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Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) (Amendment) (England) Order 2013

Volume 743: debated on Thursday 28 February 2013

Considered in Grand Committee

Moved by

That the Grand Committee do report to the House that it has considered the Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) (Amendment) (England) Order.

Relevant document: 16th Report from the Joint Committee on Statutory Instruments.

My Lords, this order will enable local authorities to implement localised council tax support from 1 April when council tax benefit is abolished. These changes are part of the Government’s wider policy of decentralisation. The order will amend the Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) Order 1996, which allows local authorities, if they choose to do so, to contract out statutory services relating to the administration of local taxes which they would normally have to provide themselves: for example, the calculation of individual council tax liabilities and the serving of demand notices.

New administrative functions will be created when localised schemes are implemented. This order will add these new functions to those that can be contracted out already. The new functions are: the issuing of council tax reduction decision letters; the payment of reductions in certain circumstances where the billing authority is of the opinion that it would be appropriate; the serving of penalty notices in connection with a reduction; the repayment of an amount paid in connection with a penalty issued in connection with reductions under local schemes that has been subsequently quashed; and the calculation and collection of premiums on long-term empty dwellings.

The Council Tax Reduction Schemes (Detection of Fraud and Enforcement) (England) Regulations 2013 deal with the detection of fraud and enforcement mechanisms relating to local authority schemes. They provide local authorities with the means of protecting their reduction schemes from attempted fraud and deterring those who may be considering making a false claim.

These regulations are being put forward for approval using powers in Sections 14A, 14B and 14C of the Local Government Finance Act 1992, which were inserted by Section 14 of the Local Government Finance Act 2012. These powers allow for the creation of criminal offences, the creation of civil penalties that may be imposed by local authorities, and regulations providing powers to require information from individuals or organisations.

These powers are broad, and noble Lords and Members in the other place rightly sought assurances from the Government during the passage of the Bill on how the Government would seek to exercise them. A statement of intent, Localising Support for Council Tax: Information Sharing and Powers to Tackle Fraud, was published in July last year and committed the Government to bringing forward proportionate and measured proposals that would not go beyond the existing powers relating to council tax benefit, while replicating only the powers that were essential in the context of reduction schemes. These regulations are the result of that commitment, and I shall explain how that has been translated into specific provisions.

Regulation 2 sets out a number of definitions, but noble Lords may wish to note how we are defining a council tax offence for the purposes of subsequent regulations. A council tax offence is defined as any criminal offence committed in making an application for, or in the award of, a council tax reduction; or an offence committed for the purpose of facilitating the commission of such an offence; or any attempt or conspiracy to commit such an offence. It does not include offences committed for wider purposes related to council tax administration and enforcement, nor for other criminal offences committed against a local authority. Noble Lords may wish to bear this context in mind when examining later regulations that deal with requiring information and the creation of offences.

Regulation 3 provides for local authorities to authorise individuals to undertake investigations into council tax offences. The provisions are equivalent to those that are currently in place for local authorities to authorise investigations into housing benefit and council tax benefit cases. However, the regulation restricts how authorised officers may exercise their powers. They may do so only,

“for the purpose of preventing, detecting and securing evidence of the commission … of a council tax offence”.

This does not allow for powers to be exercised for routine checks on individuals or, more generally, to verify the content of applications.

Regulation 4 provides that authorised officers may require a person to supply information that is needed, again for the prevention, detection and securing of evidence of council tax offences. Where the person from whom information is to be required falls within the list of persons set out under paragraph (3), information may be required only in relation to a particular person, and where there are reasonable grounds for believing that the identified person, or a family member,

“has committed, is committing or intends to commit a council tax offence”.

The classes of people who may be required to provide information are equivalent to those who may be required to provide information for welfare benefit offences, with the removal of certain groups. For instance, we are not providing for officers to require information from telecommunication providers, since such requests should instead be exercised, monitored and reported on through legal avenues under the Regulation of Investigatory Powers Act and be subject to requirement for judicial approval and oversight.

Regulation 5 provides for electronic access to information to be provided to an authorised officer, where such arrangements can be made. Local authority investigators have similar powers to seek electronic access to information in relation to welfare benefit investigations. Under the regulations, the powers to require electronic access to information may be used only where the electronic records are likely to contain relevant information for the purpose of preventing, detecting and securing evidence of the commission of a council tax offence.

Regulation 6 provides that it will be a criminal offence intentionally to delay or obstruct an authorised officer when exercising their power to require information. It is also an offence to refuse or to fail, without reasonable excuse, to provide information or access to electronic records when required to do so. I hope noble Lords will accept that deliberately frustrating an investigation should itself be an offence. These offences are similar to those that exist in relation to delay or the obstruction of an officer in relation to a welfare benefit investigation.

Regulation 7 provides that it will be a criminal offence to make a false representation or to provide or allow to be provided information that is known to be false in order to gain a reduction.

Regulation 8 makes provision, similar to that currently in force for council tax benefit, that a failure to notify a relevant change in circumstances would be an offence. The regulation also makes it an offence knowingly to cause or to allow another person to fail to notify a change in circumstances affecting their entitlement to a reduction.

Regulation 9 deals with offences that may be committed by a body corporate and the ability to prosecute the officers themselves if the offence was due to their actions or omissions.

Regulation 10 deals with the legal timescales for prosecutions.

Regulation 11 provides that a local authority may offer to impose a penalty on a person rather than prosecute them through the courts. In the face of sufficient evidence to prosecute, the person may wish to avoid a criminal sentence and voluntarily accept a financial penalty. In return, the local authority can avoid the need to prepare a legal case and the time and resources involved. Any such agreement would be subject to a cooling-off period and may be offered only when there is sufficient evidence to institute proceedings, so that there is no question of any person with a legitimate defence being pressured or forced into accepting a penalty against their will.

Regulations 12 and 13 extend the existing system of financial penalties that local authorities may impose for council tax discounts, so that similar penalties may be imposed in relation to council tax reductions.

An authority may impose a £70 penalty on a person when they are negligent in providing information or notifying a change in circumstances that lead to them receiving a reduction beyond their entitlement. These are for non-criminal actions and are at the discretion of the local authority. If a person has been charged with an offence or issued with a penalty as an alternative to prosecution, a penalty may not be imposed. There is no question of penalties being imposed under these two regulations when a person has been charged with an offence and a prosecution subsequently fails or lacks sufficient evidence.

In conclusion, these regulations in large part reflect the provisions that are currently in place for the internal administration and enforcement of council tax benefit. If approved, they will carry out two essential functions. They will enable local authorities to deliver their local schemes, whether using internal resources, external providers or a mixture of both, as well as providing a proportionate but robust system of enforcement powers to combat attempted fraud and seek information from organisations that can assist in bringing offenders to book.

Localising council tax reduction delivers on three of the Government’s key priorities: devolving power and control over local matters from the centre; reforming the welfare system to make work pay; and reducing the deficit. It is important that we provide authorities with what they need to deliver a cost-effective council tax system and to combat attempts to defraud them and honest local taxpayers. Together, this is what these statutory instruments will do, and I commend them to the Committee.

My Lords, first, I declare my interest as a vice-president of the Local Government Association. I shall comment on this one and on the next, too, so I need speak only once.

I have a desire for a reassurance that in all the contracting out of existing functions of local authorities, whether they have been previously contracted out or may be in future, exactly the same standards will apply on matters concerning data protection and in the duties, obligations and service standards of those to whom work is contracted out. I am thinking in particular of the role of bailiffs and what standards of service they will be required to work to. There has been a discussion and things have been done about this in the past year or two, but I seek the Minister’s assurance that exactly those same standards, or perhaps even better standards, will apply in future.

My Lords, I am grateful to the noble Lord, Lord Shipley, for speaking before me, because it has reminded me to say that I am also a vice-president of the Local Government Association, which I may have forgotten otherwise. The points that he made are ones that I would also have wished to make, and I will not repeat them. I refer particularly to the point on bailiffs, which was very well made, and I look forward to hearing the response from the Minister. I will come back to the freedom of information point.

I thank the Minister for her explanation, as it was good to have such a detailed explanation of the instruments. It answered a couple of the questions that I have, although I have others. Obviously, we support measures that would prevent fraud, detect it and take action against it, and any system of enforcement should be effective and fair. We entirely concur with those principles. My questions are on points of clarity, because I was not 100% clear. Legislation can sometimes be opaque, and it would be helpful to have some more information.

As the noble Lord, Lord Shipley, was saying, when services are contracted out, particularly in this case, very detailed confidential financial information can be provided to a private company or organisation. I understand that under data protection legislation, the responsibility would remain with the local authority, but would the DCLG give any guidance to local authorities on how they may enforce their responsibilities to organisations to which they have contracted out those services? What redress would remain available to an individual who felt that their confidentiality had been breached in any way? Would that remain a matter for the local authority, or would responsibility lie with the company that held the information and had inadvertently or wrongly released it?

On a general point about freedom of information in circumstances where services have been contracted out or privatised, under a public authority we regularly read in the press information about the collection and enforcement of council tax. It is open to public debate; indeed, we sometimes even see league tables published of how local authorities have performed. Will that information still be available if it is held by a private company rather than the local authority? Clearly it is information that is of interest at present.

The order is relatively straightforward, and those are the only questions that I have on that. I have a few questions on the regulations. On the power to require information, Regulation 4(1) states:

“An authorised officer who has reasonable grounds for suspecting that a person”,

and goes on to explain why the information is required. I am not clear about the phrase “reasonable grounds”. Is there a definition of the reasonable grounds required for suspecting that someone has the information? What happens if the evidence required cannot be produced? Although an authorised officer may have reasonable grounds for suspicion, that does not mean that the organisation or individual definitely has the information required. What evidence would be accepted that they are unable to supply the evidence required?

I am also curious about the sanctions for not doing so. Under Regulation 6, headed “Delay, obstruction etc of authorised officer”, it appears that sanctions apply only to an individual. If the delay, obstruction or refusal is due to the extreme inefficiency of an organisation and not an individual, are there any sanctions in place? Regulation 6(1) seems to apply only to an individual not providing information, not to an organisation. I may be wrong, but that seems very specific. Perhaps the noble Baroness can explain whether it is my understanding or the drafting that is not accurate. That would be very helpful. I assume it is my mistake, although the mistake might lie somewhere else, but from here it appears that it is only an individual, not an organisation, who can face sanctions.

Regulation 4(5) states:

“An authorised officer shall not, in exercise of those powers, require any information from any person by virtue of that person falling within paragraph (3) unless it appears to that officer that there are reasonable grounds for believing that the identified person to whom it relates is … a person who has committed, is committing or intends to commit a council tax offence”.

There will be clear evidence if someone intends to commit a bank robbery or to enter a property without consent—burglary, theft—but I am not quite sure how we would know whether someone intends to commit a council tax offence. I do not have the benefit of legal training and I have adopted a common-sense approach on this. I do not understand how one would know whether someone intends to commit a council tax offence. It is slightly curious wording. I would not like to be in a position where someone is second-guessing a person’s intention to notify changes in circumstances or to pay their council tax bill.

On false representation for obtaining a reduction, Regulation 7(1)(b) states:

“provides, or knowingly causes or knowingly allows to be provided, any document or information which P knows to be false in a material particular”.

There is similar wording in Paragraph 8. Can the Minister enlighten me on the kind of circumstances she envisages this would include. I am not clear what would be included in that.

My final point relates to Regulation 11 concerning a penalty as an alternative to prosecution. In principle, it is absolutely right and good if legal proceedings can be avoided, as they are costly and often not the best way of resolving an issue. I would hope that the Government and all of us would encourage local authorities to distinguish between a genuine mistake that a person had made and was keen to rectify as soon as possible and a deliberate attempt to defraud. A penalty as an alternative to prosecution should be just that: it should be for an intention to defraud, not a catch-all for a genuine mistake where there is no clear evidence to take the matter to court but someone ends up paying a penalty.

Regulation 12 concerns a person negligently making an incorrect statement or representation or negligently giving incorrect information or evidence. I am not a lawyer, but I consulted a lawyer on what “negligently” would mean in that context. He told me that he could write a book on it but I wanted only a paragraph. My understanding is that something that is negligent can indeed be a genuine mistake. Obviously such a mistake should not be made when dealing with issues such as someone’s council tax, but I hope that the Minister would not want to see the automatic issue of a penalty when a person might be very upset about making a mistake and want to resolve it.

As I said, it is clearly very sensible to avoid legal proceedings wherever possible for all the reasons that I have stated. However, if someone has made a genuine mistake and they have a genuine defence, they should be able to receive independent advice regarding their options before accepting a penalty. I have recently heard of a number of cases where council officers have been posted at magistrates’ courts, and before a person goes into the court to offer their defence for not having paid or for there having been a delay or some other problem they are encouraged by the council to pay up because, they are told, it could cost them more to proceed in court. They do not really understand that they would have a chance to offer their defence in court. Having paid up, however, they still have to pay more because the case has got as far as the court. Clearly, the issuing of a penalty before that point is the right course of action but not if it is used as a catch-all for dealing with somebody who has made a mistake.

If would be helpful if the Minister could say something about the circumstances in which she feels that a penalty would be used. Can she also say whether she thinks the Government would consider people having the opportunity to receive independent advice on receiving a penalty? That could speed things up. There is a provision in Regulation 11(11)(h),

“that a person who agrees to pay a penalty may withdraw the agreement within 14 days”,

but that means that they have to start the whole process again. Therefore, I think it would be better if the person could get advice before any penalty was issued.

Those are a few points on which I seek clarity. I hope I have made it clear that we believe it is important to prevent, detect and deal with fraud fairly and effectively, and we support measures that do so, but I should be grateful if the noble Baroness could give me some clarification on the issues that I have mentioned.

My Lords, I thank the noble Lord, Lord Shipley, and the noble Baroness, Lady Smith, for their questions, which were, as I would have suspected, practical and straightforward, and I shall try to deal with them in that way.

The noble Lord, Lord Shipley, asked about data protection. It is correct that local authorities remain the responsible authority, even though they have contracted out to a private company or have made alternative arrangements. They are responsible for ensuring that the provisions of the Data Protection Act 1998 are met. That position has not changed; that is the way it is at the moment.

The noble Lord, Lord Shipley, and the noble Baroness, Lady Smith, also talked about bailiffs. The use of bailiffs has worried this House for some time. We are very clear that aggressive bailiff activity is completely unacceptable, and we are committed to bringing forward effective proposals to protect the public and ensure that they act proportionately. The proposals are to implement Part 3 of the Tribunals, Courts and Enforcement Act 2007, which would provide legal protection by introducing a comprehensive code that governed, among other things, when and how bailiffs can enter somebody’s premises, what goods they can and cannot seize if necessary and sell, and what fees they can charge. Aggression, force and enforced sale are more or less the complaints that we have heard all along, and we are trying to deal with them.

Is the Minister also aware of circumstances recently when bailiffs entered people’s homes to try to remove property but the poverty was such that they could retrieve nothing to sell anyway?

I know that that matter has been raised, but that will be covered by what we are trying to do with the Tribunals, Courts and Enforcement Act 2007. The noble Baroness is correct that if there is nothing there that enables a debt to be dealt with, bailiffs ought to report that to local authorities and not just go ahead. We have had a lot of discussions on bailiffs and the Government are very sympathetic to what has been said. Efforts will be made to try to restore some confidence in the bailiff service, which is not very strong at the moment.

The data protection standards will, as I have already said to the noble Lord, Lord Shipley, remain as at present, with the local authorities being responsible for them. I think the noble Baroness, Lady Smith, asked what an offence committed by a body corporate is. It is when an offence has been proved to be committed with the consent or connivance of, or attributed to any neglect on the part of, a director, manager, secretary, or other similar officer purporting to act in any capacity. The number of occasions when a body corporate may be involved in an individual’s council tax seems to me to be remarkably slim, but it is there just in case.

No, I think not. My question was about corporate bodies in relation to the power to require information by the authorised officer. Regulation 6 is entitled, “Delay, obstruction etc of authorised officer”. It refers only to an individual, but an authorised officer can require an organisation or a body to provide information. I do not think that that is the question that the noble Baroness is answering. I am happy for her to write to me on that.

I shall write to the noble Baroness, if she does not mind, on the people who are entitled to ask for information. I apologise for not answering her question correctly.

The proof of intention to commit an offence is not very easy, but it can be obtained or come from information that is made available, such as anonymous tip-offs, discrepancies between records that people become concerned about, reports of fraud from the DWP, and so on. It may not appear very often, but there are areas where it would be possible to demonstrate intention.

I hope that I have more or less picked up all the points raised by the noble Baroness, Lady Smith. As I say, they are essentially practical, but if I have missed any, I will come back, but as I say, I hope that I have addressed the main points.

Motion agreed.