set up a company; run it for a certain time; take all the receipts they can obtain (they are not profits; the company usually ends up going bust); do not pay their debts; and in particular do not pay their liability for national insurance or PAYE. In those cases I have no reason whatever to disagree with the idea that those directors should be made personally liable. It is a gross abuse. Those who practise in the companies courts, as I have done to some extent, see it happening time and again and it is absolutely right that stern measures should be taken to stop it.

    However, when we come to the way in which it is proposed to enact the provision, I have equally strong objections. What is taking place is a form of abuse which is well known in company law and described as either "wrongful trading" or "fraudulent trading"; that is, people who incur liabilities on behalf of their company when they know there is no reasonable prospect whatever of those liabilities being paid. One might have thought that the right course, as with other forms of wrongful or fraudulent trading, would be to send those cases, in the usual way, to be dealt with by the companies court. But what is proposed here is something completely different; namely under Clause 9, use of the adjudication procedure so that the decision will be taken initially not by the court but by some official within the Department of Social Security. The route of appeal—and this is perhaps even more extraordinary—will be not to the companies court. which is accustomed to dealing with problems of this kind and gets them day in and day out, but to the appeals tribunal. Such cases will be miles away from any other kind of case that the appeals tribunals deal with. This is completely the wrong route for dealing with such cases.

    Therefore, while I am entirely in favour of the principle of hitting these directors hard, we need to do it in the right way by sending cases to a court which has experience in dealing with problems of this kind and not to a tribunal which has no experience whatever and whose ordinary cases are miles away from anything of this kind. While I do not oppose the principle, if the amendment is accepted today we feel strongly that it will be necessary to come back at Report stage to make a further amendment.

    7.30 p.m.

    I thank noble Lords for their comments. I say to the noble Lord, Lord Goodhart, that the purpose is only to investigate one liability and not the liability of the directors as a whole in the way they ran the business if the business went into bankruptcy. It is only the question of whether they handed over the national insurance contributions. That is a matter which the adjudication procedure could handle.

    With respect to the noble Lord, I do not think you can separate the two. It is a single picture. The directors who run these companies do not pay their debts. Some of them may be national insurance, some will be PAYE, and some with be debts to private creditors. It is all part of the same picture. One cannot separate them out in that way.

    These are national insurance offences concerning the non-payment of contributions. For instance, Customs and Excise have exercised a similar power in regard to penalties for VAT debts for some years. It could be modelled on much the same kind of procedure.

    I thank noble Lords for their general support of the principle even though there is some disagreement as to the way in which it will be carried out. The noble Lord, Lord Higgins, asked which directors are culpable. The investigation of each director's responsibility and knowledge will be carried out so that only those shown to have acted knowingly and deliberately will be penalised. As far as concerns being able to collect money, I say to the noble Lord that one can only collect what is available. If they have spent it all or have got rid of it, one can only collect what is there.

    Disqualification of directors is really a matter for the Department of Trade and Industry under company law. But disqualified directors can still work in companies and conceivably still be involved in some kind of national insurance fraud. The exact form of appeal arrangements will need to be looked at in the light of the transfer of the Contributions Agency to the Inland Revenue.

    The principle of limited liability, raised by the noble Lord, Lord Higgins, is not really intended to protect fraudsters and those who are seriously negligent in carrying out their responsibilities. I am sure the noble Lord agrees that people who carry out fraud should not he able to hide behind limited liability. I think I have dealt with all the points. I beg to move.

    On Question, amendment agreed to.

    I beg to move that the House do now resume. In moving this Motion, perhaps I may suggest that the Committee stage begins again not before 8.35 p.m.

    Moved accordingly, and, on Question, Motion agreed to.

    House resumed.