Public Authorities (Fraud, Error and Recovery) Bill
Monday 3rd February 2025
(4 months, 3 weeks ago)
Commons ChamberPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Watch Debate Read Debate Ministerial Extracts
20:50 - The House divided: - Ayes: 343 / Noes: 87 - Question accordingly agreed to.
Madam Deputy Speaker (Caroline Nokes)
The reasoned amendment has not been selected.
The Secretary of State for Work and Pensions (Liz Kendall)
I beg to move, That the Bill be now read a Second time.
This Bill will help deliver the biggest ever crackdown on fraud against the public purse, which has now reached an astonishing £55 billion a year. That includes fraud against our public services, such as by those who abuse the tax system; fraud by dishonest companies that use deception to win public contracts and manipulate invoices; and benefit fraud by criminal gangs and individuals, which now stands at a staggering £7.4 billion a year.
There have always been people who commit fraud against the state—tragically, this is not a new problem—but at a time when families across the country are working so hard to pay their bills and put food on the table, when more than 7 million people are stuck in pain and discomfort on NHS waiting lists, and when a shameful 4.3 million children in Britain are growing up poor, it is simply unforgiveable that the Conservatives allowed fraud to spiral out of control. During their 14 long years in government, they failed to put in place a proper plan to crack down on fraud, and there is no better symbol of this than their failure to update the powers of the Department for Work and Pensions to properly crack down on benefit fraud. Just let that sink in for a moment.
Over the last decade, fraudsters have become increasingly sophisticated in the techniques that they use to steal people’s money, using data, technology and all manner of scams. In response, banks and other companies have transformed their ability to spot and stop fraud, and to protect their customers’ money, but the last Government completely failed to do the same for taxpayers. In all their time in power, and with all the developments in technology and the ability to share data and information, they failed to update the DWP’s powers. The Conservatives will no doubt claim that they did introduce measures, but, in truth, they put forward one poorly thought-through measure that was tagged on to another Bill at the tail end of the last Parliament, without any of the proper safeguards or oversight in place. Today, all that changes with our new fraud Bill.
This Bill is tough and it is fair. It is tough on the large companies and dodgy businessmen who try to defraud our public services, it is tough on the criminal gangs and individuals who cheat the benefit system, and it is fair to claimants who make genuine mistakes, by helping us to spot and prevent errors earlier. Taxpayers deserve to know that every single pound of their hard-earned money is being spent wisely and that benefits are there only for those who need them, not fraudsters who take advantage.
Richard Burgon (Leeds East) (Ind)
The Secretary of State is absolutely correct to say that we need to pursue criminal gangs that are engaged in widespread organised theft. I put a written question to the Department for Work and Pensions to ask about the amount lost through personal independence payment fraud, and I was told that only 0.2% of such claims were fraudulent in 2022-23. Does the Secretary of State agree that as we pursue organised criminal gangs, it is really important that we make it clear that there cannot be a hostile approach to disabled people claiming PIP or disabled people more widely who are using the benefits system as they deserve to?
Liz Kendall
People who are genuinely entitled to claim benefits have nothing to worry about from this Bill, but we believe that the £7.4 billion wasted every year through benefit fraud must be cracked down on.
To the corrupt companies with their dodgy covid contracts, to the organised criminal gangs and to every single individual knowingly cheating the system, our message today is clear: we will find you, we will stop you and we will get our money back.
Jim Shannon (Strangford) (DUP)
No one denies that there are those who are blatantly cheating the system, as I referred to in my oral question to the Secretary of State earlier today. On her point about fair play, however, can she give an assurance to me and to the House? I am concerned that if officials in the Department seek out low-hanging fruit, people who have a genuine disability could be denied their rights. I am concerned about the anxiety, the depression and the physical effects that that might cause.
Liz Kendall
Actually, the Bill will do the precise opposite. Through the measures relating to the Public Sector Fraud Authority, we are saying to the large companies and corporations and to the individuals cheating, “We will treat you equally. We do not allow fraud against the public purse. We want to stop it and get our money back.”
Several hon. Members rose—
Liz Kendall
I will make a bit of progress.
I want to start by setting out the measures in the Bill that give the Public Sector Fraud Authority the powers that it needs—further to the point that the hon. Member for Strangford (Jim Shannon) rightly raised—to fight modern fraud across the public sector on behalf of Government Departments and public bodies.
Liz Kendall
I will set this out first. The Bill will provide the authority with new powers to obtain search warrants, to enter premises and seize evidence as part of fraud investigations, to compel businesses and individuals to provide information where there is a suspicion of fraud, and to enable it to better detect and prevent payments made as a result of fraud or error. It will also bring in new debt recovery powers, so that we can get public money back for taxpayers, and new financial penalties that the PSFA can use as an alternative to often lengthy criminal prosecutions.
What happened during the pandemic was completely unacceptable, with billions of pounds squandered by the Conservatives on dodgy deals with their covid cronies. This Bill will help us to get that money back. It will double from six to 12 years the time limit for civil claims to be brought in alleged cases of covid fraud, giving the PSFA and our new covid counter-fraud commissioner more time to investigate complex cases relating to those who exploited a national emergency for personal profit.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I have spent more than a decade studying fraud and error in the DWP. The Secretary of State is right that levels of fraud have been intransigently high, but my concern is about where there are errors. Quite often, they are made by the Department. My constituent received a £5,000 overpayment. Will the Secretary of State make it clear to the House that people in that situation will not have money taken out of their bank account, and that they will be treated properly if there is a small error on their side or a big error by the Department?
Liz Kendall
I will come on to that point in a moment, but I have the utmost respect for my hon. Friend. In fact, I think that the measures in the Bill will help us to spot such errors and prevent them from happening in the first place. People make genuine mistakes. We do not want them to build up errors and build up debt that they have to repay. I think that the Bill is part of solving that problem. I will say more about that in a moment.
I turn to fraud and error specifically in our welfare system. The Bill will modernise and extend the DWP’s anti-fraud powers, bringing it into line with other bodies such as His Majesty’s Revenue and Customs, so that we can use technology and data to find and prevent fraud more quickly and effectively; so that our serious and organised counter-fraud investigators have the powers they need to search premises and seize evidence, including from criminal gangs, and bring offenders to justice; and so that we can ensure that when people owe us money and, crucially, when they can pay, we get that money back for taxpayers. That all comes with strong and new safeguards and with independent oversight on the face of the Bill, as I will set out in detail.
David Pinto-Duschinsky (Hendon) (Lab)
As my right hon. Friend mentioned, the Conservatives did not do much on this issue except tagging on a Bill at the very end of their tenure. The Information Commissioner’s Office was very critical of the approach taken in that fraud Bill. Can she reassure the House that she has addressed those concerns?
Liz Kendall
I can indeed reassure the House. The Information Commissioner was rightly critical of the last measure introduced by the Conservatives—the third-party data measure. He has written to us today, and we will make sure that his letter is published. He says that he has reviewed our proposals and is very clear that the current measure more tightly scopes the type of information that can and cannot be shared; specifies much more clearly those in the power’s scope; requires a statutory code of practice before measures are taken; and includes a requirement for the Secretary of State to appoint an independent person to carry out reviews of these functions. I am more than happy to publish that and share it with the House, because I think it shows the changes this Government are making.
We are serious about getting these measures through. We understand people’s concerns, and we have addressed them. The Information Commissioner’s letter should reassure the House.
Andy McDonald (Middlesbrough and Thornaby East) (Lab)
My right hon. Friend has the House’s wholehearted support in pursuing the recovery of funds taken by fraud and error. The National Audit Office estimates that, in the last financial year, £39 billion of tax revenue was not received due to fraud and error, compared with £7 billion in overpaid benefits classed as fraud, which we want to pursue. Can she reassure the House that an appropriate level of resources will be targeted at recovering this large sum of money, which will bring better dividends back to the Treasury?
Liz Kendall
My hon. Friend is right to raise this issue, which he knows the Chancellor and the Treasury team are looking at seriously. The clear message from this Government is, “If you are getting money to which you are not entitled or owe money to the taxpayer through either unpaid taxes or fraud, that is wrong.” We treat everything the same, large or small. We believe in our public services and our social security system, and we want people to know that every single penny of their money is wisely spent and goes to those in the greatest need.
Rachel Gilmour (Tiverton and Minehead) (LD)
As a Member of the party that introduced the state pension, I am behind the Government on this Bill because we all want to cut down on tax fraud and evasion. But I am concerned that pensioners are included under this blanket of Government scrutiny, and it seems that the only thing they have done to deserve it is to get a bit old.
Liz Kendall
One of the new measures introduced by the Bill, the eligibility verification measure, explicitly excludes the state pension. I reassure the hon. Lady on that point.
Shaun Davies (Telford) (Lab)
In places like Telford, it is a basic principle that people pay into the system and then take out of the system, or their neighbours do, when they are in need. The companies and individuals that are defrauding national benefits are often also defrauding local authority benefits and schemes. Will we extend these powers so that local government is able to work with national Government to pursue this fraud?
Liz Kendall
I reassure my hon. Friend that local authorities will be able to put examples to the Public Sector Fraud Authority for scrutiny. The new powers introduced by the Bill will enable the PSFA to crack down on precisely those issues.
Liz Kendall
I will crack on a little, and then I will be happy to take an intervention.
I will now spell out each of the Bill’s measures in turn. First, there are powers to investigate potential fraud. The Bill will mean that, for the first time, the DWP’s serious and organised crime investigators will be able to apply to a court for a warrant to enter and search the premises of suspected fraudsters and criminal gangs to seize items for evidence, such as computers and phones. At the moment, our investigators have to rely on the police to do this. The Bill will enable us to act much more quickly to gather evidence, to take control of and speed up investigations, while also freeing up police time. These powers will be used only when approved by the courts, and the police will continue to be responsible for arresting suspects.
Secondly, the Bill will update the DWP’s information-gathering powers for investigating fraud. At the moment, we have the power to require information from only a limited list of third parties. This does not include key organisations and sectors that could help to prove or disprove suspected fraud, such as airlines.
To add to that, there is limited ability to require responses to requests to be sent electronically. Instead, quite unbelievably, they have to be sent in writing or physically collected, which is time consuming and cumbersome, to say the least. That limitation on our powers completely underlines how the changes in the Bill are long overdue, and the lack of action by the previous Government. The Bill widens who the DWP can compel information from, and it will enable us to require the information to be provided digitally by default.
Thirdly, our new eligibility verification measure will enable us to require banks or other financial institutions to provide crucial data to help identify incorrect benefit payments people might be getting, including fraudulently, such as if someone has too much in savings, making them ineligible for a benefit, or if they are fraudulently claiming benefits abroad when they should be living in the UK. People should not be getting benefits they are not entitled to, and the alerts will make the process of identifying potential fraudsters much simpler, quicker and easier.
However, we know that people lead busy lives and sometimes genuine mistakes happen. The measure will help there too, by finding and putting errors right quickly, preventing people from building up large debts that they then need to repay. I am absolutely determined to reduce benefit mistakes by stopping them from happening in the first place and to avoid debts building up, with all the worry and distress that causes. That is why I have launched the independent investigation into the overpayment of carer’s allowance, in order to learn lessons about what went wrong and ensure that does not happen again.
I want to stress to the House that, under our eligibility verification measure, the DWP will not be able to access people’s bank accounts or look at what they are spending. We will not share any personal information with banks. Once an alert has been issued, any final decision about someone’s benefits will always be taken by a human being and the state pension will be excluded from the measure. There will also be independent oversight of the power on the face of the Bill, with the requirement to produce reports and lay them before Parliament, which I will say more about in a moment.
Sammy Wilson (East Antrim) (DUP)
The Minister is outlining the actions she intends to take to ensure that errors do not happen and that humans will conduct any reviews. However, once a decision has been made—whether the error was genuine or not, the person should not have received the money—the Bill sets out that the person is still subject to all the measures that would be imposed on people who have deliberately engaged in fraud. That is the real worry. Despite the Secretary of State’s assurances, errors will still be made. Judgments will have to be made about whether the money, given in error, is recoverable, and if it is recoverable, it will be treated as if that were fraud.
Liz Kendall
No, it will not be treated in the same way. There is much more we can do to use technology to prevent genuine mistakes and errors building up in the first place, but we also have to use all the technology and information-sharing abilities we have to crack down on fraudsters who will use anything they can to try to defraud the system. I will come to the wider safeguards in the Bill towards the end of my speech, but my hon. Friend the Minister for Transformation and I will be more than happy to talk to the right hon. Gentleman in more detail about any other concerns he may have.
Ben Maguire
I am interested to hear about the measures in the Bill relating to local authorities and public authorities. Has the Secretary of State considered expanding remit of the Public Sector Fraud Authority to investigate cases of serious mismanagement of funds by local authorities, such as the recent botched sale of Newquay airport by Conservative-controlled Cornwall council, which reportedly cost Cornish taxpayers over £1 million in consultancy fees and the like?
Liz Kendall
The hon. Gentleman has made his point simply and clearly. The Bill is about tackling fraud and people who have defrauded the public purse. I am sure his local newspaper will write his comments up very clearly.
The fourth chapter of part 2 of the Bill is about widening our ability to punish fraudsters using a financial penalty as an alternative to seeking prosecutions. At the moment, we can issue financial penalties only in cases of benefit fraud. The Bill extends our ability to use them in cases of fraud against any type of DWP payment—for example, if we had any future scheme like the kickstart employment scheme. That will ensure that more fraudsters committing a wider range of fraud can be dealt with swiftly without going to court.
Last but not least, the Bill gives the DWP more power to get back public money that someone owes in cases where they can repay it but repeatedly refuse to do so. This power does not cover people on benefits or in payrolled employment, because money can already be recovered through the social security or pay-as-you-earn systems, but for people who have moved off benefits and are not on PAYE—for example, because they are self-employed or now living off savings—the Bill will enable the DWP to request the bank statements of people we know owe us money but who have repeatedly refused to engage with us, to verify that they have sufficient funds to repay. We can then recover the money from their bank account through either a one-off lump sum or regular deductions. That will be done in a fair and manageable way, with time for the person to make any representations and the right to appeal.
As a last resort, if someone owes us more than £1,000 and continues to repeatedly refuse to engage with us and agree how they will pay the money back, we can go to court and get an order to disqualify that person from driving for up to two years. This is the same power that the Child Maintenance Service has been able to use for the last 25 years in cases where a parent repeatedly refuses to make payments to support their child. In considering a disqualification order, a court will always check whether the person needs a driving licence for work, because taking it away would be totally counterproductive if they do, and look at other reasons why a license may be essential, such as if the person is disabled or a carer. The measure is for people who have repeatedly refused to engage with the system. It is an important power that the DWP should have to bring people to the table for a discussion about how they will repay the money that they owe. We are clear that someone keeping public money to which they are not entitled is serious, and will result in serious consequences.
Ben Lake (Ceredigion Preseli) (PC)
I am grateful to the Secretary of State for outlining some of the Government’s thinking behind clause 91. Will she elaborate on whether the Government have considered the fact that such a disqualification would have a disproportionate impact on somebody living in a remote area, compared with those in more urban areas, where there is much greater access to public transport?
Liz Kendall
As I said, the court will always look at whether the person needs a car for their job, but we cannot say that people are allowed to get away with fraud in different parts of the country. This is about getting money back. The measure is for people who have repeatedly refused to engage with us, and who we know have the money to repay what they owe. We can bring them to the table and have a discussion about that repayment. I think that most members of the public would think that that is totally reasonable and fair, and that is the new power that we will have.
Let me turn to the strong new safeguarding measures in the Bill. First, as I have said, there will be independent oversight in the Bill for the eligibility verification measure, and new powers for the DWP and the Public Sector Fraud Authority to investigate fraud. I will appoint an independent person to oversee how the EVM is being used and its effectiveness. The Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Queen’s Park and Maida Vale (Georgia Gould), will also appoint an independent person to review the use of the PSFA measures. Both will be required to provide reports to the Government, which will be published and laid before Parliament. His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services will oversee the investigation powers of the DWP and the Public Sector Fraud Authority. Any complaints about the use of the new search and seizure powers in the Bill will be referred to the Independent Office for Police Conduct.
Kirsty Blackman (Aberdeen North) (SNP)
This is a genuine question on the power to request information: will the DWP be able to request information from charitable organisations that are perhaps providing support to people, or from Members of Parliament, who may be providing support to constituents who come through our door?
Liz Kendall
The eligibility verification measure is for banks and financial institutions. It has been tightly defined, which is one of the reasons the Information Commissioner has written his response now. The last Conservative Government just referred to third-party data. That was not a serious proposal, narrowly defined with proper independent oversight. We want the legislation to pass and be used proportionately and effectively. That is why we have included the proposals as drafted.
The second important point is that there will be a statutory code of practice on how the powers can be applied, which we will consult on during the passage of the Bill, to clearly define the scope and limitations. Thirdly, there will always be vulnerability checks for each individual under the new debt recovery powers to ensure that people are not forced to pay back money that they cannot afford. Last, but by no means least, final decisions affecting benefit entitlement will always be made by a human being. Those decisions will sit alongside the right to reviews and appeals—no ifs, no buts. Put together, I believe that those new safeguards will provide the reassurance that the public and some Members of this House need that the Bill’s powers are proportionate, safe and fair.
The Bill delivers the biggest upgrade to the DWP’s anti-fraud powers in more than 14 years. It brings in new powers to tackle fraud right across the public sector by empowering the Public Sector Fraud Authority, and not before time. Our approach is tough but fair: tough on criminals who cheat the system and steal from taxpayers; tough on people who refuse to pay back money; fair on claimants, by spotting and stopping errors earlier, helping to avoid people getting into debt; fair on those who play by the rules and rely on the social security system; and fair on taxpayers, by ensuring that every pound is spent wisely, responsibly and effectively on those who need it. We were elected on a mandate for change, and that is what the Bill will deliver.
Madam Deputy Speaker (Caroline Nokes)
I call the shadow Secretary of State.
Helen Whately (Faversham and Mid Kent) (Con)
A strongly held Conservative principle is that public money must not be wasted. We hold this view not because we are mean, but because the Government do not have money of their own. What they have, they raise through taxation from all of us. A tiny fraction of every penny that they spend is yours, mine and everyone else’s who pays in. Those who spend public money have a duty to spend it wisely, and ensure that it ends up only with those who should have it, for the purpose for which it was intended. In a big, complex system of government in a country of nearly 70 million people, from time to time that will not happen for a range of reasons—from a form that has been accidentally filled in with the wrong information, or a change of circumstance that someone forgot to notify the jobcentre about, to serious organised fraud—but however taxpayers have lost out, it is incumbent on the state to do all that it can to get their money back. That is what taxpayers rightly expect. It is part of the unwritten contract for collecting that money in the first place. Therefore, it will be no surprise to hear that, in principle, we support the Bill’s aim. In fact, much of the Bill continues work that we did in government, and legislation that was interrupted by the election.
It is important to put what we are discussing today in context. Before the pandemic, fraud and error across the DWP benefits and tax credit system was at a near record low, but then we had two national crises—first, the pandemic, then war in Ukraine—which piled huge cost of living pressures on families across the UK. During both, we acted rapidly. We set up never-seen-before systems of support in record time. We protected millions of people’s jobs. We paid half of everyone’s energy bills for a year. We got direct payments to the people who needed them the most. I am proud of what we did, and I think that history will look back kindly on how we supported people through those times, but the truth is that when we do something fast at a moment of crisis, that inevitably opens up new vulnerabilities in the system. Disappointingly, against a national spirit of getting through hard times together, some people saw it as a chance to make a quick buck, and we saw a material increase in the amount being lost to fraud within the system. Any and all of us could spell out better uses for that money. That is why, back in May 2022, we published our plan, “Fighting Fraud in the Welfare System”. We increased the number of frontline counter-fraud professionals in the DWP, created a new Public Sector Fraud Authority and started work on new legal powers to investigate and punish fraudsters. It was a good start. In 2022-23, fraud and error were cut by 10%. We saved £1 billion through the Department’s dedicated counter-fraud activities. The next year we upped that to £1.35 billion, exceeding the £1.3 billion target, yet we were still not satisfied.
In May last year, we published a second fraud plan to save £9 billion by 2027-28, which included hiring more staff to check claims for accuracy, modernising information-gathering powers, broadening the penalty system and investing £70 million in advanced data analytics. In April, we announced plans for a new fraud Bill to align DWP investigations with HMRC, treating benefit fraud like tax fraud and giving investigators new powers to make seizures and arrests. When the general election was called, the Data Protection and Digital Information Bill had already passed through the House of Commons. The Bill included the powers the Government are introducing today to require third parties, such as banks, to provide relevant information to the DWP. To the extent that this Bill continues that work, I do not envisage substantial disagreement—albeit we have questions on how the law will work in practice. I also have serious concerns about the powers that the Cabinet Office is giving itself.
Before I deal with those, let me say that I recognise the concerns that people have about the state getting too much information about their finances. Privacy should never be taken lightly. I do not want to live in a country where the Government can access our bank accounts and look at what we have been spending our money on, and I would not support a Bill that would allow the Government to do that, but I believe that it is right for the DWP to learn lessons from HMRC to recoup taxpayers’ money. The fact of the matter is that if someone receives money from the state, it is not unreasonable for the state to investigate if there are signs they are taking money that they should not be.
As I said, I have some questions about how the social security powers in the Bill will be put into practice, and I expect to probe those matters further as the Bill progresses. For instance, on the role of banks, how much testing has been done of the systems that they expect to use? The Horizon scandal is a recent reminder of how computer systems do not always get it right. What progress has been made on the code of conduct, and when will we see it? I also note that no impact assessment has been done on the cost to banks. Has the Minister met the sector and discussed what the changes mean for it? I know there are concerns within the sector about the lack of detail brought forward by the DWP. If the maximum level of scrutiny allowed under the Bill is demanded by the DWP, how would that work in practice for banks and what would it cost?
On the sanctions that can be meted out under the Bill, we support the Department for Work and Pensions being given further powers to pursue recovery outside of benefits and PAYE, but are the measures outlined in the Bill tough enough? Why is 40% the maximum amount of someone’s capital that can be reclaimed? Allowing for hardship, which the Bill does, why should someone potentially keep the majority of their ill-gotten gains?
It is not clear how the Bill intends to treat carer’s allowance overpayments, which I know from my time as Care Minister are complicated and often accidental, though unfortunately not always. None the less, they are a loss to the taxpayer that should be investigated. We would like to understand in more detail how the savings we are told to expect from the Bill will accrue. How many people does the Government think that will affect, and what proportion is it of the fraud currently being perpetrated? I was concerned the other day to see reports in the media of a number of artificial intelligence schemes being quietly shelved in the Department. It is noticeable that the plans rely heavily on human labour to root out fraud. While I know the Government have to create jobs somehow, I would be interested to hear what consideration has been given to automating some of the processes in future. That too will help ensure that taxpayers’ money does not go to waste.
I come to my main area of concern, which is the powers being given to Cabinet Office Ministers and the Public Sector Fraud Authority. I know what it is like to make legislation thinking that I, as a good person, would only use it wisely, but I also know what it is like to be wrongly investigated by a public authority on the grounds of a misleading newspaper article. Looking at the investigatory powers bestowed in chapter 2 of the Bill, how could one not be worried to see a Minister being given powers, with little oversight, to compel a person to release whatever information they wish, in any format demanded, within 10 days, along with the information of anyone connected to them, on any grounds that the Minister deems “reasonable”—and to disclose that information to whomever they think necessary, with the sole right of appeal being only to that Minister? It could be impossible for someone to comply within the timeframe given, yet the Bill includes fines set at £300 a day for missing the deadline.
Of course the Government should go after fraudsters, but I worry that some of that power could be abused and that, in its current form, it may breach laws on the state taking someone’s property without due process. I would be interested to hear if experts in the legal sector have been consulted on the legislation as drafted. Have Ministers engaged with the Law Society, the Bar Council or, for that matter, organisations like Liberty and Justice?
In the Department for Work and Pensions and the Cabinet Office, it is right to pursue fraudsters with the full might of the law, but the ends cannot justify all means and the process must always be fair, reasonable and proportionate. I look forward to further discussions on the detail of the Bill, and I am sure that colleagues in the other place will be preparing for that, too.
In the meantime, we must not let the Bill distract from the elephant in the room. For every penny the Bill will save—welcome though that is—it will do nothing about the billions of pounds that will be racked up in sickness benefits under this Labour Government. It is staggering that they did not come into office with a plan. They have done nothing to halt the tide in the seven months they have been in office, and I hear that they have shelved some of the work we handed over. We have heard not a murmur about what they will actually do, just briefing after briefing to the papers. Why not bring an actual plan to Parliament rather than talking to the papers? I suspect you, Madam Deputy Speaker, might agree with me on that point.
We had a plan—where is theirs? Every day the Government scramble about without a plan costs taxpayers millions. Fraud and error in the system is a problem, and I am pleased to pledge the Opposition’s support for tackling them, but let us not use this Bill as a distraction from the big issue. We all agree that the welfare system needs reform. Let us end the briefings and have some action.
Madam Deputy Speaker (Caroline Nokes)
Before I call the next speaker, I just want to make it clear that after the hon. Member for Oldham East and Saddleworth (Debbie Abrahams), I will call the Liberal Democrat spokesman, the hon. Member for Torbay (Steve Darling).
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
It is absolutely right that fraud against the taxpayer, whoever it is by, is detected, that money is recovered and that future fraud is prevented. We saw fraud during covid when, for example, the abuse of the bounce back loan scheme cost the taxpayer nearly £5.5 billion. There was also covid-related contract fraud, such as the purchasing of unusable personal protective equipment, which was outrageous.
As my right hon. Friend the Member for Leicester West (Liz Kendall) mentioned, the National Audit Office identified six areas of fraud risk against the public sector, estimated to cost the taxpayer between £55 billion and £85 billion. They are grant fraud, which is the misappropriation or misuse of grant money; service user fraud, which we have focused on today; procurement and commercial fraud; income evasion; internal fraud and corruption; and regulatory fraud.
In its 2023-24 annual report and accounts, the DWP estimated that it made overpayments—including fraud and error—of £9.7 billion out of the £269 billion that it spent. That is 6.7% of related expenditure. However, it also made underpayments of £4.2 billion—that is 1.6% of related expenditure—up from £3.5 billion the previous year, because of underpayments of disability living allowance. Within that, there were different levels of fraud for different benefit types. For universal credit, the level of overpayment for the same period is 13.2%. That is down from a peak of 21% in early 2020, during the covid pandemic, when some of the controls were suspended to speed up the application process. In fact, by value, two thirds of all overpayments are on universal credit—£6.5 billion out of £9.7 billion.
The DWP has tried to argue that the increase in fraud in the social security system reflects an increase in fraudulent behaviour in society. However, that does not explain why the overpayments are concentrated in universal credit accounts, or why, for example, there was a 10% reduction in fraud incidents reported in the crime survey for England and Wales between 2023 and 2024. The National Audit Office and Public Accounts Committee agree. In its recent report on the DWP’s annual accounts, the PAC said that it was not convinced by the DWP’s claims, adding that that was a “dangerous mindset”. The Committee also produced the following context, which we should all consider:
“It is concerning that DWP is not providing a decent service to all its customers, who include some of the most vulnerable in society and some of those with the most complex needs. In particular, claimants of disability benefits, including Personal Independence Payment (PIP) and Employment and Support Allowance (ESA), are receiving an unacceptably poor service including processing times compared with those receiving Universal Credit (UC) and State Pension.”
I worry that many of those disabled claimants, made vulnerable by their circumstances, are receiving less than the DWP estimates that they are entitled to. I believe that there is a genuine commitment from Ministers to change the DWP’s culture and build trust with its service users, but the Bill will be seen by many as more evidence not to trust the DWP and not to engage. I am not alone in that; in evidence to the Work and Pensions Committee inquiry on safeguarding vulnerable claimants, Citizens Advice raised concerns that the failure to engage is the second largest category that the DWP classes as fraud, and that when the enhanced review team identifies a household as having potentially made a fraudulent claim, payments may be immediately suspended. Citizens Advice recommended that the detriment caused by such a suspension should not take place while the fraud review process is ongoing. Disability Rights UK, UK Finance and others have raised concerns about the lack of systemic safeguards in the Bill. To their credit, Ministers have accepted that and will look at it as a whole.
However, Ministers—particularly those from the last Conservative Government—will remember the housing benefit fraud allegations, in which more than 200,000 people were wrongly accused of and investigated for housing benefit fraud and error last June. An AI algorithm—which the shadow Secretary of State, the hon. Member for Faversham and Mid Kent (Helen Whately), just said we should be using more of—incorrectly identified people as potentially behaving fraudulently, and they were investigated. That is really serious. What level of investigation of innocent people do Ministers consider acceptable?
Policy in Practice has also raised concerns about underclaiming, barriers to accessing support, the lack of value for money of the DWP’s fraud detection, prevention and recovery system, which addresses less than 5% of the debt owed, and how the focus on fraudulent claims is
“spoiling the system for the 97% of ‘genuine’ benefit claims”,
fuelling beliefs about benefit cheats, and detracting from
“the millions of households that are rightfully and legitimately supported by a social safety net designed to be there for all of us when we need it.”
I have questions for the Ministers, some of which I have raised with them before. What risk assessments of the Bill have been undertaken? I know that there is an impact assessment and a human rights assessment. What are the risks, what mitigations have been put in place, and will the Government publish them? How are safeguarding concerns, including the Caldicott principles and the responsibilities of the Caldicott guardian—which the DWP has, to its credit, now put in place—addressed in the Bill? This Bill is too important for us to mess it up and for innocent people to become the victims.
Madam Deputy Speaker (Caroline Nokes)
I call the Liberal Democrat spokesperson.
Steve Darling (Torbay) (LD)
I thank the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) for laying out very concisely some of the challenges in ensuring that the Bill does the right thing without going too far and breaking the things that people want fixed.
Clearly, defrauding the benefits system is wrong. One need only reflect on the level of disinvestment in many of our public services by the previous Government to note how that can bleed the system dry. I reflect on my own Torbay constituency, where the hospital tower block has scaffolding around it not because it is under repair, but to prevent bits of concrete from falling and killing people. I reflect on the lack of investment in our schools; the challenges with reinforced autoclaved aerated concrete mean that the necessary capital programme will not happen for the next six years. I reflect on the lack of investment in our police services, which means that the number of sworn officers has massively reduced. Those are serious issues that affect us following the lack of investment under the previous Government.
The Conservative Government were asleep at the wheel during the covid pandemic, as the Secretary of State alluded to in clear terms. Businesspeople in Torbay told me that they felt Rishi Sunak was—
Madam Deputy Speaker
Order. I remind the hon. Gentleman that we refer to Members not by name but by constituency. I think he was referring to the right hon. Member for Richmond and Northallerton.
Steve Darling
My apologies, Madam Deputy Speaker. Those businesspeople felt that the then Chancellor of the Exchequer was filling carrier bags full of £50 notes and placing them around towns, expecting people just to pick them up, so low were the safeguards for a number of the covid support schemes.
I will move on to an item that has already been covered by a number of colleagues: the carers scandal. More than 136,000 people—equivalent to the population of West Bromwich—have been left with liabilities of £250 million that they are extremely worried about. The Government have quite rightly commissioned a review, but it is due to report not in the near future but next summer. I challenge the Minister: why not wait for that review’s findings before we push hard on these proposals, so that we can ensure that lessons are learned? We want fraud to be tackled, but we want it done in the right way. There have been just seven working days between this Bill’s First Reading and its Second Reading. Large tracts of the safeguards and the rails around it are out for consultation as we speak, which we need if we are to understand what safeguards there will be to protect our communities.
Colleagues have already mentioned AI, and they are right to have done so, because there are real concerns about a lack of transparency—[Interruption.] Sorry, Jennie is joining in; she is having a dream about rabbits. As Liberal Democrats have already highlighted, we do not know what safeguards there will be around the use of AI. How can we back the Bill until we know what safeguards will exist? I would like to reflect on how the Bill can contain those appropriate safeguards. Sadly, as the hon. Member for Oldham East and Saddleworth highlighted, the DWP is a broken Department.
Robin Swann (South Antrim) (UUP)
Bearing in mind the money that has been claimed back from unpaid carers and our concerns about the DWP, does the hon. Member agree that this legislation would see more unpaid carers or their like come under far harder and harsher penalties?
Steve Darling
I welcome the hon. Member’s intervention; he has highlighted a serious issue, and he is spot on. One has only to reflect on the significant backlog, with 90,000 people waiting for their pension to be reviewed as part of the winter fuel allowance issues—that is a massive backlog.
Access to Work, which is meant to support people with disabilities into work, is sadly another broken system. Quite often, those wishing to receive support find that job offers are withdrawn because their work package has not been pulled together in time. An academic survey has highlighted that over three years, sadly, almost 600 people committed suicide around the management of their support from the DWP. I suggest to the Secretary of State that, while one understands the aspirations of this Bill, it is far too much of a Big Brother Bill. It is far too much of a snoopers charter, and I suggest to the Government that they withdraw it.
Oliver Ryan (Burnley) (Lab/Co-op)
I thank the Secretary of State for introducing this important Bill. Fraud is a serious issue, and we simply cannot tolerate the level of fraud that the previous Government left us with. In the year 2023-24, we lost almost as much to fraud as we spent on defence.
We have all heard the stories of people fraudulently claiming covid support and benefits to which they were not entitled. People have been claiming from the safety net not for security in their time of need, but to feather their own nests on the backs of British taxpayers. I am glad that this Government are serious about protecting public money from fraudsters, and I have no time for the whataboutery of the Liberal Democrats.
This robust Bill closes loopholes, strengthens enforcement and prioritises financial accountability. It is a great step forward for the real change that we promised at the election. The message from me and my constituents is quite clear: those who defraud or attempt to defraud the British public in any way deserve to feel the full weight of the law. I believe in doing what is right to protect taxpayers and hard-working people in business, which is why I will not stand by while fraudsters take advantage of the system. The Bill says, “If you have defrauded the British taxpayer, we will come for you, and we will not mess about.” That is what people in Burnley, Padiham and Brierfield want.
Turning specifically to the strengthening of measures on covid fraud, I am proud that one of the first actions taken by this Government was to appoint the covid corruption commissioner, and that the Bill bolsters the commissioner’s powers and doubles the time limit in which civil claims can be brought, among other measures. A typical example of rampant covid corruption was the bounce back loans, which have already been referred to by other Members. Those loans saw millions of pounds of public money shovelled out of the doors of the Treasury without proper oversight. We have all read the stories and heard about some of the heinous outcomes—huge amounts of public money gone to fake companies as well as people using stolen identities or providing products that were either defective or just plain did not exist. Meanwhile, I have had to explain to my constituents why basic public services have gone to the wall.
To put it into perspective, all in, the previous Government handed the equivalent of £20,000 of taxpayers’ cash to fraudsters every minute of the last Parliament, and now Conservative Members moan that there is no money for anything. If this Bill had become law earlier, much of that fraud could have been prevented by allowing stronger eligibility verification procedures, faster detection of fraudulent transactions and faster financial recovery powers for quicker action against fraudsters.
Moving on to benefit fraud and the Department for Work and Pensions, the same principle applies: those who defraud the British public will feel the full weight of the law, and will have nowhere to hide. We have a moral duty to recover every penny of public money that has been defrauded, and I am glad that the Bill full-throatedly says so. Benefit fraud has tripled since 2019, and since then we have lost almost £10 billion overall to fraud and error. As the now Leader of the Opposition said while in government, fraudsters were let “off the hook” by the Tories. People who work hard to pay their taxes deserve to know that every pound stolen is a pound that cannot be spent on public services, and they deserve to have that money returned. It is simply unforgivable that the previous Government allowed fraud in the benefit system to get to this level.
By voting in favour of the Bill, we will allow this Government crucial investigatory and search and seizure powers that are essential if we really want to tackle fraud in this country. I know that there will be concern from some quarters, but I am reassured that the Secretary of State has taken into consideration the necessary safeguards that will balance the need for effective fraud prevention and recovery. Indeed, if during the passage of the Bill she finds a way to be tougher and go further, she should do it; I am not sure whether two years is enough for a driving ban.
The powers we are extending to the Public Sector Fraud Authority have already proven effective. They are used by the DWP and by HMRC, and by expanding them, we will recover more funds and bring more fraudsters to justice. This is the first update to those powers in 20 years, as the Secretary of State said. Of course, DWP investigators should be given warrant powers, to save police time if nothing else.
The safeguards are in the Bill to make sure we tackle fraud effectively and, as importantly, protect people’s rights, as the Secretary of State has also said. To address a point raised a second ago by the shadow Secretary of State, the hon. Member for Faversham and Mid Kent (Helen Whately), decisions will be made by a human being in the final stages, as with any decision that affects somebody’s benefits. I think that is right, and clearly it is something that the Secretary of State has tried to stipulate.
People in Burnley, Padiham and Brierfield expect their money to be used effectively, and they demand accountability, with fraudsters who exploit the system being held to account and locked up if necessary. As the Secretary of State said, the Bill is tough but fair, with measures designed to save an awful lot of money over the next five years. That is a promising step that I believe will restore public trust and tackle financial mismanagement. I am grateful to the Secretary of State for taking the issue so seriously—more power to her elbow.
Mr Peter Bedford (Mid Leicestershire) (Con)
I would like to echo many of the points raised by the shadow Secretary of State for Work and Pensions, my hon. Friend the Member for Faversham and Mid Kent (Helen Whately). Like her, I am a conditional supporter of the Bill. While I welcome its intent, I would like to raise a few questions regarding its implementation and its true impact on reducing fraud and error in the system.
Conservative Members understand three core principles: the importance of promoting personal responsibility, the importance of law and order, and of course, the importance of reducing the burden of an overreaching state and ensuring that taxpayers’ money is spent efficiently. I am therefore pleased that by introducing this legislation, the Secretary of State appears to have accepted the long-standing arguments made by Conservative Members. The Bill, much like the previous Government’s policy paper, is both necessary and overdue. It is a scandal that fraud and error in the DWP benefits system has reached such levels. Since the pandemic, the UK taxpayer has overpaid £8 billion due to a lack of proper provision for the DWP to thoroughly investigate cases of fraud and error.
This Bill maintains the focus of the previous Government’s policy paper on fighting fraud in the system. Under the previous Secretary of State, my right hon. Friend the Member for Central Devon (Mel Stride), the DWP saw a 10% drop in fraud and error in the system, which led to savings of over £2 billion between 2022 and 2024. That was achieved through the Department recruiting over 2,000 review agents and hiring 1,400 counter-fraud professionals. Unfortunately, due to time constraints at the end of the last parliamentary Session, my right hon. Friend was unable to carry out the modernisation of information-gathering powers or to broaden the scope of cases that could lead to civil penalties. I have no doubt that, had those Conservative policies been fully implemented, fraud and error levels would be lower than they are now.
Turning to the Bill, although I support its principles, I seek clarification from the Secretary of State on several key points. First, can the Secretary of State guarantee that this Bill will not distract her and the Department from much-needed reforms to benefit conditionality, including work on health assessments and increasing incentives for people to find work?
Lewis Cocking (Broxbourne) (Con)
My hon. Friend is making an excellent contribution and I support what he is saying. We must get benefit fraud down and I support some of the measures in the Bill. On the point he has just raised, does he agree that this is only one side of the coin in dealing with benefits in this country? Of course, we must do everything we can to get benefit fraud down, but the other side of the coin is encouraging people to go back to work, because the best form of welfare is having a well-paid job.
Mr Bedford
I absolutely agree with all the sentiments my hon. Friend has expressed. Getting a job is the best route out of poverty, and it is the best route to ensuring that we have a more socially mobile society.
Secondly, my instinctive belief in personal liberty means that I believe provisions allowing access to individual bank accounts must be handled with caution. Can the Secretary of State therefore confirm that such measures will be used only as a last resort, and that the independent person appointed by the Cabinet Office will be given full oversight and will report transparently on the use of these powers?
Thirdly, the Bill proposes the restriction of driving licences for those committing fraud against the DWP, but what alternative deterrents does the Secretary of State propose for those who do not drive? His Majesty’s Revenue and Customs and the Child Maintenance Service already have these powers. I would like to see the independent person assess whether these measures are as impactful at the DWP.
Fourthly, Gareth Davies, the Comptroller and Auditor General at the National Audit Office, wrote last year that the forecast
“shows that DWP no longer expects Universal Credit fraud and error to return to the levels seen before…the COVID-19 pandemic”.
In response, the DWP explained that this was because there has been an “increasing propensity” for deceit across British society. I do hope that the Secretary of State will push back against this defeatist culture in the DWP and that my constituents in Mid Leicestershire do not continue to foot an astronomical bill for people committing fraud in the Department.
Finally, to gauge the correct path when dealing with fraud and error in the system, will the independent person conduct a review to determine whether the provisions in this Bill are just as effective as the Conservative policies of the previous Government?
In conclusion, as a Conservative, I support the intent of this Bill. It is shocking that fraud and error are at current levels. However, I urge the Secretary of State to work collaboratively with Members across the House to ensure that individual freedoms are respected, that the Bill does not distract from wider welfare reforms and that its measures deliver a long-term reduction in the welfare bill.
Gill German (Clwyd North) (Lab)
This Bill is crucial for delivering on this Government’s manifesto commitment to safeguard taxpayers’ money. As the Secretary of State has rightly stated, we must be
“turning off the tap to criminals who cheat the system and steal law-abiding taxpayers’ money.”
In Wales alone, the national fraud initiative found £7.1 million of fraud and payment errors in 2022-23, up by £0.6 million since the previous year. Figures such as this show just how much a blight on the economy fraud and error continue to be. I have heard at first hand from constituents about instances of benefit fraud that they are well aware of, such as individuals using past addresses to make claims to which they are not entitled. They know that this is not right, and they expect us to take action. It is also essential that we crack down on organised crime gangs and streamline the process through which DWP investigators can act to bring these serious offenders to justice more swiftly.
I welcome this Government’s crackdown on fraud, because every £1 lost to fraudulent claims is £1 that could be spent on vital public services—services that my constituents in Clwyd North rely on to strengthen our communities and improve lives. However, it is crucial that we make a clear distinction between intentional fraud and accidental individual error. Errors leading to overpayments may be the result not of deliberate wrongdoing, but of the inherent complexity of the social security system itself. Many of my constituents have shared their struggles with the complexity of applying for benefits, and knowing what to apply for and how. This causes significant stress, and it exemplifies the risks of penalising individuals who may simply have been unable to navigate the system, further entrenching the fear of making a mistake. The Bill must therefore go hand in hand with reforms to make this navigation far more straightforward.
A YouGov survey for Turn2us in 2024 found that 77% of respondents believed they would struggle when they needed to claim benefits if their circumstances changed. This highlights the real challenges that people face in navigating a system that is often confusing and difficult to understand. The Government must ensure that their powers to recover overpayments differentiate between fraudulent criminal activity and genuine mistakes. Without this distinction, there is a risk of penalising individuals who have simply struggled to navigate the system, and those people may already be in vulnerable situations.
Getting this Bill right, however, will mean that £1.5 billion of taxpayers’ money over five years will be saved. That money can be invested in the services that people in my constituency and across the country rely on, from public transport to local infrastructure. With fraud and error costing nearly £10 billion a year, we must act decisively to drive down this fraud and error and protect public funds. At a time when families are struggling and public services are under pressure, ensuring that taxpayers’ money is spent where it is truly needed is not just responsible, but essential.
This Bill must tackle fraud and error in a way that is fair and proportionate and does not punish those who have made an honest mistake. I know that the Government have worked hard to include measures that will ensure that these critical distinctions are made as the Bill progresses. However, it is crucial that we do not shy away from coming down on this issue, and that we ensure constituents see their hard-earned contributions going directly to the services that strengthen our communities.
Siân Berry (Brighton Pavilion) (Green)
This Bill is, at heart, Conservative legislation left over from the most dark corner of the last Administration, and I have no qualms about opposing it. I will speak against giving it a Second Reading and, alongside my fellow Green Members, will vote against it later.
One of the changes that people wanted to see when they voted out the last Government was a welfare system that treats people with dignity and respect. Sadly, this Bill is instead based on blame and suspicion of people in need of help. It has a focus on fraud when a far bigger issue is unclaimed and under-claimed benefits due to a lack of awareness, complexity in the system and stigma. The people losing out are not helped by this legislation. The Chair of the Select Committee, the hon. Member for Oldham East and Saddleworth (Debbie Abrahams), set out the risk of damaging trust in and engagement with the DWP. We also have the risk of reigniting damaging and unfair stereotypes from some people involved in wider debates on these issues on social media, in newspapers and in broadcast media.
All in all, this Bill is deeply concerning and disappointing, and I had hoped better of this Government on this issue. I sincerely hope that Ministers will go back to the drawing board and come up with a new, fair and humane policy for dealing with what is a very small proportion of fraud in our benefit system.
I have had so much correspondence on this from constituents who are very concerned about the Bill’s sweeping powers to invade their privacy and treat them as suspects, not citizens. I am talking about pensioners who need pension credit, people who are permanently disabled and whose entitlement to employment and support allowance is clear and settled, people who are precariously underemployed or unemployed who need universal credit, family carers, and people who are simply on low wages and cannot make ends meet. These are citizens, not suspects.
The clauses about what appear to be routine and regular Government access to information from bank accounts for eligibility verification—not linked to serious crime—most concern me. I am also opposed to the clauses that increase powers of search and access to homes for more serious matters, and those that would remove driving licences from people who are having difficulty paying back to the DWP overpaid money due to what may simply be human error at a difficult time in their lives, not fraud at all.
I therefore suggest that the Government come back to this House with the parts relating to covid fraud and to contractors and businesses, and maybe add something on the much bigger problem of tax fraud. On the rest, I suggest that they start again with a process of genuine listening and co-production, with those who claim social security, about appropriate, fair, respectful and secure ways of ensuring that people in need of support can receive what they are entitled to, and to protect in a proportionate way against those who may seek to defraud the Government or local authorities.
This process would fit together very well with the recent proposal from the charity Mind in response to other upcoming changes to benefit processes, which asks for a new approach to the benefits system and a commission led by disabled people to redesign benefit assessments. Mind says that this kind of process would help to rebuild trust between disabled people and the DWP. I agree, and my personal view is that this Bill will do the absolute opposite.
In summary, I believe that this Bill should go no further, and I and my Green colleagues will be voting accordingly today, to stand up for our constituents’ rights and dignity and for social security based not on intrusion and suspicion, but on support.
Jon Trickett (Normanton and Hemsworth) (Lab)
I wish to make a few points. First, it would have been impossible not to note the zeal of the Secretary of State when she was banging on the Dispatch Box and talking about fraud and loss to the taxpayer, and she is right to do that. We, on this side of the House at least, believe in public expenditure, and therefore there is a duty on us to ensure that every single penny is spent in an appropriate manner. So where it is wasted or stolen or fraud is going on, we should bear down on it.
However, although the Secretary of State started off with that zeal and passion in talking about the gangs and others, she talked most about benefit claimants. Although the Bill sets up powers for the fraud authority, it deals largely with the question of fraud in the benefit system. But the title of the Bill mentions both fraud and error, and not enough time has been spent in this debate on the nature of error, which is far bigger than can be easily acknowledged.
I looked at the figures for PIP. Between 2019 and 2024 some one in four cases for alleged fraud by PIP recipients were dropped before reaching appeal, indicating the decision had lapsed because the Department had decided in favour of the appellant. That indicates the scale of the error that this Bill also wants to address. I am going to refer to a couple of cases in a moment or two, but at the core of this Bill is the creation, effectively, of a partnership between the state and the private banks, and the Bill does not make clear what that partnership will look like. I hope that we get some clarity on that before the Bill reaches Committee.
The banks themselves have said that they are very worried about this Bill, because they have a statutory duty, imposed by this House, to make sure that they deal properly with vulnerable clients. The banks have said there is a contradiction between the contents of this Bill and the obligations that fall on them and their duty to treat people who are vulnerable in a proper way. I want to reflect on that briefly.
Let me give the House a case from my own constituency that is symptomatic of a wider problem. A couple were referred to my office. They both had learning difficulties, both were illiterate and innumerate, and they found it impossible on their own to fill in the dozens and dozens of questions which the forms require people to fill in to get access to the benefits. So they were helped to put the form together by people employed to look after such people. The DWP then decided, years later, that it had made an error and had overpaid the couple by a large amount. This error came to light as a result of a review of some kind in the Department. So here is a very poor and vulnerable couple who were unable to fill in the form on their own and who had been helped by professionals, and what did the state do? It sent them a bill for £20,000.
All Members will have a great deal of empathy—they would not be in this job otherwise—so we can imagine the state that couple were in when they received a bill from the state to repay £20,000. It was discovered after they came to my office that they had in fact filled in all the forms correctly; this was a computer error caused by someone failing to key in some of the information that had been provided to the DWP. Neither the council which was helping them nor their support workers spotted the fact they were being overpaid; nobody spotted it, so this went on for a number of years and the sum reached £20,000. A deeply vulnerable couple were left in that situation.
Eventually they encountered a local councillor in my constituency who referred them to me. We went through the whole thing and managed to make an appeal on their behalf. But this Bill gives people only 28 days once they have received an order to pay. It took us longer than 28 days to resolve this once it had got into my office. I just say to the Secretary of State that 28 days is not long enough in these complicated cases for people to produce the evidence to show they are a victim of error rather than they have committed a fraud. There was a presumption by the state that they had committed a fraud of £20,000, totally incorrectly, it turned out.
I worry that the Bill will put people like my constituents, and I imagine constituents of every Member in this House, in the same position. My constituents were fortunate to find an MP, but many people in that situation would not know how to find their way through the system.
That raises the question I have referred to about the banks. The banks have a statutory duty to protect vulnerable customers. How will they exercise that duty when they are being required to provide information to the DWP about the financial activities of various individuals banking with them?
On the subject of vulnerability, Disability Rights UK tells us that one third of all claimants of legacy benefits have mental health problems. I imagine that most of those people would be regarded as vulnerable by the banks and by every humane person in this House. One therefore wonders just exactly how we will reconcile the statutory duty on the banks with what they are required to do in relation to this Bill.
We are giving powers to this fraud authority. I personally am in favour of tackling fraud, as I have said—I am a Yorkshireman, and I do not like spending money. I do not like money being spent wastefully by the state either, and when I was the leader of Leeds city council, everyone knew I was strong on waste.
Finally on vulnerability, have the Government commissioned and received an equality impact assessment? If they have, can that be placed in the Commons Library, because the Bill will clearly have an impact on people who are extremely vulnerable? I think something somewhere in the Department will refer to that impact assessment.
I will make a couple of final points. It is suggested that the Bill will save £300 million a year by tackling benefit fraud. That is a large amount of money, but we can compare it with the £10 billion of fraud on personal protective equipment provided during covid, the £16 billion lost to the taxpayer in fraudulent covid schemes, the £5.5 billion a year of tax evasion, or the £6 billion of other illegal activities against HMRC. The £300 million is important, but it is not the largest amount of fraud that is taking place. The fraud authority is getting new powers and will be staffed up. How will it choose among the disproportionate amounts by which the state is being defrauded by various different agencies, by private individuals and, frankly, by some gangsters, too? Will the staffing be allocated according to the prejudices of politicians—whichever politicians are then in charge—or will it be allocated proportionately to the loss to the taxpayer incurred through different forms of fraud?
My final point is on the Information Commissioner. The Secretary of State suddenly announced that she received a letter today—it would be interesting to read it—but the Information Commissioner had been suggesting that the powers were disproportionate. We need to see the letter, and hopefully it will go into the Library or somewhere.
Clause 74, which empowers schedule 3 to the Bill, goes right to the kernel of the problems with this Bill, which could not be clearer. I am worried that it is not apparent how the intervention of banks will be invoked. Schedule 3 allows the banks to be invoked and then for action to take place. Will the bank account of every single citizen in the UK be looked at? That is the view of some campaign groups in society. If so, that is a massive incursion into the liberty that the British people hold dear. If not, how will the banks be asked to identify particular individuals? What process will be gone through? That is not clear, and the Bill does not explain it. I have read clause 74 two or three times, as have many other people.
Finally, can we be assured—not necessarily now, but as the Bill progresses through its various stages—exactly how that right of appeal will work? I have just referred to the 28-day cut-off, but will the Secretary of State look again at that? It seems to me that it is slightly too tight.
David Chadwick (Brecon, Radnor and Cwm Tawe) (LD)
It is an honour to follow such an excellent speech from the hon. Member for Normanton and Hemsworth (Jon Trickett). As a Welsh Liberal Democrat, I find myself concerned with the civil liberties aspects of this Bill, particularly the influence and power it gives to the big banks. I spent seven years working in data privacy as a data protection consultant, and reading this Bill created more questions than it answered. I worked on datasets involving different businesses, Governments and organisations from across the world. In particular, I want to speak to the points around the banks, because as we speak, customers from Lloyds and Halifax cannot access their bank accounts because of an outage. We should be concerned about making banks the judge, juries and executioners of social policy, particularly with something as important as welfare policy.
The UK has strong data protection laws that have been carefully negotiated over time and inherited from the European Union, and this Bill threatens to erode some of those protections and implicates treaties that we have already signed, such as the data adequacy agreement we have with the European Union. If the EU was to turn around and say that it was unhappy with the Government’s decision to monitor their subjects and citizens in this way, that would create many more problems for organisations across the UK. Citizens should have the right to object to automated decision making, and I struggle to see how asking banks to scan their datasets for potential fraud could not be regarded as decision making. Let us give citizens the right to be able to object to these decisions being made about them. If we do not, we might be violating the data privacy agreements that are already in place.
What do the Government expect the process to look like, when they are asking the banks to provide this information? The Secretary of State said that the information would be provided in a digital format, but what will that actually look like in practice? What could go wrong if, as has been mentioned, the banks are having to relay huge datasets to the Government and to the DWP in particular? That could create honeypots of data that might be easy for hackers to intercept and interfere with.
In data protection, if there is not data integrity, availability and confidentiality, essentially all of the agreements that exist with the data subject and the data processor can be said not to be valid. I therefore wonder what the Government see as the perfect framework for this data to be provided. Does it mean that the banks will have to export the names of everyone who has more than £16,000 in savings and send that to the Government to see whether they are in receipt of welfare payments?
One of the core principles of a free society is the right to privacy, yet in its current form, this Bill represents an intrusion by the state into the privacy of individual citizens. Under the Bill, the Government would be granted sweeping powers to access and monitor the personal financial records of citizens, even without any evidence of suspicious activity to justify such actions.
Many people are in receipt of welfare payments through no fault of their own, and this Bill could result in the mass surveillance of private financial information, potentially affecting 9.4 million citizens. The presumption of innocence is a cornerstone of our justice system, yet the Bill would fundamentally alter that principle. Under the Bill, individuals could be presumed guilty until proven innocent, with their personal data shared, investigated and scrutinised without sufficient cause or due process. That sets a dangerous precedent, where the burden of proof falls on citizens, not the state. We have all seen the devastating impact of errors made by the Department for Work and Pensions on individuals. Such a system could lead to disastrous consequences, where it falsely flags someone as fraudulent due to simple administrative errors or unintentional mistakes. The hon. Member for Normanton and Hemsworth acknowledged that the banks had raised concerns about whether they are the right organisations to do this.
The Bill risks creating a two-tier society where certain groups are subjected to intrusive financial monitoring by the state while others are not, which would undermine the principles of equality and fairness that our society is built on. In the current climate where banks are closing branches left, right and centre—Lloyds bank has announced that it will close its branch in Pontardawe—the Government should not be asking banks to act as judge, jury and executioner in social welfare policy while granting themselves access to people’s bank accounts but not requiring those banks to ensure that citizens have access to their bank accounts. That does not sit well with the liberal society that I want to live in, and I do not believe that my citizens want to live in such a society, either. I call on the Government to rethink their proposals and to assure us that the Bill will not undermine our data protection adequacy agreement with the European Union.
David Pinto-Duschinsky (Hendon) (Lab)
We have heard lots of statistics and detailed policy questions, but I want to start by sharing two stories. The first is of Antonia Foods in Wood Green, north London. From the outside, it looked like a normal neighbourhood corner shop selling fruit, veg and groceries, but from its back room Galina Nikolova and Gyunesh Ali ran a vast fraud operation, making use of transnational networks to file hundreds of illegal UC claims. By the time they were caught, they had defrauded the DWP of over £50 million. When the police finally raided their addresses, they found cases stuffed with cash. Nikolova and Ali received prison sentences, as did many of their associates, but the reality is that most of the money they claimed had long since disappeared, likely spirited out of the country. They had successfully stolen from us all.
The second story is of Yvonne, a disabled woman who was paid thousands of pounds more in benefits than she was entitled to over a number of years as a result of an innocent mistake and is now struggling to make ends meet as the DWP deducts overpayments from her current entitlement. Both those stories illustrate why we so desperately need the Bill.
The extent to which fraud against the public purse spread under the last Government is breathtaking. The proportions are simply staggering. As my right hon. Friend the Secretary of State said, public sector losses amounted to £55 billion last year—as much as the defence budget, and three times what we spend on police in England and Wales. That loss costs every man, woman and child £800 a year and is the equivalent of a third of the entire national VAT take.
This is not a victimless crime or some technical infringement. It robs every family in Britain, erodes our public services and takes money that could be used to help those most in need, depriving the most vulnerable of support. My constituents in Hendon and people across the country rightly expect it to be tackled. This is a crime that feeds on the most disadvantaged and weakens not only public services but the public’s faith in those services and their fairness. I say gently to those who have criticised the Bill that there is nothing progressive and nothing compassionate about allowing fraud to fester. It is a scourge that must be tackled. It is a scourge that grew out of control and was professionalised under the last Government.
Perhaps no area illustrates the challenge that we face, how it evolved and the last Government’s catastrophic failure to kerb fraud better than benefits. The DWP’s net bill for fraud and error, even after deducting underpayments, is £8.6 billion. That is £272 a second, £16,300 a minute and almost £1 million an hour. In the time that it will take for us to have the debate, the DWP will have lost more than £3 million. The bill for fraud and error is roughly the same as the Department’s entire programme budget. The DWP loses as much to fraud and error as it spends on every active programme it has to help the unemployed, the long term-sick, those with disabilities and the elderly. The picture is shocking, and it got much worse under the Conservative party.
The headline figures for fraud and error excluding underpayment tripled in cash terms between 2010 and 2024 from £3.3 billion to £9.7 billion. As bad as those figures are, they actually understate how badly things deteriorated under the Conservatives. Claimant error rose only slightly in cash terms, while official error remained flat. In contrast, fraud rose a stunning sevenfold in cash terms and more than fourfold as a proportion of the total benefits budget. That was not some act of God; it was the result of serial failures by the Conservatives, who failed to understand that fraud was evolving and failed to modernise the DWP’s powers to allow it to keep up in the arms race with the fraudsters. They also made truly terrible policy and design choices that actively fuelled the fraud crisis.
That can be seen nowhere better than in how the Conservatives set up universal credit. Because of their failures in properly establishing and policing its gateway, it became a magnet for fraud. Universal credit accounts for just 22% of benefit spending but contributes over 76% of all benefits fraud. Almost £1 in every £9 claimed through UC in the Conservatives’ last year in power was claimed fraudulently, compared with just £1 in £25 for housing benefit, £1 in £300 for PIP and just £1 in £1,000 for pensions.
The reality is that the Conservatives failed to take the threat of fraud seriously and failed to understand how it was being professionalised and industrialised, as my earlier story showed. They left us all to pick up the bill. They say that they acted, but the truth is they did nothing for years. Even when they finally got their act together at the end of their term in office, it was too little, too late. Once again, we are having to step in to clear up their mess. They owe everyone in the House and everyone in the country an apology. It is striking that in all their bluster during the debate, we have not heard the only word that they should be uttering: sorry.
Fraud exploded on the Conservatives’ watch because of their failings, but the pattern of fraud also tells us much about why the powers outlined in the Bill are so desperately needed. The DWP’s own statistics show that of the £7.4 billion lost to fraud last year, about £1 billion was lost to people who held too much capital to be eligible, £1.3 billion was lost to those who had failed to report their self-employment earnings, and a further £1.3 billion was lost to those who had failed to provide sufficient evidence. A further £250 million was lost to those who were abroad. Those frauds could have been caught with better data and better investigatory powers. It would have been possible for banks to spot people with too much capital to claim, or those with considerable earnings, yet today, because of the last Government’s failure to update their legislation, the DWP cannot compel information digitally.
Virtually all banking is now done online, and yet while fraud is propagated through digital channels and moving at lightning speed, the DWP is still forced to rely on analogue tools. In other fields, we already integrate information and get institutions to work together to prevent fraud. Banks regularly scan patterns that indicate fraud; benefits should be no different. We need digital tools and access to digital data to fight fraud. As with tax, investigators should have the powers they need to recover funds from those who are no longer on benefits. That is why the powers that the Secretary of State is proposing to take are so important as they will allow us to better identify those committing fraud and take more effective recovery action to get taxpayers’ money back.
That brings me back to my second story. Along with the measures that the Chancellor brought forward in the Budget, these measures will help us protect legitimate claimants by helping to pick up overpayments earlier. Last year, 480,000 people had deductions averaging £500 taken from their universal credit payments because of overpayments. Underpayments can be a source of huge anxiety and hardship. Preventing them and catching them earlier will help protect the most vulnerable claimants. That will be possible only because of the better data and the better processes that the Bill will help support.
As we heard from the hon. Member for Brecon, Radnor and Cwm Tawe (David Chadwick), some have voiced concerns about whether the powers proposed in the Bill will impinge on people’s rights. I am strongly reassured by the powerful raft of safeguards that the Secretary of State has included in the Bill. Those safeguards mean that new debt recovery powers will be focused not on those on benefits, but rather on those who are neither on benefits or PAYE, and the DWP will not have access to people’s bank accounts, contrary to what some have implied during the debate. Those safeguards will include independent oversight and options for appeal. I am pleased to hear that, on top of that, the ICO believes that the safeguards address the concerns that it had with the Conservative party’s proposals.
This is a fair and balanced package, which modernises our approach and gives us the digital tools to fight a digital scourge, and the enforcement powers to take on organised crime while protecting the vulnerable. This Government and this ministerial team are modernising our system to protect public money, help the vulnerable and, critically, get Britain working. I am proud to support the Bill.
Kirsty Blackman (Aberdeen North) (SNP)
I want to comment on a number of speeches that have been made. As the Scottish National party tabled a reasoned amendment, which unfortunately did not get selected, it will not surprise anyone that we have a number of significant problems with the Bill.
Part 1 of the Bill relates to recovering the covid moneys and the services and goods that the Government received that were substandard, for which organisations need to pay the Government back. Since its scope does not extend to Scotland, I will not add many comments, except to note that I have a long track record of bringing up covid fraud, particularly PPE frauds, in this Chamber. I will support the Government’s work to recoup the money that was fraudulently taken in Government contracts that did not deliver.
I oppose the DWP elements of the Bill, which are not what social security should be about. As my friend, the hon. Member for Brighton Pavilion (Siân Berry), said, the social security system should be built on dignity and respect. Very few Members have said that we should have a social security system that works. Members have talked about tightening up eligibility criteria. Last week, people talked about the number of scroungers that there are—people not in work who are claiming social security benefits—and how desperately we must get them back to work. People should have opportunities, but it is also important that we have a social security system that catches people and supports them when they are not able to access those opportunities, because they are struggling with their physical or mental health or have learning difficulties. We need a social security system that works.
I have asked the Minister on a couple of occasions about co-production, which an hon. Member also mentioned. Co-production is needed when it comes to changes to disability benefits. If the Government are to reduce the amount of money being paid out for disability and sickness benefits, they must work hand in hand with disabled people. They must not just say, “We are going to reduce it by this amount.” They need to sit round the table with disabled people to have those conversations and to make clear what changes they want.
In Scotland, we have reformed the previous PIP system to create the adult disability payment and child disability payment. I used to get a number of emails and people walking through my door who were terrified about their upcoming PIP assessment—having to fill in those forms again, and sit and write a long list of the normal things that their child cannot do, on an annual basis. We have changed that in Scotland. We do not have regular assessments. If someone has a longer-term condition, they do not have to go through that awful situation on an annual basis. The Government need to focus on dignity, respect and co-production. That should be way ahead of conversations around fraud.
It is important that the social security system, the procurement system and the tax system do not propagate fraud. As has been mentioned a number of times by Members from across the Chamber, the tax system creates a huge amount more fraud and a huge amount more could be recouped from that than from the social security system.
I have major concerns about how the Government are approaching the issue. Why are they introducing this Bill before the child poverty strategy? Why is this more of a priority than cancelling the two-child cap and taking kids out of poverty? Why are the Government talking about nearly £10 billion a year owed to the DWP? Just to be clear, that is not what they intend to recoup. According to the impact assessment, at least 30% will be written off, so £10 billion is a misleading figure. It might be the total amount of fraud and error, but it is not what the Government expect to get back. It does not take into account that they will spend £420 million over the next few years just to increase the number of staff or the costs of the eligibility criteria. It is also not a net figure—it is just the headline figure right now. All the work being done on the legislation is to recoup a fairly insignificant amount of money, but it will put people through absolute hell.
As has been said, the Bill will treat people as guilty rather than begin from the point of view that they are innocent. Potentially, it will put every person applying for benefits through an eligibility check through their bank. It will put them under surveillance in a way that is not compatible with the human rights that we should all expect. Let us remember that we are talking about people who, in some cases, are incredibly vulnerable, and may have their driving licence taken away.
The hon. Member for Normanton and Hemsworth (Jon Trickett) talked about two of his constituents who found themselves in a difficult situation and who did not have a huge amount of literacy. It is possible that one of those people could have had a driving licence. For disabled people, a car can be an lifeline—the most important thing. For people with mental health problems, opening letters can be really difficult. People might not engage with the DWP through no fault of their own, but because they are not getting the mental health support that they need.
That £10 billion or however much will be recouped will not fix mental health services to ensure that everyone is capable of getting up in the morning, having their breakfast, having a shower and opening the letters in scary, big writing that have come through the door. It will not ensure that people can engage in that system. It will not teach them to read and write—they may not be capable of that. I share the concerns of other Members that, for some individuals, the powers of recouping and of revoking a driving licence are entirely inappropriate. We have not had enough reassurances on that.
My concerns about the Information Commissioner are still extant. The Secretary of State said that she has had a letter from the Information Commissioner. I understand that it is probably not her fault, but I am really disappointed that we have not seen that letter in advance of today—[Interruption.] I am being told that it is being published.
The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
It is on the ICO website.
Kirsty Blackman
Unfortunately, I have not seen it because I was not aware of its publication until the Secretary of State stood on her feet. It would have been helpful for Members to have been given that information beforehand, so that we could have read the Information Commissioner’s comments in advance of Second Reading, given a number of us have mentioned the significant concerns of the Information Commissioner in relation to the previous Bill.
The Secretary of State said that the Bill is tough and fair. Another Member talked about tax and benefit fraud, and the issue with the DWP making overpayments. They suggested that this new system will ensure that overpayments are caught earlier. I suggest that that is a tad over-optimistic. The DWP makes mistakes and makes overpayments, and now we are giving it another place to make errors. The DWP can now see into people’s bank accounts and say, “You don’t meet the eligibility criteria, so you won’t be getting the social security payment.” Until we have built up much a higher level of trust, most people will assume that these powers will create more errors in the system, rather than reduce them.
Lastly, on a subject that I mentioned earlier, a massive number of disabled people have no trust in the social security system. They are massively concerned about the cuts coming down the line and concerned in particular that they will bear the brunt of those cuts, given the comments from so many politicians, using the word “scroungers” and talking about people fraudulently claiming benefits.
Despite the fact that the hon. Member for Hendon (David Pinto-Duschinsky) very helpfully laid out the figures on every pound claimed fraudulently, which I genuinely thought was very helpful, disabled people feel that they are being lumped in with the entire group of people claiming fraudulently—whether they can or cannot work, whether they are being paid universal credit or PIP to assist them with their work, and whether they have a helpful employer or have not been able to find one.
People feel they are being demonised by politicians simply for claiming social security, which they are entitled to. Until that trust is rebuilt, making the decision to look at their bank accounts, as in these measures, is the absolute wrong decision. The Government need to do what they can to put dignity and respect at the heart of the social security system and rebuild people’s trust in it before they introduce these sweeping, disproportionate powers.
The hon. Member for Brighton Pavilion mentioned the fact that there are so many unclaimed benefits. Surely ensuring that people have the money they are entitled to, ensuring that they have enough to live on, reducing child poverty and ensuring that not one child grows up in poverty should be more of a priority for the Government than introducing eligibility criteria and demanding that banks provide financial information on social security claimants.
Zarah Sultana (Coventry South) (Ind)
I will focus on the powers in the Bill that force banks to trawl through our private financial data, scanning for indicators of fraud and error—indicators that are not publicly disclosed —and flag those individuals to the Government. These powers will allow the Department for Work and Pensions to seize money directly from bank accounts without due process, suspend driving licences and even search properties and personal devices. They are not the hallmarks of a free and democratic society but the tools of an Orwellian surveillance state.
Let me be clear: we all agree that genuine fraudsters should be held to account, especially multimillionaire tax avoiders, organised criminal gangs and the dodgy companies that exploited covid funding. However, the Bill goes far beyond that. It will subject millions of innocent people—disabled individuals, carers, jobseekers, pensioners and parents—to unwarranted financial surveillance, treating them as suspects by default, simply because they receive state support. It is deeply unjust. The Government already have extensive powers to investigate suspected fraud; under existing legislation, they can access bank accounts where there is reasonable suspicion of criminal activity. However, the Bill removes the need for suspicion altogether. Put simply, this is mass surveillance.
There are significant risks. We have already seen the devastating consequences of automated decision making in the Post Office Horizon scandal, where faulty software led to hundreds of wrongful prosecutions. The Bill risks repeating that injustice on an unprecedented scale, and we should not have to wait for an ITV drama to expose it in the future. The DWP has already made mistakes in accusing benefit claimants of debt. Last July, The Big Issue reported that a disabled woman had her disability benefits stopped and was accused of owing the Government £28,000, which the DWP later admitted was its mistake, while a single mother was accused of a £12,000 debt when the DWP actually owed her money. Algorithm-driven financial surveillance will inevitably result in errors that will disproportionately affect the most vulnerable in our society: the elderly, the disabled and those already struggling to make ends meet. Even a 1% error rate in the AI system used by banks could lead to thousands of benefit recipients being wrongly flagged, unfairly investigated and forced into lengthy appeals.
Moreover, the Government’s own impact assessment suggests that these measures would recover just £146 million annually, which is less than 2% of the estimated annual loss to fraud and error. In contrast, £23 billion in benefits and support goes unclaimed each year, while £3 billion in claims is underpaid. Yet the Bill does absolutely nothing to address those injustices or to build a security system based on dignity and respect; instead, it targets those who can least afford to be wrongly flagged as fraudsters.
This legislation represents a rushed process with little scrutiny. At 116 pages long, the Bill was scheduled for Second Reading just seven working days after First Reading. It is an attempt to push through mass surveillance powers with minimal debate, bypassing the necessary checks and balances that should apply to any policy, especially one that affects millions of people’s fundamental rights. The powers are also legally questionable, with privacy experts warning they could breach article 8 of the Human Rights Act 1998.
The Bill risks creating a two-tier justice system—one for the very wealthy, who will never face this kind of intrusion, and another for those on benefits, who will be subject to constant scrutiny, automated checks and the threat of their money being seized, perpetuating harmful stereotypes about so-called benefits cheats. It will therefore also distract attention away from the millions of households that are legitimately supported by a social security system that exists to support every single one of us when we need it.
Civil society groups including Amnesty International, Big Brother Watch, Disability Rights UK and Age UK have all condemned the powers, warning they will entrench discrimination against the poorest and the most vulnerable. We cannot allow that to happen. We cannot allow the Government to turn our banks into agents of the state, spying on their customers and reporting back to Whitehall; we cannot allow the presumption of innocence to be eroded by a culture of suspicion and surveillance; and we cannot stand idly by while the most vulnerable in our communities bear the brunt of this overreach. This is not the change people voted for. I therefore urge the Government to remove clause 74 and schedule 3 from the Bill.
Jim Allister (North Antrim) (TUV)
None of us, I hope, has any empathy with fraudsters. I trust that it is the united view of this House that fraud, wherever it occurs, should be pursued with rigour. However, that does not mean that a Bill that proclaims itself to have that purpose should be simply nodded through. The fine print of this Bill deserves as rigorous an examination as any other.
There are a number of areas in this Bill that I find concerning. I find the equivalence in investigative powers and the initiation of those powers between investigating fraud and investigating overpayment troubling. There is a huge difference between a person who enriches themselves through fraudulent activity and someone who is innocent, but is the recipient of an overpayment—not because of a mistake they have made, but because of a mistake the Department has made. That is a huge distinction morally, and in every other way. Yet it seems to me that the Bill makes an equivalence between the powers of investigation in that regard, which is something I find discomforting and unfair.
I also find some of the detail we find in the Bill surprising. As our law presently stands, a person can be regarded as and held to be a fraudster, in the eyes of the law, only if they have been convicted of fraud beyond all reasonable doubt. That is the hallowed and long-standing criminal standard that has to be reached before someone is convicted as a fraudster. But no longer is that the standard. Indeed, no longer is it for the courts to decide whether someone is a fraudster. Now, under clause 50, the Minister can decide whether someone is a fraudster, and not on the criminal standard but on the balance of probabilities. Clause 50 states:
“The Minister may impose a penalty on a person if satisfied, on the balance of probabilities, that the person has carried out, or conspired to carry out, fraud”.
The Minister—not our courts, but the Minister—will decide, on the balance of probabilities, whether someone is a fraudster. How could that be right? How could that be fair?
It gets worse, because when we read clause 50 with clause 52, we discover that the penalty is measured not by what the fraud was in every case, but by what the fraud might have been. So a person can be penalised on the balance of probabilities; not by a court, but by a Minister; and not for having obtained anything fraudulently, but for what they might have obtained had the fraud been perfected. I say to the House that is taking us far too far. That needs to be re-examined.
Then we come to clause 91. Under this astounding, disconnected provision, a person can be disqualified from driving if they have failed to pay back £1,000, whether they got it by fraud or, as I read it, they were overpaid it. They can lose their driving licence not because they have been convicted of fraud, but because clause 91(2) states that the schedule that will now be amended will make
“provision for a liable person to be disqualified”.
What is a “liable person”? We have to go to clause 11 to discover that a “liable person” is somebody on whom the Minister has served a recovery notice. If the Minister serves a recovery notice on you, that makes you a liable person under clause 91, and under clause 91, if you still have not paid back £1,000, you can lose your driving licence. Really? I do think that with this measure we have hugely run away with ourselves in terms of what is proportionate and appropriate.
There is much in this Bill in the way of overreach, which the Government need to re-examine. Yes, let us go after fraudsters. Yes, let us recover the money that they should never have had. But let us do it in a way that respects the traditions of our legal system and of the decency in our society, instead of the overreach of some aspects—not all—of the Bill.
The Bill does not apply to the area I come from, Northern Ireland, but inevitably, because parity controls the welfare payments that are made in Northern Ireland, there will eventually be some parallel, reflective legislation. That will be needed, but I want to say a word—I want the Minister to take it on board—about the Northern Ireland Executive. Welfare payments in Northern Ireland are demand-led. They are administered by the Department for Communities in the Northern Ireland Executive, but they are demand-led. Therefore, in that sense, they are not coming out of the Northern Ireland block grant.
It seems to me that there is a tendency within the Northern Ireland Executive to be less rigorous than they ought to be on fraud, because they are not recovering money that has been misused from the block grant; they are recovering money that has been misused from the Treasury. That, for some of them, shamefully, does seem to create a disincentive to pursuing fraud recovery with the vigour that they should. I say that on the basis of figures released in a number of Northern Ireland Assembly answers. They show that in the last five years there have been only between 200 to 300 fraud pursuit cases in Northern Ireland, touching on only £4.5 million. There is a lot more fraud in the benefits system in Northern Ireland than £4.5 million.
Yes, let us pursue fraud with vigour, but let the Secretary of State put some pressure on the Northern Ireland Executive to ensure that they are living up to their obligations to also save the Treasury the money that has been lost in fraud.
Sally Jameson (Doncaster Central) (Lab/Co-op)
The Bill sets out a clear agenda that this Government will be tough on fraud. It will ensure fairness for benefit claimants and offer confidence to the taxpayer. When it comes to taxpayers’ money, fraud and waste cannot and must not be tolerated. I am pleased that the Government are taking that approach, and I am proud to speak in favour of the Bill.
I was appalled, frankly, to learn that a total of £35 billion of taxpayers’ money has been lost to fraud and error since the pandemic. I think of my constituents in Doncaster Central, of how desperately our hospital needs refurbishing, of how many children live below the poverty line, and of how many of my constituents are stuck on NHS waiting lists. I am outraged at just how much money, which could have helped to solve those problems, was instead drained by fraudsters, sometimes on a large and organised scale, and by the careless errors of the previous Government. With these measures, this Government will protect claimants by preventing errors earlier, ensure that our benefits system works for those who claim benefits they so desperately need, and give taxpayers the right to see their hard-earned money spent well.
I welcome the fact that the Government are bringing the Department’s search and seizure powers in line with those of HMRC and the Child Maintenance Service, and I am pleased to see the Department’s commitment to ensuring strong safeguards on those powers, including the appointment of an independent body to conduct independent inspections of the Department’s investigations. We must ensure that the tough measures we introduce to recoup taxpayers’ money are met with equally tough scrutiny and safeguards. I hope that will remain a priority as the Bill passes through the stages of this House.
I have no doubt that some Opposition Members will claim that they introduced measures to crack down on benefit fraud. Indeed, they did—eventually. At the very tail end of the last Parliament, they tagged measures on to the end of another Bill, which never passed. It has fallen to us, as it has in many other areas, to take the necessary action. Whether it is benefit fraud or fraudulent covid contracts, these are not victimless crimes. It is public services and our constituents who lose out. We need to get on with this job. We cannot afford to lose more public money, which our constituents pay for with their taxes and should feel the benefit of.
Tough measures, tough sanctions and tough safeguards are the key to ensuring that our welfare system is fair for its genuine claimants and robust enough to ensure that taxpayer money goes where it is supposed to go: to the people and the services that need it most.
Jim Shannon (Strangford) (DUP)
Let me, at the outset, make it clear for the record that I think it is important that the Government pursue fraud. I asked the Secretary of State about that this afternoon during DWP questions. There is a story in the newspaper today, and it may even have been in yesterday’s Sunday paper, about a gentleman who defrauded the system of about £800,000 and skipped off to, I think, Romania. There was no treaty whereby we could pursue him, but obviously the Government wish to ensure that all those moneys are recoverable. The point I am making is that there are clearly those who set out to defraud the system, and it is important for the Government to respond positively. I think they are doing that, but I have some concerns.
When we speak to constituents on the doorstep, none of them have an issue with people who need help from the state—who are ill, or out of work for other genuine reasons—but there is a definite feeling that people should not claim and work on the side, and I agree that we need to clamp down on those who are “doing the double”. That terminology may not be used very often, but its meaning is clear. The statistics suggest that there may well be an issue, although the scale referred to in Government documentation varies greatly. The National Audit Office puts the amount across the United Kingdom of Great Britain and Northern Ireland in 2023-24 in the range between £5 billion and £30 billion. It is clear that we need to do something effective. Those who work hard and are barely making ends meet are crying out for fairness. However, I fear that we may open up powers that cannot be removed and that would turn us into a nanny state.
In my earlier intervention on the Secretary of State, I expressed concern about those who make genuine and honest mistakes. The hon. and learned Member for North Antrim (Jim Allister) referred to that, in his polished and qualified way. People fill in forms and think they are doing it correctly, but perhaps they make a mistake and tick the wrong box. It happens all the time. I asked my right hon. Friend the Member for East Antrim (Sammy Wilson) whether he had dealt with many such cases over the years. I have dealt with about 30, perhaps 40, every one of them involving a genuine mistake when someone unfortunately ticked the wrong box and had to repay the money. I am concerned about those who are disabled, those who are anxious, those who are depressed, those who have emotional or mental issues. I do not want them to become the “low-hanging fruit” for Ministers and the Department to pursue, rather than pursuing those who are guilty of claiming benefits only just this side of £1 million, like the person I mentioned.
A girl in my office, a member of my staff, works full time on benefits, five days a week. Her diary is full from 9 am until 5 pm every day of the week. Disabled people come to my office, and they are the people whose cases are genuine. They are the people who have applied for benefits and are anxious and worried about the whole thing. I always say to them, and the girls in the office say it as well, “If you are going to get the benefit—and it is right that you do—put the facts on your application form, and the Department will make a decision.” Those are the people I fear for. They are the people I worry for. They are the people about whom I myself feel anxious on their behalf, worrying about what could happen to them.
When people apply for benefits genuinely, the DWP does sometimes make mistakes. Every one of the 30-odd people I mentioned earlier with whom I have been involved over the years was successful because there had been a genuine mistake. I have to say, “Guys, I respect this greatly, because I understand the principle of what you are trying to do, so you should never be in doubt about where I am coming from”—I apologise, Madam Deputy Speaker; I should have referred to “hon. Members” rather than “guys.”
The hon. and learned Member for North Antrim mentioned people having their driving licences removed if they have not repaid £1,000 when it is money that, perhaps, they should not be in receipt of. However, if their driving licences are taken away when they have simply made a mistake, and they are penalised and deemed to be guilty, they cannot go to their jobs because they have no cars, and cannot do the work that would enable to pay the money back, that is overkill.
I also want to say something about bank accounts. Everything I do in this House comes from Strangford, and it will not surprise anyone that the examples I will give are Strangford-based. I say that to help all the other Members here. I was contacted by a constituent whose brother has been diagnosed with paranoid psychosis and was living in a tent when she realised that he had been turned out of his apartment and his benefits had fallen by the wayside. She took control, got him on benefits and found him a private rented apartment. Because he does not trust banks, which is part of his health issue, all that is done through her accounts. Without her, he would be unable to pay rent or do anything, as he does not trust Government and she handles it all. Will her bank accounts be open to Government scrutiny? Will she hand over care to the social worker who ceased contact because her brother would not engage, and signed him off as too difficult to work with? That is all part of the paranoid psychosis—the health problems, the disabilities, the emotional and mental issues that such people face. I think of these people. I will always speak up for the wee man and the wee woman who are penalised through a system that tries hard to achieve the goals that it sets itself, but unfortunately—again—falls by the wayside.
Who will take care of the situation if this man’s sister objects to Government rifling through her accounts when she works hard and pays more than her share in tax? One hon. Gentleman—I cannot remember who it was—said that HMRC should be pursuing other moneys with the same zeal that they are showing in this case. What security will my constituent have to ensure that her privacy is not sacrificed because she is helping her brother? More importantly, how many others like her —friends and families of those suffering from mental ill health—will pull back because of that?
I ask the Minister for an assurance about such cases, and I think it important for each and every one of us who has a conscience—I am not saying that no one else has a conscience; perhaps I should say, those of us who have concerns on behalf of our constituents—to bear them in mind. A Government overreach for those who are caring for the mentally ill, and who already lead a life of stress owing to their caring duties, without recompense from the Government because they already work—could lead to more pressure from the state to fill the breach. I must respectfully say that I do not see how we have the capacity for this.
I never want to see a scenario in which genuinely disabled people are so concerned about the scope of Government regulation in respect of their moneys that they do not claim what they are entitled to. That would be terrible. The Government set a system—whether it is the personal independence payment, universal credit, disabled living allowance, pension credit or attendance allowance—and all those benefits are there for a purpose. When people come to me, I always say, “The Government have set this aside for you. It is yours if you qualify and the criteria are there.” I think of people who save for a holiday, or perhaps their partners work and take them on a holiday tailored to their needs; perhaps they will go to the hotel in Portrush, not far away, or perhaps they will take a plane to Jersey, with a wheelchair and an assistant to get them on and off the plane. I do not want such people penalised when their disability is such that they can only do that if there is someone with them. They may be afraid to go on that holiday because they fear being labelled a benefit cheat, while those who are doing the double, as it used to be known, should be unable to continue that life at the expense of the taxpayer. My question to the Minister is this: how do the Government intend to find the balance?
It is critical for us to get that balance right. I understand the urge to do this, and it is right to do it, but I do not want those who are justified in receiving a benefit to be penalised. I note that the Government believe they could reclaim some £54 million in 10 years. If that figure is right, this is worth pursuing, but how much will it cost to run over that period? How much will it cost the Government to chase all these moneys? How do we send a message to those who are concerned about their loss of freedom to a Government who can look into family bank accounts that this is a measure worth taking?
My final words to the Government are these: “Do. the job that you have set yourself, but make sure you do not chase the wee man and the wee woman”—the people whom I represent, the people whom the hon. Member for Blyth and Ashington (Ian Lavery) represents, the people whom we all represent on both sides of the House.” Those are the people I am speaking up for tonight, and I want to make sure that they are protected.
John McDonnell (Hayes and Harlington) (Ind)
I do not want to repeat what has been said by others, but I will share my perspective on the Bill. It is in two parts, and there is almost unanimity about the first part, which deals with how we tackle fraud carried out through contracts and so on. I thank the hon. and learned Member for North Antrim (Jim Allister) for pointing out some of the elements of real concern in that part of the Bill, which, to be frank, I missed. The Bill has been published for only a week, and it has been difficult to go through it. I have been somewhat distracted by the Government trying to concrete over a quarter of my constituency with a third runway at Heathrow, and elements of the Bill need further examination. To be frank, I think it will face legal challenge in some form.
I cannot welcome the first half of the Bill enough, which deals with tackling overall fraud. I was the first MP to raise with the then Chancellor the corruption that was taking place with covid bounce back loans. I raised it a number of times in the House, and I wrote to him twice. I received a standard letter that was almost identical to the response I got from the banks, which said they were going through their usual investigatory process, and then we eventually discovered that fraudulent claims for bounce back loans amounted to at least £5 billion. I welcome the first half of the Bill, because we need to be ruthless on the corruption and fraud that takes place.
However, the second part of the Bill, particularly clause 74 and schedule 3, is where we are straining, to be frank. Some hon. Members have mentioned the context already. There is real fear out there among people who claim welfare benefits, particularly disabled people. It is a result of their being targeted, and of careless language in this place and elsewhere. That is then exaggerated even further by the media, and benefit claimants become targets.
I echo what the hon. Member for Strangford (Jim Shannon) said, because I have the same problem in my constituency. Sometimes it is about telling people to claim what they are entitled to, because they are terrified of the stigma around claiming benefits at the moment, particularly older people. The atmosphere that we now have is a climate of fear, and I am worried that this debate will add to that climate of fear.
The Secretary of State said that any proposal has to be proportionate, safe and fair, but there are real concerns about the proportionality of this Bill. As other Members have said, it is a mass surveillance exercise. The road to hell is paved with good intentions, and I fear that once we start down the path of surveillance in this way, others will come back with proposals for where we can go further. As Members have said time and again, there is an issue with safety. How many lessons do we have to learn about the way that computer systems and the use of algorithms have destroyed people’s lives? My hon. Friend the Member for Normanton and Hemsworth (Jon Trickett) said that the banks are gearing up, but they have expressed concern that the Bill is almost an exercise beyond their abilities. As a result, there will be errors, which will reinforce the climate of fear around benefits.
Jim Shannon
I apologise for omitting this issue from my speech. Does the right hon. Gentleman agree that the Government have decided to penalise those who have been charged with alleged fraud? Does he feel that there should be a system in place so that they can appeal?
John McDonnell
That is why the code of practice is going to be interesting. The code of practice needs to be published as rapidly as possible to see what mechanisms will be available for us to protect our constituents.
I have one area of experience with regard to the flagging up of sums of money that raise concerns: in the debates that we had on tax avoidance, we talked about suspicious activity reports. There is a record of real faults and a high number of errors in that process. As a result, people have been not just penalised, but penalised unfairly and exposed unfairly. It is not that I am in any way a defender of tax avoidance or anything like that, but if we are to introduce a system, we need to make sure that it is secure and effective, and does not penalise people unfairly.
The Bill is supposed to be proportionate, safe and fair. The reason why people will feel that it is unfair is that it specifically targets people who are often in desperate need. If there was a group of people whose accounts we would want to monitor because there has been a history of fraud, and who have had to pay money back—some have gone to prison—it would be MPs. I was here during the expenses scandal. Following that experience, are we really not monitoring our accounts for undue payments and so on? Why is it always the poor who we target in this way?
As I said, I am really worried about the climate of fear, particularly among people with disabilities, which the hon. Member for Torbay (Steve Darling) mentioned. We know about 600 suicides that are related to DWP activity. We circulated John Pring’s book “The Department”, which looks at the DWP’s role in those deaths, to all MPs, and it was starkly obvious that it had made a significant contribution, if not caused them. I remember a case in Scotland in which a poet in Leith committed suicide but did not leave a suicide note; he just left a letter from the DWP beside him.
My view is that whatever steps we take in exercising the powers in the Bill, we have to be extremely careful. One of the things I want to raise—if I can crowbar it into this legislation through an amendment, I will—is that a number of us, on the basis of the work of Mo Stewart, who does research on poverty and welfare benefits, have said that we must give people assurances that they will be protected and that we will do everything we can to cause no harm, and certainly not cause any further suicides, but we must also learn the lessons of what has happened in the past.
One of Mo Stewart’s proposals is for an independent advisory panel for DWP-related deaths. We have exactly that system in place for deaths in custody. We have an advisory system at the moment for the DWP but, to be frank, it is not working. The minutes of the panel’s meetings are cursory, and it does not do detailed reports in the same way as the deaths in custody panel. If we are to reassure people out there that we really are looking after their interests, that is one small step that we could include in this legislation. I am not sure that we will be able to crowbar it into the title of the Bill, but I will do my best and would welcome other Members’ creative drafting to help me. Such a measure would send out the right message. The Secretary of State has tried to do that tonight with her assurances about the processes, but I am not sure whether that will be enough, given the climate of fear that we now have.
What are the next steps? I hope that there will be sufficient time in Committee for us all to get our head around the detail of the Bill. I hope that there will be more consultation; it would be better to delay Report to enable that. I also wish to raise the same issue as the hon. Member for Brighton Pavilion (Siân Berry): we were given assurances that the proposals would be implemented by co-production rather than announced from above.
It would be an example of good governance if there were a process of proper consultation. After the Ellen Clifford case, in which the High Court ruled against the previous Government on their consultation, the spirit of the Government’s response was that there would then be proper consultation, hopefully on the principle of “Nothing about us without us”. Consultation on the detail of the Bill throughout its passage would be the best example that this Government could give of that process working productively so that we get it right and we do not endanger any more people, as unfortunately has happened in the past.
John Milne (Horsham) (LD)
I am sure that I speak for all hon. Members when I say that putting a stop to fraud of any kind is welcome, especially at a time when public money is scarce. However, many of my Horsham constituents have contacted me to say that the powers outlined in the Bill are very far-reaching and, if abused, could have hugely detrimental effects on benefit claimants through no fault of their own.
As my hon. Friend the Member for Torbay (Steve Darling) said, the carer’s allowance repayment scandal shows exactly what can go wrong when the state has high-level powers over debt recovery. Due to departmental error, not the claimants’ error, there were more than 250,000 cases of overpayment to carers in the last five years of the Conservative Government. That is an enormous number. What would have happened to those carers, who are paid very little for the huge service to society that they provide, if the powers in the Bill had been in place during those five years? They would probably have faced forced withdrawals from their bank account, the possible removal of their driving licence or even forced entry to their home by the DWP.
The Bill will give increased powers to access private bank accounts. This requires careful consideration from a civil liberties perspective. However, the DWP already has the power to compel third parties to share data where criminal activity is suspected. The new powers appear to reduce the need for prior evidence and simply grant access at will. Given that access to banking information is estimated to recover just 1.4% of the Government’s annual loss to fraud and error, do these powers of forced withdrawal represent a proportionate action? Before introducing new powers, it might make more sense for the Government to increase the efficacy of existing requirements on third parties to report suspicious activity, and for HMRC to share banking data on an annual basis.
The Government have asserted that the Bill will save the public purse £1.5 billion, but in the absence of an impact statement, how do we know? If the DWP is to have the power to take people’s money, suspend driving licences and enter homes, we should at least be very confident that it is worth it. In particular, we need to be sure that the savings predicted do not come from the blameless victims of departmental error, as happened with the carer’s allowance overpayment scandal. It is of huge importance that fraud be reduced, but until we are sure that we have learned the lessons of the past, we run the risk of damaging people’s lives for insufficient benefit. We are at risk of making the same mistakes again, but with fewer checks and balances.
The sentiment of the Bill is welcome, but there are risks attached. I am concerned that it builds a narrative that assumes that the claimant is the guilty party, when it could be the Department that is at fault. I therefore call on the Government to apply all possible care before launching new regulations that, at present, would amount to a matter of trial and error.
Paula Barker (Liverpool Wavertree) (Lab)
I recognise that fraud exists across the public sector and that it is wholly right for any Government to track down the fraudsters, the criminal gangs and those who cheat the system at the bottom as well as the top—we have heard about the VIP fast lane—but I hold deep reservations about the unintended consequences of the Bill in its present form.
We have heard some very constructive contributions this evening from Members across the House. I thank my right hon. Friend the Secretary of State, who is always accessible and has been willing to listen to my concerns and those of my many constituents who have got in touch to express their views. Although she has allayed some of my fears, I did let her know that I would raise my concerns in the Chamber today.
First, the Bill needs to make a greater distinction between fraud and error. We cannot accept a situation in which our constituents are being accused of fraud on the back of genuine personal errors. I know at first hand from my experience as a constituency MP that the Department is more than capable of making glaring errors of its own, and people suffer greatly as a result. The welfare system is not an easy one to navigate; people should be supported when problems arise, rather than there being a natural presumption towards guilt. Many organisations that have been in touch with hon. Members share this fear, so it is essential that the Government address the point head on.
Other aspects of the Bill sit very uneasy with me. The Government already have the powers, under existing legislation, to investigate those who are suspected of fraud. That raises the question why the Bill is needed. It feels like a hammer to crack a nut.
After the second world war, the Attlee Government set about establishing a welfare state as a safety net for those who were genuinely in need. The Attlee Government took responsibility for looking after the wellbeing of all their citizens from the cradle to the grave. Worryingly, there now seems to be a determination to transform the British welfare state into a system of mass surveillance.
I will be grateful if the Minister responds to the following points. First, although I acknowledge that the Secretary of State spoke about this at the Dispatch Box, what provisions are being made in respect of proper oversight of these proposed new powers? How would any financial institution navigate data protection conflicts between the Government and its customers? How would data security risks be mitigated?
During an iteration of the Bill introduced by the last Government, the Equality and Human Rights Commission called for it to be scrapped. A legal opinion from Dan Squires KC and Aidan Wills found that the powers in the previous iteration were likely to breach UK article 8 privacy rights protected in the Human Rights Act. Can the Minister tell us what legal advice the Government have received on the proposals in the Bill?
I have serious concerns that assertions and decisions on individual cases, if automated, could lead to Horizon-style injustices if the necessary steps are not taken to put the right safeguards in place, alongside measures to guarantee some level of transparency and accountability when mistakes arise. We are looking at a hugely significant change to our welfare system, at a time when the Department is responsible for record underpayments. Surely that should be a Government priority, rather than further upheaval of a system that threatens to further stigmatise those who legitimately rely on the welfare state.
There are low levels of fraud in the benefits system. The latest Government figures put it at 2.8% of total benefit expenditure, which translates to overpayments due to fraud recorded at 3.7% in the financial year 2023-24. Although it is right and proper to look at ways to reduce that figure, politicians in this place have a responsibility to make it clear at every opportunity that any such move, especially one as far-reaching as this, is intended to target a small minority of criminals. The constituents I support often tell me that the services they interact with, and by extension the Department, tend to view them with suspicion and lack of empathy. The Bill must not be used to entrench such attitudes.
For the British public, whether they are in work or out of work, life is getting harder. Rampant inequality has broken our economic model, while the 1% continue to squeeze the rest. I very much hope that the Bill will not end up punishing the wrong people, making those inequalities even worse. I look forward to Government Front Benchers engaging with those who express legitimate concerns today and during the Bill’s parliamentary journey. I will not oppose its Second Reading, but I will work constructively with colleagues across the House to table amendments in Committee that alleviate my concerns and those of right hon. and hon. Members.
Jo White (Bassetlaw) (Lab)
In Bassetlaw, most people work hard all their lives, pay their dues and want to live comfortably. They keep themselves to themselves, whether in Worksop, Harworth, Retford or the villages, but what unites them in anger is the known benefit fraudster who lives down the street. I have lost count of the number of times I have heard the rage, the sense of injustice and grievance that benefit fraud is happening on their doorstep, and that nothing seems to be done about it.
With billions of pounds of public money lost last year, we welcome this Bill in Bassetlaw. At long last, it is the start of real action against the fraudsters and those milking the system, whether they are workshy or feeding the coffers of organised crime. This legislation will give the DWP new anti-fraud powers, for the first time since the Tony Blair years, bringing it into the digital age.
I welcome the new search and seizure powers, bringing the DWP into line with HMRC’s investigative powers—seizing luxury goods, bags of cash and mobile phones to use as evidence of fraud, and taking active control of investigations into the criminal gangs that are defrauding the taxpayer. If that means raids, let it crack on.
I welcome the new, stronger powers to pursue those who receive money that they are not entitled to. Where they refuse outright to repay, it is right that their driving licence should be removed. Banks and building societies flagging fraud, such as long-term trips abroad or wages going into an account while benefits are also being claimed, is also welcome.
Although the Government will at last be tough on fraud, the new powers will include strong safeguards to ensure that they are used appropriately, protecting the vulnerable and the sick. The message from today is that if you are living off the wages of fraud, we are coming to get you. If you have nothing to hide, you have nothing to fear.
That is why I back the Bill’s additional measure to pursue those who ripped us off during covid, including the previous Government’s greedy friends who grabbed the PPE contracts and the fake company owners who took the business loans. We will not allow time limitations to act as a barrier. We want our money back and the thieves jailed, and we want anyone who lined the pockets of their mates to feel the long arm of the law.
I cannot abide the thought of my constituents’ hard-earned money funding the luxury lifestyles of the fraudsters. Labour is the party of working people, and this Bill puts our values into action. This Bill is all about fraud. It is the start, not the end, of stamping out corruption, insider dealing and the defrauding of those who strive and save by working hard. This is the start of resetting broken Britain.
Mr Luke Charters (York Outer) (Lab)
Thank you, Madam Deputy Speaker. Last, but I hope not least.
Before entering this place, I spent a lot of my career tackling fraud. One key trend in fraud is its increasing sophistication. Rather than the art of a local chancer, fraud is increasingly conducted by organised crime groups using elaborate mechanisms, deeply advanced technology and rapidly shifting modus operandi. That includes benefit fraud gangs. I am sorry to say this, but fraud in the benefit system has reached an industrial scale. Frankly, it is time the Government got a grip, which is why I welcome their swift action in introducing this Bill.
My right hon. Friend the Secretary of State wrote an excellent op-ed today highlighting this exact point. This is the money of many hard-working Brits, and it has been stolen from right under their noses. The Tories presided over a system that allowed criminals to line their pockets at taxpayers’ expense.
Paula Barker
My hon. Friend is making a passionate speech, and he talks about benefit fraud on an industrial scale. Does he really believe that just over 2.5% is an industrial scale?
Mr Charters
As I will come to, it is about the advanced techniques that these fraud gangs are using. It is industrial-level criminal activity.
Last year, £7 billion was cheated out of taxpayers’ pockets, and we have been left to clean it up. If we had that cash, we could have funded extra police officers or vital repairs to some of our hospitals. Frankly, it would also have made it easier to fill the £22 billion black hole left by the Conservative party, wherever its Members are.
I now turn to a few concrete examples of why this Bill matters. First, on the economics, the Bill is expected to save £1.5 billion over the next few years. These are not insignificant sums of money. It is important to stress that the public purse is not an endless pot, and the contributions of millions of working people across the country, including many of my constituents in York Outer, help to fund it. They want to see taxpayers’ money being spent wisely. Stealing benefits is not just fraud; it is a slap in the face to the hard-working taxpayers who fund our public services. This Bill changes that.
The Bill is not just about keeping more taxpayers’ cash in the Treasury. As Brits, we embody the values of kindness, decency and fairness. Although we are rightly outraged about criminals circumventing our system, we all want a reliable welfare state for the people who truly need it. Every £1 stolen by benefit fraud gangs is £1 less for a low-income single parent looking for a job on universal credit, £1 less for a disabled person on the higher rate of PIP, and £1 less for someone on carer’s allowance. In many cases, these payments are a lifeline for people getting back to work. At the moment, this cash is going to criminals rather than carers.
I now turn to a few recent cases of organised benefit fraud to elucidate the scale of the challenge we face. All have been settled and are now in the public domain following prosecutions.
In May 2024, we saw the largest benefit fraud case in history. The operation saw five Bulgarian nationals forge thousands of documents to make thousands of fraudulent universal credit claims to the value of £50 million.
In October 2023, seven people were sentenced for falsely claiming employment support allowance. They used advanced techniques to hijack identities, resulting in the crime group stealing hundreds of thousands of pounds.
An investigation by City of London police in 2020 saw enforcement against a benefit fraud ring to the tune of hundreds of thousands of pounds. I take a brief moment to praise the excellent work of our law enforcement agencies, including City of London police, who I have met, for their collaboration. That is exactly how the last fraud ring was closed. This example shows the benefit of public-private partnerships, which this Bill seeks to catalyse, in tackling benefit fraud,
What do these cases have in common? The benefit fraud was actually a predicate to other illicit activities. They demonstrate the need to upgrade our response, and this Bill represents additional lines of defence in our rising to the challenges we need to fix. Some of the measures in this Bill will do exactly that: supporting covid-era fraud investigations; strengthening the PSFA by establishing it as a separate entity; giving the PSFA powers to compel evidence and enter premises with a warrant; extending the time limit to bring action against historical fraud to 12 years; and granting extra powers for recovering money.
I recently visited the national economic crime centre at the National Crime Agency, and I know the scale of the challenges we face when it comes to tackling fraudsters. I have no doubt that, with this Bill, the Government will smash the benefit fraud gangs, but we must also acknowledge that this Bill represents a significant shift for the financial industry. It is a step into a new dawn for those in the banks who work on tackling economic crime, as they will be spending more time tackling benefit fraud.
It is right that the Government are pursuing a growth-first strategy, which has to be carefully balanced with the economic crime plan. The Financial Conduct Authority’s new consumer duty was an important stride forward for the industry, and I was proud to play a small role in that, but, as scrutiny of the Bill continues, I warmly invite Ministers to engage with the FCA and report back to the House on how the new powers will carefully balance consumer vulnerability with the need to drive down benefit fraud.
Finally, there is an important scenario that must be considered more carefully as the Bill progresses in this place. A victim of domestic abuse—let us call her “Jane”—is quietly saving money to escape, but then an account information notice is issued. Based on three months of bank statements, a debt recovery notice follows. Jane has 28 days to appeal, but no access to legal advice. Worse still, her abuser intercepts the letter and her savings, which are her lifeline to escape, are seized. Her escape plan is exposed, putting her at risk. We must ensure that financial processes do not accidentally or invertedly work against victims of domestic abuse in those scenarios, as I am sure Ministers are aware.
To close, the Prime Minister said in a speech at a recent Labour party conference:
“If we want to maintain support for the welfare state, then we will legislate to stop benefit fraud”.
When it comes to tackling organised crime groups, not only is he right, but the Bill is proof he is delivering on his promise. The Bill is about smashing the benefit fraud gangs, treating taxpayers’ money fairly and ensuring we have a safety net left for the genuinely vulnerable people who need it. I refer time and again to a point I made in my maiden speech that rings as true today as it ever has done. I said:
“I want to ensure that there is no safe harbour for fraudsters, no compromise in our pursuit of their schemes and no escape from justice.”—[Official Report, 17 July 2024; Vol. 752, c. 124.]
Rebecca Smith (South West Devon) (Con)
It is a pleasure to wind up this important debate on behalf of the official Opposition. It has been a really interesting debate, with some strong views expressed by Members from all parties, and the disagreements did not necessarily come from where we might have been expected. In fact, it seems the official Opposition and the Government are more in agreement than anybody else.
The hon. Members for Oldham East and Saddleworth (Debbie Abrahams), for Torbay (Steve Darling), for Clwyd North (Gill German), for Doncaster Central (Sally Jameson) and for Strangford (Jim Shannon) all spoke. My hon. Friend the Member for Mid Leicestershire (Mr Bedford) made some very valid points. At the end of the debate, the hon. Member for York Outer (Mr Charters) made an interesting point about the connection between the Bill and violence against women and girls, which will be important to consider in Committee. Passionate views were raised by the hon. Members for Brighton Pavilion (Siân Berry) and for Aberdeen North (Kirsty Blackman), and the hon. and learned Member for North Antrim (Jim Allister). It has been an interesting debate all round.
Before I start, I want to reflect on some of the comments made about covid. As has been made clear, the Bill is in two parts: one part is about the Cabinet Office and the increasing powers, and the other is about the benefit fraud challenges facing the DWP. The previous Government, particularly when my right hon. Friend the Member for Richmond and Northallerton (Rishi Sunak) was Chancellor, saved a huge number of businesses through the bounce back loans and jobs through the furlough scheme, and provided initiatives like the kickstart programme. Without those, even more people would have needed to claim from the DWP. The National Audit Office has said that there is no evidence of ministerial involvement in improper procurement or contract decisions, so it is important to make that point for the record.
As we have heard, the measures in the Bill are a continuation of much that the previous Conservative Government were implementing before the election was called, but it also contains some concerning extensions to the powers of the new Government. A pattern is emerging: the Government pick up our previous work, quietly remove some of the more sensible plans, and add some ill thought out plans of their own. My hon. Friend the Member for Faversham and Mid Kent (Helen Whately) highlighted our record in government of tackling fraud in the welfare system and fighting public sector fraud. Members on the Government Benches seem to have forgotten that record but, in good faith, I will assume that is error rather than fraud on their part. It has been a few hours since my hon. Friend shared that record, so allow me to recap.
Before the pandemic, we worked hard to secure near record low levels of fraud and error across the DWP welfare and tax credit systems. We knew the stress and anxiety experienced by those who had been overpaid, we were hunting down those who were deliberately misappropriating the system, and our actions were making a difference. However, given the amount of Government support provided during the pandemic, it is not surprising that individuals and groups sought to exploit the emergency situation we all faced.
In response to that, we published our “Fighting fraud in the welfare system” paper in May 2022. That crackdown led to a 10% reduction in fraud and error, and £1 billion saved through dedicated counter-fraud activities. In addition, an estimated further £1.35 billion was saved between 2023 and 2024. Our ambition did not end there. Last May, we published a further paper, “Fighting fraud in the welfare system: going further”, which set out plans to save an additional £9 billion by 2027-28 by cracking down on benefit cheats. During the debate, we heard about the Data Protection and Digital Information Bill, which was the precursor to part 2 of the Bill before us. Furthermore, our proposed fraud Bill would have aligned the Department for Work and Pensions with HMRC, enabling us to treat benefit fraud in the same way as tax fraud, giving investigators new powers to make seizures and arrests.
All that is before we look at our record of tackling public sector fraud, as additionally included in this new Bill. Our taxpayer protection taskforce secured about £1.2 billion, which was either blocked from being paid out or recovered through our compliance work. We set up the Public Sector Fraud Authority, whose powers are being extended in the Bill, to work across Government to reduce fraud against the public sector. Its first-year target was £180 million, which was smashed with savings of £311 million.
Our risk, threat and prevention service was the first in-house fraud squad of its kind in the world when set up in 2023. Working across Government, it set out to ensure the public purse was protected at key points, as new spending programmes or policies were announced. Why was that important? We know that between 2023 and 2024 alone, the Public Accounts Committee has found that nearly £1 in every £15 was either error or fraud. That is an eye-watering amount of taxpayer money, as the vast majority of Members would agree. The ambition of the Bill for a more powerful Public Sector Fraud Authority could lead to about £54 billion being recovered from public sector fraud in 10 years, which is a welcome figure.
However, the Government could be doing more. We have heard how the taxpayer simply cannot afford the Government to stop here—more action is essential. The new Government’s inaction to date in reforming health and sickness benefits is estimated to have cost the taxpayer approximately £1.8 billion since July 2024, which is around £266 million every month. Instead, the new Government have gone after pensioners, employers and farmers, actions they were ready and waiting to take without delay. Yet here we are, seven months into a new Parliament, with not a peep on how they will reform the benefit system, other than repeating that they will come up with a plan soon. Indeed, they had 14 years to come up with that plan. Every day Labour ducks the tough questions, the benefits bill continues to grow.
However, taking a step back, it is important to remember why we have a benefits or welfare system in the first place. I am sure that across the House we are agreed that it is morally right for the state to provide for the most vulnerable—those who, through no fault of their own, need financial support to provide for themselves or their family. In debating the Bill, it is easy to forget that, in the majority of cases, beneficiaries of additional support from the state claim it simply to get on with their lives, and they are not a cause for concern. However, as the title of the Bill suggests, there is a need to recover public money that has been claimed either in error or because of fraud—as a result of an innocent mistake or with deliberate intent. This is, after all, as we have heard multiple times, taxpayers’ money that has ended up in the wrong bank account. That needs rectifying, which is why, as we have already made clear, we support the Bill in principle.
My hon. Friend the Member for Faversham and Mid Kent set out a number of questions, which I hope the Minister will address shortly in his summing up. Unsurprisingly, we remain concerned about the final details of the legislation and the huge absence of a plan to tackle the rapidly rising benefits bill. However, we look forward to debating the details of the Bill further in Committee shortly, and working cross-party to ensure that further progress is made. First and foremost, we must see money from the public purse fairly and squarely in the hands of those it is intended for, and not in the hands of the fraudsters working to line their own pockets.
The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
I hope that the House will bear with me; I have binned my original closing speech, given the number of contributions that we have heard, and some of the legitimate questions and concerns that colleagues have set out. I thank those colleagues who rightly highlighted the scale of the challenge, and why the Government must act to tackle fraud against the public sector. My hon. Friends the Members for Burnley (Oliver Ryan), for Clwyd North (Gill German), for Hendon (David Pinto-Duschinsky), for Doncaster Central (Sally Jameson), for Bassetlaw (Jo White) and for York Outer (Mr Charters) all set out the scale of the challenge, and the views of their constituents on this issue, in very robust terms.
I agree with my hon. Friend the Member for York Outer about the risk of unintended consequences, particularly on the issue of violence against women and girls. We are looking at that closely and will continue to do so. A number of Members referred to the alleged lack of an impact assessment, or the publication of one. An impact assessment has been published, alongside the view of the Regulatory Policy Committee, and is available for colleagues to view.
Let me turn to specific concerns about the Bill, starting with those of the shadow Secretary of State, the hon. Member for Faversham and Mid Kent (Helen Whately). I welcome the tone of the Conservatives, and their broad support for a number of the principles in the Bill. She is correct that it is incumbent on the state to get its money back. It is part of the unwritten contract that she referred to. I felt there was a slightly tenuous justification for the escalation in benefit fraud that we have seen in recent years: the war in Ukraine. I know that we are happy to blame Putin for many things, but that was a new one on me. She rightly pointed to an escalation in benefit fraud and error as a result of covid, but that does not explain why the level of fraud and error in the Department for Work and Pensions was higher in 2023-24 than in any of the years from 2021-22 onwards—£9.7 billion last year, a record level. The issue is getting worse, not better, and that happened on the Conservatives’ watch.
The shadow Secretary of State suggested that the contents of the Conservatives’ fraud plan would have solved all these problems, and that we are copying much of what was in it. It is fair to say that the Conservative party legislated only on the third-party data measure in that plan. The Conservatives never mentioned debt recovery powers, and made no efforts to get a grip on public sector fraud with the new powers that we are introducing by putting the PSFA on a statutory footing. Overall, their appalling record hardly comes as a surprise.
The shadow Secretary of State went on to say that she was concerned about the amount of information being shared by banks. Just to be clear, we will not be sharing any information with banks. The information that will come back to us will have very strict criteria, and we are taking a specific power to fine banks for oversharing information that is out of scope. She asked what testing has been done on this; two trials have been undertaken, so we know that the proposal will work, as it pertains to the eligibility verification measure.
The shadow Secretary of State went on, with some audacity, in my view, to challenge whether the debt recovery powers go far enough—powers that the Conservative party refused to take, and never put forward when they were in government. She mentioned the number of AI schemes that have been set aside. Test and learn is perfectly normal in the AI space. I remind her that some of the schemes that had not been taken forward are now moving through under different names. She mentioned the PSFA, and raised concerns about the right to compel information. The powers have independent oversight to ensure that their use is proportionate, so although no organisations are exempt, all actions are considered within a robust legal framework.
We then heard from the Conservatives, astonishingly, that there is nothing in the Bill to get a grip on the benefits bill. What cheek, when the benefits bill spiralled by some £20 billion on their watch! As for their so-called plan, I remind the shadow Secretary of State that they made a hash of it and that we lost a judicial review on their failed plan just a few weeks ago, so we will take our time to bring forward the proposals and will consult on them, and we will get this right.
I am grateful for the support of the Conservatives, but I hope that it will manifest itself in the voting Lobby later because, with the exception of the hon. Member for Mid Leicestershire (Mr Bedford), who I believe is the Parliamentary Private Secretary, we have not had a full speech from a single Conservative Member—just one intervention. If that does not show the lack of seriousness with which they take this issue, the appalling record and position we have inherited should do just that.
I want to spend a little time on the comments of the Chair of the Select Committee, my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), who is a champion for vulnerable people. I particularly want to speak to the measures we are taking to assure ourselves of the appropriate support for vulnerable people, both within the scope of the Bill and more generally, because that is important and relates to a number of comments from Members. It is always the Department’s priority to set repayment plans that are affordable and sustainable; that we make use of the debt respite service, Breathing Space, which allows for a temporary protection from creditors; and that we provide additional support to help customers manage their money. We work with the Money and Pensions Service under its brand name “Moneyhelper”, which offers free, independent and impartial money and debt advice. Indebted customers are routinely offered a referral, with the majority who meet the criteria taking up that offer.
In addition, a DWP debt management vulnerability framework has recently been introduced to provide guidance for advisers on how to support customers at risk of becoming vulnerable, including signposting to specialist support. That is embedded across debt management, and part of that involves advisers undertaking annual refresher training on identifying and supporting customers experiencing vulnerability. Within the scope of the Bill, it is important to recognise that the power of debt recovery will not be used on benefit claimants. It extends only to those who receive their income through means other than benefits or through payrolled employment.
There are also important safeguards in the Bill that govern the process of debt recovery and the new enforcement powers. There will be repeated efforts at contact before any enforcement action is taken, and there will be affordability checks before any deductions are taken from bank accounts. There will be limits on the size of those deductions, a right to require deduction orders and a right to appeal deduction orders beyond that. Also, the DWP can vary or suspend the deduction order following a change in circumstances.
Kirsty Blackman
I appreciate that the Government have made changes around affordability, but they still do not assess either benefit clawbacks or the deductions on the basis of whether they are actually affordable for the people having to pay them back. Are the Government planning to put that in place at some point in future?
Andrew Western
The hon. Lady will forgive me if I have not understood her correctly, but there is specific provision in the Bill on the debt recovery powers to limit the amount that can be clawed back to 40% of anybody’s capital, but if I have misunderstood that, I am happy to have a conversation with her afterwards. I hope that I have set out some of the steps we are taking in the Bill and more broadly to ensure support for vulnerable people.
The Liberal Democrat spokesperson, the hon. Member for Torbay (Steve Darling), was right to highlight the scale of covid fraud and the lack of safeguards in place to protect the public purse. He highlighted the carer’s allowance review, which will report this summer, not next, but we are already learning the lessons of that. Much like the proposals in the Bill, data is key, so we have secured funding to extend the verify earnings and pensions service system of alerts from HMRC to 100% of claims. We will ensure in this Bill that the eligibility verification measure information is processed quickly to reduce large overpayments, and to avoid a repeat of what happened on the last Government’s watch with carer’s allowance.
The hon. Member for Torbay raised the use of AI, as did my hon. Friend the Member for Oldham East and Saddleworth. There will always be a human decision maker on each of these powers, so where decisions are made, a human—not AI—will make that call. For EVM, a flag would be passed to a human to establish benefit eligibility. For debt recovery, it would be passed to a human to assess vulnerability and the ability to pay. For information gathering, it would be passed to a human for investigation where there is a suspicion of fraud. For search and seizure, a warrant would be granted by a judge. At all times, a human is making those decisions, as is right and proper, given the powers that we are talking about.
According to the hon. Member for Mid Leicestershire, there is no doubt that had the Conservatives had longer, their policies would have driven fraud down further and faster than our proposals will. Thankfully, we do not have the opportunity to test that theory. Given their appalling record—with fraud and error escalating every year since the pandemic and standing at £9.7 billion last year—I dread to think what they would have done when they turned their attention to these matters.
The hon. Member for Mid Leicestershire went on to ask whether the independent person would report on the use of powers. Yes, and those reports—on both the PSFA side and the DWP side—will be placed before Parliament annually. He asked about non-drivers and the point of suspending licences when not everybody drives. Well, short of taking the power to prevent somebody from walking, I fail to see how much further we could have gone in that regard. However, I recognise—as I hope he does—that that is only one of a suite of measures that we are considering to move us forward in the powers available to us.
Of course, it is important to recognise that the introduction of an independent person was not considered necessary by the Conservative Government in the third-party data measures that they proposed under their Data Protection and Digital Information Bill. We are introducing that measure not just for the PSFA powers or the eligibility verification measures, but for information-gathering powers and powers of search and seizure.
I understand that the hon. Member for Brighton Pavilion (Siân Berry) is concerned, but I fundamentally disagree with the idea that it is conservative to want to tackle benefit fraud, and that we should ignore the £7.4 billion-worth of welfare fraud last year. I certainly do not think that it is conservative to go after public sector fraud; in fact, if it were slightly more conservative, we might not be in the terrible position we are in now.
My hon. Friend the Member for Normanton and Hemsworth (Jon Trickett) raised a number of important questions. Time prevents me from running through them all now, but I would be delighted to meet him to discuss them further. I was especially concerned by the case that he raised. One potential benefit of the eligibility verification measure is that it will allow us to detect overpayments earlier, but clearly we want to ensure that the DWP is handling such issues correctly first time. The ICO was mentioned by a number of Members, including my hon. Friend. Just to clear that up, it was not a letter received into the Department; the ICO published on its website today its findings and thoughts on the Bill at this stage. It recognises the steps that we have taken on proportionality, and I welcome those comments.
The hon. Member for Brecon, Radnor and Cwm Tawe (David Chadwick) has concerns about banks and the potential erosion of data protection powers—that is not my view. The Bill will involve very limited data sharing. The Department for Work and Pensions is not monitoring accounts, and we will fine banks if they overshare in that space.
The hon. Member for Aberdeen North (Kirsty Blackman) made an important contribution. To clarify, the Bill is not predicated on saving £10 billion in welfare fraud; it sets out to save £1.5 billion over five years, but it is part of overall measures to save £8.6 billion over that period, because we do not accept the level of fraud in the system at present.
The hon. Member for Coventry South (Zarah Sultana) suggested that the Bill subjects millions of people to unwarranted financial surveillance. To give Members absolute clarity, we will not receive transactional information from banks, we will not look in bank accounts directly, and we will not ask banks to take decisions on whether somebody has committed fraud.
The hon. and learned Member for North Antrim (Jim Allister) raised the question of clause 50 on the PSFA side of the Bill and asked what constitutes fraud. For clarity, it is standard for powers to be taken by the Secretary of State—or a Minister in this case—but in practice, qualified and experienced decision makers will consider cases as authorised officers.
The hon. and learned Gentleman went on to raise clause 91 and the removal of driving licences. I would gently say to him that this is an existing power held by the Child Maintenance Service. The question of liable persons and whether removal is proportionate would be a matter for a judge; it would only happen after repeated attempts to secure repayment, and before any disqualification occurs, an individual will always be given the opportunity to agree a repayment plan. This is a power of last resort, but I assure the hon. and learned Gentleman that if he has specific concerns about the pursuit of fraud in Northern Ireland, I am happy to follow them up.
As always, the hon. Member for Strangford (Jim Shannon) spoke from the heart about the plight of his constituents and the challenges they face. I want to assure him that this is not a Bill that is intended to focus on the low-hanging fruit of vulnerable people; that is why it includes some of the protections I set out earlier, and it is why we are putting in place independent oversight for the debt recovery and eligibility verification measures. He asked about the right of appeal, and I can confirm that the rights of review and of appeal against a ruling in the debt recovery space are written into the Bill.
The important question of appointees is one that I want to address directly, given the point that the hon. Gentleman raised about his constituent’s sister. To be very clear, that is something we had significant concerns about after the previous introduction of the third-party data measure, and the system will remove appointees. There may be circumstances in which those bank accounts need to be checked if the appointee receives benefits themselves, but if they do not, they will be screened out.
Kirsty Blackman
The individuals who are going to do the independent assessment will be appointed by the Secretary of State. Would it not be better for Parliament to agree the appointment of those individuals, so that we can be assured that they are actually independent?
Andrew Western
Clearly, we will inform Parliament as to who that will be, but we will go through a proper recruitment process. If the hon. Lady is talking about the independent person to be appointed for the eligibility verification measures, we will go through a thorough recruitment process to ensure they have the expertise needed. They will report every year to Parliament, and it is right and appropriate that they do so.
I thank my right hon. Friend the Member for Hayes and Harlington (John McDonnell) for his support for part 1 of the Bill, but I understand his concerns about the powers as they pertain to the Department for Work and Pensions. One of his principal concerns was about banks perhaps being unable to exercise those powers appropriately; what we are proposing is not intended as a decision-making action, but as a data push. Banks will not make decisions—a human within the DWP will carry out that investigation. He has raised concerns about potential errors in the system, and to be clear, we acknowledge that this is a new power. We intend to scale it up in a “test and learn” phase, doing so gradually so that we can get it right, but we simply cannot ignore the problem and not look to take these powers when we had a £7.4 billion problem with fraud in the DWP last year.
Turning to the hon. Member for Horsham (John Milne), I think I have already dealt with the issue of carer’s allowance overpayments and how we are starting to put that right. To clarify again, we are not accessing bank accounts; banks will be doing that for us, but they will not be taking decisions as to somebody’s benefit eligibility. The hon. Gentleman said that we should look at the efficacy of existing powers to request information. We are doing that through the updating of information-gathering powers and the right to compel information digitally. We will be moving to a list of excluded organisations, rather than a list of organisations from which we are able to compel information.
My hon. Friend the Member for Liverpool Wavertree (Paula Barker) raised a series of concerns, which I know come from a good place. I am very happy to meet her to discuss some of these powers—it is important that we get this right—but on the particular question of the legal advice and article 8, although she is correct that Big Brother Watch did commission some legal opinion, we are confident that the powers in the Bill are compatible with the European Convention on Human Rights. They are different powers, distinct from the third-party data powers put forward as part of the Data Protection and Digital Information Bill, and we do think that they are compatible with the ECHR, including the right to a private life under article 8. That is specifically because the third-party data elements are now narrower, and because we have included the safeguards that I have set out. We think the measures are justified in accordance with the law and are proportionate.
The final speech was from the Opposition spokesperson, the hon. Member for South West Devon (Rebecca Smith). Again, I felt it was constructive, if slightly fantastical at points, and I may disagree about the extent to which the Conservatives had more sensible plans that have since been abandoned by this Government. On the question of public sector fraud, I note that she pointed to action to be taken to try to claw back public money. Can I suggest to her that they seek to put that in a press release? If they are not enough of a laughing stock because of their previous behaviour, they would be after seeking to claim that they had a positive story to tell in that space.
I will finish by reiterating the comments of my right hon. Friend the Secretary of State: whoever you are—big businesses, covid fraudsters, organised criminal gangs seeking to defraud the system or individuals knowingly cheating on their benefits—it is not acceptable. We have a major problem, and we are taking the powers needed to act.
Question put, That the Bill be now read a Second time.
Public Authorities (Fraud, Error and Recovery) Bill (Programme)
Monday 3rd February 2025
(4 months, 3 weeks ago)
Commons ChamberPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text
Public Authorities (Fraud, Error and Recovery) Bill (Money)
Monday 3rd February 2025
(4 months, 3 weeks ago)
Commons ChamberPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text
Public Authorities (Fraud, Error and Recovery) Bill (First sitting)
Tuesday 25th February 2025
(4 months ago)
Public Bill CommitteesPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 February 2025 - (25 Feb 2025)
The Chair
We are now in public session and proceedings are being broadcast. Before I begin, I remind Members to switch their electronic devices off or to silent. Tea and coffee are forbidden. Date Time Witness Tuesday 25 February Until no later than 10.10 am Professor Mark Button, University of Portsmouth; Dr Rasha Kassem, Aston University; Professor Michael Levi, Cardiff University Tuesday 25 February Until no later than 10.30 am Cifas Tuesday 25 February Until no later than 11.00 am Kristin Jones; NHS Counter Fraud Authority Tuesday 25 February Until no later than 11.25 am Money and Pensions Service Tuesday 25 February Until no later than 2.30 pm National Audit Office; HM Revenue & Customs Tuesday 25 February Until no later than 2.50 pm John Smart Tuesday 25 February Until no later than 3.10 pm UK Finance Tuesday 25 February Until no later than 3.30 pm JUSTICE Tuesday 25 February Until no later than 3.50 pm Public Sector Fraud Authority Tuesday 25 February Until no later than 4.10 pm Big Brother Watch Tuesday 25 February Until no later than 4.40 pm Campaign for Disability Justice; Greater Manchester Coalition of Disabled People Tuesday 25 February Until no later than 5.00 pm Department for Work and Pensions; Cabinet Office
We have three motions to consider: the programme motion on the amendment paper; a motion to enable the reporting of written evidence for publication; and a motion to allow us to deliberate in private. In view of the tight timetable, hon. Members may wish to take those motions formally, without debate.
The Minister will move the programme motion standing in his name, which was discussed by the Programming Sub-Committee yesterday.
Ordered,
That—
1. the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 25 February) meet—
(a) at 2.00 pm on Tuesday 25 February;
(b) at 11.30 am and 2.00 pm on Thursday 27 February;
(c) at 9.25 am and 2.00 pm on Tuesday 4 March;
(d) at 11.30 am and 2.00 pm on Thursday 6 March;
(e) at 9.25 am and 2.00 pm on Tuesday 11 March;
(f) at 11.30 am and 2.00 pm on Thursday 13 March;
(g) at 9.25 am and 2.00 pm on Tuesday 18 March;
(h) at 11.30 am and 2.00 pm on Thursday 20 March;
2. the Committee shall hear oral evidence in accordance with the following Table:
3. proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 7; Schedule 1; Clauses 8 to 69; Schedule 2; Clauses 70 to 74; Schedule 3; Clauses 75 to 77; Schedule 4; Clauses 78 to 90; Schedule 5; Clause 91; Schedule 6; Clauses 92 to 98; new Clauses; new Schedules; Clauses 99 to 104; remaining proceedings on the Bill;
4. the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Thursday 20 March.—(Andrew Western.)
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Andrew Western.)
Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Andrew Western.)
The Chair
We are now in public session and proceedings are being broadcast. Before we hear from the witnesses, do any hon. Members wish to declare interests that are pertinent to the Bill?
Michael Payne (Gedling) (Lab)
I would like to declare an interest as a member of both Nottinghamshire county council and Gedling borough council, which are both responsible for administering benefits.
Michelle Welsh (Sherwood Forest) (Lab)
Mine is exactly the same: I am a member of Gedling borough council and Nottinghamshire county council, which have responsibility for administering benefits.
Rebecca Smith (South West Devon) (Con)
In the same vein, I am a member of Plymouth city council.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
I am a trustee/director of Southwark Charities, which provides accommodation for some older people who may be affected by the provisions of the Bill—a cursory reference, really.
Examination of Witnesses
Professor Mark Button, Dr Rasha Kassem and Professor Michael Levi gave evidence.
The Chair
Q
Professor Button: Good morning, everybody. My name is Professor Mark Button. I am co-director of the Centre for Cybercrime and Economic Crime at the University of Portsmouth and I have been researching fraud-related issues for nearly 20 years.
Dr Kassem: Good morning, everyone. I am Dr Rasha Kassem, senior lecturer and leader of the fraud research group at Aston University. Like Mark, but probably for fewer years, I have been researching all aspects of fraud.
Professor Levi: I am Michael Levi. I am professor of criminology at Cardiff University and I have been researching fraud for 53 years, so I think I win on that score, although that may mean I am very out of date.
Mike Wood (Kingswinford and South Staffordshire) (Con)
Q
I will start by asking the panel a reasonably general question. What, in your experience, are the main limiting factors in investigating public sector fraud?
Professor Button: There is a number of factors. Obviously, the first challenge with dealing with social security fraud and a lot of the rest of public sector fraud is that you have no choice but to deal with those people. It is not like a bank or a private company, which have the opportunity to decide whether to do business with that particular person. In the case of someone making a claim for a benefit, the public sector body has to deal with that person.
You are obviously dealing with increasingly highly organised fraudsters that often operate across borders. That poses significant challenges, particularly for many public sector fraud agencies, particularly when the police themselves have very limited resources. Fewer than 2,000 officers are dedicated to economic crime. They simply do not have the time to help public sector bodies deal with these things. When you look at those particular challenges, having professional capacity within government to investigate fraud with the appropriate powers is a sound basis for dealing with these problems.
Dr Kassem: The capabilities and skills of public authority staff would be a main challenge for me. Do they have the same understanding about what fraud means, its impact, the methodologies and typologies of fraud and the limitations of each type? I ask that because when you talk about fraud, you are talking about fraud committed against the public sector by individuals as well as organisations. The procedures cannot be the same in each case, and the motivations and the resources will not be the same in each case, so they have to have this understanding.
Equally, there has to be an understanding about the differentiation between fraud and error; the element of intent to deceive is the main differentiating factor. Do we have criteria that tell staff in the public sector how to differentiate between fraud and error? Is that agreed upon criteria to ensure that errors are not happening? Are they trained and do they have the proper skills to enable them to investigate without accusing, for example, innocent people and impacting adversely vulnerable individuals? That would be the main challenge, in my view.
Professor Levi: I have one final, quick point, because I know that there are a lot of questions. At one extreme, there is the point that Mark made about organised crime groups and so on, but it is a question of identifying when something is an organised crime activity, which you can only do easily either by getting intelligence or by correlating claimants’ data to build up a pattern, as in covid-19 fraud schemes. At the other extreme, there is what is probably the majority—failure to notify a change in circumstance. This has always been the most common part of the area covered by the Department for Work and Pensions. As far as the Public Sector Fraud Authority goes, I think it is a question of identifying a lot of internal cases from people that you would not ordinarily suspect.
Mike Wood
Q
Professor Button: One of the key things is always resources. If you look at the size of the PSFA at the moment, in terms of the scale of fraud, and look at some of its estimates, you see that this is substantially more than the estimates of fraud in the DWP, so having a relatively small unit, as proposed, is, I think, a limitation. For me, the key thing is having the appropriate resources within that unit to have a real impact on fraud. That question, “Is there enough there at the moment?”, is a key one.
Dr Kassem: Although I believe that this is a very positive step and definitely will enhance accountability, several things need to be considered. To start with, the definition of fraud can be a bit limiting in the current Bill, because, first, it assumes that fraud is happening for financial reasons when that is not necessarily the case. There are non-financial motives. Let us consider insider fraud—fraud committed by insiders, people working for the public authorities—which is one of the most common threats not just in the public sector, but across other sectors. A disgruntled employee can be as dangerous as someone with a financial motive. So I would stick with the Fraud Act 2006 definition of fraud, because it mentions personal gain full stop. It can be financial and it can be non-financial. That has to be clarified.
There is also the difference between fraud and error. I know that intent is mentioned—rightly so—as the main differentiating factor between fraud and error. Again, however, we have to be very clear about the criteria that would enable public sector staff to differentiate between fraud and error, because you do not want them to make mistakes and accuse innocent individuals of committing fraud, just like what happened in the Post aOffice scandal. That would cause further reputational damage to the Public Sector Fraud Authority and the public sector in general, so they have to be very careful about the criteria, which have to be agreed upon.
This is the second area that I want to talk about: because there is a difference between fraud and error, the recovery and the procedures, in terms of perpetrators committing fraud versus those committing an error, need to be clarified in the Bill. I do not think that that is clear enough at the moment.
The third point is about understanding the very nature of fraud—the fact that fraud can be committed by individuals and organisations. The policies and procedures that will be followed when you deal with fraud committed by individuals should not be the same as those that are followed when you deal with organisations. For example, if you were to take preventive measures, the procedures would be different for organisations versus individuals. With organisations, you are talking about controls, compliance measures and so on. That has to be clarified in the Bill—how fraud committed by organisations will be dealt with versus fraud committed by individuals.
Lastly, I would like to raise the possibility of abuse of power. Again, although the PSFA has greater intentions of preventing fraud, you want it to appear to the public that there is less risk of abuse of position. The oversight board will be very important there as an independent body, and perhaps it could be a board independent from the PSFA staff who oversee the work. For this to work, there have to be proper governance structures, including independent board members who have proper fraud expertise and understand the limitations and the mission of the public authorities. It will be very important for public authorities to report on their operational performance to enable that independent board to oversee properly.
Professor Levi: I do not quite agree with all those comments. Some of those measures do not need to be in the Bill, but they obviously need to be part of the structure. The Bill will hopefully last for a long time, and I am sure that you are all familiar with changes.
I think the point about the resource is important, but you also need to allow time for bedding in. There is the issue of where they will recruit staff from, and how experienced they are in actually dealing with stuff. I remember the Assets Recovery Agency, which was a stand-alone body. It was closed down because it did not recover as much as it cost at that time, as there were so many appeals. This is not quite analogous with that agency, but one needs to remember that it takes years to develop skills in actually handling cases. I do not think that is so much a question of the limitations of the Bill but a warning about not expecting too rapid results. Obviously, the practitioners and policymakers may offer a different view from mine, but I think it takes quite a long time. When I reviewed the Serious Fraud Office for the royal commission in 1992, I saw that gaining expertise in actually dealing with stuff takes quite a while, and some would argue that it has not yet done that.
Mike Wood
Q
Professor Button: With any kind of initiative like this, you will always get a degree of displacement. The clever fraudsters will find new means to get around the rules. Obviously, a lot of these measures are directed at the more opportunistic individuals who are not as well organised and probably do not invest as much time in looking for means to get around some of those measures. For that client group of offenders, the Bill will be quite effective. However, for the more organised offenders, particularly the more organised crime elements, they will find ways to get around some of these measures.
Professor Levi: I am not clear about the provisions for international linkages in the Bill. Perhaps that is something that just needs to be sorted out afterwards, but people need to be able to chase money overseas. The question about who does that, and what they need to do before they are able to do that, is pretty important. This is not so much in covid-19 frauds, because that has already happened, but a lot of these things are time critical. The asset-freezing orders that were granted to the police in 2017 have proven very effective, so we need to think about what processes there are for dealing with stuff rapidly.
Dr Kassem: I have one final point. I raised the issue of differentiating between fraud committed by individuals and by organisations. I think that needs to be sorted in the Bill, not afterwards. For example, from a governance perspective, the Bill says that you can access banks accounts and freeze assets, but whose? Are you going to take the assets from the organisation, the directors running the organisation or the fraud perpetrators inside the organisation? This has to be sorted, because you will face another issue, at least in courts, about who is the controlling mind in the organisation. The organisation has a mind of its own legally, and therefore cannot be treated in the same way as when you deal directly with individuals. If that is sorted, there will hopefully be a higher probability of recovery and fewer loopholes in the Bill.
Professor Levi: There is also the question of legal aid for those suspected or accused who have to take some measures to appeal. I was not clear about that, although it may be my fault.
Neil Coyle
Q
Professor Levi: I am not sure that it needs to be in the Bill. Definitions of what we mean by “organised” are typically vague. An act committed by three or more people for the pursuit of profit is a very low bar for organised crime. A fraud by one person can be perfectly well organised, but they are not part of an organised crime group. In policing, we talk about organised crime activity and people normally think about organised crime groups. That is a definitional problem that may be too much for the Bill in its present form, and indeed for Governments. They certainly need to think about what conditions apply to which people, and I am sure they have. I am not sure whether that constraint needs to be in the Bill, but Dr Rasha may have a different view.
Dr Kassem: For me, when I talk about fraud committed by organisations, it does not have to be organised crime. It could be a legitimate organisation defrauding the public sector. Again, the Bill mentions things around recovery, such as accessing bank accounts and seizing assets—how would they apply in cases of organisation versus individual? That needs to be thought about carefully in the Bill. Again, when you think about the nature of fraud and who is committing it, you are talking about different powers and different motives for individuals versus organisations. There are different assets and different ways of recovery. They are not the same, and therefore that has to be clarified in the Bill.
Neil Coyle
Q
Dr Kassem: It depends on whether they have knowingly done that, because the differentiating factor between fraud and error is the intent.
Neil Coyle
Q
Dr Kassem: Yes, in terms of the intent, because errors could happen. The differentiating factor between fraud and error is the intent to deceive. The example you mentioned could be error or fraud, depending on the intent to deceive. There must be clear criteria in the Bill to at least guide staff in the public sector to differentiate between fraud and error.
Neil Coyle
Q
Dr Kassem: It could be, yes.
Professor Levi: I agree.
Neil Coyle
So does that distinction need to be in there—that there needs to be the flexibility to treat this on an individual basis?
Professor Button: I was just going to say that my son recently reached 18 and went to university, and my wife received a letter saying something like, “Unless you have these circumstances, you have to positively say that they are staying on in further education.”, so there would be a clear misrepresentation there, I think. There would not be any opportunity for an error in that particular example, based on my experience with my son.
Neil Coyle
But what if the 18-year-old went into work? The point is that the onus is on the individual to make clear the change in circumstances to the Department, but the Department also has the opportunity to question. In your case, you are showing that the Department has done that.
Professor Button: They sent a letter, and you had to fill in a form to say that your son was staying on in further education in order to continue receiving payments.
Professor Levi: Yes, to reduce the fudge. It is sometimes difficult to see how there can be a legitimate explanation in the case that you are rightly using, but there must be a possibility of arguing. I am not sure myself that that needs to be in the Bill—that is a matter of criminal law, which the Bill does not seek to change in this case—but, in most departmental behaviour, they will adjust. Mark’s son’s case is a perfect example; the Department has clarified so that, if the family had continued claiming under those circumstances, it would be clear that they had committed an offence.
Neil Coyle
Q
Professor Levi: I am enthusiastic about the extension of the 12-year limitations; I think that is very sensible, particularly in view of the length of time that has elapsed since covid-19. But I am not sure how you would insert something in the Bill that would enable it to be varied. Presumably Parliament would like to see those proposals before they are approved, but there is an issue about parliamentary time—or it could be done through supplemental issues.
But I think it is right. Very few people can envisage the future. Look at the impact of technologies in our time. People will find ways of getting around things that you have not thought of yet, so that is pretty normal.
The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
Q
Dr Kassem: There are lots of definitions talking about fraud, including lies, cheating and misrepresentation for personal gain, but my point is that personal gain can be financial or non-financial. The Bill specifically mentions financial gain, but what would you do if you had a staff member working for a public authority who, for example, allowed unauthorised access or shared information out of revenge? There is no financial gain in that case. Would you treat that as fraud?
Andrew Western
Q
Dr Kassem: Yes, I have seen that in the literature, but not in practice yet. I think the way to go forward with that is by education and raising awareness about fraud and its impact, because those individuals committing fraud do not see the harm there. They see the Government as having lots of money in a rich country. They see themselves as entitled as well—more than others—and they take their fair share, or they might do it out of revenge, ideology or coercion, perhaps. There are lots of motivations for them to do that. Educating them about why this is wrong and what would be the consequences of committing fraud can help to reduce fraud over the long term and raise awareness about it. Equally important is training staff in public authorities about fraud, what it means and how to detect it. Prevention is better than a cure. Again, those have to go hand in hand. Yes, there has to be an investigation and a deterrent to discourage people from doing it, and this Bill is an excellent step in doing so.
However, if you produce the Bill, with untrained staff members who are not able to identify fraud criminals individually or organisationally, it will not really work. Preventing fraud requires a holistic approach. You cannot focus on prevention alone or on enhancing accountability alone, or on deterrence or investigation. Everything needs to work together, and education plays an important part internally in public sectors and externally across the public.
Professor Button: I have recently done some research where we replicated a study from 10 years ago. We sought a representative sample of the population and their attitudes to various deviant behaviours, including benefits fraud, and we found there was a significant decline in honesty. I think there are changes that are particularly pronounced among younger people. It has been driven by a whole range of factors, not least it is much easier to be dishonest now. If you go back 20 or 30 years, if you wanted to apply for a loan or a credit card you had to go to a bank. Now you just do it online on a computer. It is much easier to engage in dishonest behaviours in those types of ways.
The other thing is that social media and different types of forums provide opportunities for people to discuss how to engage in dishonest behaviour. I am doing some research at the moment about online refund fraud. We have been going into forums where a wide range of individuals discuss how to defraud retailers and get refunds for stuff that they have bought online. I strongly suspect that that kind of thing is probably also going on for benefits fraud. All of those factors are making it much easier, so I think there is a much more significant challenge for not just the public sector, but private sector organisations in dealing with fraud because of that.
Professor Levi: There is a lot of scope for unchallenged behaviour. Who gets challenged by people? If you do not have face-to-face relationships, the opportunities for moral education are much fewer. Personally, I think there needs to be a lot more in schools, but there is a lack of capacity in the schools curriculum for that kind of thing. Also, there should be more about how to avoid being a victim and discussions about money muling and so on. There is a broader spectrum of behaviours where people can get involved in fraud that we need to look at collectively.
The Parliamentary Secretary, Cabinet Office (Georgia Gould)
Q
Professor Button: If you look at this in the broader context of hybrid policing bodies, which is one of my areas of study—non-police bodies that engage in a whole range of enforcement functions—what is being proposed in terms of the accountability of this body compared with, say, the Health and Safety Executive, the Gangmasters and Labour Abuse Authority and some of the many other different types of enforcement bodies is certainly on a par with, if not better, than some of those organisations, with the inspection, the complaints body that people have access to and the additional measures in place.
One of the crucial areas is obviously when you get to prosecutions. With the Post Office scandal, we have seen the challenges if you have too much control over prosecution as well. The Department for Work and Pensions does use the Crown Prosecution Service, but with the lesser sanctions, it might be an issue to have more accountability, where you have that situation, to avoid excessive use of those penalties in a very negative way. That is possibly the only area where I would see an issue. Otherwise, the accountability measures are very similar to the many other hybrid enforcement bodies that central Government have.
Georgia Gould
Q
Professor Button: Yes, I think that does. That is fine.
Professor Levi: His Majesty’s inspectorate of constabulary and fire and rescue services has been pretty tough on fraud policing by the police, so I am personally encouraged by the proposal for accountability and review by them. It is reasonably rigorous and scientific, and there is the National Audit Office as well. Following on from Professor Button’s comments, sampling behaviours at all levels is a good methodology for testing. The question that Dr Kassem was raising earlier about the internal stuff and the supervision of that is a more complex example.
Dr Kassem: My suggestion was more about having an independent oversight board—independent from the PSFA—to review the work and also perhaps to support an independent audit of the operation and see whether the Bill is actually working in terms of recovery and of transparency and fairness. Someone might say, “Okay, we need someone from the PSFA on the board to feed back about operational tasks and challenges and so on.” That is fair enough, but that could slightly reduce the independence that we are talking about. It can still produce a report to describe the work, the performance and the challenges that it met, and a completely independent board can then oversee the work and challenge and scrutinise it if needed.
Georgia Gould
Q
Dr Kassem: Yes.
Georgia Gould
It is really reassuring to hear that because oversight is incredibly important to us. I have one more question, but I am happy to give way to others.
Andrew Western
Q
Dr Kassem: Personally, I would recommend a board rather than an individual, because how sustainable could that be, and who is going to audit the individual? You want an unbiased point of view. That happens when you have independent experts discussing the matter and sharing their points of view. You do not want that to be dictated by an individual, who might also take longer to look at the process. The operation is going to be slower. We do not want that from a governance perspective—if you want to oversee things in an effective way, a board would be a much better idea.
Professor Button: The only thing I would add on the DWP is that it is likely to be much more resource-intensive. There are likely to be a lot more cases. Having an appropriate capacity is important for that.
Professor Levi: I agree with that. Historically, in relation to asset forfeiture, say, the problem has been one of excessive caution rather than too much activity. A lot of legal challenges remain. I was on the Cabinet Office Committee that set that up, and there can be too much governance of that, so there is a tension between having a lot of governance in place and saying, “Look, can we get on with it?”
Rebecca Smith
Q
Professor Button: It is important to tackle those areas. I am not sure whether it is something that needs to go in the Bill. I think it is more an issue of giving the body the capacity to go after those types of individuals and to work with other relevant policing agencies— I suspect that that would need to be the case—to deal with it, rather than saying such things in law. We have the Online Safety Act 2023, which covers a lot of areas. Is that useful enough? Are the Fraud Act 2006 and the historical offence of conspiracy to engage in fraud appropriate, or do we need to create a new, specific offence of, say, promoting social security fraud online? I would not like to comment on that; it is probably something that needs more thought. The key thing is more enforcement, and disrupting forums where that kind of discussion is taking place.
Professor Levi: There is also the issue of signalling to people where the boundaries lie. This is an issue not so much for the Bill, but for enforcement practice across the board. We need some condign activities that communicate to people via social media, as well as in the old media that we may read, what is acceptable, and what is and is not legal. The National Crime Agency has been pretty good about that in the cyber-crime area, in trying to educate people and to divert them away from crime. There are some good lessons across that. It is also a question of resource and how many such things people can deal with.
Georgia Gould
Q
Professor Levi: The Americans used to be better at this than may have been the case in the past few weeks. The General Accounting Office and some of the inspectorates general in the US have been pretty active, but the US still had a huge amount of covid-19 fraud. Australia is getting better. Clearly, the head of the Public Sector Fraud Authority is part of this group of people trying to improve things, but I would say we are starting at a pretty modest level, in terms of numbers of people. In terms of the DWP, it is a struggle for everyone. We have to look at it in relation to general welfare. I remember going to a meeting and talking to some French delegates who said to me that it was about—
The Chair
Order. That brings us to the end of the allotted time for this panel. I thank the witnesses very much for their evidence. We will move to the next panel.
Examination of Witness
Helena Wood gave evidence.
The Chair
We will now hear evidence from Helena Wood, director of public policy and strategic engagement at Cifas and a fellow of the Royal United Services Institute.
Mike Wood
Q
Helena Wood: I find it quite difficult to comment on that, given that we are yet to see the code of practice. A lot of burden has been placed on that code of practice as it stands to build in some of that proportionality. I know the Government have committed to consulting on that code of practice forthwith, but without seeing that, a lot hinges on how those powers will be used in practice. Without that being known to me at present, I would quite like to see something pulled up on to the face of the Bill to build in proportionality by design.
Both on the PSFA side and the DWP eligibility verification powers, the Bill is a very blunt instrument, as it stands, and I think the law would do well to pull up those proportionality measures on to the face of the Bill. We have to look at this Bill in its broader context: very much unintentionally, it stands at that ideological debate between the rights of the individual to privacy and the rights of society as a whole to benefit from the funds that are available to fund essential public services. We have to deal with both of those arguments with due caution and due respect. As it stands, the Bill tends to be quite blunt in the way things are proposed on its face, and I would like to see a lot more from that code of practice and how it will be built in.
Beyond that, I would like to see a lot more about the people who will be using these powers. Again, we trust the police to use their coercive and intrusive powers based on their skills, experience and training. At the moment, there is a reasonably low bar set in the legislation, which is merely to be a higher executive officer or senior executive officer—a very entry-grade civil service officer. Other coercive powers that we can see across areas I have studied over the course of a 20-year career, particularly the Proceeds of Crime Act 2002, require some professional skills: where one is not a police officer, one must be a trained financial investigator. It is a trained and accredited role that is overseen by statute. Here, the competence of the individuals using that power, and the trust we can thus place in them to use those powers proportionately, is quite limited.
Mike Wood
Q
Helena Wood: It depends which part of the Bill we are talking about. This is a game of two halves: some of the PSFA powers, for example, mirror powers that are used almost as standard across the landscape of counter-financial crime, and I think we can be more comfortable about the use of those powers. The power I have more concerns about is something that is very new and incredibly intrusive, and without limitation to it being a civil or criminal investigation: the DWP eligibility verification powers. There, we need to proceed with more caution about how they are used, given that this is very much at risk of being a blanket, phishing-style power without any recourse to the limitations and the bars that others have to reach to use other powers that would be either a civil or criminal investigation. I think that part of the Bill requires a little more thought and proportionality pulling up front, unless the Government can bring forward that code of practice to allow those of you around the room judging this Bill to see what will be in the code to limit the use of those powers to the highest risk of high-end investigations, rather than making it a blanket power.
Mike Wood
Q
Helena Wood: Absolutely. The concerns I have around those powers are about collateral intrusion. We can all agree that the quality of data both on the DWP side and on the part of financial institutions is not always as good as it could be. I completely agree with the need to minimise the level of information that those institutions give back to the DWP, to caution against unnecessary intrusions upon privacy, but I would like to see a minimum standard of data match that would be required to take action on that data. If the banks are only giving a minimum amount of information back into the DWP, how do we know that that is an absolute specific match on the individuals they have on their system? Without seeing information about how that will be acted upon in the code of practice, I am slightly cautious. We need to see that detail earlier rather than later, for you to be able to make that judgment about the risk of unintended consequences of this legislation.
Let us again look at this in its broader context. This is a very intrusive power, but it sits in a suite of other measures and powers available to investigators across the system. What we do not want to do with this power is to bring those other powers into disrepute. We have to apply it with due caution, making sure that a match is a match. I would like to see which specific data points will be available to the DWP investigator to ensure this is a match and to minimise the risk of collateral intrusion.
Andrew Western
Q
Helena Wood: That is a very good question. It goes back to the balance between individual rights to privacy and society’s rights as a whole. Only you can make the decision about where that balance falls. Going back to the previous question, I would like to see built into the oversight of the use of the power a specific requirement for the independent reviewer to look at instances of collateral intrusion and where mistakes have been made, and to report on those to Parliament. If we can build that into the code of practice—forgive me for keeping on going back to that code, but I think a lot of the use of this power hinges on how it will be used in practice and by whom. We need to build some significant guardrails against that.
The second point I would make is that to my knowledge, this is an unprecedented power internationally, so how can we be sure it is going to be effective in practice? We know, for example, that individuals rarely have one bank account in one institution any more. In fact, numerous pieces of research—forgive me; I do not have the figures in my head, but I can refer those back to the Committee—show that individuals now have masses of bank accounts across five, six, seven and up to 10 or 20 institutions. By targeting one institution, are you really going to get a full picture anyway? If this is to be proportionate, we have to be clear that intrusion is proportionate and is going to be effective in practice. I am yet to see the evidence that it is, if it is used in a scattergun way. That is why it would be great to build into the code of practice something much more targeted around risk. For example, high-risk postcodes coming through in intelligence around organised crime attacks on the benefits system might be one way to look at this.
Andrew Western
Q
My concern is about broadening the scope. We have taken significant steps, when set against previous proposals in this area, to narrow the scope of the Bill. For instance, we are initially looking only at the three benefits where we see the highest levels of fraud and error. Universal credit is obviously principal among those.
Does the work that we have done to narrow the scope reassure you at all when you look at the Bill—for example, the removal of the state pension and the restriction to only one financial institution? Clearly, without that, we would have to look at every single bank account in the country in detail and investigate why every single person in the country has £16,000, if we are unable to see across the full range of bank accounts that they have.
Helena Wood: Absolutely, and I will answer that question in two parts. If we compare this Bill with the predecessor Bill that was put forward by the previous Government, the concerns have been listened to. There is much more significant oversight and much more limited scope. If we look at that in comparison with the predecessor Bill, that is absolutely true.
On the second part of your question, you make a very good point that this is not always organised crime. I would build on the point made by my predecessors in giving evidence that this is absolutely what we would refer to as a first-party fraud-driven approach. At Cifas, we run a fraud behaviours survey every year, questioning individuals about their general attitudes to fraud—individual-level fraud—and we see those numbers ticking up year on year about what individuals deem acceptable. Your point is well made and fully made about the rising levels of first-party fraud. We do have to look at it as both a first-party fraud and an organised fraud response.
Andrew Western
Q
Helena Wood: A really good point was made, and others who follow me in this Committee’s evidence sessions will make it as well: fraudsters rarely simply defraud the public sector or the private sector. It is often the case that those with a propensity towards fraud will look at any channel through which they can gain financial benefits.
This is very much a narrow-facing Bill, but we have to look at it in its broader context. I would question whether DWP could be doing more to share information with the private sector, using existing powers to do so. There are plenty of voluntary information and data-sharing schemes available to which DWP is not plugged in. It would complement this particular power to be able to layer the data picture and the intelligence picture, and not just look at this single piece of information in isolation. There will be a number of data points across the private sector that you could gain through voluntary data-sharing schemes that DWP is currently not engaging with.
Rebecca Smith
Q
Helena Wood: Absolutely; the point was well made in previous evidence that the police simply do not have the resources to look at fraud against consumers, never mind to support DWP, so I think it is entirely necessary to extend those powers of search and seizure to DWP as well. Again, I keep coming back to the broader context: there are other powers. We should not assume that this Bill is the sole answer. It has taken a very civil lens, quite necessarily, on what is a huge-volume crime, which cannot be dealt with simply through a criminal justice response alone. We have to save that criminal justice response for use in a surgical way, for the really high-end cases, particularly in an organised crime sense. We should not be seeing it as an either/or.
What I would not like to see from this is the replacement of the necessary deterrent of a criminal investigation and prosecution with pure use of civil measures. We need to use that full suite of powers beyond this Bill, including those in existing legislation, such as the Proceeds of Crime Act 2002, and standard issue fraud criminal prosecutions. Something that I would like to see from the independent oversight is that we do not lose that criminal thread. We have to keep prosecuting where necessary, and providing that necessary deterrent through all the available means, not just the ones available in this Bill.
Georgia Gould
Q
Helena Wood: This is a really necessary approach. However, I would caution that we are holding off from establishing the PSFA as a statutory body for now, and I completely understand the reasons for that: we are in a very tight fiscal environment, the cost of setting up a new agency is substantial, and we need to test the competence of the PSFA in doing so. However, I think in due course we need a more fixed timeline to move the PSFA off into a statutory body, to at least remove any perception—if not actual political interference—in investigations. That is really important—we need a stronger timetable. I know that will happen when the time is right, but I would like to see a stronger timetable towards it. I think there will be at least a perceived risk of Executive overreach if the PSFA does not move in that direction more quickly.
Georgia Gould
Q
Helena Wood: There is a question of “Who guards the guards?” in some respect. This Bill has significantly built in oversight; I think at every step we see that. However, it depends who the independent chair is, and a question would be whether that individual could be subject to a parliamentary approval process, as other oversight positions are—particularly if we look at the National Audit Office model, for example. It might be good to build in a parliamentary approval process for the individual who will take that role.
Georgia Gould
Q
Helena Wood: That is a really good question, which deserves more considered thought. These are people who have not gone through the police training process, for example.
I wonder if it is worth considering whether we make use of the powers contingent on being a financial investigator, as accredited under the Proceeds of Crime Act. However, I make that suggestion with some caution, knowing that in a practical sense there is a national shortage of financial investigators across the country. We are haemorrhaging these individuals; we train them up in the public sector and they go straight out to be poached by the financial sector, and probably to respond to some of these measures set out in the Bill. I say this with some caution, however, as that is a properly accredited and overseen process of skills. We need to look carefully about who exercises those powers and whether they need to do an analogous police training programme. I think there is some consideration of the professionalising investigations programme, although they cannot be officially credited over time—they will not be using the powers as frequently as that process would require.
Those are the parts of the Bill I would like to see strengthened in some way. It is perhaps incumbent on the Government to look at what the other routes are beyond a financial investigator to ensure the right level of competence in using what are very intrusive powers.
Andrew Western
Briefly, on the question of efficacy and scale, His Majesty’s Revenue and Customs has powers at the moment to request information from banks en masse. Given the experience we have within Government of doing that, and from what I can see, the lack of problem with it, I wonder whether you feel—
The Chair
Order. Alas, that brings us to the end of the allotted time for the Committee to ask questions. On behalf of the Committee, I thank Helena Wood for her evidence. We will move on to the next panel.
Examination of Witnesses
Kristin Jones and Alex Rothwell gave evidence.
The Chair
We will now hear evidence from Kristin Jones, formerly of the Serious Fraud Office and the Crown Prosecution Service, and from Alex Rothwell, chief executive of the NHS Counter Fraud Authority. For this panel, we have until 11 o’clock.
Mike Wood
Q
Kristin Jones: I am sure I have the same answer as Helena. Until we see the codes of practice and the operational guidance, it is difficult to tell. Obviously, I have operated in very regulated situations where there has been accountability, but without that extra information, I cannot really say at the moment. But I think it is important that when you interfere with the rights of the individual, decisions are taken at a sufficiently high level by people with sufficient experience.
Mike Wood
Is that your view as well, Alex?
Alex Rothwell: I would echo Kristin’s thoughts. I suppose there is not necessarily anything novel in the Bill. Those powers exist elsewhere, so we have seen them in operation. The ability to test and learn, which is baked into the proposals, is very helpful. Importantly, it addresses a need.
Mike Wood
Q
Kristin Jones: Not on the face of the legislation necessarily, but I would perhaps expect certain commitments in debate that the code of practice will cover certain areas.
Mike Wood
Q
Kristin Jones: I do have some reservations about dealing with corporate organisations, as was expressed earlier, because a corporate cannot speak itself; it can speak only through its officers. The Bill only talks about notices; it does not talk about answering questions. It is quite difficult if you are not able to ask an officer of a corporate questions and you have just written answers through notices. I wonder whether there are sufficient powers for dealing with the more serious, top end of public sector fraud.
Mike Wood
Q
Alex Rothwell: Perhaps a good example is that although we believe we are losing something in the region of £1.3 billion a year to fraud, the amount of fraud that is actually identified is relatively low, because a lot of the value we get is from future prevention. For example, in 2023-24, the figure was something like £5.2 million, but we only recovered 12% of that figure. There is a lot more value to be had. The Bill will be incredibly helpful for us to recover more money from people who have been suspected of fraud. When it comes to pursuing criminal justice outcomes in relatively low value cases—perhaps individuals who have taken £5,000 or £10,000, who have been exited through human resources processes or who have simply left the organisation—the Bill gives us an incredible opportunity to recover more funds, and I think we would use it extensively.
Mike Wood
Q
Kristin Jones: My career has been dealing with fraud in the public and private sector, and I think it is important that when fraud is investigated and you discover something that is not in your scope, you are able to communicate it so that fraudsters are tackled, whether that is in the private or public sector. That is my only concern.
Alex Rothwell: The Bill seems pretty comprehensive in terms of our requirements. There are things that I have concerns around, including training—not just of individuals who are exercising the powers, but of those who manage them and set the culture and tone of an organisation and how it is built in. I echo Kristin’s comments about private sector providers. For example, we are increasingly seeing private sector providers providing NHS services, so how would that be exercised? From my point of view it is more about the exercise of the powers than the extent of the powers.
Kristin Jones: The other thing I think is missing compared to when other organisations have been established is that we only talk about investigators. I am a great believer in a multidisciplinary team, with early legal advice, accountancy advice as necessary and financial investigators, but we have an organisation at the moment in which we only define the role of the investigators.
Andrew Western
Q
Alex Rothwell: I certainly echo your thoughts in terms of attitude. We have seen that expressed in a number of different ways through surveys and transparency—the international transparency index, for example. In terms of statistics, we have seen our fraud prevalence rate remain fairly steady over the last five to seven years, but it is a complex picture because I think that we have been increasing our fraud protection measures as well. What we have seen across the board are bitter pay disputes and a sense that contracts do not pay enough. We have extensive provider assurance programmes that are recovering funds through what we classify as error. I do not see any change in that climate necessarily. Opportunities to strengthen prevention, for us, are the most important factor to influence people’s decision making before they commit fraud. So it is a huge concern to me, but not necessarily in terms of statistics.
Kristin Jones: During my career, I have seen sentences for fraud increase dramatically and that sends a clear message but, over my career, instead of only a few people being exposed to fraud, when you answer your telephone, there is a good chance you have a scammer at the other end; it could happen once a week, if not several times a day. If you are being targeted, it could be every mealtime, with the scammer hoping that while you are distracted you will fall for some con. The worry is that the public are exposed so much to fraud that its seriousness gets watered down in their mind. You have these forums where you can recommend how to claim various things from the Government and how to hit sweet spots to get that benefit or grant. So it has changed and perhaps people are not as shocked by fraud as they used to be.
Andrew Western
Q
Alex Rothwell: Data sharing is critical to our ability to prevent fraud. We have a particular challenge in the NHS in that medical records are in a particular category, so we are exempt from the Digital Economy Act 2017. Perhaps I would focus in the first instance on the rich data sets that the Government actually hold and our ability to communicate inter-Department. Those data sets are critical, yet it is still challenging to obtain data. In many ways, the data protection legislation already provides the ability to share information, particularly where fraud is concerned, although the application of it is often quite risk averse. I wish it had been called the Data Sharing Act and not the Data Protection Act, quite frankly.
Kristin Jones: I come from a slightly different angle on this. Having prosecuted for many years and had to deal with the Criminal Procedure and Investigations Act 1996 and the responsibility to gather material and go through it, I think it is important, if you have data, to decide what you are going to do with it. In preparing for this Committee, I looked at the National Audit Office report on carer’s allowance. There you have a lot of data being gathered, passed and, if it is not addressed, discarded. For me it is important, if you gather data, to do something with it. There has been a lot of discussion about error. It is important for the public that, when they apply for something that they may not be entitled to, if that information is held, they can rely on that. If you apply for a passport and you fill the form in wrongly, you do not get your passport. It should be the same in other parts of government. You should be able to rely on the information the state already holds on you. This relates to the point about child benefit.
Siân Berry (Brighton Pavilion) (Green)
Q
Alex Rothwell: In terms of search warrants and physical access?
Siân Berry
Yes. The other powers that you mentioned already exist and are being transferred to a new place where things are conducted. Eligibility verification in the form that it is written is quite novel.
Alex Rothwell: Does His Majesty’s Revenue and Customs not have the ability to conduct those inquiries?
Siân Berry
As inquiries, but the difference is that we are talking about routine use.
Alex Rothwell: More extensive use.
Siân Berry
Yes. Would you care to comment on the eligibility-verification powers more specifically?
Alex Rothwell: I can see why there is concern. People have complex lives—perhaps it is not as straightforward as how much capital is in a bank account at a particular time. I think the powers need to be exercised very carefully. I am reassured by the opportunity to test and learn from the process through oversight, but I do recognise the concerns.
Kristin Jones: I used to be in charge of international assistance when I was at the Serious Fraud Office. One of the difficulties is that whereas other countries have a central bank register or building where you can tackle that and find out all the accounts and individual holes, here we do not. It is more tricky to try to verify financial information because there is no central register.
Alex Rothwell: We were speaking before about whether it is flexible enough to cover future events. The way that we use cash or funds is changing in terms of digital currencies and so on, and the way that people hold value is changing.
Siân Berry
Q
Alex Rothwell: Yes.
Michael Payne
Q
“It is very unlikely that most of the losses due to fraud and corruption”
during the pandemic
“will ever be recovered.”
How far do you agree with that statement? Do you think the new powers for the Public Sector Fraud Authority change the prospects?
Alex Rothwell: I absolutely do think they change those prospects. I was still in law enforcement when covid-19 was happening, and there was an extensive discussion about the police’s ability to support investigations. Frankly, policing had significant challenges with fraud, and still does, in terms of the volume of attacks against individuals and businesses, which made supporting the public sector almost an impossible ask, so I certainly welcome the ability to strengthen the public sector fraud response.
On whether the money will be recovered, there are significant challenges, as I am sure you are aware. It is right to apply a cost-benefit approach as well; although there is a moral imperative, we increasingly look at things in a commercial sense and at whether there is financial value in recovering funds.
Kristin Jones: It is very difficult to get money back from fraudsters, especially where it is organised, because the money disappears into different accounts in different names, and overseas through lots of corporate bodies, so it will be a big challenge. The important thing about this piece of legislation is whether we are future-proofing it so that, looking forward, we can learn from what has happened in the past and not repeat the mistakes.
Rebecca Smith
Q
Alex Rothwell: If we take the view that fraud has already happened—I have spoken about prevention, but once a fraud has happened and we have discovered it—there are increasingly limited opportunities to pursue criminal investigations. Although we maintain a strong investigative capability that deals with more serious types of criminality, we know about the challenges in the criminal justice system—the disclosure burden is high, it is incredibly expensive to run criminal investigations, and often they take eight years or longer to reach fruition—so we are increasingly looking at how else we can deal with fraud when it is presented to us.
In many ways, it is the low-value, high-volume cases that we see that are more challenging, where we are perhaps seeking to recover funds from someone who has taken £5,000, as I mentioned earlier. This is where I have the most interest in the Bill, because I think we would seek to use those powers extensively, and of course every penny that we recover is money that will be well spent in the NHS. I do not necessarily see any gaps in this particular legislation. There are elements of the work that we do in the national health service where we would benefit from some more powers, but the focus here is obviously on the Bill, rather than on our own ability. A lot of that would apply to how we access medical records, for example.
Georgia Gould
Q
Alex Rothwell: If we look across other international jurisdictions, we see that law enforcement agencies often have quite distinctive public sector fraud or crime functions—for example, the FBI has an extensive healthcare fraud capacity. The way policing has evolved over the last 20 or 30 years, particularly with an emphasis on drug supply, knife crime and firearms, has meant there is little capacity in policing to tackle public sector fraud, and of course there is an ever-present terrorism threat, which is changing rapidly. There is also safeguarding, with the National Crime Agency having quoted publicly the figures in terms of people who are a risk to children, for example.
One of the challenges is that even if you invest more in fraud capability, when a crisis happens, whether that is because of public order or some other form of crisis, policing has to flex more than other investigations. Inevitably, crimes like fraud are perhaps easier to put on hold for a time. Certainly since 2018 we have seen a gradual professionalisation and an increasing capability in the public sector, which I endorse. We could invest more in the police, but my concern is that there will continue to be crises that affect policing that will impact the ability of policing to support the public sector in the way that is required.
Kristin Jones: I agree with everything that Alex just said. The same applies to prosecution: if you have specialist prosecutors, where the resource is ringfenced, they do not get dragged away, but if you have them in with other prosecutors, it depends on what the pressure is at any particular time as to what resource is going to be given to fraud prosecutions.
Gill German (Clwyd North) (Lab)
Q
Alex Rothwell: One thing that we have always struggled to do is put a value on deterrence, because it is quite hard to say categorically that someone has not done something because of a change in approach to something. However, it is my view that, once it is known that there are increased powers in this space and that individuals will be pursued for funds, we will see some behaviour change. We could potentially quantify that, but the challenge is directly relating it to the Bill, particularly if you introduce other measures at the same time. I think there will be a powerful deterrent effect if it is exercised correctly and at scale and the public can see the benefits.
Kristin Jones: I agree. If people know there is an increased likelihood that they will be detected, that will have an effect. It is also important to use similar means to get the right narrative across about what you should and should not be doing.
Georgia Gould
Q
Kristin Jones: We have to plan for emergencies—they will, inevitably, occur—and the work on that should be kept up to date so that you can refer back to one you prepared earlier. That is so important because when there is an emergency, everybody is doing their best to get through it as fast as they can, and that is not the time for slow consideration, whereas having been through that experience, now is the time to reflect and document what we are going to do in future.
Alex Rothwell: Fundamentally it is about the loosening of controls, our understanding of the impact of the loosening of controls, and the friction that is or is not introduced when you are addressing an emergency. We also now have a much better understanding of how that can manifest itself. But I am confident that the Bill would enable an effective response.
Georgia Gould
Q
Alex Rothwell: From my perspective it is the digital footprint that is left and our ability to analyse that at scale. Very few transactions, if any, take place that do not have a digital or electronic footprint of some kind. The data sharing and our capability to analyse that data is the most important factor. The Bill goes some way to addressing that, but obviously elements of the Bill are about responding to fraud once it has happened. That, for me, is the biggest challenge. But on top of that are the safeguards that we put in place to ensure that our interpretation of that analysis is also correct.
Georgia Gould
So the other half—the prevention side—has to accompany this.
Alex Rothwell: Absolutely.
Georgia Gould
I very much agree.
Kristin Jones: Increasingly in society today knowing what the truth is, with the amount of data and false information out there, can be the problem.
Andrew Western
Q
Alex Rothwell: Data analysis has been particularly effective, as has getting better at recording and reporting—for example, we now have a ubiquitous case recording system that exists across the national health service. The greatest value we have seen so far has been in improved data analysis on large datasets that exist on, for example, national contracting. That is where the value lies in future.
Georgia Gould
Q
Alex Rothwell: Yes, it is. As I mentioned, the professionalisation of fraud specialists has made huge inroads in terms of the acceptability of fraud professionals, particularly in a finance environment—we deal with audit committees and so on—and there is also the recognition that the Government are taking fraud seriously. That is not just this Government but the previous one as well. The direction we have had from the Cabinet Office—
The Chair
Order. That brings us to the end of the allotted time for the Committee to ask questions. I thank the witnesses for their evidence. We will move on to the next panel.
Examination of Witnesses
Anna Hall and Christy McAleese gave evidence.
The Chair
For our final session this morning we will hear oral evidence from Anna Hall, corporate director of debt, and Christy McAleese, debt advice strategy and policy lead, both at the Money and Pensions Service.
Rebecca Smith
Q
Anna Hall: A lot of the operational detail of how the powers will work needs to be worked through, and the code of conduct will clearly be extremely important. Already existing in government are the debt management vulnerability toolkit and the public sector economic abuse toolkit, both of which have been set up by the cross-Government and cross-debt advice sector fairness group. We would like to see those existing systems tailored for the Bill and the recovery powers, to make sure that the code is implemented fairly.
There is lots of detail in the debt management vulnerability toolkit. It is about making sure that every individual is treated fairly, no matter how the debt has arisen. Once a debt is owed to Government, we are interested in how someone is able to set up a sustainable repayment plan. How are they able to access free debt advice and get the support they need? Regardless of how the debt has arisen, there is their ongoing expenses, their family, the need to make sure that there are no unintended consequences for wider society and their family, and how that debt is recovered.
Christy McAleese: I agree with Anna. There are possibly also opportunities in the code of conduct to build on some of the good work that the Department for Work and Pensions has already been doing on its ways of working with the debt sector. That includes good and consistent signposting and referrals through to free debt advice if, as seems reasonable, someone who has perhaps been contacted by the Department seeks advice from the sector. There are also some things around the acceptability of the debt sector—the advice worker being able to act on behalf of the person, so third-party forms of authority—and we could look at that. That would streamline the process for the person in debt and make it much easier for the debt sector to work with the Department. There are probably other things in that area.
Rebecca Smith
Q
Anna Hall: We can talk about who should be consulted. Debt advice organisations and consumer groups are important, because they will be the ones that interact with and support individuals in how they set up repayment plans and interact with the debt they owe to Government. At the Money and Pensions Service, we have an adviser panel, whereby we convene the debt advice sector, creditors and everyone who interacts in the ecosystem of debt advice. We can certainly support with that.
We are pleased with how DWP officials have engaged with us so far. They are clearly prioritising the people who are likely to be vulnerable. We work with them on an ongoing basis and expect to continue that through the development of the code of conduct.
Christy McAleese: To add to that briefly, we have a track record of doing consultation exercises in this area, and we have been sharing some of those learnings with colleagues at the DWP. In particular, as Anna mentioned, our debt adviser panel, which is made up of frontline advice workers from right across the sector, has been a valuable forum for us to understand how particular aspects of work that we are doing, and wider Government work, impact on the sector, and particularly on people in debt. Colleagues at DWP have been discussing how they can interact with that panel as part of the process as well, which we would really welcome.
Rebecca Smith
Q
Anna Hall: One thing that we know quite a lot about at the Money and Pensions Service is how people in debt behave. They do not always behave in a particularly rational manner, or in the way that you might expect people to behave, as with all people interacting with systems.
It can be incredibly overwhelming to have multiple debts. If you draw an analogy to other types of debts that people might owe—say, mortgage arrears or rent arrears—the fact that you might lose your home if you do not pay it is obviously an effective deterrent. For some people, those kinds of consequences are an effective deterrent. But we see day in, day out in the services we fund that people leave it right to the last minute before they seek help, and some people do not seek help at all. There can be all kinds of reasons for that. It could be something to do with them—they may struggle with literacy; they may have really overwhelming mental health issues; or it could be that they just do not know what to do. It could also be that they do not know where to seek help from. So I am sure it will be a deterrent for some people, but for other people, deterrents are not really the reason that they do not engage with the system.
We think it is really important that the systems that are set up once a debt has arisen are encouraging and supportive and help people to engage with the Department, so that they can set up an affordable and sustainable repayment plan. That will minimise the number of people who get to that point. We have experience of working with the finance sector and with other Government Departments that are trying to recover debt. If you really focus on being supportive, encouraging and creating the environment where frontline staff are people that you would want to disclose information to, set up income and expenditure, get a signpost to debt advice from and those kinds of things—if that is inherent in the system—you will not need the deterrent very often. There are huge numbers of people who are very vulnerable who have multiple debts, and deterrents are not really the thing that will impact on their ability to engage.
Andrew Western
Q
Anna Hall: We work with the Department in a number of ways. One of the most recent initiatives is working with Jobcentre Plus colleagues to embed the Money Adviser Network referral system into that. That means that where people present at Jobcentre Plus for a variety of reasons and are identified as having some kind of debt or money difficulty, they can either be referred to the MoneyHelper website—that is the Money and Pensions Service website—which has a variety of information on money, debt and pensions, or they can get a referral through the Money Adviser Network to one of our funded debt-advice providers. It is as seamless as possible and it really enables someone who presents perhaps not realising that there is help out there. When someone interacts with a system that they have to interact with, it is great if we can offer a real range of support that allows them to get to debt advice as quickly as possible.
I probably would say this, wouldn’t I, but debt advice can be absolutely life-changing for people? Its impact is huge. One thing we know is that people often do not know that debt advice exists. A huge number of people would benefit from debt advice. They do not know where to look or how to find it and think that is maybe is not for them, and they do not know what will happen when they get debt advice. If you have someone reassuring at the jobcentre saying, “This is a really independent, trusted service and it can help you sort out your financial affairs, and here is a seamless transfer through to that debt advice service,” that can be incredibly effective.
We are working with the Department, in Jobcentre Plus and across the board, on where people are particularly vulnerable and where they really need that support before they can even start to think about finding work or engaging with other things. If you are worried about whether you have food, whether you have money coming in and what you are going to do about the bailiff who is coming to knock on your door, you really need to deal with that before you can look at your long-term future.
The Department and all the officials we have been working with have been prioritising that. Being an arm’s length body of the Department for Work and Pensions is really helpful to make those connections, and embedding debt advice into all those systems has been really welcomed by the Department.
Andrew Western
Q
Can you reflect on the way that we have structured the process for people to engage with the Department when they are notified that they owe us a debt? We have done everything that we can to structure that as a power of last resort. Do you think that that is as robust as it can be with the multiple points of contact, the attempt to agree a sustainable and affordable repayment plan, and the ability, even after we have agreed a deduction, for somebody to come back to the table and negotiate that with us? Is there anything else that you would like to see in that space, or do you think that that is robust in reassuring ourselves that it is a power of last resort?
Anna Hall: It certainly looks that way from the detail in the Bill. As others have said, the code of conduct will be the critical thing. One of the things is that if frontline staff are not picking up vulnerabilities, or they are not trained in how to sort out affordability, in empathic listening or in all the protocols about how to have different types of conversations with people in different types of vulnerable situations—if those things are not in place—some of the processes in the Bill will not be as effective. It comes down to the training for frontline staff, and the capacity and processes to then follow up on what has actually been disclosed, that will enable those repayment plans to be put in place before those later processes. If those are not in place, that could cause some real issues. How successful this Bill is will come down to the code of conduct, as many have said.
Christy McAleese: I agree with what Anna has said. There are probably parallels with what has happened in the financial services sector and changes due to consumer duty and other requirements there. They have found that it is about embedding that culture in frontline staff and recovery staff, and making sure that they are trained effectively. The process on paper needs to be brought to life. We have been assured by the colleagues we have been speaking to at DWP so far that that is in their thinking. They have really demonstrated a willingness with us to learn what they can from how this is approached in the debt advice sector as well. We are reassured on that.
Andrew Western
Q
Anna Hall: We understand the DWP’s intent to ensure that debts can be recovered across all the different groups of people who might owe money. We are really focused on what happens when that debt arises and how people are treated in that situation. It is probably slightly outside our remit to comment on some of what you just outlined, but once the debt has arisen, we would look at how people are treated fairly in that situation across the board.
Christy McAleese: I have nothing to add.
The Chair
There being no further questions, I thank the witnesses for their evidence.
Ordered, That further consideration be now adjourned. —(Gerald Jones.)
Public Authorities (Fraud, Error and Recovery) Bill (Second sitting)
Tuesday 25th February 2025
(4 months ago)
Public Bill CommitteesPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 February 2025 - (25 Feb 2025)
The Chair
We will now hear evidence from Joshua Reddaway from the National Audit Office, and Richard Las from His Majesty’s Revenue and Customs. We have until 2.30 pm.
Rebecca Smith (South West Devon) (Con)
Q
Joshua Reddaway: I guess I am agnostic as to what is done, but the benefits would be an opportunity for governance and an opportunity for accountability, clarity and transparency. I am sure that we would be absolutely delighted to audit the accounts for the PSFA and help to provide some of that transparency. Of course it is currently incorporated with the Cabinet Office, so it is about a clear line of sight. You have to offset that against the fact that there is an administrative burden for producing things like sets of accounts, and having governance and so on. The bigger question, and the one for the Committee, is whether it will enable better oversight of the powers in the Bill.
Rebecca Smith
Having a separate organisation?
Joshua Reddaway: Having a separate body.
Rebecca Smith
Q
Joshua Reddaway: I do not have a major opinion. I would ask whether you are comfortable with the oversight arrangements. One thing to point out is that this will be the closest thing to an anti-corruption unit that the Government have, with search powers. Are you happy with that being constitutionally in the Cabinet Office or not? I am also interested in what the criteria are. The explanatory notes have set out that there will be an efficiency assessment for the powers in the impact assessment. I am not sure the Cabinet Office is clear on exactly what that means. It is interesting to think about what would actually trigger it to exercise that power under the Bill to create it as a separate body.
Rebecca Smith
Q
Joshua Reddaway: In short, yes. Would you like a longer answer?
Rebecca Smith
That would be great.
Joshua Reddaway: First, we should be clear: with most fraud, once the payment has gone, you are not going to get it back. I have a professional next to me who can talk to you about the challenges and the pursuit, but if you ask how much fraud is out there, the answer is a lot. If you add up all the official estimates from the different schemes during covid, it is £10.5 billion-worth of fraud. The Government have so far recovered £1 billion of that, mostly from HMRC and less from others. Of course, HMRC stopped collecting it because it knew that its resources would have a higher return of investment if they were re-diverted back to tax rather than fraud recovery. I am afraid you are always on to a losing game if you enter the recovery phase, but every million counts. It is always nice to get something back.
The covid counter-fraud commissioner has only just been appointed. Their role is to review these schemes and see whether there is a way to get the money back. My understanding is that the six-year time limit under the Fraud Act 2006 will be expiring next spring so, with that timetable alone, if the fraud commissioner is going to bring forward anything that has a chance of working, it makes a lot of sense to give them a bit more time. Like I say, we are really sceptical that it is possible to get the majority of that £10.5 billion back. Some of it will come back from the bounce back loans anyway, but the vast majority of it has gone. But every million counts.
The Chair
Do you want to add anything, Mr Las?
Richard Las: On the covid side of things, we have not stopped our efforts, but we have recognised that we are not going to pursue it as a lead subject. However, we are conducting other inquiries and looking to other taxes. We will be looking at whether there was fraud under the covid schemes, and we will still be pursuing that. I still have a large number of cases going through the courts or heading towards prosecution in relation to the scheme. A bit like Joshua, I am certainly not giving up on it—we will keep pursuing it—but, in a decision on how we deploy our resources, we are saying, “We’ll look to what we think are the higher risks, and we will pick up the covid risks as and when we come across them at the same time.”
The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
Q
Joshua Reddaway: Specifically, do you mean the EVM—eligibility verification measure—stuff?
Andrew Western
All the powers pertaining to the DWP—the five principal areas in the DWP’s proposals—so information gathering, debt recovery, penalties reform, powers of search and seizure, and EVM.
Joshua Reddaway: Okay. To step back, we have been looking at a general trend of rising levels of benefit fraud for a few years. Actually, it has come down a little since covid, because there was a blip then, but if we take covid out, the levels were rising anyway. Currently, it is more than £10 billion, if you include the bit of benefits that HMRC pays—obviously, that is coming down with universal credit.
I do not think that what is in the Bill will solve that; what is in the Bill will support tackling it. This is about adding a few tools to the DWP toolkit. The key thing is that prevention is better than recovery. DWP is really good—one of the best in the world, as far as we can see—at knowing how much fraud is occurring; I am afraid it is not very good at saying why it occurs. In particular, DWP is not great at saying what it is about the way in which it administers benefits that enables fraud to occur or error to happen.
For some time, we have been advocating for DWP to get a much more granular view of its control environment. I think that, given how I interpret the capital rules here—it is an EVM exercise—it is doing that. This is one of the places where DWP said, “Actually, our control over capital at the moment is, frankly, to ask people how much capital they have,” which left it fairly exposed to the risk that people did not tell them the truth. Several times, the Public Accounts Committee asked DWP if it had the powers it needed, and several times has said, “The one area we need to explore is capital.” The challenge for this Committee is to work out whether that proposal is reasonable and includes enough oversight, given the privacy issues. In terms of there being a real problem behind it, however, I can confirm that there is a control-level issue that DWP is trying to resolve.
The other issues that the Bill tries to deal with on enforcement are similar. If we look at the impact assessment, the EVM was £500 million a year when fully rolled out and operational—that is a significant dent, but only a dent, in the £10 billion. I want to be clear: yes, I do think that there will be an impact. Is it sufficient? No. Is it meant to be sufficient? I doubt it. I think that DWP knows that, and that it has a very hard slog ahead of it. I will try to hold it to account—I am afraid it is your Department—on that hard slog of understanding where fraud is coming in and where error is happening, and put in controls step by step to improve it. There are no shortcuts in that.
Richard Las: My reflection is that fraud is inherently difficult to identify and potentially more difficult to investigate at times. How do you identify fraud? If I think about HMRC, you need information and to be able to triangulate information to understand the risks in front of you so that you can identify the highest risk. Sometimes you will not know what that risk is, or whether it is fraud or error, but it will point you in a direction. I feel that as an agency, if you have fraud, you need a good bedrock of information to understand the environment and to identify risk. A lot of that information can be information you gather from your customer—in our case, a taxpayer—or third party information. It is information that we can use to triangulate and verify. We do that regularly with lots of different information sets.
Once you come to investigate and deal with fraud, it is obvious to everybody, but people do not always co-operate, so you need powers that allow you to compel people to co-operate or powers that allow you to secure information and evidence in a way that you otherwise would not be able to do, because people would not do that. On the general framework, we are always looking to improve our basis for powers and our ability to use them. Certainly I feel that much of what is included in the Bill is powers that HMRC already has in many respects. We use those powers, we would argue, in a proportionate and necessary way, and there are controls and safeguards about how we do that. It is a difficult business with fraud. If you do not have some of those tools at your disposal, you are working with one arm behind your back.
Andrew Western
Q
Joshua Reddaway: Is there an alternative? I am aware that DWP is thinking about open banking as an alternative, but that, of course, would have wider implications and at the moment is on a voluntary basis. You have got that.
I honestly think that it fundamentally comes down to this: if you want to be able to detect, and if Parliament has set an eligibility criterion of capital as part of universal credit and some other benefits, DWP can either use that as a kind of symbolic deterrent so that you can opt out by owning up that you have that capital—that has a use—or if you want it to actually be enforced, you have to provide DWP with a tool that goes a bit further than just asking. There are various ways that you can get data matching from various different partners. This is the one that the Government have come up with.
Andrew Western
Q
Richard Las: It is the Finance Act 2011 that you refer to, which allows us bulk data gathering powers on information that we believe will support our functions. I guess it is not just the banks, but we do get the information on interest-bearing accounts. It is an annual exercise, not a real-time exercise. It is clearly timed in such a way that it helps us understand whether the right amount of tax has been paid on interest that has been accrued. We are talking about large accounts because in most cases people’s interest is quite small, but there will be some people who get a lot of it. We have a huge amount of controls over how we manage that information and how we use it and protect it; they are our normal requirements as with any other taxpayer data.
We gather other information from third parties. We have information from merchant acquirers on transactions that businesses might make, for example. We also have information that we get from online platforms in terms of sales and things like that. It is all part of bringing that information together. HMRC very much respects taxpayer confidentiality and manages that data responsibly. I guess those safeguards can exist in other organisations.
Andrew Western
Q
Richard Las: I do not know, if I am honest, whether there is. I can look that up for you.
The Parliamentary Secretary, Cabinet Office (Georgia Gould)
Q
Joshua Reddaway: I think you are referring to the report we did in March 2023, after the PSFA had just been established. We very much wanted it to be a baseline for the challenges it was trying to deal with. We basically said that there needed to be a cultural change across all of Government, that 84% of the resources were in DWP and HMRC, and that covid really exposed that the Government did not have the capability in other Departments. I have to say that, from our point of view, we saw fraud as essentially a welfare and tax issue for many years, so it was a bit of a surprise to start bringing it out to the other Departments a bit more.
I would interpret the Bill as being about giving the powers, particularly on the enforcement side, and in the meantime, the PSFA has been doing quite a lot on the prevention side. The prevention side is primarily where I would be focused because that is where the biggest gains are to be had in dealing with the cultural changes that are needed across all of Government. Mind you, I do not read the Bill as being against that; I see it as supplementary.
We would be very disappointed if the PSFA became exclusively an investigation and enforcement-type agency. The impact assessment thinks it can get roughly £50 million over 10 years from enforcement. Like I say, every million counts, but that is very tiny compared with the challenge that the PSFA is trying to meet. Is that the sort of thing you are interested in?
Georgia Gould
Q
Joshua Reddaway: It is not rare to find what we call audited bodies, Government organisations, that have found a fraud, have taken it as far as they can through their internal services, and have tried to hand it over to the police to make an arrest—this is the point where it is outside audit—but have not been able to find anyone who will pick up that file, which has been fairly developed. The point that we raised in the 2023 report and that the PSFA was trying to deal with was: how can you get an organisation that fills the gap to help defend the Government when they get attacked? The police are basically going to say that Government are big enough and ugly enough to look after themselves on this.
When we looked at fraud more widely across society in a report that we did later in 2023, we found that at that time it was 40% of all crime and 1% of police resources. That is what you are trying to tackle here. You are trying to have an organisation that fills the gap on enforcement. How important is that? I think it is about having a deterrent, and if you get it right it should also be about root cause analysis. By that I mean, if you have an investigation and you are able to fully investigate it, it is not just about prosecuting that person, but about properly understanding why that happened in the first place, and improving it. So if you are an organisation that is outsourcing an investigation to another party, I always wonder a bit whether they will do that bit of the loop. I am hopeful that the PSFA will develop the capability to do that.
Georgia Gould
That is a very helpful challenge.
Joshua Reddaway: That is my understanding of this. Our one concern is, please don’t let this be the tail that’s wagging the dog.
Siân Berry (Brighton Pavilion) (Green)
Q
Joshua Reddaway: Interesting. The reason we always talk about error and fraud together is because it is often really difficult to differentiate between them when you are doing prevention. So, in my job, I am more interested in fraud and error together because I am more interested in how to correct that and stop the money going out. If you are in Richard’s job, as I am sure he will tell you in a second, he is going to be more interested in the one that you can prosecute—to an extent.
Richard Las: I am happy to jump in from an HMRC perspective. It is important to understand what the driver is—I think that is absolutely right—and to be able to distinguish between fraud and error. We have estimates for fraud and error in terms of the tax system, which we publish every year. We generate those estimates for a lot of different activity, but partly they are the result of our own inquiries, so we are analysing what we do and what we see. We make a judgment—is it fraud, is it error?—and we work out what is going on. Absolutely, you have to look at the underlying reasons, so if there is an error, a repeated error, you ask what is going on there—what is the cause of it? Certainly, as we develop our business in HMRC—especially with people filing online—we are very much looking to prompt people so that they can get the right answer. Those of you who do self-assessment hopefully will see that yourself—“Are you sure? Is this information correct?” That really does help in reducing errors—the simple errors that people might make, because it is complicated.
Siân Berry
Q
Richard Las: Potentially. But it goes both ways, often. Sometimes people overpay as well.
Joshua Reddaway: If you are looking at a particular case, normally the first thing you detect is that it is wrong—the transaction is not correct. You then have to take it to a certain level before you can work out, on the balance of probabilities, what it is. In tax world, is it evasion or avoidance? Then you go down a different route, depending on how you are dealing with it. Obviously, if you want to go for a prosecution, you have to have much more evidence and you have to be beyond reasonable doubt to go there.
I think the reason why PSFA often deals with both is that it is at that earlier stage of dealing with prevention, and it is not always clear which one you are dealing with; besides which, we want to stop error as well. My job is to definitely try to stop both, through audit and accountability. I think where it does not make sense for PSFA to get involved is where that fundamental responsibility for correcting the control environment belongs with the Departments. So if you see that as a, “They have done that triaging; they now think that it’s fraud,” you need an enforcement capability and you go down that route, but I would be very disappointed if that meant in that triage process that an error was not being dealt with. Does that explain?
Siân Berry
Q
Joshua Reddaway: I am saying I do not think this Bill is about that issue.
Siân Berry
Okay. Even with that title?
Joshua Reddaway: Even with that title.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Q
Joshua Reddaway: On how much fraud is created?
Neil Coyle
Q
Joshua Reddaway: Is this the behavioural effect?
Neil Coyle
Q
Joshua Reddaway: I have not done anything that adds to the information that is already in the impact assessment. I have not audited it, so I would just point to the numbers in there. I know there is an issue around whether people will split their money between multiple bank accounts. Is that also part of what you are referring to?
Neil Coyle
Yes.
Joshua Reddaway: I have spoken to DWP and the OBR about that. My understanding is that frankly it is an area of uncertainty, and that they wanted to make an adjustment because they knew there would be an effect but they do not know what that will be. We will have to come back and see what that is.
For me, the more fundamental point is that this power will not stop all fraud. It is designed to stop some. Will there be behavioural effects that will limit that? Yes. Does that in itself mean you should not try? No.
Neil Coyle
Q
Joshua Reddaway: My first instinct is that I would ask DWP how it was going to do that, because that is how the wonderful world of audit works.
Neil Coyle
Of course.
Joshua Reddaway: Secondly, I would suggest to them that they can establish a baseline, because this is pretty transparent within their published statistics. You have got a breakdown there of how much fraud is caused by people mis-stating their capital. The reason DWP is able to do that is because when you apply for a benefit, you do not have to provide your bank statements, but when you are subject to an inquiry that informs the statistics, you do have to provide your bank statements. The statistic is generated by the difference between those two processes. That will continue to be the case after this power is enacted.
Andrew Western
Q
Joshua Reddaway: I think that is a fair comment, given that I said it does not really deal with error. I was really referring to the enforcement powers under PSFA. I think PSFA do other stuff that is in the error space, but the enforcement stuff is not. The enforcement stuff for DWP also will not really be in the error space. However, you are quite right that any data matching is an opportunity to detect error, and DWP are used to that. For example, when they are doing targeted case reviews, that will be detecting error as well as fraud. What we know from the statistics is that DWP believes there is more fraud than error in that space, but I entirely accept the premise of your question, and I should have made that part clear.
Andrew Western
Q
Richard Las: Ultimately, it allows us to operate immediately and with real clarity. We would be under the same kind of governance and restrictions as the police would be, in terms of having to go to a court to get those warrants, but, in terms of our ability to—
The Chair
Order. We have come to the end of the allotted time. I thank the witnesses for their evidence, and we will move on to the next panel.
Examination of Witness
John Smart gave evidence.
The Chair
We will now hear oral evidence from John Smart, formerly partner for forensics at Ernst & Young, who now sits on the Public Sector Fraud Authority’s advisory panel. We have until 2.50 pm.
Mike Wood (Kingswinford and South Staffordshire) (Con)
Q
John Smart: I think being fully independent would probably be helpful, although I suspect that the realistic impact of that will be more theoretical rather than practical in the short term. Maybe, in the longer term, a fully independent, stand-alone organisation would be much more helpful.
Mike Wood
Q
John Smart: That needs to be determined in terms of the overall governance structure of the organisation, as and when it is set up, because it would clearly need to have an independent board, and some of the oversight powers proposed in the Bill would need to be independent of the management of that business. I think it would require quite a lot of thought around the overall governance structure, the way it operates and the way that the day-to-day management of the business is independent of the oversight powers.
Mike Wood
Q
John Smart: As you say, the nature of the investigations that will be carried out by the PSFA will be quite different from those being carried out by the DWP. Certainly, the proposal in the Bill is that investigations that require some form of search warrant will be carried out with a police officer present, and therefore the powers that are being given to DWP in relation to this Bill will already sit with the police that will accompany any investigators that are doing work on behalf of the PSFA. That is my understanding.
Mike Wood
Based on your experience with the PSFA so far, is that consistent with the length of time that, in most cases, it takes such organisations to reply to requests for information?
John Smart: The consistency question is an interesting one. I think a lot of those powers are likely to be applied specifically in relation to banks and telecoms companies. They already have procedures in place to respond to requests for information, and therefore, in the majority of cases, my suspicion is that those short timeframes will be consistent with what they normally deal with, so there will not be a big onus on them to change the way they normally operate.
Mike Wood
Q
John Smart: They are not, no. I do not know which institutions are likely to be required to provide information. There will be individuals and institutions. Other institutions might find it more difficult, but there is an appeals process, which they can apply to use, in relation to provision of information. If it is unreasonably onerous, I suspect it will mean that the timescale will be varied.
Mike Wood
Q
John Smart: That is true. I have spent 35 years investigating fraud, and the challenge is that there is a need to be reasonably speedy in doing those investigations because, as we heard earlier, any recoveries are going to be much reduced if there is a significant delay in carrying out the investigation and applying for either criminal or civil proceedings to take place. Therefore, speed is important in any investigation. Otherwise, you are spending a lot of time and effort without getting the result you need.
Mike Wood
Q
John Smart: I think weeks is reasonable. A small number of weeks is a reasonable number to look for, rather than days or months. Months is far too long, and days is probably a little too short in relation to the ability of organisations to respond.
Andrew Western
Q
John Smart: At the risk of echoing what has been said before, I think it is critical that we modernise the approach to fraud, and the Bill is a good step towards that modernisation. The critical part of a lot of investigations now—and of identifying, preventing and detecting fraud—is the use of data. Getting that data and information quickly and effectively is critical. I think the Bill will go a long way towards speeding up and broadening the available information that can be used to prevent, detect and prosecute fraud. That is a really valuable thing that we should be pushing for, because relying on pieces of paper to seek information from organisations is crazy in this day and age, when you can do it electronically and get an answer relatively quickly. If you are turning up with a piece of paper, it can take weeks or months.
Rebecca Smith
Q
John Smart: Having worried about this for a number of years, I think there are a lot of steps that the Government—the PSFA—can take over time, but we are on a ladder to get to a position that is constantly moving because the fraudsters are developing all the time. One critical thing that I have been concerned about for a number of years is the use and sharing of data across Government. Government have so much data available to them, and third parties have a lot of data available to them. There is clearly a privacy question that rapidly comes into play, but from my perspective, if the data is available to Government, they should use it. They should use it proportionately: they should not exploit those powers to use that data on some sort of phishing trip, but if there is evidence that fraud is being or has been committed, getting that evidence in the hands of investigators quickly is critical to preventing the fraud from continuing and to identifying and recovering any money that has been lost. To my mind, there is quite a lot of work still to be done on data sharing across Government.
Rebecca Smith
Q
John Smart: Absolutely. There are two points to make. The first is that that frauds that are already happening would be identified if the data was shared more effectively and quickly. Secondly, by joining up data that is sitting in Companies House, the licensing authority, or wherever, you can find evidence that a fraud is being carried out and prevent frauds from happening in the first place.
Rebecca Smith
Q
John Smart: An obvious example is the United States; there is an interesting case in point at the moment, which I have dealt with quite a lot. The US has whistleblower reward legislation in place, which is very effective at flushing out issues affecting payments made by Government. Their qui tam legislation, as it is called, flushes out frauds by incentivising whistleblowers to blow the whistle. It creates a lot of work for various organisations, but it encourages people to think about whether fraud is being committed against the Government in the US. That is an obvious piece of legislation that might be worth considering in this country.
Georgia Gould
Q
John Smart: That is a big question. I have been involved with the Cabinet Office for over 12 years, so the inception of the PSFA came about while I was working there. In the 18 months since it was formed, the PSFA has gone a long way to reach a better understanding of where the issues sit across Government. Clearly, it plays best outside the DWP and HMRC. My passion has been identifying where fraud is taking place, which I have worked on for the past 10 years, and trying to quantify the fraud occurring within Government. As you all know, that is very hard to quantify because it is hidden and therefore unknown. The PSFA has gone a long way and is continuing to flush out where resources should be committed to preventing, investigating and deterring fraud across Government outside HMRC and the DWP. That is critical. When I first started asking Departments where frauds were within the Departments, they replied, “There’s nothing to see here.” At least now, particularly because of the work the PSFA has been doing, there is recognition that there is a real issue to be addressed, and that it is not just expenses fraud, or whatever they used to think it was.
Georgia Gould
Q
John Smart: As we said earlier, the larger organisations will be geared up to provide the information within the timeframe required. Some of the smaller organisations might struggle to meet that 10-day requirement, but I still think it is a reasonable starting point. If you do not start with a reasonable starting point, for the larger organisations you end up deferring decision making and action being taken. I think 10 days is reasonable.
Georgia Gould
Q
John Smart: Exactly. That is the reason for the starting point.
The Chair
If there are no further questions, I thank John Smart for his evidence, and we will move on to the next panel.
Examination of Witnesses
Eric Leenders and Daniel Cichocki gave evidence.
The Chair
We will now hear oral evidence from Eric Leenders and Daniel Cichocki, both from UK Finance. We have until 3.10 pm.
Mike Wood
Q
Daniel Cichocki: A number of conversations with the industry have taken place since the measure was announced. We have been very clear since the announcement was made that we are supportive of the efforts to tackle fraud and error in the public sector. We recognise the scale of the challenge that the Government face, and as a private sector we see clearly the damage fraud does to both the public and the private sectors. We are very supportive of the objectives of the Bill. As you say, the key thing for us as a sector that is heavily regulated, both from a vulnerable customer treatment stance—my colleague Eric Leenders is best placed to talk about that—and a financial crime compliance perspective, is that more detail on the specifics of how the measure will work is still to emerge through the code of practice, but extensive conversations about that are under way.
From the banking industry perspective, we are keen to ensure that the compliance requirements for banks are clear in terms of what information is required. We hope to see in the code of practice, as soon as is practical, details of the specific criteria against which the Government will mandate banks to perform checks under the measure.
Mike Wood
Q
Daniel Cichocki: We are awaiting more detail. We have high-level indicators that the Government are likely to use the measure to require banks to perform checks against, which gives us some sense of the scale. Our initial assessment is that it is likely to be significant, but the key thing for us is to have more details of the criteria that the Government will require us to check against under the measure.
Mike Wood
Q
Daniel Cichocki: It is quite difficult at this stage to perform that level of assessment, partly because so much detail of the measure will be set out in the code of practice. We are obviously very keen to ensure that the expectations of the industry in complying with the new requirement are proportionate, but that is difficult to assess in detail before we have seen the detail of the code of practice. Much will depend on the mechanism through which banks will be required to share the information, the frequency of the information notices, whether the criteria we are required to run the checks against change over time and other factors that will influence how much capacity is required from the banking sector. As I say, at this stage it is challenging to do a detailed assessment.
Mike Wood
Q
Daniel Cichocki: Certainly. The banks share very significant amounts of information with Government Departments and law enforcement to ensure compliance with measures to tackle economic crime. We take that very seriously. We also continue to share extensive information with the Director of Public Prosecutions where there is suspicion of fraud. There is certainly an existing set-up to respond to information requests.
There is a difference with this particular measure, though, and we are keen for it be considered. This request is for information to tackle both fraud and error. A lot of the information sharing that we as an industry currently do with elements of law enforcement is very much focused on suspected fraud, economic crime and serious and organised crime. This is a slightly broader measure, so we are keen to see in the code of practice a very clear set of requirements for banks to comply with. The infrastructure is certainly there.
Mike Wood
Q
Daniel Cichocki: A variety of powers exist to date. Some have time measures built in for compliance with them and some are voluntary. I think you have to ensure that this particular power is balanced against all the information sharing that the industry is currently required to do with both Government and law enforcement. For example, it must be balanced against the voluntary sharing that the industry is doing, particularly with law enforcement. Certainly, those of us working in economic crime are primarily focused on how we can work with Government and law enforcement to tackle serious and organised crime. Striking the balance between the additional requirements under this power and that effort is an area of focus on which we have also been engaged with the Government.
Mike Wood
Q
Daniel Cichocki: Given that the eligibility verification measure is one of the more extensive powers in the Bill, we think that it may be appropriate to require the Minister to attest that its use is proportionate, as is required with the other measures in the Bill. That is just because of that particular power’s scale in requiring banks to share information on both potential fraud and potential error. As it includes the sharing of information of customers who may not be suspected of any crime whatsoever, we think that it would be helpful if the Government were to articulate that their use of the measure is proportionate, as is the case with the others.
It would also be helpful if the Bill were to replicate the very effective Proceeds of Crime Act 2002 exemption, which exists within the eligibility verification measure, in the other measures across parts 1 and 2 of the Bill. That is simply because we do not think that it is necessarily proportionate or helpful for banks to be considering, in complying with legislation, whether they should also be undertaking a suspicious activity report for the authorities. One of the constructive conversations that we have been having with Government is how we delineate our responsibilities to comply with this legislation and our responsibilities to comply with financial crime measures. We will be writing on this in more detail, but we suggest that the exemption under the eligibility verification measure, which is very helpful, should be replicated in other elements of the Bill.
Andrew Western
Q
Daniel Cichocki: We are making this suggestion because under the Bill banks responding to an information request or a direct deduction order, would have to consider whether there is some indication of financial crime that under POCA requires them to make a suspicious activity report. We think it is simpler to remove that requirement, not least because where there is a requirement to make a suspicious activity report there is a requirement to notify the authorities; clearly, there is already a notification to the authorities when complying with the measure. Removing that requirement would avoid the risk that banks must consider not only how to respond to the measure but whether they are required to treat that individual account as potentially fraudulent. We are trying to manage risk out of the system more broadly with financial crime compliance, so we think it is much more proportionate and effective to simply apply the same exemption across all the measures in the Bill.
Andrew Western
Q
You briefly mentioned direct deduction orders. I know you have some concerns about the debt recovery power, and this is an opportunity for you to set them out. Is there anything you want to elaborate on beyond what you have just said about that element of the powers we are proposing?
Eric Leenders: There are two or three key areas for us. First is the affordability assessment. I think you have heard previously that the use of the standard financial statement would be helpful in outlining essential monthly expenditure. I will come back to that point.
Secondly, I believe the caps differ between the PSFA and the DWP. We think that they should be aligned, with the PFSA’s 40/20 split also applied to the DWP. It is also quite important that there is some form of de minimis, so that individuals do not find themselves without any funds whatsoever. Our thinking is something aligned to the £1,000 threshold that there is in Scotland. HMRC has a threshold of about £5,000, or £2,000 for partners paying child maintenance. We think there should be a floor, but more essential is consideration of one month’s essential expenditure. That would allow the individual to readjust their expenditure in the period when they need to consider making the payments under the deduction order, or indeed the period in which the balances are withdrawn.
Andrew Western
Q
Eric Leenders: We would like to consider a specific de minimis. There are probably two approaches: an absolute amount or a relative amount, dependent on the individual’s essential expenditure—not their lifestyle expenditure. That is why we feel that the standard financial statement would be a useful tool.
Siân Berry
Q
Going back to Daniel’s earlier comment, can you clarify that you do not yet have a clue regarding the volume of requests? Have you been given some sort of estimate by the Government?
Daniel Cichocki: Let me take that first. The Government set out two broad criteria pertaining to the eligibility verification measure: the capital check and the check against abroad fraud, through assessment of transactions abroad. It is difficult at this stage, because the industry has not undertaken any detailed collective analysis of the criteria against the current book of customers. That work has not yet been done. We anticipate it being done through the development of the code of practice, but key for us is understanding exactly what criteria we will be required to run, and then banks can start to build an assessment of how that looks against their current book. That detailed work has not yet taken place.
Siân Berry
Q
Daniel Cichocki: I do not think we take a view on the scope of individual benefits for which this is applied. The key principle for us is that where there are changes to the eligibility criteria, we are required to check that there is proper public consultation around those changes and an appropriate implementation period for any of those changes, and that those changes are not too frequent. As an industry, we have to build a system to run these checks every time, and every change will have to be built and tested. For us, it is more about the principle of the frequency and appropriateness of the changes. The broader debate around what is in scope is not one we have taken a view on.
Siân Berry
Q
Eric Leenders: Certainly. I will just build on Dan’s point regarding change requirements, to give a picture of the timespan involved. Typically, a change would involve the build—IT systems change and training, which is policy and procedures. We would also need to think about communications, including potentially into terms and conditions for the legals that sit around that. We would want to build monitoring systems to ensure that we have conformance and some form of review process. We have a three-line defence model, where the business runs the business, the second line checks the business, and the third line checks the checkers, so to speak. We then repeat that cycle. Putting that in place takes some time, which rather illustrates Dan’s desire for fewer changes and additions, because all of that would need to be considered.
The point on vulnerability is very well made. There is a slight health warning in my comments, because the Financial Conduct Authority is due to publish findings from a thematic review imminently, as I understand—within the next couple of months. The broad drivers we adhere to that they identify are around financial resilience—we touched on that point a little earlier—and physical and mental strain. There are potentially some mental strains for individuals who feel they may be under suspicion, particularly where those prove not to be founded. Life events are critical now—key in affordability, typically the driver for financial difficulty, and also capability. There are various measures, but as an industry we typically would work to a reading age of nine to ensure that the UK population understands the communications that they receive. In building out the guidance, it would be very helpful for a period of consultation so that we can get into the detail and forensics around those points.
Siân Berry
Q
Eric Leenders: It would always be within the gift of a consumer to open a separate account. They can then ask for the benefit to be paid into that account. There might be a risk, from a wider perspective, that potentially attorneys and landlords might no longer want to receive benefits directly because of the potential admin burdens through this Bill. I flag that as a consideration. I do not think it is necessarily a show-stopper but certainly it is something that I think from a vulnerability perspective we need to be alive to, because that might be an additional responsibility on a vulnerable person, for example, to pay the rent.
Georgia Gould
Q
Daniel Cichocki: The key thing for us now, as I said in relation to the DWP measures, is to start to look at the detail of the draft regulations and the code of practice that sit behind the powers, which we look forward to engaging on. Our broader observations are more on the DWP side. Across both elements of the Bill we welcome very strongly the independent review processes that have been built into the powers. We think the scope of those reviews could just consider some of the other factors that we know have been raised as questions around these powers. For instance, could there be more direct scope for that independent reviewer to consider the impact of some of the unintended consequences on vulnerable customers and the cost of compliance? Those are just some broader points on the independent review, but I think the principle of having one across both elements of the Bill is important.
Rebecca Smith
Q
Daniel Cichocki: In terms of broad principles, obviously wherever there is additional legislation and regulation on the sector, we would hope that that is proportionate. We anticipate doing further work with the Government to help to support the impact assessment as a result of the more detailed work when we see the draft code of practice, when we are better able to understand the methods through which this information will be shared, the practicalities of how it works, and the scale at which the powers will be used. We therefore anticipate more work being done around the impact assessment.
We would hope and anticipate that the Government would recognise that the impact on the private sector needs to be proportionate. As well as the cost implications around resource, this is also around prioritisation. To my earlier point, many of the teams that will be complying with this legislation will currently be complying with the broader legislation and regulation that we have in place, sharing information with the Government and law enforcement, and ensuring proportionality of how that resource is deployed. Certainly from an industry perspective, as a broad principle, we would see it as appropriate and desirable for much of that resource to be focused on serious and organised crime in the round.
Eric Leenders: I have a couple of brief points. First, one consideration is congestion. There is quite a crowded mandatory change stack, as we call it. There is a sequence of changes in train that firms are already implementing. Secondly, to your specific point about the cost-benefit analysis, we recognise the challenge that the cost will be direct, as in the build costs that we have just summarised. The benefits—reducing and deterring criminality generally, and perhaps even preventing it—are perhaps more indirect. I suppose that leads to another point: the extent to which we need to be thoughtful about circumvention and how to ensure that the legislation is suitably agile, so that bad actors cannot game the system no sooner than it has been introduced.
The Chair
There being no further questions, I thank our witnesses for their evidence. We will move on to the next panel.
Examination of Witness
Ellen Lefley gave evidence.
The Chair
We will now hear from Ellen Lefley, senior lawyer at Justice. We have until half-past 3 o’clock.
Rebecca Smith
Q
Ellen Lefley: It is right that the bank power, which is the eligibility verification measure, is separated out in terms of proportionality because, just to clarify, it is important that the other powers of information, search, entry and seizure, which are extended by the Bill to the PSFA and to DWP, all contain that threshold form of words of needing “reasonable grounds” of suspicion or belief. That threshold for the exercise of state power requires reasonableness and objectivity—for there to be something there. That rule-of-law barrier prevents fishing expeditions and state intervention in people’s lives when there is simply nothing to it.
Any such form of words, however, is missing from the eligibility verification measure, which is why the privacy concerns and the concerns about the proportionality of the measure have been so concentrated. Justice is concerned about the proportionality of the measure precisely because it does not have that threshold of reasonable suspicion and because of the vast numbers that could be subject to it, albeit that the state pension has been taken out of scope—it was in scope before, under the almost-equivalent measure in the Data Protection and Digital Information Bill last year.
The concern is with the broadness of that power, the lack of a threshold and the fact that the fundamental right to privacy is involved. We all have a right to privacy, and we all have a right to enjoy our privacy in a non-discriminatory way, and that is the further issue that I would raise. I am sure that others will raise this today, too: the almost inevitable disproportionate impact that those financial surveillance powers will have on people who are disabled. There has been no equality impact assessment for this Bill, but there was for the previous one—not that it was released, I think, but it was the subject of a freedom of information request and I had sight of it. It revealed that, even though about 23% of the population at large are disabled, that figure is about 50% for the benefits-receiving population. There is that prima facie disparity. The financial privacy that is enjoyed by citizens of this country and people who reside here is less protected for disabled people than for others. That very much needs to be proportionate and justifiable, given the fundamental rights that are engaged.
Rebecca Smith
Q
Ellen Lefley: Reassurance cannot be the word, unfortunately, given the moment we are in, which is one of increasing automation and increasing investment in data analytics and machine learning across government. Last month, I think, we had a Government statement about mainlining AI into the veins of the nation—that includes the public sector. Knowing that that is coming and having a clear focus on how the functions in the Bill will be operationalised need to be a key concern.
The preservation of human intervention in decision making might have been a statement that has been made, but it is not on the face of the Bill. Indeed, we need to remember that the Data (Use and Access) Bill, which is also before Parliament, is removing the prohibition on fully automated decision making and profiling. That is happening concurrently with these powers. In addition, over the years, there have been numerous Horizon-like scandals that have happened in the benefits area. One, quite close to home in the Netherlands, was a childcare benefit scandal, which Committee members will know of. In that scandal, recipients of childcare benefit allowance in the Netherlands were subject to machine-learning algorithms that learnt to flag a fraud risk simply because of their dual nationality. So there is a problem here. Even with the powers that are subject to reasonable grounds, we need to have a wider discussion as to what reasonable means and what it definitely does not mean when we talk about reasonable grounds of suspicion, when suspicion is an exercise that is informed in a tech-assisted and technosocial decision-making environment.
Justice has some suggestions as to how reasonable grounds can be better glossed in the Bill in relation to generalisations and stereotypes that a certain type of person, simply because of their characteristics, is more likely to commit fraud than others. Perhaps it could be recorded in the Bill that that definitely is not reasonable.
Some useful wording from the Police and Criminal Evidence Act code of practice A is not in the Bill because it relates to the power to stop and search, which is not being given to DWP officers, probably rightly and proportionately, but some explicit paragraphs in the code of practice for stop and search for police officers say that they cannot stop and search someone based on their protected characteristics. Under the Equality Act 2010, they cannot exercise their discretion to stop and search someone due to generalisations and stereotypes about a certain type of person’s propensity to commit criminal activity. Amendments like those could strengthen the Bill against unreasonable, but perhaps not always detectable suspicions being imbued by machine-learning algorithms. Of course, if there will always be a human intervention in the decision-making process, perhaps that could be explicitly recorded in the Bill as well.
Andrew Western
Q
Ellen Lefley: They make up a larger number of the cohort, so we would analyse a prima facie indirect discrimination potential risk there, which would then need to be justified as being necessary and proportionate. The proportionality assessment of course is for Parliament, but we consider that a significant amount of scrutiny is required not only because of the privacy impacts, but because there is that clear indirect discrimination aspect. I am not alleging direct—
Andrew Western
Q
Ellen Lefley: Raising the risk of indirect discrimination when you have cohorts of the population that are disproportionately reflected in any subcommunity of the population that will be exposed to any power is a relevant consideration, so yes in that respect. When it comes to the eligibility-verification measures, the proportionality analysis is, in our view, strained because there is not that threshold of reasonable suspicion. The mere fact that benefits recipients are in receipt of public funds makes them subject to this power. Of course, that could go further; all the public servants and MPs in this room are in receipt of public funds. If that is the threshold that we as a society are happy with, some real scrutiny of its proportionality is required, because it is a power that can require private financial information.
Andrew Western
Q
Ellen Lefley: When I speak about proportionality, the degree of loss is relevant, but there is no question but that the economic wellbeing of the country is a legitimate aim. On whether measures are proportionate to achieving that aim, we must consider not only whether there is any reasonable suspicion, but the degree of external oversight. The Bill includes that consideration, and there are various ways in which some of the powers are subject to independent review.
We have some suggestions as to how those independent review mechanisms can be a stronger safeguard and therefore make the measures more proportionate. For example, the independent review mechanisms seem to have the ability to access information but no power to demand it. That raises a query as to transparency and the full ability of the independent reviewer in different circumstances to meet their objectives. Also, when an independent reviewer lays their report before Parliament with recommendations and those recommendations are not going to be adopted, it might be helpful for there to be an obligation on the Department to provide reasons why not. That would be a more transparent way of ensuring that the oversight measure is as effective as intended.
Sally Jameson (Doncaster Central) (Lab/Co-op)
Q
Ellen Lefley: On the £35 billion figure, I think the benefits fraud and error figure was around £10 billion, and I think £7 billion can be shown to be fraud. I am sorry if I have got that wrong.
Andrew Western
Q
Ellen Lefley: I am grateful. It is a difficult one. For example, we could have almost zero crime in this country if everyone’s house had 24/7 surveillance installed. There will always be a way of decreasing privacy to increase state surveillance and therefore reduce unwanted behaviour, but the balance needs to be struck. Justice’s view is that when the state is getting new powers to investigate people’s private affairs, the balance is struck by having that reasonable suspicion threshold, which requires reasonable grounds for believing that a crime has been committed. That ensures that the powers given to the state in any primary legislation are not open to abuse or arbitrariness. Of course, the laws in the statute book must be written narrowly so that they protect rights on the face of it, rather than being written broadly and relying on the self-restraint of future Administrations to exercise them proportionately.
Charlie Dewhirst (Bridlington and The Wolds) (Con)
Q
Ellen Lefley: We continue to have concerns, acknowledging that there are two key oversight mechanisms in the Bill that were not in the previous one: this independent reviewer role and the code of practice. It would be far easier for Justice, but more importantly for Parliament, to be assured of the proportionality of any human rights infringement if that code of practice were before us.
Paragraph 79 of the human rights memorandum to the Bill notes that the code of practice will significantly impact whether the EVN measures are proportionate and prevent arbitrary interference with people’s privacy. It would therefore be very helpful to see that detail in order for Parliament to be confident about the content of that code of practice and how these powers will actually be used.
Mike Wood
Q
Ellen Lefley: I will try to give a very brief summary of the wider legislative framework that operates with respect to artificial intelligence in general. There are, of course, human rights obligations on any public authority or any authority exercising public functions, as well as equality obligations against direct and indirect discrimination. There is the data protection framework, which of course relates to personal data. Then there are different obligations on artificial intelligence use within different sectoral areas.
Mike Wood
Q
Ellen Lefley: That is where it gets quite tricky, because of course the first barrier would be even knowing that you have been subject to any kind of algorithmic decision making or algorithmic-assisted decision making. If you have been subject to a completely automated decision, the new data Bill that is coming through will enable you to make representations and to request human intervention after the fact. But if algorithms are assisting a human decision-making process, there is no right to be notified, let alone to complain.
The position of someone who has been subject to one of these decision-making processes also needs to be considered in a very realistic way. The motivation, empowerment, means and brain space to complain in such circumstances cannot always be relied on. Justice is clear that while access to redress is always important, preventing unfair and discriminatory decision making always needs to be the priority.
The Chair
There being no further questions, I thank the witness for her evidence. We will now move on to the next panel.
Examination of Witness
Mark Cheeseman OBE gave evidence.
The Chair
We will now hear evidence from Mark Cheeseman OBE, chief executive of the Public Sector Fraud Authority. We have until 3.50 pm.
Mike Wood
Q
Mark Cheeseman: The practical benefit to consider is that the place from where these powers are operated will have some degree of independence and separation from Ministers. That is a practice you would see in other circumstances as well, so it may give Parliament some assurance. That is balanced up against the cost.
Mike Wood
Q
Mark Cheeseman: In the Bill, the Minister passes the powers to authorised officers. The authorised officers could be in that statutory body, and the authorised officers would be the ones who use the powers to do that. Those authorised officers would be people who have experience working in fraud and are part of the Government counter-fraud profession.
Mike Wood
Q
Mark Cheeseman: The Bill currently lays it to the authorised officers. One of the transformations that has been going on in Government is the professionalisation of counter-fraud work. We now have a counter-fraud profession. There are now professional standards where, a while back, there were not, for a lot of investigations in the public sector. There are professional standards and practices, and a code of ethics for people who work in the sector. That sets a standard for the knowledge, skills and experience that the authorised officers exercising the powers would have. As to what level they are, that aligns with current practice and what you would see across the public sector.
Mike Wood
Q
Mark Cheeseman: The Public Sector Fraud Authority has been created by bringing together people from other spaces. These powers are designed by His Majesty’s Revenue and Customs. We heard from Richard Las earlier about the powers that HMRC uses to take action on suspected fraud where it has reasonable cause to do so. It is some of those experts who have come and developed these powers. I feel that that capability will come into the organisation, through which the organisation will be able to use the powers.
Mike Wood
Q
Mark Cheeseman: Absolutely. The code of practice will be developed alongside the legislation, as is standard practice.
Mike Wood
We saw this in other legislation under the previous Government. It is not uncommon for Ministers to give an undertaking that at least a draft code might be published before legislation returns to Parliament for final decisions to be made. I know this is, perhaps, a question to ask of Ministers in a future session, but what are your thoughts on developing a draft code that parliamentarians might be able to look at whilst making those decisions, given that the legislation is now well under way? Is that something that you feel is a long way away, or would it be possible to have at least an outline of a draft code in a reasonably short period of time? I accept that there will be developments as we learn with experience.
Mark Cheeseman: I will leave Ministers to answer that question later, but we are developing the codes of practice now. The reason I talked about who has come into the Public Sector Fraud Authority to think about this is because it is not from scratch; we are basing it off current practice elsewhere. We are now developing those and they are under way, but I will leave it for Ministers to respond on the timescale.
Mike Wood
Q
Mark Cheeseman: It is important to remember that the 10 days in the legislation is a minimum. It is the lowest that would be used. It is not saying that it will always be 10 days. One of the witnesses earlier highlighted that some of the organisations will have standard practices where they could respond in that time—they will be set up to do so. The time that is given will be dependent on the organisation you are interacting with, the individual you are interacting with and what is reasonable. Our fraud investigators are trying to balance the expediency of doing the investigation with making sure that people can respond, and that it is a fair and reasonable time to respond. The balance is there, and we should remember that that timescale is a minimum.
Mike Wood
Q
Mark Cheeseman: It is slightly different—it goes back within the structure, but the review of that decision is done by a separate authorised officer from the original authorised officer who did it.
Mike Wood
Q
Mark Cheeseman: The process as set out in the legislation is within the organisation, but there is an extra safeguard of an independent chair who will review the decisions taken by authorised officers. One would expect that that would be on a sampling basis, but we will be reviewing those decisions. If there are practices where those timescales look unreasonable, the independent chair could pick up on that and ask for action to be taken on it.
Mike Wood
Q
Mark Cheeseman: There will be case-by-case review, but you are right; it will be more, “Here is an issue that should be dealt with, and here’s how”.
Andrew Western
Q
Mark Cheeseman: My view is that the Bill does strike that balance, and it tries to strike the balance. It is difficult, because you need to balance the ability to take action against someone who has committed fraud against the state with having fair and reasonable processes for looking at someone who has not. The purpose of an investigation is not to find fraud; it is to find fact. That is why we have professionals who are trained and have a code of ethics around objectivity; their role is to find fact, not fraud. The Bill tries to strike that balance both by having authorised officers and by having the oversight that is in place. The Government structure, in having the counter-fraud profession, provides some of that as well. My view of the Bill is that there is a fair amount of independent oversight—that is a good thing—to increase how well things are done.
Michael Payne (Gedling) (Lab)
Q
Mark Cheeseman: Of course. When we estimate fraud, we estimate fraud and error, as the NAO has done. The NAO used the methodology that we have used previously. We have not repeated that yet, because it has gone ahead of us in the cycle. I have no reason to indicate that its estimate is incorrect, but that is its estimate, and Joshua was here earlier.
We estimate fraud and error as a whole, rather than fraud separately, but what we have seen in the fraud data is that detected fraud in the public sector has risen over the past few years. We have published that. Some was due to covid, but some is in other spaces. Earlier witnesses indicated that the threat has risen and that there are some changes in the perception of fraud and of how people may approach it.
My perspective is that the level of fraud and error in the system is high. There is waste there, and Parliament itself has challenged the Government on what more they can do to deal with it. The threat is rising, and therefore in my position, I think that the powers will help to take action on that. There is more to do to drive down waste and to reduce fraud in the system.
Michael Payne
Q
Mark Cheeseman: I will come back to what I said about the counter-fraud profession. We are one of the only countries in the world with professional standards published. Those are used by the police, the Serious Fraud Office and HMRC. They use these types of powers successfully on a regular basis. We would have exactly the same standard of investigator—both by bringing them in and by training them up to those standards—who would use these powers if and when they are in place.
Georgia Gould
Q
Mark Cheeseman: Yes. Apologies—that was a slip when I answered earlier. Yes, the powers of the Minister—it is written as “the Minister” in the Bill—are delegated to authorised officers, who sit in the PSFA. They would be qualified to the standards of the profession, and they would be taking the decision. What I was referring to earlier is that any review decision, if someone asked for a review, would be taken by a separate authorised officer. There are a number of provisions in the Bill to enable people within the process to make an information-gathering request or to ask for something else to be reviewed.
Georgia Gould
Q
Mark Cheeseman: Absolutely. That decision is made by the authorised officers, based on their experience of weighing up both proportionality and how they can engage with the organisation or individual they are asking for that information, and that individual or organisation can request a review of that request.
Georgia Gould
Q
Mark Cheeseman: Absolutely. First, the PSFA has been brought together from experts across the system. We have brought in experts not just from within the public sector, but from other sectors, and we also work with other countries to understand what they do on this. We have been consulting very widely with the public sector, and a number of the people who have come to look at this have looked at it from the point of view of what they could not achieve in their own public bodies and therefore how they could take more action and what that power would look like. We have also brought together other investigators and asked them what they think the optimal powers are and what the proportionality aspect and the safeguards should be, and considered that. We have done quite broad consultation within the public sector, but we have also asked local authorities what their views are on other aspects such as that.
Georgia Gould
Q
Mark Cheeseman: The Public Sector Fraud Authority has two elements to it. One is overseeing Government and how individual Departments are doing in dealing with fraud and what they are doing on it; the Bill itself says that Departments would refer cases to the PSFA and ask for them to be dealt with under it. The second is providing some of the services that support Departments around taking action on fraud where it happens.
The biggest difference we will make, alongside that, is through prevention. We heard from witnesses earlier about the use of data and analytics. We have a data and analytics service that works with public bodies to use that to find and prevent fraud up-front. We also have a risk service that works with other parts of the public sector to understand the risks they face, in order again to prevent those risks by putting in controls.
While there will always be that balance, there will also always be some element of fraud that is still committed. We will not be able to design a system where there is no fraud risk or design out fraud. There will always be cause for an efficient, effective and proportionate part of the machine to take action on those instances of fraud and to investigate them thoroughly and properly.
Rebecca Smith
Q
Mark Cheeseman: Again, I do not know whether it would need to be in the Bill; that would be for you to debate. As it gets past the authorised officer, there is a structure: there are senior leaders with deep experience in investigating fraud who are overseeing them. We have structures of senior investigation officers overseeing your investigators and the individual authorised officers. While it may feel like a big jump, there is a structure to ensure quality, to ensure the right practices, and so on. That directly compares with what happens elsewhere.
I am pretty comfortable that “authorised officers” is a term used elsewhere. I recognise what you say about the seniority of grade; I had to have a wry smile, because it took me a while to get to HEO and SEO—higher executive officer and senior executive officer—but those are still senior, experienced roles. They are experienced administrators with a high level of skillset and expertise doing those roles. Part of the reason for creating the counter-fraud profession is to show the expertise and capability that those experienced counter-fraud experts have in taking action on fraud.
The Chair
There being no further questions, I thank the witness for his evidence and we will move on to the next panel.
Examination of Witness
Jasleen Chaggar gave evidence.
The Chair
We will now hear evidence from Jasleen Chaggar, the legal and policy officer at Big Brother Watch. We have until 4.10 pm.
Rebecca Smith
Q
Jasleen Chaggar: We recognise that the Bill is different from the previous Conservative Government’s Bill and some changes have been made. However, we are still concerned that the purported safeguards in the Bill are really insufficient. One of the major safeguards that is pointed to as a reassurance is the fact that financial transaction information and special category data will not be handed over to the DWP from the banks. However, it is a circular safeguard in reality, because once the account number and name of the individual has been passed on to the DWP, it can very easily go back to the bank and request that granular financial information. That is incredibly privacy invasive, as you will know, so we are still concerned about the safeguards in the Bill.
A similar safeguard is the provision for an independent person, but there are no safeguards about what qualifications that person should have. They are expected to provide an annual report to Parliament, but we are concerned that their oversight role is more to do with enforcement than accountability. There are provisions about the efficiency of the measures but no provisions about how they impact equality or the adverse consequences on benefits recipients, so we are not reassured by these safeguards.
Rebecca Smith
Q
Jasleen Chaggar: Is that in relation to—
Rebecca Smith
Particularly in relation to bank account details and information on spending, and that sort of thing, which you just used as an example.
Jasleen Chaggar: On the eligibility verification measures—what we are calling the bank spying powers—we are recommending that they be removed in their entirety. They really are unprecedented financial surveillance powers. There are no other laws like this in this country. The powers would permit generalised mass surveillance of everybody’s bank accounts. It is not just benefits claimants who will be targeted; it is everyone’s accounts, including yours and mine. They will be scanned using algorithmic software to make sure that the eligibility indicators are not met. Even if you are a benefits recipient, you can appoint an individual—a parent, a guardian, an appointed person or your landlord—to receive the benefit on your behalf, so those people will also be pulled into the net of surveillance. We do not really see a way in which these measures could ever be proportionate.
Andrew Western
Q
Jasleen Chaggar: What is really important about the Bill is the conflation of fraud and error. It is not just people suspected of serious crime, or even low-level crime, who are pulled into the net of surveillance. It is also people who, while navigating the complexities of the benefits system, may have found themselves on the wrong side of making a benefits claim and made a mistake. It also involves DWP’s own errors, which make up one in 10 errors. What is critical when we are thinking about the Bill is that it is suspicionless surveillance that applies to everyone.
Andrew Western
Q
Jasleen Chaggar: There is another difference between HMRC recovering money and the DWP recovering money. When you think about the types of individuals these powers will be recovering money from, they are among some of the most vulnerable in our society. There are people living on the breadline, disabled people, elderly people and carers, who will all be dragged into this surveillance. The risk of errors caused by the automated system that is proposed will, therefore, have a dispro- portionate effect on those groups of people. There is a difference, if that is the case, between the powers being used by HMRC and the DWP.
Andrew Western
Q
Jasleen Chaggar: I am not aware of powers that are similar to eligibility verification notices that are exercised by the DWP. I am aware that they have similar powers in relation to direct deduction orders, and maybe that is the distinction that the witnesses earlier were making.
Andrew Western
Q
You talk about the inclusion of error, as well as fraud, in what we are attempting to do here. Do you accept that there is the potential, through the effective use of the eligibility verification measure, to detect overpayments through error sooner, thereby reducing any overpayment because it would come to light earlier?
Jasleen Chaggar: Yes, and to stop people getting into debt is an incredibly laudable aim. The question is whether we are willing to infringe the privacy rights of the entirety of the population to do that. Perhaps a more proportionate solution would be to make it easier for those benefits claimants who are making mistakes to navigate the system in the first place.
Coming back to your previous point, if you were happy to send me information about those powers, I would be happy to get back to you with our position on those.
Andrew Western
Q
Jasleen Chaggar: I accept that the Government are purporting that this is a sufficient safeguard, but I propose that it is not, because of that circularity.
Andrew Western
Q
Jasleen Chaggar: Absolutely. We believe as much as anyone that fraud and error need to be tackled in this country. Our position is that the best way to do that is through intelligence-led policing, where there is suspicion of fraud and not just of error, that is well resourced. In relation to error, as I have said, we think that making the benefits system easier to navigate in the first place, and the DWP getting its own house in order to avoid its own errors, are far better, more proportionate and privacy-preserving solutions than the ones proposed in the Bill.
Andrew Western
Q
Jasleen Chaggar: I think that it is important that suspicion has already arisen before those policing powers can be enacted. The police already have powers to request that granular financial information where there is suspicion of fraud.
Andrew Western
Q
Jasleen Chaggar: I think that there are ways to address this. We are a civil liberties organisation, and our job is to be a watchdog and to ensure that privacy rights are preserved. I do not have a solution for how the police should find out whether someone is suspicious, but we should not sacrifice the privacy rights of us all just to find out whether we should be suspicious of someone when no suspicion exists. As I said, it is a disproportionate power.
Siân Berry
Q
Jasleen Chaggar: Our view is that the powers will only ever be proportionate if they uphold the presumption of innocence, due process and judicial oversight, and any privacy infringements are set out in law and are necessary and proportionate. We feel that a code of conduct would be insufficient, because it would just defer those legal protections to some other time. Also, if an individual has a problem as a result of the use of the powers, they are unable to enforce their rights through a code of conduct. Setting out the protections in legislation would create a far more rights-preserving framework, with which we would definitely feel more comfortable.
Siân Berry
Q
Jasleen Chaggar: We are really concerned about the unintended consequences of the Bill. We appreciate that there has been an effort to tackle fraud and error, which is a serious problem, but we also have to consider the adverse and unintended consequences. One of those is the algorithmic error that can occur when automated systems are used on a population-wide scale. If the algorithms are scanning the bank accounts of 10 million people, an error rate of just 1% will result in 100,000 cases where innocent people are wrongfully investigated.
We are also really concerned about the human backstop element. The DWP has assured us that there will be human involvement in any investigations on the back of receiving this data, but when you receive such a deluge of information from the banks, that calls into question whether the human involvement will be meaningful. The impact assessment acknowledges that by saying that we might have to slow down the rate at which we receive all this data from banks. We are very concerned about the false positives, and about the devastating effects that they would have on the lives of the individuals who are wrongfully investigated.
Benefits recipients, who are already subjected to burdens in terms of documentation requirements, will find themselves subjected to an investigation by the DWP. We have heard from dozens of disability rights and elderly rights groups about the anxiety and stress that this will cause. Also, when benefits recipients are under investigation, they can find that their benefits are suspended, meaning that they will not have the money to pay for food, medical bills or heating bills. So the equality impact also has to be considered, and we have not actually seen an equalities impact assessment for the Bill either, which is a concern.
The Chair
There being no further questions, I thank the witness for her evidence. We will move on to the next panel.
Jasleen Chaggar: Thank you for having me.
Examination of Witnesses
Geoff Fimister and Rick Burgess gave evidence.
The Chair
We will now hear oral evidence from Geoff Fimister, of the Campaign for Disability Justice, and Rick Burgess, from the Greater Manchester Disabled People’s Panel, who joins us via video link. For this panel, we have until 4.40 pm. I have introduced the witnesses already, so we will go straight to Rebecca Smith.
Rebecca Smith
Q
Geoff Fimister: I should say, first of all, that the Campaign for Disability Justice was launched relatively recently—a few months ago—by Inclusion Barnet. We now have a substantial number of individuals—several hundred—supporting us, as well as a substantial number of organisations, ranging from large charities to grassroots disabled people’s organisations, so we get quite a lot of feedback.
I suppose our concern with the Bill include a broad aspect, but also a very specific aspect as to how it may impact disabled people. The broad aspect is that, because it focuses very much on means-tested benefits, it will, by definition, disproportionately affect people on low incomes, and disproportionately affect disabled people, because they are more likely to be on low incomes than others.
The practical issue, which I think has attracted the most concern, from the conversations I have had, is false positives, as the previous witness, Jasleen Chaggar, mentioned. We are all familiar with a world in which we have problems with malfunctioning technology. Every few months, my internet provider locks my inbox because of “suspicious activities”, which have included sending an email to an MP’s researcher or one to Mencap. Every now and then, my bank freezes my wife’s and my bank accounts because of “suspicious activity”, such as, on one occasion, purchasing a sandwich from a Marks and Spencer in Deptford.
That might sound entertaining, but it is a serious business; this tech goes wrong, and I think the previous witness made the point that, if large numbers of people are embraced by this kind of trawl, it will go wrong for a percentage of them. We do not know whether that will be a large or a small percentage, but even a small percentage of a big number is a lot of people. People being left without any income if technology triggers the cessation of their benefit is a serious business. Not having any income can cause hardship, debt and stress. In extreme cases, there can be serious health and safety issues. Disabled people are concerned about that kind of eventuality.
As to what we can do about it, I understand the thrust of the Bill and where it is coming from. In parliamentary terms, it has widespread backing, although a number of reservations have been expressed. We would like to see some sort of safeguard whereby benefits could not be stopped unless and until it was established that there was an overpayment—not that the DWP thinks that there might have been because the tech spotted something. We do not want to see a “shoot first and ask questions” later approach. If we could have some protection along those lines, that would be helpful.
Rick Burgess: I stress that I am from the Greater Manchester Coalition of Disabled People. The panel is something we do, but I am not speaking in that role today.
There are particular worries about how this affects people living with mental distress, particularly those with diagnoses of paranoia, schizophrenia, depression or anxiety. This adds to the feeling of being monitored, followed and surveilled, because you literally are being surveilled by your bank on behalf of the Government. So it will necessarily reduce the wellbeing of disabled people who are claiming benefits that are monitored by the system. There is no getting away from that.
On the potential risks, when you enter a trawling operation, you are not targeting it in any way; you are simply looking at everyone. So the error rate becomes extremely important. We do not know exactly what the technology is. We have not seen the equality impact assessment, but even if it had a failure rate of 0.1%, which would be a quite respectable systemic failure rate—it is pretty acceptable in a lot of these areas—that is still 1,000 people per million scanned. If you are talking about even the means-tested benefits, that is going to run to thousands of people getting false positives. If you think about the entire DWP caseload, which is 22.6 million people, that is over 22,000 people. Bearing in mind that the Post Office scandal involved fewer than 1,000 people, you are at the inception stage of something that could be the greatest miscarriage of justice in British history, if you go ahead with this with untested technology that has not had proper impact assessments.
I stress, though, that we are against this measure in its totality because it treats disabled people as a separate population who should have lower privacy rights than the general population. In that respect, given that the United Nations has condemned the UK twice in a row for grave and systemic human rights abuses, this is going further in the wrong direction and failing to address the failures identified by the UN. It is further marking disabled people for additional state oppression and surveillance, which, as I said, will necessarily be harmful to a great many of the people under the surveillance regime.
Andrew Western
Q
Rick Burgess: Because we are over-represented in those classes. If you choose to target it at those cohorts, you are accepting an additional level of targeting towards disabled people, which is discriminatory.
Andrew Western
Q
Rick Burgess: I think it does edge into that. There is certainly established thinking and case law that begins to establish that. The Equality and Human Rights Commission need to be brought into this urgently. There need to be public and transparent equality impact assessments, because I do not see how this does not breach a right to privacy and represent discrimination against groups who are over-represented in these cohorts.
Andrew Western
Q
Rick Burgess: It is about where that measure is one of a number of additional enforcement measures, rules or laws that would have negative consequences. The key to this is the trawling nature of the technology; it is not targeted, beyond being aimed at everyone on UC, everyone on ESA and so on. When you trawl, you do not target, and then you have a huge cohort. If, in that cohort, you have over-representation, without even thinking about it, you have then enacted a level of discrimination, because of the trawling nature of this approach.
If this approach applied to everybody on benefits, that would also be slightly questionable, because you are applying a different level of privacy to people who get an award from the DWP versus people who do not. If it applied to the whole country, I suppose that would be fairer in one respect, but it would also be a breach of everyone’s privacy, which goes to another question.
In terms of this measure being important for Government revenue, the amount lost to the tax gap is more than four times more—we are talking about £9.1 billion, but the tax gap is over £39 billion. You would recover more money if you subjected the whole country to this measure, but I would suggest that the reason you do not subject the whole country to it is that there would be outrage, because people would find their rights to privacy being completely abused.
Applying this measure in these targeted ways suggests a level of, “Well, these are people who perhaps have less rights to privacy than the general population.” If you are happy to have your bank account monitored in this way, fine, but you have not suggested that this should apply to the general population. You have suggested that it should apply to a population who receive benefits, and within that population there is an over-representation of disabled people, who are already exhaustively monitored, reviewed and tested and having to provide proof, whether that is for a blue badge, personal independence payment, ESA, universal credit or a concessionary pass on public transport.
The life of a disabled person is to be constantly tested and examined and having to produce proof, and this is another step in that. That is why this is germane to the United Nations report on the convention on the rights of persons with disabilities. We have continued down the road of removing rights, not respecting them, and of subjecting disabled people to greater scrutiny, greater surveillance and greater tests of their basic rights to be a citizen of this country. It is really quite distressing for disabled people to be in this position.
Not only have we had two really damning reports from the United Nations, but the new Government is actually adopting old policies of the previous Government and continuing on that road. The level of anger and distress in the disabled community is absolutely enormous. It is really difficult to explain to people that this is not an obvious attack, or one motivated by ableist assumptions about how disabled people run their lives or whether they are more or less honest, or more or less genuine, than people who are not disabled. It is really hard going for us—I have to tell you that. Disabled people in Britain have had a decade and a half of being the scapegoat of this country, and it has to stop. This measure is actually making it worse, as opposed to stopping that scapegoating.
Geoff Fimister: I just want to add something to a point that Rick made. We both made the point that the discriminatory aspect relating to disabled people arises, in the immediate sense, from the fact that these means-tested benefits are primarily in scope at the moment, and disabled people are disproportionately likely to be on low incomes. It is worth adding that if this measure were to be extended at a future stage to a wider range of benefits, potentially bringing disability benefits into scope, that would be even more sharp discrimination against disabled people.
They are not theoretical points that Rick has been making—there is a really raw feeling among disabled people that they are being targeted. In the context of quite a lot of negative media publicity around the interface between employment and unemployment among disabled people, there is an unpleasant atmosphere for disabled people. That is certainly the feedback that we are getting.
Andrew Western
I will not ask any more questions, but I just say to Rick that I think it might be helpful for a follow-up conversation to take place. Without wishing to get into a protracted argument, there were some things that I did not recognise as part of the Bill, but clearly that is how people are feeling and how the people you represent are feeling. I am very happy to ask officials to pick up a conversation to go through the detail.
The Chair
There being no further questions, I thank the panel for their evidence, which was robustly delivered.
Examination of Witnesses
Andrew Western and Georgia Gould gave evidence.
The Chair
For the final session, we have the Ministers in charge of the Bill. We have until 5 pm. You have been participating actively in the proceedings already, but could both of you please introduce yourselves for the record?
Andrew Western: I am Andrew Western, Minister for Transformation at the DWP.
Georgia Gould: I am Georgia Gould, the Minister for public sector reform at the Cabinet Office, with responsibility for fraud against the public sector.
Mike Wood
Q
Andrew Western: For the DWP part of the Bill, there will be three individual codes of practice: one for the eligibility verification measure, one for the debt recovery measure and one for the information gathering measure. As for exactly how they will work, you will appreciate that we are able to talk only in general terms at the moment, because that will depend on what the final version of the Bill looks like. That is why we do not currently have a code of practice that we can share.
Perhaps it will be helpful if I say a bit about how we intend to engage both Houses on the content of the codes of practice. For the Bill Committee, I will provide an outline of what will be covered by the draft codes of practice as we come to each of the relevant clauses, allowing the Committee to provide feedback on what they feel should be in there.
Beyond that, we intend—there are ongoing engagements, as you heard earlier from, for instance, UK Finance—to publish a draft version of the codes of practice as they pertain to the DWP in time for the House of Lords Committee stage, so it will also have the opportunity to play into the conversation on that. Ultimately, there will be a final statutory public consultation on the content of the codes of practice. It is difficult to say with any sort of exactness or precision what the codes of practice will look like at this stage, without knowing what amendments, if any, will be made to the Bill. But I know that Georgia has a code of practice on her side as well.
Georgia Gould: I do, and the same applies. As we go through the clauses, I will share with the Committee where we are on the codes of practice in relation to those clauses. We are working on the same timeline set out by the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Stretford and Urmston. For the PSFA, within the Bill, it requires a code of practice that is particularly focused on penalties, in clause 60. Beyond that mandatory content, the intention is that the code of practice will also include information on safeguards and vulnerability assessments when it applies to the PSFA powers for investigating individuals, and more detailed information on the various reviews and appeals.
Mike Wood
Q
Andrew Western: That is the route we are taking. Obviously, Members have an opportunity to suggest what they would like to see in the code. The code is primarily an operational document rather than one on the general principles in the Bill and what we are trying to achieve through it. I absolutely understand that Members will want to see that, but we are simply not able to bring forward a final code of practice. It would not be possible to do that without knowing what is in the Bill. We can commit to sharing a draft as soon as we are able, but even that would be subject to change. It is not unusual, as I understand it, for this to be the case.
Mike Wood
Q
Andrew Western: All I would say is that that is the timeline we are proposing to follow. We will share the draft code of practice as soon as we are able to do so for all the measures that have them.
Mike Wood
Q
Andrew Western: I am happy to confirm precisely—because it may be that Members, as we go through the Committee stage, make it very clear what their expectations would be—what the current proposal is before we go into line-by-line scrutiny on Thursday.
Mike Wood
Yes.
Andrew Western: Because they are iterative documents that will change as we go through the test-and-learn phase. In particular, we are looking to introduce the eligibility verification measure in quite a cautious manner initially to check that it works, and to check that we do not have the sort of overreach that some witnesses have suggested may be the case. We want to be certain that the false positives that we have talked about and that witnesses have raised are minimised as best as possible. It is to enable flexibility so that we have the maximum potential to make any changes that we require, but obviously we would update the House as and when we were to do that.
Mike Wood
Q
Andrew Western: I would be very happy to have that conversation, should you want to table any amendments in that regard.
Mike Wood
Q
Andrew Western: I would not accept that and I do not think that that is the case. I would say that we require that flexibility. Even with the six weeks, if there are problems in the process, we would potentially need to act more swiftly than that, based on feedback from stakeholders. As I said, colleagues are very welcome to table amendments if they want to secure any changes in that regard.
Neil Coyle
Q
The Chair
That is a matter for debate. I think it is probably a question for the Library. Let us carry on with the questioning.
Mike Wood
Q
“Where it is proposed to introduce a code of practice in a way or for a purpose which departs from the guidance below, Ministers should be aware that this is likely to be controversial, particularly in the House of Lords.”
Have officials brought that to your attention?
Andrew Western: As I said earlier, we hope to have a draft code of practice by the time we reach the House of Lords Committee Stage. Clearly, alongside consideration of that guidance, as I said—and it was reiterated by Mr Coyle—this has not been unusual practice in recent years, as I understand it.
Mike Wood
Q
“the drafting of the code ought to begin early enough to enable a decision as to whether statutory provision is required”.
Has that drafting been done early enough?
Andrew Western: As I said, we will debate this in more detail as we come to the relevant stages. I think that we have done this in sufficient time to enable us to consult, as we are required to do, on the statutory code of practice and to ensure that both Houses can see it as it makes its way through the process.
Mike Wood
Q
“if Parliament is to be asked to enact statutory provisions relating to a code,”
which appears to be the case in this instance,
“a draft of the proposed code should if at all possible be made available so that the appropriateness of the statutory provisions can be properly considered.”
Obviously, that is part of the legislative process. Should we not have that information? Why should only the House of Lords be provided with that?
Andrew Western: I suspect that at that point you are asking a procedural question, so I am not best placed to answer it.
Michelle Welsh (Sherwood Forest) (Lab)
Q
Andrew Western: In the DWP space, we estimate that the amount would be £1.5 billion over the forecast period. That roughly equates to around £950 million on the eligibility verification measure, with the overwhelming majority of the rest—in fact, almost all of it—coming from the debt recovery power. There are also potentially significant savings over time that my hon. Friend the Parliamentary Secretary, Cabinet Office may want to outline with regard to the PSFA powers. I realise that they are scalable; they start off small-scale. Minister Gould, would you like to come in on the potential?
Georgia Gould: They are more modest in the first instance. We are estimating just under £60 million-worth of savings. We are testing the new models. If the model is successful, there is potential to scale that up. We think that this is the first time we are introducing powers to take on fraud in the wider public sector outside tax and welfare. A huge amount of fraud has gone uninvestigated. We think the deterrent impact of this will be substantial.
Gill German (Clwyd North) (Lab)
Q
Andrew Western: As I have highlighted in my questions to witnesses throughout the day, there is the potential, through the eligibility verification measure, for a number of overpayments to be detected earlier than they would have been otherwise, thereby avoiding the large numbers that we have seen people rack up in overpayments through, for instance, the carer’s allowance challenges that we have seen in recent years.
The breadth of the conversation we are looking to have with people who are in debt with the Department is significant. We heard about the MoneyHelper service, on which the Money and Pensions Service works with us. That is just one of a range of organisations and packages that we utilise to support people who are in debt. We know that, whatever the reason—whether it is fraud or error, but particularly, as you say, if it is error—it is an incredibly stressful time for people.
In debt recovery terms, the power that we are taking is intended to be a power of last resort. What we always want to do, having been through all the things that you would expect us to do—the vulnerability management framework that was referenced earlier and the assessment that we make of people’s ability to pay—is to agree an affordable repayment plan. By the time we reach the point where we are looking for a direct deduction order, we would have looked to engage somebody on multiple occasions, contacting them several times and trying to agree that plan. This is for people we have no other means of engaging. It is as much a lever to try to bring them to the table and have the sorts of conversations you referenced as anything else.
This is also about addressing the existing fundamental unfairness. We can directly deduct from somebody in receipt of benefits, by deducting from that benefit entitlement, and we can do the same for someone in pay-as-you-earn employment, but we do not have that opportunity for people in receipt of income through other means—most obviously, but not exclusively, self-employed people. There is a fundamental point about addressing that inequity in the system. Having made those financial assessments, we know that these are people who can afford to pay. We have tried to reach out with the wraparound support that you suggested, and ultimately, they continue to refuse to engage.
Michael Payne
Q
Andrew Western: As it relates to the DWP—I do not know whether you want to say anything about the PFSA powers later, Georgia—it is worth reflecting that the proposed eligibility verification power is in effect a data-push power. The banks will not make any decisions as to someone’s culpability, on what penalty they might receive, or on whether the overpayment flagged on the account is legitimate; all the banks will do is send back a marker against an account to suggest that someone is in breach of their eligibility requirements.
For example, that might include someone who has more than £16,000 in their account, but is in receipt of universal credit. It is important to say that the flag is then passed to a human investigator to analyse the information and look at what the reasons may be, because there can be very legitimate reasons why someone has more than £16,000 in their account and is still entitled to benefits, such as someone who has received a compensation payment that is out of scope of what would be considered capital for benefit-eligibility reasons.
In all the five principal measures on the DWP side of the Bill, a human is involved in the decision making: on eligibility verification, it is passed to an investigator; on information gathering, when we receive information, it is passed to an investigator to consider the next steps in a fraud investigation; on debt recovery, an individual—a person—would make a decision as to someone’s ability to repay a debt; and on penalties reform as proposed, a human will determine what actions will be taken against a person who received a penalty for fraud against a DWP grant scheme. That is entirely the way that it works with any other penalty that can already be applied. Finally, on the powers of search and seizure, as we would expect, a human judge will take a decision on whether to issue a warrant. At every stage, a human decision maker is baked in before any final decision on sanction or otherwise.
Rebecca Smith
Q
Andrew Western: A draft code of practice will not be available at that stage, so I will speak in general terms about what we intend to include, but there will not be a written document at that stage.
Rebecca Smith
Q
Now the question that I was coming to, if I may. The state pension has been explicitly excluded from the eligibility verification measure, and the three means-tested benefits are the initial focus. I wonder why the Government have left it open to include other non-means-tested benefits in future, and what data would the Government ask for in those cases?
Andrew Western: The state pension is excluded—because of the particular nature of the eligibility criteria for state pension and the consequently incredibly small amount of fraud that we see on it—considering the number of people we would have to bring into scope of the measure to go after what is a tiny amount of fraud. It is not considered proportionate to do that, as far as I am concerned.
The determination that we have made as to the three benefits that should initially be in scope is entirely predicated on current levels of fraud and error. We want to retain the ability, if necessary, to bring other benefits into scope, should there be a surge in fraud in those benefit areas. We do not anticipate this, but we want to future-proof the Bill as best as we can, should there be any material changes in the level of fraud in those areas. For instance, if we consider the tiny amount of fraud in the state pension versus the £1 in every £8 currently spent in universal credit that turns out to be fraud or error, it is clearly right to distinguish between benefits and consequently to have some in scope and others not.
Sally Jameson
Q
Andrew Western: I answered this slightly in response to Mr Payne, but the flag in of itself does not mean that someone has been found guilty of fraud. A bank indicating to us that someone has above a certain amount of capital in their account does not mean, “Job done, box ticked”, or that person receives news that they have been found to have committed fraud, or that we then go through the penalty process with that individual. It would be referred to the most appropriate team for investigation—in the case of capital fraud, the team that looks at that particular type of fraud.
The principal other type of fraud that we think would be in scope is people who have been out of the country for longer than they are allowed to be as a condition of their benefit. Again, it is really important that we do not automatically penalise somebody for having done that, because it could be on grounds of a health emergency abroad. I had somebody in my advice surgery recently whose flights had been cancelled due to an environmental issue in the country that he was seeking to return from. It is really important that this is triaged to a human investigator to look into what the nature of the flag is, what the benefit eligibility criterion that we suspect may not have been satisfied is, and then take the appropriate steps needed to establish whether there is any legitimate reason for that.
Siân Berry
Q
Andrew Western: We would need, at that point, to take advice—legal advice, primarily—if there was that level of concern around any human rights impact. I would not want to second-guess, but certainly, in the instance where those views have been put forward and the legal advice suggested that they were valid, then clearly we would need to take appropriate action to ensure that the Bill is legal and satisfactory.
Siân Berry
Q
Anthony Western: When I talk about reducing over-payments, I mean reducing the value of overpayments rather than the number. Obviously, for a bank account to be flagged, there would have to be something in there to cause that flag. This would not reduce the overall number of overpayments necessarily, but it would reduce the amount of debt that someone might have accrued, were the eligibility verification measure to identify that at an earlier stage. We have seen some horrendous cases, through the carer’s allowance issues that have come to light, involving really significant numbers, because it has gone on for several years. That is the sort of thing we would be able to stop as a result of this—I am really sorry, Siân, but I cannot remember the rest of your question.
Siân Berry
Q
Andrew Western: I am not sure that I fully understood the question, so please come back in if needed. It is clearly the case that if somebody has been receiving benefits that they are not entitled to, for whatever reason, they could end up in a worse financial position as a consequence. That is necessarily the case for two principal reasons. One is that in universal credit all overpayments are reclaimed regardless of the circumstances behind them. That was the policy enacted by the previous Government. The other reason is that they may no longer receive benefits that they previously believed themselves to be entitled to. For instance, if it comes to light that you have £18,000 in your account and there is no mitigating circumstance for that, it would be the case that you would be worse off in overall terms because you would no longer receive that benefit.
Siân Berry
Q
Andrew Western: I am not prepared to put a percentage on it. We would have to see what came out. We have done two previous trials on this and we are fairly confident in the mechanisms that are in place. That has underpinned some of the assumptions we have made. We are committing through this process to a test and learn phase so that we can keep errors as minimal as possible. Ideally, I would not want to see any errors at all, but ultimately we have structured this so that, were something to come back as a false positive, as it were, it would not lead to an immediate decision, because it would be passed to a human investigator for further investigation.
Neil Coyle
Q
Andrew Western: I think it is fundamental, given both the lack of previous action that you identify and a general modernisation of powers. The world is changing. The nature of fraud is changing, and the behaviours exhibited by fraudsters are different from those of 10 or 15 years ago. The previous Government tried to bring forward the third-party data measure, now likened to the eligibility verification measure, but it did not have the oversight and safeguards in place that we have now.
There are a number of totally new proposals in the Bill that are crucial. To your point about the capacity of the police, the powers of search and seizure will be particularly helpful in speeding up investigations into serious and organised crime, because we can crack on with that, as it were, and enter premises without the need to wait for co-ordinated action from the police.
The other totally new power that is really important here, and which I personally think is a fairness argument, is the ability to directly deduct from people who receive their income through means other than benefits or PAYE employment. Overall, it is a fundamental change to the way that we do it, and it is part of a broader package. As I said earlier, this saves £1.5 billion over the forecast period, but it is part of a broader suite of measures that amount to the largest ever intervention to tackle fraud of £8.6 billion over that period. Unfortunately, like many of these things, that number is so high because the level of fraud we have is so high.
Georgia Gould: I add that the PSFA measures are entirely new. There have previously been no powers to investigate and recover fraud from the wider public sector, outside of tax and welfare. This is some of the highest-value fraud, through procurement or businesses falsely applying for Government grants, which is currently going un-investigated because of the resource pressures that you talked about. These are landmark new powers to investigate fraud across the wider public sector that have not previously been considered.
Neil Coyle
Q
Andrew Western: Yes. We are always looking at ways that we can build stronger relationships and build trust. On specific interventions, I would argue that—although it runs contrary to the evidence that we heard from the witnesses—there is the potential, through the eligibility verification measure, to build trust not just with disabled people but with all people in receipt of benefits, because we will be able to check that they are entitled to what they have. The capture of overpayments at an earlier stage and the ability to know that people who are genuine claimants are receiving the right amount of benefit will help to build that trust.
What really erodes trust is someone being captured in a position where they think that they have, for several years, been receiving benefits to which they are entitled but then end up with, for instance, a £35,000 debt to the Department. There is a suite of activity ongoing with stakeholders. The Minister for Social Security and Disability is doing a tremendous amount of work to reach out to repair relationships where that needs to happen. That work must continue because people make a fair point when they tell us that they are fearful of the DWP. I speak to people who do not want to apply for current benefits; they want to stay on legacy benefits because they fear they will lose entitlement through the application process. That is something that we need to constantly keep under review. We need to look at what we can do to improve those relationships.
Charlie Dewhirst
Q
Andrew Western: That is an important question, on which I have sought to reassure myself. We have already been through a spending review process in which we secured additional funding for further targeted case review officers and officers in the fraud space. I actually think that the number of fraud staff in the Department is slightly concerning not because of a lack but because the number of people suggests the scale of the problem. Because of the spiralling nature of fraud, we have had no option but to significantly scale up the number of people working on both prevention and detection of it. I hope that by embracing new technology, and through data sharing and other mechanisms, we can gradually reduce that number over time. It is a damning indictment of the state that we are in with fraud and error that we have that number of people.
To answer the question, I am assured and we have secured funding for the people that we need.
The Chair
There being no further questions, I thank the Ministers, and all the witnesses, for their participation.
Ordered, That further consideration be now adjourned. —(Gerald Jones.)
Public Authorities (Fraud, Error and Recovery) Bill (Third sitting)
Thursday 27th February 2025
(4 months ago)
Public Bill CommitteesPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 27 February 2025 - (27 Feb 2025)
The Committee divided: - Ayes: 6 / Noes: 10 - Question accordingly negatived.
The Chair
Before we begin, I have a few quick preliminary announcements. Members should send their speaking notes by email to hansardnotes@parliament.uk. Please, everyone, switch mobile phones and electronic devices to silent. No matter how much we want tea or coffee, they are not allowed during our sittings.
Today, we will begin line-by-line consideration of the Bill. The selection and grouping list for today’s sitting is available in the room. It shows how the clauses and selected amendments have been grouped together for debate. Amendments grouped together are generally on a similar issue. Please note that decisions on amendments do not take place in the order in which they are debated, but in the order in which they appear on the amendment paper. The selection and grouping list shows the order of debates. Decisions on each amendment, and on whether each clause should stand part of the Bill, are taken when we come to the relevant clause.
A Member who has put their name to the lead amendment in a group is called to speak first. Other Members are then free to catch my eye to speak to all or any of the amendments within that group. A Member may speak more than once in a single debate. At the end of a debate on a group of amendments, I shall call the Member who moved the lead amendment again. Before they sit down, they will need to indicate whether they wish to withdraw the amendment or seek a decision. If any Member wishes to press any other amendment in a group to a vote, they should let me know in advance.
Clause 1
Core functions of the Minister for the Cabinet Office
Question proposed, That the clause stand part of the Bill.
The Parliamentary Secretary, Cabinet Office (Georgia Gould)
It is a pleasure to serve under your chairship, Mrs Lewell-Buck. I look forward to constructive dialogue with the Committee throughout the day.
As the Committee is well aware, fraud against the public sector takes money away from vital public services, enriches those who seek to attack the Government, damages the integrity of the state and erodes public trust. The Bill makes provision for the prevention of fraud against public authorities by the recovery of money paid by public authorities as a result of fraud or error, and for connected purposes. Under part 1, the Bill authorises powers that will be used by the Public Sector Fraud Authority, part of the Cabinet Office, and under part 2, by the Department for Work and Pensions, on which the other Minister in Committee, the Parliamentary Under-Secretary of State for Work and Pensions, will lead.
I will now consider clauses 1 and 2 together. Clause 1 gives new core functions to the Minister for the Cabinet Office and sets out what can be recovered by the use of the powers under part 1 of the Bill. It describes what the Government want to achieve with part 1: to investigate more public sector fraud; to get back funds lost to the public purse through that fraud; to take enforcement action against fraudsters, whether through civil or criminal routes; and to support public authorities to prevent and address fraud against them.
The functions of the powers under part 1 will be used to deliver. As such, it is necessary that this clause stands part of the Bill. The functions are given to the Minister for the Cabinet Office, but it is important to stress that that is drafting convention, and the Minister will not use the powers personally; instead, in line with the Carltona principles, later clauses set out that the decisions may be taken and powers utilised by authorised officers and authorised investigators appointed by the Minister. Those officials will sit within the Public Sector Fraud Authority and will be experienced investigative professionals trained to Government counter-fraud profession expectations, sitting in a structure led by senior counter-fraud experts. As we heard from the witnesses, that will sit within a system of oversight, to be discussed later in the Bill.
The clause also sets out what “recoverable amounts” are. First, that means payments made as a result of fraud or error that have been identified during the course of a fraud investigation to be either fraudulent or erroneous, and which the affected public authority is entitled to recover. Later clauses cover how that entitlement is established. Error as well as fraud is included here, because if an investigation discovers that there has not been fraud, but none the less that a person has received money that they should not have, the debt powers in the Bill can, if necessary, be used to recover it. That is in line with the approach taken by others, including His Majesty’s Revenue and Customs and the DWP, but it is important to stress that the core function of the powers is to investigate and recover losses from fraud. Recovery in that way will normally be when alternative voluntary routes have been exhausted, or a person or business can repay but is refusing to do so. All attempts will be made to engage.
Secondly, “recoverable amounts” covers any other amount that a public authority is entitled to recover in respect of that fraud. That covers frauds where no payment has been made, but the fraudster has benefited in some other way—for example, fraudulently not paying what they owe—and the value of that can be determined. Finally, it also includes any interests which would be collectable in those circumstances.
Clause 2 sets out how the Minister for the Cabinet Office can carry out the functions in clause 1. The clause excludes HMRC and the DWP from the list of bodies that the PSFA will be able to take this action for as they both have significant resources and expertise in this area, as well as their own powers. Again, we will discuss that later.
Importantly, the clause does not remove or supersede responsibilities and functions that other public authorities may have in respect of fraud and the recovery of money. The powers in this part allow the Government to fill a gap and complement what already exists. The intention is that, in exercising these functions, the Minister, and the authorised officers and investigators who will use the powers on behalf of the Minister, are not simply moving investigations and recoveries that would happen anyway into the Cabinet Office. Instead, they will primarily use them in a way that is additive, to take on investigations, recover money and take enforcement action that would otherwise not have been done.
Subsection (3) says that the Minister may charge “a fee”. The PSFA does not currently charge for its investigative services, but that gives it authority to do so in the future, consistent with the cost-recovery approach set out in HM Treasury’s “Managing Public Money” guidance. “Public authority” has a broad definition set out in clause 70 and would include, for example, other Government Departments, arm’s length bodies and local authorities.
Clause 2(4) says that the Minister is included in the definition of public authority in clause 70 as far as that concerns fraud or suspected fraud against the Minister, or recovery of money for the Minister. That is to ensure that frauds against the wider Cabinet Office and its agencies and bodies can still be investigated by the PSFA. However, to ensure that there is no conflict of interest, it will be set out in guidance that the PSFA will not investigate alleged frauds within the PSFA or allegations against the Minister personally but will refer those to another agency as deemed appropriate on a case-by-case basis. That will help to ensure the integrity of PSFA investigations by keeping responsibility for investigating fraud in the PSFA, or by the Minister, external to that function, to preserve appropriate independence.
Finally, subsection (5) ensures that, in giving Ministers these functions, this part does not affect a public body’s entitlement to recover an amount or any functions it has in respect of fraud or recovery. That means existing functions and powers are not taken away from public authorities or superseded by the Ministers’ functions.
Mike Wood (Kingswinford and South Staffordshire) (Con)
His Majesty’s Opposition agree with the Bill’s principles and support the Government in what they are seeking to do, but we will be using our best efforts to try to help them do it better where we can. As the Minister said, clause 1 sets out the functions. Those functions seem perfectly sensible and reasonable, as does the way in which the Minister for the Cabinet Office is to interact with other public authorities as set out in clause 2. One of the themes that runs throughout almost all clauses of the Bill is the issue raised by multiple witnesses on Tuesday about how the functions to be allocated to the Minister or their representatives are to be exercised within the various codes of practice provided for in the Bill.
On Tuesday, the Minister seemed to indicate that the Government intend for those codes of practice to be made available for the House of Lords to scrutinise, but not for the House of Commons. That obviously makes it much more difficult for the Committee to consider the appropriateness of those functions and the various powers in the Bill. I urge the Government again to reconsider and look at how the House of Commons can be given those chances before our House completes its consideration. We recognise that that will not be possible in Committee.
In August 2022, the previous Conservative Government established the Public Sector Fraud Authority within the Cabinet Office. We welcome the Bill taking that work forward by establishing the PSFA as a separate body from the Cabinet Office, to which the Cabinet Office is able to transfer functions. We entirely support the Government’s efforts to tackle fraud and error.
The National Audit Office puts the amount lost by fraud and error in the range of £5 billion to £30 billion in 2023-24, so ensuring that the Bill works to tackle both error and fraud is crucial within the functions set out in clause 1, and we will come on to that with some of our amendments to later clauses. Equally, we wish to ensure that the functions assigned to the Minister for the Cabinet Office are proportionate and capable of independent review and oversight. We will return to these important issues with our amendments later on.
I would like to ask the Minister some questions on clauses 1 and 2, the first of which is about the definitions. The Bill does not provide definitions of “fraud against a public authority” or “error”. As we heard in evidence on Tuesday, Dr Kassem from Aston University stated that
“the definition of fraud can be a bit limiting in the current Bill, because, first, it assumes that fraud is happening for financial reasons when that is not necessarily the case. There are non-financial motives. Let us consider insider fraud—fraud committed by insiders, people working for the public authorities—which is one of the most common threats not just in the public sector, but across other sectors. A disgruntled employee can be as dangerous as someone with a financial motive. So I would stick with the Fraud Act 2006 definition of fraud, because it mentions personal gain full stop. It can be financial and it can be non-financial. That has to be clarified.”––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 6, Q3.]
Really, it must be clarified within the functions set out for the Minister for the Cabinet Office. Why should that not be the case, and how does the Minister define these things for the Bill, if it is not in line with the Fraud Act 2006? Clause 2(3) also states:
“The Minister may charge another public authority a fee in relation to the exercise of functions under this Part on behalf of, or in relation to, the public authority.”
Can the Minister clarify what we would expect that fee to be? Is it arbitrary or a set amount? Does the Minister decide or is there a particular process?
I would also like to ask the Minister about the amounts that the Government expect to recover under the Bill. According to its impact assessment, the powers in part 1 are estimated to lead to around £54 million—the best estimate for net present benefits—being recovered from public sector fraud over 10 years. Can the Minister reassure the Committee how robust that estimate is, what it is based on and how confident the Government are that the full amount of money will be recovered?
The reason I ask that is because, for the Government across the 10 years, the best estimate for fraud recovered minus costs is £23 million. Different numbers of cases could mean a loss or a slightly higher return, which could be between minus £1.5 million and £24 million. How will the Government ensure that the Bill recovers more money than is paid out in costs in administering its functions? As clauses 1 and 2 are the foundation for establishing the PSFA, the Opposition are content for them to stand part of the Bill.
Steve Darling (Torbay) (LD)
It is a pleasure to serve under your chairmanship, Mrs Lewell-Buck. I am pleased that you already see that we will become the official Opposition by the next general election, as long as the right hon. Member for North West Essex (Mrs Badenoch) continues.
The Liberal Democrats would like to state clearly that fraud is wrong and, as the Minister rightly stated, it robs the state of the ability to support people and drive the change in our communities that we all thirst for. Our concern is that this legislation is being rushed through Parliament at breakneck speed, and rushed legislation can result in dangerous consequences for those who get caught up in it eventually. I share this concern with the Minister: we legislate at haste and repent at leisure when things go wrong.
Georgia Gould
I thank both hon. Members for their constructive comments. This dialogue will be really important in scrutinising the Bill. I also welcome the support for action on fraud, and the acknowledgment that it is a significant issue.
On timing, I reassure the hon. Member for Torbay that the powers in the Bill that the PSFA is asking for are all powers that exist elsewhere in government. They have been used and tested; they are just being brought into a new context. At the moment, there are few powers to investigate or recover fraud that happens to the wider public sector, but this part of the Bill seeks to rectify that. There has been a great deal of consultation led by me, the Under-Secretary of State for Work and Pensions and our teams to get us to this point, but we will engage constructively with scrutiny as we move forward.
On the cost-benefit analysis, the overwhelming message from witnesses was that these new powers are necessary because there is a gap in investigating and recovering fraud against the wider public sector, and that the Bill will make a difference.
On the question of the £54 million and whether that is robust, that is a modest amount given we know that at least £3 billion of fraud happens against the wider public sector. It has come about through a great deal of work from the PSFA in modelling forward the current size of the enforcement team and how the powers are used elsewhere. We can therefore be confident in that figure, but if the powers work well we could grow the capacity and potentially recover more fraud.
At the moment, we know that there is fraud going on that the Government cannot investigate. A big part of this will be the deterrent and making it clear that if there is fraud in procurement or grants, there will be real powers to investigate and recover that money. That is really important both for the concrete recovery of money and for trust in how public funds are spent.
On the wider points about the importance of oversight, including of the Bill, that has been incredibly important to the Government. We thought deeply about the measures in the Bill and we will discuss that as we go through it. As for the development of the codes of practice, as I hope the Committee will see today, I will refer to the measures that are to be put in the code of practice as we go through the clauses, so that we can have some discussion about that.
I reassure the Committee that the definition of fraud in clause 70 is as it is defined in the Fraud Act 2006. That includes the main fraud offences, which are false representation, fraud by failure to disclose information when there is a legal duty to do so, and fraud by abuse of position. Hopefully that provides reassurance on that question, and I look forward to answering any other questions.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2 ordered to stand part of the Bill.
Clause 3
Information notices
The Chair
With this it will be convenient to discuss the following:
Amendment 10, in clause 3, page 2, line 36, at end insert—
“(1A) The Minister has reasonable grounds to suspect a person has committed fraud against a public authority if—
(a) there is an objective basis for the Minister’s suspicion based on facts, verifiable information or intelligence, and
(b) a reasonable person would be entitled to reach same conclusion based on the same facts, information or intelligence.
(1B) The Minister does not have reasonable grounds to suspect a person has committed fraud against a public authority if the Minister’s suspicion—
(a) is based in any way on—
(i) the person’s physical appearance,
(ii) any protected characteristic under the Equality Act 2010 that a person may have or appear to the Minister to have, or
(b) is based solely on any generalisation or stereotype giving rise to a belief that certain groups or categories of people are more likely to be involved in criminal activity.”
Amendment 14, in clause 3, page 3, line 10, delete “10” and insert “28”.
Amendment 9, in clause 3, page 3, line 30, at end insert—
“‘reasonable’ means the Minister must have formed a genuine suspicion in their own mind, and the suspicion that fraudulent activity has taken place must be reasonable. This means that there must be an objective basis for that suspicion based on facts, verifiable information and or intelligence which indicate that fraudulent activity will be found, so that a reasonable person would be entitled to reach the same conclusion based on the same facts and information, and or intelligence.”
Mike Wood
Clause 3 would give the PSFA the power to issue information notices to a third party, compelling them to provide information within a deadline. The amendments set out the circumstances in which that would be done and set what we think is a perfectly reasonable test of reasonableness, as well as exploring the time provided for the recipients of notices to respond. Our amendments are designed to probe some areas of this process. The powers given to the Minister for the Cabinet Office in clause 3 are wide-ranging, so we wish to ensure that these are used reasonably and proportionately, and solely in connection with the explicit purpose of the Bill. We have tabled amendments 11, 10, 14, and 9 to that end.
We have to remember that the powers can be used against individuals and small businesses. While we might expect most of the notices to be issued against multinational companies, particularly financial institutions, we also need to consider those who do not have the capacity of larger organisations. The powers must be used reasonably and effectively in all circumstances.
Amendment 11 sets a reasonableness test relating to whether the information being requested is likely to relate to the fraud in question—for example, in private text messages—and therefore whether it is reasonable to ask for that information, and whether the cost involved in recovering the required information is likely to be reasonable and proportionate. The Minister referred to equivalent powers that are available in other forms of investigation that the Government and their agencies and bodies carry out. We see the reasonableness test as equivalent to that which HMRC must meet in its notices.
We also wish to ensure that the powers are not misused, and amendments 9 and 10 are directed towards that purpose. Although clause 3 states that the Minister can use the powers only against someone
“whom the Minister has reasonable grounds to suspect has committed fraud against a public authority”
the Bill provides no definition of “reasonable”, so amendments 9 and 10 are designed to fill some of that gap.
Amendment 10 specifies that the Minister for the Cabinet Office
“has reasonable grounds to suspect a person has committed fraud against a public authority if…there is an objective basis for the Minister’s suspicion based on facts, verifiable information or intelligence, and…a reasonable person would be entitled to reach same conclusion based on the same facts, information or intelligence.”
We want to be clear about what we do not think are reasonable grounds. These would include, for example, if the Minister’s suspicions were based in any way on a person’s physical appearance—protected characteristics under the Equality Act 2010 that the person may have, or appear to the Minister to have—or were based solely on any generalisation or stereotype giving rise to a belief that certain groups or categories of people are more likely to be involved in criminal activity. We want to ensure that the powers are exercised responsibly and appropriately.
Amendment 9 gives the definition of “reasonable” as meaning that
“the Minister must have formed a genuine suspicion in their own mind, and the suspicion that fraudulent activity has taken place must be reasonable. This means that there must be an objective basis for that suspicion based on facts, verifiable information and or intelligence which indicate that fraudulent activity will be found, so that a reasonable person would be entitled to reach the same conclusion based on the same facts and information, and or intelligence.”
Amendments 9 and 10 are based on the reasonable grounds for suspicion that are contained in the PACE—the Police and Criminal Evidence Act 1984—code A.
Bearing in mind that these powers will be exercised against individuals, some of whom might struggle to provide information, we want to probe the choice of 10 days as the timeframe in which to provide information. Amendment 14 increases the minimum notice period from 10 working days to 28, which is similar to the standard minimum time that people would expect to be given to respond to written requests for information from HMRC. Given the scope of the information that might be requested, appropriate time must be given to organisations and individuals to comply. External circumstances should also be taken into account when considering the time periods. If an individual is on annual leave or off sick for a few days, they may have less than a week to provide the information or they will face significant fines. That does not seem reasonable.
We are not necessarily saying that 28 days is a better time period than seven, but I would be grateful if the Minister explained why the Government set the minimum time that they did. That is particularly pertinent, as failure to provide the information required would carry a civil penalty of £300 a day, which, for an individual, can amount to a considerable sum of money very quickly.
In its current form, without being more specific about what it means to be “reasonable” or expanding the timeframes, we are a little concerned that the powers that clause 3 gives the Minister may not include the necessary checks and balances, so I would appreciate her reassurances on that point.
Steve Darling
Perhaps the word that the shadow Minister used most was “reasonableness”. In our strange political world in recent months, the question of what is reasonable in our society has changed significantly following the change of President in the United States. What normal society would expect is “reasonable” of an elected official, both here and in America, gives me, as a Liberal Democrat, cause for concern in relation to how we can make sure that a Bill like this, which gives very significant powers to the state, sets safeguards in stone to protect our communities. We will come to that later, but I would welcome reassurance from the Minister. Although I am sure that we are all reasonable people in this room, others who are unreasonable might take power at a later stage of our lives. With this legislation, how can we put safeguards in place? I hope that we will cover that later, but the Minister’s early thoughts would be welcome.
Georgia Gould
I welcome those probing amendments, because they give me an opportunity to provide some clarity and reassurance on those important points. I will respond to them in a second, but on the question of safeguards, as I said in my introduction, we have thought very deeply about them and we are really mindful of the responsibility of these powers, so a broad range of safeguards has been built into both sides of the Bill.
On the PSFA measures, all the use of powers will be overseen by a separate team that will be accountable to an independent chair who will transparently report their findings annually to Parliament. The use of the wider powers will be overseen and reviewed by His Majesty’s inspectorate of constabulary and fire and rescue services, which has a lot of experience in this. There are various routes of appeal and review built into the powers, as well as times when applications to court are needed, and we will deal with those in some depth as we go through the clauses. Oversight is absolutely critical, and that is why we have put such a robust oversight system in place.
On clause 3, currently any information needed from first parties or connected third parties can be asked for only if they refuse to provide it, and there is no way for the PSFA to compel the information to be produced without having to go through the civil court. The clause enables authorised officers in the PSFA to compel information to be produced that is not excluded, where it is necessary, proportionate and in line with the data protection legislation, from individuals and businesses as part of a civil fraud investigation. As we discussed on Tuesday, those authorised officers will all be highly trained and subject to professional standards and a code of conduct.
In particular, clause 3 extends the Minister’s powers to include taking copies of information and requiring the individuals to provide information in a specified form. The power includes imposing duties on an individual to retain information that they already hold for longer than they would normally be required to. For example, that might apply where the PSFA requests contractual notes as part of an investigation that a person may retain for only three years. Where the request is made just before the end of that period, the information notice would also explain that any failure to supply the specified information might result in a civil penalty being imposed.
The clause details the requirements of the information notice, including the format, the timeline for compliance and the location for submission. A similar approach is used by HMRC. In practice, authorised officers would engage, where possible, on a voluntary basis before issuing an information notice. The clause also ensures that there are restrictions on the information notice from demanding “excluded material” or “special procedure material”, as defined under the Police and Criminal Evidence Act.
I will turn to the amendments, and as I said, I am very grateful for the opportunity to explain how this clause works, which I hope will provide some reassurance. Clause 3(1)(a) and (b) set out a test for issuing an information notice. An authorised officer will have the power to compel information only when it is necessary and proportionate to do so, and only when the information being requested relates to a person whom the authorised officer has reasonable grounds to suspect has committed fraud. On that basis, PSFA authorised officers will request the information only when there are reasonable grounds to do so.
The question that amendment 10 raises is, “What is meant by ‘reasonable grounds’?” It must be objectively reasonable for them to suspect fraud, given the information available to them. An authorised officer must genuinely suspect that the fraud has been carried out by the individual, and that belief will be based on facts, information and/or intelligence. Reasonable grounds cannot be supported on the basis of personal factors such as those listed in the amendment, or a hunch. It is critical to set out that authorised officers will be using those facts and will be bound by the public sector equality duty and the Equality Act.
The reasonable grounds test is a standard, widely accepted test used by various organisations, including the DWP, the Serious Fraud Office and the police. Further to that, to ensure that the reasonableness test is applied properly in practice, the PSFA will have built in place safeguards. For example, authorised officers must consider all the facts of a case known to them at that time when they decide what is reasonable. Authorised officers must ensure that each decision made relating to the use of the powers is documented and available for checking. Management checks will ensure that those procedures are followed correctly. Information holders can also request a review of a decision to issue an information notice if they feel that there were no reasonable grounds.
As I said, there will also be independent oversight of the use of powers by an independent body such as HMICFRS or the new independent chair. I am setting out this detail on the record now, but we will also be transparent about this for those who do not leaf through Hansard. The code of practice envisioned by this legislation for the PSFA elements of the Bill relates to civil penalties. As civil penalties are the mechanism for ensuring compliance with the information gathering powers, we will also set out in the code of practice, and in further published guidance if necessary, how the information gathering powers will be used in practice, as I am doing today. We will also fulfil the commitment that we made on Tuesday to talk about what will be in the codes of practice as we reach the relevant parts of the Bill.
Let me turn to the period of compliance. Our approach in the Bill accommodates the variation in size and type of fraud investigations that the PSFA is likely to take on. As such, the Bill allows information providers a minimum, critically, of 10 working days to comply. However, in practice, the information notices will be tailored on a case-by-case basis, with each being judged on its merits and with the time period applied appropriately. Similar approaches are used in HMRC. That, in turn, protects the information holder from being asked to produce information in an unreasonable timescale.
On Tuesday, we heard from John Smart, who said:
“Some of the smaller organisations might struggle to meet that 10-day requirement”.
That is why we will be tailoring the requirement. But, he also said,
“I still think it is a reasonable starting point. If you do not start with a reasonable starting point, for the larger organisations you end up deferring decision making and action being taken. I think 10 days is reasonable.”––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 46, Q81.]
As I said before, that is the minimum.
Again, we will set out the commitment to tailoring to ensure that we are proportionate and reflect the different types of organisations and individuals who might be asked for information in the code of practice or published guidance. Alongside the time period for compliance, an information provider will have the opportunity to request a review, which would include the ability to vary the time period for compliance if it was considered that a longer timeframe was needed. The current drafting outlines a five-layered process for information holders to request a review of an information notice that they have received. I can go through that detail if Committee members want me to, but I hope that that provides some reassurance on hon. Members’ points.
Rebecca Smith (South West Devon) (Con)
I thank the Minister for those points, but I seek a bit more clarification. There are references to “the Minister” in clause 3, and I want to be clear about this, because we talked a lot about the code of practice during the evidence session on Tuesday. Is the Minister saying that the code of practice will have reference to the authorised officers? So, for Hansard, where clause 3 refers to “the Minister”, it is actually more likely, through the code of practice, to be referring to the day-to-day operation of those investigators. The Minister also mentioned that the definition of reasonableness is as per other departmental records and is widely available. Just to clarify, will that also be in the code of practice so that it is easily accessible for anybody in the public to look at what that might include? I seek more clarification on those two points.
Georgia Gould
Yes, the code of practice will be much more operational guidance that will be targeted at the authorised officers and their day-to-day operational practice. It will include the information that I have set out.
The Chair
Does the shadow Minister wish to press amendments 10, 14 or 9, which were just debated, to a vote?
The Chair
With this it will be convenient to discuss the following:
Amendment 16, in clause 4, page 3, line 36, leave out “Minister” and insert “First Tier Tribunal”.
Amendment 17, in clause 4, page 3, line 38, leave out “Minister” and insert “First Tier Tribunal”.
Amendment 18, in clause 4, page 4, line 3, leave out “Minister” and insert “First Tier Tribunal”.
Mike Wood
The amendments are all about ensuring that there is not just independent oversight but an effective independent channel of appeal against information notices that does not just go back to the same organisation that issued the original notice. Clause 4 will allow for the person to whom the information notice is given to appeal the notice up to seven days after it is issued, but that appeal will go back to the Minister for the Cabinet Office—or, in practice, the PSFA—to review it and decide whether to revoke, amend or uphold the notice. As drafted, it gives the Minister significant power, as really the only responsible person who can review the decision to give the notice.
There therefore appears to be a significant lack of independent oversight. I would be grateful if the Minister could explain why there is no ability to have an independent appeal of the kind that would generally take place against HMRC decisions and notices, through the first-tier tribunal. That is why we tabled amendments 15, 16, 17 and 18: to change the appeal body from the Minister for the Cabinet Office to the first-tier tribunal. We are concerned that, given it is the Minister who has been given the power to investigate fraud, it is then a case of allowing the Minister to mark their own homework if they—or the people acting on their behalf—review the decisions themselves.
I would like to understand the Minister’s view on whether that is an effective use of ministerial time and capacity. Does she envisage that any such appeal decisions would be delegated? In the amendments, we propose to replace the Minister with the first-tier tribunal in that process, which would be equivalent to the processes that would be expected when a decision of HMRC is reviewed. Our amendments would ensure that an independent third party is involved with the review process.
I would be grateful if the Minister could explain why there should be no ability for such an appeal to be made, whether it is made immediately against the notice for information or perhaps as a second appeal stage. We need to be satisfied that there is a good reason why people who are the subject of those notices, which may be quite onerous, particularly for individuals and smaller organisations, should not have the ability to appeal to an independent body. Normally, natural justice would assume that to be the case.
Steve Darling
I concur about the safeguarding of individuals. While there may be an independent reviewer or chair, the challenge, for me, is who appoints them. If it ends up being the Minister who appoints the chair, how independent will they be? Given what we are seeing elsewhere in the world, how do we ensure that we build a structure of independence into the Bill that we may not previously have thought was needed? I am somewhat supportive of the proposals from colleagues, but equally, I look forward to hearing what the Minister has to say on the challenge.
Georgia Gould
Some points of clarity: the hon. Member for Kingswinford and South Staffordshire asked who would do the reviewing. A more senior officer from within the PSFA would complete that review, not the Minister themselves. The entire process would be overseen by a separate team who are accountable to an independent chair, and critically, who will report into Parliament to provide that level of independence.
The other important context is that the Bill also—we will come to this later—provides for the PSFA to become a statutory body, fully independent from the Minister. In the meantime, it is incredibly important that we have this process of oversight and the independent chair, as we discussed. All these issues are important for balance. We have to avoid giving fraudsters the ability to abuse the review process and frustrate investigations. As John Smart told the Committee on Tuesday, months is far too long, and adding a further route to appeal to the tribunal at that very early stage would add months, if not years, to our investigations into suspected frauds. We have tried to balance this very carefully to ensure that there are appropriate routes to review that sit within a system that is independently overseen.
I believe that we have found the right balance in the Bill, and I have explained those layers of review. They include internal review, which is the appropriate route that strikes the right balance between fairness and avoiding fraudsters frustrating the process. As I said, the internal reviewer will be a separate authorised officer, who will be—this is a requirement in clause 66—an authorised officer of a higher grade than the original decision maker. The way that these reviews are performed will be subject to oversight/ We will talk later in more detail about the oversight in the Bill, but it will include the inspections by HMICFRS and the day-to-day oversight by an independent chair, which could include live cases.
I explained in the previous debate—I did not go through the detail, but I can do so—the stages of an information notice going through if someone still does not agree that they should provide the information. Ultimately, it is really important that if a penalty is issued for non-compliance, the information provider can appeal to the relevant court against that penalty, so there is a formal appeal to a court at the end of the information-gathering process if it gets to that place. However, the intention of the powers—as I said, this will be written into the code of practice—is very much to work alongside those organisations that are gathering information, and to be proportionate to their size and the requests put forward, so I believe we have found the right balance.
Mike Wood
I thank the Minister for those responses, but I think that the first-tier tribunal is perfectly capable of dismissing applications that are without merit, without significantly extending the time. Given the importance of an independent appeal mechanism, I wish to push the amendment to a vote.
Question put, That the amendment be made.
Mike Wood (Kingswinford and South Staffordshire) (Con)
I beg to move amendment 12, in clause 4, page 3, line 33, at end insert—
“or of the duration of the period mentioned in section 3(4)(a)”.
The Chair
With this it will be convenient to discuss amendment 13, in clause 4, page 4, line 2, at end insert—
“, including by extending the duration of the period mentioned in section 3(4)(a) where satisfied that the person is reasonably unable to comply with the requirement to provide the information within the time required by the notice”.
Mike Wood
Amendments 12 and 13 are in a similar vein to amendment 14 —they allow the individual or organisation issued with an information notice to apply to the independent body or board for an extension to the 10 working days within which they are currently required to provide information requested in the notice, if they are reasonably unable to comply. Sorry, have I skipped ahead a section?
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Feel free to skip ahead to the conclusion.
Mike Wood
Sorry, it has been a while since I have been on a Bill Committee.
The amendments would allow the individual or organisation to apply for an extension to the 10 working days within which they are currently required to provide information requested in an information notice, if they are reasonably unable to comply. This is a common sense approach to support people who are engaging with the process and prevent them from being hit with penalties, which was never the intention of the legislation. This is also important because we do not know precisely what information the Minister will be able to ask individuals to provide, other than that an information notice cannot require the giving of particularly sensitive—such as excluded or special procedure—material, as defined in sections 11 to 14 of the Police and Criminal Evidence Act 1984. This includes confidential business records or journalistic material. Otherwise, the Minister for the Cabinet Office has a very open-ended power to require different types of information. It would be helpful if the Minister could explain whether the Government would consider allowing those issued with information notices to apply specifically for an extension if they cannot reasonably provide the information within the time period requested.
Steve Darling
I can add very little to what the shadow Minister said. Again, I am broadly sympathetic on the need to have these safeguards in the legislation, and on not knowing what the practice notes are. We are very much in the dark, so that does give us cause for concern.
Georgia Gould
The critical thing to note here is that we have been very clear in the Bill that 10 days is a minimum. As we heard in evidence, some organisations will find it very easy to provide the information within 10 days; others will find it harder. As I have already set out, we will ensure that responding to different kinds of organisations proportionately is referenced in the code of practice.
I previously explained why we believe that the time limits in the Bill for information requests are appropriate, and why we believe that internal review strikes the right balance in preventing fraudsters from frustrating the process. The current drafting includes powers for authorised officers to vary the duration of an information notice in clause 4. The clause allows an information notice to be varied subject to the outcome of an internal review. A variation of a notice can include amending the timeframe to comply with a request if it is found that a longer timeframe is required.
We have discussed how the Bill allows information-providers a minimum of 10 working days to comply, which in practice will be tailored on a case-by-case basis, with each case judged on its own merits and the time period applied appropriately. This is a similar approach to that taken by HMRC, for example: an authorised officer would take account of the nature of the information or documents required and how easy it will be for the person to provide or produce them. That, in turn, protects the information-holder from not being asked to produce information within an unreasonable timescale. In response to the amendment, I ran through what the reasonable grounds test will be and the kinds of thinking that authorised officers will have to go through to determine what information they will gather. That includes writing it down so that their thought processes in requiring information can be reviewed.
Steve Darling
I welcome that reassurance from the Minister, which we will take onboard.
Mike Wood
I thank the Minister for her response, which offered some moderate reassurance. We would be comfortable if either it was included in the Bill or we at least had sight of the code of practice, which will actually define that decision-making process. A fundamental flaw of this Bill Committee is that we are being asked to make decisions on something that may be produced in the future, of which we have no advanced sight. For now, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Georgia Gould
Clause 3 introduces a civil power that allows authorised officers to compel information from first and third parties, similar to that used by HMRC. Clause 4 introduces a right to request a review of a decision to issue an information notice within seven days of a notice being issued. The policy intention is that this provides adequate time for an individual or business to request a review of a decision to issue an information notice, and sets a time limit for a review that will balance any attempts that might be made to aggravate the information collection process by slowing down the fraud investigation unnecessarily. During the review process, authorised officers will work with information-holders to give them every opportunity to comply.
Steve Darling
The Minister referred to a review process; it would be really helpful if the Committee could be aware of how long that process is likely to take.
Mike Wood
Clause 4 gives the Minister a considerable amount of power to compel individuals, as well as organisations, to provide an unspecified range of information within what could be very tight timescales, on pain of a fine of £300 a day if they fail to comply. The only route to appeal these powers is going back to the person or organisation that is exercising them, and we are concerned about the natural justice of this approach.
The legislation, as drafted, involves no impartial third party in the review process on a case-by-case basis, so it leaves individuals with nowhere else to go if they disagree with what is being asked for, or cannot practically comply with the request in the specified timeframe. Our amendments aim to balance these powers, and I am naturally disappointed that the Minister was unable to consider accepting at least some of them.
Georgia Gould
First, it is important to set out that these powers will be used by authorised officers who sit within a professional standard. They are highly trained and have a code of ethics that they apply. It is a deliberately limited group of people to ensure that we have full oversight. The kind of decisions that they make will have to be written down, so they can be overseen by the team within the Cabinet Office, which is answerable to the independent chair and to another independent body, and that is likely to be HMICFRS. I think I have already set out, and it is in the Bill, that the reviews on a case-by-case basis will have to be done by another authorised officer who is of a higher grade than the one who made the decision. There will be no set time, but we will set out a range within the wider guidance.
The intention of the Bill is to ensure that we prevent and recover fraud against the public sector. We want to be reasonable and proportionate, and as I have said, we will set out further information about the size and scale of organisations and timeframes within the code of practice. What we really need to avoid is organisations that have committed fraud using appeals to frustrate the process and keep this going for ages, so that money is moved and we lose the ability to recover critical public funds. We think that a huge amount of oversight has been put into this overarching package, but we have to ensure that we allow authorised officers to get the information they need and recover fraud. Finally, it is important to remember that, if we go through a process where somebody does not provide that information, and a fine is levied, they are able to apply to the courts at that point. There is that fundamental backstop to the system.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Gerald Jones.)
Public Authorities (Fraud, Error and Recovery) Bill (Fourth sitting)
Thursday 27th February 2025
(4 months ago)
Public Bill CommitteesPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 27 February 2025 - (27 Feb 2025)
The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
It is a pleasure to serve under your chairship, Mrs Lewell-Buck. Clause 5 is an explanation of the principles related to information sharing that pertain to the Public Sector Fraud Authority and the Cabinet Office. It sets out how the disclosure of information would work for the purpose of facilitating the Minister’s exercise of the core functions. It refers to how the Minister may use information disclosed under subsection (1); the specific purposes for which it may be disclosed; and what the Minister may not use information for. Information must not be used for any purpose other than the purpose for which it was disclosed and may not be disclosed to any other person without the consent of the Minister. I commend the clause to the Committee.
Mike Wood (Kingswinford and South Staffordshire) (Con)
Clause 5 will give the Minister enormous powers to request and share information for the purpose of facilitating the Minister’s exercise of the core functions under the Bill. Given that the Minister’s core functions are to decide whether to investigate and take enforcement action, we are concerned that almost any information could be shared to facilitate the making of those decisions.
Likewise, the Minister may share information onward. If they give consent, the information may go further yet. Again, this is a case of the Minister marking their own homework. They get to decide who knows what and whether it gets shared onwards, without any external oversight from an impartial third party. I would be grateful if the Minister explained what sort of information the Government envisage being requested, under what circumstances, and what safeguards will apply to the sharing of that information.
Andrew Western
I thank the shadow Minister for his question. I would not want to second-guess the specifics of what may be required in the sharing of information on a case-by-case basis; clearly that sort of speculation may restrict us unnecessarily. What I would say, however, is that the independent oversight powers laid out for the execution of the PSFA’s work would be in place to ensure that if anybody, up to and including the Minister, were considered to have overstretched their powers, it would be able to comment and investigate as necessary.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6
Amendment of the Investigatory Powers Act 2016
Andrew Western
I beg to move amendment 1, in clause 6, page 4, line 28, in column 1, after “Office” insert
“, so far as relating to the Public Sector Fraud Authority”.
This amendment limits the designation of the Cabinet Office as a relevant public authority for the purposes of Part 3 of the Investigatory Powers Act 2016 so that it is designated only so far as relating to the Public Sector Fraud Authority.
Andrew Western
I am sure that colleagues will agree that the amendment is straightforward. It will limit the designation of the Cabinet Office as a relevant public authority for the purposes of part 3 of the Investigatory Powers Act 2016, so that it is designated only in so far as it relates to the Public Sector Fraud Authority.
Clause 6 sets out the purposes of the amendment to the 2016 Act and is straightforward in its terms. It will make a small tweak before the entry for the Common Services Agency for the Scottish Health Service to insert “Cabinet Office” and the relevant provision.
Mike Wood
As the Minister says, the clause will add the Cabinet Office to the Investigatory Powers Act 2016. The Act governs the powers available to the state to obtain communications and communication data, provides statutory safeguards and clarifies what powers different public authorities can use and for what purpose. This legislation will give the Cabinet Office further and greater investigatory powers.
Government amendment 1 seeks to clarify that this applies not to the whole of the Cabinet Office, but to the Public Sector Fraud Authority only. I am glad that the amendment will rectify that fairly major drafting error. Obviously, the Opposition support the amendment.
The Parliamentary Secretary, Cabinet Office (Georgia Gould)
I am sorry to have arrived late. Clause 6 will provide essential powers to obtain communications data from telecommunications providers, as and when necessary, as part of an investigation into fraud against the public sector. As a result of the clause, the PSFA will be listed under column 1 of schedule 4 to the Investigatory Powers Act 2016 and will thereby be granted the power to request communications data—the how, where, what and when, as opposed to the content, of communications—for the purposes of investigating suspected fraud against the public sector. The clause will not give the PSFA surveillance and covert human intelligence powers.
The precise listing of the PSFA in schedule 4 will not permit self-authorisation to use the relevant powers; a request for communications data in the course of a criminal investigation must be approved by the independent Office for Communications Data Authorisations. The powers also come with extra oversight from the Investigatory Powers Commissioner’s Office, which will inspect the designated communications data single point of contact that facilitates the lawful acquisition of communications data and effective co-operation between the IPCO and public authorities that have these powers.
I welcome the Opposition’s support for Government amendment 1, which is necessary to align us with the Home Office’s new approach to restrict powers to specific teams in other Departments within the same schedule. The amendment will change the way the Department appears in schedule 4 to the Investigatory Powers Act, as it will restrict the use of the powers to the Public Sector Fraud Authority only, not the Cabinet Office as a whole. The amendment will ensure that the use of the powers is properly restricted and that there are no unintended consequences for other parts of the Cabinet Office.
I commend clause 6, as amended by Government amendment 1, to the Committee.
Amendment 1 agreed to.
Clause 6, as amended, ordered to stand part of the Bill.
Clause 7
Police and Criminal Evidence Act 1984 etc powers
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Schedule 1.
Clauses 8 and 9 stand part.
Georgia Gould
Clause 7 and schedule 1 cover the investigative powers in the Police and Criminal Evidence Act 1984. Clause 8 will give the PSFA a legal route to apply to a court for an audit in relation to property that has come into its possession in the course of a fraud investigation. Clause 9 will bring the PSFA under the oversight of the Independent Office for Police Conduct for serious complaints about its use of PACE powers.
Clause 7 will designate authorised investigators with the necessary authority to use limited provisions from PACE within the remit of public sector fraud investigations. These include powers to apply to the courts for a warrant to enter and search premises and to seize evidence, and special provisions to apply to the courts to gain access to certain types of material that are regarded as excluded material or special procedure material.
These are criminal investigation powers and will only be used in criminal investigations to enable all reasonable lines of inquiry to be followed and all relevant evidence to be collected. PSFA staff must be specifically authorised by the Minister before they can use the powers in the clause. Authorised investigators will be able to access and process evidence under the same conditions applicable to the police, ensuring that robust investigative protocols are followed. PACE has its own code of practice, and authorised investigators will adhere to the provisions that apply to the PSFA’s PACE powers, in particular PACE code B, which deals with the exercise of powers of entry, search and seizure.
Clause 7 is fundamental in reinforcing the Bill’s objective of combating public sector fraud effectively by equipping investigators with powerful investigative tools, governed by long-standing safeguards. The provision of such powers is essential and reflects our commitment to holding to account those who defraud public resources, maintaining the integrity of public administration.
Schedule 1 will modify the provisions of PACE adopted in clause 7 so that they apply to authorised investigators within the PSFA when they are conducting criminal investigations into fraud offences committed against the public sector. Clause 7 will enable these modifications to have effect; they include equating authorised investigators with constables for the relevant sections of PACE, clearly defining the range of their responsibility and authority. An amendment to replace “articles or persons” with “material” in schedule 1 is specifically intended to clarify the scope of investigations conducted by the PSFA. By defining the term more narrowly with reference to “material”, it reflects the fact that the PSFA will not be conducting searches of individuals.
While detailed stipulations regarding the retention and handling of seized material are set out in PACE, schedule 1 will provide the essential adaptations necessary for the authorised investigators to carry out their roles effectively while adhering to established legal safeguards. Overall, schedule 1 is necessary to equip authorised investigators with precise, tailored powers from PACE so that they can enforce the legislative aim of combating fraud within the public sector.
Clause 8 will give the PSFA a legal route to apply to a court for an order in relation to property that has come into its possession in the course of a fraud investigation. The order will determine who the property should be returned to and whether changes need to be made to the property before it is returned or, if appropriate, destroyed, subject to suitable safeguards.
The PSFA will not routinely need to use this power. It will use it only in three specific situations: first, when there is conflicting evidence as to who the property should be returned to; secondly, when it is not possible to return property to its owner, and the PSFA is otherwise liable to retain it indefinitely; or, thirdly, when it has been identified that the property could be used in the commission of an offence. Clause 8 will protect the PSFA in situations in which it could otherwise face having to retain property indefinitely, at ongoing cost to the taxpayer, and where it cannot return the property to its owner. It will ensure effective management and disposal of items, helping to prevent misuse while reducing the administrative burden.
The use of a magistrates court to determine the appropriate course of action is a critical safeguard. This external judicial oversight ensures transparent and lawful disposal decisions. A mandatory six-month waiting period is built into the process before property can be disposed of or destroyed. This period will allow any interested parties to make claims on the property. However, if a magistrates court orders that the property be returned to its owner, there is no waiting period for that return. Further application to court can be made if initial orders do not resolve ownership or disposal issues, ensuring ongoing flexibility and fairness in property management. Equipping the PSFA with these powers is vital for appropriately concluding fraud investigations and reflects similar practices in other Government Departments.
I turn to clause 9. The PSFA’s use of PACE powers will be subject to robust internal and external scrutiny. Elsewhere in the Bill, clauses 64 and 65 set out provisions under which His Majesty's inspectorate of constabulary and fire and rescue services will work with the PSFA. Clause 9 amends the Police Reform Act 2002 to extend the functions of the director general of the Independent Office for Police Conduct to include oversight of public sector fraud investigators and enables them specifically to consider the PSFA’s use of PACE powers and associated investigations. In doing so, this clause enables the IOPC to be engaged where necessary to investigate death, serious injury, accusations of staff corruption or serious complaints against the PSFA’s use of PACE powers, although we hope that none of those will come to be.
The amendments made by clause 9 also include allowing the Minister to issue regulations conferring functions on the director general in relation to these investigations. In practice, this enables the Minister to detail in due course the specific remit of the IOPC in relation to the PSFA. This clause represents a typical approach to engaging the IOPC in legislation, similar to that of other law enforcement agencies.
The clause will also enable the sharing of information between the director general, the Minister and those who act on their behalf. Additionally, it will enable the sharing of information with the Parliamentary Commissioner for Administration to facilitate potential collaborative investigations with the IOPC. The clause will ensure that any information sharing complies with existing data protection and investigatory powers legislation. Incidents and complaints will be either self-referred from the PSFA or referred to the IOPC via a third party. Any potential cases of serious injury or death that occur in the exercise of the PSFA’s PACE powers would be automatically referred to the IOPC for review.
The use of the independent complaints function offered by the IOPC is a key element of the oversight landscape, ensuring that the PSFA is held accountable to the highest standards in the exercise of PACE powers, and providing confidence to the public that the Government take their responsibilities in using the powers seriously. I went through a lot of detail there, but I know that the Committee is concerned about the proper oversight of powers, as it should be.
Mike Wood
Clauses 7 to 9 give authorised investigators the powers to enter and search premises and execute search warrants, and powers for the seizure, retention and disposal of property. Those are obviously extensive powers with potentially significant consequences. While strengthening powers to tackle fraud is welcome, we have some concerns. For example, clause 7(3) states:
“An authorised investigator is an individual who is authorised by the Minister to exercise the powers conferred by this section.”
The clause would extend some PACE powers to authorised investigators at the PSFA to investigate offences of fraud against a public authority.
An authorised investigator is defined as a Cabinet Office civil servant of at least higher executive officer grade. What training will those investigators have in order to carry out their functions appropriately? In evidence earlier this week about public sector investigators, Dr Kassem said:
“Are they trained and do they have the proper skills to enable them to investigate without accusing, for example, innocent people and impacting adversely vulnerable individuals? That would be the main challenge, in my view.”––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 6, Q2.]
Paragraph 3(2)(b) of schedule 1 states that an authorised investigator may be “a higher executive officer”, which is adding to the positions specified in PACE. The comparable position in the police appears to be specified as
“a police officer of at least the rank of inspector”.
Is the Minister satisfied that a higher executive officer is of equivalent rank and experience to a police inspector? Salary bands would suggest that they are not. A quick search suggests that the starting salary of a higher executive officer may be as little as £38,000, whereas a police inspector in London would typically be on at least £61,000. That suggests that there will be some disparity in the level of seniority that one might expect between the two positions. Is she satisfied that a higher executive officer has the seniority for the very far-reaching powers that the Bill would give them?
Turning to clause 8, it is welcome that there is a role for the magistrates court—we finally have some external oversight—where a Minister must apply to make a decision about an individual’s property.
Clause 9 amends the Police Reform Act 2002 so that an individual may go to the director general with complaints or misconduct allegations in relation to the Public Sector Fraud Authority. However, it appears that there remains discretion for the Minister, who only “may” make regulations conferring functions on the director general in relation to public sector fraud investigators and “may” disclose information to the director general. Does the Minister intend to make those regulations? What may they contain? If regulations are made under those provisions, what parliamentary procedure will they be subject to?
Georgia Gould
I thank the shadow Minister for those questions. As he said, these are important powers, and it is critical that the right training is in place. I reassure him that all these authorised officers will have relevant training to the standard that police officers have for the use of the PACE powers. As he set out in his remarks, an application for search warrants must be made to a magistrate, so there is already an external body ensuring that they will be used correctly.
Another critical component of the PSFA’s use of the powers is that if an authorised officer is visiting a property, they will be accompanied by a police officer and will not go their own, so we have not included powers of arrest because of the nature of the PSFA investigations as separate to the Department for Work and Pensions. The powers sit within a range of safeguards, some of which have been mentioned. To remind Members, His Majesty’s inspectorate of constabulary and fire and rescue services will also oversee the use of all these powers, as it has experience of doing that. The powers will be overseen in any serious circumstances by the Independent Office for Police Conduct.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
Schedule 1 agreed to.
Clauses 8 and 9 ordered stand part of the Bill.
Clause 10
Acting for another public authority
Question proposed, That the clause stand part of the Bill.
Georgia Gould
As I have set out, the Bill provides the key powers to investigate suspected fraud against the public sector. However, to be able to deliver a holistic counter-fraud service and recover vital funds lost to fraud and error, powers are needed to act on behalf of other public authorities for recovery action. That is what clause 10 outlines. The PSFA will already have conducted investigations before the recovery phase and will know the background to the case and the people and businesses involved. It will be able to leverage that information and those relationships to secure recovery, prioritising voluntary repayments first. It will then be able to utilise the proposed recovery powers already used across Government to get back fraudulent funds where people can afford to repay their illicit gains but are refusing to engage with us.
The recovery of fraudulent funds is complex, as is fraud itself. In 2021-22, the Government’s fraud landscape report found that only 23% of fraud losses were recovered. That is not good enough. Having a central recovery function within the PSFA will allow it to develop the expertise and capability required to drive effective recovery action on behalf of other public bodies. Providing the option to keep some of the recovered funds, subject to agreements with the public bodies concerned, helps to fund the development of that recovery expertise and provides value for money for the Government and taxpayer.
Clause 11 outlines the requirement to issue a recovery notice before proceedings can be brought to a court or tribunal. The notice must outline what the Government believe is owed and why. It must also provide information as to how the amount can be voluntarily repaid. Once issued, the liable person has a minimum of 28 days to respond. The recovery notice will effectively signal the end of the PSFA investigation.
During an investigation, a suspected liable person will already have had the opportunity to make their case and provide evidence to support their position. This provides the liable person with further opportunities to positively engage on the matter, either through voluntary repayment or by providing additional evidence. It also provides them with ample opportunity to prepare for a potential future court or tribunal proceeding. The issuing of a recovery notice is therefore an important step that promotes fairness and transparency in proceedings by providing a liable person with an overview of the position.
Clause 12 provides a key safeguard for the use of the recovery powers. During an investigation, the PSFA will collect and assess evidence to determine whether a liable person or business received payments made as a result of fraud or error. It will outline its reasonings in the recovery notice. However, it will be able to use the proposed recovery powers only if a liable person agrees and a court or tribunal has made a final determination of what is owed.
We will not be making unilateral decisions as to what is owed. Instead, this process firmly embeds independent judicial decision making. If a liable person disagrees with the determinations, they can present their case in a court or tribunal. If a liable person agrees, we do not need to seek confirmation from a judge, making important judicial time and cost savings and ensuring that we do not further overburden the judicial system.
Those are all important steps in commencing our recovery action. The positive impact of the Bill is predicated on being able to effectively recover funds identified as being lost to fraud or error. We have already agreed that recovery is a vital new core function of my Department, and it is one that we should strive to ensure can operate effectively to return money lost to fraud and error to the public purse.
Mike Wood
Clause 10 allows the Minister for the Cabinet Office to act on behalf of another public authority to recover a recoverable amount, including bringing court or tribunal proceedings, and recovered money will be returned to the other public authority unless it is agreed that the Minister can retain some or all of it. We have some questions about what has to be agreed ahead of time. Can the Minister just act, or do they need prior approval from the public authority beforehand, so that there is clarity about the basis on which the Minister for the Cabinet Office is acting and any division of recovered funds?
Clause 11 sets out the recovery notice that the Minister must give before proceedings can be brought to court or a tribunal, and what is included in it. How is it decided how much can be recovered? What assets are taken into account, and what is the process before the legal system becomes involved?
Clause 12 sets out that the recovery methods can be used only to cover the amount where the liable person agrees or a court or tribunal has determined the amount is recoverable. Where the liable person does not engage, what mechanisms exist to encourage them to do so? Are there penalties if a court or tribunal is involved, and how long is the legal process typically expected to take, given current capacity? What does capacity look like at the moment? We feel that, in principle, the powers could be proportionate, but that depends on how they are to be exercised. I would be very grateful if the Minister clarified some of those points.
Georgia Gould
The first point to clarify is that before any investigation and any debt recovery are started, there would be a vulnerability test on that individual, and that would be part of the basis for the decision making. As for whether there was a voluntary agreement about the recovery of debt, a conversation would happen with the individual, but there is a limit to the amount that would be recovered—up to 40% of their assets in their bank account for fraud and 20% for error. In terms of whether people would try to frustrate the process by unnecessarily reviewing it, one of the features of the Bill is that it can include interest on the money that is paid, so that is a disincentive to continue to drag out the process, and the matter can be resolved as quickly as possible—and voluntarily.
On the initial phase of the PSFA’s investigatory and debt recovery work, if there is a limited number of officers, we do not expect a high burden on the court system—we expect less than double digits to be taken through initially—and we believe that the provision around interest is a key disincentive against frustrating the process.
Question put and agreed to.
Clause 10 accordingly ordered to stand part of the Bill.
Clauses 11 and 12 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Gerald Jones.)
Public Authorities (Fraud, Error and Recovery) Bill (Fifth sitting)
Tuesday 4th March 2025
(3 months, 3 weeks ago)
Public Bill CommitteesPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 4 March 2025 - (4 Mar 2025)
The Chair
I remind Members to send their speaking notes by email to hansardnotes@parliament.uk and to switch all electronic devices to silent, and that tea and coffee are not allowed during sittings. Should any Member want to speak to any clause or amendment, please bob in the usual way as you would in the Chamber and try to catch my eye.
Clause 13
Penalties etc
Question proposed, That the clause stand part of the Bill.
Georgia Gould (Queen’s Park and Maida Vale) (Lab)
It is a pleasure to serve under your chairship, Mrs Lewell-Buck.
Clause 13 allows the Government to use the proposed recovery powers to recover late penalty payments and associated interest deriving from the civil penalty regime that is introduced in chapter 5 and any additional relevant costs, either awarded by a court or tribunal or incurred in exercising the recovery powers. In all of these cases, money will be owed to the public purse. Once it has been recovered, it can be used for public good. If these sums were to remain unrecovered, it would not have this positive impact.
We are building strong safeguards and appeal routes into all our measures, including on the application of penalties. Decisions to impose a penalty will be taken by authorised officers, and we have discussed the training that they will have. It is also intended that the debt recovery powers will be overseen by the independent oversight mechanisms, which we will turn to later in the session. Where we are justified in using the proposed recovery powers to seek payments directly from bank accounts and pay-as-you-earn earnings, we want to be able to use them. The penalties and costs will all derive from the fraud investigations that the Public Sector Fraud Authority will carry out.
Clause 14 restricts when chapter 4 recovery powers can be used to recover penalties. They can only be used when the timeframe for appealing a penalty has passed without any appeal being bought or any appeal against the penalty has been finally determined by a tribunal. Penalties are issued for important reasons to encourage compliance and to help make the whole Bill work effectively, and to help make the PSFA effective in its efforts to tackle fraud against the public sector.
Penalties are not something that can be put into the back of a drawer and forgotten about. Fraud is an expensive business for Government. It costs us money when people defraud us. It costs us money to investigate, to take proceedings through courts and to pursue recovery. It is not fair that these costs are shouldered by law-abiding citizens. It is right that those who do not follow correct procedures are penalised and have to pay.
Clauses 13 and 14 enable us to hold debtors to account, driving up recovery of what is owed by letting us use the recovery powers in a wider but proportionate manner and with the appropriate safeguards and appeal routes in place. However, this has to be done with respect of due and proper process, which is exactly what this clause mandates. These clauses are important safeguards that rightly prioritise the liable person’s right to appeal a penalty decision over the recovery of the penalty. It provides us with operational flexibility to recover a range of debts, driving up the value for money of our operations. I commend clauses 13 and 14 to the Committee.
Mike Wood (Kingswinford and South Staffordshire) (Con)
Clause 13 sets out that the Minister can use powers to recover amounts from a penalty, such as late payment, but also relevant costs to be awarded by a court or tribunal. Relevant costs rightly also include costs that are reasonably incurred by the Minister in exercising the powers in chapter 4.
Can the Minister share details on what this measure might include? What is reasonable and what are the expected amounts that might be recovered in this way? Does this also cover legal costs—for example, court fees and legal representation? Will it include investigatory costs, such as the use of forensic accountants or data analysts? Does it extend to administrative costs, such as the work of civil servants processing cases? How is reasonableness to be determined within these clauses? What criteria or guidelines will be used to assess whether a cost is reasonable and will there be an independent review process to prevent excessive or disproportionate costs from being been claimed? Will the affected individuals or entities have the right to challenge, at an appropriately early stage, costs that they deem to be unreasonable?
On the expected scale of the costs, do the Government have an estimate of the average cost that could be incurred and recovered under these provisions, and will there be caps or limits on the amount that can be recovered from an individual or organisation? Does the Minister expect those to vary? How will cost recovery be monitored and reported to ensure transparency?
Given the potential financial impact on those subject to enforcement proceedings, it is crucial that clear safeguards, transparency and accountability mechanisms are in place to ensure that costs remain proportionate and fair. I would appreciate further detail from the Minister about how these costs will be defined, managed and reviewed.
Clause 14 provides that the Minister can recover an amount due in respect of a penalty only when the time for appealing has passed without an appeal, or any appeal has been finally determined. We think that that is perfectly sensible and will support the clause.
Steve Darling (Torbay) (LD)
In the oral evidence, Professor Levi highlighted some powers regarding asset freezing that the police have had since 2017. I would welcome the Minister’s reflections on whether these powers could have a significant impact in this area of the law—in particular, whether they would apply to international organisations, and the impact on individuals. I think that would be helpful to the Committee.
Georgia Gould
I welcome the support for the clause. To clarify, the operational costs of running PSFA operations and investigations will not be included in reasonable costs. There is work being done through the test and learn period by the enforcement unit to inform those costs, and guidance will be published in due course. As I have set out previously, there will be independent oversight of the full use of these powers, by a team that will answer to an independent chair. They will report to Parliament and will look at all aspects of the use of these powers, including the cost. If it is not established by agreement, we will have to apply to a court or tribunal to determine what the debt is, so there will be that added aspect of independence.
For asset seizing, we can apply for orders through the courts. In evidence we heard from the financial industry, there were questions about how the powers will work together, and there is work going on to respond to some of those questions. Our teams are working very closely with those financial bodies.
Question put and agreed to.
Clause 13 accordingly ordered to stand part of the Bill.
Clause 14 ordered to stand part of the Bill.
Clause 15
Payable amounts
Question proposed, That the clause stand part of the Bill.
Georgia Gould
Before I go into the detail of the clauses, I want to take a minute, as we are entering a new chapter, to make some opening remarks about the wider powers.
Chapter 4 of part 1 introduces debt recovery powers. In 2021-22, detected fraud and error outside of tax and welfare was £823 million, of which only £190 million—23%—was recovered. Alex Rothwell, from the NHS Counter Fraud Authority, told us in his evidence that the Department recovered only 12% of fraud and error. There is a long way to go in this space, which is why the powers are so important.
We know that recovery of fraud-related debt can be challenging. Debt recovery powers are limited to a small number of organisations and are therefore not available across the public sector. The Public Accounts Committee, Home Affairs Committee and National Audit Office have all strongly challenged the Government to do more across the public sector to take action on fraud loss. As part of the Bill, we are bringing debt recovery powers into the PSFA to enable the Government to better recover fraud debt outside of tax and welfare. We heard from Alex Rothwell that these powers will be incredibly helpful for us to recover more money.
The powers are not new to Government—HMRC and the Child Maintenance Service already have the power to recover debt from bank accounts, and DWP and the Child Maintenance Service can recover debt from earnings. We will utilise best practice from those organisations in operating the powers. Although we initially expect to use them in just a small number of cases, we hope that this will grow as and when the PSFA enforcement unit expands.
We have consulted widely with a range of fraud and debt stakeholders, including public bodies, academics and non-public sector groups. Banks, charities and civil liberty groups have been engaged so that we can incorporate lessons learnt from the experience of debt recovery processes in Government. We know that those in debt can be in challenging situations, which is why the use of the powers will follow best practice across Government, including the Government debt management function standards, and guidance such as the debt management vulnerability toolkit.
Importantly, the powers will only be used once efforts to engage and secure voluntary repayment have been unsuccessful. The only people and companies who will face the powers are those who have the means to repay, but who refuse to do so. Those affected by the powers will have the right to make representations, apply to vary orders, request an internal review, and finally, appeal to the tribunal. The powers will be used by trained authorised officers who will be subject to independent oversight. The debt recovery powers in the Bill balance the need to recover public money efficiently, while ensuring that recovery is fair and proportionate, with robust safeguards to protect those in vulnerable situations.
Clause 15 refers back to clauses 1 and 13 to define a payable amount as: a payment made as a result of fraud or error, as discovered by an investigation into suspected fraud; a penalty under the civil penalty regime established by chapter 5; and, finally, relevant costs. This creates a limitation as to the debts that the Government will be able to use the chapter 4 recovery powers on, specifically, those determined by and during an investigation into suspected fraud, including from associated penalties.
We seek these recovery powers purely to further the counter-fraud activity that we will carry out to tackle fraud against the public sector. We do not intend to become a general debt recovery agency for the Government, and clause 15 confirms that. It reflects the operational context and purpose of the PSFA and its focus on tackling fraud and error.
Further to that, clause 16 confirms that we will be able to seek alternative recovery action through the civil courts. Although the Bill will provide the powers to seek recovery directly through bank accounts and PAYE earnings, these might not always be the most appropriate or effective recovery route. For instance, the liable person might hold significant other property assets or keep assets or money abroad. In those cases, it would be unfair for us not to seek recovery.
We therefore wish to work through established legal procedures to ensure that we can seek to pursue recovery through the most appropriate and effective mechanisms—for example, liability orders. The importance of clause 16 is that it confirms that the Bill does not limit existing powers. I commend clauses 15 and 16 to the Committee.
Mike Wood
As the Minister said, clause 15 establishes that a payable amount is a recoverable amount as defined in previous provisions of the legislation, while clause 16 further grants the Minister the power to apply to the county court for a recovery order. That ensures that a recoverable amount is treated as an enforceable payment under section 85 of the County Courts Act 1984, or as if it was directly ordered by the court.
While the mechanism for recovery is now clear, there are important practical questions about its implementation. First, we would like further reassurance about the impact on the county court system. What projection have the Government made regarding the number of cases that they expect to be brought under these provisions? Given the existing backlog in county courts, what assessment has been made of the additional burden that these measures will place on the system? Has the Minister engaged with her colleagues at the Ministry of Justice and His Majesty’s Courts and Tribunals Service to ensure that county courts have the capacity and resources to handle these cases efficiently and in a timely manner?
To develop further the issue of efficiency and speed of resolution, what is the expected timeframe for these cases to be resolved once an application is made? Do the Government anticipate delays due to a high caseload in county courts, and if so, what mitigations are they putting in place to help to deal with those delays? Will the Government publish guidance or at least a framework on the expected process and timeline for obtaining a recovery order?
It is essential that these powers do not result in undue delays, excessive court burdens, or legal uncertainty for those subject to a recovery order. Further clarification from the Minister would help to ensure that this system functions fairly and efficiently—balancing the need for enforcement and fairness to the taxpayer to recover sums that are owed, with the available judicial capacity.
Georgia Gould
We have published an impact assessment. That says that with the current size of the enforcement unit, we expect there to be about eight cases, so a small number, but of course if the powers work well and we expand the unit, that will increase. As the hon. Member would expect, we have engaged heavily across Government on all these questions. The critical thing is that there is significant deterrence to having to go through a court process—in terms of the interest that is going to grow on the debt, and the fees that would be accompanied by the legal costs and other costs associated with that process. Our hope is that the majority of people will go through a voluntary process—that will be both easier and less expensive for them—and that these powers will be used primarily as a deterrent.
Question put and agreed to.
Clause 15 accordingly ordered to stand part of the Bill.
Clause 16 ordered to stand part of the Bill.
Clause 17
Direct deduction orders
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clause 18 stand part.
Clauses 20 and 21 stand part.
Georgia Gould
Clause 17 introduces direct deduction orders as a method to recover public funds lost to fraud and error from a liable person’s bank account. Direct deduction orders are a vital mechanism to recover funds from a liable person who can afford to repay their debt but refuses to do so. This debt recovery mechanism is not new to Government; the Bill seeks to bring powers that are used elsewhere into the PSFA, not to create brand-new powers for the PSFA. That provides assurance of their effective and proportionate use, and we are doing the same here. The introduction of direct deduction orders is essential to bolster the Government’s ability to recover public funds, ensuring that taxpayer money lost to fraud and error is reclaimed and redirected towards essential public services and the common good.
To safeguard the use of these powers, direct deduction orders will be used after an investigation by the Public Sector Fraud Authority into suspected fraud against a public authority. The decision to make a direct deduction order will be made by trained and authorised officers in the PSFA who will work to the standards of the Government counter-fraud profession. The investigation must determine, to the civil standard of proof, that money is owed to the public sector as a result of fraud or error. As I have said, we will seek voluntary engagement and repayment, and only after those efforts have been unsuccessful will direct deduction orders be used. As outlined in clauses 12 and 14, there are clear restrictions as to when these powers become available, ensuring that their use is not unfettered.
Mike Wood
Clause 17 establishes that when a payable amount is recoverable, the Minister can issue an order for direct deductions from a liable person’s bank account, either through regular deductions or a lump sum payment, as she said. Clause 18 further clarifies that those deductions can be taken from any account in which the liable person has a beneficial interest. That is extremely important, given the difficulty in establishing the different networks of bank accounts that may be held, particularly in cases of serious and organised fraud. We welcome the flexibility the clause introduces.
Although the provisions aim to improve efficiency in recovering public funds, there are still questions regarding fairness, proportionality and the safeguards that are in place, starting with the definition of beneficial interest in clause 18. Clause 18(1) allows the Minister to make an order on an account that is held by the liable person and contains an amount that the Minister considers the liable person has a beneficial interest in. What criteria or evidence does the Minister expect the PSFA to use in determining a person’s beneficial interest in an account, given the complex ownership and title structures that may be in place? On the flip side of that, how will the rights of third parties be protected, particularly if funds belong to someone other than the liable person that might be held in a shared account?
That brings us to the question of joint accounts. Clause 20 assumes that a joint account is split equally between account holders unless the Minister has reason to believe otherwise. What types of evidence would be accepted to demonstrate that the liable person’s beneficial interest is different from an equal split? The Minister referred to bank statements, but would those investigating also look at legal documents or perhaps third-party testimony? Would that be appropriate in some circumstances? Will additional checks be carried out to ensure that joint account holders are not unfairly penalised for debts that might not be theirs? It is not uncommon for people in marriages or long-term partnerships to have a domestic joint account. It might well be that one of the partners in the relationship is, in practical terms, paying more into an account, but also using the account more than the other partner, despite the two names being equally on the face of the account.
Clause 21, on the notice and the right to respond, sets out the process of notifying banks and liable persons before deductions are made, and includes provision allowing them to make representations within 28 days. The clause allows the Minister to notify the bank first before informing the liable person, to prevent account closure, asset withdrawal or other measures being taken to deprive the taxpayer of the recovery of sums that might rightfully be recoverable. Can the Minister point to a precedent for that approach in other areas of law? How does that align with best practices in financial enforcement?
Although clause 21 allows the liable person to make representations to the Minister, there is not an explicit provision for an independent appeal mechanism. Is there a reason why the Bill does not provide for such a process? Would the Government consider an independent review mechanism, beyond the systematic review that is in place for the Bill, to ensure that decisions are fair and transparent and do not disproportionately affect people in individual cases?
To go back to the potential risks of financial and domestic abuse that I touched on earlier, deducting money from joint accounts could create serious risks for individuals in financially abusive relationships. What safeguards will be put in place to prevent financial hardship, particularly for vulnerable individuals who might not actually be responsible for the debts that the PSFA seeks to recover? What specialist training will staff receive to identify and mitigate the risk of financial or domestic abuse? The effectiveness of the measures will depend on strong safeguards, clear guidance and robust oversight mechanisms to ensure fairness and proportionality. I would appreciate further clarification from the Minister on those points.
Steve Darling
I rise to speak about clause 20 in particular. Liberal Democrats are heartened by clause 18, which clearly says that if there is another account the money could be drawn from, that will be utilised. However, we are particularly concerned about coercive and controlling relationships.
In my 30 years serving the people of Torbay as a councillor, I found on a number of occasions that people who are happy to conduct fraud against other parties, whether the state or other organisations, are often very happy to financially abuse their partners as well. That leaves their partners in a very vulnerable situation. I found that often the individuals affected are very trusting people who have vulnerabilities elsewhere in their lives, which would be recognised by the Department for Work and Pensions if it were supporting them.
I really want to hear from the Minister how the DWP is going to support people and be alive to the risk. It is about making sure that there is a culture of knowledge of the issue among the investigators. Although it is essential that we get the money from fraud in, we do not want collateral damage on people who have been abused.
Rebecca Smith (South West Devon) (Con)
I have some queries about clause 17 and the provisions on recovery from bank accounts. My comments apply to clause 38 as well, but I will speak specifically to clause 17.
Earlier, the Minister mentioned that some of the powers for direct deductions and deductions from earnings are used more widely across the DWP, particularly in the CMS for recouping costs for parents. Have the Government thought more broadly than simply direct deductions and deductions from earnings? My understanding is that the CMS has quite strong powers beyond that and has used them in the past.
Given the nature of fraud against public authorities—these are ultimately quite serious offences—what more has been done to consider whether direct deductions and deductions from earnings are enough and will be all that is required? At some stage, do we need to think about putting in tougher and more stringent powers to claw back the money owed to the Government?
John Milne (Horsham) (LD)
As the Minister described, the powers in the Bill are already used by other parts of Government. Can she provide us with any evidence of their success? Are they doing the job they were made for? Have they led to a change in behaviour in the way potential fraudsters set up accounts or attempt to disguise beneficiary interests?
Georgia Gould
I really appreciate the focus on vulnerability and oversight, because with these powers comes a huge amount of responsibility. The questions that have been raised today are really important.
First, the joint account holder will be able to make their own representations for review. The starting point will be the equal split, as was set out, but they will be able to make representations and ask to have their rights reviewed as part of the investigative process.
On the wider point about vulnerability, which was well made, there is a huge amount of established practice in Government, and the PSFA will seek to learn from that. The Government debt management vulnerability toolkit will be utilised. All the authorised officers will have training in vulnerability and economic abuse. Vulnerability assessments will take place in every single instance of debt recovery and vulnerability will be kept under review. A range of training and safeguards is in place around our approach.
On clause 21, I reassure the shadow Minister that there is precedent in HMRC. There can be both an internal review and an appeal, which is set out in clauses 34 and 31.
A wider point was made about whether we have looked at different and wider powers. The thing to remember about the powers is that in the majority of cases, but not all cases, we expect them to be used to recover funds from organisations rather than individuals, which is why we have focused on the financial side of debt recovery and penalties. Other powers are used by other Departments. I said earlier that we want to continue to be able to use other legal procedures to pursue recovery, including liability orders, and the Bill will not stop us doing so. We have a range of options in front of us.
Rebecca Smith
I thank the Minister for that reassurance and for outlining that there are further abilities to recover funds. Particularly in recoveries from organisations, does that include the seizure of assets should that be necessary? A lot of organisations might be asset rich but cash poor. If we seek to retrieve money on behalf of the Government, is the ability to seize assets, if required, within the framework the Minister alluded to?
Georgia Gould
Among the powers in the Bill there is only the power to recover debt through the ways that I have set out.
Question put and agreed to.
Clause 17 accordingly ordered to stand part of the Bill.
Clause 18 ordered to stand part of the Bill.
Clause 19
Requirement for banks to provide information
Question proposed, That the clause stand part of the Bill.
Georgia Gould
The clause outlines the information notices that can be given to a bank, how the bank must comply, the information it must provide and how the information can be used.
To determine whether to make a direct deduction order, an account information notice or a general information notice may be given. This is crucial in ensuring that sufficient financial information is gathered to facilitate informed debt recovery decisions, thereby enabling the effective recovery of public funds. The information provided by the banks is necessary and proportionate to ensure that the liable person’s financial situation is considered before a direct deduction order is made. This approach is already used by HMRC for its comparable direct recovery of debt, and it is also requested by the DWP in part 2 of the Bill.
The information gathered will protect vulnerable people, prevent hardship and safeguard non-liable joint account holders, while acknowledging the vital need to recover public funds lost to fraud and error. Banks must comply with a notice under the clause, and may be liable to a penalty for failure to comply without a reasonable excuse—this will ensure that the measures are adhered to. Furthermore, banks are prohibited from notifying account holders that they have received a notice under clause 19, to avoid tipping off debtors and thereby prevent money from being moved from the account. Overall, the clause is necessary in furthering the effective recovery of public funds. Having outlined the key provisions in clause 19, I commend it to the Committee.
Mike Wood
Clause 19 grants the Minister significant powers to obtain financial information from banks before making a direct deduction order, including the ability to request three months of bank statements, or perhaps statements covering a longer period where specified. The power to issue an account information notice requires banks to provide statements to determine what deduction should be made, and the power to issue a general information notice requires banks to disclose an individual’s account details, balances and correspondence addresses.
Clearly, in many investigations there will be good reason why some or all of that information is necessary, appropriate and justified. Of course, some of the information will be extremely sensitive, so we need necessary safeguards and appropriate oversight to ensure that sensitive information is requested and subsequently shared only where it is directly necessary to the investigation, and where the Minister or PSFA has justifiable grounds to think either that an error is costing the public sector significant amounts of money or that there has been a case of deliberate fraud. As I said about the previous grouping, a prohibition on banks informing the liable person that an information notice has been issued is a sensible measure to prevent that person from taking action to frustrate attempts to recover money that ought to be recovered—they could, for example, empty their account before deductions could take place. In principle, we support powers designed to ensure effective debt recovery under the right circumstances and when used in the right way, but there are several concerns regarding proportionality and oversight when it comes to protecting legitimate privacy rights.
First, on the unlimited timeframe for bank statements, clause 19 states that the Minister must obtain at least three months’ worth of statements, but can request a longer period if specified in the notice. What criteria will determine whether more than three months of statements is needed? Is there a reason why no upper limit is specified within the clause on how far back those requests can go? Clearly, the further back that requests are made for a bank statement, the greater the risk that they could lead to overly intrusive requests that may not be entirely necessary for the debt recovery.
On the broad information-gathering powers, the general information notice allows the Minister to demand a full list of all accounts held by the liable person, their details and their addresses. Presumably, that is for the specific financial institution that the notice refers to. Are there any safeguards to prevent excessive or disproportionate use of those notices? Must there be a reasonable suspicion or at least a threshold to be met before those powers can be exercised? The Bill states that the Minister can only request information to exercise their core functions, but that is obviously a very broad measure so could be interpreted very broadly.
Banks would be prohibited from informing the liable person that an information notice had been issued. Although that prevents individuals from evading deductions, it means that they may be unaware of a Government investigation into their finances even after the event. Are there any circumstances in which the liable person might be informed that their financial data has been accessed—perhaps after an investigation has been closed? Does the Minister envisage any independent oversight to ensure that those powers are used proportionately?
On the burden on banks and financial institutions, on which my hon. Friend the Member for South West Devon and I have tabled amendments to be debated later in the proceedings, these powers will require banks to process and respond to Government information notices, likely adding costs and administrative burdens to those institutions. Have the Government consulted with financial institutions to assess how proportionate the kinds of requests envisaged under the Bill are, the ease or the difficulty of compliance, and the estimated cost to banks and the financial sector? During evidence last week, some financial institutions did not seem to have any idea of what scale of burden that would be putting on their members. Again, a large part of this came back to the lack of visibility of draft codes of practice.
On privacy and data protection concerns, although the Bill states that the Minister can only request relevant information, that can be interpreted broadly. What legal protections exist to ensure that financial data is accessed and used appropriately for the very narrow purposes for which these clauses are intended? Will there be an independent review mechanism to assess whether those powers are used lawfully and proportionately?
Finally, given the wide-ranging implication of the powers, further clarity and safeguards are needed to balance effective debt recovery against individual privacy rights. I would welcome further details from the Minister on those critical issues, so that we can be comfortable going forward that the wide-ranging powers that we would be granting to the Minister and the PSFA cannot be misused and that individual privacy rights will be protected and respected.
Steve Darling
I ask the Minister to reflect on how speedily the Bill is going through Parliament. As we heard from the hon. Member for Kingswinford and South Staffordshire, financial institutions are not clear about the impact on or the cost to them. When we legislate in haste, challenges will often come out of the woodwork in the longer term. In this particular area, again, the issue is about the safeguards. We assume that we are dealing with reasonable people, but we do not have to look far in international news to see what can go wrong when unreasonable people gain power.
Where are the safeguards? When holding a Minister to account, it is often assumed that the Minister will be a reasonable person. Sadly, however, in the future the Minister may not be a reasonable person, so where are the safeguards for individuals? Also, as alluded to earlier in the debate, it would be helpful to have some assurance on the banks and the impact on them.
Georgia Gould
Let me go through those points in turn. The first question was about why someone might need information before three months. There are two critical reasons why: one is to ascertain potential vulnerability and affordability plans—we have talked about safeguarding joint account holders so as to have more information—and the other is to prevent people from evading paying: if more information were needed to ensure that the assets had not been moved. Throughout, we have tried to balance ensuring fairness for the taxpayer and protecting vulnerability. I hope it will give some reassurance that such powers are used effectively elsewhere in Government. We have learned from best practice.
I talked through the process of the first notice, and that will be where the individual is informed that that information has been requested. As we have discussed, a number of safeguards are built into the process, and the intention when recovering debt will be to work with the individual and to make it collaborative. If people refuse to pay, only at that point would we apply to the courts or a tribunal, where safeguards are of course in place.
To the wider question of what safeguards hold the system to account, as I have outlined and as we will discuss in more detail later, a team answerable to an independent chair will oversee every part of the process, including the ability to look at live cases and at the patterns, to ensure proportionate use of the powers. That individual will report to Parliament. Separately, a fully independent body will review the full use of the powers. We expect that to be His Majesty’s Inspectorate of Constabulary and Fire and Rescue Services. The Bill also includes a provision to make the PSFA a statutory body, and so fully independent of the Minister. While it remains in this smaller phase, where we are testing the powers, the independent safeguards are built in.
On the point about the consultation with the finance bodies, I hope the Committee heard in the evidence that UK Finance was clear that we have been having a constructive dialogue on all of the issues. The PSFA has published an impact assessment, which suggests that, in the first instance, banks will need to look at a very small number of cases. We have committed to testing and learning alongside the process as the PSFA grows. There will be established practice for working closely with the banks. We expect the burden on banks for the application of the PSFA powers to be limited. I hope that gives some reassurance on oversight.
The Chair
With this it will be convenient to discuss clause stand part and clause 23 stand part.
Mike Wood
Clause 22 outlines how much can be directly deducted from a liable person’s bank account, while clause 23 specifies the information that must be included in direct deduction orders. These provisions are central to the enforcement mechanism and yet there are many questions that remain about their practical implementation and fairness.
As we have said many times in Committee, it is very difficult to assess how the system will work without seeing a draft code of practice. As Anna Hall from the Money and Pensions Service said when giving evidence last Tuesday,
“the code of conduct will be the critical thing. One of the things is that if frontline staff are not picking up vulnerabilities, or they are not trained in how to sort out affordability, in empathic listening or in all the protocols about how to have different types of conversations with people in different types of vulnerable situations—if those things are not in place—some of the processes in the Bill will not be as effective. It comes down to the training for frontline staff, and the capacity and processes to then follow up on what has actually been disclosed, that will enable those repayment plans to be put in place before those later processes. If those are not in place, that could cause some real issues. How successful this Bill is will come down to the code of conduct, as many have said.”––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 30, Q49.]
The Minister kindly promised during earlier sessions that:
“As for the development of the codes of practice, as I hope the Committee will see today, I will refer to the measures that are to be put in the code of practice as we go through the clauses, so that we can have some discussion about that.”––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 27 February 2025; c. 92.]
This is another occasion where it would be helpful, as the Minister suggested, to know a bit more about the code of practice, to enable us to scrutinise the provisions better. As witnesses have said, the code of practice is key to how effective the provisions will be. The effectiveness of the Bill will depend on matters such as the training for frontline staff on assessing affordability and vulnerabilities, the processes to evaluate hardship and to create fair payment plans, and the protocols to identify and support people in vulnerable situations.
Can the Minister provide further information about the code of practice, when it will be available for scrutiny and how it will relate to those elements of these clauses? How will the direct deduction system work in practice? As I say, this is a question about staff training and decision making; it will be an operational matter rather than something that can necessarily be directed from Westminster or Whitehall, so how will staff determine a suitable recovery amount and timeline? What principles will guide repayment plans, and how will assessments be made to ensure that affordability and prevent hardship?
Without knowing those matters, it is difficult to judge the appropriateness of some parts of these clauses, because there obviously will be some vulnerable individuals who might be subject to some of the measures in these clauses. What safeguards will be in place for those who require additional support? Will special provisions exist for individuals facing mental health issues, financial abuse or crisis situations?
I turn to the limits on deduction amounts. This is an area where we think the Government are possibly not going far enough: they are setting a maximum deduction limit even when sufficient funds exist and even when the Minister is satisfied that there has been deliberate fraud and an intention to deprive the taxpayer of money that should rightfully be being spent on public purposes.
Obviously, there are some safeguards in the clauses relating to hardship and essential living costs. The legislation states that deductions must not
“cause…hardship in meeting essential living expenses,”
but just how is that hardship to be assessed? Would someone who fraudulently obtained money be allowed to retain it if they successfully argued that they would suffer hardship from repaying it, even if they were never entitled to the money in the first place? And where does that line fall? Presumably, we would not expect them to be able to retain money to allow them to lead a certain quality of life that they may be used to, but that is obviously very different to being able to pay essential bills.
Under the Bill, in cases of fraud, only 40% of credited amounts can be deducted in the relevant period. We are not sure why that cap is in place when the individual was never entitled to the money. If a person has sufficient funds and there has been a conscious—perhaps even organised—attempt to defraud the public sector, why limit recovery rather than allowing full repayment?
That brings me to amendment 19, which stands in my name and that of my hon. Friend the Member for South West Devon. It proposes removing the 40% cap to ensure full recovery under this legislation where possible and subject, obviously, to the safeguards to which I have referred—the hardship test and the independent oversight that is contained within the clauses.
Mrs Lewell-Buck, if you had defrauded the taxpayer out of £100,000—I am not for a moment suggesting that you would—and £100,000 happened to be visible within your bank account, and the Minister was satisfied that that was the result of a conscious course of action on your part to defraud the taxpayer and that there was no reason to imagine that losing it was going to cause you obvious hardship, why should you be allowed to keep £60,000 of that £100,000 in your bank account, even though the money was simply not yours? In that hypothetical situation—I ought to repeat that—it would be stolen money. It does not seem right that the legislation appears to protect 60% of defrauded money and prevents recovery through these mechanisms, so I intend to push amendment 19 to a Division. Who is subject to the safeguards in the clause? If the Government are confident that those safeguards are robust enough to apply to the first 40%, it seems that they ought to be robust enough to apply to the remaining 60% as well.
Returning to clause 22, what happens if too much is deducted? The Bill states that the Minister must not deduct more than the payable amount, which is a sensible and logical bar to set. However, what mechanisms exist to correct over-deductions? What recourse does a liable person have if an error is made and they suffer loss as a result of an over-deduction?
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Is the shadow Minister suggesting a level of deductions that is acceptable? The amount that the Department for Work and Pensions can claim back has fluctuated in recent years. Are the Opposition proposing a level at which that threshold should be set?
Neil Coyle
I am not talking about the amount for those who have committed fraud but for the second group that the shadow Minister mentioned, where there perhaps has been a mistake.
Mike Wood
In the case of non-fraudulent claims, where the Minister is not satisfied that there has been fraud on the part of the liable person, I would be inclined to go with the Government’s figure of 20%. That is reasonable in the case of errors, and it obviously allows for longer-term recovery where a genuine mistake has been made. Where there is deemed to have been fraudulent activity, it does not make sense to give those responsible the protection of protecting 60% of the money that they have stolen.
Neil Coyle
Is the shadow Minister’s other concern, with those who have committed fraud, that he thinks the payment should be faster? The Bill allows for 100% of this falsely claimed sum to be recouped, but he seems to be suggesting that he would like to see that done faster. Is that the nature of the amendment?
Mike Wood
Obviously, the Bill allows for sums to be recouped through regular earnings. Where money is in a bank account, we have established that the money is there from the information notices and other measures in the Bill. If the full amount that has been defrauded is available within the account, it seems to make little sense not to be able recover that sum from the account, rather than relying on a deduction of earnings order.
Clause 23(5) requires banks to comply with direct deduction orders. Have the financial institutions been consulted on those obligations and are they content with them? As was said earlier, the evidence that we heard last Tuesday suggested that many financial institutions did not seem to have a grasp of what those obligations and burdens might look like, as well as the costs that would arise.
To conclude, the effectiveness of these provisions will depend heavily on the codes of practice on staff training and on fair procedures. Further clarification is needed to ensure deductions are proportionate, transparent and do not cause undue hardship, particularly in cases of fraud and financial vulnerability. But where there has been demonstrable fraud, the Opposition see no reason to protect 60% of credit in a bank account where it may be linked to conscious efforts to defraud the taxpayer. I would welcome the Minister’s response to those concerns.
Steve Darling
The Liberal Democrats support this Conservative amendment. I will not go over the arguments again, as they have been well put. Some clauses talk about safeguards. It is about the culture of the organisation, making sure that individuals have professional curiosity and how to foster that within the organisation. Professional curiosity can bear significant fruit for a number of Government organisations when they conduct activities, but broadly we are supportive.
Siân Berry (Brighton Pavilion) (Green)
It is a pleasure to serve under you today, Mrs Lewell-Buck. I do not support the Conservative amendment. A lot of the discussion in Committee has been about reducing the risk of harm to potentially vulnerable people and people caught up in these frauds, who might not deserve to be punished in any way. I would not support taking out a measure that is there presumably to reduce the consequences of making an error. Therefore, I will not support the amendment.
Georgia Gould
I welcome the opportunity to respond to the amendment and to clarify an error that I made in a previous discussion that might have contributed to some confusion. When I talked about the recovery of debt and a limit to the amount that will be recovered, I mentioned up to 40% of assets when I meant to say credited amounts. To be clear, in the instance that the shadow Minister mentioned—say the Member for Kingswinford and South Staffordshire defrauded the Government, they had £200,000 in their account and it was a lump sum, the powers would enable the PSFA to recover that money, with the safeguards of not leaving that person in financial destitution. The 40% is related to ongoing repayments and the speed of repayment. I hope that that gives some reassurance to the hon. Member.
To the points that Opposition Members have made about vulnerability and training, the PSFA authorised officers will be highly trained. They are subject to professional training and a code of ethics within that. That includes the kind of professional curiosity that the hon. Member for Torbay talked about. On debt recovery, they will work to establish debt practice, including the debt management vulnerability toolkit, which is publicly available. I would be pleased to send him those documents so he can understand the vulnerability assessments that will be made and scrutinise them.
To go through the detail of the clauses, specifically for a regular direct deduction order, the total deductions in a 28-day period must not exceed either 40% or 20% of the amount credited to the account in the relevant period: for fraud, 40% is the maximum; for error, the maximum is 20%. Throughout the Bill, we have sought to bring powers that are used elsewhere into the PSFA, not to create brand new powers for the PSFA. This provides assurance of their effective and proportionate use, and we are doing the same here. The 40% maximum limit is in line with existing legislation, such as the DWP’s existing direct earnings attachment powers and the Child Maintenance Service deduction from earnings order powers.
Mike Wood
I thank the Minister for giving us some clarification on that, but the direct deduction is different from an earning attachment where there is likely to be another similar amount coming in the following month. The Minister suggested I might have £200,000 in my account, which I think would raise a few eyebrows all around. But if all £200,000 had been the result of fraud from the public sector, and I chose to put that regular direct deduction order in place, my understanding of clause 22(3) is that in the first month the maximum that could be deducted would be 40% of £200,000—which is £80,000.
Georgia Gould
First, I want to make absolutely clear that I was not accusing the hon. Member of any fraud, but just using a hypothetical. In that instance, the PSFA would use the lump sum direct deduction orders, so they would be able to take the full amount. They would not need to use the direct earnings attachment. It would be a lump sum direct deduction order that would recover that money. As I said, there are no limits to that, except that it does not cause hardship in meeting essential living expenses. I hope that provides some reassurance.
The 40% maximum limit is in line with existing legislation. The amendment seeks to remove the 40% cap for fraud, allowing a higher percentage of regular deductions to be made. To be absolutely clear, for lump sum direct deduction orders, there is no maximum limit on the total amount of deductions. However, the lump sum deduction must still adhere to the core principles, in meeting essential living expenses and be otherwise fair. That ensures that where a higher proportion of the payable amount is present in the account, we can recover the debt more efficiently while maintaining those key safeguards.
We are also able to issue a lump sum direct deduction order and then establish a regular direct deduction order. That allows us to take an initial higher amount of deduction, with regular payments thereafter where appropriate. This is a better route than allowing for a higher level of deductions. It builds on established practice, is proportionate while still being impactful, and it limits the disincentive to earn that an unlimited regular deduction would create. A too-high regular deduction would disincentivise earnings so strongly that it would result in slower, not faster, recovery of funds for our public services.
I turn to clause 22, which sets out the amount of deductions that there may be under an order. We have ensured that the amount of debt we collect at any given time is fair. That is why we established maximum limits based on whether debt was accrued due to fraud or error. We have discussed the safeguards and precedent at length, and the powers here build on precedent across Government. A key consideration throughout the creation of the debt measures was to robustly prevent hardship, learning from best practice. The challenge was to balance that with the need to send a strong deterrent message to those who have the means to pay their fraud and error-related debt to Government, but refuse to do so.
Clause 22 caters for that by ensuring that the terms of the order will not cause the liable person, any other account holder, or a person living with or financially dependent on the liable person or any other account holder, hardship in meeting essential living expenses. To ensure we include other considerations outside of this list, the terms of the order are also required to be otherwise fair in all circumstances.
Clause 23 provides the contents and effect of direct deduction orders. Regular and lump sum direct deduction orders must specify the amount, or a method for calculating the amounts, to be deducted and when. A regular deduction may specify different amounts or different methods to be deducted at different times. For example, the first deducted amount may be higher than the following payments to recover the debt in the most efficient way possible. Deductions may not be made until 28 days after an order has been made. That provides a safeguard for the liable person, allowing them the requisite time and opportunity to request a review under clause 45. Banks must comply with the direct deduction order, whether regular or lump sum, to ensure adherence to these measures. A penalty may be imposed for failure to comply under clause 53.
Clauses 22 and 23 send a strong message to those with fraud and error-related debt to the Government, while preventing hardship and protecting those who are vulnerable. They play an essential role in the operation of a direct deduction order and align with the core principle of seeking the effective recovery of public funds.
I have set out the powers that are available under the Bill, but as I said earlier, they do not prevent the Government also being able to use powers that are already available, such as applying to the courts to seize assets. Having outlined the key provisions in clause 22 and 23, I commend both to the Committee.
Mike Wood
Given the Minister’s reassurances, I will not press amendment 19 to a Division now, but we may wish to come back to the matter on Report. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 22 and 23 ordered to stand part of the Bill.
Clause 24
Bank’s administrative costs
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
New clause 6—Report on cost implications for banks—
“The Secretary of State must, within three months of the passing of this Act, publish a report on the expected cost implications of the provisions of this Act for banks.”
Amendment 23, in clause 103, page 63, line 35, at end insert—
“(3A) Before bringing into force any of the provisions of Part 1 of this Act, the Secretary of State must consult with banks as to the costs which will be incurred by banks upon application of the provisions of Part 1.
(3B) Where consultation finds that the expected costs to banks are at a disproportionate level, the Secretary of State may not bring into force the provisions which are expected to result in such disproportionate costs.”
Georgia Gould
Clause 24 enables a bank to deduct administrative costs that it has reasonably incurred when complying with a direct deduction order from the liable person’s account. This provision is essential to ensure that banks are adequately compensated for the administrative efforts required to comply with the orders, thereby facilitating the efficient operation of debt recovery processes while protecting account holders from undue financial strain. A direct deduction order will then specify how the bank can deduct its administrative costs while complying with the maximum amount of total deductions as specified in the clause 22.
Clause 37 contains a power to make further provision through regulations as to the administrative charges which can be imposed by the banks. That power will be used to introduce a cap on the charges which can be imposed under this clause and which can be adjusted in line with inflation and to ensure that the charges remain reasonable at all times. The amount may be deducted by the bank immediately prior to the direct deduction order. To safeguard against that causing unintended hardship, the question of deducting the bank’s administrative costs for the liable person must be taken into account when complying with the hardship considerations outlined in clause 22. That will ensure that the direct deduction order and deduction of the bank’s administrative costs do not cause the liable person, other account holders, those living with the liable person or joint account holder or those financially dependent on the liable person or joint account holder hardship in meeting essential living expenses and that the deductions are otherwise fair in all circumstances.
Regarding the burdens on the financial services sector, the Government are extremely mindful of the burdens that the Bill places on industry, including financial institutions. We want to ensure that banks are not subjected to disproportionate burdens or costs in complying with these measures. As I have outlined, that is why we met with key representatives of the finance industry, including UK Finance, individual banks, building societies and the Financial Conduct Authority, to ensure that there is close and sustained engagement on this Bill. We heard directly from UK Finance in evidence last Tuesday. The finance sector has supported the Bill’s objectives and there are constructive conversations already taking place. The direct deduction order powers in this Bill align with those existing powers and we will continue working with the DWP to align direct deduction order processes across both Departments where possible to simplify implementation.
Mike Wood
As the Minister said, the clause allows for deductions from a liable person’s account to include reasonable costs incurred by the bank in processing the deduction order. While the clause will ensure that banks can recoup legitimate administrative expenses, several important questions arise about fairness, oversight and overall financial impact.
Steve Darling
I echo many of the concerns raised by the shadow Minister. There are serious issues with giving a blank cheque to banks to undertake certain activities. How are they planning to calculate what their cost is? Is it purely the direct cost of that activity, or are they able to ladle into that some of their central costs? Clearly, if they did not exist as a bank, they would not be able to undertake these activities. There is uncertainty, and we wish to see fairness and transparency. Some feedback from the Minister on this matter would be extremely welcome, because although it is fair that people pay for the activity to be undertaken by banks, so that the burden does not fall on either the banks or the taxpayer, it is important that it is equitable. I look forward to the Minister’s response.
Georgia Gould
I referred in my opening remarks to the positive and ongoing conversations that we are having with banks and the UK finance industry, and that was reflected in the evidence we heard. A UK Finance representative said that a number of conversations with industry have taken place since the measures were announced, and referred to “constructive conversations”.
Concerns were raised about safeguards for the charges that banks could put in place under the PSFA measures, and I have already outlined some of the safeguards in place. The deduction of a bank’s administrative costs should not cause the liable person, other account holders, those living with the liable person or joint account holder, or those financially dependent on the liable person or joint account holder hardship in meeting essential living expenses, and they should be fair.
There are further protections in the Bill. Clause 37 contains the powers to make further provisions through regulations on the administrative charges that can be imposed by the bank. The powers will be used to introduce a cap on the charges that can be imposed under the clause and adjusted in line with inflation. To give further reassurance to the Committee, this is in line with the powers that HMRC has through the Enforcement by Deduction from Accounts (Imposition of Charges by Deposit-takers) Regulations 2016. For HMRC, the regulations specify that the amount should be
“the lesser of…the amount of those administrative costs reasonably incurred by the”
bank “and £55.” So there is precedent, and the necessary regulations will be made in due course.
In my view, new clause 6 is not required. We have already published the Bill’s impact assessment, which sets out the minimal expected cost to businesses of its measures, where it has been possible to do so, including to banks. The impact assessment has been green-rated by the Regulatory Policy Committee. DWP has also committed to providing estimates in a subsequent impact assessment of the business costs for DWP’s eligibility verification measure, within three months of Royal Assent. So DWP has already come forward to commit to bringing forward that information as part of the package. I am confident that that will provide the necessary transparency that the shadow Minister seeks, and I hope that our commitment again today to provide those costs reassures hon. Members.
Equally, we believe that the purpose of amendment 23 is already provided for through the regulation-making powers under clause 37. As I stated, we have consulted and will continue to consult the banks to implement the measures in part 1 of the Bill, as set out in the published impact assessment. In part 1, the costs to banks are expected to be minimal and offset by the ability of banks to recover administrative costs from the liable person.
Clause 24 enables the banks to recover administrative costs from the liable person, and clause 37 provides for regulations to be made in relation to the costs that a bank may recover by virtue of clause 24. We intend the regulations to be reasonable for those paying and for the banks. Before introducing such regulations, a consultation must occur with those representing the interests of banks. We are committed to continuing engagement and consultation with the financial services sector through the passage of the Bill and its implementation —indeed, that has been ongoing since evidence was given last week.
It is important to put the cost to banks in the context of the amount that will be recovered under the Bill, which we estimate to be £940 million—money that is vital to delivering public services. It is right that every part of the system plays its part in recovering money that was lost to fraud. Having outlined the key provisions in the clause, I urge the Committee to agree that it should stand part of the Bill.
I have just received a message: I thought I said that DWP would produce an impact assessment in 12 months, but I said three months. I assure everyone that it is 12 months.
Question put and agreed to.
Clause 24 accordingly ordered to stand part of the Bill.
Clause 25
Insufficient funds
Question proposed, That the clause stand part of the Bill.
Georgia Gould
The clause sets out the action to be taken if the amount in the account is lower than the amount specified in the direct deduction order. Should that situation arise in relation to a lump sum direct deduction order, no deduction is to be made by the bank, and the bank must notify us as soon as possible. If it occurs in relation to a regular deduction order, the order is to be read as requiring the deduction to be made on the same day the following week. If the amount in the account still remains lower, no deduction is to be made and the bank must notify us as soon as possible. That approach ensures that individuals are not unduly penalised or driven into financial hardship because of insufficient funds, while maintaining the integrity of the debt recovery process through prompt communication and reassessment. Having outlined the key provisions of the clause, I commend it to the Committee.
Mike Wood
The clause outlines the procedure when a bank account does not contain sufficient funds to fulfil a direct deduction order. The key provisions are as follows. For lump sum deduction, if the full amount is not available, no deduction is made and the Minister is notified. For regular deductions, if the necessary funds are not available, an attempt is to be made again on the same day the following week. If funds remain insufficient, no deduction is made and the Minister is notified.
I have some key questions and concerns as to what happens next. Once the Minister is notified, what are the next steps? Does the notification trigger further action to recover the money through other means? Is there a set timeframe in which the Minister must decide on further steps? Does the Minister have discretion to determine the best course of action, or are there prescribed steps that must follow? If funds are unavailable in the specified account, is there a process to check whether the liable person has other accounts in their name with other financial institutions that may have sufficient funds? Would the Minister have the power to issue a further general information notice to a bank in order to identify other accounts that could be used for recovery?
Georgia Gould
I am grateful for the shadow Minister’s questions. This clause and his questions really highlight the balance between safeguarding vulnerability—ensuring that people are not left without money to be able to support themselves and dependants—and recovering all the money owed to the Government.
Hopefully, the shadow Minister will be reassured that alternative recovery methods will be available, including using other powers in the Bill to gather information on, or recover money from, other accounts held by that liable person. If an individual continues to try to frustrate the process, as the shadow Minister has described, there are civil penalties through deduction orders of £300. If all the powers in the Bill are frustrated, the authorised officers will be able to apply to the courts to seize assets and to use other powers available. There are a number of options to ensure the full recovery of defrauded money to the state.
Question put and agreed to.
Clause 25 accordingly ordered to stand part of the Bill.
Clause 26
Restrictions on accounts: banks
Question proposed, That the clause stand part of the Bill.
Georgia Gould
Direct deduction orders will be an effective tool in recovering money owed to the public sector. However, it is important that we include measures in the Bill to make clear the obligations of banks and account holders with regard to the orders.
Clause 26 introduces restrictions on accounts from the perspective of banks. The bank must ensure that the account is not closed at the request of the account holder. If the notices relates to a lump sum direct deduction order, the bank must also secure that no transactions occur that would reduce the balance below the amount specified on the order, or the bank may transfer the specified amount, or the amount in the account if it is lower, into a hold account created by the bank to protect it. The bank must ensure that no transaction occurs that would result in the hold account’s balance falling below the amount transferred into it. When a bank transfers an amount into a hold account, it must ensure that in doing so, it does not cause any disadvantage to the liable person or any account holder. These provisions are essential and are a key safeguard to ensure that funds required for recovery are preserved while also protecting account holders from any disadvantage, thereby maintaining trust and fairness in the enforcement process.
Clause 27 imposes restrictions on account holders to prevent them from taking any action that may frustrate the effect of the first notice or direct deduction order, which the shadow Minister raised concerns about. To clarify, frustrating the effect of the first order in this context means frustrating the effect of the proposed direct deduction order, the terms of which are set out in the first notice. Frustrating the effect of the first notice or the final direct deduction order might include a liable person creating a new bank account in order to redirect the payment of their salary, or the liable person falsifying the extent of their protected essential living expenses.
These restrictions are vital to ensure that funds necessary for debt recovery are not deliberately concealed or moved, thereby upholding the fairness and integrity of the public fund recovery system. They are also balanced within the wider direct deduction order measure, which includes review and appeal rights that are also intended to be subject to independent oversight, to be discussed later. Should a person frustrate the effect of the first order or direct deduction notice, a trained authorised officer may decide to impose a penalty under clause 53.
Mike Wood
Clause 26 places significant responsibilities on banks once a direct deduction order has been issued. The bank must ensure that the account is not closed while a deduction order is active, prevent transactions that would reduce the balance below the required deduction amount—for example, the transfer of funds—and ensure that these actions do not cause disadvantage to the liable person.
I have a few questions about those responsibilities. How are banks expected to assess disadvantage or hardship, based on what is likely to be very limited information available to them about their account holders? What guidance or criteria will be provided to banks to determine what constitutes a disadvantage to the liable person? How can banks assess the potential immediate impact of blocking transactions, including preventing spending on essentials—for example, food or utility bills—and any consequences that might arise from that? How will they consider longer-term financial obligations, such as rent or mortgage payments, disruption to which could cause significant hardship?
The lack of a code of practice makes it difficult to properly scrutinise these measures. The code of practice is expected to provide crucial details on how banks should balance enforcement with protecting individuals from undue harm, but we will have to wait until after we have made decisions in Committee and in the Bill’s remaining stages to see it. It would be helpful if the Minister could clarify how these concerns will be addressed in the code of practice and provide as much specificity as possible.
Clause 27 states that account holders must not take actions that frustrate the direct deduction process, such as closing the account, moving funds elsewhere to evade the deduction or engaging in other actions that undermine the effectiveness of the recovery process. The matter of penalties for non-compliance needs to be looked at carefully. What penalties will be imposed if an account holder deliberately frustrates the deduction order? Would non-compliance be treated as a civil offence, or could it lead to criminal penalties in cases of deliberate obstruction? If the financial institution failed to prevent it, would that be a civil offence, or would it be seen as a regulatory issue?
Is there an appeal mechanism if an account holder can prove that a transaction was necessary and not an attempt to evade the deduction? For example, what would happen if someone urgently needed to pay rent or buy medicine and did not realise it would interfere with the deduction order? Would there be any flexibility in cases of financial difficulty, and how would that be assessed?
Given the significant responsibilities placed on banks and the potential impact on individuals, further clarity is needed on how banks will be guided in assessing disadvantage and hardship, how the code of practice will address these concerns and ensure practical implementation, what penalties will apply if an account holder frustrates the deduction process or if a financial institution fails to prevent such frustration, and what appeals or exceptions exist for necessary transactions that unintentionally interfere with the deduction order. Those clarifications are essential for ensuring that the system is both effective and fair.
Georgia Gould
It is important to set out again that these powers will be used in the last instance and, in many cases we hope they will be a deterrent. In the majority of cases, we expect people to engage with the authorised officers and come to a voluntary agreement. If people do not agree, the powers will be used only after an application to a court to determine the ability to recover that debt. In the first instance, we expect these powers to be used in a very limited fashion; the impact assessment talks about fewer than 10 cases a year. There is ample time to work through with banks how these powers are used and ensure that it is proportionate.
The shadow Minister raised concerns that the powers are too harsh in some cases and that they will leave people vulnerable in others, which shows the balance involved. The measures have been carefully thought through, and they include safeguards for vulnerability but also the ability to step in if people are deliberately frustrating the process.
We will issue guidance to banks on how the three months of bank statements will be determined, and authorised officers will work with banks to ensure that this works effectively. The shadow Minister asked about the penalty. It will be a £300 fixed penalty notice for failing to comply. As with every part of this, people will be able to request a review and, ultimately, to appeal.
Question put and agreed to.
Clause 26 accordingly ordered to stand part of the Bill.
Clause 27 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Gerald Jones.)
Public Authorities (Fraud, Error and Recovery) Bill (Seventh sitting)
Thursday 6th March 2025
(3 months, 3 weeks ago)
Public Bill CommitteesPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 6 March 2025 - (6 Mar 2025)
The Committee divided: - Ayes: 6 / Noes: 10 - Question accordingly negatived.
The Chair
I remind members to email their speaking notes to hansardnotes@parliament.uk. Members should not imbibe tea or coffee in the room, and electronic devices should be switched to silent.
Clause 56
Procedural rights
Question proposed, That the clause stand part of the Bill.
The Parliamentary Secretary, Cabinet Office (Georgia Gould)
It is a pleasure to continue to serve under your chairmanship, Sir Desmond.
A priority when designing the Bill was that its powers be sufficiently balanced by strong oversight and transparent safeguards to protect the vulnerable and guard against human error. Rightly, a large number of the questions from the Committee have probed that. Clause 56 is a key part of that design. It ensures that certain steps must be taken and assured before a penalty may be issued; these steps cannot be rushed, skipped or subverted. As I have confirmed, the application of these powers will be strictly limited to specifically authorised officers within the Public Sector Fraud Authority, as set out in clause 66. To exercise the powers, these officials will be required to comply with the relevant training and qualifications, as set out in the relevant codes. They will be subject to both internal and external oversight, including scrutiny of training.
Further safeguards are embedded throughout the legislation for civil penalties. These include the right to make representations in clause 56, the ability to request an internal review in clause 57, and the ability to request an appeal to an appropriate court in clause 60. Additional details of the safeguards will be set out in a code of practice published before the first use of the civil penalty powers. I will give some detail of what will be in that code of practice when we discuss the later clauses. Clause 56 is essential because it holds the PSFA and this Government accountable, ensuring that the safeguards are not only explained to the public but maintained and reviewed by independent oversight.
Clause 57 ensures that a penalty decision notice must be issued before a penalty is imposed, and provides an essential safeguard by giving individuals access to a review and sufficient time for it to be carried out. Powers of review will be available only to authorised officers within the PSFA who are appropriately trained. Penalties are a key part of the deterrent message that this Government wish to send by delivering the Bill. Fraud will not be tolerated, but it is not enough to simply recover money lost to fraud and error. A clear message must be sent that fraudulent actions have consequences.
Clause 58 is essential to ensure that the PSFA enforcement unit acts with transparency and is held accountable for its decisions. It is also an essential safeguard for the individuals and businesses that it will deal with, as it provides a right of review and a chance for decisions to be challenged. As part of the process, the penalised person will have the opportunity to request a review of the penalty and state why it should not be imposed; a person may contest the level of the penalty. During review, a penalty will not be imposed, per clause 57(3). If a person is not satisfied with the result of a review, they will have the opportunity to appeal the outcome to an appropriate court, per clause 60. Reviews will be carried out by an authorised officer of higher grade than the authorising officer who made the original penalty decision, as stated in clause 66(3). This is yet another safeguard that ensures a fair review of the penalty.
Mike Wood (Kingswinford and South Staffordshire) (Con)
The clauses outline the steps and safeguards before the Minister may impose a penalty. Getting these provisions right, ensuring that due process is followed, affected individuals and businesses have a right to respond and penalties are not imposed arbitrarily, is crucial.
Clause 56 sets out the procedural rights of a person facing a penalty. It ensures that penalties are not imposed without the affected party first being allowed an opportunity to respond. Subsection (2) requires that a notice of intent be given to any person facing a penalty, inviting them to make representations before a final decision is made. Under subsection (3), the notice of intent must include the amount of the proposed penalty, the reasons for imposing a penalty of that amount, and the means by which representations may be made, as well as the timescale for doing so.
As we are approaching the end of part 1, I know that the Government will be disappointed if I do not have a long list of questions on these provisions for the Minister. A theme from Tuesday’s sessions was the time limit on representations. The Bill states that individuals and businesses must be given a minimum of 28 days to make representations. There is a little more flexibility in the provisions we debated on Tuesday, but do the Government intend to set a maximum limit, whether in the legislation or perhaps the code of practice, on the number of days that would be available for such representations? If not, how will it be ensured that the process does not become excessively prolonged, as the Minister spoke about on Tuesday? As well as causing delay for the public authority seeking to recover funds, it might cause uncertainty for businesses and individuals. We are also interested to hear about guidance that might be issued on when it would be appropriate to vary the 28 days and allow a longer period for representation in order to strike a balance.
On the issue of authorised officers, and assuming that the decisions are being delegated, the Minister has previously referred to the Carltona principle whereby Ministers can delegate decision-making and executive powers to appropriate officials. In the light of the Government’s intention to repeal the Northern Ireland Troubles (Legacy and Reconciliation) Act 2023, I am interested to know whether they have assessed the impact that might have on the operation of the Carltona principle in these circumstances. The principle is derived from pre-second world war case law, but it was significantly weakened in the Gerry Adams challenge. It was one of the things the previous Government were seeking to change, as a response to amendments in the House of Lords to re-establish the principle. In the absence of the 2023 Act, will the principle still be legally robust enough to allow the delegation that the Government intend under this Bill?
We assume that the decision on whether to maintain, reduce or cancel a proposed penalty will be made by an authorised officer rather than the Minister for the Cabinet Office, so will the Minister set out the level of seniority of the authorised officers within the PSFA and how that decision was reached? What training will those officers be required to undergo for this specific function, and what steps is the PSFA expected to put in place to ensure consistency in decision making across different cases?
Clause 57 outlines the process for issuing a penalty decision notice once a final decision has been made. Again, the requirements in the clause appear to be sensible and necessary if we are to ensure that individuals and organisations are fully informed of their liability and have an opportunity to challenge decisions that they believe to be incorrect or unfair, so we support the clause standing part of the Bill.
Clause 58 deals with reviews of penalty decisions. I have a few questions about who in the PSFA or Government will conduct the review. Who will ensure that they are properly separate from the individual decision-making process and if the reviews are to be conducted by officials, what will be the level of seniority required?
The clauses set out important procedural safeguards that seem to be appropriate to ensure penalties are not imposed unfairly. If we are given clarification regarding the degree of discretion available, the seniority, and training in decision making and the safeguards that ensure fairness, we will be content for the clauses to stand part of the Bill.
Steve Darling (Torbay) (LD)
It is a pleasure to serve under your chairmanship, Sir Desmond. The Liberal Democrats broadly welcome the proposals in the clauses. Safeguarding people is an essential part of the Bill. I suspect we will go into that in greater depth as we embark on part 2.
Georgia Gould
I would indeed have been disappointed if the shadow Minister had not had lots of detailed questions for me on the operation of the powers. I agree wholeheartedly about the importance of safeguards.
To take the questions in turn, we are confident of the legal robustness of the Carltona principle. It is how Government routinely works, and we are confident that the powers can be exercised by highly trained authorised officers. As the shadow Minister says, 28 days is a minimum. There are no plans at the moment to introduce a maximum, but the intention is for the team to work as quickly as possible to recoup public money. As we have discussed, there might be exceptional circumstances where people need more time, and the authorised officers will be able to provide that time on a case-by-case basis, always bearing in mind the need to return money that is owed because of fraud.
We will talk shortly about the oversight and review process, but we want a separate team outside the PSFA that is answerable to an independent reviewer. It could look at the wide range of cases and ensure there is consistency and that powers are used proportionately. It could report to Parliament, so there would be ongoing scrutiny of the exercise of the powers. It is important to remember what will have taken place by the time we get to a penalty. In order to establish the recovery of a debt, if the individual did not agree, the matter will have gone to court. An authorised officer will have reviewed the case and submitted to a senior member of the team the rationale for a penalty to be imposed.
There are a number of routes of review. The first is a review by another authorised officer of a higher grade in the PSFA team. If the individual is not satisfied with that, they will, as the shadow Minister set out, have the ability to apply to a court or a tribunal to have that reviewed. There are robust safeguards built in within the PSFA and outside the PSFA.
Question put and agreed to.
Clause 56 accordingly ordered to stand part of the Bill.
Clauses 57 to 59 ordered to stand part of the Bill.
Clause 60
Appeals
Georgia Gould
This legislation is underpinned by robust oversight and layers of protection for individuals and businesses. Safeguards have been put in place to ensure that there are sufficient opportunities for individuals and businesses to make representations, request internal reviews of decisions and appeal to the relevant courts. Every opportunity will be provided to ensure that no one is penalised unfairly or in error.
Clause 60 is an important final safeguard that ensures that everyone has the right to appeal to an independent court or tribunal should they disagree with the PSFA’s final determination. Per clause 14(b), once an appeal is made, recovery measures may not be exercised until after the appeal is heard and completed.
The clause includes a delegated power that allows the Minister, by regulation, to make further provisions about appeals. The regulations are subject to the negative procedure. Crucially, the Minister is not given the power to remove the right of appeal; instead, the Minister may amend the clause simply to make the appeal process more efficient—for example, by allowing an appeal against a penalty or debt to be heard at the same time.
Mike Wood
We support the provision that a person can appeal against a penalty to the appropriate court. This is an appropriate level of oversight for these civil penalties, and it is appropriate that the court can uphold, revoke or amend the penalty notice and make the final decision on whether an individual should be penalised for fraud. Obviously the Minister’s judgment that the behaviour was fraudulent and caused the loss to the public authority will form a part of that decision. It is clearly right that there is a role for the legal system in the appeal process. It is also sensible to have the decision by the appropriate court marked as the final decision, to prevent ongoing appeals that could frustrate the proper recovery of funds that are properly payable.
The clause also allows the Minister to make further regulation via the negative procedure regarding appeals against a penalty notice. Will she explain why the negative procedure was judged appropriate in these circumstances, rather than one that would allow Parliament automatically to have its say on any proposed regulations? What further provisions does she envisage being introduced at a later date? I understand that part of the purpose of the clause is to accommodate unforeseeable changes in circumstances, so it is not always possible to see the detail, but some clarity on the kind of area or circumstances in which regulations may be needed would help the Committee to form a judgment on the clause. If no further provisions are expected and there is no reason to imagine that they may be necessary, that clearly renders that part redundant.
That is a rather shorter list of questions to this clause—I am drawing to a close. I would appreciate if the Minister could provide that clarification.
Georgia Gould
I am pleased to provide that clarification. As I said, the critical point is that this provision is very limited in its scope, and the right to appeal set out in the Bill cannot be removed. In my initial remarks, I gave an example of making the appeal process more efficient, such as by allowing an appeal against a penalty or debt to be heard at the same time. The provision is limited to how appeals are operationalised, and does not affect the right to have an appeal.
Question put and agreed to.
Clause 60 accordingly ordered to stand part of the Bill.
Clause 61 ordered to stand part of the Bill.
Clause 62
Code of practice
Question proposed, That the clause stand part of the Bill.
Georgia Gould
The clause is an important part of the Bill because the code of practice will set out how and why civil penalties will be calculated and imposed. This will help to ensure that those powers are used transparently and reasonably. I made a commitment as we went through the previous clauses to go into detail about what will be in the code of practice, which I plan to do now.
The code of practice will set clear guidance and standards for authorised officers when using the powers. It will also help the general public to understand how those powers are exercised. To encourage co-operation with our investigations, allowing the PSFA to recover more from fraudsters in the most efficient way possible, it may be appropriate to offer discounted penalties to those who co-operate.
We will consult on the code of practice and publish it ahead of the first use of the civil penalty powers to ensure sufficient time for Members to familiarise themselves with the measures. In the spirit of being helpful to the Committee, I want to give as much detail as I can on what the code of practice will contain so that the House has the opportunity to understand it, as well as the other place in due course. This will of course be subject to change if either House amends the Bill.
The code of practice will set out the statutory obligation under which it is published, who the intended audience is, and how it should be used. It will set out the rights of anyone who is penalised, which will include appointing legal advisers or other representatives, and how to access legal aid, if entitled to do so. It will set out how the civil penalty system will be overseen by senior officials and set out the roles of the oversight function and the “independent person” under clauses 64 and 65.
The code will explain the scope of the power and how individuals, companies and other organisations will be treated. It will also set out the various kinds of penalties in the Bill, and that penalties may be applied to fraud that occurred before the Bill is enacted. It will cover the training that authorised officers will have undertaken before being authorised to issue civil penalties and the standards used by the Government’s counter-fraud profession.
The code will inform the public about the investigative process in enough detail to give a fair understanding of how cases will be proven to the civil standard, without giving so much information that it would enable a fraudster to game the system. This will include how cases are referred to the PSFA, how authorised officers will be trained to assess individual vulnerability and how that will be assessed during the initial case assessment.
The code will explain how the information powers in the Bill work, how they will be used, the safeguards for their use and how reviews may be requested. It will include how authorised officers will establish a claim, including in court, and how authorised officers will assess whether a case meets the civil burden of proof required to issue a fraud penalty. It will also test that assessment with others, including subject matter experts, specialists and legal advisers. It will explain the decision-making process, including who will make the decision about penalty calculation and imposition.
The code will also set out the circumstances in which the PSFA will not apply a penalty, such as where there has been an error rather than fraud. Importantly, it will also make it clear that civil penalties will not be applied as an alternative to criminal prosecution but as a separate response to fraud.
The code will set out how fraud penalty levels will be calculated. Penalties will be bespoke to the case they relate to, based on the individual facts. Penalties imposed will be reasonable and proportionate, and the code will set out what that means in practice. Penalty levels will be decided by reference to a variety of factors, based on the circumstances of each case. Those include, but are not limited to: the financial loss to the public authority; the time period and frequency of the offence, whether it is a one-off or a sustained fraud; the harm done to a public authority; the impact of the offence; the offender’s behaviour; whether the offender has acted alone or as part of a group; whether a position of trust held by those committing fraud has been abused.
Separately, the code will set out how the penalties in the Bill for non-compliance will work, along with information powers and debt recovery powers, and the safeguards that will be in place. It will set out the criteria by which the PSFA may offer to discount a penalty for fully co-operating and disclosing fraud. It is beneficial to the Government to seek early resolution to investigation and enforcement action, and that kind of discount is used elsewhere to incentivise that. However, the code will also explain that there can be no discount without full co-operation.
The code will set out the practical steps of issuing a penalty in accordance with the clauses in the Bill. That will include the issuing of notices of intent; how a person can access their right to make representations on any relevant matters; how penalty decision notices will be issued; and how to access the rights of internal review and of appeal to the tribunals. On that last point, the code will also help a person to understand what a tribunal is and how to appeal. It will not replicate the existing published guidance on the tribunals, which it will instead signpost people to.
The code will set out when a penalty becomes payable, how to pay it and what will happen if it is not paid. That will include setting out how the debt recovery powers in the Bill will work, if their use is required, and other potential routes of debt recovery action. Finally, the code will make it clear how the PSFA will process, hold and share data, as set out in the Bill and with reference to the Data Protection Act 2018.
The content of the code of practice, as I have set out, will give anyone affected by these powers a clear understanding of what will happen and why, their rights and responsibilities, and how the PSFA will act throughout the process. Having explained that, I commend clause 62 to the Committee.
Mike Wood
I thank the Minister for that explanation. Obviously, it is helpful for us to have what are, essentially, the chapter headings of the code of practice—the areas that it will cover. That clearly provides some degree of transparency, but it is no substitution for the detail of what will actually appear within those chapters.
We heard from a range of witnesses last week who, in response to many of our questions, were unable to say whether the powers and provisions in the Bill are appropriate and proportionate because of the absence of detail about the code of practice. It would be helpful and courteous to this House, therefore, if as much detail as possible about what will appear—the actual provisions for how the code of practice will operate, rather than just the chapter headings—could be made available at an early enough stage for it to be considered during the Bill’s passage through this House.
Can the Minister give more information about the input that will go into deciding what the details are within the code of practice? Which stakeholders does she expect will be engaged with? Are there any parallel equivalent codes of practice in other areas that might be expected to be a model for this code, or are we effectively starting with a blank sheet?
Again, although the Minister’s explanation is extremely welcome, we continue to be disappointed that the actual detail is currently scheduled to be made available only for Members of the House of Lords to consider before legislating, rather than elected Members of Parliament. We appreciate the recognition of the importance of transparency, which we are obviously seeking to maintain throughout the Bill, but we hope that the Government will accelerate their plans to provide more information for Members of Parliament so that informed decisions can be made about this important legislation.
Siân Berry (Brighton Pavilion) (Green)
It is a pleasure to serve under your chairmanship again, Sir Desmond. I want to reiterate the points made by the Opposition spokesperson, the hon. Member for Kingswinford and South Staffordshire. It is not good enough to be able to refer only to the official record of the long list that the Minister just read out of what is likely to appear in the code of practice. At this stage of the legislation, we ought to be scrutinising at least a draft.
The clause does not include any consultation on a draft code of practice and there are no scrutiny safeguards built into the legislation, so it is wrong to not be looking at the details. In previous debates, I have set out my concerns that although there have been reassurances that this part of the Bill is about major fraud, and that it excludes the Department for Work and Pensions, it is easy to envisage that there may be a scheme of fraud against other Departments that involves defrauding grants that are available to support people claiming certain benefits. That might bring people who are poorer and more vulnerable into a scheme where, according to previous clauses, these penalties may be applied. We need to look at the code of practice in draft form at this stage of the legislation or as soon as possible.
Steve Darling
Legislation that is rushed is often legislation that is dangerous, and I fear that that is where we are today. The hon. Member for Kingswinford and South Staffordshire was very polite in putting his challenges to the Minister, but I would like to be a little more robust and say that I believe it is extremely unreasonable that we do not have the code before us. “The devil is in the detail” is a hackneyed phrase, but that is the fact of the matter. I say to the Minister that it would be extremely helpful if the code could be published before the legislation passes throughout Parliament, so that there is at least the opportunity to scrutinise it at a later date. I look forward to receiving a satisfactory response from her.
Georgia Gould
I am grateful for those questions. As I set out, the code of practice provides additional guidance and operational detail, but the important thing is that the key safeguards we have discussed are covered in a great deal of detail in the Bill. We have gone through the right to appeal and the level of the authorised officer who will be looking at every part of the process, whether that is the initial decision or the review. We have discussed the timeframes, all the appeal routes that are built into the legislation, and the oversight. The key safeguards to the operationalisation of these powers are in the Bill in a great deal of detail.
It is right that I went through the kind of operational detail that the code of practice will cover. To hopefully offer some reassurance on the questions of consultation and precedent, in developing the code of practice, we are building on a great deal of precedent within Government—from the DWP, the Home Office and His Majesty’s Revenue and Customs—on the use of these powers and what has worked well. There is already a huge amount of consultation, at ministerial and official level, on developing the code. There will be a public consultation on it as well, and, as we have already committed, we will bring forward the code of practice within the parliamentary process.
Question put and agreed to.
Clause 62 accordingly ordered to stand part of the Bill.
Clause 63 ordered to stand part of the Bill.
Clause 64
Independent review
Steve Darling
I beg to move amendment 31, in clause 64, page 34, line 23, at end insert—
“(1A) Prior to appointing an independent person, the Minister must consult the relevant committee of the House of Commons.
(1B) For the purposes of subsection (1A), ‘the relevant committee’ means a committee determined by the Speaker of the House of Commons.”
This amendment would ensure Parliamentary oversight of the appointment of the “Independent person”.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
Clause 65 stand part.
Steve Darling
The amendment is about ensuring transparency around the Bill. I have already explored transparency, and other hon. Members have talked about reasonableness. The Bill gives the Minister the ability to appoint their own independent person. Although I am sure that those in power for the foreseeable future are very reasonable individuals who will genuinely appoint independent persons, we can read in our newspapers about people not very far away who are effectively appointing yes-people around them, so I fear that we need to future-proof the Bill to ensure that the people appointed are genuinely independent.
Constitutions elsewhere in the world have checks and balances heavily built into governance. The amendment, which proposes to delegate to the Speaker the decision about how the appropriate Committee of Parliament can be involved and consulted about the appointment of the independent individual, would be a good way of ensuring genuine independence and reasonableness. I hope that the Government seriously consider it; we will be pressing it to a vote.
Georgia Gould
I will start by talking about clauses 64 and 65, and then I will address the amendment.
It is absolutely necessary that there is appropriate independent oversight to ensure the powers in the Bill are used appropriately, and we welcome debate on that. That is why we have introduced the power to appoint an independent person, which might be one person—an independent reviewer—or an organisation such as His Majesty’s inspectorate of constabulary and fire and rescue services. They will augment the existing oversight structures laid out elsewhere in the Bill, such as the role of the Independent Office for Police Conduct, set out in clause 9, which will investigate the most serious complaints into the PSFA’s use of entry, search and seizure powers.
Clause 64 mandates that an independent person appointed by the Minister undertakes reviews of the use of powers in the Bill. The independent reviewer will conduct reviews to consider whether the exercise of the powers is in keeping with the legislation, codes of practice and relevant guidance. They will produce a report of their findings for the Minister, including any recommendations they deem appropriate. The Minister is then required to publish the report and lay it before Parliament. That ensures there is both public and parliamentary accountability in the role of the independent person outlined in the Bill.
As we state in the explanatory notes, we intend to make the duty imposed by the clause in two ways. First, the Government will commission His Majesty’s inspectorate of constabulary and fire and rescue services to inspect the PSFA’s use of the new investigative powers, which can include the end-to-end investigative process and decision making. HMICFRS has a long-standing history, going back to 1856, and it independently assesses and reports on the performance of police and fire and rescue services in the UK, as well as other public bodies with investigatory powers, such as His Majesty’s Revenue and Customs. HMICFRS reports are already made available publicly, and are an efficient way to hold bodies accountable for their investigative practices.
Secondly, the Government are creating a new position for an independent reviewer to whom the PSFA’s oversight team will report. The independent reviewer will assess how the PSFA exercises the powers given to it in the Bill. The independent reviewer will carry out reviews and report on whether the use of the powers is in keeping with the legislation, codes of practice and relevant guidance, as well as considering areas where HMICFRS or other oversight bodies have not already reported. The independent reviewer could, for instance, consider live case reviews or conduct supplementary reviews between those undertaken by other bodies, or look specifically at how the PSFA has taken forward recommendations from past reviews. The independent chair will have discretion in determining where to focus their resources.
We do not believe it is necessary to legislate in the manner proposed by the amendment to ensure parliamentary scrutiny. Parliament will scrutinise the independent person’s report, which the Minister is obliged to lay in Parliament. There is also an established process for agreeing posts that should be subject to pre-appointment scrutiny by Select Committees without the need for legislative provision. That process is to reach agreement on posts suitable for pre-appointment scrutiny between my Department and the Chair of the relevant Select Committee. We will be following that process for the appointment of the independent chair. We hope that offers assurance to the hon. Member for Torbay. The appointment of the independent reviewer will also fully comply with the governance code on public appointments which is overseen by the Commissioner of Public Appointments.
Mike Wood
Clause 64 sets out that the independent person has responsibilities to prepare and submit a report on the review. We welcome that element of transparency, but are conscious that we need to balance those publications against the privacy of individuals. It is covered within the legislation, but could the Minister further detail the measures that are being taken to ensure that the independent person’s reviews do protect the privacy of individuals involved, especially where there may not have been a legal process in which someone has been found guilty of an offence?
What sort of person is considered an independent person for these purposes? Is the provision intended to create a team of civil servants in the Department who do these reviews, or will it be an individual? What oversight will there be of the independent reviewers, and what resources will they have? Will they have any other responsibilities beyond the report that they produce at the end of the period that the Minister sets out?
Clause 65 allows the Minister to give direction
“as to the period to be covered”
by the review, and provides that the Minister
“may disclose information to the independent person, or to a person acting on behalf of the independent person”.
Even if the Minister is only able to set timeframes for reviews, I would still like clarity as to how independent that person is intended to be from the PSFA, the Cabinet Office and the Minister. We understand why information will need to be shared between the Minister and the independent person if they are to carry out that function, but what protections are in place to maintain privacy and protect against the sharing of unnecessary personal information that goes beyond what the independent person will require?
We have some sympathy for amendment 31, tabled by the Liberal Democrats. There is clearly a need to ensure a proper and open appointment process, as choosing the right person will shape the effectiveness of many of the review mechanisms. It is therefore vital that that decision is right. The involvement of Parliament does seem to be one way of achieving that oversight, in the absence of any better proposal in the legislation. While we recognise that this role may be rather different from the others that are set out in annex D of the Cabinet Office guidance on pre-appointment scrutiny, we would be more comfortable knowing that there is going to be that scrutiny rather than relying, at some point after the legislation is passed, on conversations between whoever happens to be in the Cabinet Office at the time or whoever happens to be Chairing whichever Committee the Speaker feels is most appropriate to be conducting any such hearings.
Georgia Gould
Let me address those questions. The first thing to say on personal or sensitive information is that the teams will of course remain subject to data protection legislation and fulfil all their obligations under the law. Only information that is pertinent and necessary to the review or inspection process will be shared with external bodies, and that will be done in accordance with information handling rules.
The team in the Cabinet Office will be a small, separate team that does not undertake day-to-day investigations; the team will be created to exercise the reviewing powers in the Bill. Its members will take direction from, and report to, the independent chair. They are intended to carry out the day-to-day oversight work as well as to support the functioning of the independent chair, both administratively and in conducting their formal reviews. A similar approach is taken by other independent persons who have a duty to conduct independent reviews or monitoring, and who require support from a Department —for instance, the independent Prevent commissioner for the Home Office. There is provision within the Bill for the PSFA to become a statutory body that will further separate out these functions. I reiterate the point that I made in response to the amendment: we do expect, as is normal process, that there will be a parliamentary role in the appointment of the chair, but we will continue to stay open to all suggestions as the Bill progresses.
Question put, That the amendment be made.
Georgia Gould
The powers in the Bill are conferred on the Minister, but they will be exercised by officials specifically authorised by the Minister and termed “authorised officers”. The clause is an essential element of the legislation. It sets out the decisions that, if not made by the Minister personally, may be undertaken by an authorised officer only: deciding to give an information notice; deciding to give a recovery notice; deciding to make or vary a direct deduction order; deciding to make or vary a deduction from earnings; deciding to give a notice of intent to impose a civil penalty; and imposing a civil penalty.
Furthermore, the clause details some fundamental safeguards on the use of the powers. First, to be appointed as an authorised officer, the individual must be employed in the civil service within the Cabinet Office. That is to ensure strict control over who may use the powers. The clause also defines who may conduct internal reviews, a protection offered widely in the Bill. Any internal reviews must be undertaken by an authorised officer at least one grade senior to the officer involved in the initial decision, or by the Minister. That ensures that officers cannot review their own decisions when challenged for an internal review.
Authorised officers form the backbone of the Government’s approach to taking the powers. The officers will need to complete a rigorous bespoke training programme, which will cover all aspects of investigative practice, including the relevant powers under the Police and Criminal Evidence Act 1984 for authorised investigators. That will be to the same standard as for other public bodies using the same powers. Only after the training conditions have been met will an individual be put forward to the Minister for authorisation to act as an authorised officer and then may use the powers. Their use of the powers must follow strict processes, guidance and codes of practice. They will be subject to internal and external independent oversight of their use of the powers.
The clause is essential, as it provides a statutory gateway for PSFA officials to use the powers under the Bill. Without the clause, the Government’s intention to improve counter-fraud enforcement would either be impractical, or the powers would be given to more individuals than is absolutely required. I commend the clause to the Committee.
Mike Wood
As the Minister says, the clause sets out those decisions that can be taken by an individual authorised by the Minister on their behalf. It specifies that the authorised officer must be a civil servant in her Department. Where there is a review, it must be taken by an authorised officer of a higher grade than the one who took the original decision. As we said when debating earlier clauses, the level of the original officer seems to be set at a rather lower level than in the equivalent decision-making processes in the police and other similar organisations. The measures set out in the clause appear to be sensible, but we have one or two questions about their practical aspects.
In particular, how many of the decisions referred to in the clause does the Minister expect an officer to be likely to make on a weekly basis? When we were debating civil penalty notices, the Minister suggested that it might only be a few a year. This clause covers a rather wider range of notices, so some idea of the workload to be expected of authorised officers will help us to form a better picture of the detail of what we expect authorised officers to be considering. Similarly, does the Minister have any expectation at this stage of how many authorised officers across the different grades will be fulfilling these functions?
Georgia Gould
I thank the hon. Gentleman for those questions. Critically, we have been clear that the team will be small. However, as I have said, if the practical use of these powers goes well—we expect it to, because they are widely used in government—there is the opportunity to grow the team. Importantly, these will be highly trained officers who are specialists in this work. They will have that breadth of experience. In the first instance, we expect around 40 cases a year, but as I said, that is subject to change as time goes on.
The team will be higher executive officers or above in the PSFA. Authorised investigators must also be higher executive officers or above. That means that they will receive further training on PACE powers. Where PACE stipulates that a decision must be made by an officer with a rank of inspector or above, schedule 1 states that it will be taken by an authorised investigator of senior executive officer grade or above. That is proportionate. These are highly trained officers. We specifically ask that the powers not be given out widely, but to a group of people who will have a huge amount of training and oversight to be able to exercise them proportionately, and in a way that recovers fraud but also safeguards those being investigated.
Question put and agreed to.
Clause 66 accordingly ordered to stand part of the Bill.
Clause 67
Disclosure of information etc: interaction with external constraints
Georgia Gould
I beg to move amendment 3, in clause 67, page 36, line 10, leave out “disclosure, obtaining or use” and insert “processing”.
This amendment clarifies that clause 67(3) applies in relation to all processing of information and makes it consistent with clause 67(1) and (2)).
Georgia Gould
The clause is essential in protecting specific information, preventing potential harm to individuals and upholding ethical standards in situations where unauthorised sharing could cause damage. The clause ensures that the powers adhere to current data protection legislation by safeguarding data from misuse, damage and unauthorised access. It also ensures that a person’s legal professional privilege rights are protected. The clause safeguards an individual’s rights and prevents them from being forced to provide information that could incriminate them.
Amendment 3 is necessary to clarify that this power applies to all processing of information, and to provide consistency with clauses 67(1) and (2). It would replace “disclosure, obtaining or use” of information with “processing”. It would create no additional effect and ensures clear comprehension that clause 67(3) applies in relation to all processing of information.
Mike Wood
The clause sets out how the provisions relate to data protection legislation. It is clearly an important provision to reinforce the data protection framework, given the number of concerns raised, particularly by Opposition Members, about the protections for individual privacy. The clause sets out some protection, albeit at a baseline of the existing legal provisions, to prevent breaches of any obligation of confidence owed by the people making disclosure, or of other restrictions including legal privilege. It seems eminently sensible, but will the Minister detail further the oversight mechanisms that will ensure that the safeguards are followed? What processes and avenues are available if someone believes that the requirements set out in the clause have not been followed? How should that be pursued?
As the Minister said, Government amendment 3 is a technical amendment. We have no objection to it.
Georgia Gould
As I set out previously, the PSFA will collect personal data necessary only for the relevant purposes and will ensure that it is not excessive. Any data not relevant to the stated purposes will be erased in line with the data retention policy, which specifies that data connected to a suspected fraud is held for up to five years following resolution. Data that is not connected is held for up to two years. The use of the powers will be governed by the Data Protection Act 2018 and other data protection legislation.
Amendment 3 agreed to.
Clause 67, as amended, ordered to stand part of the Bill.
Clause 68
Crown etc application
Question proposed, That the clause stand part of the Bill.
Georgia Gould
Clause 68 sets out how the powers in part 1 of the Bill variously apply or do not apply to the Crown, to Parliament and to the King and his estates, and in circumstances of grounds of national security. The clause sets important boundaries on the scope of part 1. As such, it is essential that it stands part of the Bill.
The clause ensures that the Crown is bound by specific powers and provisions in the Bill. It applies in relation to premises used or held on behalf of the Crown —for example, a building owned by a Government Department—in the same way as any other premises. For instance, an authorised investigator could, if necessary, apply to a court for a warrant to enter, search and seize evidence from Crown premises. However, it does not bind the Crown in respect of some powers, specifically those in clauses 16 to 37, relating to recovery orders and recovery from bank accounts, and chapter 5, relating to civil penalties. If it did, the effect would be the Crown recovering money from itself or imposing a penalty on itself that it would pay to itself, simply moving money within its own accounts.
Subsection (4) creates a power for the Minister to certify that it appears appropriate in the interests of national security that the powers of entry conferred by this part should not be exercised on Crown premises specified in the certificate. Authorised investigators could not seek a warrant to enter those premises to search for evidence. This carve-out exists because there are certain Crown premises where searching may compromise national security. It is important that this is respected. In that event, the PSFA would discuss with the relevant Department or agency what alternative approach may be possible.
Finally, the clause states that the power of entry conferred by this part cannot be exercised on His Majesty’s private estates or premises occupied for the purposes of either House of Parliament. The King’s private estates are those held by His Majesty as a private person. This does not mean the Crown Estate—the sovereign’s public estates, which are managed by the Crown Estate commissioners on behalf of the Crown. In the incredibly unlikely event that evidence suggested that it was necessary to search the King’s private estates or either House of Parliament, the PSFA would request to be invited by the appropriate authority, which would be the Speaker or the Lord Speaker in the case of this House and the other place, respecting the privileges of Parliament.
Clause 70 is the interpretation clause, which sets out the meaning of terms used in part 1. I do not propose to run through the whole list of terms. Many of them are straightforward and refer back to previous clauses we have debated, but some are important to understand the scope of this part or are used in a novel way. I will say a few words about them so that the Committee can understand them in the correct context.
The first term is “authorised officer”, which we covered in clause 66. In this part, authorised officer has the meaning given in clause 66, which as we have already seen says that they must be employed in the civil service in the Minister’s Department. This means that other types of public sector workers, such as consultants or contractors, cannot be authorised officers, which is a safeguard on the use of the powers.
The clause defines “fraud” as including
“the offences in sections 1 and 11 of the Fraud Act 2006…and…the offence at common law of conspiracy to defraud.”
The Committee will recall that we discussed this in the debate on clauses 1 and 2, and I can repeat the assurances that I gave then. The definition sets the scope of fraud in relation to the core functions of a Minister in clause 1, and it covers the three main fraud offences: fraud by false representation, fraud by failing to disclose information and fraud by abuse of position. It also covers the common-law offence of conspiracy, which requires that two or more individuals dishonestly conspire to commit a fraud against a victim. Together, these give the scope needed to tackle the key forms of public sector fraud.
The clause defines “public authority” as
“a person with functions of a public nature so far as acting in the exercise of those functions”.
This sets out the scope of the Departments, bodies and agencies that the PSFA would be able to work with and on behalf of. The definition is deliberately wide to enable the PSFA to tackle public sector fraud wherever it may arise. It will allow the use of powers to investigate fraud against all central Government Departments and agencies—except HMRC and the DWP, because they already have existing powers—as well as local government and any arm’s length delivery mechanisms that deliver functions of a public nature.
The clause defines “suspected fraud” as
“conduct which the Minister has reasonable grounds to suspect may constitute fraud”.
We discussed this definition in the debate on clause 3. Reasonable grounds to suspect is an objective test meaning a belief based on specific evidence that a reasonable person would hold. It is not just based on the investigator’s own subjective opinion. It is a reasonable test that asks, “Would an ordinary, reasonable person”—like you or me, Sir Desmond—“being in possession of the same facts as the investigator, agree that it was reasonable to suspect that fraud had occurred?” This is a common standard to initiate an investigation.
Finally, beyond the definitions, the clause clarifies references to
“giving a notice or other document”
and sets out how court proceedings are considered to be finally determined. The clause is essential to ensure the correct understanding and interpretation of key terms used throughout part 1 of the Bill.
Clause 71 states that all regulations under this part should be made using statutory instruments. This ensures a structured approach to the regulatory framework. The clause allows for the creation of different types of provisions, such as consequential, supplementary, incidental, transitional or saving measures. This flexibility helps to adapt regulations to various circumstances.
The affirmative procedure requires that the regulations be approved by both Houses of Parliament, which ensures that there is oversight and accountability. The negative procedure allows regulations to be implemented promptly, but they can still be annulled by either House of Parliament if necessary. The option to convert regulations from the negative to the affirmative procedure ensures flexibility in response to the significance of particular regulatory provisions.
Clause 71 is essential for establishing a coherent and responsive regulatory framework in the legislation. By mandating the use of statutory instruments, it promotes a structured process that enhances accountability and keeps the regulatory system transparent.
Mike Wood
We fully support the measures in clause 68 on Crown premises and the Houses of Parliament—they seem perfectly sensible. As the Minister said, clause 70 specifies a whole string of definitions. Given the time, Members may be relieved to know that I do not have a specific response for each of them; there is very little in the definitions to quibble with.
Clause 71 sets out the regulations under this part. The Minister drew attention to subsection (5), which allows for the regulations specified in the Bill to be subject to either the negative or affirmative procedure. As we said earlier in Committee, many of the cases that have been outlined will be require regulations that have potentially far-reaching consequences, both for individuals and organisations. Such consequences would strongly justify the active participation of Parliament, rather than simply relying on the negative resolution, which lacks any guarantee of a debate on an attempt to pray against.
Regulations can be very difficult for Parliament to object to. We encourage the use of the affirmative procedure and hope the Government will detail their intentions on when it will be used for provisions that would otherwise be subject to the negative procedure. Beyond that, we have no objections to the clauses.
Georgia Gould
When I previously went through the different regulatory areas, I also went through which would be subject to the negative and affirmative procedures. I absolutely hear the point; the critical point for me is that the key provisions sit in the Bill. We do not expect changes made by regulation to change the key areas of oversight and the safeguards but, as the shadow Minister says, the provision for changes is there if necessary.
Question put and agreed to.
Clause 68 accordingly ordered to stand part of the Bill.
Clause 69
The Public Sector Fraud Authority
Question proposed, That the clause stand part of the Bill.
Georgia Gould
The clause creates potential for the Public Sector Fraud Authority to be established as an arm’s length statutory body, as defined in schedule 2. It contains provision for the establishment, constitution and operational framework of a new statutory body called the Public Sector Fraud Authority. It enables the transfer of the functions conferred on the Minister by the Bill to the new PSFA, and other practicalities.
The policy intention is not to commence the provisions for the independent PSFA immediately, but at a later date once a review of the effectiveness of the use of the powers has been undertaken. Providing the ability to establish the PSFA as a statutory body allows for future flexibility in how the Government conduct their counter-fraud activities. However, the decision to establish the PSFA as a new arm’s length body should not be taken lightly, nor should any decision to create a new statutory body. The Government have assessed the case for doing so immediately and decided that it would be disproportionate at this time to do so, but that will be kept under review.
The PSFA is running a pilot enforcement function. There are a relatively small number of staff and cases, so we judge that turning the PSFA’s limited enforcement function into an arm’s length body would be disproportionate at this time, given the significant cost and administrative burden involved in the short term. The Government intend to focus instead on ensuring that the powers conveyed in the Bill are bedded in effectively and the oversight is strong, so that the PSFA’s valuable work can benefit immediately from the additional investigative tools and debt recovery powers the Bill enables.
The Government will review the position on the PSFA as a statutory body once a suitable amount of time has passed to fully understand the required scope and scale of such a body. Schedule 2 ensures that, at the appropriate juncture, the Government will have the tools needed to create that body. It provides precise detail on constitution, make-up and remuneration of a board. It enables the PSFA to appoint staff. Remuneration, pensions and other payments shall be determined subject to the approval of the Minister.
Furthermore, the schedule imparts a duty on the PSFA to exercise its functions effectively, efficiently and economically. It allows for the PSFA to authorise a member of the PSFA, their staff authorised for that purpose, or a committee or sub-committee to exercise its functions. The independent PSFA must prepare a report on the exercise of its functions for the financial year, to be sent to the Minister. The Minister must lay the reports before Parliament and publish them. The Minister may create appropriate transfer schemes for assets and liabilities to enable the independent PSFA to exercise its functions. The schedule also provides a regulation-making power to transfer the powers conferred by the Bill to the new body.
The schedule allows the Minister to amend part 1 of the Bill and other existing enactments amended by part 1. This is to ensure that part 1 of what will be the Act is fit for purpose when the PSFA is established as a statutory body. The Minister may make regulations that enable the Minister to give the PSFA general or specific directions regarding the exercise of its functions. This would allow the Minister to guide the PSFA’s strategic priorities to align with Government priorities, or to direct the PSFA’s future structural changes, for example.
Mike Wood
The clause contains provisions on setting up the Public Sector Fraud Authority on a statutory basis. As I said at the beginning of Committee stage, we support the Government’s work to strengthen the PSFA’s role. The form in which it has been operating since it was established under the previous Government offers an opportunity to see how its functions can be exercised more effectively to recover a greater amount of public money that has been lost either to fraud or to error.
Although we have a range of concerns, which we have discussed, about the exercise of some of the functions and, in particular, about the oversight of some of them, we think the decision to have a Public Sector Fraud Authority is the right one, and agree that there may be future circumstances in which those functions could be performed more effectively were the authority placed on a statutory basis, so we do not oppose schedule 2.
As we have reached the end of part 1 of the Bill, and so probably the end my exchanges with the Minister, I thank her for the answers she has given. We will seek to follow up on some of those answers during the passage of the Bill, but for now we are happy for clause 69 and schedule 2 to be part of the Bill.
Siân Berry
In general, I very much support the move to make the PSFA an independent body, and the constitution in schedule 2 seems like a good start. However, looking through it I cannot see anywhere how the people appointed as the chair and executive of the PSFA will be subject to a code of conduct; to rules on transparency and registering interests; to requirements relating to compliance with the Nolan principles; and to the oversight of the Advisory Committee on Business Appointments relating to subsequent work after they leave the PSFA. The Minister, who is currently named in the Bill, is subject to all those requirements.
There is clear potential for conflicts of interests in the various roles, so it is important that they are put under that regime. Will the Minister be clear about how that will come about and whether that could be added to the constitution if it is not already there?
Georgia Gould
I echo the shadow Minister and thank him for his constructive line of questioning. It has been helpful to look into this part of the Bill in such detail. As he set out, I hope we will continue to have conversations about a number of areas, not least some of the commitments I made to look at the provision on 28 days in parts of the Bill. I appreciate the support for the provisions in this area.
On the process of establishing a statutory body, there is Cabinet Office guidance on the establishment of a public body that looks at a whole range of issues, and protections in the ministerial code require Ministers to maintain high standards of behaviour and to behave in a way that upholds the highest standards of propriety.
Question put and agreed to.
Clause 69 accordingly ordered to stand part of the Bill.
Schedule 2 agreed to.
Clauses 70 and 71 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Gerald Jones.)
Public Authorities (Fraud, Error and Recovery) Bill (Eighth sitting)
Thursday 6th March 2025
(3 months, 3 weeks ago)
Public Bill CommitteesPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 6 March 2025 - (6 Mar 2025)
The Committee divided: - Ayes: 13 / Noes: 3 - Question accordingly agreed to.
The Committee divided: - Ayes: 3 / Noes: 13 - Question accordingly negatived.
The Committee divided: - Ayes: 3 / Noes: 13 - Question accordingly negatived.
The Committee divided: - Ayes: 3 / Noes: 13 - Question accordingly negatived.
The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
It is a pleasure to serve under your chairship, Sir Jeremy. In commencing debate on clause 72, my hon. Friend the Parliamentary Secretary, Cabinet Office, passes the baton to me, to discuss part 2 and the elements of the Bill that pertain to the Department for Work and Pensions. This part sets out reforms of the Department’s approach to five key areas: information gathering, the eligibility verification measure, debt recovery, search and seizure, and penalties reform,
Clause 72 inserts proposed new section 109BZA into the Social Security Administration Act 1992. The new section grants DWP authorised officers powers to issue information notices to any information holder as part of a DWP criminal fraud investigation. When I say “authorised officers”, I mean DWP staff who have been authorised by the Secretary of State on completion of training and receiving accreditation, and can therefore issue notices. “Information holders” may include businesses or employers; a useful illustration of the sort of organisation from which we may request information is a travel agency. This kind of information can be vital in proving or disproving fraud.
The DWP already has powers to compel information in the Social Security Administration Act 1992. The Act sets out a list of information holders from which the DWP can request information, but that list is restrictive. New section 109BZA will update the powers to enable the DWP to obtain relevant information from any information holder in respect of all payments and investigations made by the Department; it also includes the ability to compel it electronically, which is a vital updating mechanism. These updates enable the DWP to take an approach similar to the one already adopted by the Scottish Government for their own criminal investigations into social security fraud.
The DWP takes its responsibilities in handling personal information very seriously. That is why new section 109BZA is constructed with a number of safeguards to ensure the appropriate use of the powers. First, per subsections (1) and (2), the power may be used only by an authorised officer where there are reasonable grounds to expect that a person has committed fraud. Reasonable grounds are established by an objective review of available facts, intelligence and evidence. This is the same principle on which the police also determine reasonable suspicion. Reasonable grounds cannot be supported by personal factors or a hunch. In addition, subsection (1)(b) stipulates that all the information requested must be “necessary and proportionate” for the purposes of investigating the fraud allegation. This determination will be made on a case-by-case basis. Mandatory training in the use of this power will be undertaken by all authorised officers.
New section 109BZA will make it easier for information holders to understand and respond to requests for information. It requires that the information notice must identify the individual concerned, and set out how the information should be returned and by when; it must also set out the consequences of non-compliance.
The clause will help to make the DWP’s fraud investigations more effective in both proving and disproving fraud. I understand that the Opposition will be interested in the code of practice, but I urge them to hold their comments until we consider clause 73, in which the code of practice is discussed at length. Having outlined the main provisions in the clause, I commend it to the Committee.
Rebecca Smith (South West Devon) (Con)
It is a pleasure to serve under your chairmanship, Sir Jeremy. As it was to the Minister, the baton has been passed to me from our Cabinet Office spokesperson, my hon. Friend the Member for Kingswinford and South Staffordshire, as part 2 sets specifically how the Bill applies to the DWP.
We recognise that there is a huge amount of work to be done, given the increasing levels of fraud and error against the Department for Work and Pensions in recent years. We broadly support the details of part 2, but unsurprisingly, we will have some questions in the coming sessions, and we are tabling a number of amendments too.
Clause 72 amends the Social Security Administration Act 1992 to provide powers to require information related to fraud. An authorised officer can give a written notice requiring information where they have reasonable grounds to suspect that the person has committed or intends to commit fraud, and where it is necessary and proportionate to do so. The Minister spoke about how this will enable organisations outside the DWP to be required to provide information. It would be useful to understand better the Social Security Administration Act and what it is currently used for, to make sure that we have covered specifically why it needs to be amended in addition to the provisions of this legislation. I recognise what the Minister is saying, but is there a problem now? Are we not able to take its provisions far enough, and so need these changes to be made? Why are existing information-gathering powers insufficient? This is quite a broadening of the current powers, so some clarification would be great.
I have another question on clause 72 and the changes proposed to the 1992 Act. When we talk about a “person”, is this just the person the information is being requested of—an estate agent or whoever it may be—or does the term also relate to the person being investigated? Are we talking about the person who is suspected of committing a fraud, a person in possession of information about that person under suspicion, or both? In effect, who is the written notice intended for? I am sure that is probably straightforward, but it would be useful to have it outlined clearly.
I note what the Minister said about the code of practice, which I was not planning to mention in this speech. I was saving my comments on that for clause 73—we are learning as we go in this. Can the Minister confirm whether there are any limits on the non-financial institutions that will have to provide information under the verification notices? Does this include institutions such as education institutions, insurance companies, water agencies and others that people receiving benefits might be paying bills to? Where do the limits lie around the types of organisations that will be contacted? I appreciate that is done in other legislation at the moment, but it is quite a big move. We may well cover this later, but are they subject to the same sort of time restrictions as other organisations? If a school that has never had to do this before is contacted, and they have no idea of what is expected of them, how are we going to ensure that they are not penalised? This could be the first time that anything like this has come in their direction.
Steve Darling (Torbay) (LD)
It is a pleasure to serve under your chairmanship this afternoon, Sir Jeremy. Liberal Democrats believe, as do all members of the Committee, that fraud is bad. It clearly impacts on the ability of the state to support people and our communities. It is important to put that on the table. I will give a small overview as we start debate on part 2 of the Bill, but as a liberal, the idea of mass surveillance within this part of the Bill causes me grave concern on a number of levels. This will be unpacked over the next few sessions.
I would welcome the Minister commenting on why this piece of legislation is being rushed. The rush poses a danger to our communities. The fact that the Government commissioned a review into the carer’s allowance overpayments is to be welcomed. We Liberal Democrats called for that, but we are gravely concerned that the Government are bashing ahead with this legislation without being able to take into account any lessons that could be learned from the carer’s allowance debacle.
Although the vast majority of the challenges that we face are error and fraud, my and my colleagues’ concern is that the Government need to fix the Department for Work and Pensions, which is effectively broken. I could wax about that for England, but I will not. When the machine is not fit for purpose, we need to fix it before adding more bells and whistles; simply adding to a broken machine will not fix it. I would welcome some explanation of why we are dashing ahead when we do not have the findings from the carer’s allowance overpayments review. I would also welcome a deeper explanation of what reasonable grounds for suspecting fraud will be. Putting a bit more colour on the palette would be extremely helpful.
Andrew Western
I welcome the broad support from the Opposition spokesperson, the hon. Member for South West Devon, for the overall intent of the Bill. She asked a number of questions about the usage of the 1992 Act. It sets out the information-gathering options available to the Department where fraud is suspected. When we want to compel information for whatever reason—it may be a referral, or data or evidence may be suggesting that there has been fraudulent activity—there is the ability to request, as part of an ongoing investigation, any information that may be useful.
There are two principal reasons why we need changes. The first is modernisation, as I said in my opening comments. I am sure all Members can see how being able to request information via digital means will add speed and simplicity to the process. That is a basic modernisation. There is a more significant change in the shift towards an exclusion list rather than an inclusion list of organisations, which broadens the range of organisations that we can request information from.
The hon. Lady asked whether institutions such as schools or utilities companies may be in scope. In essence, anybody is in scope for this power—for a request for information—unless they are withholding exempted information. There is a range of things that would be specifically exempt. Legally privileged material is an obvious example, as is information that could lead to self-incrimination for recipients and their spouses or civil partners.
It is worth saying for clarity that organisations that provide no-cost advice and advocacy services will not be compelled to share personal data about their service users. That will maintain trust, which is an important principle of their work, and allow individuals to seek help without fear of their information being disclosed. There is also an exemption from providing excluded or special procedure material as defined under the Police and Criminal Evidence Act 1984. That includes personal records, including records relating to physical or mental health, human tissue and confidential journalistic materials. Those are the types of information that would be exempt. With the exception of the organisations providing advice and support, all organisations are essentially in scope if they hold other relevant information to help with an ongoing inquiry.
The person in receipt of the notice is the person or organisation we are compelling the information from, rather than the person about whom it is compelled. So the person receiving the notice is the one we are asking for detail from.
Andrew Western
With permission, before turning to clause 73, I will take the opportunity to make a few general points about the approach to codes of practice for this Bill more generally, as that has become a recurrent theme in the line-by-line scrutiny and was in the evidence-gathering sessions last week. The codes of practice issued under the Bill do not contain statutory provisions. That means that they do not have any particular legal effect; they will simply outline how the measures will be operationalised in more detail. The Bill, and particularly its associated schedules, set out a baseline for that operation. In my view, that gives us more than enough opportunity to understand how the Bill will work in practice.
As the codes of practice do not contain statutory provisions, the guidance, as previously referred to in the evidence sessions, does not say that we must provide them alongside the legislation. The guidance even goes so far as to say that it is “unnecessary” to make it a statutory requirement to provide these codes at all, but we have done so as we believe that is the right thing to do. It is the legislation itself, as I said, that should be considered and scrutinised. There is considerable detail within the Bill, and it clearly sets out the legal obligations that the Government are creating that Parliament must consider, as we are doing in Committee.
As I have said, however, we want to be more transparent with the House, because we recognise that these codes are of interest, even if they are not wholly relevant to the legal obligations that the Bill will create. As such, as my hon. Friend the Parliamentary Secretary has done on part 1, I will provide an outline of what the codes will cover as the relevant clauses are debated. We have committed to provide drafts of the relevant codes as soon as they are available. That is not a requirement, but it recognises the interest of Members. We are going above and beyond what is required in the spirit of transparency.
The “Guide to Making Legislation”, which the hon. Member for Kingswinford and South Staffordshire may be interested to know was reissued this week—I assure him that it will be my bedtime reading this weekend—outlines that codes are not to be used as a substitute for legislation. That is why we have made a conscious effort to include lots of detail in the Bill about how the powers will work in practice.
The clause amends section 3 of the Social Security Fraud Act 2001 to require a new statutory code of practice for authorised officers accredited by the Secretary of State to exercise the information-gathering powers under the proposed new section 109BZA of the Social Security Administration Act 1992. Beyond the detail already included in clause 72 and other parts of the Bill, the code will set out more detail on the limitations of the powers and how they must operate, and clear conditions for their use. That includes detail on the meaning of a reasonable suspicion of fraud, as set out in clause 72.
The code will also include additional detail to help guide information providers. It will provide further detail on the timeframes for compliance and how an information request must be complied with—including how to comply with requirements under subsection (5), which includes the power for the DWP to request that information be provided in a specified form, and for the DWP to require an information holder to state where the information may be held if they do not have it and to explain why it cannot be provided.
The code will also include further details on the consequences of non-compliance. Under existing legislation, information providers who fail to comply with an information notice may be subject to prosecution, which can result in a fine of up to £1,000. If they continue to refuse to provide the requested information, they may be liable to a fine of up to £40 for every day that they fail to provide the requested information. That approach will apply to the new information-gathering provisions. There will also be further detail in the code about the consequences for information providers who repeatedly fail to comply with information requests, and about what may be considered a reasonable explanation for why the information provider is not able to comply with an information notice.
Before issuing the code of practice for the first time, we will carry out informal consultation with stakeholders on a draft code, to ensure that their views are reflected in the drafting. Once finalised, the code of practice will be laid before both Houses of Parliament and published.
Rebecca Smith
I thank the Minister for setting out that information. This is a short clause, so my comments will not be long. It amends section 3 of the Social Security Fraud Act 2001 to add a code of practice on the use of information powers exercised by an authorised officer.
As has been said, much has been made of the lack of a code of practice. We maintain our view, and I am sure other Opposition Members will agree. I have heard the reassurances of the Minister and, earlier today, of the Cabinet Office Minister, but the Minister’s indication of what will be in the code gives me an opportunity to ask a couple of questions.
I welcome that there will be a consultation on the code, although I appreciate that it could slow down the introduction of the legislation. Had the code of practice been developed in tandem with the Bill, or even beforehand, we could have implemented the Bill much more quickly after its passage to crack on with recouping some of the fraudulent costs and highlighting any errors being made. However, we are where we are and, even so, I welcome the consultation.
The Minister has reassured me that we will continue to hear about the code of practice, but my other question goes back to what I said on clause 72 about additional non-financial organisations that might be contacted, and to what the Minister has just said about the fines to be levied for non-compliance. A huge amount of responsibility is being placed on the people who receive these notices. This will be new to them as it is a new Government power, particularly as it pertains to the DWP.
What will be in the code of practice to ensure that we remember the people about whom we seek information are not necessarily the ones at fault? How do we communicate with them so that they want to co-operate, and so that they do not end up in a non-compliant position? This may not be within the scope of the Bill, but how do we communicate to the general public, in layman’s terms, what is expected of them? For example, if this lands on the desk of a primary school headteacher, how will the Department ensure that they understand what has been done and are not terrified by the process? How will it ensure that we achieve the process and outcomes we all seek?
Steve Darling
The Minister will not be surprised that I return to the fact that the Bill has been rushed. I respectfully remind him that we are a very refreshed House of Commons. This is fresh information for the vast majority of Members. Although Parliament may have a corporate memory, this Bill has moved at great pace since First Reading and we remain very concerned that this may result in errors.
The Minister has assured us that the code of conduct will be available in due course, but can he identify by what date or by when in the legislative programme? That would give us some comfort. Although positive words have been said about the code of conduct, it drives the culture of an organisation, and culture is extremely important. I look forward to some words of reassurance from the Minister.
Andrew Western
I am not sure that I agree with the assertion of the hon. Member for South West Devon that the time it takes to pass the code will significantly slow down the Bill. As she is aware, we are currently working with a range of organisations and stakeholders, and we are gathering information and ideas for a draft of the code.
To answer the hon. Member for Torbay, we hope to share the draft of the code before Committee in the House of Lords. I am happy to put that on the record, as it is an important point that applies to all codes of practice in the Bill, both for the Public Sector Fraud Authority and the DWP.
I am not sure I fully agree with the hon. Member for South West Devon that we could have saved time by having already drafted and consulted on the code. If there were any amendments to the Bill, the code would have to be rewritten, at least to some extent, to reflect them.
I was asked which organisations are anticipated to be called upon to provide information, as well as their willingness to do so and our ability to maintain a positive relationship. They want to engage with this, because tackling fraud is important and has a clear public benefit. We want to make the information notices as clear as possible. People will have at least 14 days to comply with an information request, and they will have the right to appeal should they have any particular issues. We would look to work with them wherever possible to ensure that they are able to provide the information needed. Clear communication is important, and we want to be certain that we achieve it.
I have dealt with the question about the code of practice, and I hope that is helpful to the hon. Member for Torbay. I struggle rather more with his suggestion that our being a new Parliament means the Bill has been rushed. A number of Bills have already made their way through the House since July. The machinery of government must be able to continue at the pace required to react to change, particularly for a Bill such as this where we are responding to evermore challenging and complex types of fraud. The Department for Work and Pensions alone lost £9.7 billion to fraud and error last year, which suggests to me that urgency is required. On that basis, I see no issues with the timings of the Bill.
Question put and agreed to.
Clause 73 accordingly ordered to stand part of the Bill.
Clause 74
Eligibility verification
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Amendment 30, in schedule 3, page 84, leave out line 12.
This amendment would remove pension credit from being a ‘relevant benefit’ for the purposes of the Act.
Amendment 25, in schedule 3, page 84, line 12, at end insert “(d) housing benefit”.
Amendment 29, in schedule 3, page 84, leave out lines 13 to 17.
This amendment would remove the provision for regulations to change the list of qualifying benefits.
Amendment 35, in schedule 3, page 84, line 13, leave out from “to” to end of line 17 and insert
“remove types of benefit from the definition of ‘relevant benefit’”.
This amendment would mean that benefits could not be added to the list of “relevant benefits” by regulations.
Amendment 24, in schedule 3, page 84, line 25, at end insert—
“or such an account which is held by a person appointed to receive benefits on behalf of another person.”
Schedule 3.
Andrew Western
Before I address this group, may I make a brief correction? I confused my information notices earlier: it is 10 days to comply, with no right of appeal, but we are happy to have conversations with those who, for whatever reason, are unable to provide the information that we require, and to work with them to ensure that they can.
I will speak to clause 74 and schedule 3, and then colleagues can speak to the various amendments. Clause 74 inserts proposed new section 121DB and proposed new schedule 3B, which is outlined in schedule 3 to the Bill, into the Social Security Administration Act 1992. The proposed new clause and schedule contain provision for the eligibility verification measure, and they must stand part of the Bill so the Secretary of State can issue a bank or other financial institution with an eligibility verification notice, which will help the DWP to identify incorrect payments in the social security system.
Ensuring that a person is eligible for the benefit they are receiving will help to prevent fraud and genuine errors so that people do not accidentally build up large debts, with all the worry and distress that causes. The measures before us are tough on fraud, but they are also about: fairness to those who play by the rules and rely on the social security system; fairness to those who make errors, by helping to identify potential errors sooner; and fairness to taxpayers, by ensuring that every pound is spent wisely, responsibly and effectively on those who need it and are legally entitled.
Fraud and error in the welfare system were responsible for the overpayment of almost £10 billion in 2023-24. Since the pandemic, £35 billion of taxpayers’ money has been incorrectly paid to those not entitled to that money. These measures alone will save £940 million over the next five years, up to 2029-30—a figure that has been certified by the independent Office for Budget Responsibility.
An eligibility verification notice issued under schedule 3B will require a bank or other financial institution to look within its own datasets and to provide data to help the DWP identify where someone might not meet the eligibility criteria for a particular benefit. To do that, the notice will contain defined criteria that the bank or other financial institution must use to detect accounts that might not meet the eligibility rules for a certain benefit—for instance, accounts that receive universal credit but have over £16,000 in capital, which is above the normal limit to remain eligible.
Only then, if there is an indication that an individual may not be eligible for the benefit they are receiving, will the bank or other financial institution share limited information about the account to allow the DWP to undertake further inquiries, as necessary. We know that a customer might hold money in more than one account, and not necessarily in the one that receives the benefit payment. For that reason, schedule 3B requires a bank or other financial institution to look at all the accounts it provides to the individual, and to compare them with the criteria set out in the notice.
The measures also contain important safeguards to protect benefit recipients and associated individuals, to protect their data, and to ensure that it is not unduly onerous for a bank or other financial institution to comply with an eligibility verification notice. Those safeguards, which are extensive, include clearly restricting who the DWP can collect information on, and for what purpose; clearly restricting how the DWP can use the information gathered under these powers; tightly limiting the accounts in scope, including the sharing of data on UK accounts; limiting the type of information that can and cannot be requested, with clear provisions that certain data, such as information on transactions, cannot be shared; and showing that a human will always be involved in decisions that affect benefit entitlement. A code of practice must be produced, providing guidance for financial institutions on their obligations under this legislation.
To protect the privacy of our customers and associated individuals, such as appointees, we must take steps to ensure that limited information is shared with the DWP—the minimum to enable further inquiries, where necessary. That is why part 2 of proposed new schedule 3B outlines provision for a comprehensive penalties regime to prohibit banks or other financial institutions from sharing information that is not permitted to be shared under the measure, as outlined in paragraphs 1(4) and (5). This can include information about individual transactions and special category data, such as data about an individual’s health, ethnic origin or political opinions.
If a financial institution wishes to dispute a notice, it has recourse under proposed new schedule 3B. Specifically, it will have access both to a process to ask the DWP to review the decision to issue a notice, as set out in part 3 of proposed new schedule 3B, and to an appeals process to formally dispute the requirements of a notice, as set out in part 4. Part 5 will mean that the Secretary of State must publish a code of practice to govern the use and operation of the measure, including data received under it.
I said I would spend a moment on codes of practice where appropriate, so I will now speak to this in more detail. The code of practice for EVM will provide further guidance for banks and other financial institutions on complying with notices, and information for those who may be affected by the measure. It will include detail on the eligibility of verification notice and its purpose, including how it will be sent, who should comply with it, and further details on the accounts in scope, such as linked accounts and appointees. It will specify further the type of information that the DWP will request from financial institutions, and the type of information that is prohibited, such as transaction and special category data. It will also set out how the DWP will use the data received in response to a notice, beyond what is in the Bill.
The code will also set out more detail on the safeguards to ensure that the measure is exercised in a proportionate and measured manner, along with the mechanisms embedded to ensure accountability. This includes safeguards for individuals, financial institutions and the data itself, as well as the independent oversight of the measure. It will explain how data must be handled and treated once received, along with the confidentiality and security requirements and compliance with rules and provisions set out in the Data Protection Act 2018 and the UK general data protection regulation. It will also set out clear avenues for compliance concerns to be raised.
The eligibility verification measure is projected to save £940 million over the next five years, and it is a vital part of a package of measures that will save up to £1.5 billion over the next five years.
The Chair
Before I call the shadow Minister, it would be immensely helpful if Members could say whether, at this stage at least, they intend to press their amendments to a vote. They will, of course, have a chance to change their mind if the Minister persuades them otherwise when he winds up.
Rebecca Smith
As we have just heard, clause 74 amends the Social Security Administration Act to give power to the Secretary of State to obtain information for the purposes of identifying incorrect payments of certain benefits. I think that is fairly self-explanatory, so I do not have any questions.
Schedule 3 provides further detail on eligibility verification measures, but what happens when people have an account with a bank or financial institution other than the one that DWP payments are made into? We talk a lot about linked bank accounts, but it is implied that one bank will be looking to see whether a person has multiple accounts. However, people have much more complicated lives.
How does the Minister intend to ensure that we not only look at the account into which the benefit is paid, so that the investigation is more thorough? Thinking specifically about National Savings & Investments—a Government account into which people save money—are we going to make sure that a person’s entire suite of bank accounts are included, or just the one into which the DWP pays money?
That leads me on to my amendments. As the official Opposition, we have tabled amendments 24 and 25 to schedule 3, relating to the scope of who may be subject to the legislation. I will also speak to the amendments tabled the hon. Members for Torbay and for Brighton Pavilion during my comments.
Amendment 24 would include within the scope of the Bill accounts held by a person appointed to receive benefits on behalf of another person. We have tabled that because it would mean that proxy accounts are not excluded and wider patterns of potential organised fraud could be monitored and prevented over time. Without that measure, we believe that it would be easy for fraudsters to deliberately evade monitoring.
Steve Darling
I am sure that many colleagues will be alive to the fact the proposals before us mean that one in eight will be affected by these quite significant powers of mass surveillance. Will the hon. Lady advise us on how many more people will be affected by including housing benefit in the proposals?
Rebecca Smith
If I may, I will come to that when I speak to amendment 25, which deals with housing benefit. I think it will be simpler if I deal with the amendments separately, but I thank the hon. Gentleman for that question.
We believe that we should look at the recipients of what are essentially proxy accounts because, without that measure, it would be easy, as I said, for fraudsters to evade monitoring deliberately, and therefore investigations and consequences. The Bill in its current form will be limited in how it can tackle welfare fraud, which is one of the main purposes of the legislation. Ultimately—maybe with the exception of error—where people are determined to commit fraud, there are numerous ways of doing it, and if the Government’s Bill is not enabling that significant investigation, we believe that it will fall at the first hurdle.
We also believe that the proposal has the value of increasing protection for vulnerable or older people who may otherwise be unwittingly targeted by those seeking to defraud the DWP. In effect, therefore, this amendment broadens the scope of fraud prevention, ensuring that any misuse of benefits by third parties is identified, and that includes those who are acting as a proxy. We argue that this is, in effect, a tidying-up amendment to enhance the measures in the Bill and to ensure that the legislation does not create loopholes before it has come into force.
We have also tabled amendment 25, as we believe that we should add housing benefit to the list of benefits that fall within scope. If we are serious about tackling fraud and error, we should want to expand the relevant benefits as far as we can, while ensuring that the cost-benefit analysis remains proportionate. Although housing benefit is in the process of being replaced as part of the roll-out of universal credit, as of November 2024, 2 million claimants of traditional housing benefit remain. New claims, as Members will know, can still be made for housing benefit by people who have reached state pension age or who live in supported, sheltered or temporary housing. Receipt of benefit is dependent on household income, including savings and capital, among other criteria.
Amendment 25 provides a focus in our debate on economic impact and cost effectiveness. The current accredited official statistics, published by DWP in its report, “Fraud and error in the benefit system”, show:
“The Housing Benefit overpayment rate was 6.3% (£980m) in FYE 2024, compared with 5.7% (£860m) in FYE 2023… Overpayments due to Fraud were 3.9% (£600m) in FYE 2024, compared with 3.5% (£530m) in FYE 2023.”
That represents £600 million of lost taxpayer money. The report continues:
“Under-declaration of financial assets (Capital) was the main reason for the changes across total Housing Benefit overpayments”—
I know that came up quite a lot during our evidence sessions. The report also states that at a total level, capital fraud
“increased to 2.2% in FYE 2024, compared with 1.3% in FYE 2023.”
We know that that is a significant problem. Indeed, as we heard in evidence from the Minister about capital fraud, the amount is eye-watering. Often this is about error, but equally, it does still mean that people fall out of scope for receiving benefits. That increase is statistically significant and highlights why we believe that housing benefit should be brought within the scope of the Bill, if the Government are truly serious about tackling welfare fraud and error.
Steve Darling
I reflect to the hon. Member for South West Devon that accusing somebody of being short-sighted when they have a guide dog with them is a bit of a juxtaposition, but it was taken well.
The Liberal Democrats and I have grave concerns about this Orwellian approach to mass surveillance, and that the proposals are overcooked. I go back to my concerns that the DWP is, sadly, not fit for purpose. One has to look only at the significant delays throughout the system and the challenges within that Department, and yet we are looking at granting it massive, extremely significant powers. The DWP already has the ability to intervene where it suspects fraud, and we welcome that where there is reasonable suspicion, but to actually subject people to this approach is outrageous. Some of the evidence I heard when I consulted people from disability groups is that people with mental health issues may be fearful. They may think, “Because the Government Minister is looking in my bank account, I can’t afford the nice cheesecake from Waitrose. I can only shop in discounted supermarkets because the Minister is going to be watching what I am doing.”
Turning to our amendments, we have grave concerns that the approach could be the thin end of the Government wedge. We have therefore tabled amendment 29 to put a clear restriction on the proposals, ensuring that what is before us is set in stone rather than allowing for mission creep.
On amendment 30, we know from the debacle around the winter fuel allowance that getting pensioners to step up to the mark and claim pension credit has been a real challenge. I also draw the Minister’s attention to the fact that pension credit is an area where there are significantly lower levels of fraud. There are already low levels of fraud generally throughout the benefits system, but the pension credit levels are extremely small.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
I think the Conservative spokesperson just gave the figure of £500 million in pension credit fraud and error last year. Is the Lib Dem spokesperson saying that that is not very much?
Steve Darling
We need to make sure that there is a level of proportionality. On pension credit, proportionality suggests to me that pensioners are often extremely private people, and they will fear that the Minister will be looking through their shopping bills. Although there may be reassurances, this is still the presentation of what parts of our society may see as a Big Brother state. We have concerns about the impact, and by excluding pension credit specifically through amendment 30, we would serve some of the most vulnerable people in our society in the best way we can.
Siân Berry
It is a pleasure to serve under you again, Sir Jeremy. I rise to speak against clause 74 and schedule 3, and to support my amendment 35, which I intend to push to a vote. I also support the two Liberal Democrat amendments, and will vote for those if they are pressed.
In short, I am opposed to clause 74 and schedule 3 standing part of the Bill, and to the related powers that apply to the eligibility verification process. These powers do nothing less than bring in a system of disproportionate, mass financial surveillance of millions of people who have done nothing wrong and are not suspected of any wrongdoing. It is of profound concern that these powers are likely to be used at scale to monitor the private bank accounts of people who need the support of society and have done absolutely nothing to arouse suspicion.
One of the changes that people wanted to see when they voted out the last Government was a welfare system that treats people with dignity and respect. Sadly and disappointingly, these parts of the Bill are based instead on blame and suspicion of people in need of help, when the bigger issue is unclaimed and underclaimed benefits due to a lack of awareness, complexity in the system and stigma. I asked the Minister in the evidence session whether he would be using these new powers to also help alert people who are underclaiming benefits to what they may be due. The answer was not very clear, but I think it was no, because only the possibility of overpayments and reclaiming those was discussed.
I do not want to tweak these proposals—I want to prevent these two parts of the Bill becoming law at all, because they would allow the DWP to require banks and other financial institutions to provide information about claimants of universal credit, pension credit and employment support allowance in order to interrogate their claims of eligibility and entitlement. I assume that every claim would be examined over time. That means a huge new invasion of citizens’ privacy.
Currently, if someone is out on the street, the police can only use suspicion-less stop and search on them if they have a section 60 notice in place, which involves setting out a clear reason, identifying a small area and identifying a fixed time for which that would take place. The Bill effectively puts a section 60 notice around every single person who claims these benefits. These people include, disproportionately, people from protected groups—disabled people and older people. This is a real problem; it is discriminatory, unsettling and unfair.
On the numbers, around 7 million people receive universal credit, around 1.4 million pensioners receive pension credit, and around 1.5 million get help from employment support allowance. These powers will drag nearly 10 million people directly into a net of intrusive financial surveillance, as well as those appointed to receive benefits on their behalf, including parents, carers, appointed people and landlords. Given that several of these benefits have eligibility requirements based on household income, we are bringing in family members as well. Unsurprisingly, these measures are of huge concern to disability rights, poverty, pension and privacy groups, who are united in their opposition to them.
Ideally, I want to see everything struck out, but amendment 35 to schedule 3 would at least mean that more benefits could not be added to the list of relevant benefits by regulations. It would leave in place the ability for Ministers to remove benefits through regulations in future.
The hon. Member for Oldham East and Saddleworth (Debbie Abrahams), Chair of the Work and Pensions Committee, set out on Second Reading the risk of damaging trust in and engagement with the DWP for millions of people who might otherwise not claim benefits. I raise that problem because I believe that underclaiming is as much of a problem as fraud and error and should be getting as much attention.
On proportionality, it is incumbent on Ministers to come up with a new, more proportionate way to address fraud, where there is reasonable suspicion. I am not against the issue being looked at, but I add that administrative errors are 8% of the problem. They are caused by the DWP’s mistakes and should not result in a need to treat as suspects people who might make errors in their claims due to lack of clarity in or awareness of requirements.
It is absolutely right that fraudulent uses of public money are dealt with robustly. To that end, the Government already have significant powers to review the bank statements of welfare fraud suspects. Ministers did not hear me complaining at the new powers to require more information when there is a reasonable suspicion of somebody having committed fraud. This eligibility requirement goes way, way beyond.
There are automated decision-making powers coming through in another Bill, which impacts on this Bill and the assurances we have received from Ministers. They say that no automated decisions will be made based on the eligibility verification data alone and that, where potential fraud is identified against those eligibility indicators, cases will be referred to the DWP for further consideration and investigation. However, assurances by the DWP that a human will always be involved in the decision whether to investigate an individual are not set out in the legislation, and the scale and nature of any human input is very unclear, despite its having been promised.
Furthermore, as we heard in oral evidence, while assurances about human involvement are also provided for under current data protection law, the Data (Use and Access) Bill currently making its way through Parliament will remove any proper prohibitions on automated decision making. Those must be included in this legislation, in the code of practice or in the regulations. I believe it is for the Government to produce urgent amendments to solve the problem.
John Milne (Horsham) (LD)
It is a pleasure to serve under your chairmanship, Sir Jeremy. It is important for us all in this place to remember that, although we make legislation with the best of intentions, it does not always play out perfectly in practice. As a member of the Work and Pensions Committee, I heard evidence a few days ago from a number of claimants who have had a very bad experience at the hands of the DWP. Their overall theme was one of antagonism and hostility from the service, and they described a number of serious problems.
That is the attitude that, unfortunately, many claimants and many people across the country have. They think that the objective of the DWP is to catch them out rather than to help them—rightly or wrongly, that is what they feel. In that context, the title of this Bill covers “fraud and error”, not “fraud and genuine human mistake”—which, frankly, is what goes on a lot of the time.
I say that particularly in the context of our amendment 30 relating to pension credit. As my hon. Friend the Member for Torbay has described, pension credit is an area of relatively low fraud. However, there are more elderly and vulnerable people who are more likely to make an error, particularly in the context of the removal of winter fuel payments. There is a little extra onus on pension credit, and we are trying to push greater take-up. About a third of eligible people do not claim pension credit. Part of the reason is that many of them feel intimidated by the process and the feeling that they are getting something that they should not have. It is fear that holds them back.
A few months ago, the Secretary of State for Work and Pensions, the right hon. Member for Leicester West (Liz Kendall) said she would “move heaven and earth” to try to push that take-up higher, because we never seem to get past that 65% to 66% level. In that context, this feels like a retrograde measure, likely to depress rather than to encourage take-up.
Neil Coyle
Could the hon. Member give us the figures on the increase in pension credit take-up for the period during which a Lib Dem held the position of Minister for Pensions?
John Milne
That was before my time and I was not even in the country, so I am afraid I cannot answer that question.
It is very important that we should be pushing take-up, not sending it into reverse. For that reason, I ask the Minister to reconsider the need to include pension credit; that the upside—the amount of money that might be recovered from fraudulent claims—is relatively modest compared with the potential downside of putting more people off claiming.
Regarding amendment 29, tabled by the Liberal Democrats, we have heard from many witnesses, such as Big Brother Watch, about the risk of mission creep and these powers being extended in too many directions. It seems to me completely unnecessary to simply give the Minister of the day the power to add whatever benefits he or she feels like at that time. There is no need for it. Excluding that now does not affect the tax take or the potential benefit for the Government, and it seems an unnecessary and disproportionate power. I urge the Minister to reconsider the inclusion of that measure.
Damien Egan (Bristol North East) (Lab)
I want to make a few points, because I am worried that some Members are underestimating the level of fraud and the direction of travel, because it is only going up.
The hon. Member for Brighton Pavilion is correct in a sense in saying that people voted for change and that fairness in the welfare system is one of the things they voted for, but part of that is about having confidence in the welfare system. People can see the level of fraud, and they want the Government to restore the balance so that it is less in favour of people committing fraud.
I encourage those Members who are apprehensive about these elements to visit their local jobcentre. I did two visits at my local jobcentre in Kingswood; I had to go back because the work coaches had so many stories to tell. Members of the Work and Pensions Committee will have heard me say this before, but I spoke to two women: one had been there for 45 years and the other 41 years. They said the level of fraud is something that they have never seen before. I wish they were here now, because everything that they said about how we deal with it was about getting information from banks and other agencies and sharing that information on eligibility and combating fraud. I wanted to make those points and I encourage Members to speak to them.
Siân Berry
Does the hon. Member recall me talking about clause 72 and not speaking up about speeding up the electronic getting of information from banks when people are under suspicion? Does he agree that there is a barrier at that point?
Damien Egan
I really appreciate the point, but I think if hon. Members were to spend time and speak to work coaches—as they may have done—they would find that work coaches want, and are asking for, more of that information to be shared. It is also about trying to prevent people from committing fraud.
Andrew Western
I will make a few general comments on the thrust of hon. Members’ contributions, beyond the comments that they made about their amendments, and then I will speak to the amendments as one at the end of my contribution.
The Opposition spokesperson, the hon. Member for South West Devon, talked about people who bank with more than one financial institution, and asked what happens if their benefit is paid into one institution and they have savings in another. She is right that we will not have full sight of somebody’s accounts if they bank with more than one institution. That is by design, specifically because of the concerns we heard from other Members about the scope of the Bill. Were we to take the power to check every single account in the country, there would understandably be significant outcry about proportionality; indeed, we have heard some of that with regard to what I would call the limited scope of what we are putting forward.
I would be especially concerned were we to attempt to narrow the scope by sharing the details of benefit recipients only. That would breach an important safeguard that we have built into the eligibility verification measure: namely, that we will not share data directly with banks. I do not think there would be a way to do that for somebody who banks with more than one institution without either checking every single bank account in the country—which would not only be a mammoth undertaking, but would lead even me to use words such as “mass surveillance”—or sharing data in the other direction, which I am incredibly keen to avoid.
This is a question of scope. We have gone a considerable way in narrowing the scope of this eligibility verification measure. It most obviously compares to the third-party data measure that the previous Government put forward in the Data Protection and Digital Information Bill. That did not make the same interventions to narrow scope—for instance, removing the state pension—nor would there have been independent oversight of the process.
The hon. Lady is correct that there is a question about what happens when somebody banks with more than one institution. I assure her—this is a really important point from a fiscal perspective—that the savings that we have earmarked against the Bill and the eligibility verification measure are based on the principle of checking only the institution into which the benefits are paid. That does not mean that we would check only that account, however, so if the person had more than one account—a current account, a savings account and so on—that would be in scope, albeit business and charity accounts are explicitly ruled out.
The hon. Lady also asked about the capacity to better protect older and vulnerable people. That is incredibly important. Clearly, there is already a range of safeguards across the Department to work with people who present to us as vulnerable. We have specialist staff who work with those people and a vulnerability management framework within the Department to ensure we work as best we can with people who need additional help and support. She is right that that may manifest more in cases involving pension credit, and we will do all we can to work with people in need of additional assistance.
That does not mean that we get everything right, but we have made strides in our day-to-day support for vulnerable people, both when they apply for benefits in the first place, and when they owe debt to the Department for whatever reason. When we come to the debt recovery powers in the Bill, I will say significantly more about the vulnerability protections that we have built into the Bill and have more generally across the Department.
That brings me to the general comments that the hon. Member for Torbay made. I will avoid some of the more hyperbolic language—“Orwellian”, “mass surveillance”—and go straight to one of my favourite things: a Waitrose cheesecake. I assure him that, as expressly set out on the face of the Bill, transactional data will not be shared with the Department for Work and Pensions under the eligibility verification measure. He says that people are saying that that should be of concern to benefit recipients; I suggest that those of us in this House have a particular responsibility not to peddle those sorts of myths.
I am compelled to address the overarching accusation that the DWP is not fit for purpose. We are not a perfect organisation and do not claim to be, but we support millions of people, week in and week out, pay out billions of pounds, week in and week out, and provide a vital safety net for people up and down this country. I am proud of the work that we do. That does not mean that we do not need to strive to make improvements or that we are in any way beyond reproach. But I have to say that the role we play in supporting the most vulnerable people in society is absolutely critical for this Government.
Siân Berry
I hope the Minister will not take this the wrong way, but I hope that he is able to understand that the stigma that people feel about applying for benefits is partly to do with the attitudes people have towards those who receive benefits. The idea of the Government applying a privacy invasion measure against that cohort of people as a whole feels like discrimination to them. It adds to the stigma; it speaks to the fact that they feel that they are not treated as well as other people in society. They are not believed when they say that they do not have £16,000. Those are all parts of the same package of discrimination, are they not?
Andrew Western
They would be, were the powers entirely unique. However, as we heard in the evidence of the representative from HMRC, there is a long-standing power—introduced, I believe, in the Finance Act 2011—for HMRC to routinely and regularly check all interest-bearing bank accounts in the country. I have not looked at the cohort of people who are fortunate enough to have interest-bearing bank accounts, nor have I ever been in such a position myself, so I plead ignorance here. However, I suspect that there is not the same over-representation of vulnerable groups.
The important point—this comes back to the broader point around automated decision making, AI and so on that the hon. Member for Brighton Pavilion made—is that we are looking to better improve our access to data, not take decisions as a direct result of the information we have received. Indeed, we have built in human decision making at every stage of the five areas where we are taking new or updated powers on the DWP side of the Bill.
Steve Darling
I referred to the proposals as Orwellian, and my concern goes back to “Animal Farm” where the notice was amended to read:
“All animals are equal, but some animals are more equal than others”.
We have this perverse situation with the legislation where for some sections of society it is appropriate for the Government to use AI to go through their bank accounts, and for other sections of society it is not appropriate to use AI to go through people’s bank accounts. How does that lead to a society that is cogent and speaks together? Or is this just sowing division around our communities?
Andrew Western
It is incredibly important to reiterate for anybody who may be watching our proceedings that the Government will not be going through anybody’s bank accounts. We will be asking banks and financial institutions to do that, and to share information with us only where there is a potential breach of eligibility verification. The information that is shared with us will be specifically related to identifying the bank account and the potential breach of eligibility. It will not be, for instance, special category data or transactional data.
To return to my point about the use of AI and automated decision making, when a flag comes back on the eligibility verification measure, a potential breach of eligibility will immediately be passed to a human investigator to take that forward. It will not at any point trigger a penalty or a prosecution for fraud without a human intervening and, as they do at present, establishing that there is potentially fraudulent activity or, indeed, an error that warrants a reclamation of overpayment.
Amendment 30 seeks to stop the DWP from being able to use the eligibility verification power in respect of pension credit. We have had quite the debate about that already, and the hon. Member for South West Devon made many of the points that I would have made.
Mike Wood (Kingswinford and South Staffordshire) (Con)
According to the House of Commons Library, one of the biggest factors in that 10% of pension credit expenditure that is lost to fraud and error is payments to people who are abroad. How will the measures on eligibility verification help to identify people who do not actually live in the country so would not be eligible for pension credit?
Andrew Western
I am grateful beyond belief to the hon. Gentleman, because he highlights why this provision is so important. More than 50% of the fraud and error that we see in pension credit comes from two principle sources, which the eligibility verification measure specifically seeks to address. One is the issue of capital fraud, where there is a relatively easy indicator—for example, in respect of universal credit, was the individual in receipt of capital in their account of more than £16,000?
The provision also has the benefit of helping us to establish when somebody has been out of the country for longer than their benefit entitles them to be. For instance, it would provide a flag on an account when somebody’s bank account suggested they had been making purchases abroad and so on. We would not receive the transactional data or know specifically where the purchases were made—or, indeed, whether it was cheesecake or some other item—but it would give us specifically the date that somebody left the country, and thereby show whether they were in breach of the length of time they are allowed to be away. This is not, then, just a tool to deal with capital fraud, although that is the most straightforward example to articulate and, therefore, the one I use most readily; it will also be useful to identify people who have been abroad for longer than their eligibility suggests they should be allowed to be while continuing to receive benefits.
It is important to recognise—I touched on this when I set out the human safeguard that is in place—that a flag would not necessarily mean that someone has done anything wrong, or that they are no longer entitled to benefits. On capital fraud, it might be because someone has received, perfectly legitimately, a Government compensation payment, such as for infected blood, which would be out of scope. That is why a human would check that. The person would therefore not lose benefits or receive an overpayment.
On someone being out of the country for longer than they are entitled to be—if they have been taken ill, or if there has been an environmental catastrophe, humanitarian disaster or some such, that means they are unable to leave the country they are in—again, that would be investigated. The person would not face action as a result. I hope I have set out exactly how the eligibility verification measure is useful not only for capital fraud, but for allowing us to notice and receive indications about when someone has been out of the country for longer than they are entitled to be while still receiving benefits.
As I said, on amendment 30, the hon. Member for South West Devon touched on many of the comments that I would have made about why pension credit is included. The change would not explicitly exclude pension credit, as with the state pension, because the legislation still enables Ministers to lay regulations for its inclusion at a future date. My intention, however, is to use the power for pension credit payments from the outset, because unfortunately the rising trend in overpayments of pension credits demonstrates that pension-age benefits are not immune from fraud and error.
In 2023-24, £520 million in pension credit was overpaid, and pension credit has one of the highest rates of capital fraud and error, with £198 million lost in 2023-24 alone. The rate of fraud in pension credit increased by more than 50% in 2023-24, as against the previous year, so we have a clear problem. The under-declaration of financial assets and claimants staying abroad for a longer period than is allowed remain the two main causes of pension credit overpayments in ’23-24. As I said previously, they accounted for more than 50% of all overpayments.
Equally, it is important to ensure that people receive the right payments. The eligibility verification measure is not about removing pension credit payments from anyone; it is about confirming that claimants meet the conditions of entitlement. The measure also enables the Department to help to prevent individuals from unknowingly accruing overpayments, pension credits or any other benefit in scope, which could lead to financial stress if later they need to repay money they were not entitled to.
Overall, the measure and the inclusion of pension credit will help the DWP to ensure that public funds are used responsibly while maintaining confidence in the benefit system. On that basis, I will resist amendment 30.
Rebecca Smith
Before we move on from pensioners, throughout the debate there has been a valid concern about pensioners potentially being alarmed at or feeling vulnerable about what might happen. Will the Minister clarify something? Any pensioner who is not involved with pension credit is not likely to fall within scope of having their bank accounts checked, so only those people who are interacting with the Department in one shape or another are likely to have their bank accounts searched, and only in relation to those benefits. Every single pensioner out there will not have their bank accounts scrutinised; only someone of whatever age or bracket who is, or seeks to be, in receipt of benefits will fall within the scope of the Bill. Am I correct in believing that? That would at least reassure a proportion of pensioners—although not all—that they are not, as we said, going to get snooped on for buying a cheesecake. They will fall in scope only if they end up interacting with the Minister’s Department.
Andrew Western
I am happy to confirm that the situation is as the hon. Lady articulated. Only someone in receipt of one of the three benefits initially in scope would face use of the eligibility verification measure.
Steve Darling
Will the Minister confirm whether, once the Bill has passed, he could choose to increase the scope to include all pensioners?
Andrew Western
That brings me to amendment 25, which seeks to include housing benefit, and to later amendments on the affirmative procedure regulations that we propose for being able to bring other benefits in scope. We would need to do that to reflect the changing nature of fraud and the fact that fraudsters, unfortunately, change their behaviour and the benefits they target depending on the safeguards in place and the extent to which they are effective. Therefore the answer to the question is yes, and I will say more on that when we come to the specific amendments in that space.
Public Authorities (Fraud, Error and Recovery) Bill (Ninth sitting)
Tuesday 11th March 2025
(3 months, 2 weeks ago)
Public Bill CommitteesPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 March 2025 - (11 Mar 2025)
The Chair
I remind Members to send their speaking notes by email to hansardnotes@parliament.uk and to switch all electronic devices to silent. Tea and coffee are of course not allowed during sittings.
Clause 75
Eligibility verification: independent review
Steve Darling (Torbay) (LD)
I beg to move amendment 37, in clause 75, page 41, line 25, at end insert—
“(1A) Prior to appointing an independent person, the Minister must consult the relevant committee of the House of Commons.
(1B) For the purposes of subsection (1A), ‘the relevant committee’ means a committee determined by the Speaker of the House of Commons.”
This amendment would ensure further oversight into the appointment of the “Independent person”.
The Chair
With this it will be convenient to discuss the following:
Amendment 38, in clause 75, page 41, line 29, leave out “person” and insert “board”.
This amendment would replace the “independent person” with an independent board.
Amendment 39, in clause 75, page 41, line 32, leave out “person” and insert “board”.
This amendment is consequential on Amendment 38.
Amendment 40, in clause 75, page 42, line 19, leave out subsection (7) and insert—
“The Secretary of State may by regulations appoint persons to, and confer functions upon, an independent board for the purposes of securing compliance with subsections (1) to (6).”
This amendment is related to Amendment 38.
Amendment 41, in clause 75, page 42, line 23, leave out first “person” and insert “board”.
This amendment is consequential on Amendment 38.
Amendment 42, in clause 75, page 42, line 24, leave out “person” and insert “board”.
This amendment is consequential on Amendment 38.
Clause stand part.
Steve Darling
It is a pleasure to serve under your chairmanship, Mr Western. We have touched previously on having an independent overview of the activities that will take place under the Bill, and this is another opportunity to have the checks and balances I have alluded to on a number of occasions. Of course, all Members in the room are reasonable people, but we see in world politics what happens when people are unreasonable. Given that the United Kingdom’s constitution is unwritten, beginning to build those checks and balances into legislation is important. Amendment 37 would hardwire them into the Bill, and I ask that the Minister give it serious consideration. I have heard hints that it may be taken into account in one way or the other when the Bill goes to the other place, but I would welcome some reassurance, if possible, that that is the case.
John Milne (Horsham) (LD)
It is a pleasure to serve under your chairmanship, Mr Western. As my hon. Friend the Member for Torbay said, the amendment is about checks and balances. We appreciate that the Bill has been introduced in the context of the Government’s desire to cut the benefits bill, but the Treasury deeming something to be financially necessary does not necessarily make it right.
The percentage lost to fraud and error is relatively modest, but of course the sums are huge because the overall number is huge. We need to remember that these measures will not get anywhere near recovering all that money, so the question is: is the action proportionate, considering the sacrifice we are making in terms of civil liberties? It is vital that we get the best value from public money, but the amount expected to be recovered is just 2% of the estimated annual loss to fraud and error of £10 billion, and just a quarter of what is lost to official error at the Department for Work and Pensions.
As drafted, the clause empowers the Minister to appoint an independent person to carry out reviews of the Secretary of State’s function under schedule 3B to the Social Security Administration Act 1992. There is no external oversight, and that undermines the credibility of the role. Our amendment states:
“Prior to appointing an independent person, the Minister must consult the relevant committee of the House of Commons”,
which means
“a committee determined by the Speaker of the House of Commons.”
Without proper scrutiny, the role’s independence is undermined, potentially damaging trust in the process.
The Committee previously heard evidence from Dr Kassem of Aston University, who stated:
“I would recommend a board rather than an individual, because how sustainable could that be, and who is going to audit the individual? You want an unbiased point of view. That happens when you have independent experts discussing the matter and sharing their points of view. You do not want that to be dictated by an individual, who might also take longer to look at the process. The operation is going to be slower. We do not want that from a governance perspective—if you want to oversee things in an effective way, a board would be a much better idea.” ––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 13, Q15.]
A board would ensure that the appointment is truly independent and subject to parliamentary scrutiny. We therefore propose that the Minister must consult the relevant House of Commons Committee before making such an appointment. That simple steps would ensure genuine independence and parliamentary scrutiny, and would strengthen transparency and public confidence.
Rebecca Smith (South West Devon) (Con)
It is a pleasure to serve under your chairmanship this morning, Mr Western. As we have just heard, Liberal Democrat amendments 37 to 42 would mean that, before appointing an independent person, the Minister had to consult a Committee of the House of Commons nominated by Mr Speaker. Amendments 38 to 42 seek to replace an independent person with an independent board, and therefore to allow the Secretary of State to appoint persons to, and confer functions upon, the board.
I have a couple of questions for the hon. Member for Torbay. What greater independence do the Liberal Democrats think will be gained by changing the requirement, given that both the independent board and the independent person would be appointed by the Secretary of State? What practical difference will the amendments make to improve the review process and ensure that it is high quality?
The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
It is a pleasure to serve under your chairship, Mr Western. With your permission, I will speak to amendment 37 before speaking to amendments 38 to 42. I will then speak to why the unamended clause 75 should stand part of the Bill.
Before I begin, I will respond to a couple of the comments made by the hon. Member for Horsham on the relatively small amounts of fraud and error we see. With this particular measure, as he is aware, we are initially targeting the three benefits with the highest levels of fraud and error. To take universal credit as an example, it is £1 in every £8 spent, which is a tremendously high number and one we must do everything we can to bring down. However, it is worth recognising and explaining to colleagues that the measures in the Bill are part of a broader package to tackle fraud, which reached £8.6 billion across the relevant period. This is not the beginning and end of the Department’s work on fraud across that period, but it is the part of that overall package that requires legislation.
Returning to my substantive notes on the question of a “board” versus a “person”, I think there may be some misunderstanding of definitions here. Amendment 37 seeks to oblige the Secretary of State to consult a relevant Committee of the House of Commons before appointing the independent overseer of the eligibility verification measure. I believe that the amendment is unnecessary and I will be resisting it.
We recognise the importance of appointing the right person or body to oversee the use of the eligibility verification measure. That is why we have made it a requirement that the overseer report annually on the use of the power directly to the Secretary of State, who will then lay the report before Parliament. We have included that key safeguard to ensure the effective and proportionate use of this power and to introduce greater transparency in the use of it. The person or body will be appointed following a fair and public recruitment process, which will be carried out under the guidance of the Commissioner for Public Appointments.
I assure the Committee today that we will abide by the governance code on public appointments throughout the process. Whether this role is subject to pre-appointment scrutiny will be governed by the code, and we will follow its guidance at all times. The final decision on who will oversee this measure will, in all cases, be made by the Secretary of State. That is because the governance code on public appointments points out:
“The ultimate responsibility for appointments and thus the selection of those appointed rests with Ministers who are accountable to Parliament for their decisions and actions.”
We will keep the House informed about the process at all key stages, including when the process is set to begin and on the proposed final appointment.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Am I right in thinking that the Work and Pensions Committee will be entitled to call any witness, including whoever is appointed to this role, to give evidence to it and to be scrutinised by its members?
Andrew Western
My hon. Friend is entirely correct. The Select Committee always has that power, and were it to have any concerns whatever, it would look to exercise that power at the earliest opportunity.
I recognise that the amendment has been tabled with good intentions. However, because of our commitment to an open and transparent recruitment process, and because we will be abiding by the requirements of the governance code on public appointments, it is unnecessary and I will resist it.
I will now turn to amendments 38 to 42, which seek to remove the term “person” and insert the term “board” in reference to the appointment of an independent reviewer of the eligibility verification measure, as set out in clause 75. I recognise the intent behind the points raised, but the amendments are unnecessary and I will resist them. It is probably useful to clarify that, legally, the term “person”, as referred to in the clause, can refer to an individual person, a body of people or a board, as per the Interpretation Act 1978. I therefore reassure the Committee that any reference to “person” in the Bill includes a body of persons, corporate or incorporated, that is a natural person, a legal person or, for example, a partnership.
I reassure the Committee that the Secretary of State will appoint the most appropriate and suitable independent oversight for the measure. That might be an individual expert, which is consistent with the approach taken for oversight of the Investigatory Powers Act 2016, or it might be a group of individuals who form a board or committee. As the Cabinet Office’s governance code on public appointments clearly sets out, Ministers
“should act solely in terms of the public interest”
when making appointments, and I can assure the Committee that we will do just that.
To offer further reassurance, I confirm that the appointment process for the independent person or body will be open, fair and transparent, adhering strictly to the governance code on public appointments, which ensures that all appointments are made based on merit, fairness and openness. The Government will of course notify the House of the appointment. I therefore resist these amendments.
I will now turn to clause 75. Independent oversight is one of several safeguards for the eligibility verification measure, and I remind the Committee of the others that we discussed on Thursday. First, we are initially pursuing the measure with just three benefits in scope. Others can be added by regulations, but not, in any circumstances, the state pension, which is specifically excluded from the Bill. Furthermore, limits on the data that can be collected are set out in the Bill. For instance, no transactional data or special category data can be shared. Finally, as we discussed at length on Thursday, a human decision maker will be in place to determine whether any fraud has been committed.
Clause 75 provides a vital safeguard for the eligibility verification power. By inserting proposed new sections 121DC and 121DD into the Social Security Administration Act 1992, it establishes a requirement for independent oversight of the power, to ensure accountability, compliance and effectiveness. We recognise the importance of safe and transparent delivery of the eligibility verification measure, which is why we are legislating to make it a requirement for the Secretary of State to appoint the independent person to carry out annual reviews.
As per proposed new section 121DC(2), the person must prepare a report and submit it to the Secretary of State. And as per new subsection (3), the Secretary of State must then publish the report and lay a copy before Parliament. New subsection (4) outlines that the first review must relate to the first 12 months after the measure comes into force, and new subsection (5) outlines that subsequent reviews must relate to each subsequent period of 12 months thereafter. Those annual reviews and reports will ensure transparency in the use of the measure and its effectiveness.
To ensure that the eligibility verification measure is exercised in a responsible and effective manner, in accordance with the legal framework, new section 121DC further details what each review must consider during the review period. That includes compliance with the legislation and the code of practice, and actions taken by banks and other financial institutions in complying with eligibility verification notices. The review must also cover whether the power has been effective in identifying, or assisting in identifying, incorrect payments of the benefits covered during the review period. In new subsection (7), there is provision for the Government to bring forward regulations to provide relevant functions to the independent reviewer to enable them to perform their duties under the clause.
In order to ensure that the independent reviewer is able to fulfil their duties, clause 75 also provides a legal gateway for the Secretary of State to disclose information to the independent reviewer, or a person acting on the reviewer’s behalf, for the purposes of carrying out the review. That can be found in new section 121DD, which is inserted by clause 75. Data protection provisions in new sections 121DD(2) to (4) make it clear that such sharing must comply with data protection legislation and other restrictions on the disclosure of information.
In conclusion, the clause represents a key safeguard in relation to the new power and confirms a previous commitment to Parliament to establish oversight over it and ensure its proportionate and effective use. On that basis, I propose that clause 75 stand part of the Bill.
Rebecca Smith
Apologies, Mr Western, because I probably should have spoken to clause 75 stand part when I made my earlier remarks—it was just 9.20 am. Thank you for letting me speak now.
As we have discussed, clause 75 amends the Social Security Administration Act 1992, adding provisions for a review of the powers given through clause 74, which we debated last week. The Secretary of State must appoint an independent person to carry out the reviews, and a report must be submitted, published and laid before Parliament. I am grateful to the Minister for his assurances that, by definition, a “person” could be a body, a board or a panel. That has precluded quite a lot of the notes I was going to read out this morning, but it is good to hear that that definition is included in the Interpretation Act 1978.
However, it is worth again putting on record some of the evidence that we heard, and the fact that that definition caught the attention of some of those who gave evidence during our initial sittings. Some experts were concerned to have the eligibility verification reviewed by, potentially, a panel to ensure that it was both sustainable and auditable and that an unbiased viewpoint could be presented. Dr Kassem said:
“Personally, I would recommend a board rather than an individual, because how sustainable could that be, and who is going to audit the individual? You want an unbiased point of view. That happens when you have independent experts discussing the matter and sharing their points of view. You do not want that to be dictated by an individual, who might also take longer to look at the process. The operation is going to be slower. We do not want that from a governance perspective—if you want to oversee things in an effective way, a board would be a much better idea.” ––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 13, Q15.]
Clearly, the Minister addressed that in his comments, but it does raise the question of what volume of work he envisages the independent person, panel or body having to assess. I appreciate that that could well be a “How long is a piece of string?” exercise at this point, but does it have any bearing on whether the Secretary of State will appoint one person or several people at the point at which this body is instituted? I ask that question to reflect the concerns about volume, speed and the ability to get the review produced in the right amount of time, and also to provide clarification to those who gave evidence.
Finally, we heard from Helena Wood that she had concerns that the Bill is a “very blunt instrument”, specifically in relation to its powers on eligibility verification. What consideration has the Minister given to those comments, especially about the proportionality and reasonableness of the measures in the Bill, to ensure that it does not get used as the blunt tool it appears to be? What more information about how the powers in the clause are to be exercised will be set out in the code of practice in due course?
Andrew Western
I acknowledge what the hon. Lady said about the evidence we heard and the preference for a board. If I am being absolutely transparent with the Committee—as I would be expected to be—I am entirely open-minded at this point about where we may end up. I do not have a person, body or group in mind. That is why I hope that the open and transparent process yields the best possible result in terms of the qualifications and specialisms of the individual or individuals who may ultimately be appointed. A range of skills would be of use to us—specialisms in data and human rights, and in welfare, obviously—so I am open-minded about where we end up in relation to who takes this work forward for us.
On the question as to the volume of work, the hon. Lady is correct that it is something of a “How long is a piece of string?” question. However, in terms of the bare essentials, the requirement is to produce an annual report to be laid before Parliament, so I would not expect the volume of work to be at the extreme end in terms of how onerous it would be.
Steve Darling
I am pleased to have had the debate. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 75 ordered to stand part of the Bill.
Clause 76
Entry, search and seizure in England and Wales
Andrew Western
I beg to move amendment 34, in clause 76, page 43, line 38, leave out from “the individual” to end of line 1 on page 44 and insert
“is an official of a government department and—”.
This amendment clarifies that to be an authorised investigator an individual must be an official of a government department and be of the specified grade.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
Clause 77 stand part.
Government amendments 4, 5 and 33.
Schedule 4.
Clause 78 stand part.
New clause 3—Application of the Police and Criminal Evidence Act 1984 to investigations conducted by the Department for Work and Pensions—
“(1) The Secretary of State must, within six months of the passing of this Act, introduce regulations for the purpose of applying certain powers of the Police and Criminal Evidence Act 1984, subject to such modifications as the order may specify, to investigations of offences conducted by the Department for Work and Pensions.
(2) The powers to be applied must include—
(a) the power of arrest;
(b) any other such powers that the Secretary of State considers appropriate.
(3) Regulations made under this section shall be made by statutory instrument.”
Andrew Western
Clause 76 will insert a new section 109D to the Social Security Administration Act 1992 to make provision for specialist DWP staff to apply to the courts for a warrant to enter a premises for the purposes of search and seizure. That is one of the five overarching powers that we are looking at in the Bill. It is a new power for the Department, but not uncommon across Government more broadly. These actions may be exercised only by an authorised investigator—an individual who has received authorisation from the Secretary of State and completed industry standard training.
As drafted, subsection (6) of proposed new section 109D could be interpreted as requiring an authorised investigator to be either an official of a Government Department or of at least higher executive officer grade. Amendment 34 makes it explicit that an authorised investigator must be both an official of a Government Department and an HEO, for the purpose of these powers in England and Wales. That is an important clarification and is in line with our original policy intent. I trust that the amendment is welcome, as it ensures that there are clear criteria in place and that only those who hold the right office and grade may be authorised to exercise the powers in clause 76 and schedule 4.
I turn to clause 76 itself, and the substance of the powers of entry, search and seizure for the DWP. The clause will insert new section 109D and schedule 3ZC into the Social Security Administration Act 1992, which will provide DWP-authorised investigators with the power to apply for warrants, enter a premises, search it and seize items. It will also give authorised investigators power to apply for an order to gain access to certain types of materials that refer to business or personal records, defined in the Police and Criminal Evidence Act 1984 as “excluded material” under section 11 or “special procedure material” under section 14.
The ability to undertake this activity will play a crucial role in gathering and securing evidence to bring serious and organised benefit fraudsters to justice. Currently, DWP investigators must rely on the police to undertake all this activity—securing the warrant from the court and exercising it—on their behalf. The clause changes that. It means that DWP-authorised investigators will be able to apply directly to a court for a warrant to enable them to enter, search and seize items from premises, but only during a serious and organised criminal investigation.
I can assure the Committee that DWP-authorised investigators will be required to meet the same legal requirements when submitting an application as the police. That includes undertaking all activities in compliance with the Home Office code of practice on entry, search and seizure. In addition, independent inspections of the DWP’s use of the power may be conducted by His Majesty’s inspectorate of constabulary and fire and rescue services in England and Wales or by His Majesty’s inspectorate of constabulary in Scotland. That is addressed in clause 87, which we will consider later, and will be in addition to the internal safeguards, including clear processes for signing off warrants, that the DWP will have in place to ensure that the powers are used appropriately, safely and lawfully.
Clause 77 will insert new section 109E and new schedule 3ZD into the Social Security Administration Act 1992, and will provide equivalent entry, search and seizure powers for DWP-authorised investigators carrying out investigations of serious and organised fraud in Scotland. The powers enabling entry, search and seizure in England and Wales are primarily provided by PACE, and that is addressed in clause 76; however, there is no equivalent Act in Scottish law to provide the basis for these powers, so the powers in relation to Scotland are set out in this Bill. New schedule 3ZD to the 1992 Act —inserted by clause 77 and schedule 4 to the Bill—provides the basis for applying for a warrant for entry, search and seizure and exercising that warrant in Scotland. Those powers are similar to those set out in clause 76 and schedule 4 for England and Wales.
Clause 77 enables a DWP-authorised investigator to apply for and execute a warrant or a production order—a court-authorised directive requiring an individual to promptly disclose information relevant to a criminal investigation—in Scotland. It also provides for the DWP to search premises and seize items when that action is authorised by a sheriff in Scotland. The clause is intended to achieve parity between the nations, and I commend it to the Committee.
Government amendments 4 and 5 are minor and technical and aim to deliver the original policy intent of schedule 4, relating to entry, search and seizure for the DWP in Scotland. Their effect is to provide that where an authorised investigator who is exercising a search warrant identifies materials or items that have a bearing on any offence under investigation, they should seize them only if taking a copy or record, such as a photograph, is deemed to be not appropriate. That will ensure that items or materials are seized only where necessary, and will apply the same safeguard in Scotland as is currently the case in England and Wales.
As the Bill is drafted, the requirement to take a copy where possible, rather than seizing something, would apply only to an item and not to material. The amendments will deliver the original policy intent, which was not to differentiate. They will also ensure that no seizure, copies or records should be made where an item or material is subject to legal privilege or defined as “excluded” or “special procedure” material. I hope that my explanation assures Members that the amendments are minor and technical, and will ensure that schedule 4 works correctly and is in line with the existing approach taken by the police. I commend Government amendments 4 and 5 to the Committee.
Government amendment 33, which is very similar to Government amendment 34, makes it clear that an authorised investigator must be both an official of a Government Department and of HEO grade, but this time in relation to the use of these powers in Scotland, under schedule 3ZD, which is set out in schedule 4 to the Bill. I trust that the amendment will be welcomed like amendment 34.
Schedule 4 outlines modifications to the Police and Criminal Evidence Act 1984 for entry, search and seizure operations in England and Wales, and includes equivalent legislation for operations that take place in Scotland. The schedule sets out the essential modifications and practical details needed for DWP-authorised investigators to fully execute powers of entry, search and seizure. It outlines new schedule 3ZC to be inserted into the Social Security Administration Act 1992, to modify certain provisions in PACE to provide the relevant policing powers to DWP-authorised investigators in England and Wales.
The schedule sets out the minimum grade required to be an authorised investigator, which is the minimum civil service equivalent of a police constable. The DWP will require 250 authorised investigators to be trained to industry standards, and they will be subject to internal management checks. The schedule also restricts the use of the powers so that they are exercisable only for the purpose of investigating a DWP offence, as defined in clause 84 of the Bill. It permits others to accompany an authorised investigator on to the premises named in the warrant and limits a DWP-authorised investigator’s authority so that they can conduct searches only of “material” and not of people. The schedule also makes technical modifications to PACE, to allow the DWP to carry out entry, search and seizure activity in the same way as the police.
Schedule 4 also outlines new schedule 3ZD to the 1992 Act, which makes provision for entry, search and seizure in Scotland. As far as possible, this replicates the approach taken in England and Wales, except where an alternative approach is needed to account for the different legal system in Scotland. The primary differences between schedule 3ZC and 3ZD are the process that must be followed when executing a warrant in Scotland, which includes providing a copy of the warrant to persons on the premises; the process for issuing receipts for items seized; the legal requirements for making applications for Scottish production orders and Scottish warrants for special procedure material.
Clause 78 replicates the approach taken in legislation governing police actions in respect of the Crown and Crown premises. It sets out how the law applies in the unlikely event that the DWP needs to obtain a warrant to enter Crown premises. It provides for a DWP-authorised investigator to apply for a warrant to search the locker of a suspect who works in, for example, a Government Department, but it prohibits the use of these powers in the interests of national security once the Secretary of State has certified that this is the case, and with regard to any private estates belonging to His Majesty and the Houses of Parliament. The package of measures in the Bill will leave very few places for organised criminals and the gangs who attack the DWP to conceal the evidence of their crimes, but clause 78 keeps us in line with other similar legislation.
Rebecca Smith
The DWP has fewer powers than other organisations, such as His Majesty’s Revenue and Customs and the Gangmasters and Labour Abuse Authority, which are tasked with investigating economic crime. We know that it does not have the power to arrest or to conduct search and seizure. Clause 76 will allows DWP-authorised investigators to apply for and execute a court warrant with or without police involvement in England and Wales. The aim is to help the DWP investigate and disrupt serious and organised fraud by giving investigators the power to make searches and seizures. That will allow them to deal with, for example, cases where universal credit claims are made using false identity documents.
We in the official Opposition want the Bill to work and the DWP to be able to successfully identify and tackle benefits fraud. DWP estimates of fraud and error in the welfare system exceeded £8 billion in each financial year from 2020-21 to 2023-24, with a combined total of £35 billion overpaid. For the financial year 2023-24, the DWP’s central estimate is that benefit overpayments totalled £9.7 billion, which is 3.7% of all benefit expenditure. Of that overpayment figure, £7.4 billion, or 76%, was due to fraud, £1.6 billion, or 16%, was due to claimant error, and £0.8 billion, or 8%, was due to official error, or 8%. It is clear that fraud costs the DWP the most, yet we worry that the Bill will be more effective at tackling error than fraud. We therefore support the powers in clause 76 to tackle fraud.
Steve Darling
The power to seize items, down in the weeds of an investigation, is essential to ensuring that we hold the right people to account. However, I am alive to the fact that seized items are often kept for a long time. Our mobile phones often contain our whole lives. Not that long ago, a resident in Torbay who was accused of a criminal offence and was under investigation had his mobile phone seized by Devon and Cornwall police for a very long time—a matter of months. What assurance can the Minister give that when the power of seizure is used—particularly when it is used to seize a mobile phone—items will be returned in a timely manner? What timescale does he plan to set for civil servants to return such items?
Andrew Western
Let me begin with some of the questions from the Opposition spokesperson, the hon. Member for South West Devon. Her comments setting out the challenge and her commitment to wanting the Bill to work are incredibly welcome. She is right to set out the scale of the challenge. That is why we are taking the powers that we are proposing.
On whether the requests and the use of the powers of search and seizure will be reserved to members of our staff working in serious and organised crime only, the answer is yes. On the level of seniority of team members executing those powers, it is HEO-grade officers that do that. In terms of salary equivalent, salary can be quite a crude comparison for a number of reasons. Police officers undertake shift work and an element of their salaries is higher as a result. Obviously, as members of the emergency services, there is a level of risk to their work. The National Crime Agency suggests that an HEO grade is the equivalent of a police sergeant, although in salary terms, it is probably more akin to a police constable.
On training, they will receive the industry standard training, equivalent to the training that police receive in this area. On safeguards more broadly, for the power in the Bill, a lot of the safeguards in place relate to the fact that a warrant is granted by a judge. There is always that specialist person making a determination in terms of appropriateness and proportionality. All warrant applications and all warrants would be exercised in compliance with the Home Office code of practice for entry, search and seizure. That is specifically limited to serious and organised crime only—that is multiple people working together to commit complex fraud, typically resulting in higher value overpayments.
As I said, everybody executing this power would be of HEO grade. They would have had the industry standard training. Investigations will also be subject to independent inspections, which will report on the DWP’s use of the powers, and any serious complaints can be reported to the Independent Office for Police Conduct. A range of safeguards is built into the proposals.
If I may, I will come later to the question from the hon. Member for Torbay about the return of information. There are specific provisions to enable us to keep items for as long as is needed, but there is a desire to return things as soon as possible. Elsewhere in the Bill, we speak to the specific powers that would be required were we wanting to go further and not return an item. There is a commitment to return, unless specific powers are required to prevent further criminality based on evidence found on phones. I cannot give a specific timeline—something would be kept for the length of time necessary for the purposes of the investigation—but I hear the point, particularly about mobile phones.
I stress again that this is about serious and organised crime. If I think of some of the cases I have seen—Operation Volcanic, for example—we are talking about going into buildings where there are several dozen, if not hundreds, of pay-as-you-go mobile phones set up expressly for the purposes of fraudulent activity and criminality. I would perhaps be less sympathetic to the swift return of those phones, and I hope the hon. Gentleman understands why.
I turn to new clause 3. I appreciate the explanation of the rationale from the hon. Member for South West Devon, but I do not share her view. I gave great consideration to the question of whether to take powers of arrest when first having discussions about the scope and shape of the Bill. The Bill enables trained DWP investigators to apply for a search warrant to enter a premises, search it and seize items or material that may have a bearing on the DWP case being investigated. Put bluntly, it gives us the right tools to do the job effectively.
Crucially, it enhances police efficiency by allowing the DWP to handle warrant applications and carry out search and seizure activity, freeing the police from those administrative and investigative tasks that they currently undertake for the DWP. No longer will DWP investigators always need to rely on the police for search warrants, take up police time briefing them on the specifics of the warrant applications or always be restricted to simply advising the police as to what items may be relevant during a search, only for them to then be seized by the police and later transferred to the DWP.
On efficiency, we are taking the powers we need to smarten up our processes. The current process is clearly imperfect. It is inefficient for both the DWP and the police, as well as burdensome in terms of resource, and the Bill resolves that situation. There is a clear rationale for the powers set out in the Bill, but the same cannot be said for the amendment.
To close, I will explain why it is not appropriate for the DWP to undertake arrests as well. I am concerned about the safety impacts; the police have expertise that equips them to carry out arrests. The policy intent is to facilitate more effective investigations and smoother administration, striking the right balance between activities undertaken by the DWP and the police. A power to arrest would require the DWP to take on roles that go beyond those that are administrative and evidence gathering in nature.
Not only that, but it is common for a serious organised DWP offence to involve other types of serious and organised crimes. As a result, a suspect is likely to be involved in wider criminality than just a DWP related offence, such as firearms, drugs or being involved in people trafficking. It makes sense that the police would conduct the arrest in such a situation and, after that, DWP investigators could focus their time on searching the scene for relevant evidence related to the DWP offence.
In addition, for the DWP to be able to operate independently of the police would require the DWP, for example, to have appropriate vehicles for transporting an arrested person and custody suites for detaining them. Currently that is not the case and, to be clear, we are not moving in that direction. We do not operate extensively in that area and allocating resources there is unlikely to be efficient or make sense.
The powers in the Bill promote effective collaboration between the DWP and the police, bring some genuine efficiencies and allow each team to focus on its strengths, which is the right approach. This amendment would not serve the same purpose and it would add a layer of complexity to the DWP’s work that we are not equipped to deal with, either in terms of the expertise of our team or the equipment that we have. For this reason, I must resist new clause 3.
Amendment 34 agreed to.
Clause 76, as amended, ordered to stand part of the Bill.
Clause 77 ordered to stand part of the Bill.
Schedule 4
Social security fraud: search and seizure powers etc
Amendments made: 4, in schedule 4, page 91, line 28, after “item” insert “or material”.
This amendment clarifies that paragraph 2(3) of new Schedule 3ZD of the Social Security Administration Act 1992 (as inserted by Schedule 4 of the Bill) applies in relation to any item or material.
Amendment 5, in schedule 4, page 91, line 31, after “item” insert “or material”.
This amendment clarifies that paragraph 2(4) of new Schedule 3ZD of the Social Security Administration Act 1992 (as inserted by Schedule 4 of the Bill) applies in relation to any item or material.
Amendment 33, in schedule 4, page 93, line 32, leave out from “individual” to end of line 33 and insert
“is an official of a government department and—”.—(Andrew Western.)
This amendment clarifies that to be an authorised investigator an individual must be an official of a government department and be of the specified grade.
Schedule 4, as amended, agreed to.
Clause 78 ordered to stand part of the Bill.
Clause 79
Offence of delay, obstruction etc
Question proposed, That the clause stand part of the Bill.
Andrew Western
I am sure colleagues will be pleased to know that this speech will be brief.
Cases of serious and organised fraud against the DWP can amount to millions of pounds being stolen from the taxpayer. Clause 79 provides for consequences when those suspected of serious and organised fraud intentionally attempt to delay or obstruct an investigation. A suspect can be prosecuted if they intentionally try to frustrate a DWP investigation, and if convicted, they can be fined up to £1,000. Without this important provision, DWP fraud investigations into serious and organised criminal attacks on the social security system could be wilfully manipulated by those suspected of carrying out the fraud, which would be an untenable situation.
Rebecca Smith
I am sure the Committee will be pleased to hear that I will also be brief.
It is an offence under section 111 of the Social Security Administration Act 1992 to intentionally delay or obstruct an authorised officer, and conviction for a failure to comply may result in a fine of up to £1,000. Clause 79 means that obstructing an authorised investigator will be treated in the same way as obstructing an authorised officer, which means that obstructing an authorised investigator will be a criminal offence carrying a fine of up to £1,000. We are happy for the clause to stand part of the Bill.
Question put and agreed to.
Clause 79 accordingly ordered to stand part of the Bill.
Clause 80
Disposal of property
Question proposed, That the clause stand part of the Bill.
Andrew Western
This clause gives the DWP a clear legal path to seek court approval to dispose of property that has come into its possession when executing a search warrant. In most cases, the seized items will be returned to their rightful owner as soon as they are no longer required by a criminal investigation. However, as I alluded to in responding to the hon. Member for Torbay, there are certain circumstances in which this may be either not possible or not desirable.
An order may be sought when a seized item does not belong to the suspect and where it is not possible to identify the rightful owner, where there is a high risk that returning the seized item means it could be used for the furtherance of crime or where information needs to be deleted before the item is returned to prevent a further offence. This will prevent the risk of, for instance, returning a seized smartphone that contains data relating to hijacked or stolen identities that may enable fraud and the distribution of information that could be used for criminal gain. With the increasing use of technology, it will be ever more critical to ensure this does not happen. This clause allows the DWP to act in the same way as the police.
To avoid the risk of incorrect disposal of seized items, applications for any action of this kind must be made to, and must be approved by, a court. In addition, there are restrictions on how quickly seized material can be disposed of. In all cases, six months must elapse from the approval of an application by a court before a seized item can be destroyed.
Finally, any person with an interest in an item can make an application to the court. This could be the DWP, the item’s rightful owner or the person from whom it was seized. The clause sets out specific criteria in relation to any challenges that may be brought and the procedures that apply. If an order has been given for the item to be destroyed, the order cannot be revoked. However, the timeframe for the item to be destroyed may be challenged.
This clause creates a legal and proportionate gateway for the DWP to deal with seized items appropriately. This ensures that the DWP can act in the same way as the police when concluding fraud investigations.
Rebecca Smith
Where DWP investigators seize items from a premises, they will generally be returned to the owner if they are no longer needed for an ongoing investigation. As we have heard, it may not be appropriate to return an item in certain cases, such as if the person from whom the item was taken is not the actual owner or if the owner cannot be traced. In some cases, there may be a risk that a seized item could be used for a criminal purpose if it were returned. We acknowledge that clause 80 gives the DWP a lawful basis for disposing of the items. Clause 80 stipulates that items cannot be destroyed until six months have passed from when the magistrate approved the application to destroy them. Why is six months the chosen timeframe, and what are the precedents for other evidence seized in criminal investigations?
We support the provision allowing someone with an interest in the item to request the court to alter an approved action in relation to the item. We believe that is sensible. Can the Minister give an example of the sort of scenario that might refer to, just for the benefit of the Committee? What will the timeframe be for such applications? Finally, how will interested parties be made aware of items they may wish to take court action over? I assume it will not be a police lost property office, but ultimately it is one of those questions of how someone will know that there is something in which they might have an interest.
Andrew Western
I will briefly answer those questions. The period of six months is the same as set out in the Police (Property) Act 1897. We want to ensure alignment where we can to make the process between the police and the DWP as seamless as possible, so that serious and organised fraudsters do not recognise any difference.
On the question of how someone will know if we were intending to destroy their items, the clause does not require the DWP to inform any relevant person of any intended action in relation to the seized item. That is commensurate with how the 1897 Act works for the police in similar circumstances, but anyone who has an interest in the seized goods will have the same access right as the Secretary of State to apply to a court for a particular course of action to be taken. That could include seeking an extension before the seized item is destroyed. In all cases, a notice to occupier information notice will be left at the property, which will provide information about the search, the items seized and relevant points of contact.
Question put and agreed to.
Clause 80 accordingly ordered to stand part of the Bill.
Clause 81
Amendments to the Criminal Justice and Police Act 2001
Question proposed, That the clause stand part of the Bill.
Andrew Western
Clause 81 applies only to Scotland and amends the Criminal Justice and Police Act 2001 to enable DWP-authorised investigators to seize an item from a premises and scrutinise it off site to determine its relevance to the investigation. This will apply in circumstances where it is challenging or even impossible to determine the relevance of an item to an investigation while on site. In some cases, large volumes of documents could be found that may comprise valuable evidence, but that will take a long time and need detailed scrutiny to assess. A locked electronic device may be found that could have evidence stored on it. This clause gives DWP-authorised investigators the ability to deal with those kinds of situations in the same way as the police by seizing items and taking them off site for sifting or further examination elsewhere. Without the authority granted by this clause, vital evidence could be missed, lost or even destroyed if left on site. In all instances, the DWP will seek to return seized items as soon as possible to the owner, where they are no longer needed or found to be irrelevant to an ongoing investigation. Those are the main provisions in clause 81, and I commend it to the Committee.
Rebecca Smith
Clause 81 amends the Criminal Justice and Police Act 2001 to deal with situations where authorised investigators cannot ascertain whether an item or material contains information relevant to that search, such as when dealing with large volumes of materials or files or electronic devices. That material therefore may need to be taken to be examined elsewhere, and we recognise that the clause allows for material to be seized and then sifted, rather than sifted and then seized. For that reason, we are happy for the clause to stand part of the Bill.
Steve Darling
I seek the Minister’s guidance as to how DWP officers, when they undertake these acts, will ensure that seize and sift will not be the standard modus operandi and that it is used only in appropriate cases. When will the Government publish a code of conduct? What guidance will be given? It might be tempting to undertake trawling operations for information rather than taking the spear-fishing approach that would garner the evidence more easily. I would welcome the Minister’s reassurance on that.
Andrew Western
I am grateful to the hon. Member for South West Devon for her support and to the hon. Member for Torbay for his questions. By way of reassurance, the DWP cannot just seize anything and everything from a place it has entered with a warrant; it can seize only items that are directly relevant to the investigation. Other oversight is built in, given the ability to make complaints to the IOPC and the oversight powers we are affording to HMICFRS, and people will be trained to the industry standard and so on, but fundamentally they must be able to demonstrate that a seizure is directly relevant to the investigation.
Question put and agreed to.
Clause 81 accordingly ordered to stand part of the Bill.
Clause 82
Incidents etc in England and Wales
Question proposed, That the clause stand part of the Bill.
Andrew Western
Clause 82 amends part 2 of the Police Reform Act 2002 and will insert proposed new section 26H, which provides for the IOPC to investigate any serious complaints or serious harm related to the use of the powers of entry, search and seizure. There are multiple safeguards—including industry-standard training for all authorised investigators—to minimise the risk of the Bill’s entry, search and seizure powers being used incorrectly. I assure Members that the likelihood of a serious complaint, particularly anything that involves death or serious harm, is extremely unlikely. However, an effective and independent complaints process is essential when it comes to powers of this nature.
Whenever a search warrant is executed, information will be provided setting out how to raise a complaint and what to do in the unlikely event that the complaint is serious or involves death or serious harm. The clause aligns the DWP’s approach to serious complaints and incidents relating to entry, search and seizure with that of other bodies with similar powers, including the police. That is why we have agreed with the Police Investigations and Review Commissioner that they will investigate serious incidents that occur in Scotland related to the use of the powers of entry, search and seizure by the DWP under clause 83.
If a complaint is not of a serious nature, as defined in IOPC guidelines, it can still be raised via the existing departmental complaint procedures. It will be investigated internally, and if an individual is not happy with the complaint response, they can ask for their complaint to be reviewed by a more senior manager. If an individual remains dissatisfied with the Department’s final response, they may escalate their concern to the independent case examiner.
Clause 83 amends articles 2, 3 and 4 of the Police and Fire Reform (Scotland) Act 2012 (Consequential Provisions and Modifications) Order 2013. It mirrors the provisions of clause 82, which applies to England and Wales, and provides for similar independent investigation arrangements for serious incidents in Scotland. I again reassure Members that robust safeguards will be in place, including investigators having comprehensive training, robust internal governance with clear processes for signing off warrants, and the external independent authorisation of all warrants by the courts.
In the very unlikely event that a fatality is associated with the DWP’s use of the powers, the Police Investigations and Review Commissioner can be directed to investigate by the Crown Office Procurator Fiscal Service, which is Scotland’s public prosecution service and death-investigation authority. We expect that, in almost all cases, incidents relating to the DWP’s use of the powers will fall outside of the scope of being serious in their nature. In such cases, the Department’s existing complaint procedures will be used, as I set have out.
It is crucial to build trust in the Department, especially when serious incidents happen. The public must know that their concerns will be handled with importance and impartiality. Clauses 82 and 83 provide that assurance by establishing a transparent and accountable investigation process that is independent of the Department. Having outlined their main provisions, I commend the clauses to the Committee.
Rebecca Smith
Clause 82 specifies that the Independent Office for Police Conduct—which oversees complaints, professional conduct matters and serious incidents involving the police and similar bodies in England and Wales—will handle serious complaints relating to the DWP’s use of the powers under proposed new section 109D in relation to DWP offences. That will be done through a regulation-making power, so will the Minister explain what modifications might be made to how the IOPC oversees complaints when its functions are extended to DWP investigators? How much additional funding does the Minister anticipate the IOPC will need to take on those functions?
Andrew Western
On the question of funding for the IOPC and the PIRC, we are in ongoing discussions with them about what the exact costs will be. We clearly do not expect the costs to be excessive because it is not a massive shift from the work they undertake already.
On the question of what modifications are required to the IOPC role, the regulations will set out how the functions will work for the DWP. It is important to remember that we envisage that the IOPC will look at cases only where there have been serious complaints and deaths, so we are not talking huge numbers.
There could be a range of ways in which people can refer. It may even be that we would self-refer if there has been a death. One of the principal reasons why I did not consider it prudent to take the power of arrest is that that minimises the likelihood of our finding ourselves in that position. Where arrests are undertaken, clearly the police will be on site with us and responsible for that.
I do not envisage the process for making the complaints to be set out explicitly in the code of practice, but clearly if someone contacted the Department and wanted to make a complaint of that nature about something very serious that was outside the scope of internal complaints—for instance, if there had been harm or death—we would immediately refer the person and the case to the IOPC. As I say, the costs are not expected to be excessive, but we would expect to meet them ourselves.
Question put and agreed to.
Clause 82 accordingly ordered to stand part of the Bill.
Clause 83 ordered to stand part of the Bill.
Clause 84
DWP offence
Question proposed, That the clause stand part of the Bill.
Andrew Western
The clause creates a new definition of “DWP offence”, expanding on the existing definition of “benefit offence” set out in the Social Security Administration Act 1992. The DWP must have the power to respond to the different types of fraud we find. We know that, for example, the misuse of national insurance numbers can be a gateway to wider fraud. If criminals steal the identities of honest people and misuse their details to make false benefit claims, that is unacceptable and we need the power to act.
Fraud is not just contained to the most claimed benefits, like universal credit—as we saw with kickstart, grant payments intended to support people when they need extra help can also be abused—yet DWP investigative powers are limited when investigating other types of crime. By providing a new definition of a DWP offence, the clause ensures that fraudulent activity relating to grants, loans, national insurance numbers and other financial support issued by the DWP is explicitly captured in the law. It allows any offences linked to the payments to be met with firm action. The new definition works hand in hand with our enhanced investigation and entry, search and seizure powers in the Bill, thereby giving the DWP the ability to obtain critical evidence needed to prove or disprove allegations of fraud, in a fair and proportionate way.
The clause is about ensuring that every pound lost to fraud, and taken away from those who genuinely need support, is pursued with all the powers we have, whatever the nature of the payment may have been. I commend the clause to the Committee.
Rebecca Smith
I thank the Minister for outlining the plans around the clause, which would establish the definition of a “DWP offence” to allow any offence relating to a benefit payment, credit or grant that the DWP administers to be included under the new information-gathering powers. It would also include offences related to national insurance numbers.
We support the clause, which should hopefully allow DWP to gather information more holistically and lead to more successful prosecutions, but I have a couple of brief questions. What assessment has been made of the scale of prosecutions that could be made? What assessment has been made of the cost of exercising the new power?
Andrew Western
I thank the hon. Lady for her support and her questions. I would not want to put a specific number on the prosecutions—as I said, we have not had the powers to investigate these crimes in full before—but we think that by bringing these areas it into scope not only will we find significant offences that we need to clamp down on but there will be a deterrent effect. Having both levers together makes this an important tool to have in our arsenal.
On the costs, they would be broadly similar to those we already bear for investigating any other type of offence. They would not be materially different in terms of the implications for our budget.
Question put and agreed to.
Clause 84 accordingly ordered to stand part of the Bill.
Clause 85
Disclosure of information etc: interaction with external constraints
Question proposed, That the clause stand part of the Bill.
Andrew Western
The clause is an important safeguard for the DWP’s information-gathering powers. It sets out the kinds of information that a DWP-authorised officer cannot compel from an information holder. The exemptions are similar to those set out in the Social Security Assistance (Investigation of Offences) (Scotland) Regulations 2020. They are designed to prevent information from being obtained that is particularly sensitive, or if it would be inappropriate for the DWP to do so. For instance, as with the existing legislation, exemptions apply to legally privileged material and to information that could lead to the self-incrimination of the person or their spouse or civil partners.
In addition, the clause sets out exemptions for excluded material and certain special procedure material, as defined in the Police and Criminal Evidence Act 1984. This includes material such as medical records, records about counselling that an individual may have received, and journalistic material. The clause also prevents information notices from being issued for personal information about the use of organisations that provide free advice and advocacy services—including, for example, charities that provide refuge from abuse—thereby ensuring that vulnerable people can seek help without fear that their information will be disclosed.
Any use of the powers must be compliant with obligations set out in data protection legislation, which requires that personal data is kept secure and is not misused. The powers cannot be used to obtain communications data. If the DWP seeks communications data as part of its investigation, it must follow the authorisations and processes under the Investigatory Powers Act 2016. Further detail on the safeguards will be in our code of practice, which will be consulted on before being laid before Parliament, and to which all authorised officers will be required to adhere. Having outlined the main provisions of clause 85, I commend it to the Committee.
Rebecca Smith
Clause 85 sets out that DWP’s actions under part 5 of the Social Security Administration Act 1992 must comply with existing laws relating to the use of data and with the existing protections to protect confidential data and data prohibited under the Investigatory Powers Act. I have a brief question before I move on to subsection (8). Does the Minister envisage that clause 85 will provide much practical constraint on how the DWP is able to share information?
Subsection (8) states:
“A person who provides services on a not for profit basis in relation to social security, housing (including the provision of temporary accommodation) or debt, may not be required under the provision to give personal data about the recipients of the services.”
I acknowledge what the Minister just said about the particularly vulnerable, who may be in refuges or places like that, but the provision feels quite broad, particularly in relation to debt recovery and support. Many organisations might have quite a lot of information that would be helpful to the DWP—I think particularly of, for example, Citizens Advice, which sees the records of quite of a lot of people. Why has that carve-out been included and what purpose does it serve, beyond protecting particularly vulnerable groups that we do not want to put in danger?
My other question is about whether the provision excludes local authorities, which often provide temporary accommodation, for example. Does the subsection mean that local authorities will not be part of the group that could be asked for information?
Andrew Western
First, I am not of the view that the protections overly constrain our ability to gather the information we need and execute fraud operations as effectively as possible. The provision significantly broadens the overarching information-gathering package, the number the organisations from which we can compel information and the nature of the information that we can receive, but it is important that we take the steps needed to rule out some of the obvious kinds of information that people would expect us to remove, such as medical records and journalistic material.
It will probably help if I clarify the matter of the special protection status for certain organisations—I apologise if I was not clear when I said this before. The clause does not exempt charities or any specific organisations; it exempts certain types of information, such as that from organisations that provide services free of charge in relation to social security, housing or debt. We can still ask them for information, but not in relation to the advice they have provided. The measure is therefore perhaps not as restrictive as it may seem. It is not that the organisations can never be asked for information; it is just that certain types of information, of the nature I outlined in my principal contribution, will be protected.
Local authorities are not exempt, and they will have a part to play in much of our investigatory work, as the hon. Member for South West Devon suggested.
Question put and agreed to.
Clause 85 accordingly ordered to stand part of the Bill.
Clause 86
Giving notices etc
Question proposed, That the clause stand part of the Bill.
Andrew Western
The information-gathering powers set out under clause 72 will be amended to ensure that information can be compelled from third parties digitally. That is an important step forward for us. The updated information-gathering powers create a single, clear legal gateway so that the DWP can compel information from third parties, it is more straightforward to respond, and that information can be provided digitally.
The Department must ensure that provisions are in place so that, in the event of a failure of digital systems, investigations are not impacted. Therefore, under such rare circumstances, the DWP will retain the power to compel information in writing, as set out in clause 86 —[Interruption.] I think Jennie likes this one. The clause also confirms that the DWP giving an administrative penalty notice by post is sufficient to effect service, and also applies to the eligibility verification measure, enabling the DWP to issue a notice to financial institutions by post, if necessary.
Rebecca Smith
Clause 86 inserts the provision for the DWP to retain the ability to issue an information notice and receive relevant documents by post. The Minister will be pleased to hear that he has answered my questions. The only thing I would ask is: how often does he expect information notices to be issued digitally? I suppose the flip question is: are you expecting the system to work perfectly and the post option to be used very rarely? For example, with vulnerable and older groups, might the post option need to be used more broadly than digital in certain cases?
Andrew Western
Clearly, in individual cases, if someone were to request contact by post, we would want to bear that in mind, but without wishing, as the Minister for transformation, to sound over-confident about the digital capability of some of our systems, in my view we would need to use these powers extremely rarely. It would be digital by default, except in the instance of, for example, system failure.
Question put and agreed to.
Clause 86 accordingly ordered to stand part of the Bill.
Clause 87
Independent review
Question proposed, That the clause stand part of the Bill.
Andrew Western
Clause 87 introduces an important safeguard by providing that all the criminal investigation powers in the Bill are independently inspected. As the Committee would expect, the DWP will make every effort to ensure that its criminal investigations are carried out to the letter of the law—through effective training, internal guidance and, for our entry, search and seizure powers, independent authorisation by the courts. However, it would not be right for the Department to simply mark its own homework. That is why the clause provides for an independent person to be commissioned by the Secretary of State to undertake inspections. This will ensure that there is a formal provision in place to establish that arrangement, and that it can be done in a way that is suitable for both the DWP and the independent person.
The independent person will be responsible for impartial inspection of the Department’s effectiveness, and compliance with relevant codes of practice and guidance in its criminal investigations. That aligns with other Government bodies such as His Majesty’s Revenue and Customs, the Gangmasters and Labour Abuse Authority and the National Crime Agency, which also use investigatory powers at different levels and are also subject to independent inspections.
I am pleased to say that the independent person the DWP intends to commission is His Majesty’s inspectorate of constabulary and fire and rescue services for matters relating to investigations in England and Wales, and His Majesty’s inspectorate of constabulary in Scotland for investigations in Scotland. Those well-established bodies are experts in conducting such inspections and independently assessing the use of criminal investigation powers. Their reports will be published and laid before Parliament, including any recommendations for improvements.
The clause ensures that the Department’s criminal investigations will be conducted with transparency and accountability, demonstrating its commitment to fairness and transparency when exercising its criminal powers.
Rebecca Smith
Clause 87 provides for DWP investigation activity to be inspected and evaluated by an independent person or body. The Secretary of State will be able to appoint someone to inspect DWP criminal investigations, and to provide written reports and recommendations to the Secretary of State, which must be published and laid before Parliament. That review will also consider the DWP’s compliance with the codes of practice, which we have not yet seen, as was much discussed in earlier sittings.
We welcome the transparency that clause 87 will bring to how the DWP is using these powers; however, unlike clause 75, the clause does not state how often reviews would have to be conducted. Is there a reason for that? The Secretary of State would give “directions” as to the period to be covered by each review, having first consulted the independent person. Can the Minister confirm how frequently the Secretary of State will ask the DWP investigation activity to be reported on, and will the independent person or body be able to carry out reviews on their own initiative or will they have to wait until directed to do so by the Secretary of State?
The Minister has already given the Committee an indication of who may be appointed to lead those reviews, and I assume the layout of the police and fire authorities relates to that particular question, so I will not restate that for the record, but can I also ask the Minister how quickly reviews are expected to be concluded once they have been initiated—referring back to the wording of clause 75? For these reviews to be meaningful, there must be a way for the DWP to learn lessons and improve practice, so how can the Minister reassure the Committee that there will be a process in place for that to happen?
The Chair
I remind Members to bob if they wish to catch my eye to speak, and to refrain from using the word “you”, which refers to me as opposed to the Minister.
John Milne
My colleague has just partially asked my question. While we broadly welcome the clause, we are concerned by the absence of the code of practice. Could the Minister give any indication of the kind of guidance that it might contain? Also, at what stage of the parliamentary process will there be scrutiny of it, given that it will not be during this Committee?
Siân Berry (Brighton Pavilion) (Green)
It is a pleasure to serve under your chairship, Mr Western. I want to raise the comments made by the Information Commissioner in relation to the Bill and the updates to the previous Government’s proposals. I understood that they were more content with this Bill than the previous Bill. They were pleased that it brought data protection more tightly within the measures, and that it talked about data protection in a much more consistent way with the law. They said that the Bill more tightly scopes the types of information that can and cannot be shared. I understand that our debate on clause 85 covered some of those improvements.
However, at the end of their comments, the Information Commissioner talked about the review process, and said very clearly that they would like to explore with the Government the role that the Information Commissioner’s Office can play in assisting with the review process. This clause does not set out the different offices and people with whom the independent reviewer needs to liaise in preparing their report. I wondered whether Ministers could comment on their thoughts surrounding that process, and consider setting out in the code of practice or further guidance how the independent reviewer might engage properly with data protection in their review.
Andrew Western
There were a number of questions there—I was scribbling at pace—so if I miss anything, please intervene. In terms of when and how often investigations will happen, it is expected that the period for each review will be set and carried out in mutual agreement with each of the bodies. On whether they can ask to undertake a review, it would need to be in consultation with the Secretary of State, but it is fair to say we would be doing ourselves no favours by refusing to bear their request in mind. Likewise, on timescales, it is all in collaboration with the Secretary of State.
On when we can expect to see the codes of practice, for search and seizure the Home Office’s existing codes of practice will apply, but for information-gathering powers it will be the updated code of practice, which will be consulted on and laid in Parliament before being used. We anticipate that new codes of practice will be available before Committee stage in the House of Lords.
In relation to the response to inspections and how we would learn from them, once the independent body has produced its report the Secretary of State must publish it and lay it before Parliament. Although no legal obligation is placed on the Secretary of State to implement recommendations, we will respond to all recommendations promptly and, as a learning organisation, always look to make continuous improvements.
Rebecca Smith
I thank the Minister for answering those questions. The lack of stipulation on timeframe, frequency and so on begs the question of why this provision is in the Bill. Ultimately, what will trigger a review? That is the bit we probably have not touched on. Who will say to the Secretary of State, who no doubt is an incredibly busy woman, “This is what we need to be doing at this time”? I appreciate that it would be her officials, but this provision is buried in the middle of the Bill and there is no stipulation that a review has to happen after a 12-month period, every six months or whatever. How do we ensure that this transparency, which we welcome, will actually take place, and that the benefits of having a review come to pass?
Andrew Western
That is a reasonable question. Clearly, if there are incidents such as those that would bring into scope the IOPC powers, that would attract significant attention and it would be obvious and—dare I say it?—necessary for the Secretary of State to refer there. In relation to timescales and so on, much of that would depend on what has happened in a period. Were we to say that this was something that will be done every year or every other year and then something happened immediately, we would lack the flexibility to utilise the powers in the agile way we hope to do so. I appreciate that it may appear vague when compared with some powers that we have previously discussed, but that is so we can respond to events, rather than seek to dodge the use of the power.
Clearly, to an extent we will always work in collaboration. As I say, I would not intend at any point to resist a request from HMICFRS or any other body to look into work that we had undertaken, in particular in response to anything that may be considered controversial, not least because search and seizure powers are totally new for the DWP. We need to land them appropriately and build trust that we are able to execute the warrant powers properly.
The Information Commissioner’s comments related primarily to the eligibility verification measures, as they pertain to a direct comparison to the third-party data powers in the Data Protection and Digital Information Bill. Obviously, the Information Commissioner has fairly wide-ranging powers to involve himself in any investigations. It is not something that we would look to resist. I think the channels are already in place for him to engage wherever he feels that it is appropriate.
Question put and agreed to.
Clause 87 accordingly ordered to stand part of the Bill.
Clause 88
Enforcement of non-benefit payments
Question proposed, That the clause stand part of the Bill.
Andrew Western
Clause 88 sets out the details of how an overpayment of a non-benefit payment, such as under the kickstart scheme that was used after the pandemic, will be made recoverable. This is necessary if we are to use the administrative penalty in connection with such cases to enable us to improve fairness, allowing the Department to address fraud wherever it occurs in the welfare system. As the Bill specifically seeks to extend the use of the administrative penalty—a penalty that is considered only after a criminal investigation of a suspicion of fraud—we are specifically extending the recovery of overpayments to cases of fraud against a non-benefit payment.
This means that, before we can recover overpayments of non-benefit payments, the DWP will need to have completed a thorough criminal investigation into a suspicion of fraud and either an administrative penalty is accepted or there is a court conviction. Once that has happened, the process for recovery of non-benefit overpayments will be the same as the long-established processes for social security overpayments. As with social security overpayments, a notice must be sent to the person who received the non-benefit overpayment. The notice sets the right to challenge the overpayment decision.
The overpayment decision can be challenged first by requesting a review by the Secretary of State, and if the decision is maintained, they can appeal to the first-tier tribunal. Individuals have one month to apply for a review and one month after the notification of the outcome of the review to appeal, as outlined in proposed new subsections 71ZK(2) and 71ZK(6). These time limits are the same as those for challenging benefit overpayment decisions. If the decision is not disputed or is upheld following a review or appeal, the non-benefit overpayment becomes recoverable in the same way as social security overpayments.
Clause 88 is fundamental. It ensures that there is fairness in the DWP’s response to fraud, meaning our investigators and decision makers treat cases of fraud against any DWP payment in the same equitable way.
Rebecca Smith
Clause 88 sets out the mechanism for the recovery of non-benefit payments. This applies when a person misrepresents or fails to disclose a material fact, and as a consequence they or another person receives a non-benefit payment, or an amount of a non-benefit payment, that they would not otherwise have received. Subsection (2) provides a power to recover the overpayment.
Clause 88 also sets out what the Secretary of State must do before an overpayment can be recovered. This includes providing an overpayment notice, the detail that must be included in that notice, and that the person must have had the opportunity to challenge the overpayment. The Secretary of State can issue an overpayment notice only if the person has been convicted of an offence set out in the legislation, or if it appears possible to institute proceedings against a person for an offence. The only grounds to appeal a notice are if there has been no overpayment of a non-benefit payment or if the amount stated in the notice is not correct. Any appeal must be made before the end of the period of one month, beginning the day after the day on which a person was given the notice.
This question has probably been answered in an earlier debate, but I will ask it anyway to get it on the record: will the notices be sent in the post or electronically? That links back to our debate on clause 86; how the Government ensure that the notices get to the right people is going to be particularly important. Finally, why is there no ability to extend the one-month period, and on what basis was one month decided?
Steve Darling
I just want some assurance on how it was decided that one month was long enough. For my sins, I served the people of Torbay in elected of office for 30 years before getting elected to Parliament. I am alive to the fact that some people have chaotic lives. I am only too aware of how sometimes people turn up to the citizens advice bureau with a couple of carrier bags full of unopened envelopes because due to their mental health challenges the only way they are able to deal with their world is by putting their head in the sand, sadly.
I wanted an assurance on whether there was a level of flexibility. It appears from the clause that there is a drop-dead proposal here. What flexibility is proposed? I look forward to hearing the Minister speak about those people who are perhaps more vulnerable than the rest of us.
Rebecca Smith
I was hasty in putting down my notes and I realised I left out a bit, so thank you for humouring me, Mr Western. Clause 88 also sets out that there is a right of appeal to the first-tier tribunal against the notice, unless it has been revoked on review. We welcome the ability to appeal to the first-tier tribunal, but can I ask the Minister whether any amounts recoverable will be paused during the appeal process? Again, there is only one month to appeal to the first-tier tribunal, so can he explain on what benefit this timeframe was chosen?
Andrew Western
On whether notices will be sent in the post, it will be a mixture, as in the case for benefits rather than grants. The means of communication may be electronic or by post—there is always a blend. When we follow up in instances where debt recovery is required, we always use a range of mechanisms, such as telephone, digital and post, to attempt to get hold of somebody when we need to.
On the question from the hon. Members for South West Devon and for Torbay regarding how we came up with the one-month period either side of the appeal, that is the existing practice in the case of benefits, and we feel that it is therefore appropriate for non-benefit grants. To give some assurance on flexibility and vulnerability, the characteristics of claimants that might make them vulnerable, such as mental health difficulties, disabilities and other mitigating circumstances, will always be factored in by the decision maker when deciding whether to opt for an administrative penalty in the first place. At present, that happens in the case of benefits, and we would be extending that practice to grants and other non-benefit issues.
If the customer is suspected of being vulnerable at any stage of the investigation, the team leader or higher-investigations leader, in consultation with the investigator, will decide on the appropriate next steps. On the question of the timeliness of recovery, recovery will not start before an appeal was made. If there is an appeal, there will have been no recovery.
Question put and agreed to.
Clause 88 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Gerald Jones.)
Public Authorities (Fraud, Error and Recovery) Bill (Tenth sitting)
Tuesday 11th March 2025
(3 months, 2 weeks ago)
Public Bill CommitteesPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 March 2025 - (11 Mar 2025)
Siân Berry (Brighton Pavilion) (Green)
I beg to move amendment 7, in clause 89, page 55, line 6, leave out from “unless” to the end of line 14 and insert—
“(a) the liable person agrees, or
(b) there has been a final determination by a court or tribunal that it is necessary and proportionate to exercise a power under Schedule 3ZA.”
This amendment would mean that the Secretary of State can only exercise powers to recover amounts from a person where the person agrees or where a court or tribunal has determined that such recovery is necessary and appropriate.
Siân Berry
It is a pleasure to have you back in the Chair this afternoon, Sir Jeremy. The amendment covers direct deduction orders relating to social security payment debt of individuals who are no longer on benefits and not employed within the pay-as-you-earn system, as well as the use of powers to disqualify debtors from driving—a power I oppose, and we will debate that when we come to schedule 6.
The clause introduces the power for the Department for Work and Pensions to recover funds directly from a person’s bank account without a court warrant. The Secretary of State may make a direct deduction order in respect of a recoverable amount, where the debtor is no longer on benefits and is not employed within the PAYE system. As I understand it, the powers apply to all benefits under sections 71 to 78 of the Social Security Administration Act 1992, including universal credit, and employment and support allowance. The powers apply to not only overpayments caused by deliberately fraudulent behaviour, but negligent oversight, incorrect statements and failure to disclose information. A DDO may be issued in relation to a joint account, if that is the only account that the debtor has.
The amendment would replace the conditions for such powers under proposed new section 80A(5) of the 1992 Act and would mean that the Secretary of State can only exercise powers to recover amounts from a person where the person agrees that the payment is due, or where a court or tribunal has determined that such recovery is necessary and appropriate. The language and wording almost exactly mirrors that in clause 12, on page 9 of the Bill, which provides that protection for debtors to public authorities. If the likes of potential covid fraudsters and corrupt company directors get the protection of a court or tribunal decision, it is difficult to understand why a benefit recipient should not get the same.
It is worth noting that we already have powers to address the scenario where a debtor is no longer on benefits and not in PAYE employment. In such cases, the DWP can recover overpayments through county court enforcement proceedings. I am aware that the DWP argues that the county court method of enforcement is slow and resource-intensive. However, that is not a good reason to jettison judicial oversight from a process that allows the Government to take money directly from individuals’ bank accounts.
My amendment 7 seeks to address the concern that those powers hand an extraordinary amount of discretion to the Secretary of State, as there is no threshold to determine what constitutes hardship or what would be fair in all the circumstances. Furthermore, as far as I can see, no floor is defined for the amount of money that must be left in the debtor’s bank account.
I understand that the DWP maintains that the power is like those used by His Majesty’s Revenue and Customs and the Child Maintenance Service, but that is not comparing like with like. Child maintenance is money owed—already defined to be affordable—by one parent to ensure provision for their dependant who does not live with them. That differs from an individual claiming money from the social security system who has been overpaid, potentially through no fault or a simple mistake of their own, where restitution may be extremely difficult to manage fairly and affordably.
Furthermore, I understand that HMRC powers have safeguards: before the powers are exercised, debtors must receive a face-to-face visit from an HMRC agent; and HMRC must retain at least £5,000 across the debtor’s accounts. By contrast, the Bill leaves those protections to the DWP’s discretion, based on the debtor’s representations and covertly obtained bank statements.
The amendment is also needed because the direct deduction powers as drafted would not be powers of last resort. For example, there is no requirement for the minimum number of times a liable person has failed to engage with the DWP before the powers can be exercised; there is no definition of whether someone has been given a reasonable opportunity to settle the debt; and there is no requirement for an in-person visit from the DWP. Such safeguards matter, because benefit recipients may not be engaging due to incapacity, illness, mental health problems or other genuine reasons. If those circumstances are ongoing, this will be an ineffective deterrent to force people to engage and repay their debts.
The amendment would mirror protections in part 1 of the Bill by limiting the availability of direct deduction order powers to cases where the debt is accepted, either by the debtor or by judicial determination. That would prevent the DWP from lowering the legal threshold at which funds can be removed directly from an individual’s bank account. I hope that we will come back to this issue at a later stage, as I really do want some action on it.
The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
It is a pleasure to serve under your chairship again, Sir Jeremy. Amendment 7 would introduce a new requirement for the direct recovery from account power, restricting its use to cases where the debtor agrees or where a court or tribunal determines that the exercise of the power is necessary and appropriate. I am not clear whether the amendment would do exactly what the hon. Member for Brighton Pavilion intends, which I believe is to place the restriction on all the new DWP recovery powers proposed in the Bill, but I will address the amendment as I think it was intended.
Although I share the view that there should be protections in place to ensure that the direct recovery power is used proportionately and appropriately, I do not agree that the amendment is necessary. In my view, the Bill already contains sufficient safeguards. The amendment would also introduce unnecessary burdens for courts and tribunals, create avoidable inefficiencies and, ultimately, reduce the amount of taxpayers’ money that the power would bring back into the public purse.
The Department has long-standing powers under sections 71 and 71ZB of the Social Security Administration Act 1992 to recover public money wrongly paid in excess of entitlement. Those provisions include a strong framework, including rights of reconsideration and appeal against the overpayment decision. The DWP already has powers to recover such overpayments through deduction from benefits and PAYE wages under sections 71, 71ZC and 71ZD of the 1992 Act.
The power in the clause is aimed at recovering taxpayers’ money owed by debtors who persistently evade repayment and refuse to engage with the DWP to agree affordable repayment terms, even though they have the means to do so. It is highly unlikely that those debtors, who, until this point in the debt recovery process, have ignored all reasonable requests by the DWP to work with it to agree repayment terms, would suddenly willingly agree to the DWP recovering the money they owe directly from their bank account. It is therefore highly likely that, under the amendment, the DWP would be required to seek a determination from the court or tribunal that a direct deduction order is necessary and appropriate.
The DWP can already seek lump sum recovery from a debtor’s bank account through the courts by applying for a third-party debt order. The very rationale for introducing this power is to recover more than £500 million of public money over the next five years without using court time unnecessarily. The amendment would create entirely avoidable inefficiencies.
The Bill already makes sufficient provision for a debtor to challenge a direct deduction order if they do not agree with it, first through the right to make representations concerning the terms of the order prior to any deductions being made and, following that, through a right of appeal to the tribunal. That is in addition to the debtor’s existing mandatory reconsideration and appeal rights concerning the decision that there is a recoverable overpayment that must be repaid.
In addition to those safeguards, the Bill includes sufficient provisions to ensure that the power is used appropriately and proportionately. Specifically, it provides that it is a last-resort power that can be used only if recovery is not reasonably possible by deductions from benefit or PAYE earnings. The debtor can avoid the power entirely at any point by working with the DWP to agree affordable and sustainable repayment terms.
Separately, the disqualification from driving power can be exercised only at the discretion of the court. Again, that provision includes necessity and proportionality considerations by requiring disqualification to be suspended provided that the debtor makes the payments ordered by the court, and ensuring that an order cannot be made if the court considers that the debtor has an essential need for a licence.
Lastly, the amendment would be likely to reduce the expected deterrent impact of the direct deduction power. Although the DWP will take the appropriate action, in line with legislation, to address debtors who persistently evade repayment of taxpayers’ money when they have the financial means to repay, the power is expected to encourage debtors to agree affordable and sustainable repayment with the DWP without the need to proceed with an order.
Making such an amendment would lessen the power’s effectiveness, meaning that the DWP would have to take this action more frequently than envisaged and potentially subject debtors to court proceedings where the DWP would not have as the Bill is currently drafted. I hope—but I suspect possibly not—that I have reassured the hon. Member for Brighton Pavilion that the Bill contains sufficient provisions and safeguards.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Is it fair to say, for the reasons that the Minister outlined on the removal of the deterrent, that this amendment would not only assist some who seek to commit fraud but cost the DWP in its internal legal responsibilities and duties, as well in what it has to contribute to the court process to pay for what the amendment would require, in the sum of tens of millions of pounds?
Andrew Western
I would not put a specific value on it, but my hon. Friend may well be right with the sort of figures that he suggests. Yes, there would be additional costs from the preparation in advance of court appearances, as well as the administrative costs of applying to the court itself. I think we would bear a significant burden, were we to agree to this amendment. Having outlined my reasons, I will resist amendment 7.
Clause 89 inserts proposed new section 80A into the Social Security Administration Act 1992, and it sets out which debts can be recovered by the new DWP recovery powers introduced in part 2 of the Bill. The new recovery powers are, firstly, the power to recover from bank accounts via direct deduction orders and, secondly, the power to disqualify a person from holding a driving licence.
The introduction of this clause ensures that the DWP can apply the new recovery powers to relevant social security debts. The clause is crucial to ensure that the new recovery powers in clauses 90 and 91 are used proportionately, appropriately and as intended by making them a power of last resort. By that, I mean that the DWP can use the new powers only after a debtor has been given all reasonable opportunities to repay the money owed, and only where recovery by existing powers is not reasonably possible.
The DWP debt stock stands at over £9 billion. As set out in the impact assessment, there is approximately £1.7 billion of off-benefit debt where individuals are able to avoid repayment, as the DWP is currently unable to recover effectively and efficiently in these cases. The Department’s current recovery powers are limited to deductions from benefits or PAYE earnings, meaning that those with other income streams and capital can choose not to repay their debt. The powers are vital to tackle those who repeatedly and persistently evade repayment, bringing £565 million of taxpayers’ money back into the public purse over the next five years.
These powers are expected to have a deterrent effect and to encourage many debtors to agree to repay without the powers being used. Debtors will be notified of the powers and their potential to be used to recover the money owed, should the individual continue to evade repayment. Let me be clear: where someone keeps money to which they are not entitled and repeatedly refuses to repay, the DWP will recover that money through these new powers. I commend the clause to the Committee.
Rebecca Smith (South West Devon) (Con)
It is a pleasure to serve under your chairmanship again, Sir Jeremy. Clause 89 sets out how money is to be recovered. It specifies that the Secretary of State cannot recoup the money from someone’s bank account or disqualify them from driving until they have given the liable person a reasonable opportunity to settle their liability, notified the liable person that the Secretary of State may exercise the power to recover the amount, if the liability is not settled, and the Secretary of State must also have given the liable person a summary of how the power would be exercised.
We support the recovery of money that has been fraudulently claimed, and I believe it is pretty clear that we need to do it. However, when the money has been given out in error, particularly to vulnerable claimants, as has been mentioned this afternoon, will the Minister explain how those vulnerable claimants will be communicated with? How will the DWP ensure that funds can be managed in a way that is sustainable for the individual who has to make those repayments? I hope that would also reassure the hon. Member for Brighton Pavilion.
Green party amendment 7 would mean that the Secretary of State can exercise powers to recover amounts from a person only where the person agrees or where a court or tribunal has determined that such recovery is necessary and appropriate. We in the official Opposition question why the Secretary of State should be prevented from recovering amounts that have been fraudulently claimed, unless the person in question agrees. The amendment seems to us to entirely frustrate the purpose of clause 89, which may well be its intent.
Siân Berry
Would the hon. Member care to comment on the fact that in clause 12, actual fraudsters are given the option to either have a court agree, or for them to agree to repay the amount?
Rebecca Smith
In terms of the Cabinet Office powers that we debated under part 1 of the Bill, I think we are not comparing apples and apples; we are comparing apples and pears. I am not the Government, so it is not my Bill, but ultimately we have heard the figures—indeed, I have shared the significant amount of fraud we are talking about—and if I were in the Minister’s shoes, I would say that the number of cases is not comparable. I continue with my view that this is different from the first part of the Bill.
I would be interested to hear an explanation from the hon. Member for Brighton Pavilion about why she does not believe that money that has been fraudulently claimed from the DWP should be paid back. However, I have a question for the Minister off the back of amendment 7, which is similar to the question I asked him about clause 89. Regarding the concerns about the definition of hardship and vulnerability that the hon. Member for Brighton Pavilion mentioned, what might those levels be? I appreciate that that is potentially difficult to include in the Bill, but it would be interesting to know what is defined as a level of hardship that would have an impact on repayment, and how that would be determined.
Andrew Western
I will spend a moment setting out the process around the establishment of communications prior to deduction from a bank account and the affordability considerations that we undertake.
A person who is not paid under PAYE, or is in receipt of benefits, is identified and referred to the DWP’s debt management team initially to recover the debt. The debt management team makes multiple attempts, by letter or phone, to contact the person over at least four weeks to agree a voluntary repayment plan. If no contact can be made at that point, the case is referred to the DWP debt enforcement team, who will make at least four further separate attempts at contact, by letter or phone. That will include, at a minimum, two written notifications setting out the debt amounts owed, how the DWP may enforce the recovery of the debt, and with signposting to debt support to ensure that support is offered to vulnerable people.
If there is still no contact made, the person has repeatedly refused to engage and agree a voluntary plan. At that point, the DWP will check that the person has not made a new claim for benefit or entered PAYE employment, to check the person is suitable for this sort of recovery action. The person’s bank can then be contacted by the DWP to provide three months of bank statements from their accounts to check the affordability for any deduction, and to help the DWP work out the right amount, and frequency, of any deduction. The deductions must be line with caps in legislation. For regular deductions, that must not exceed 40% of the amounts credited into an account over the period for which bank statements are obtained. This will ensure that no one is forced to repay more than they can afford, so no one is pushed into financial hardship due to the recovery of debt.
Once that affordability assessment is complete, the DWP must write to the person to outline the debt that is being recovered—in other words, what has been overpaid and what is owed—the amount and frequency of the deduction, and how the deduction will be made, which in this case is from their bank account. The letter must outline the opportunities for the person to make representations to the DWP about any circumstances that the Department should consider before making the deduction, and it must also outline their right for the deduction decision to be reviewed. The person has a month to make representations or request a review. The letter must also outline appeal rights, including that if a person has made representations or asked for a review and the deduction order has been upheld, they may appeal the decision to the first-tier tribunal.
If there is no contact, one month after notifying the person of the proposed deduction the DWP will instruct the bank to deduct money, and repayments will be made directly to the DWP from the person’s bank account until the debt is repaid. That shows that it is quite a rigorous process, with a number of attempts to make contact with the person and a number of safeguards in rights to object and rights to appeal. In addition, for particularly vulnerable people, we have the vulnerability framework; part of that process supports people through referrals to advice services. We work with the Money and Pensions Service in particular, and frequently refer people to its services frequently.
For specific vulnerabilities and in particular cases, there is discretion to consider waiving the debt. That is unusual, but it is clearly an important safeguard for extreme cases—for instance, where domestic violence or financial coercion is involved. That is applied very much on a case-by-case basis; it is not a power or a policy that we would expect to use regularly.
I hope I have given the Committee an indication of the support and process for vulnerable people, and the number of humps in the road, as it were, before we get to the point at which we make a deduction.
Siân Berry
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 89 ordered to stand part of the Bill.
Clause 90
Recovery from bank accounts etc
Question proposed, That the clause stand part of the Bill.
Andrew Western
Clause 90 inserts proposed new section 80B into the Social Security Administration Act 1992, adding the direct deduction order power to recover public money owed to the DWP directly from a debtor’s bank account. Direct deduction orders are vital to recovering funds owed by debtors who have the means to repay a debt but refuse to do so. This is essential to bolster the DWP’s ability to recover more of the public money owed by those who persistently evade repayment, to minimise losses to the taxpayer and to redirect the funds recovered to essential public services.
The powers also make DWP debt recovery fairer. At present, the DWP can recover debt directly from people on benefits by making deductions from benefits; it can also recover debt directly from those on PAYE through a direct earning attachment, but for those who are neither on benefits nor on PAYE, the DWP has limited options for recovery if they refuse to pay. That cannot be fair. For those not on benefits or PAYE, where all attempts to agree an affordable and sustainable repayment plan have failed, the option available to the DWP is to seek a third-party debt order via the court. Such action is restricted to lump-sum recoveries and can lead to debtors facing challenges securing credit due to the court judgment. Introducing the new power will allow the DWP to return taxpayers’ money to the public purse more effectively through affordable and regular deductions, without using court time.
There are important safeguards. First, the powers are to be used only as the last resort; multiple attempts at contact must be made, and those must be of different types—for example by letter and telephone. Secondly, all direct deduction orders will be subject to an affordability assessment based on the three months’ bank statements obtained. Thirdly, before any recoveries are made, individuals must be notified of the proposed action; they will have the right to present information to the DWP about their circumstances and the proposed terms of the order, in response to which the DWP may vary or revoke the order. Fourthly, if an order is still upheld after a review or consideration of information presented, the individual has a right of appeal to the first-tier tribunal. These are important safeguards to ensure deductions do not cause undue hardship. In addition, the Department will always signpost to debt management advice. In the oral evidence session, we heard from the Money and Pensions Service about how well that partnership is operating.
Direct deduction orders are essential to increasing the amount of debt that the DWP can recover. They are balanced measures, with robust safeguards to protect those who are vulnerable or experiencing financial hardship. Having outlined the main provisions in clause 90, I commend it to the Committee.
Rebecca Smith
Clause 90 makes provision for recovery of social security debts directly from the liable person’s bank account. That power is broadly similar to powers contained in the Child Support Act 1991 and the Finance (No. 2) Act 2015, which enable deductions to be made directly from the liable person’s bank account without a court order. We support the inclusion of the power in the Bill, but further to our debates on part 1, I should be interested to know whether any other measures beyond bank account recovery and disqualification from driving were considered. Reference was made earlier to the ability to seize assets, particularly in relation to part 1 and the Public Sector Fraud Authority, but as that is not on the face of the Bill I would be grateful for further details about if and where that is allowed for within part 2.
John Milne (Horsham) (LD)
It is a pleasure to serve under your chairmanship again, Sir Jeremy. I am again raising concerns about a serious power to make direct deductions from people’s bank accounts.
Life does not always come in neat paragraphs; it is messy. I have had a number of letters from constituents in Horsham setting out the kind of errors that can happen. A lady called Marianne, who is a universal credit recipient, received a small inheritance, which she tried to report by phone and email, but that still resulted in her wrongly losing her UC for a period. Another constituent, Hannah, said:
“I have zero hours contract and work between 9-11 hours a week at just over minimum wage. At times I have had a back dated pay rise which pushed me over the allowance limit (I wasn’t informed in advance this was happening). I’m also at the mercy of someone else submitting my hours, so if they aren’t submitted on time they roll over to the next pay period causing me to exceed the allowance limit.”
At no time did she ever come anywhere near the allowance limit in real earnings; nevertheless, she was caught up in the rules.
Does the Minister feel that we have sufficient safeguards to avoid that kind of inadvertent administrative error? Mistakes have happened in the past and will continue to happen, but this is a very strong power that could cause real distress.
Andrew Western
We have not considered the seizure of assets under this Bill; nor are we are looking at forcing the sale of a home. We want to ensure that the powers we take are proportionate. We are not seeking to cause further hardship, and clearly the loss of their home would likely move a person into that category. Those decisions would ultimately remain with the court were we to take particularly serious case through the courts.
The hon. Member for Horsham raised some examples from his casework of people in receipt of universal credit who found they were inadvertently in receipt of overpayments. If they are still in receipt of universal credit—I think they are, going by what the hon. Gentleman said—they would be out of scope for the debt recovery powers that we are considering, so this provision would not apply in those specific examples.
If someone tells us of a change of circumstances, we always seek to action that as swiftly as possible. In cases such as the second example that the hon. Gentleman cited, where the mistake was the employer’s, there is not a tremendous amount that the Department can do. I have sympathy with his constituent, but it does not sound like that case would fall under the umbrella of departmental error. I assure him, however, that as both his constituents were still in receipt of benefits, they would not face a deduction from their bank accounts. That does not mean that an overpayment would not be recovered through other means, but recovery would be out of scope of this power. The treatment of overpayments from universal credit as recoverable was determined by Parliament a long time ago—I believe in 2012.
Question put and agreed to.
Clause 90 accordingly ordered to stand part of the Bill..
Schedule 5
Recovery from bank accounts etc
Siân Berry
I beg to move amendment 8, to schedule 5, page 98, line 10, leave out from beginning to end of line 24 on page 99.
This amendment would remove the requirement for banks to provide information to the Secretary of State for the purposes of making a direct deduction order.
My amendment 8 is related to our debate about direct deduction orders and safeguards for people with social security debts. The amendment would remove the requirement for banks to routinely provide information to the Secretary of State for the purposes of making a direct deduction order. It is important to note that before the Secretary of State can make a direct deduction order, they must submit an account information notice to the bank with which the debtor has an account requesting copies of the debtor’s bank statements covering a period of at least three months prior to the notice being issued.
I understand that the disclosure’s intended purpose is for the Secretary of State to consider whether the debtor can afford to have the funds deducted, but the schedule states that the bank must not inform the debtor or joint account holders if it receives an AIN. I am concerned that powers to request granular information from banks about their customers, without the customers’ knowledge, to decide whether an individual can afford to pay back an overpayment are intrusive and potentially authoritarian. Bank statements can reveal sensitive and private information about an individual’s movements, associations, political opinions, religious beliefs, sex life, sexual orientation and trade union membership. Since an AIN can also apply to joint accounts, individuals who are not themselves benefit recipients can have their private financial information disclosed to the DWP in a similar way.
The powers will affect individuals who have been overpaid because of mistakes and oversights. The Secretary of State should not be able to covertly demand a person’s financial records without suspicion that the person has committed any criminal offence. I sincerely hope that the Minister will consider amendment 8. It would remove the powers that require banks to hand over bank statements and account information, and thus it would prevent direct deduction orders being issued on the basis of covert financial surveillance. As with amendment 7, I hope we will come back to the issues raised by amendment 8 at a later stage, and that we will see some changes in this area.
Andrew Western
I will resist amendment 8. It is challenging to receive an amendment such as this after a conversation about what we are doing to protect vulnerable people. Having stressed the need to do that and to ensure that debts can be repaid in a way that is affordable, it would be wrong of me to agree an amendment that would entirely remove our ability to ascertain that.
The amendment seeks to remove the requirement for banks to provide information to the Department in response to an account information notice and a general information notice for the purpose of making a direct deduction order. That removes a critical safeguard on direct deduction orders.
Siân Berry
Will the Minister consider the covert aspect of the requirement? The information is not given voluntarily by the person concerned. That is the authoritarian surveillance aspect and that is what concerns me the most; it is not merely that the Secretary of State is seeking useful information.
Andrew Western
The challenge is that, by that time, we will have made repeated and sustained attempts to contact the person to ask them to engage with us to agree an affordable repayment plan, to assess their ability to agree that plan and to encourage them to pay back what has already been established as a recoverable debt. The requirement is part of a power of last resort. I am not convinced that we would be able to secure engagement from such a person, as the power applies in relation to someone we have repeatedly tried to contact. Without it, I fail to see how we could both have a conversation with someone whom we have not previously been able to contact and assure ourselves that we would not be putting somebody in a particularly challenging financial position.
Neil Coyle
Is it fair to say that the impact of this amendment, if made, would be to require the DWP to ask people that they suspect of committing fraud for their permission to investigate whether they are committing fraud? Is it not likely that the number of potential fraudsters willing to give that information would be the roundest of round numbers?
Andrew Western
Not quite. We would not be contacting banks to establish whether fraud had been committed under the amendment. We would already have established that a debt is owed, so that investigation would already have been completed. The debt, whether it was the result of fraud or error, has been established. However, I agree with my hon. Friend on the number of people who, having previously not engaged with us at all, will concur on the need to check bank statements to assess affordability. That may well be the roundest of round numbers.
Under the Bill, before any direct deduction order is actioned, the DWP must issue an account information notice to a bank to obtain bank statements. The AIN must contain the name of the debtor and identify the targeted account. This is a necessary and important safeguard so that the DWP can gather sufficient financial information to make informed decisions on fair and affordable debt recovery. Obtaining this information is also vital to the effectiveness of the direct deduction power, as the Bill is clear that a deduction cannot be made until this information has been acquired. Without the information from bank statements, the DWP will not understand a debtor's financial circumstances and will not be able to establish an affordable deduction rate and commence recovery.
I remind the hon. Member for Brighton Pavilion that the reason the information is not known is the sustained lack of engagement by the debtor in efforts to agree a voluntary and affordable repayment plan, and that the power is aimed at recovering taxpayers’ money from debtors who persistently evade repayment and refuse to engage with the DWP. The information gathered will make it clear whether they have the means to do so. Finally, I remind the Committee that these powers will be used as a last resort, and that by working with the DWP to agree affordable and sustainable repayment terms, debtors can avoid the application of the powers altogether.
Siân Berry
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Rebecca Smith
I beg to move amendment 48, in schedule 5, page 101, line 17, leave out from “exceed” to the end of line 18 and insert—
“(a) in a case to which sub-paragraph (3A) applies, the amounts credited to the account in the relevant period, or
(b) in any other case, 20% of the amounts credited to the account in the relevant period.
(3A) This subsection applies in a case where the Minister is satisfied, on the balance of probabilities, that the payable amount to which the regular direct deduction order related is recoverable from the liable person because the liable person committed fraud.”
The Chair
With this it will be convenient to discuss amendment 22, in schedule 5, page 110, line 29, at end insert
“to which paragraph 6(3A) does not apply”.
Rebecca Smith
As hon. Members can see, amendment 48 would change the percentage of collections made, to bring them in line with what we have debated previously, so taking it down from 40% to 20%. It is fairly self-explanatory, but we felt that this decrease would make sense and tidy things up a bit. We are interested to know whether the Minister is in agreement.
Rebecca Smith
Amendment 22 is self-explanatory and I assume it is not something the Minister will be interested in, but we thought it was worth seeing what conversation could be had around it. Ultimately, it is as it is written and we are interested to hear the Minister’s response.
Andrew Western
Amendments 48 and 22 seek to limit the amount that can be deducted via a direct deduction order in any month to 20% of the amount credited to the account in the relevant period in non-fraud cases, and to set no limit in cases where the Department considers it more likely than not that the debt is the result of fraud.
The hon. Member for South West Devon will know I have sympathy with the idea of quickly collecting debts that arise due to fraud, but the measures in the Bill already allow the Department to collect higher amounts through a lump sum deduction order, rather than through a regular deduction order. This important flexibility in the application of these powers will allow us to seek a higher level of deductions. A lump sum deduction order can also be followed with a regular deduction order, if deemed appropriate.
The Bill currently states that, where recovery is made under a regular deduction order, the deduction must not exceed 40% of the amount credited into the account during the relevant period. Forty per cent is the maximum and is in line with other maximum rates for the DWP’s existing recovery powers, such as the direct earnings attachment power and the Child Maintenance Service’s deduction from earnings order power.
Mike Wood (Kingswinford and South Staffordshire) (Con)
Perhaps the Minister can correct me if I have misunderstood, as the drafting obviously relates to the parallel provisions we debated in clause 22. My understanding is that, as currently drafted, if the Minister or the Public Sector Fraud Authority is satisfied that a loss is the result of fraud, they can impose a lump sum deduction up to 100% of the credited amount in an account. However, if they were to use a regular deduction order, each sum can be only 40%. Is there any reason, in principle or for welfare, why it is okay to take 100% of someone’s account on day one but not okay to take 50% today and 50% the following month?
Andrew Western
Put simply, my understanding is that if an individual debtor has sufficient money in their account to pay 100% on day one without financial hardship, we will apply that power. Where that is not possible—for example, if a person’s debt exceeds their means to repay it in one go—we will look at a regular deduction order. It is on that basis that we came to the 40% figure, which is based on the income going into an account each month.
We have set the cap to ensure that ongoing living costs can still be met on a month-by-month basis. It may not be that the figure used is 40%. We are simply seeking to give ourselves flexibility up to that amount. We are not saying that we will never recover more than that. If someone has £10 million in a bank account and owes the Department £1 million, it is reasonable to assume it will not cause them undue hardship to recover all of it in one go through a lump sum deduction.
The two powers are complementary but separate—one deals with ongoing recovery from a person who does not have sufficient means for recovery in one go, and the other deals with people who have savings or means significant enough to do just that. I hope that answers the question. I am happy to take another intervention if not.
The Bill currently states that when a recovery is made under a regular deduction order, deductions must not exceed 40% of the amount credited into the account during the relevant period—month by month is the obvious example. Forty per cent is the maximum and is in line with other maximum rates for the DWP’s existing recovery powers. The Department intends to set lower rates for regular deductions in non-fraud cases, allowing those rates to remain in line with existing recovery powers. Paragraph 24 of proposed new schedule 3ZA to the Social Security Administration Act 1992 therefore makes provision for regulations to be brought forward to set a maximum percentage deduction that is less than 40% in these cases.
Andrew Western
My argument is that the amendment is not required. The intention is to align deduction rates with other recovery methods used by the Department, and therefore the maximum rate of deduction is expected to be limited to a maximum of 20% in non-fraud cases.
I stress that these are maximum regular deduction rates; the actual deduction rate will depend on the level of income and other affordability considerations, based on the Department’s experience when applying deduction caps using existing recovery guidance outlined in the benefit overpayment guide, which can be found on gov.uk. In non-fraud cases, the amount regularly deducted will likely range between 3% and 20%. Similarly, not all fraud debt will be recovered at 40%. Regular deductions in fraud cases will range between 5% and 40%, depending on the debtor’s circumstances.
How the new debt measures operate will be clearly set out in the forthcoming statutory code of practice. These powers will enable the Department to apply the most appropriate debt recovery method to ensure efficient recoveries are made. Having outlined why I feel amendments 48 and 22 are unnecessary, I will therefore resist them.
Rebecca Smith
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Andrew Western
I beg to move amendment 6, in schedule 5, page 107, line 2, leave out from “review” to end of line 7.
This amendment leaves out provision that is not needed; paragraph 13(5), (6) and (8) of new Schedule 3ZA of the Social Security Administration Act 1992 (as inserted by Schedule 5 of the Bill) makes the necessary provision.
Andrew Western
This amendment seeks to remove unnecessary repetition in the Bill, specifically removing part of paragraph 18 of proposed new schedule 3ZA to the Social Security Administration Act. This concerns the provision for the Secretary of State to notify the bank, the liable person and any other account holders, where appropriate, of the outcome of a review where a direct deduction order has been varied by the DWP.
This amendment does not change or remove that provision, as the DWP has a key obligation to ensure that all affected parties are notified of any changes to a direct deduction order following a review. This amendment simply removes a provision that is not needed; paragraphs 13(5), (6) and (8) of proposed new schedule 3ZA already makes the necessary provision. This amendment will simplify the Bill and prevent unintended confusion and duplication.
Schedule 5 introduces proposed new schedule 3ZA, which contains the substantive provisions of the new direct deduction orders, introduced in clause 90. The ability to recover directly from bank accounts is vital to recover public money owed to the DWP by those who have the means to repay but refuse to do so. As I outlined in my speech on clause 90, these powers will bring greater fairness to DWP debt recovery. At present, the DWP can recover debt directly from people on benefits only by making deductions from their benefits, and from those on PAYE through a direct earnings attachment.
For those who are on neither benefits nor PAYE, the DWP has limited options for recovery. Currently, there are an estimated 885,000 debtors off benefit who are not in repayment, with an estimated £1.74 billion not in recovery from this group. This schedule outlines powers to make lump sum and regular direct deductions from bank accounts through the use of a direct deduction order, as outlined in paragraph 1 of proposed new schedule 3ZA. Paragraph 3 outlines the information notices that the DWP can give to a bank, how the bank must comply, the information it must provide and how this information can be used.
To determine whether to make a direct deduction order, the DWP can give a bank an account information notice or a general information notice. An account information notice must be given to a bank, prior to any direct deduction order, to obtain bank statements. It must contain the name of the debtor and identify the targeted account. It is a necessary and important safeguard so that the DWP can gather sufficient financial information to make informed decisions on fair and affordable debt recoveries. A general information notice can be issued at any time for the purpose of determining whether to make a direct deduction order. It requires the bank to provide information on all the bank accounts held by the debtor, including any joint or unincorporated business accounts.
A bank must comply with an information notice, and may be liable to a penalty for failure to comply without a reasonable excuse. The information provided by the bank is necessary and proportionate to ensure that the DWP considers a debtor’s financial situation before making a direct deduction order. As set out in paragraph 4, the schedule also requires the DWP to presume that any moneys in a joint account belong equally to the debtor and the other account holder, unless there is evidence to the contrary. That ensures that only the portion of funds reasonably attributable to the debtor can be recovered from joint accounts, protecting the rights of other account holders.
Before seeking to recover debt, the DWP must give the debtor notice. The notice must identify the account to be subject to the proposed order, state the terms of the order and identify the recoverable amount to which the order relates. It must also invite the debtor to make representations. It must set the time for representations to be made, which must be at least one month. The Secretary of State must consider those representations and uphold, vary or revoke the order. Only after any representations have been considered can the direct deduction order be made. If no representations are received, the order can be made but the account holders are given a further month to request a review.
To ensure that funds necessary for debt recovery are not deliberately concealed or withdrawn, a bank may be required to take steps, in response to the notice, to ensure that the amount proposed to be deducted is not removed while the account holders are given time to make representations or request a review. That is vital to ensure that funds necessary for debt recovery are available in the debtor’s bank account so that the direct deduction order cannot be evaded.
If an order is made, it must be given to the bank and account holders. If the account holder is still dissatisfied, having made representations or sought a review, they can appeal to the first-tier tribunal, as I outlined previously. That allows disputes between the DWP and the debtor to be worked through quickly, while providing fair opportunities for the use of the power to be challenged.
When making a direct deduction, a DWP official will assess the bank information and determine the most appropriate deduction. As set out in paragraph 6, the schedule limits regular direct deductions to no more than 40% of the funds entering the account over the period in which the bank statements have been supplied. Regulations can lower, but not raise, the maximum percentage in some or all cases. That safeguards against excessive deductions and brings the powers in line with existing DWP recovery method legislation.
There is no legislative cap on lump sum deductions, as we expect to use them only where someone has large available savings. However, the DWP must be satisfied that neither lump sum nor regular deductions will cause the debtor, the other account holder or their dependants hardship in meeting essential living expenses. The Secretary of State may also vary direct deduction orders in the light of a change of circumstances—for example, if the debtor has a change of income or makes a new benefit claim.
In addition, paragraph 8 includes provision for a bank to deduct from the debtor’s account the administrative costs it has reasonably incurred by complying with a direct deduction order. That provision is essential to ensure that banks are compensated for the administrative efforts required to comply with the orders, thereby facilitating the efficient operation of debt recovery processes while protecting account holders from undue financial strain.
The schedule also contains provisions to ensure flexibility in direct deduction orders. Paragraphs 12, 13 and 16 allow the Secretary of State to vary, suspend or resume a regular direct deduction order. That provides the Secretary of State with the necessary flexibility to take appropriate action in relation to an order where a debtor’s circumstances change. Paragraph 9 requires that no deduction be made where the amount in the account is lower than the amount to be deducted. It is an important further safeguard to ensure that no one is pushed into hardship by a direct deduction order. Paragraph 17 makes provision to revoke a direct deduction order upon notification that the debtor has died.
Overall, the measure represents a significant part of the Bill, enabling the recovery of public money owed from those who persistently refuse to repay effectively, proportionately and fairly. Through this measure, the DWP estimates that it will realise benefits of £565 million in recovered debts over the forecast period.
Rebecca Smith
Schedule 5 makes provision regarding direct deduction orders from bank accounts. These can be regular or lump sum. The Secretary of State may make a direct deduction order in respect of a joint account only if the liable person does not hold a sole account in respect of which a direct deduction order may be made that would likely result in the recovery of the recoverable amount within a reasonable time. I would be grateful if the Minister explained what criteria will be used to decide whether a person has such an account. This came up last Thursday in relation to the main bank account of a claimant and the fact that the DWP will not be able to ascertain what other bank and savings accounts may be held. Is the same true here? Is this relevant only if the joint account is the account into which the benefits are paid? For the record, I am referring to column 238 of Hansard on 6 March.
The schedule will give the Secretary of State a power to request bank statements that is not time limited. It will also give the Secretary of State the power to request from banks details about the accounts that a person holds with that bank. The Secretary of State can set out how and when the bank must comply with the notice, and explain that the bank may be liable for a penalty under it if it fails to do so without a reasonable excuse. Can the Minister reassure the Committee about his planned engagement with banks—indeed, has he already had such engagement? Do banks think that this is a manageable requirement, and what will the costs of administering it be? Should that engagement with banks be due to happen, what might be done to reflect their views?
We have discussed that there is quite an onerous expectation on banks. The Parliamentary Secretary, Cabinet Office, the hon. Member for Queen’s Park and Maida Vale, made a comment, in terms of the Cabinet Office powers, that it was almost the banks’ civic duty to make sure that they do this. I am intrigued to know whether they agree with that. It would be interesting to know what engagement Ministers have had, and what they will do about it. Lastly, how long will banks have to comply with notices, and what level of penalty will be levied on them if they do not comply? I think those are fair questions.
John Milne
The hon. Member raises the issue of the burden on banks; there is also the potential burden on the claimant. Banks sometimes have very large administrative charges, well in excess of the actual costs of whatever it is they do. Can the Minister give any assurance that there is some upper safety limit on excessive charging by banks? For instance, will a bank be able to charge for its corporate cost centre—a contribution towards its head office or functions—as can be the case with other charges? Basically, I seek clarity on the balance of how the charges will be administered.
Rebecca Smith
That relates to what I was going to say on amendment 43, had we got to it. I entirely appreciate what the hon. Member says about dealing with the vulnerable and protecting them from undue expectations, but is it not right that, if someone’s bank account goes overdrawn, they pay those charges regardless of their financial situation? Are we potentially seeking to give claimants more rights than they would ordinarily have with their own bank account simply because it is the DWP that is trying to recoup the money, rather than their bank?
John Milne
I am simply concerned that there should be some control of, or protection against, excessive charging. In the past, institutions have inflicted disproportionate charges that bear no relation to the actual cost of servicing whatever action had to be remedied. I am therefore seeking confirmation from the Minister that there is some protection in that direction as well with regard to the costs on the banks, as we said earlier.
Andrew Western
On the question raised by both the Opposition spokesperson and, substantively, the hon. Member for Horsham on the amounts that banks will levy in administrative charges on customers who are subject to a deduction order, paragraph 8 of schedule 5 makes provision for banks to deduct sums from an individual’s account for the purpose of meeting reasonable costs. Paragraph 23 makes provision for the Secretary of State to make regulations to set and maintain a cap on the charges that the banks may deduct. That is in line with the approach taken by the Child Maintenance Service, which sets maximum rates that the debtor can be charged for lump-sum or regular deductions.
To give an indication of the maximum amounts, that is £55 for a lump-sum deduction and £10 that the bank may charge for each regular deduction. It is worth stating, for the benefit of Members, that banks do not necessarily charge that amount; it can be significantly lower, but that is the most that someone can expect to pay.
On banks more generally, the exact costs to banks of this are still being worked through, for obvious reasons, but they have the ability to claim back administrative costs, as we have just discussed. On engagement, I have met UK Finance and a number of banks on a number of occasions. I think that the overarching theme of those conversations is that they would not want anything too onerous placed on them, but that they welcome the thrust of what we are trying to achieve and want to be helpful in working with us to achieve that. Speaking of costs to banks is probably a natural point for me to mention the penalty that can be placed on banks for not complying, which is £500.
On the question of multiple accounts and the determination of which accounts to look into and so on, we would make multiple orders if we wanted to look at more than one bank account. We would send information notices to each of those. We can use those notices to see other accounts that are held and relevant. Were someone to have a number of accounts, they would not be able to evade this provision, as was the case perhaps when we were discussing the eligibility verification measure.
I think I have probably answered everything that I had noted. Please let me know if there is anything else. I was about to repeat myself—
The Chair
No need for that.
Amendment 6 agreed to.
Schedule 5, as amended, agreed to.
Clause 91
Disqualification from driving
Question proposed, That the clause stand part of the Bill.
Andrew Western
The clause inserts proposed new section 80C into the Social Security Administration Act 1992 to enact the disqualification-from-driving power. The introduction of the clause will allow the DWP to apply to the court to disqualify temporarily a person from driving, if they persistently and deliberately fail to repay their debt. The power is vital to boost the DWP’s ability to recover public money.
In accordance with clause 89, the power will be used as a last resort in the most serious cases, where the outstanding debt is at least £1,000 and where the debtor has persistently and deliberately evaded repaying their debt, such as by moving their capital out of reach of a direct deduction order, introduced under schedule 5, despite having the financial means to repay.
Schedule 6 inserts proposed new schedule 3ZB into the 1992 Act and it contains the substantive provision of the disqualification-from-driving power introduced under clause 91. The schedule sets out when the power may be used and how it will operate, including rules on the operation of suspended and immediate disqualification orders, variation and revocation of orders, as well as the grounds on which an order may be appealed. Appeals may be made to the appropriate appellate court on points of law, including the terms of an order or the court’s decision to make, not make, vary or revoke an order.
Only when all attempts at recovery, including the new direct deduction power, have failed will the Department for Work and Pensions be able to apply to the court for a suspended DWP disqualification order. If the court agrees that the debtor had the means but did not repay without a reasonable excuse, it will order the debtor to make what it assesses to be affordable repayments. The debtor can avoid being disqualified by making those repayments; it is only if the debtor does not comply with the court’s repayment terms that the DWP can apply for an immediate DWP disqualification order. It is at that point—again, only if the court agrees—that the debtor can be disqualified from holding a licence for up to two years.
Before either a suspended or immediate order can be made, the debtor will have opportunity to be heard by the court. We recognise that stopping someone from driving is a serious step, so my Department has built in several safeguards to give debtors every opportunity to avoid that. For example, missing a single instalment will not result in an immediate disqualification order. Even when someone is disqualified, they can get back the right to drive when they start making the repayments and the court considers that repayments are likely to continue.
However, persistent evaders who have the means to pay their debts will no longer be able to evade paying; it is against them that we would utilise this power. It is important to note that the court cannot make either a suspended or immediate order if it considers that the debtor has an essential need for their licence, such as if they need to drive as part of their job or to care for a dependant. That important safeguard in schedule 6 ensures a balance between taking robust action against those who deliberately evade recovery and preventing undue hardship.
The powers are key to recovering funds from those who deliberately evade repayment of public money owed to the DWP. Having outlined the main provisions in clause 91 and schedule 6, I urge the Committee to support them.
Rebecca Smith
Clause 91 makes provision for a liable person to be disqualified from driving. Any disqualification from driving will always be suspended in the first instance, subject to the liable person complying with what the court has assessed to be affordable and reasonable payments. When disqualification does occur, it is temporary and the liable person can have the disqualification lifted by satisfying the court that they are now making and will continue to make repayments.
We support the clause in general, but I have a few questions for the Minister about the practicalities, which are worth debating. First, however, will he clarify whether the clause is for cases of fraud, error or both? From what he said, it feels as if it is for both, and it is worth getting that on the record. What safeguards will the Department put in place to ensure that someone is not disqualified unnecessarily? Again, it sounds as if there is a long process before getting to that point. Is there a right of appeal or can the process be stopped before the disqualification takes place?
A few additional questions came to mind as I listened to the Minister just now. What role are the DVLA and the police expected to play in the wider disqualification? Who is responsible for the enforcement of that disqualification? I certainly know of a neighbour of mine who was disqualified for two years but continued driving; it was frustrating when I knew what he had done. Who would be responsible for that enforcement? In that instance, I knew that I could ultimately go to the police, but the scenario could be different in this case.
Likewise, will the decisions to disqualify from driving be publicised as they are when someone is disqualified for speeding or drink-driving? Again, that is part of the punishment; it also enables other people to know when somebody is in breach and promotes enforcement. It is also worth querying what measures might be put in place when somebody cannot be disqualified. The Minister said that some people would not be disqualified because of their jobs or family situations. What would be the deterrent for those people?
Furthermore, what if the person were not a driver or in possession of a driving licence? Obviously, recovery will be attempted from bank accounts, but if losing a driving licence is the final stop point it will be in the interests of fraudsters to divest themselves of theirs. We need to make sure that whatever it is that we are trying to achieve in the Bill, there are no shortcuts or opportunities for people to evade the repayment that the Department seeks.
John Milne
I am uncomfortable with this proposal, because it seems unfair that one group of people should be liable to a punishment and not another. If someone cannot drive or they do not have a car, this punishment means nothing to them, whereas another group who do drive are affected—and some of them very deeply, depending on their lifestyle, such as living in the country or other necessary means. I am fundamentally uncomfortable with what seems to be a punishment that falls on only one group of people, when it should be levied equally.
Siân Berry
As we have been discussing, schedule 6 and clause 91 make provision that, where all other methods of debt recovery have failed, including the direct deduction order measures we have been discussing, the DWP may apply to a court to have the debtor disqualified from driving. Like the hon. Member for Horsham, I have real concerns about these new powers. I cannot see how this specific novel civil penalty of removing a driving licence is at all appropriate to the particular group of people we are discussing, nor do I see the equivalence to the people being enforced upon by HMRC and the Child Maintenance Service, which have similar powers.
Legitimate benefit claimants who are overpaid through error, make a mistake or for any other reason owe money to the DWP are, almost by definition, in need of help. They might often make mistakes or fail to disclose information through an oversight, and their failure to engage with the DWP to date might be due to genuine incapacity and health issues. I am therefore very concerned that there are ineffective safeguards in the court process for these powers.
Although the DWP must apply to the court for the disqualification order, the court does not have discretion to refuse unless the debtor needs a driving licence to earn a living or has another essential need for one. It is unclear the extent to which this will protect vulnerable benefit claimants who have not engaged with the DWP due to incapacity, illness or mental ill health, or for whom driving is not essential for their work, but may be essential for their wellbeing or family life. I am not sure that the proposed legislation is clear enough about what will be deemed essential or what will be reasonable for the court to object to.
I also have concerns, as outlined a moment ago, that these powers cannot be exercised unless the people concerned have tried every other method, from benefit deductions or deductions from earnings to the direct deductions from bank accounts—the measure we have just discussed, which is extraordinarily intrusive on people’s financial information and privacy. Given that these powers would only be used where it appears that those other powers cannot be, is it not true that they are basically only for when a debtor cannot physically pay back what they owe? In effect, this measure of removing the driving licence is a punishment. It is a poverty penalty for those who do not have the means, despite all the intrusion that Ministers have gone through to establish that, to return what they have been overpaid.
I cannot support this power. It is incredibly punitive. I do not think it will create the conditions in which debtors are encouraged to engage with the DWP, but it could create dire consequences for individuals who are already struggling and least able to afford repayments.
Andrew Western
I will attempt to answer those questions, and hon. Members are free to intervene if I have missed anything. The Opposition spokesperson, the hon. Member for South West Devon, asked whether this would be a power that is implemented in response to just fraud, or fraud and error. Because it is in response to a failure to repay a debt, it could be utilised for either. The criteria for its use is not how the overpayment came about, but whether the person has engaged to pay it back.
The safeguard around whether somebody is disqualified unnecessarily is all the various measures that we have attempted previously, plus the determination of the court. Responsibility for enforcement would lie with the Courts and Tribunals Service and the DVLA. However, if somebody was driving without a licence, that would clearly also be a legal issue. On the question whether we would advertise that somebody had had their licence suspended, we would not, because no crime has been committed; the suspension is just as a result of somebody failing to repay a debt. That is distinct from somebody who has had their licence removed because they have broken the law through drink-driving or some such crime.
John Milne
In the light of the Minister’s confirmation that this power does refer both to error and fraud, I am all the more concerned. Removing a driving licence can mean the removal of a means of income. It is almost like the old-fashioned debtors’ prison: someone is in debt, so they are put in prison, and then they cannot get out of their debt. It is a Catch-22 situation.
I understand that the power has been used regarding the Child Maintenance Service. I have a case in Horsham where a constituent feels that he is being unreasonably demanded of; he is in trouble because he will potentially lose his job because of just such an order. Therefore, this power could be applied inaccurately or incorrectly—it is inevitable that in a large organisation there will be mistakes—so I am concerned that the power seems both very extreme and, as I said before, not generally applied. It should be generally applied in order to be legitimate.
Andrew Western
On the point about a debtors’ prison, if somebody requires their vehicle for work, that is a criterion that a judge can consider in terms of whether a licence should be disqualified. It is also worth remembering that, in all cases, the initial move would be to suspend the suspension of the driving licence to give somebody the time to engage with us and start to pay. While, as I say, this is baked in as a last resort, we have put a number of break points in this process for people to engage. Indeed, even after we have suspended the licence, if somebody starts making repayments, they can have their licence reinstated. However, we have explicitly stated that caring responsibilities and the need for a car for employment purposes are criteria that would mean that we would not look to pursue that suspension.
Turning to the comments from the hon. Member for Brighton Pavilion, I understand where she is coming from. She is consistent in her view of an erosion of civil liberties coming about as a result of many aspects of this Bill. However, I must say to her that the idea that we have exhausted everything, including deductions from benefits, fundamentally misses the point about the cohort of people who would be in scope for this power. Benefit claimants and people who are paid through PAYE would not be in scope of the driving licence power; it would be people who are no longer on benefits. Indeed, if they were on benefits, we would be able to deduct from those benefits directly, without needing recourse to such actions.
I therefore take a fundamentally different view from the hon. Lady on whether this amounts to a poverty penalty. Clearly, the poorest people would not be impacted by this power; it is for people who we know have the means to pay. Usually, we know they have the money, but they have moved it out of our reach, so we have ascertained their ability to pay, but it is not possible to lay our hands on those funds. This power—like wider mechanisms for people who do not drive, such as charging orders—is the initial lever to bring people to the table.
As I said in response to the hon. Member for Horsham, before we suspend a licence, we will ask people to engage with us. After agreeing the right to suspend that licence, we will give somebody a further opportunity to engage with us and to begin making regular repayments. After the licence has ultimately been suspended, there will again be the opportunity to commence regular payments and have the licence reinstated. All that is a power of last resort.
I will give the Child Maintenance Service statistics for context. The CMS utilised this power on seven occasions last year; six of those were suspensions of suspension and only one was an actual suspension of a driving licence. That tells us that this power is important as much as a deterrent as in practice. It is for that reason that it forms a part of this Bill.
Question put and agreed to.
Clause 91 accordingly ordered to stand part of the Bill.
Schedule 6 agreed to.
Ordered, That further consideration be now adjourned.—(Gerald Jones.)
Public Authorities (Fraud, Error and Recovery) Bill (Eleventh sitting)
Thursday 13th March 2025
(3 months, 2 weeks ago)
Public Bill CommitteesPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 13 March 2025 - (13 Mar 2025)
The Chair
I remind Members to send their speaking notes to hansardnotes@parliament.uk, to switch off electronic devices and to abstain from tea and coffee. It is Lent, after all.
Ordered,
That the Order of the Committee of 25 February be amended as follows—
In paragraph (1)(f) delete the words “and 2.00pm”.—(Gerald Jones.)
Clause 92
Code of practice
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
It is a pleasure to serve again under your chairship, Sir Desmond. After that remarkably collegiate agreement on the most controversial item of today’s business—I hope—I turn to clause 92.
The clause provides a vital safeguard for the new debt recovery measures. It inserts new section 80D into the Social Security Administration Act 1992, making provision for a code of practice. In the clause, we have made it a requirement that the code sets out how and when the Department for Work and Pensions will exercise its functions under direct deduction and driving disqualification powers, as well as its approach to penalties for non-compliance by banks, and how any information obtained will be used and processed. The code will also include further information on how safeguards and other provisions in the Bill will be applied, such as those on reasonable opportunity to settle the debt, and how those struggling with debt can be signposted to independent debt advice and money guidance.
We recognise the importance of transparency in the use of the new debt recovery measures. That is why, before issuing the DWP’s debt code of practice for the first time, as per our statutory obligations we will carry out a formal public consultation on a draft of the codes, to provide an opportunity for all interested parties to review them. Once finalised, all the relevant codes of practice will then be laid before both Houses of Parliament for 40 sitting days, before publication.
The clause is a key safeguard to ensure that the new DWP recovery powers are exercised proportionately, and it offers transparency for the public on their use. I commend it to the Committee.
Rebecca Smith (South West Devon) (Con)
The clause requires the Secretary of State to issue a code of practice about the giving of notices to banks requiring the provision of information, the processing of information, the circumstances in which penalties may be issued to banks, and the circumstances in which the Secretary of State expects to exercise functions to disqualify a liable person from driving.
As we have said several times in Committee, it has been extremely difficult to scrutinise the Bill without the code of practice. Will the Minister confirm when it will be published? I believe he just did, but we will get it on record again. He said that it will be before the Bill is finalised, but it would be useful to know what sight we will have of it beforehand. What can the Minister say about how the code of practice will regulate the giving of information notices to banks?
We clearly agree that the Secretary of State should consult on the draft code, and the Minister has just implied that it will be a public consultation. It would be useful to know what form that consultation will take, and how it will be publicised to ensure that it can be seen by as many people as possible. Will it include a consultation on the impact of bank costs and what those should be, and give banks an opportunity to feed back at that point in time?
The Secretary of State must consult before the first code of practice is issued, which is welcome, but there is no suggestion that further revisions will be subject to any scrutiny. Will the Minister confirm whether that is the case? What oversight mechanisms exist to ensure that the code of practice is not changed for the worse in the future, and to ensure that Parliament remains informed?
When does Minister envisage that the powers in the Bill will first be used, given the delay that the code of practice consultation will necessitate? What might trigger a revision and reissue of the code, and who might be able to alert the Secretary of State to the need for that? The clause implies that the Secretary of State could revise the code, but what would be the trigger and who might be involved? Will there be a non-statutory review after a certain period of time as an initial check and balance?
Steve Darling (Torbay) (LD)
It is a pleasure to serve under your chairmanship, Sir Desmond. I thank the Minister for his introduction to the clause and for his assurance that there will be a consultation; it would be helpful if he could explain the likely consultees. Also—Opposition Members have repeatedly raised this question—what are the key principles within that consultation and what areas is he keen to address with the code of practice? The Minister has alluded to that already, but a bit more flesh on the bones would be extremely helpful.
Often, people who commit fraud use other peoples’ accounts and abuse them, and are often financial abusers. Will the Minister flesh out how the code of practice will take that into account? Finally, I would be grateful if the Minister could expand on how the code of practice will take account of people with learning disabilities, covering both those who are able to operate the accounts themselves and those who may need a proxy to manage the account.
Andrew Western
Members have asked a number of questions, which I will do my best to cover. On the broader context and content of the code of practice, I outlined a range of areas such as a reasonable opportunity to settle debt, the exercise of functions under direct deduction, driver disqualification powers, penalties for noncompliance by banks, the use and processing of information and ensuring that that is compliant with the Data Protection Act 2018 and GDPR, as one would expect.
On the broader question of how we would work with people with vulnerabilities—the hon. Member for Torbay mentioned financial abuse and learning disabilities—there are a range of existing practices through which the Department supports people, as I set out in some detail on Tuesday afternoon. We have a vulnerability management framework and assessments of an individual’s vulnerabilities at all points throughout the process are built into our existing debt recovery practices, including a specialist team who work with customers who we know to be vulnerable. I think that the Department has sufficient infrastructure in place to deal with and support people who find themselves in those circumstances, either as victims of financial abuse or because of some of the disabilities that the hon. Gentleman mentioned.
The hon. Member for South West Devon asked about the issuing of notices. The code of practice will give guidance on when notices are given and further guidance on how banks should comply. On the subject of consultees, it is important to say that we are in ongoing dialogue with banks and organisations such as the Money and Pensions Service about support for people who find themselves in debt. The public consultation will invite those who are already closely engaged with the subject to correspond with us further. That will include some of the stakeholders I have just mentioned, but we will accept evidence from anybody who wants to feed into that process.
I would not want to second-guess the cause of any future revision, but were it to become apparent that there were issues that we needed to contend with, grapple with and get right—whether they came out in discussion with stakeholders or in the practical application of the code—I imagine that that would be a sensible stage at which to do so.
I was asked about delay and when the code would be in place. We are looking at laying it before both Houses of Parliament for 40 days, so I am confident that delay will not be a particular challenge for us in recovering some of the figures that are scored against this measure. We anticipate that the draft code of practice will be available to Members before Committee stage in the House of Lords.
Question put and agreed to.
Clause 92 accordingly ordered to stand part of the Bill.
Clause 93
Rights of audience
Question proposed, That the clause stand part of the Bill.
Andrew Western
The clause inserts proposed new section 80E into the Social Security Administration Act 1992. That provision gives DWP officials right of audience and allows them to conduct litigation in the magistrates, county and Crown courts in England and Wales. New section 80E has been introduced to enable lay DWP officials to oversee civil claims and applications and appear in related court hearings on behalf of the Secretary of State in debt recovery matters. That is similar to the rights already provided to other Government Departments, such as His Majesty’s Revenue and Customs and the Child Maintenance Service, as well as local authorities.
The disqualification from driving power in clause 91 and schedule 6 of the Bill will be exercised by the court only on application from DWP, and there are other civil recovery mechanisms already available to DWP involving the courts. Those are generally routine proceedings, but, without the clause, DWP is required to instruct a solicitor in every case. However, the clause does not prevent DWP from instructing a solicitor for debt recovery proceedings where it would be appropriate to do so. That ensures that DWP can recover public money in the most efficient and effective way from those who evade repayments, thereby reducing costs for the taxpayer.
Rebecca Smith
As the Minister has just set out, clause 93 grants rights of audience and rights to conduct litigation in the magistrates court, county court and Crown court in England and Wales for, or in connection with, debt recovery proceedings to designated officers of the Secretary of State. That will allow DWP officials to be able to pursue the enforcement of debts via the court without the need to instruct solicitors, thereby ensuring cost efficiency in the recovery of public funds.
This is not particularly complicated clause, so I have just a few questions. We would like confirmation of the level of seniority of the officials signing off the decisions to bring litigation, and will the DWP officials bringing the cases have appropriate training to do so? Where court appearances are required, does the Minister anticipate a slowing down of recovery proceedings? I know he has talked about cost efficiency, but will this mean that it will take slightly longer? Will costs increase as a result, either in terms of what is owed by the person that the action has being taken against or the costs that might be necessary through the courts?
Finally, what consultation has there been with the Ministry of Justice around these new provisions in terms of capacity, the costs and the court backlogs? Will this measure create a problematic situation, or is the Minister confident that it will be okay going forward?
Andrew Western
I may have missed a question about costs, so will the hon. Lady please ask me that again if needed? The team members taking forward cases for us in the court will be HEO, or higher executive officer, level. That is the existing process, and that is the required level of authorisation for those using similar powers. This is not particularly new for us; it is just new for us in this space. A specialised DWP team will receive training in conducting litigation and appearing in court in addition to training on the new recovery powers. We already have the right to conduct and appear in similar tribunal proceedings, so we will share best practice when developing that training.
On the question of MOJ consultation and court pressures, whether we use solicitors or take them forward ourselves, the pressure on the courts will be the same, so there will not be a material impact on the court backlog. Clearly, the MOJ is aware of our intentions in this regard, but this is more about our ability to do that while minimising costs.
Rebecca Smith
My final question was about whether court appearances, regardless of whether that is with a solicitor or through DWP officers, will effectively slow down recovery proceedings. As a result, will there be some knock-on costs either for the person who the action has been taken against, if interest is being charged or anything like that, or for the Department in terms of staff and that sort of thing? I assume it will be a last resort, but it would be interesting to have an answer.
Andrew Western
It is very much the case that the power is a last resort. Where there are additional costs, we will be able to recover them. It is important to recognise the steps, as I outlined on Tuesday afternoon, that will have been gone through before the point at which we reach this process. If we were to go through a more traditional route outside these powers, it would add considerable time to the process. I remind Members that by the point at which we take somebody to court, we have reached out to them multiple times through debt management and at least four further times through debt enforcement, and we have offered at every break in the process the opportunity to agree an affordable repayment plan. That would be the case right up until this stage, so I can reassure Members that it would be a power of last resort.
Question put and agreed to.
Clause 93 accordingly ordered to stand part of the Bill.
Clause 94
Recovery of costs
Question proposed, That the clause stand part of the Bill.
Andrew Western
Clause 94 inserts proposed new section 80F into the Social Security Administration Act 1992 and relates to the recovery of costs from debtors. The clause simplifies existing legislation to ensure that the costs of court enforcement that DWP is already entitled to reclaim from debtors can be effectively recovered from the debtor, together with any costs incurred by DWP under the new direct deduction and disqualification from driving powers. The clause enables DWP to recover these costs from the debtor using any of the available recovery methods, to make sure that, as debtors’ circumstances change, the money can still be recovered. The clause ensures that the taxpayer does not pick up the burden for costs associated with pursuing debtors who refuse to repay public money, and that DWP can recover these costs from the debtor in the most effective way.
Clause 95 inserts new section 80G into the Social Security Administration Act 1992, providing technical interpretative provisions for the new debt recovery powers contained in part 2 of the Bill. First, it confirms that debt recovery provisions should always be read in a way that is consistent with data protection legislation. This is a relatively standard provision that deals with any unintended and unforeseen ambiguity or apparent conflict with normal data protection principles. Secondly, it confirms that references to “giving notice” can include, among other methods, service by post, as defined in the Interpretation Act 1978. That avoids ambiguity about how, for example, proposed deduction orders can be given to account holders for their consideration, which is a key safeguard under the new direct deduction order power.
Rebecca Smith
Clause 94 states that any costs incurred by the Secretary of State in recovering an amount under clauses 71 to 80 or schedules 3ZA or 3ZB of the Social Security Administration Act 1992 may be recovered as though they were recoverable under the same methods as the debt itself. Will it be done separately, and what might the cost to the Department be in putting that forward? Is there any limit to the costs that the Secretary of State can recoup in this way?
Clause 95 clarifies that provision does not require or authorise processing of information that contravenes data protection legislation, or the Investigatory Powers Act 2016. The final line states,
“references to giving a notice or other document…include sending the notice or document by post.”
This also came up in the debate on Tuesday, so I would like to get it on the record. I assume I know the answer, but can the Minister clarify whether this includes electronic methods of communication also, such as email? If I may ask this, as I am intrigued, then why does sending by post need separate legislation? We have debated the subject twice now, and the answer is probably really straightforward, but as it is set out on its own line, it might be a nice idea to find out why it has to be legislated for. I ask that purely because I am nosy and would like to know.
John Milne (Horsham) (LD)
It is a pleasure to serve under your chairmanship, Sir Desmond. Clause 84 states that costs incurred by the Secretary of State in taking recovery actions can be themselves recovered. Will the Minister clarify what happens in a case where the claimant is found to be not guilty? What happens to the costs then? Are they borne by the bank, the DWP or the claimant? Will he also clarify how the cost of the general trawl through all the accounts is apportioned?
Secondly, to go back to the issue of fraud versus error, and how they seem to be treated as pretty much the same throughout the Bill, will the Minister clarify whether, where it is the DWP’s error, a claimant would still end up paying the administrative charge? If that is the case, it seems quite unreasonable, so it would be great if the Minister could clarify those points.
Andrew Western
I am a little perplexed by the suggestion that somebody would be found not guilty or be charged. We are talking about debt recovery, so it is a slightly separate matter. It is not a criminal issue; it is a question of how, through civil powers, we can reclaim funding, so I am not sure that those questions arise. But if the hon. Member for Horsham wants to intervene on that, he is welcome to.
On the question of whether fraud and error are distinguishable in the reclamation of debt, the answer is no. They are treated in the same way, because this is about situations in which it has already been established that somebody owes us a recoverable amount and they have repeatedly refused to engage. I refer to my earlier comments about the number of times we would have reached out to somebody to get them to engage with the process. Parliament has previously resolved that overpayments of certain types of benefits are recoverable, and the Bill does not change that.
On the question about savings and so on, we would be able to recover all reasonable costs. There is no particular limit on what we can recover, and it is treated on the same terms as debt.
On the question of why we need to make a distinction for email, this is one of those situations in which I am grateful that I can sometimes reach out for answers. It goes back to the Interpretation Act 1978; we did not have email back then, so we need to set out separately, on a legal and technical basis, that post is specifically allowed, given provisions elsewhere. Yes, digital is still permissible, but we need to state specifically that post is acceptable as well.
John Milne
I used the word guilt, but can we forget that? I am referring to a case in which a claimant was investigated, so costs were incurred, but they were found not to be at fault, rather than guilty.
Andrew Western
I think the hon. Gentleman is referring to situations in which the court determines that the debt is not recoverable. I imagine that at that point we would bear the cost ourselves; it would not be recoverable from the individual. There is clearly some risk for us in that, as is perfectly usual, but by the point at which we decided to take somebody to court we would be able to demonstrate that a significant amount of effort had gone into attempting, through other mechanisms, to make them pay back what they owed the Department, so I hope we would have a very high success rate in that regard.
Question put and agreed to.
Clause 94 accordingly ordered to stand part of the Bill.
Clause 95 ordered to stand part of the Bill.
Clause 96
Offences: non-benefit payments
Question proposed, That the clause stand part of the Bill.
Andrew Western
The clause amends sections 111A and 112 of the Social Security Administration Act 1992 to include non-benefit payments. This will enable the DWP to charge a person with an offence under either of those sections where it relates to a non-benefit payment. This is a key clause that, in conjunction with clause 97, will enable the Department to offer an administrative penalty where there are appropriate grounds to do so.
The Government take a fair and proportional approach to tackling fraud and error. We will always be tough on serious fraud, but for less serious first-time offences it is appropriate and fair that we have the opportunity to offer an alternative to prosecution. The person will always have the choice to accept or reject an administrative penalty, should they wish to do so. I commend the clause to the Committee.
Rebecca Smith
The clause makes it an offence for a person to fraudulently claim a non-benefit payment for themselves or another person by making false representations or providing false documentation. Generally, we support this provision.
A non-benefit payment is a prescribed payment that is not a relevant social security benefit and that is made by the Secretary of State to provide financial assistance. Will the Minister provide for the record some examples of the types of payment that would fall within scope of the Bill as a result of this measure? Will he reassure us that it will cover all payments, unlike the provisions on social security benefits, which apply only to the three benefits included in the legislation? The flip question is: does the Minister anticipate any exceptions that will not be covered? If any new non-benefit payments were introduced in the future, would they automatically fall within scope of this legislation? Earlier in Committee we had a similar debate about enabling new benefits to come into scope; would the same apply to new non-benefit payments?
Steve Darling
The Minister alluded to proportionality and not wanting to criminalise people in undertaking an administrative charge. As my hon. Friend the Member for Horsham alluded to, it would be helpful if the Minister unpacked a little more for the Committee where that proportionality kicks in.
Andrew Western
Where proportionality kicks in is already established in the Department. We have trained investigators who ascertain whether we are looking at deliberate fraud, its severity, and what is therefore the appropriate mechanism to seek recourse. We are talking about administrative penalties for situations in which we consider there to be a clear case of fraud, not error, so proportionality will not really be changed by the Bill. What will change is our ability to extend the existing processes to non-benefit payments.
The example of a non-benefit payment that we use most routinely is a payment from the kickstart scheme, which came about at the end of the pandemic and which I think it is fair to say was open to abuse. We saw some particularly egregious examples of that, so we want to make sure that any similar grant schemes—as opposed to benefit schemes—are within scope of these powers.
On the point that the hon. Member for South West Devon made about only three benefits being in scope of the Bill, that is only as it pertains to the eligibility verification measure. All benefits are in scope of the Bill more broadly.
Andrew Western
The clause amends the Social Security Administration Act 1992 to expand the types of overpayments that can be considered for an administrative penalty under sections 115A and 115B to include non-benefit payments, such as the grants that were paid through the kickstart scheme. Currently, the option to offer an administrative penalty as an alternative to prosecution is not available for non-benefit payments, so the DWP is required to refer all such cases for prosecution. Extending the scope to include non-benefit payments will enable the DWP to offer those who receive a non-benefit payment an administrative penalty as an alternative to prosecution, in appropriate circumstances.
The measure gives individuals or colluding employers the choice to accept the administrative penalty or have the evidence reviewed before the courts. The change is really about fairness. It will bring equity and parity to the way the Department tackles and addresses fraud and it will offer first-time offenders or those who commit low-value fraud an alternative to prosecution. It will provide the individual or colluding employer with a choice, allow the courts to focus on the most serious crimes, and enable the Department to resolve cases more quickly where appropriate.
Rebecca Smith
The clause makes provision to allow for a penalty to be issued, instead of prosecution, if an overpayment notice has been issued in relation to a non-benefit payment. This can occur only after the review period has passed and, if a review was sought, after a decision has been made and any subsequent appeals have concluded.
We support efforts to be tough on those who have taken advantage through fraudulent methods and gained from benefits they were not entitled to receive. Will the Minister explain in what circumstances a penalty would be deemed more appropriate than prosecution, and why? That said, we also do not want to unfairly hit those who have made a genuine error, so in what circumstances would a penalty be seen as appropriate, assuming the claimant engages with the process?
Has any consideration been given to the likely timescales for the repayment of moneys obtained following erroneous claims? How long does the person have? Would a repayment be allowed before a penalty was applied? From what the Minister just outlined, the answer is likely to be yes, because an entire process would have taken place first; I seek clarification on the timetable or the process involved, particularly for those who have made a genuine error, and on how they will be able to stop the train and settle what they need to without any penalties.
Andrew Western
On when a penalty will be considered more appropriate, there are clearly thresholds for our investigators’ interpretation of when somebody has committed fraud and at what level we consider that fraud to be.
On the hon. Lady’s point about genuine error, the clause is for situations where we consider that somebody has committed fraud, not error. The administrative penalty does not arise in cases of what we consider to be error. It may be that it is a first-time offence. It would certainly need to be a low-value offence, because an administrative penalty is capped at £5,000. It is worked out as 50% of the value of the overpayment, so the amount would always need to be below £10,000. For anything beyond that we would be looking at prosecution. How long a person has to pay back will depend on a range of factors. It is clearly dependent on their ability to pay the money back, and what their means of production is and so on. That would always be considered on a case-by- case basis.
Question put and agreed to.
Clause 97 accordingly ordered to stand part of the Bill.
Clause 98
Amendments to the Social Security Fraud Act 2001: loss of benefits following penalty
Andrew Western
I beg to move amendment 36, in clause 98, page 61, line 21, leave out from “(a)” to end of line and insert “—
(i) omit the words from ‘section 115A’ to ‘or’, and
(ii) for the words ‘the corresponding provision for Northern Ireland’ substitute ‘penalty as alternative to prosecution in Northern Ireland’, and”.
This amendment updates a parenthetical description in section 6B(2)(a) of the Social Security Fraud Act 2001.
Andrew Western
This straightforward amendment is a minor and technical change that looks to update section 6B of the Social Security Fraud Act 2001 by removing the phrase “the corresponding provision”, which will no longer be needed once clause 98 is agreed, and substituting in appropriate wording.
Section 6B, as enacted, references two Acts in which a penalty is defined in legislation and which would attract the loss-of-benefit penalty. The first is the Social Security Administration Act and the second is the equivalent legislation for Northern Ireland. Clause 98 will remove reference to one of those Acts—the Social Security Administration Act 1992—to ensure that the loss-of-benefit sanction is no longer applied if an administrative penalty has been offered by the DWP and accepted by a benefit claimant. Doing so will mean there will no longer be corresponding legislation in section 6B(2)(a) of the Social Security Fraud Act 2001, as it will reference only Northern Ireland legislation. I assure the Committee that the amendment is minor and technical and will have no operational impact on the remaining provisions in the 2001 Act.
Clause 98 removes the loss-of-benefit provisions in cases where an administrative penalty has been offered and accepted as an alternative to prosecution. As it stands, the acceptance of an administrative penalty is compounded by a further four-week suspension of certain benefit payments. The suspension of benefits is made in addition to the acceptance of the administrative penalty and alongside the obligation to repay the overpayment. By removing the four-week loss of benefit in these cases, the clause allows for a more proportionate approach to less serious, lower-value fraud and to first-time offenders.
However, the loss-of-benefit penalty is not being removed in its entirety: it will still apply in cases that are convicted in court, with a potential loss of benefit of up to three years. Limiting the loss-of-benefit penalty to convicted cases will ensure that only the most serious cases of fraud face the harshest consequences, without imposing unnecessarily harsh sanctions on lower-level offenders. On that basis, I commend the clause to the Committee.
Rebecca Smith
The clause amends the Social Security Fraud Act so that if an administration penalty is accepted instead of prosecution, the individual does not lose their benefit provisions. From what the Minister said, it sounds like different scenarios are affected.
I appreciate what the Minister said about the different situations—for example, for a lower-level or first-time offence, someone might not lose their benefits—but the challenge is that this perhaps seems like a soft touch, depending on the situation. Does there not need to be a bit more discretion than just a threshold depending on each case being dealt with? What are the expected values of the penalties, and how do they compare with the typical benefits? Although we need to ensure that safeguards on affordability remain in place and that claimants can meet their essential living costs—that goes without saying —it is not clear why a penalty should automatically prevent the loss of benefits. Ultimately in these situations, there has to be a deterrent in addition to the penalty.
Government amendment 36 will update the Social Security Fraud Act 2001 to allow a penalty to be an alternative to prosecution in Northern Ireland. Our questions on that are the same as those for clause 98. I have nothing further to add.
Siân Berry (Brighton Pavilion) (Green)
It is a pleasure to speak to this minor amendment. I just wanted to point something out about the wording of amendment 36. In clause 98(2) there are two instances of the letter (a). I know which (a) the Government intend the amendment to refer to, but I wondered whether the wording could be clarified.
Andrew Western
I thank the hon. Lady for pointing that out. I will take advice on whether a further amendment may be required but, as she says, it does appear obvious what I mean when I refer to that measure.
On the comments from the hon. Member for South West Devon, we want to make a change so that only the most serious cases fall foul of the loss-of-benefit penalty. That increases hardship for people but, when it comes to our ability to reclaim money, in practical terms it means we would have to wait four weeks before we could start deducting from a person’s benefits.
To to give some reassurance about thresholds, were we to consider that somebody’s fraud, even in a lower-value case, was particularly outrageous—of course, that is a judgment for our investigators based on the sorts of things they see each and every day—we do retain the ability to go straight to prosecution, particularly if we think the fraud is part of something more serious or organised.
The value of the penalty is £65, but if someone loses four weeks’ benefit, as at the moment, the impact is clearly more significant. I accept that, but I think there is a strong question of proportionality here, and of the need to prevent somebody from falling into further poverty —and potentially as a consequence of that being pushed into wider activity that may be, shall we say, unhelpful.
Amendment 36 agreed to.
Clause 98, as amended, ordered to stand part of the Bill.
Ordered,
That further consideration be now adjourned.—(Gerald Jones.)
Public Authorities (Fraud, Error and Recovery) Bill (Twelfth sitting)
Tuesday 18th March 2025
(3 months, 1 week ago)
Public Bill CommitteesPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 March 2025 - (18 Mar 2025)
The Committee divided: - Ayes: 3 / Noes: 11 - Question accordingly negatived.
The Committee divided: - Ayes: 3 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Chair
I remind Members to send their speaking notes by email to hansardnotes@parliament.uk, and to ensure that all electronic devices are switched to silent. I also remind Members that tea and coffee are not allowed during sittings. It is going to be a busy morning. Please speak through the Chair, as usual, and refrain from using “you” unless you wish to speak to me.
New Clause 1
Overpayments made as a result of official error
“(1) Section 71ZB of the Social Security Administration Act 1992 is amended as follows.
(2) In subsection (1), for ‘The’ substitute ‘Subject to subsection (1A), the’.
(3) After subsection (1) insert—
‘(1A) The amount referred to in subsection (1) shall not include any overpayment that arose in consequence of an official error where the claimant or a person acting on the claimant’s behalf or any other person to whom the payment is made could not, at the time of receipt of the payment or of any notice relating to that payment, reasonably have been expected to realise that it was an overpayment.’”—(Siân Berry.)
This new clause would provide that, where universal credit overpayments have been caused by official error, they can only be recovered where the claimant could reasonably have been expected to realise that there was an overpayment.
Brought up, and read the First time.
Siân Berry (Brighton Pavilion) (Green)
I beg to move, That the clause be read a Second time.
It is a pleasure speak under your chairship again, Mr Western. I tabled the new clause as a probing amendment. In short, it would bring the test for the recovery of universal credit overpayments caused by official error into line with regulation 100(2) of the Housing Benefit Regulations 2006, meaning that they could be recovered only where the claimant could have reasonably been expected to realise that there was an overpayment.
Let me provide some background on why the new clause is needed. According to Department for Work and Pensions data, in 2023-24 the best part of 700,000 of the new universal credit official error overpayment debts entered into the DWP’s debt management system were caused not by fraud or claimant error but by Government mistakes. Unlike for many other benefits, the DWP can recover official error universal credit overpayments from claimants. This power was introduced through the Welfare Reform Act 2012, and represented a significant change to the position that previously applied to most legacy benefits.
When concerns were raised at the time, assurances were provided by the then Employment Minister that the DWP did
“not have to recover money from people where official error has been made”
and that
“we do not intend, in many cases, to recover money where official error has been made.”––[Official Report, Welfare Reform Public Bill Committee, 19 May 2011; c. 1019.]
However, Public Law Project research shows that the DWP’s default approach is to recover all official error overpayments. Relief is dependent on individuals navigating a difficult and inaccessible process to request a waiver. In 2022, only 26 waiver requests were granted.
DWP mistakes matter. The financial and psychological impacts of overpayment debt recovery on individual claimants can be severe. The research I have mentioned found that the recovery of debts, including official error overpayments, by deductions from universal credit led to a third of survey respondents becoming destitute. The risk of harm is particularly acute for official error overpayments, which individuals have no way of anticipating, so they can lead to sudden, unexpected reductions in income that impact existing fixed commitments and carefully planned budgets.
The recovery of official error overpayments brought an added sense of injustice, with individuals finding themselves in debt due to a DWP error over which they had no control. For example, one claimant was overpaid universal credit because the DWP had failed to consider income from her widow’s pension. She had informed the DWP that she received it and was assured that it would not affect her claim. She relied on that assurance and spent the money on daily living expenses. Four years later, the DWP told her that it would be recovering the resulting overpayment of £7,258.08. Aside from the significant financial impact, the stress associated with recovery impacted her mental health. She found herself constantly thinking about the overpayment and how she would pay it back, which in turn impacted on her physical health. She was left anxious that mistakes would be made again, leading to her incurring debt that she had no power to avoid.
Recovery often puts individuals who have relied on payments in good faith in financially precarious situations, forcing them to make difficult choices about sacrificing essentials. Research by the Joseph Rowntree Foundation has found that the current standard universal credit allowance is not sufficient to cover the cost of essentials. In this already difficult context, households that are repaying overpayment debt can lose up to 25% of their standard allowance each month.
People often base key life decisions and financial planning on information provided by DWP officials about their entitlement to universal credit. An official error universal credit overpayment can also have a knock-on effect on people’s entitlement to other support, such as council tax reduction. I am sure the DWP does not want to be responsible for pushing someone into further financial hardship. We can prevent this harm from occurring in the first place with my new clause, which would mean that overpayments can be recovered only where the claimant could reasonably have been expected to realise that they had been overpaid.
The new clause is equivalent to an amendment proposed by Labour Front Benchers during the passage of the Welfare Reform Act. Under the new clause, DWP officials would themselves consider the fairness of recovering an official error overpayment before any recovery was initiated. Increasing protections against the recovery of overpayments would also create a strong incentive to reduce the rate of DWP errors in the first instance, thereby contributing to a more accurate and better functioning welfare system from the outset.
The Bill provides the Government with an opportunity to proactively address a harmful and unfair process that affects hundreds of thousands of claimants each year, easing the financial burden of debt on claimants who have done nothing wrong and encouraging the DWP to get payments right first time. I hope that the Minister will respond to my points on new clause 1, and I sincerely hope that we will make progress on the issue as the Bill progresses.
Rebecca Smith (South West Devon) (Con)
It is a pleasure to serve under your chairmanship, Mr Western. This is the first time that I have spoken to a new clause in Committee. New clause 1, tabled by the hon. Member for Brighton Pavilion, would amend the Bill so that, where universal credit overpayments have been caused by official error, they can be recovered only where the claimant could reasonably have been expected to realise that there was an overpayment.
I am interested to know how the claimant could reasonably be expected to realise that the amount that they had received was an overpayment, as that would be the test for whether that person becomes liable for repaying the amount. If payments are made to an appointee’s bank account, do they become liable for spotting the overpayment under this new clause? Would the amount have to be repaid only if both the person eligible for the payment and their appointee realised the overpayment?
Are there figures on how much money is lost and recovered due to error? Do we therefore know how much the new clause would cost the DWP? Underpayments in taxes are recovered by His Majesty’s Revenue and Customs in the following months or years even where the individual is not at fault, and it is not clear why universal credit claimants should be any different. It would help if the Minister could explain to the Committee how, in the case of overpayments, a repayment plan will be put in place that is manageable for the person making the payments, and how that will be assessed.
We would be better off focusing on minimising official errors in the first place. What work is the DWP doing to better guard against overpayments, given that the overpayment rate for universal credit was 12.4% or £6.46 billion in the financial year ending 2024, compared with 12.7% or £5.5 billion in the financial year ending 2023? I argue that we need to focus on ensuring that overpayments are not being made, but once the error has been made, particularly because it is so costly to the taxpayer, we should try to ensure that the money is recouped.
Steve Darling (Torbay) (LD)
It is a pleasure to serve under your chairmanship, Mr Western. I support the new clause tabled by the hon. Member for Brighton Pavilion. On several occasions over recent weeks, Ministers have gone on the record to describe the DWP and the benefits system as a “broken” system. It is extremely helpful that the hon. Member highlighted the impact that that can have on people who often have chaotic lives and are on the edge.
I have served the people of Torbay in elected office for 30 years. Over that time, I am saddened that, particularly with the recent cost of living crisis, the levels of destitution have become worse, as I hear from people who provide food banks and other support for the people in need in Torbay. Whether it is Scope or the Joseph Rowntree Foundation, many of those good organisations highlight to policy developers that the levels of benefits are really tough and the levels of destitution in our communities are higher than they have been for many years. Therefore, I would welcome some thoughts from the Minister about this proposal, because sadly, recovery will often drive people into destitution and, as highlighted by the hon. Member for Brighton Pavilion, into severe ill health.
The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
It is a pleasure to serve under your chairship once again, Mr Western. Before I come to my general comments on the new clause from the hon. Member for Brighton Pavilion, I will attempt to respond to some of the questions that we have heard.
On how we can assure ourselves that people could reasonably have known, this assessment is made by our specialist investigation teams, who do this day in, day out. There is a balance of probabilities that they would apply to instances such as that. It is a process that has been in place for years. On whether an appointee would be liable for an overpayment, yes, they would. How much is official error? It is approximately 0.3% of all benefit payments. About £800 million is the most recently available annual figure.
On how a repayment plan is agreed—this goes to the point that the hon. Member for Torbay made also—we again have a specialist team who calculate this. We have a vulnerability framework should that be required. All repayment requests are done on an affordable basis. As we heard last week, the specifics around the new debt recovery power make attempts, throughout the process, to agree an affordable repayment plan. The limits that the Bill would put in place would be not more than 40% in the case of an ongoing deduction and 20% in cases of error. On the point about recovery causing destitution, which the hon. Gentleman also made, he will have noted that towards the end of last year, the Department announced its new fair repayment rates, reducing the amount of deduction that can be made from benefits down to 15%. As I have just outlined, further provision is made where we are looking to take these new powers to deduct directly from bank accounts.
To return to the point that the hon. Member for South West Devon made about prevention of overpayments, the eligibility verification measure is intended to help us to identify fraud, particularly in relation to capital, and people who have been abroad longer than they should be, in terms of aligning that with their eligibility for benefits, and we think that it will enable us to identify error overpayments sooner as well. Of course, people are regularly reminded to update their circumstances also. A range of mechanisms are in place already to assist with the identification of overpayments. We are not complacent. We know that there are too many overpayments through official and claimant error, just as there is far too much fraud in the Department. That is why we are taking many of the steps identified and outlined in this Bill.
Before I turn to my comments about new clause 1 specifically, let me just make a correction to something that I told the Committee last week. I said that the minimum administrative penalty that can be offered, which receives a four-week loss of benefit, is £65. I misspoke and I would like to take this opportunity to correct the record and state that the amount is £350.
New clause 1 seeks to amend existing recovery legislation, to limit when overpayments of universal credit and new-style benefits caused by official error could be recovered. Specifically, those official error overpayments would be recoverable only where the claimant could have been reasonably expected to realise they were not entitled to the overpayments in question at the time they received them. This Government are committed to protecting taxpayers’ money and ensuring that we can recover in a fair and affordable way money owed. The debt recovery powers in the Bill apply to all debt that Parliament has determined can be pursued. Section 71ZB of the Social Security Administration Act 1992, introduced in the Welfare Reform Act 2012 under the coalition Government, made any overpayment of universal credit, new style jobseeker’s allowance and employment and support allowance in excess of entitlement recoverable. That includes overpayments arising as a result of official error.
Official error can arise for a number of different reasons. Some errors, for example, occur as a result of the flexibility of the universal credit system. Unlike the tax credit system it replaces, UC works on a monthly cycle of assessment periods. It is to be expected that on occasion, corrections or changes take place over assessment periods. The system quickly rectifies these “errors” in the next assessment period and it is vital that this functionality is maintained. In these instances, the customer is not worse off as, over the course of subsequent assessment periods, they receive the correct amount on average. It is also helpful to explain that under existing departmental processes, customers have the right to request a mandatory reconsideration of their benefit entitlement as well as the amount and period of any subsequent overpayment. Following that, they can appeal to the first-tier tribunal, should they still disagree with the Department’s decision.
We recognise that overpayments, however they arise, cause anxiety for our customers. The Department’s policy is therefore to recover debts as quickly and cost effectively as possible without causing undue financial hardship to customers. DWP’s overall approach to recovery balances the need to protect public funds by maintaining recovery levels, while providing a compassionate service to all customers regardless of their circumstances. The Department’s policy is therefore to agree affordable and sustainable repayment plans. The debt recovery measures in the Bill, however, are last-resort powers for debtors who are no longer on benefits or in pay-as-you-earn employment and are persistently evading debt recovery. These powers apply across all types of debt.
All our communications to our customers signpost to independent debt advice and money guidance, and we heard from the Money and Pensions Service in our evidence sessions about how strong the partnership working between the Department and debt sector is. DWP is committed to working with anyone who is struggling to repay their debt and customers are never made to pay more than they can afford. Where a customer feels they cannot afford the proposed rate of recovery, they are encouraged to contact the Department to discuss their repayment terms. The rate of repayment can be reduced or recovery suspended for an agreed period, and the Department may also consider refunding the higher deduction that has been made. The Department’s overpayment notifications have been updated to make sure customers are aware they can request a reduction in their repayment terms. In exceptional circumstances, the Department has the discretion to waive recovery of the debt, in line with the Treasury’s “managing public money” guidance. In doing so a range of factors are considered including the circumstances in which the overpayment arose.
Finally, I have listened to and take seriously the concerns from the hon. Member for Brighton Pavilion. As the Committee is aware, the Minister for Social Security and Disability is looking at the policy design of universal credit to ensure outcomes that tackle poverty and help people to manage their money better. I will pass the concerns raised by the hon. Lady on to him, but having outlined the reasons against it, I will resist new clause 1.
Siân Berry
I thank the Minister for taking seriously the concerns I raised. I will not press the new clause further today, but I hope that it will be looked at seriously in the next stages of the Bill, and that we can discuss this further in the House. I therefore beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 2
Offence of fraud against a public authority
“(1) A person who—
(a) commits,
(b) assists or conspires in the committal of, or
(c) encourages the committal of
fraud against a public authority commits an offence.
(2) A person who commits an offence under subsection (1) is liable—
(a) on summary conviction, to imprisonment for a term not exceeding the general limit in a magistrates’ court or a fine (or both);
(b) on conviction on indictment, to imprisonment for a term not exceeding 7 years.”—(Rebecca Smith.)
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss new clause 15—Offence of encouraging or assisting others to commit fraud—
“(1) The Social Security Administration Act 1992 is amended as follows.
(2) In section 111A (Dishonest representation for obtaining benefit etc), after subsection (1G) insert—
‘(1H) A person commits an offence if they—
(a) encourage or assist another person to commit an offence under this section, or
(b) provide guidance on how to commit an offence under this section.’
(3) In section 112 (False representations for obtaining benefit etc), after subsection (1F) insert—
‘(1G) A person commits an offence if they—
(a) encourage or assist another person to commit an offence under this section, or
(b) provide guidance on how to commit an offence under this section.’”.
Rebecca Smith
I beg to move, That the clause be read a Second time.
New clause 2 seeks to make it a specific offence to commit, assist or encourage others to commit fraud against a public authority. Someone who commits such an offence would be liable to imprisonment or a fine, or both.
The offence of fraud against a public authority in the Bill is a civil offence. The Government argue that civil penalties offer an alternative to prosecution and help to mitigate the burden on the criminal justice system by offering alternative routes for the public sector to manage fraud cases. The Bill introduces a framework of civil penalties for fraud that the Minister can impose, including on behalf of other Government Departments, serving as an important deterrent against fraud in the public sector. We think it is an anomaly for public sector fraud to be a civil offence while benefits fraud is a criminal offence. Will the Minister explain why one type of fraud is seen as less serious than the other?
The Parliamentary Secretary, Cabinet Office (Georgia Gould)
It is a pleasure to serve under your chairmanship, Mr Western. I appreciate the intention of the hon. Member for South West Devon in tabling the new clause—that is, to take fraud against the public sector seriously—but the Government plan to resist it, because we believe that the proposals are already covered and that it could lead to unintended consequences that do the opposite of what she wants.
As the hon. Member said, new clause 2 would create a new offence of fraud against a public authority. We believe that that could have a detrimental effect and is unnecessary, because fraud is already an offence, and this is clearly defined in clause 70 as offences under the Fraud Act 2006 and the common law offence of conspiracy to defraud. The Bill uses those offences—they do not need to be written into it to have effect—and we have given assurances on that during a previous debate.
Consequently, there does not need to be a specific fraud offence for public authorities. Assisting and encouraging fraud against a public authority, as is mentioned in the new clause, is already an offence. The offences of “encouraging or assisting”, as set out in sections 44 to 46 of the Serious Crime Act 2007, apply to fraud offences as they do to other crimes. Again, that does not need to be written into the Bill to have effect.
The Public Sector Fraud Authority will be able to investigate cases in which it appears that someone has encouraged someone else to commit fraud. If we discover encouragement, that would likely form part of the PSFA’s investigation into a fraud case, and the Crown Prosecution Service could pursue that offence using the evidence collected. Whether action can be taken will depend on the facts of the case, the evidence available and whether the necessary standard of proof can be met.
Crucially, new clause 2 would reduce the maximum sentence available for Fraud Act and conspiracy offences from 10 years to seven years, for fraud against public authorities only.
Mike Wood (Kingswinford and South Staffordshire) (Con)
I thank the Minister for her response, but why does she feel that benefit fraud ought to be a specific offence, with maximum sentences under the Social Security Administration Act 1992, but that it is not appropriate for a specific offence to apply to people who deliberately defraud other public authorities?
Georgia Gould
As I set out, these measures are already covered, and the proposals would potentially reduce sentences from 10 years to seven years. I am sure that the hon. Member does not want those who defraud the public sector to get lower sentences than those who would defraud the private sector.
Mike Wood
The Minister is being generous in giving way. Prosecutors have a choice as to which charge to bring. They can still bring a charge under the common law offence, which as the Minister says, has a high maximum sentence—but one that is very rarely imposed—or, as with benefit fraud, they could bring it under a specific offence, as proposed in new clause 2. The Sentencing Council would then develop the guidelines that apply to deliberately defrauding public authorities. Although the Minister is right that the maximum sentence under the new clause is lower than the theoretical maximum for the common law offence, in practice, it is likely to see rather more substantial sentences imposed on conviction.
Georgia Gould
We already have effective fraud legislation. The issue that the Bill seeks to address is that we do not currently have the resources or the powers to properly investigate that or to recover money. We believe that the suggestions that are being made would have the unintended consequences of reducing the seriousness of the offence, in the way that I have set out. The proposals also omit the option available in the Fraud Act offences and the common law conspiracy offence for the Crown court to impose an unlimited fine instead of, or as well as, a term of imprisonment. Again, that weakens the response. That is contrary to the Government’s intention with the Bill that strong action should be taken against public sector fraud.
New clause 15 seeks to introduce an offence of encouraging or assisting others to commit fraud by adding new subsections to sections 111A and 112 of the Social Security Administration Act 1992. Sections 111A and 112 set out two specific offences related to benefit fraud. Although the intention behind the new clause is commendable, I believe that it is not needed for several reasons, which are similar to those I have set out on new clause 2.
First, the existing legal framework already provides sufficient measures to tackle fraud of this nature. The Fraud Act 2006 and the Serious Crime Act 2007 make it a criminal offence to encourage or assist any other offence, including when it relates to fraud. There are also existing laws that serve a similar purpose for Scotland. Those existing laws are robust and comprehensive, ensuring that individuals who provide guidance on how to commit fraud, or encourage others to do so, can be prosecuted effectively. Introducing additional subsections to the 1992 Act would therefore be redundant and unnecessary.
Secondly, the new clause could potentially complicate the legal landscape. Adding new subsections to the 1992 Act risks creating overlapping and conflicting provisions that could lead to confusion and inefficiency in enforcement. It is essential to maintain clarity and coherence in our legal system to ensure that justice is served effectively. Moreover, the new clause would mean that those convicted of a new offence would face a less punitive sentence than they would under existing laws. For example, under new clause 15, a conviction related to section 112 would carry a maximum period of custody of three months, compared with a maximum of 10 years under the existing Fraud Act. As a result, and this is similar to what I set out on new clause 2, rather than strengthening our position to respond to such types of fraud, new clause 15 could result in a weakened response.
Although new clauses 2 and 15 are well intended, neither new clause is needed as the existing legal framework already provides sufficient measures to address this issue, and introducing additional subsections would only complicate the legal landscape. However, I very much heard the points about the research being done by the hon. Member for South West Devon and the importance of tackling those who set up sites to try to defraud the public sector. I am more than happy to have a further meeting about how we can take action on that. We believe that we can do that using the existing powers, but we would welcome further discussion. The PSFA and DWP will be concentrating on the provisions in the Bill that are intended to effectively address and combat fraud through them. I therefore ask the hon. Member for South West Devon to withdraw the motion.
Rebecca Smith
I have heard everything that the Minister has said. However, we will still press new clauses 2 and 15 to a vote.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
On a point of order, Mr Western. It is a pleasure to serve under you in the Chair; can I ask you a procedure question before we go any further? We have had the presentation of the new clauses, but we have not had any declarations of interest. Given that there are some notable Conservative party donors facing potential fraud charges under covid issues, I just wonder whether that should have been declared before we got to the change in how people in those situations might be punished.
The Chair
I understand, although I was not present at the time, that all the declarations were made at the time of evidence being presented to the Committee. I thank the hon. Member for his point of order.
Andrew Western
I would like to understand how the Opposition Front-Bench team consider new clause 15 to make any provision that is not already in the Fraud Act 2006 or the Serious Crime Act 2007, which already make it an offence to encourage or assist an offence including fraud. I stress that because I am particularly concerned about sickfluencers, to whom the hon. Lady referred, but I fail to see how new clause 15 offers any provision not contained in that legislation already. It does not mention at any point that it would extend powers to what happens online, presumably because—or I can say actually because—online sickfluencers would already be covered by that legislation. I understand the intent. We have a problem with sickfluencers that we need to deal with, but I would be incredibly appreciative to understand how the new clause offers anything that is not already in that legislation.
Rebecca Smith
I thank the Minister for his comments. I have obviously heard what both Ministers have said in response. We are still keen from a principle perspective to push the new clause to a vote because we think more needs to be done to outline specifically what we are doing to tackle the online aspect. I hear what the Minister is saying but, in this particular instance, we would like to take it further.
Question put, That the clause be read a Second time.
Rebecca Smith
I beg to move, That the clause be read a Second time.
We have tabled the new clause to require the Secretary of State to publish the results of any pilot schemes run with banks to test the provisions of chapter 1 of part 2 of the Bill. We have already discussed how banks will be required to undertake ongoing monitoring work to collect the relevant information as part of eligibility verification. The impact assessment states that two proofs of concept have taken place, including one in 2017, with short summaries provided of each. Given the scale of what is being asked of the banks, however, as well as how technology has moved on in the past eight years, it is reasonable to assume that pilots will also be undertaken to ensure that the system works properly before it is fully rolled out. Can the Minister confirm that this will be the case?
In the interest of transparency, we also need to see the results of the pilots, which is why we have tabled the new clause to ensure that they are published within three months of the Act coming into force. It is regrettable that we needed to table the new clause but, as we have said several times throughout the Bill’s passage, and as we heard from witnesses before the Committee, it is extremely difficult to judge how the legislation will work in practice without seeing the code of practice and understanding what will be required of the banks. As UK Finance said in oral evidence:
“Much will depend on the mechanism through which banks will be required to share the information, the frequency of the information notices, whether the criteria we are required to run the checks against change over time and other factors that will influence how much capacity is required from the banking sector. As I say, at this stage it is challenging to do a detailed assessment.”––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 48, Q85.]
The practical implications of how to implement the Bill are not currently clear to the banks.
We also discussed the consequences of getting this wrong. As UK Finance also said in evidence,
“under the Bill banks responding to an information request or a direct deduction order, would have to consider whether there is some indication of financial crime that under POCA requires them to make a suspicious activity report. We think it is simpler to remove that requirement, not least because where there is a requirement to make a suspicious activity report there is a requirement to notify the authorities; clearly, there is already a notification to the authorities when complying with the measure. Removing that requirement would avoid the risk that banks must consider not only how to respond to the measure but whether they are required to treat that individual account as potentially fraudulent.”––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 49, Q89.]
The banks are well versed in dealing with fraud, but not so much with error. We need reassurance that there are clear expectations of the banks in delivering their duties under the Bill, that those are compatible with existing obligations regarding financial crime, and that the banks can resource them.
Andrew Western
In my view, the new clause is simply not needed. As the hon. Lady said, to demonstrate the feasibility and potential of the eligibility verification measure, the DWP conducted two proofs of concept, in 2017 and 2022, and the results have been published in the impact assessment for the Bill. Further information on the effectiveness of the measure will, of course, be available following the independent overseer’s annual review and report. No pilot schemes have or will be conducted on information notices specifically, as they are an extension of existing powers. On that basis, I resist new clause 5.
Rebecca Smith
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 7
Annual reporting of amounts recovered
“(1) The Secretary of State must publish an annual report detailing the amount of money which has been recovered under the provisions of this Act.
(2) A first report must be published no later than 12 months after the passing of this Act with subsequent reports published at intervals of no more than 12 months.”—(Rebecca Smith.)
Brought up, and read the First time.
Rebecca Smith
I beg to move, That the clause be read a Second time.
The new clause would require the Secretary of State to publish an annual report detailing the amount of money recovered under the provisions of the Bill, with the first report to be published within 12 months of its passage. The main purpose of the Bill is to crack down on error and fraud, and we support that aim. It is reasonable to ask for transparency to understand exactly how much money has been recovered thanks to the measures in the Bill, and to ensure that it is working as hoped. If it is not, further action will be needed, but at least we would know, and a discussion could be had instead of the issue being brushed under the carpet.
An annual report allows the Department enough time to produce it without being an administrative burden, while ensuring that it remains relevant and up to date. Given the large amount of money lost to fraud and error, it is important that we are all able to hold the Government to account for how effectively they are recovering it.
Andrew Western
I share and appreciate the hon. Member’s concern and interest in delivering the proposed benefits of the Bill, including the effective recovery of debt. The Bill delivers on our manifesto commitment that this Government will safeguard taxpayers’ money and not tolerate fraud or waste anywhere in public services.
Turning first to part 2 of the Bill, I do not think the new clause is necessary, given the existing routes for external scrutiny and reporting on the DWP’s fraud and error activities, including the new debt recovery powers. The Office for Budget Responsibility provides independent scrutiny of the Government’s costings of welfare measures. The Department estimates that, over the next five years, the EVM will save £940 million and the debt recovery measure £565 million. Those estimates have been certified by the OBR. In total, the Bill is estimated to deliver benefits of £1.5 billion over the next five years. In the published impact assessment, the DWP committed to monitoring and evaluation on part 2 of the Bill, including the new powers to recover debt and the EVM.
Although I understand that the hon. Member is particularly interested in scrutiny of the money recovered under the Bill, I remind the Committee that the Government have committed to the biggest welfare fraud and error package in recent history. The total DWP fraud, error and debt package, with savings from the Bill and other Budget measures, is worth £8.6 billion over the next five years.
In its annual report and accounts, the DWP already reports on the savings made from its fraud and error activities, including savings made from “detect” activity across our counter-fraud and targeted case review teams. In addition, we report on our debt recovery totals and debt stock. I think the annual report and accounts, in particular, will give the hon. Member the information in which she is interested. The Department also publishes annual statistics on the monetary value of fraud and error, including various breakdowns by benefit and type. That is another mechanism by which we can see trends over time and ensure transparency for the public.
Turning to part 1 of the Bill, the PSFA already has a published commitment in its mandate to produce an annual report that makes transparent the levels of fraud in Government and the latest fraud and error evidence base, and an annual report on its performance. Recoveries will be published in the annual report. Paragraph 12 of schedule 2 to the Bill also requires:
“As soon as reasonably practicable after the end of each financial year the PSFA,”
when set up as a statutory body,
“must prepare a report on the exercise of its functions during that financial year.”
Recoveries will be published as part of that.
For the reasons I have outlined, I resist the new clause.
Rebecca Smith
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 8
Publication of an Anti-Fraud and Error Technology Strategy
“(1) The Secretary of State must, within six months of the passing of this Act, publish an Anti-Fraud and Error Technology Strategy.
(2) An Anti-Fraud and Error Technology Strategy published under this section must set out—
(a) how the Government intends to use automated technologies or artificial intelligence to tackle fraud against public authorities and the making of erroneous payments by public authorities, and
(b) a series of safeguards to provide for human oversight of decision making that meet the aims set out in subsection (3);
(c) how rights of appeal will be protected;
(d) a framework for privacy and data sharing.
(3) The aims of the safeguards in subsection (2)(b) are—
(a) to ensure that grounds for decision making can only be reasonable if they are the result of a process in which there has been meaningful human involvement by a human of adequate expertise to scrutinise any insights or recommendations made by automated systems,
(b) to make clear that grounds cannot be reasonable if they are the result of an entirely automated process, and
(c) to ensure that any information notice issued is accompanied by a statement—
(i) setting out the reasonable grounds for suspicion that have been relied on, and
(ii) confirming that the conclusion has been formed on the basis of human involvement.”—(Rebecca Smith.)
Brought up, and read the First time.
Rebecca Smith
I beg to move, that the clause be read a Second time.
The new clause would require the Secretary of State to publish an anti-fraud and error technology strategy within six months of the Act’s passage. That must include: how the Government intend to use automated technologies and AI to tackle fraud, subsection (2)(a); safeguards to ensure human oversight of decision making, subsection (2)(b); protection of rights of appeal, subsection (2)(c); and a framework for privacy and data sharing, subsection (2)(d).
Members might be asking themselves why we tabled the new clause. In part, it is based on the evidence we received. In written evidence, the Public Law Project expressed concern that, although the impact assessment, the human rights memorandum and the statements from the Secretary of State and the Minister for transformation, the hon. Member for Stretford and Urmston, on Second Reading state that a final decision on benefit eligibility will always involve a human agent, this is not reflected in the Bill itself. In response to the Public Law Project’s concerns, the new clause would provide an audit of technology systems used to tackle fraud, ensuring accountability while addressing the risks posed by automation in decision making.
A report published by the Treasury in 2023, “Tackling fraud and corruption against government”, said:
“Public bodies can better protect themselves…by sharing data and intelligence with other public bodies and working together.”
We therefore believe the technology strategy clause recognises that sharing data is beneficial to stopping and recovering fraud, but includes additional provisions that audit its use.
The strategy must include: how the Government intend to use automated technologies or artificial intelligence to tackle fraud and error against public bodies; what safeguards exist for human oversight of decision making; how rights of appeal will be protected; and a framework for privacy and data sharing.
The safeguards must ensure that grounds for decision making are reasonable only if they are the result of a process in which there has been meaningful involvement by a human of adequate expertise to scrutinise any insights or recommendations made by automated systems. They must also make it clear that grounds cannot be reasonable if they are the result of an entirely automated process. To ensure this, any information notice issued must be accompanied by a statement setting out the reasonable grounds for suspicion that have been relied on, and confirming that the conclusion has been formed on the basis of human involvement.
We know that AI and other technologies have huge potential to improve efficiency and productivity, and they should be used where appropriate, but we cannot rely on it yet to the exclusion of people and human judgment. The strategy we propose would ensure that those points were adequately considered by the Department, ensuring that the taxpayer receives value for money while safeguarding claimants through the decision-making process.
Andrew Western
I thank the hon. Member for tabling the new clause. The Government recognise the opportunities that AI and machine learning can provide, while also understanding the need to ensure they are used safely and effectively. In January 2025, the Government outlined their response to the AI opportunities action plan led by Matt Clifford, which was commissioned by my right hon. Friend the Secretary of State for Science, Innovation and Technology. The plan outlined 50 recommendations for how the Government can leverage AI, including recommendations to improve access to data, to make better use of digital infrastructure and to ensure the safe use of AI.
Under the leadership of the Prime Minister and the Secretary of State for Science, Innovation and Technology, we have endorsed this plan, and the Government are taking forward those recommendations. As the Government work to implement the action plan’s recommendations, I do not believe that the separate anti-fraud and error technology strategy proposed by the new clause is necessary. I believe the new clause would cut across the work being taken forward under the action plan, so I reject the amendment.
As technology advances, the use of AI and machine learning will play a crucial role in detecting and preventing fraudulent activities. The Government want to make use of technology and data to tackle fraud, as the Department has a responsibility to ensure that fraud is minimised so that the right payments are made to the right people. The Government remain committed to building our AI capability, and at DWP we will take advantage of the opportunities offered by AI while ensuring it is used appropriately and safely.
Rebecca Smith
Sorry, I should have said this earlier. The new clause would make the Government’s AI strategy a statutory requirement, instead of a manifesto commitment not written into law. That is important to us because, in the case of fraud and particularly benefit fraud, we are dealing with individual people. We want to make sure that we do not inadvertently penalise the wrong people or apply something that is disproportionate. A lot has been said about ensuring proportionality and reasonableness.
I am interested in the Minister’s reflections on where else in the strategy something is applied as personally to potentially vulnerable groups of people, thereby suggesting that we do not need this protection to ensure that people are not inadvertently penalised when we use this legislation to tackle the fraud they are committing.
Andrew Western
That is a reasonable question, and clearly the AI framework is not specific to vulnerable groups in the way that the hon. Lady sets out. Decisions regarding benefit entitlement or payments within the Department are made by DWP colleagues who always look at the available information before making a decision. I would not want to make an amendment to restrict that to only the activity within this Bill; I would want it to be Departmental wide.
As I have set out a number of times at every stage and in every area of this Bill, a human is involved in decision making. There is no plan to change that. I can understand the hon. Lady’s anxiousness to see that set out in legislation, but I think it would create an anomaly between the practices within this Bill and in the Department more broadly. For instance, it is outside the scope of this Bill for a human to complete the vulnerability framework when looking at somebody in financial need who has an overpayment. I would not want to make a distinction between these powers and the rest of the Department's activities. If we were to have a broader debate, I would be happy to engage with the hon. Lady on that basis, but I would not want to create a “two-tier”, for want of a better word, description within the Department.
At every stage of model development, as we bring forward the AI opportunities action plan and our work in the AI and tech space, we ensure that checks, balances and strong safeguards are in place. I am proud of our commitment to use AI and machine learning in a safe and effective way.
To provide further assurances to Parliament and the public about our processes, we intend to develop fairness analysis assessments, which will be published alongside our annual report and accounts. These will set out the rationale for why we judge our models to be reasonable and proportionate. This reporting commitment on our fairness analysis assessment further negates the need for the new clause.
Finally, the hon. Lady mentioned the new clause’s role in ensuring reasonable grounds of suspicion when investigating fraud. I remind the Committee that, under the information gathering powers, the DWP may request information only where an authorised officer considers that there are reasonable grounds to suspect a DWP offence and that it is necessary and proportionate to obtain that information. Again, a human is fully baked into the process.
The changes made by the Bill will be reflected in the new code of practice. Updated mandatory training will be provided for staff, who will be accredited to use these new powers. Of course, with the eligibility verification measure in particular, but running throughout the Bill, the principle of independent oversight is very much in place. I hope that will provide the hon. Lady with the necessary information to show that the Government will use the information gathering powers only where there is a reasonable suspicion of fraud, and that this will have considerable human involvement. I agree that there is perhaps a broader conversation to be had about this at an appropriate time.
Rebecca Smith
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 9
Impact of Act on vulnerable customers
“(1) The Secretary of State must, within six months of the passing of this Act, lay before Parliament an assessment of the expected impact of the Act on vulnerable customers.
(2) For the purposes of this section, “vulnerable customers” means someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.”—(Rebecca Smith.)
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss
New clause 12—Impact of Act on people facing financial exclusion—
“(1) The independent person appointed under section 64(1) of this Act must carry out an assessment of the impact of this Act on the number of people facing financial exclusion.
(2) The independent person must, after 12 months of the passing of the Act—
(a) prepare a report on the review, and
(b) submit the report to the Minister.
(3) On receiving a report the Minister must—
(a) publish it, and
(b) lay a copy before Parliament.”
This new clause would look into the impact of the Act on people facing financial exclusion.
Rebecca Smith
New clause 9 would require the Secretary of State to lay before Parliament, within six months of the Act’s passage, an assessment of its expected impact on vulnerable customers.
Concern has been expressed in written evidence about the Bill’s impact on disabled people. It is important to ensure that vulnerable people are not inadvertently harmed by the Bill. There was a discussion about vulnerable customers in oral evidence, with Daniel Cichocki and Eric Leenders both supporting the notion of an impact assessment while being concerned about the mental strain of being under suspicion. They said that the FCA is due to publish a thematic review on this imminently. We suggest that this strengthens the case for a comprehensive assessment by the Secretary of State.
We define “vulnerable customers” as those who due to their personal circumstances are especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care, per the definition used by the Financial Conduct Authority, with which the sector is familiar. New clause 9 is necessary because some of the people impacted by the Bill will be vulnerable, and some will be repaying money they acquired not through fraud but through overpayments resulting from DWP error. As we heard from UK Finance, banks have duties when they suspect that financial crime is taking place, and although such errors are obviously not financial crime committed by the person who holds the account into which the payments have been made, there is a risk that the Bill does not sit well with those existing duties on banks.
We need to ensure that communication with vulnerable bank customers is of a sufficient standard, particularly where the DWP is recovering funds in cases where customer is not at fault, because the group of people we are talking about is likely to have high levels of vulnerability. If the Minister will not accept the new clause, I would be grateful for an explanation of the reasons why and, importantly, how the Government intend to undertake monitoring, which we believe is important.
The Liberal Democrats’ new clause 12 would require an independent assessment of the impact of the Bill on people facing financial exclusion. I am interested in whether the Liberal Democrats have a particular individual or organisation in mind which they think would be appropriate to undertake such an assessment, but we do not have a difficulty with the principle of the new clause.
Steve Darling
New clause 12 is about financial exclusion, as the hon. Member for South West Devon said. The Liberal Democrats’ concern is that, as this morning goes on, a number of safeguards are looking to be—for want of a better phrase—baked into the system by legislation, yet according to the Minister the only thing baked into the system is the involvement of human beings. That causes me, and I am sure other colleagues, concerns.
If an annual review were to take place of the Bill’s impact on people facing financial exclusion, conducted by the independent person appointed with the Minister publishing and sharing that with Parliament, we could ensure a level of transparency. While many of us would acknowledge that the Ministers in place at the moment are well-meaning individuals, who knows where we will be in 10 years’ time? This legislation needs to stand the test of time, so baking in these safeguards would be a positive way forward. I hope that the Minister will welcome that. I look forward to his comments.
Siân Berry
I have a lot of sympathy with both new clauses. It is really important that we look closely, as we are mandated to do, at the impact of the Bill on the people whose examples have been raised throughout the debate. The Minister should answer the questions asked by hon. Members, and if the Government will not do what is proposed in the new clauses, he should say what the Government will do instead.
Andrew Western
I begin with new clause 9, tabled by the hon. Member for South West Devon. I share her view that where the powers in the Bill are exercised, there should be a consideration of the vulnerabilities that customers may have, whether they be the customers of data holders such as banks or customers of Government —for example, DWP customers. However, I do not think that the new clause is necessary given the existing safeguards, oversight and reporting provisions in the Bill.
The Bill includes a number of protections for vulnerable people, including affordability considerations and protections for persons experiencing hardship, rights of review and appeal, and independent oversight. Those provisions have already been debated and considered by the Committee, so I will not labour the point, but I will comment on the provisions in the Bill for independent oversight, as they will play an important role here.
Rebecca Smith
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 10
Recovery of overpayments of Carer’s Allowance
“The Secretary of State may not exercise any of the powers of recovery under this Act in relation to a person who has received an overpayment of Carer’s Allowance until such time as—
(a) the Secretary of State has commissioned an independent review of the overpayment of Carer’s Allowance;
(b) the review has concluded its inquiry and submitted a report containing recommendations to the Secretary of State;
(c) the Secretary of State has laid the report of the independent review before Parliament; and
(d) the Secretary of State has implemented the recommendations of the independent review.” — (Steve Darling.)
This new clause would delay any payments being taken from people who the Government may think owe repayments on Carer’s Allowance until the independent review into Carer’s Allowance overpayments has been published and fully implemented.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss the following:
New clause 11—Audit of algorithmic systems used in relation to Carer’s Allowance overpayments—
“(1) An independent audit of algorithmic systems used in the assessment, detection or recovery of Carer’s Allowance overpayments must be conducted at least once every six months.
(2) Any audit under subsection (1) must be conducted by persons with relevant expertise in data science, ethics and social policy who have no direct affiliation with—
(a) the Department for Work and Pensions, or
(b) any person or body involved in the development or operation of the algorithmic systems under review.
(3) An audit conducted under this section must consider—
(a) the accuracy of the algorithmic systems in identifying overpayments, and
(b) the fairness of the systems’ design, application and operation, including any disproportionate impact on particular groups.
(4) After every audit a report on its findings must be—
(a) published;
(b) laid before both Houses of Parliament within 14 days of publication; and
(c) made publicly available in an accessible format.
(5) If any audit identifies significant inaccuracies, unfairness or biases in any algorithmic systems, the Secretary of State must, within 30 days of the publication of the report outlining these findings, present an action plan to Parliament which outlines the steps which the Government intends to take to address the identified issues.”
This new clause would provide for an audit of algorithmic systems used in relation to Carer’s Allowance overpayments.
Amendment 32, in clause 103, page 63, line 26, leave out from start to “following” in line 29 and insert—
“Subject to subsections (1A) and (2), this Act comes into force on such day as the Secretary of State or the Minister for the Cabinet Office may by regulations appoint.
(1A) No part of this Act may come into force until the recommendations of a report commissioned under section [Recovery of overpayments of Carer’s Allowance] have been implemented.
(2) Subject to subsection (1A), the”.
Steve Darling
I encourage colleagues to support these proposals about the carer’s allowance. Carers are the backbone of many households across the United Kingdom, and I hope the Minister will support the amendment.
John Milne (Horsham) (LD)
It is a pleasure to serve under your chairmanship, Mr Western.
The DWP is making extensive and growing use of algorithms for investigation purposes. Without proper oversight, these systems threaten error, unfairness and bias, which could lead to wrongful debt collection. Our amendment therefore calls for an independent audit of these systems at least every six months, to ensure accuracy and fairness. The audit must be conducted by experts in data science, ethics and social policy with no ties to the DWP or system developers. True independence is key.
The audit look at issues such as accuracy, so whether the algorithms are correctly identifying overpayments; fairness, so whether they unfairly target certain groups or operate with bias; and, above all, transparency and accountability. After each audit, we suggest that a full report must be published, presented to Parliament within 14 days, and made publicly accessible. If serious flaws are found, the Secretary of State must respond within 30 days with a clear action plan to fix these issues. Overall, Liberal Democrats are positive about benefiting from new technology, but we do need to consider whether it offers help, not harm.
In the wider context, what work is the use of AI generating? There are already chronic staff shortages at the DWP, with 20% vacancy rates becoming routine. Disability Rights UK has commented that operational failures now permeate every layer of welfare administration. Fraud investigation teams therefore already lack capacity to address the annual £6.4 billion of overpayments. There are only four fraud advisers per regional office to handle cases flagged by frontline staff, which has created a bottleneck, so that very often 90% of suspected fraud cases go uninvestigated. In other words, one could suggest there is already plenty of fraud to investigate without trawling for more. This amendment ensures regular scrutiny, transparency and fairness. I urge the Minister to consider it.
Andrew Western
It is important that I begin by paying tribute to the millions of unpaid carers across this country. The Government recognise and value the vital contribution made by carers every day in providing significant care and continuity of support to family and friends, including pensioners and those with disabilities. The 2021 census indicates that around 5 million people in England and Wales may be undertaking some unpaid care, and many of us take on a caring role at some point in our lives. Like other hon. Members, through my postbag and at events across my constituency, I see much of the work carers do. Carers are fortunate to have some wonderful advocates, not only their MPs but organisations such as Carers UK, Carers Trust and the Learning and Work Institute, to name but three.
We inherited a system in which busy carers already struggling under a huge weight of responsibility had been left having to repay large sums of overpaid carer’s allowance, sometimes worth thousands of pounds. We needed to understand exactly what had gone wrong so we could set out our plan to put things right. This is why we launched an independent review of earnings-related overpayment of carer’s allowance. We were delighted that Liz Sayce OBE agreed to lead this review, which is now well under way; we anticipate receiving its conclusions this summer.
The review will investigate how overpayments of carers allowance have occurred, what can be done to best support those who have accrued them, and how to reduce the risk of these problems occurring in future, but we are not sitting back and just waiting for the outcome of the independent review. Right now, we want to make it as easy as possible for carers to tell us when something has changed in their life that could affect their carer’s allowance, so we will continue to review and improve communications. From this April, the weekly carer’s allowance earnings limit will pegged to 16 hours’ work at national living wage levels, so in future it will increase when the national living wage increases. The earnings limit will be £196 a week net earnings, up from £151 today. As a result, over 60,000 more people will be able to receive carer’s allowance between 2025-26 and 2029-30. That is the largest increase in the earnings limit since carer’s allowance was introduced in 1976.
As the Chancellor said at the Budget, we need to look at the current cliff edge earnings rules. A taper could further incentivise unpaid carers to do some work and reduce the risk of significant overpayments, but introducing a taper to carer’s allowance is not without challenges. It could significantly complicate the benefit, and significant rebuilding of the carer’s allowance system would be required. The DWP has begun scoping work to see whether an earnings taper might be a feasible option in the longer term, but any taper is several years away.
New clause 10 sets out four points. As I have mentioned, an independent review has been commissioned, its terms of reference have been published and it is well under way. It is anticipated that it will report its conclusions in the summer. Both the report from the independent review and the Government’s response will be published, and we will report to the House.
I disagree with the hon. Member for Torbay on two issues. It would not be responsible of us to commit in advance to implementing all and any recommendations from such a review, sight unseen. We need to consider them carefully. In addition, the proposed new clause, as I understand it, would not have the effect he desires. We would still be able to recover overpayments of carer’s allowance from benefits under the powers in the Social Security Administration Act 1992.
The new clause would prevent our recovering debts directly from bank accounts of those not on benefits or PAYE, which is one of the additional powers given in this Bill. Even if the new clause operated as intended, it would be disproportionate to suspend all recovery of carer’s allowance overpayments until after the review is concluded, as those with overpayments are already covered by the usual safeguards of appeal rights, affordable deductions and, in exceptional circumstances, waiver. Given the discrepancy this would create between those on PAYE and benefits and those with other forms of income, I hope the hon. Gentleman acknowledges the need to withdraw the new clause rather than create further unfairness in the system.
Regarding new clause 11, I re-emphasise that we will not speculate on the findings or any potential outcomes of the independent review. All recommendations will be considered when the independent review concludes. It would not be appropriate of the Department to commit to this new auditing requirement until that has happened, when we can take a holistic view of carer’s allowance and how DWP uses data. Nevertheless, it is helpful to set out how DWP currently uses data to verify eligibility for carer’s allowance. Verification of earnings and pensions alerts were introduced to carer’s allowance in October 2018 as part of a wider strategy to identify data sources, to verify information provided by the claimant, or to identify if information has not been provided by the claimant. Like all data we use for that, it is not intended to replace the legal requirement of a claimant to provide information that may change their entitlement to social security.
VEP alerts arise from HMRC payroll data. The alert service provides a notification of new earnings or pensions as they come into payment, or if amounts change during the life of the claim. The Department uses business rules to prioritise those alerts, based on data provided by the real-time earnings system. Since 2019, we have actioned around 50% of the alerts received in the Department as part of our focus on reducing the risk and level of overpayments. Having secured additional funding in the one-year spending review, we will be deploying additional resource in 2025-26,to action the alerts received from HMRC as quickly as possible. The Department is also testing an approach of using text messages to remind customers of the need to report changes in their circumstances.
Finally, I emphasise that the use of VEP alerts does not replace human decision making. If the Department processes an alert that highlights a change in earnings and a customer has not reported the change, DWP officials will contact the customer to confirm details have changed. If any overpayment is identified, it will be referred to debt-recovery teams. DWP remains committed to working with anyone who is struggling with their repayment terms, and will always look to negotiate sustainable and affordable repayment plans.
In the light of the information I have set out, and the ongoing work of the carer’s allowance independent review, I urge the hon. Member for Torbay to withdraw the proposed new clause.
Rebecca Smith
Liberal Democrat new clause 10 would delay any payments being taken from people who the Government think owe repayments on carer’s allowance until the independent review into carer’s allowance overpayments has been published and fully implemented. Liberal Democrat new clause 11 would provide for an audit of algorithmic systems used in relation to carer’s allowance overpayments. It would require that, if any audit identified significant inaccuracies, unfairness or biases in any algorithmic system, the Secretary of State must, within 30 days of the publication of the report outlining these findings, present an action plan to Parliament that outlines the steps the Government intend to take to discuss the identified issues. I am interested to know why the Liberal Democrats are singling out carer’s allowance for this treatment—namely, the review of the algorithmic systems—rather than any other allowance or benefits. Is there a reason for that?
Liberal Democrat amendment 32 is a commencement block. It specifies that no part of the Bill may come into force until the recommendations of a report commissioned under the clause “Recovery of overpayments of Carer’s Allowance” have been implemented. We would suggest that there is more holistic information that should be made public before the Bill can be commenced, and that the focus on carer’s allowance is in danger of missing the bigger picture. For example, we need to see the codes of practice, and we need to know precisely how the banks will deliver their responsibilities under the Bill. I would suggest that those things, which are sadly not yet available to the Committee as we scrutinise the legislation, and that has greatly hindered us, would provide a much more holistic assessment of whether the Government are ready to implement the Bill than the report on recovering overpayments of carer’s allowance. Would the Liberal Democrats consider an amendment at a later stage that goes wider than that?
Andrew Western
I contend that amendment 32 is simply disproportionate given the wide range of benefits that the Bill is expected to deliver to address fraud and error, not just in the social security system but in the public sector more widely. It is essential that all of Government have access to the capabilities and tools required to stop fraudsters stealing from the taxpayer. Tens of billions of pounds are being lost to public sector fraud. These losses are unacceptable, and waste enormous sums of public money, which could be put to good use. Delaying the Bill coming into force will risk £1.5 billion of savings over the next five years. These have been certified by the Office for Budget Responsibility. The Government made a manifesto commitment that we would safeguard taxpayers’ money and not tolerate fraud or waste anywhere in public services. The Bill delivers on that commitment, and delaying its delivery is unfair on taxpayers, who deserve to have confidence that money spent by Government is reaching those who need it, and not those who exploit the system.
Secondly—we have already discussed this point at length—I remind Members that the Bill introduces new, important safeguards, including provisions for independent oversight and reporting mechanisms, to ensure the proportionate and effective use of the powers. New codes of practice will be consulted on and published to govern how new measures will be exercised in more detail. That will include details of further protections. There will be new rights of review and appeal in both parts of the Bill to ensure that there are opportunities to challenge the Government’s approach. A human being will always be involved in decisions about further investigation or the recovery of any debt.
Finally, I return to my earlier point: data and information sharing are crucial when we look at fraud and error. For example, the eligibility verification measure, while it will not be applied to carer’s allowance itself, will improve the DWP’s access to important data to help to verify entitlements, ensure that payments are correct, and prevent the build-up of overpayments. That will enable the DWP to be tough on those who cheat the benefits system and fair to claimants who make genuine mistakes. It is vital that the DWP is equipped with the right tools, and delaying this Bill will only delay these benefits. In the light of that, I hope that Members will not press the amendment.
Steve Darling
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 13
Liability orders
“(1) Where—
(a) a person has been found guilty of an offence under section 1 or section 11 of the Fraud Act 2006, or the offence at common law of conspiracy to defraud,
(b) that offence relates to fraud committed against a public authority, and
(c) the person has not paid the required penalties or not made the required repayments,
the Secretary of State may apply to a magistrates’ court or, in Scotland, to the sheriff, for an order (“a liability order”) against the liable person.
(2) Where the Secretary of State applies for a liability order, the magistrates’ court or (as the case may be) sheriff shall make the order if satisfied that the payments in question have become payable by the liable person and have not been paid.
(3) The Secretary of State may make regulations in relation to England and Wales—
(a) prescribing the procedure to be followed in dealing with an application by the Secretary of State for a liability order;
(b) prescribing the form and contents of a liability order; and
(c) providing that where a magistrates’ court has made a liability order, the person against whom it is made shall, during such time as the amount in respect of which the order was made remains wholly or partly unpaid, be under a duty to supply relevant information to the Secretary of State.
(4) Where a liability order has been made against a person (“the liable person”), the Secretary of State may use the procedure in Schedule 12 to the Tribunals, Courts and Enforcement Act 2007 (taking control of goods) to recover the amount in respect of which the order was made, to the extent that it remains unpaid.”—(Rebecca Smith.)
Brought up, and read the First time.
Rebecca Smith
I beg to move, That the clause be read a Second time.
Our new clause would provide that, where someone has been found guilty of fraud or conspiracy to defraud and not made the required payments, the Secretary of State can apply for a liability order. It further provides that, where a liability order has been made against a person, the Secretary of State may use the procedure in schedule 12 to the Tribunals, Courts and Enforcement Act 2007, on taking control of goods, to recover the amount in respect of which the order was made, to the extent that it remains unpaid.
The new clause is intended to give the DWP powers to apply to the courts to seize assets where fraud is probable, with the same burden of proof as for cash seizures. It would bring the DWP into line with the Child Maintenance Service. I know that we have had some debate on the matter, so this is probably more of a probing or tidying-up amendment than anything else, but it would be useful to have that said explicitly. It goes without saying that, if the Minister does not intend to support the new clause, I will be interested to know why. If the DWP is serious about recovering money lost to fraud and the person liable is not making the required repayments, why should the DWP not be able to apply to seize their assets?
Georgia Gould
This is similar to the previous new clause we discussed. We have a lot of sympathy with the points set out. We want to ensure that we recover money, whether it is fraud against the public sector more widely or fraud against the DWP, but we believe that that is already covered in the Bill and I will run through why.
Clause 16 clarifies that the PSFA is able to seek alternative civil recovery through the civil courts, in addition to the direct deduction orders and deduction from earnings orders in the Bill. It confirms that the PSFA will be able to apply to the county court for a recovery order. That is an order providing that the payable amount is recoverable
“under section 85 of the County Courts Act 1984, or…otherwise as if it were payable under an order of the court.”
Section 85 of the County Courts Act also refers to the use of the procedure in schedule 12 to the Tribunals, Courts and Enforcement Act 2007 to recover the money. That would enable the PSFA to seek enforcement of a debt by applying for a warrant of control in the county court, enabling a court enforcement officer to seize and sell goods to satisfy the debt. That ensures that the PSFA is able to pursue recovery through the most appropriate and effective mechanisms. New clause 13 is therefore already provided through the Bill for the PSFA and through existing legislation for the DWP—section 71 and section 71ZE of the Social Security Administration Act 1992 to be specific—allowing them operational flexibility to recover money in the most effective and efficient way to return money to the public purse. An amendment is not required to do that.
Rebecca Smith
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 14
Inclusion of systems within the Algorithmic Transparency Reporting Standard
“(1) For the purposes of this section, ‘system’ means—
(a) algorithms, algorithmic tools, and systems; and
(b) artificial intelligence, including machine learning
provided that they are used in fulfilling the purposes of this Act.
(2) Where at any time after the passage of this Act, the use of any system is—
(a) commenced;
(b) amended; or
(c) discontinued
the Minister must, as soon as reasonably practicable, accordingly include information about the system in the Algorithmic Transparency Reporting Standard.” —(John Milne.)
This new clause would require the use of algorithms, algorithmic tools, and systems, and artificial intelligence, including machine learning, to be included within the Algorithmic Transparency Reporting Standard.
Brought up, and read the First time.
John Milne
I beg to move, That the clause be read a Second time.
The new clause would require that the use of algorithms, algorithmic tools and systems, and artificial intelligence, including machine learning, should be included within the algorithmic transparency reporting standard. That standard, established by the Government, is supposed to be mandatory for all Government Departments. However, last November, The Guardian reported that not a single Whitehall Department has registered the use of AI systems since it was made mandatory.
Throughout debate on this issue, the Government have consistently downplayed the risk of using AI to trawl for suspect claimants, but if it really is that simple, why have so many organisations come out with concerns and opposition? That includes Age UK, ATD—All Together in Dignity—Fourth World, Amnesty International, Campaign for Disability Justice, Child Poverty Action Group, Defend Digital Me and Difference North East. I could go on: I have half a page, which I will spare the Committee from, listing organisations that have expressed concern. It is quite a roll call.
Governments can and will get things wrong. History tells us that if it tells us anything. In June 2024, a Guardian investigation revealed that a DWP algorithm had wrongly flagged 200,000 people for possible fraud and error; it found that two thirds of housing benefit claims marked as high risk in the previous three years were in fact legitimate, but thousands of UK households every month had their housing benefit claims wrongly investigated. Overall, about £4.4 million was wasted on officials carrying out checks that did not save any money. We know that more mistakes will happen, no matter how hard we try to avoid them. I therefore ask the Minister to support the insertion of new clause 14 as a small measure of defence against future institutional failings.
Rebecca Smith
As we have heard, Liberal Democrat new clause 14 would require the use of algorithms, algorithmic tools, and systems, and artificial intelligence, including machine learning, to be included in the algorithmic transparency reporting standard. I have obviously just heard the comments of the hon. Member for Horsham, but I would be interested to know precisely what the Liberal Democrats are aiming to achieve with this new clause and how such reporting would better enable the Government to crack down on fraud and error. Is that the intention behind the new clause?
Andrew Western
I share the support expressed by the hon. Member for Horsham for the algorithmic transparency recording standard as a framework for capturing information about algorithmic tools, including AI systems, and ensuring that public sector bodies openly publish information about the algorithmic tools used in decision-making processes that affect members of the public. However, I do not think the new clause is a necessary addition to the Bill, and I will explain why.
First, all central Government Departments, including the DWP and the Cabinet Office, are already required to comply with the standard as appropriate. We are committed to ensuring that there is appropriate public scrutiny of algorithmic tools that have a significant influence on a decision-making process with public effect, or that directly interact with the public. We have followed and will continue to follow the guidance published by the Department for Science, Innovation and Technology on this to ensure the necessary transparency and scrutiny.
Secondly, I remind the Committee that although the DWP and PSFA are improving their access to relevant data through the Bill, we are not introducing any new use of machine learning or automated decision making in the Bill measures. I can continue to assure the House that, as is the case now, a human will always be involved in decisions that affect benefit entitlement.
Thirdly, although I do not wish to labour the point yet again, I remind the Committee that the Bill introduces new and important safeguards, including reporting mechanisms and independent oversight in the Bill, demonstrating our commitment to transparency and ensuring that the powers will be used proportionately and effectively. The DWP takes data protection very seriously and will always comply with data protection law. Any information obtained will be kept confidential and secure, in line with GDPR.
John Milne
I am content to beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 15
Offence of encouraging or assisting others to commit fraud
“(1) The Social Security Administration Act 1992 is amended as follows.
(2) In section 111A (Dishonest representation for obtaining benefit etc), after subsection (1G) insert—
‘(1H) A person commits an offence if they—
(a) encourage or assist another person to commit an offence under this section, or
(b) provide guidance on how to commit an offence under this section.’
(3) In section 112 (False representations for obtaining benefit etc), after subsection (1F) insert—
‘(1G) A person commits an offence if they—
(a) encourage or assist another person to commit an offence under this section, or
(b) provide guidance on how to commit an offence under this section.’”—(Rebecca Smith.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Rebecca Smith
I beg to move, That the clause be read a Second time.
New clause 16 would require the Secretary of State to conduct a review of whistleblowing processes in relation to fraud in the public sector within one year of the Bill passing. The Opposition would like the review to include the appropriateness and efficacy of existing whistleblowing processes, the barriers to reporting fraud, the reasons for the under-reporting of fraud, and recommendations for change.
The Committee has previously discussed the 2023 National Audit Office report that highlighted the difficulties with whistleblowing within the public sector, particularly in respect of whistleblowing on senior colleagues. The NAO also highlighted that of the public sector whistleblowing disclosures it received in 2023-24, 12% related to fraud. I did not get a particularly clear answer from the Minister about the safeguards that have been put in place to ensure that junior civil servants are able to raise concerns about more senior members of staff, so I am interested to see if there is more to be said.
It is a serious issue. One of the reasons I was interested in tabling this new clause is that, as a junior member of staff at a local authority, I saw this happen. I was in a situation where two colleagues were defrauding the local housing authority, and at that stage as a 21-year-old I did not feel able to do anything about it. That is one of the biggest regrets of my life. Having worked significantly in housing since, the fact that I was not able to call them out for essentially purchasing a council house that they were no longer living in, makes me feel that this safeguard —ensuring that Government Departments’ houses are in order as the legislation goes forward—is particularly vital.
John Smart, who sits on the PSFA’s advisory panel, raised the example of the US, which has whistleblower reward legislation in place that is effective at flushing out issues affecting payments made by the Government. The legislation flushes out fraud by incentivising whistleblowers to blow the whistle, so to speak. He recommended that the Government consider such legislation, so could the Minister inform the Committee whether the Government have looked into that option? Would it be possible for us to learn from that legislation? Could the Government consider such legislation in the future, and if not, why not?
Georgia Gould
I thank the hon. Lady for raising the critical issue of whistleblowing. I assure her of how seriously the Under-Secretary of State for Work and Pensions—my hon. Friend the Member for Stretford and Urmston—myself, and both Secretaries of State take the issue of whistleblowing. I hope, as I set out our responses to the NAO report and our wider work, to offer the reassurance that the Opposition are looking for.
When it comes to internal and external fraud against the public sector, Government Departments are responsible for their own whistleblowing arrangements and for overseeing arrangements in their arm’s length bodies. For example, the Department for Business and Trade publishes and regularly updates its guidance, “Whistleblowing: list of prescribed people and bodies”, which details who individuals can raise a concern with. The list comprises bodies and individuals to whom making a disclosure qualifies the individual who makes the disclosure for legal protections under the Employment Rights Act 1996—for instance, protection against being dismissed by their employer for the disclosure.
Whistleblowers can report concerns about public sector fraud to bodies such as the NAO’s Comptroller and Auditor General, the director of the Serious Fraud Office, the Auditors General for Wales and for Scotland, the NHS Counter Fraud Authority and various other bodies listed on gov.uk. The NAO report that the hon. Lady referred to set out that between 2019 and 2022 fraud one of the most common concerns raised—I think it accounted for 40% of concerns.
On the review of the existing processes, the key findings of the recent NAO publication related to the need to increase awareness of the channels for whistleblowing, to improve the experience of whistleblowers and to ensure that lessons are learned, as the hon. Lady set out. In the light of the NAO report, and with the intention of opening up as many avenues as possible for the reporting of public sector fraud, the PSFA will explore with the Department for Business and Trade whether it would be appropriate to add the PSFA to the list of prescribed organisations. That would go alongside the existing ability to raise fraud within a public sector body or Department. We will also use the findings of the report, as well as the NAO’s good practice guide to whistleblowing in the civil service, to inform our approach.
The DWP has established processes by which members of the public and staff can report suspected benefit fraud. Members of the public can report fraud online at gov.uk, by phone or by post, while DWP staff follow clear internal guidance and processes. Given the intent to maintain the focus of this legislation, the recent work by the National Audit Office, the existing DWP processes and the steps the PSFA is taking to continue to improve the whistleblowing offer for public sector fraud, I will resist new clause 16.
Rebecca Smith
I appreciate the Minister’s response. We will withdraw the new clause, but I urge her to go back and look at what more can be done. I appreciate that the PSFA might come in as a prescribed organisation, but I am particularly concerned about how we bridge the gap and enable more junior civil servants to blow the whistle in relation to senior colleagues. Ultimately, that was the focus of the NAO report. If there is a way to look at that ahead of Report stage, I would be grateful. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 17
Duty to consider domestic abuse risk to holders of joint accounts
“(1) Before any direct deduction order under Schedule 5 is made, the Secretary of State has a duty to consider its effect on any person (‘P’) who—
(a) is a victim of domestic abuse, or
(b) the Secretary of State reasonably believes to be at risk of domestic abuse,
where P shares a joint account with a liable person believed to be the perpetrator or potential perpetrator of domestic abuse.
(2) In this section ‘domestic abuse’ has the meaning given by section 1 of the Domestic Abuse Act 2021.”—(Steve Darling.)
Brought up, and read the First time.
Steve Darling
I beg to move, That the clause be read a Second time.
I start by acknowledging the hard work of Surviving Economic Abuse in this policy area. I thank that charity for its briefing, which I am sure it has shared with all Committee members. The charity and the Liberal Democrats are keen to make sure that domestic abuse, particularly where it plays out in relation to joint accounts, is on the face of the Bill, so that it is taken very seriously.
I can almost hear the Minister’s voice saying that DWP officers are well trained to deal with vulnerable claimants, but it is extremely important to put domestic abuse on the face of the Bill. Domestic abuse is a very wicked issue in my Torbay constituency, and I am sad to say that Torbay is not alone in it being a serious challenge in people’s households. I hope the Government will take this seriously and support the new clause, so we would like to press it to a vote in due course.
Rebecca Smith
The Conservatives—the official Opposition—share the Liberal Democrats’ view that it is vital that we use different Departments across Government to tackle domestic abuse and domestic violence. We have a really strong track record of doing that in government.
In principle, the new clause seems like a good idea. I am conscious that we need to ensure that the Bill does not exacerbate or create problems for victims and put them even more at risk. I have done a lot of work on violence against women and girls away from this place, and I am conscious of how tricky it can be to prove some of these things. I wonder whether there might be other ways to achieve the same outcome. I assume that is why the Government are not able to support the new clause.
The new clause includes language such as “potential” and “believed to be”. My gentle challenge is about whether it could be worded differently, as we go forward to other stages, to make it more achievable and deliverable, and something that would have a place in the Bill. As it stands, I am not sure that would be the case, but I am interested to see this issue debated further, because the official Opposition share the commitment to tackling domestic abuse and domestic violence.
Andrew Western
We have reached the stage in Committee at which the hon. Member for Torbay can second-guess my comments. He will be as pleased as I am that this is the last of the new clauses for debate, but it is a very serious one.
New clause 17 seeks to place a duty on Secretary of State to consider the impact of a proposed direct deduction order where a person is a victim of domestic abuse, or officials reasonably believe they are at risk of domestic abuse, and they share an account with a perpetrator of that abuse. I share the hon. Member for Torbay’s view that, where the new recovery powers are exercised, there should be a consideration of whether there is evidence of domestic abuse. However, I do not believe the new clause reflects the right approach. The DWP understands the importance of supporting victims and survivors of domestic abuse, and has existing guidance, processes and operational best practice for supporting them.
The new clause would apply to both debtors and non-debtors, and would not require the DWP to take any steps to identify possible victims. Subsection (1)(a) would place a duty on officials to consider the impact any time a person was a victim, even when the DWP did not and could not have known that that was the case. Subsection (1)(b) would imply a duty to assess whether there was reason to believe the person was at risk of domestic abuse but, as the hon. Member for South West Devon suggested, in many cases the DWP will not be in a position to make that assessment. That would put officials in a difficult, if not impossible, position.
As the direct deduction powers will be used as a last resort where multiple attempts to engage with the debtor to arrange a voluntary, affordable and sustainable repayment plan have failed, we anticipate that the DWP will know very little about the debtor’s current circumstances, unless it had been made aware previously or there were clear identifiable risk factors. We are working closely with charities, some of which the hon. Member for Torbay will have heard from, to help to identify those risks, as I will outline.
Where a joint account holder could be at risk of domestic abuse but is not the debtor, we are unlikely to have ever had direct dealings with them prior to the power being used. Unless we were directly notified, it is unlikely we would have the information necessary to form the reasonable belief that they were at risk, and much less likely that we could identify all the cases where the person was experiencing abuse. I do not, therefore, agree that a placing a legal duty on officials in this way is the right approach.
We are committed to continuing to support victims of domestic abuse whenever they interact with the Department, which is why we are working with charities such as Surviving Economic Abuse, which is dedicated to advocating for women whose partner has controlled their ability to acquire, use and maintain economic resources. SEA is supporting the drafting of the code of practice to ensure that robust safeguards are in place and to encourage engagement specifically from those who are vulnerable, including victims of domestic abuse. Although SEA works with women, the principles will apply to all victims and survivors of domestic abuse.
Frontline debt management staff already receive training for their role, including on assessing affordability, discussing hardship, and identifying and dealing with vulnerable customers. As we have heard, a specialist debt enforcement team will exercise the new recovery powers, and it will be governed by a code of practice. As explained, we will consult on the draft code of practice, and I welcome further views as part of the wider public consultation.
Finally, I note that paragraph 6(1)(b) of schedule 5 already imposes a broad duty on the Secretary of State to ensure that the amount of any deduction is
“fair in all the circumstances.”
That would include consideration of the impact on a victim of domestic abuse, as the hon. Member for Torbay seeks in the new clause, where the relevant context and circumstances are known to the Department. I hope that reassures the hon. Member that his concerns are already addressed in the Bill, and that the DWP takes domestic abuse seriously and will continue to do so when exercising the new recovery powers.
Steve Darling
I would like to press the new clause to a vote.
Question put, That the clause be read a Second time.
Georgia Gould
This is the final group of clauses that the Committee will consider. I give massive thanks to the Committee for our constructive dialogue, which I am sure will continue—I look forward to a long afternoon and Thursday discussing these final clauses.
Clause 99 covers how the Bill will be applied and limited by setting out the retrospective effect of the new powers, and makes some technical amendments to the Limitation Act 1980. There is a significant policy change in the clause, which is the extension of the existing six-year limit for civil claims relating to covid frauds. I think the Committee will agree that is critical. Although the application and limitation of the clause covers the whole Bill, and the powers can be used on existing cases, retrospective effect does not apply for clauses 96 and 97, which relate to non-benefit payment administrative penalties.
Subsection (3) of clause 99 sets out that the time-limit change applies to amounts that an England and Wales public authority is entitled to claim from a person as a result of a fraud the person carried out. Subsection (5) clarifies what is meant by an England and Wales public authority, and explains that Scottish and Welsh devolved authorities are not included. Subsection (7) makes technical amendments to section 38(11) of the Limitation Act 1980.
Clause 100 enables the Secretary of State for Work and Pensions and the Minister for the Cabinet Office to ensure that the Bill works alongside all existing legislation. As is usual for Bills that may have provisions consequential for other Acts of Parliament, the power allows the Secretary of State and the Minister to amend other legislation to ensure that the Bill works effectively with existing Acts of Parliament.
Clause 101 recognises that the Bill requires a money resolution, primarily because it confers new functions on the Minister for the Cabinet Office and the Department for Work and Pensions.
Clause 102 sets out the Bill’s territorial extent, while annex A in the accompanying explanatory notes provides a full breakdown of the territorial extent and application of its measures. The provisions in part 1 apply to England and Wales. Legislative consent is required for Wales for some parts of the part 1 provisions. The provisions in part 2 apply to England, Wales and Scotland in relation to reserved matters.
As the Committee is aware, the UK Government do not generally legislate on devolved matters without the consent of the relevant devolved Governments. We have written to our counterparts in Scotland and Wales, and engagement with both remains ongoing, to seek legislative consent from Wales on the part 1 provisions that interact with Welsh competence and from Scotland on the part 2 provisions that interact with Scottish competence.
Clause 103 is required to enable the provisions in the Bill to be implemented. It sets out how the Bill’s provisions will be commenced.
Finally, clause 104 is straightforward and confirms that the short title of the Act will be the Public Authorities (Fraud, Error and Recovery) Act 2025, to summarise the intent of the Bill captured in the long title. Having outlined the main provisions in clauses 99 to 104, I commend them to the Committee.
Rebecca Smith
The good news is that the Minister has answered some of my questions, particularly in respect of clause 99 and the extension of the retrospective time limits. Clause 100 is a standard Henry VIII power to make consequential provision as a result of the legislation; does the Minister envisage that the power will need to be used frequently? Clauses 101 to 104 are standard provisions and we do not have any substantive comments to make on them.
Georgia Gould
The Henry VIII power is to ensure that any other legislation is in line with this legislation. We do not expect it to be used on lots of occasions, but it will be used on some. We welcome the Opposition’s support for the extension to the limit for investigating covid fraud. I thank the Committee again for its work on the Bill, which will ensure that we take action against fraud wherever it occurs.
Question put and agreed to.
Clause 99 accordingly ordered to stand part of the Bill.
Clauses 100 to 104 ordered to stand part of the Bill.
Question proposed, That the Chair do report the Bill, as amended, to the House.
Andrew Western
I place on the record my thanks to you, Mr Western, and all the other Chairs who have supported and guided us through the Bill. I thank the Clerks and officials from the Cabinet Office and DWP for their support. I also thank my co-pilot, the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Queen’s Park and Maida Vale; the Opposition spokespersons; and all Committee members for their input. I commend the Bill to the Committee.
Question put and agreed to.
Bill, as amended, accordingly to be reported.
Public Authorities (Fraud, Error and Recovery) Bill
Tuesday 29th April 2025
(1 month, 4 weeks ago)
Commons ChamberPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 29 April 2025 - (29 Apr 2025)
18:01 - The House divided: - Ayes: 73 / Noes: 255 - Question accordingly negatived.
18:14 - The House divided: - Ayes: 101 / Noes: 258 - Question accordingly negatived.
18:26 - The House divided: - Ayes: 95 / Noes: 257 - Question accordingly negatived.
18:39 - The House divided: - Ayes: 85 / Noes: 238 - Question accordingly negatived.
Madam Deputy Speaker (Ms Nusrat Ghani)
With this it will be convenient to discuss the following:
Government new clause 18—Consequential amendments to the Social Security Fraud Act 2001.
Government new clause 19—Devolved benefits.
Government new clause 20—Powers of Scottish Ministers.
New clause 1—Recovery of overpayments of Carer’s Allowance—
“The Secretary of State may not exercise any of the powers of recovery under this Act in relation to a person who has received an overpayment of Carer’s Allowance until such time as—
(a) the Secretary of State has commissioned an independent review of the overpayment of Carer’s Allowance;
(b) the review has concluded its inquiry and submitted a report containing recommendations to the Secretary of State;
(c) the Secretary of State has laid the report of the independent review before Parliament; and
(d) the Secretary of State has implemented the recommendations of the independent review.”
This new clause would delay any payments being taken from people who the Government may think owe repayments on Carer’s Allowance until the independent review into Carer’s Allowance overpayments has been published and fully implemented.
New clause 2—Impact of Act on people facing financial exclusion—
“(1) The independent person appointed under section 64(1) of this Act must carry out an assessment of the impact of this Act on the number of people facing financial exclusion.
(2) The independent person must, after 12 months of the passing of the Act—
(a) prepare a report on the review, and
(b) submit the report to the Minister.
(3) On receiving a report the Minister must—
(a) publish it, and
(b) lay a copy before Parliament.”
This new clause would look into the impact of the Act on people facing financial exclusion.
New clause 3—Audit of algorithmic systems used in relation to Carer’s Allowance overpayments—
“(1) An independent audit of algorithmic systems used in the assessment, detection or recovery of Carer’s Allowance overpayments must be conducted at least once every six months.
(2) Any audit under subsection (1) must be conducted by persons with relevant expertise in data science, ethics and social policy who have no direct affiliation with—
(a) the Department for Work and Pensions, or
(b) any person or body involved in the development or operation of the algorithmic systems under review.
(3) An audit conducted under this section must consider—
(a) the accuracy of the algorithmic systems in identifying overpayments, and
(b) the fairness of the systems’ design, application and operation, including any disproportionate impact on particular groups.
(4) After every audit a report on its findings must be—
(a) published;
(b) laid before both Houses of Parliament within 14 days of publication; and
(c) made publicly available in an accessible format.
(5) If any audit identifies significant inaccuracies, unfairness or biases in any algorithmic systems, the Secretary of State must, within 30 days of the publication of the report outlining these findings, present an action plan to Parliament which outlines the steps which the Government intends to take to address the identified issues.”
This new clause would provide for an audit of algorithmic systems used in relation to Carer’s Allowance overpayments.
New clause 4—Inclusion of systems within the Algorithmic Transparency Reporting Standard—
“(1) For the purposes of this section, “system” means—
(a) algorithms, algorithmic tools, and systems; and
(b) artificial intelligence, including machine learning;
provided that they are used in fulfilling the purposes of this Act.
(2) Where at any time after the passage of this Act, the use of any system is—
(a) commenced;
(b) amended; or
(c) discontinued;
the Minister must, as soon as reasonably practicable, accordingly include information about the system in the Algorithmic Transparency Reporting Standard.”
This new clause would require the use of algorithms, algorithmic tools, and systems, and artificial intelligence, including machine learning, to be included within the Algorithmic Transparency Reporting Standard.
New clause 5—Duty to consider domestic abuse risk to account holders—
“(1) Before any direct deduction order under Schedule 5 is made, the Secretary of State has a duty to consider its effect on any person who—
(a) is a victim of domestic abuse, or
(b) the Minister reasonably believes to be at risk of domestic abuse.
(2) In this section “domestic abuse” has the meaning given by section 1 of the Domestic Abuse Act 2021.”
New clause 6—Review of whistle blowing processes in relation to public sector fraud—
“(1) Secretary of State must, within one year of the passing of this Act, conduct a review of whistle blowing processes in relation to fraud in the public sector.
(2) A review conducted under this section must consider—
(a) the appropriateness and efficacy of existing whistle blowing processes;
(b) barriers to reporting fraud and reasons for under reporting of fraud; and
(c) recommendations for change.
(3) The Secretary of State must publish a report containing—
(a) the findings and conclusions of the review, and
(b) a timetable for the delivery of any recommendations for change within six months of the completion of the review.”
New clause 7—Overpayments made as a result of official error—
“(1) Section 71ZB of the Social Security Administration Act 1992 is amended as follows.
(2) In subsection (1), for “The” substitute “Subject to subsection (1A), the”.
(3) After subsection (1) insert—
“(1A) The amount referred to in subsection (1) shall not include any overpayment that arose in consequence of an official error where the claimant or a person acting on the claimant’s behalf or any other person to whom the payment is made could not, at the time of receipt of the payment or of any notice relating to that payment, reasonably have been expected to realise that it was an overpayment.””
This new clause would provide that, where universal credit overpayments have been caused by official error, they can only be recovered where the claimant could reasonably have been expected to realise that there was an overpayment.
New clause 8—Offence of fraud against a public authority—
“(1) A person who-
(a) commits,
(b) assists or conspires in the committal of, or
(c) encourages the committal of,
fraud against a public authority commits an offence.
(2) A person who commits an offence under subsection (1) is liable-
(a) on summary conviction, to imprisonment for a term not exceeding the general limit in a magistrates’ court or a fine (or both);
(b) on conviction on indictment, to imprisonment for a term not exceeding 10 years.”
New clause 9—Application of the Police and Criminal Evidence Act 1984 to investigations conducted by the Department for Work and Pensions—
“(1) The Secretary of State must, within six months of the passing of this Act, introduce regulations for the purpose of applying certain powers of the Police and Criminal Evidence Act 1984, subject to such modifications as the order may specify, to investigations of offences conducted by the Department for Work and Pensions.
(2) The powers to be applied must include–
(a) the power of arrest;
(b) any other such powers that the Secretary of State considers appropriate.
(3) Regulations made under this section shall be made by statutory instrument.”
New clause 10—Liability orders—
“(1) Where a person–
(a) has been found guilty of an offence under section 1 or section 11 of the Fraud Act 2006, or the offence at common law of conspiracy to defraud,
(b) that offence relates to fraud committed against a public authority, and
(c) has not paid the required penalties or not made the required repayments,
the Secretary of State must apply to a magistrates’ court or, in Scotland, to the sheriff for an order (“a liability order”) against the liable person.
(2) Where the Secretary of State applies for a liability order, the magistrates’ court or (as the case may be) sheriff shall make the order if satisfied that the payments in question have become payable by the liable person and have not been paid.
(3) The Secretary of State may make regulations in relation to England and Wales—
(a) prescribing the procedure to be followed in dealing with an application by the Secretary of State for a liability order;
(b) prescribing the form and contents of a liability order; and
(c) providing that where a magistrates’ court has made a liability order, the person against whom it is made shall, during such time as the amount in respect of which the order was made remains wholly or partly unpaid, be under a duty to supply relevant information to the Secretary of State.
(4) Where a liability order has been made against a person ("the liable person"), the Secretary of State may use the procedure in Schedule 12 to the Tribunals, Courts and Enforcement Act 2007 (taking control of goods) to recover the amount in respect of which the order was made, to the extent that it remains unpaid.”
New clause 11—Publication of results of pilot schemes—
“Within three months of the passing of this Act, the Secretary of State must publish the results of any pilot schemes run with banks to test the provisions in Chapter 1 of Part 2.”
New clause 12—Report on cost implications for banks—
“The Secretary of State must, within three months of the passing of this Act, publish a report on the expected cost implications of the provisions of this Act for banks.”
New clause 13—Annual reporting of amounts recovered—
“(1) The Secretary of State must publish an annual report detailing the amount of money which has been recovered under the provisions of this Act.
(2) A first report must be published no later than 12 months after the passing of this Act with subsequent reports published at intervals of no more than 12 months.”
New clause 14—Impact of Act on vulnerable customers—
“(1) The Secretary of State must, within six months of the passing of this Act, lay before Parliament an assessment of the expected impact of the Act on vulnerable customers.
(2) For the purposes of this section, “vulnerable customers” means someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.”
New clause 15—Publication of an Anti-Fraud and Error Technology Strategy—
“(1) The Secretary of State must, within six months of the passing of this Act, publish an Anti-Fraud and Error Technology Strategy.
(2) An Anti-Fraud and Error Technology Strategy published under this section must set out–
(a) how the Government intends to use automated technologies or artificial intelligence to tackle fraud against public authorities and the making of erroneous payments by public authorities, and
(b) a series of safeguards to provide for human oversight of decision making that meet the aims set out in subsection (3);
(c) how rights of appeal will be protected;
(d) a framework for privacy and data sharing.
(3) The aims of the safeguards in subsection (2)(b) are—
(a) to ensure that grounds for decision making can only be reasonable if they are the result of a process in which there has been meaningful human involvement by a human of adequate expertise to scrutinise any insights or recommendations made by automated systems,
(b) to make clear that grounds cannot be reasonable if they are the result of an entirely automated process, and
(c) to ensure that any information notice issued is accompanied by a statement—
(i) setting out the reasonable grounds for suspicion that have been relied on, and
(ii) confirming that the conclusion has been formed on the basis of human involvement.”
New clause 21—Offence of encouraging or assisting others to commit fraud—
“(1) The Social Security Administration Act 1992 is amended as follows.
(2) In section 111A (dishonest representation for obtaining benefit etc), after subsection (1G) insert—
“(1H) A person commits an offence if they—
(a) encourage or assist another person to commit an offence under this section, or
(b) provide guidance on how to commit an offence under this section.
(1I) An offence under this section can be committed where the encouragement, assistance or guidance happens online.
(1J) A person who commits an offence under this section is liable on conviction on indictment to imprisonment for a term not exceeding five years or an unlimited fine.”
(3) In section 112 (false representations for obtaining benefit etc), after subsection (1F) insert—
“(1G) A person commits an offence if they—
(a) encourage or assist another person to commit an offence under this section, or
(b) provide guidance on how to commit an offence under this section.
(1H) An offence under this section can be committed where the encouragement, assistance or guidance happens online.
(1I) A person who commits an offence under this section is liable on conviction on indictment to imprisonment for a term not exceeding five years or an unlimited fine.””
New clause 22—Impact of Act on people with protected characteristics—
“The Secretary of State must, prior to making regulations under section 103 to bring into force any provision of this Act, lay before Parliament an assessment of the expected impact of the Act on people with protected characteristics who are in receipt of social security benefits.”
This new clause would ensure any impact of the Bill on people with protected characteristics in receipt of social security benefits was examined prior to the Act’s implementation.
New clause 23—Report on public sector fraud during COVID-19 pandemic—
“(1) The Minister for the Cabinet Office must, within six months of the passing of this Act, lay before Parliament a report evaluating the extent of public sector fraud that occurred during the COVID-19 pandemic.
(2) The report must include—
(a) an account of fraudulent or erroneous payments made by or on behalf of public authorities, including but not limited to the Department of Health and Social Care and NHS England,
(b) a review of how public procurement practices in place between March 2020 and December 2021, including—
(i) the use of high priority and expedited contracting for suppliers, and
(ii) the role of political appointments and personal connections in procurement decisions,
may have contributed to fraud against public authorities,
(c) the cost to the public purse of fraud against public authorities during the COVID-19 pandemic, and
(d) an assessment of the adequacy of Government oversight and other measures then in place to prevent fraud against public authorities.
(3) Where the report finds or concludes that there were—
(a) failings in Government oversight and other measures then in place to prevent fraud against public authorities, or
(b) any action or inaction by the Government which enabled fraud against public authorities,
the Minister must make a statement to the House of Commons acknowledging these findings and setting out actions planned to ensure any failings are not repeated.”
Amendment 15, in clause 3, page 3, line 10, leave out “10” and insert “28.”
Government amendments 23 and 24.
Amendment 16, in clause 4, page 3, line 33, leave out “Minister” and insert “First Tier Tribunal”.
Amendment 13, page 3, line 33, after “notice” insert
“or of the duration of the period mentioned in section 3(4)(a)”.
Amendment 80, page 3, line 34, leave out “7” and insert “28”.
Amendment 17, page 3, line 36, leave out “Minister” and insert “First Tier Tribunal”.
Amendment 18, page 3, line 38, leave out “Minister” and insert “First Tier Tribunal”.
Amendment 14, page 4, line 2, after “notice” insert
“, including by extending the duration of the period mentioned in section 3(4)(a) where satisfied that the person is reasonably unable to comply with the requirement to provide the information within the time required by the notice”.
Amendment 19, page 4, line 3, leave out “Minister” and insert “First Tier Tribunal”.
Amendment 81, page 4, line 10, at end insert—
“(7) Where a person has applied for a review of an information notice, the period mentioned in section 3(4)(a) is to be treated as beginning on the day after which the outcome of the review is notified to the person to whom the information notice was given.”
Government amendments 25 to 29.
Amendment 1, in clause 64, page 34, line 15, at end insert—
“(1A) Prior to appointing an independent person, the Minister must consult the relevant committee of the House of Commons.
(1B) For the purposes of subsection (1A), “the relevant committee” means a committee determined by the Speaker of the House of Commons.”
This amendment would provide for Parliamentary oversight of the appointment of the “Independent person”.
Government amendments 30, 31, 76, 75, 32 and 33.
Amendment 2, page 40, line 36, leave out clause 74.
This amendment removes the requirement for Banks to look into relevant claimants’ bank accounts.
Amendment 3, in clause 75, page 41, line 21, at end insert—
“(1A) Prior to appointing an independent person, the Minister must consult the relevant committee of the House of Commons.
(1B) For the purposes of subsection (1A), “the relevant committee” means a committee determined by the Speaker of the House of Commons.”
This amendment would provide for Parliamentary oversight of the appointment of the “Independent person”.
Government amendments 34 to 43.
Amendment 8, in clause 89, page 55, line 6, leave out from “unless” to the end of line 14 and insert—
“(a) the liable person agrees, or
(b) there has been a final determination by a court or tribunal that it is necessary and proportionate to exercise a power under Schedule 3ZA.”
This amendment would mean that the Secretary of State can only exercise powers to recover amounts from a person where the person agrees or where a court or tribunal has determined that such recovery is necessary and proportionate.
Amendment 10, page 56, line 16, leave out clause 91.
Government amendments 79, 78, 77, 74, 73 and 44.
Amendment 4, in clause 103, page 63, line 29, leave out from start to “following” in line 32 and insert—
“Subject to subsections (1A) and (2), this Act comes into force on such day as the Secretary of State or the Minister for the Cabinet Office may by regulations appoint.
(1A) No part of this Act may come into force until the recommendations of a report commissioned under section [Recovery of overpayments of Carer’s Allowance] have been implemented.
(2) Subject to subsection (1A), the”
This amendment which would delay the implementation of the whole Act until the findings of the independent review into Carer’s Allowance overpayments has been published and fully implemented.
Amendment 20, page 64, line 1, at end insert—
“(3A) Before bringing into force any of the provisions of Part 1 of this Act, the Secretary of State must consult with banks as to the costs which will be incurred by banks upon application of the provisions of Part 1.
(3B) Where consultation finds that the expected costs to banks are at a disproportionate level, the Secretary of State may not bring into force the provisions which are expected to result in such disproportionate costs.”
Government amendments 72 and 45.
Amendment 5, page 73, line 6, leave out schedule 3.
This amendment is related to Amendment 2 and removes the requirement for Banks to look into relevant claimants’ bank accounts.
Amendment 11, in schedule 3, page 73, line 25, leave out from “accounts” to the end of line 31 and insert—
“which belong to a person who the authorised officer has reasonable grounds to suspect has committed, is committing or intends to commit a DWP offence.”
This amendment would limit the exercise of an eligibility verification notice to cases where the welfare recipient is suspected of wrongdoing.
Amendment 22, page 84, line 12, at end insert “(d) housing benefit.”
Amendment 6, page 84, leave out line 12
This amendment would remove pension credit from being a “relevant benefit” for the purposes of the Act.
Amendment 71, page 84, line 13, leave out from “to” to end of line 17 and insert—
“remove types of benefit from the definition of”.
This amendment would mean that benefits could not be added to the list of “relevant benefits” by regulations.
Amendment 7, page 84, leave out lines 13 to 17.
This amendment ensure that the bill can only be used in relation to benefits listed in the Bill.
Amendment 21, page 84, line 25, after “money” insert
“or such an account which is held by a person appointed to receive benefits on behalf of another person.”
Government amendments 46 to 67.
Amendment 9, in schedule 5, page 98, line 10, leave out from beginning to end of line 24 on page 99.
This amendment would remove the requirement for banks to provide information to the Secretary of State for the purposes of making a direct deduction order.
Government amendments 68 and 69.
Amendment 12, page 111, line 18, leave out schedule 6.
Government amendment 70.
The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
It is my pleasure to bring this Bill back to the House. I start by thanking all Members who have made contributions so far, and extend a special thanks to Members of the Bill Committee, some of whom are present today, for their detailed scrutiny.
This Government have an ambitious plan for change. To deliver everything we want to achieve, we must spend taxpayers’ money wisely, which is why we committed in our manifesto not to tolerate fraud or waste anywhere in our public services. The Bill delivers on that commitment. It is part of the biggest crackdown on fraud against the public purse in a generation. Nothing less will do, given the appalling position we inherited.
David Davis (Goole and Pocklington) (Con)
Does the Minister recognise that the Government’s own assessment of the effectiveness of the Bill is that it will recover a tiny 1.8% of losses?
Andrew Western
The right hon. Gentleman will be aware that we lose a total of £55 billion a year to fraud across the public sector; the Bill will recover £1.5 billion. However, it is part of broader measures—certainly on the Department for Work and Pensions side of the Bill —to save £9.6 billion across the forecast period. By the very nature of the changes that we are making with the Public Sector Fraud Authority, we are designing them to be scalable. As the PSFA becomes more familiar with the work it is undertaking, we think that it will be able to save a significant amount more.
As I was saying, Madam Deputy Speaker, with benefit fraud alone costing £7.4 billion in 2023-24, this is a major problem that is getting worse, not better. We cannot afford to ignore it, and we certainly do not accept it. Fraud against the public sector is not a victimless crime. Our public services, everyone who depends on them, and the taxpayers who fund them, all suffer. And they are increasingly suffering at the hands of fraudsters who use ever more sophisticated techniques to steal money meant for the public good.
The private sector has evolved and adapted its tools and tactics to respond, but, as the scale of the losses that I have just outlined make clear, the same cannot yet be said for the public sector. With this Bill, we will put that right. There will be new powers for the Public Sector Fraud Authority to investigate and deal with public sector fraud outside the tax and social security systems, and new powers for the DWP to modernise its response to fraud and error in the benefit system.
As my right hon. Friend the Secretary of State said on Second Reading, this Bill is tough and it is fair. It is tough on the dodgy business people who try to defraud our public services and it is tough on the criminal gangs and individuals who cheat the benefit system. It is fair to claimants who make genuine mistakes, by helping us to spot and prevent errors earlier. And it is fair to taxpayers, who deserve to know that every single pound of their hard-earned money is being spent wisely.
Ian Lavery (Blyth and Ashington) (Lab)
The Human Rights Act 1998 was one of the best pieces of legislation ever passed by a Labour Government. Can the Minister assure the House that this Bill in no way contravenes the secrecy part of the 1998 Act?
Andrew Western
I can give my hon. Friend that assurance and, indeed, that all of our legal obligations have been satisfied as part of the consideration of this Bill. The imperative thing for me as a Minister in the Department for Work and Pensions is that we are supporting those who need the social security safety net, not the fraudsters who pick holes in it.
Dr Luke Evans (Hinckley and Bosworth) (Con)
One concern that we have is the change in the way that people conduct benefit fraud. Through the use of key buzzwords, they help people to navigate the system so that they are able to take out of it what is not theirs. Does he think that there is scope in the Bill, particularly in some of the new clauses, to include specific legislation to prevent people from using words and buzzwords, or from teaching other people how to cheat the benefit system?
Andrew Western
The hon. Gentleman is correct that we have a problem with so-called “sickfluencers”, but as we will hear in the debate more broadly, the Government do have existing powers through the Fraud Act 2006 and the Serious Crime Act 2007 to take action in those areas if necessary. He is right to suggest that we should be doing more, and I encourage Conservative Members to reflect on what they did in this space during their period in power. He will be reassured to know that I have commissioned work within the Department to look at what further we can do, but in legislative terms—[Interruption.] I do believe that we have somebody crossing the Floor, Madam Deputy Speaker.
Madam Deputy Speaker (Ms Nusrat Ghani)
Just for the record, in case Hansard did not pick that up, that was Jenny the dog crossing the Floor, not a Member of Parliament.
Andrew Western
I am sure the hon. Member for Torbay (Steve Darling) is grateful to you for that clarification, Madam Deputy Speaker, even if I am not, as Jenny would always be most welcome on this side of the House.
I hope that I have reassured the hon. Gentleman that we do have the legislation required to act.
Dr Andrew Murrison (South West Wiltshire) (Con)
The Minister said that powers exist, but, plainly, they are not working, because we know that “sickfluencers” are doing their deeds and people are responding to them, particularly in the mental health sphere, where many of the claims are made. Indeed, we know that officials, or those acting on behalf of officials, are looking out for buzzwords, because, if there is a buzzword in there somewhere, they can bank the case and move on to the next one. Therefore, something plainly needs to be done to stop this. Will he look again at the Opposition’s new clauses 8 and 21, which would ensure that “sickfluencers” are targeted specifically, and say what, in the Government’s amended terms, they would do to deal with this particular group that are contributing significantly to the failure identified by my right hon. Friend the Member for Goole and Pocklington (David Davis) in relation to the amount of money that we are able to claim back from the huge sum that is lost to fraud every year?
Andrew Western
I very much agree with the right hon. Gentleman that more needs to be done; what we differ on is the need for specific legislation in that regard. Where we are falling down at present is in the scale of the activity we are undertaking. We could be doing significantly more at the moment, but as I said in response to the previous intervention, I have commissioned work to ensure that that happens. We already routinely contact social media companies to ask them to take down specific posts that could help people to commit fraud against the welfare system. I am very happy to consider practical points, but I am convinced that we have the legislative weaponry required to take the necessary action to deal with people who are encouraging others to commit fraud, both online and elsewhere.
Government amendments 23, 24, 39 and 40 bring into scope the kind of information necessary for fraud investigations and enable the PSFA and DWP to compel certain types of special procedure material, including banking records or records of employment, in line with the policy intent. Requesting this type of information is not new for DWP and occurs under its existing powers. The amendments ensure that the PSFA and DWP can compel this information to support fraud investigations, while also ensuring that important exemptions are in place, such as those for excluded material and journalistic material.
Government amendments 30 and 31 seek to address two separate issues in respect of clause 67. Government amendment 30 includes a provision in the Bill so that the powers granted to the PSFA under the Police and Criminal Evidence Act 1984—or PACE—by clause 7 of the Bill are exempt from the application of clause 67(5). This will ensure that the clause does not interfere with existing PACE provisions in relation to legal professional privilege, enabling the Bill’s PACE measures to function as intended.
Government amendment 31 removes subsection (6) in clause 67, which currently overrides existing self-incrimination protections on the PSFA’s information-gathering powers and PACE powers. This allows the common law principle of the privilege against self-incrimination to apply in the usual way—under the information-gathering powers—and ensures that the proposed PACE powers align with established PACE practices. The amendments ensure that clause 67 provides essential safeguards for the PSFA powers in the Bill related to the processing of information.
Mr Joshua Reynolds (Maidenhead) (LD)
I am sure the Minister will accept that there is growing concern about issues of automated decision making, artificial intelligence and algorithms. While wanting to ensure that we get the best results, is the Minister able to commit to the transparency we need when it comes to AI and algorithms in relation to the Bill to ensure that the most vulnerable in our society are not unfairly hit?
Andrew Western
The hon. Member will be pleased to know that I can give him that assurance and that we comply with all the Government’s required standards around the publication of such information.
Government amendments 25 and 26 relate to clause 9, which amends the Police Reform Act 2002 to extend the Independent Office for Police Conduct director general’s functions to include oversight of public sector fraud investigators, enabling them to consider PSFA’s use of PACE powers and associated investigations. Clause 9 also enables the Minister for the Cabinet Office to issue regulations conferring functions on the director general in relation to these investigations. Section 105 of the Police Reform Act 2002 sets out requirements for such regulations made under that Act.
However, section 105 only applies to regulations made by a Secretary of State. As the Cabinet Office has no Secretary of State, this section would not include the regulations that the Minister for the Cabinet Office can make under clause 9. Government amendment 26 corrects that technicality so that section 105 also applies to that Minister. In addition, Government amendment 25 simply removes reference to part 2 of the Police Reform Act 2002 within clause 9(1), as the Bill will refer to the Act more widely, rather than just part 2.
Government amendments 48 and 72 provide a clear legislative framework for how the DWP and the PSFA will handle and transfer seized evidence to the most appropriate law enforcement agency, including the National Crime Agency and the Serious Fraud Office. The amendments will ensure that evidence is handled by the organisation best equipped to deal with the specific nature of the alleged crime, fostering inter-agency collaboration and reducing delays to investigations.
Dr Murrison
The Minister is presumably keen to determine how much money is lost to fraud in Scotland, and I imagine he will require the Scottish Government to report back to the UK Government on their progress in clamping down on benefit fraud, but the same should apply in the rest of the country. That, of course, is the purpose of new clause 13, which would require an annual report on the amount of money recovered through the processes that he has outlined. Will he accept new clause 13? Will he also assure me on the point about the Scottish Government’s reporting of fraud?
Andrew Western
I assure the right hon. Member on his point with regard to the Scottish Government. However, I will resist new clause 13 because the publication of the DWP’s annual accounts will provide sufficient information about our performance on fraud and error.
Government amendment 42 specifies that the functions of the independent person who can be appointed by the Secretary of State in clause 87 do not apply to devolved benefits unless those are delivered by the Secretary of State under agency agreement. Government amendments 60 and 67 will amend the time required for compliance with a production order served in Scotland. That is to match normal conventions in Scotland. Government amendment 43 ensures that the new debt recovery powers taken by the Secretary of State under the Bill apply only to devolved benefits, while the Secretary of State recovers devolved debts under agency agreements.
Government new clause 18 and Government amendment 33 are consequential amendments to the Social Security Fraud Act 2001 and ensure that the powers of Scottish Ministers under the 2001 Act are unchanged by the Bill. Government amendments 36, 37 and 38 seek to clarify exemptions in the DWP’s information-gathering powers to deliver the intended policy outcome.
A key safeguard in the new DWP information-gathering powers is the exclusion of personal information about users of particular types of free services, such as advocacy and advice services that offer crisis support, for example when someone is fleeing domestic abuse. The intent of the safeguard is to ensure that nobody is deterred from seeking the support they need when they need it. However, the current drafting of that exemption in the Bill as “not for profit” is too broad. That excludes certain information that is very likely to be relevant to a DWP fraud investigation. For example, it prevents the Department from compelling information from housing associations, such as an individual’s address or tenancy, which can be instrumental in proving or disproving a suspicion of fraud.
Siân Berry (Brighton Pavilion) (Green)
The independent person is required to produce an annual report on the use of the new powers, which, as the Minister has just laid out, are quite extensive. However, there is no requirement for the DWP to adopt the report’s recommendations. In cases where it does not accept the recommendations, will the Government consider committing to at least explaining why they have reached that conclusion?
Matt Western
I would be very happy to report to the House on the reasons why we would not do that. I am sure the hon. Lady will allow me to write to her separately to set out how I intend for us to do that. It seems to be a reasonable request.
Returning to my original point, the current drafting would mean that DWP can compel information of that kind from private landlords or estate agents, but not from housing associations. There is an inequity there that we are seeking to address with the amendments, clarifying the drafting and continuing to protect the personal information of service users of crisis support or advocacy services.
The Bill also brings forward new information-gathering powers that govern how DWP-authorised officers can compel information to support an investigation into fraud. It also sets out where information must not be compelled—for example, to protect the long-standing principle of legal professional privilege. Separately, the Bill brings forward powers of entry, search and seizure for DWP-authorised investigators, those tasked with investigating the most serious cases of fraud. It does that by bringing those authorised investigators under the remit of the Police and Criminal Evidence Act 1984 in England and Wales, and by creating similar powers in Scotland for DWP-authorised investigators. That ensures that those investigators are governed by a similar legal framework to other law enforcement bodies that are granted access to use those types of powers.
Government amendment 41 seeks to ensure that the exemptions to information that DWP-authorised officers can compel are not applicable to authorised investigators when using powers of entry, search and seizure. Government amendment 45 mirrors that provision for the PSFA. Those amendments will support effective fraud investigation, as without access, crucial evidence might remain out of reach, slowing down our response to fraud. Those exemptions are important, but the Police and Criminal Evidence Act 1984, which applies in England and Wales, already provides such restrictions and safeguards by only enabling that information to be compelled with the approval of the courts, coupled with similar conventions that apply for Scotland. The amendment ensures that there is no duplication. The powers in the Bill remain in line with existing conventions, as set out in PACE, and correctly reflect the norms of the Scottish legal system.
Turning to Government amendments 61 to 66, paragraph 10 of schedule 3ZD currently refers to definitions within PACE in relation to special procedure material, confidential professional material, excluded material and items subject to legal privilege.
Government amendments 63 and 51 set out specific definitions to avoid linking provisions that relate solely to Scotland with existing legislation that applies to England and Wales. This also ensures that legal privilege and “items subject to legal privilege” references contained in the schedule are correctly defined for Scotland. Government amendments 61, 62, 64, 65 and 66 are consequential to amendment 63.
Government amendments 47 and 48 ensure that the powers for the DWP under PACE taken by the Bill in schedule 4 are aligned with those of the police and other Government Departments, such as HMRC, and provide a clear legal framework for what evidence can be seized and how it should be handled. Government amendments 47 and 48 mean that DWP-authorised investigators, such as the police, can seize items that are reasonably believed to be evidence of an offence, not just DWP-related offences, when undertaking entry, search and seizure activities in England and Wales. This will mean that potential evidence of any other offence, if discovered in the course of a search, can be preserved and may be seized where it is considered necessary to prevent it from being destroyed or moved. The amendments ensure that the law is clear on how it must be handled and transferred to the most appropriate law enforcement agency in England and Wales. Government amendments 49, 50 and 59 make similar provisions for authorised investigators in Scotland to those I have just described for England and Wales.
Government amendments 57 and 58 clarify how authorised investigators can prevent access to seized evidence from any offence if it may prejudice criminal proceedings in Scotland, by amending the definition of “offence” in schedule 3ZD inserted by schedule 4 of this Act. This mirrors the same provisions that are already in the Bill as it applies to England and Wales.
Government amendments 53, 54, 55 and 56 are all minor and technical amendments to correct inconsistencies in terminology. Government amendment 34 is a minor and technical amendment to provide the correct reference to powers in the Social Security Administration Act 1992, to ensure that the powers in Scotland align with those in England and Wales. Government amendment 52 amends the period of time in which a warrant must be exercised to Scotland from three months to one month. This corrects the Bill to ensure that it is consistent with the usual practice in Scotland.
Government amendment 70 ensures that the court has the power to order a person, having been disqualified, to provide their NI or EU driving licence, as is already the case for those holding a GB licence, under the new debt recovery powers. The Bill as drafted would allow a DWP debtor who evades payment and holds an NI or EU licence to be disqualified from driving. However, it inadvertently limits the court’s ability to order that person to produce their licence unless it was issued in Great Britain, undermining the power and causing administrative difficulties for the court and the Driver and Vehicle Licensing Agency. Government amendment 70 corrects this and ensures parity between GB, NI and EU driving licences under the powers in schedule 6.
Government amendments 73, 74, 77, 78 and 79 ensure that the application and limitation period in clause 99 follows the policy intention that the PSFA can investigate fraud and recover debt in England and Wales. Government amendment 44 also ensures that the DWP’s debt recovery powers in this Bill are not limited in Scotland to the usual five-year time limits in the Prescription and Limitation (Scotland) Act 1973. This makes it clear that the longer 20-year recovery period in Scotland applies to such provisions introduced or amended by this Bill. As I have set out, the intent behind these amendments is to ensure the delivery of the intended policy intent or to ensure the correct territorial application of the Bill.
David Davis
I thank the Minister for giving way, and I hope he will forgive me for waiting till what appears to be the end of his list. When the hon. Member for Blyth and Ashington (Ian Lavery) asked him about the application of the Human Rights Act in this context, he said that the Bill did not breach it, in effect. My advice is a little different, and I waited to hear about his amendments to see whether anything in them changed that. My advice is that suspicionless financial surveillance could breach article 8, which covers the right to privacy, and article 14 on the prohibition of discrimination. Will the Minister make his legal advice on this available to the House? This is incredibly important and it is central to the major criticism of this Bill.
Andrew Western
I have already made clear that I am satisfied with the advice I have received. We will make available all the information we are required to make available, but the right hon. Member will appreciate that I am not able to give an undertaking to release all legal advice at this stage. What I can say to him is that I am very confident that there is no breach of article 8 in particular. That has been explored at length as we have gone through the process.
I welcome the ongoing engagement with industry and key stakeholders. We have made a significant effort to engage all interested parties and listen to their views. That feedback has been important in shaping our approach to the Bill to date and will continue to be so as it moves to the other place.
Rebecca Smith (South West Devon) (Con)
I echo the Minister’s comments about the work of the Bill Committee. We had a constructive few weeks getting into the nitty-gritty.
I have no doubt that the House will agree that fraud is unacceptable, whether against individuals, organisations or the state. The money taken does not belong to those responsible. When it comes to defrauding the Government, money is taken from every single taxpayer. At the same time, however, errors do unfortunately happen. They might be made accidentally by the claimant or by the Department. Although there is no ill intention, errors can still be costly to the taxpayer, and that impacts some of the most vulnerable people in our country.
The question, then, is how best to tackle fraud and error in the welfare state and the public sector. Although we welcome many of the principles behind the Bill—much of which builds on the work of the Conservatives before the general election, as I am sure will be mentioned many times this afternoon—we are concerned that it has been rushed through. On one hand, there are gaps where the legislation is not tough enough. It is not a strong deterrent to make potential fraudsters think again, and it does not sufficiently safeguard public money. On the other hand, parts of the Bill have not been sufficiently prepared, and are incredibly vague and unclear on their implications for those involved and on whether the benefit justifies the cost.
This issue must be considered in the context of a sickness benefit bill that is forecast to hit nearly £1 billion by the end of the decade—even after the Government’s questionable welfare reforms—which is vastly more than we spend on defence, and more than we spend on schools and policing. We have tabled a number of amendments to address those points.
New clauses 21 and 8 seek to tackle the rise in so-called sickfluencers on social media, such as those on TikTok and YouTube who post videos showing people how they might be able to make fraudulent claims for benefits, including the personal independence payment, which requires not medical evidence but self-assessment. As we have heard, the advice offered includes specific buzzwords, template claims and guidance on passing questions at interview stage to inflate the value of claims fraudulently. We do not want to target people who provide genuine advice and guidance to people about how the welfare system and public authorities work, but that is very different from providing assistance and encouragement to commit fraud, which is not acceptable.
We recognise the vital work of not-for-profit organisations such as Citizens Advice—which works right across the country, including in South Hams and Plymouth in my constituency—and groups such as Improving Lives Plymouth. They do much to support those seeking to claim what they are entitled to. However, online sickfluencers must be tackled.
In Committee, the Minister queried our new clause and asked why it provided only for a seven-year prison sentence when similar offences carry a 10-year sentence. We have addressed that in new clauses 21 and 8, which, as the Minister will see, propose a 10-year sentence to bring them into line with similar offences.
Dr Luke Evans
In their response to my question about sickfluencers, the Government said that relevant legislation is already in place. If that is the case, how many convictions have there been under that legislation? We could infer from that number whether or not the system is working and what we need to do. My suspicion is that we need these measures to be able to hold people to account.
Rebecca Smith
I echo my hon. Friend’s concern that the existing powers are not being used enough. I ask the Minister to give us further information on how those powers are being used and an assurance that they will be used further should our new clauses be unsuccessful.
We believe that creating a specific offence to target such online fraud would send the clear message to sickfluencers that what they are doing is not only morally wrong but illegal—something that clear gives them no alternative than to realise that they will be caught. If the Government continue to oppose our amendments because they believe the powers already exist to tackle such crime, I would be grateful if the Minister set out, at the very least, how the Government will ensure that that legislation is used to the fullest, particularly with regard to the DWP, given that Government amendments 75 and 76 refer to the PFSA specifically. We are keen to see how those powers can be used fully used as the deterrent we need to tackle DWP claims. I want to know that, after today’s debate and vote, sickfluencers will be left in no doubt that the full weight of the law will be used against them, as they actively defraud the state.
Our new clause 9 is on powers of arrest. We welcome measures in the Bill—first announced by the previous Government—to give DWP investigators greater powers to aid with their investigations, such as search and seizure, and there must be appropriate safeguards around that. This will bring benefit fraud investigations into line with tax fraud investigations in His Majesty’s Revenue and Customs, which is very welcome, but we want to go further and address other shortfalls in the DWP powers. New clause 9 would add the power of arrest to the powers given to DWP investigators and resolve the seemingly illogical current position: the Government want to give DWP investigators the power to enter and search a premises, seize, retain and dispose of material, obtain sensible material and use reasonable force, but not to arrest someone if the evidence shows that it is necessary.
In Committee, the Minister highlighted that the police would be able to carry out the arrest function on behalf of the DWP should it ever be necessary, but we question whether that is a sustainable position and believe that our new clause would ensure we do not place an additional burden on the police. This is not without precedent and would bring the DWP into line with the approach taken to serious and organised crime across Government, such as at HMRC and the Gangmasters and Labour Abuse Authority.
Our new clause 10 is on liability orders, because we are concerned about the seizure of assets. We want to ensure that the DWP does everything it can to recover funds fraudulently claimed, even when that money is no longer sitting in a bank account. It cannot be right that someone can use that money to buy expensive cars, flat-screen TVs or other luxury assets, which the state cannot then recover from them. Our new clause 10 would give the Secretary of State powers to apply to the courts to seize assets where someone has been found guilty of fraud and the funds have not been recovered in order to repay the state. In a similar vein to our sickfluencers new clause, we believe these additions are needed to send the strongest message to those who are knowingly defrauding the system that they will be caught and will have to pay.
New clause 10 does not just give powers to seize assets to the Secretary of State; it says that she must use them. The DWP has said that it can already do this, but we know through written parliamentary questions that those powers have not been used in the last five years, albeit the DWP could make use of the Proceeds of Crime Act 2002. We believe there must be an explicit expectation that assets will be seized, and we need new clause 10 to ensure this is achieved.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
It is great to hear that the hon. Member’s party is committed to taking tougher action against benefit fraud after 14 years of failing in office. Does she also welcome longer sentences for fraud in other areas of Government such as covid corruption, including for those Tory donors who committed the crime?
Rebecca Smith
I thank the hon. Member for his intervention, but that is not what we are debating; it is certainly not part of my speech.
Our new clauses 11, 12 and 20 are on the impact on banks. We have concerns about the lack of detail in the Bill when it comes to the eligibility verification mechanism and the requirements that will be put on banks and other financial institutions. We do not have the statutory code of conduct. We do not know what it will cost banks. We do not know the results of any pilot schemes, and we do not know whether the amount recovered will be more than what it costs to administer. Madam Deputy Speaker, had you been in our Committee, you would know that the code of conduct was probably the thing most frequently commented on, and the Ministers did a huge amount to reassure us that it was forthcoming—
Rebecca Smith
And cheesecake as well—I did not want to say it from the Front Bench, but I have now. Madam Deputy Speaker, you will have to look back at Hansard, but I will never look at a cheesecake in the same way.
The code of conduct was regularly raised in Committee, and we got assurances continually from the Ministers, but we still lack that detail. We have therefore tabled a number of amendments to get clarity, including to require the Government to publish their statutory code of conduct, information on the testing completed to date and an impact assessment on the cost implication of the Bill for banks, as well as an amendment to allow banks to challenge the expansion of these powers if the costs that would be incurred exceed a pre-agreed amount. We know that banks and financial institutions want to help tackle fraud, but measures must be proportionate and not unduly burdensome, or they risk diverting resources from tackling other types of financial crime to meet these requirements. We cannot simply assume that the banks and financial institutions will do what is right; we need to give them an incentive to do it, too.
Our amendments 16, 17, 18 and 19 refer to the need for a first-tier tribunal. The Bill takes significant powers for the Secretary of State, giving them the power to review decisions that they, the Cabinet Office or the Public Sector Fraud Authority made. Amendments 16 to 19 change the appeal body from the Minister for the Cabinet Office to the first tier tribunal, ensuring that there is not just independent oversight but an effective independent channel of appeal against information notices that does not just lead back to the organisation that issued the notice.
Several hon. Members rose—
Madam Deputy Speaker (Caroline Nokes)
Before I call the next speaker, may I make it clear that I will come to the Liberal Democrat spokesperson immediately afterwards?
Gill German (Clwyd North) (Lab)
I welcome the return of this Bill to the House. I was happy to speak on it on Second Reading, when I welcomed the Government’s crackdown on fraud, because every pound lost to fraudulent claims is a pound that could be spent on the vital public services on which my constituents in Clwyd North rely. It is extremely good to see the recognition of the issue, and the action taken in response to the £7.1 million of fraud and error payments in 2022-23 in Wales alone—that figure is up by £600,000 on the previous year.
The fine-tuning of this Bill is important, and that fine-tuning is done through the Government amendments, which speak to the correct application under devolution settlements, policy intent, the application and limitation of part 3, and the consequential amendments proposed to parent Acts. I was glad to be a member of the Public Bill Committee that considered the Bill in more detail, and I throw my weight behind the comments made about how the Bill Committee progressed, and how helpful that was to Committee members. The explanations and expansions by the Ministers served us well and have brought us to where we are today.
I spoke on Second Reading about the distinction between intentional fraud and accidental individual error, and I am pleased that Government amendments speak to reservations relating to that, and to proportionality. Crucial safeguards will be strengthened to ensure that no one is pushed into undue financial hardship because of debt recovery. Those safeguards include strict affordability checks on recovery payments, and checks on vulnerabilities.
Edward Morello (West Dorset) (LD)
I take the hon. Lady’s point about the need to strengthen safeguards, but passing the Bill would mean that we would be extending the powers of the Department for Work and Pensions before we had the opportunity to look at the independent review of the carer’s allowance overpayments scandal and see what reform of the Department was necessary. Does she share that concern?
Gill German
The Bill will protect vulnerabilities where we see them and it is very much a Bill of last resort. It is aimed at people who are not engaging with the DWP on fraud and error cases. Now that carers are aware of the problems that have occurred in the system, we hope that they engage, so I do not believe that the Bill will impact them in the way that the hon. Gentleman suggests. Indeed, the Bill will protect claimants by enabling early dialogue, which will stop errors sooner and prevent debt building up through genuine mistakes; I initially had a reservation on that point.
It is clearer than ever that the measures are powers of last resort for those who have refused to engage and are able to pay—it is important to emphasise that point. The measures put DWP powers in line with those that already exist for His Majesty’s Revenue and Customs and the Child Maintenance Service, and put the importance of the public money spent by those bodies on an equal footing.
The behaviour change that is expected to come as a wider benefit of the Bill is welcome. The Bill encourages debtors to negotiate a repayment plan ahead of using the measures of last resort. Importantly, as has been said, it deters organised fraudsters and those looking to become involved in fraud by ensuring that it is not framed as a victimless crime. It is anything but, because it robs us all of vital money for public services. We are not willing to shrug our shoulders at that, as the Conservative party did at the rising tide of fraud during the covid pandemic and beyond. We must all reinforce the narrative that benefit fraud is not a victimless crime, and our tackling it through the Bill is long overdue.
Throughout the passage of the Bill—in Committee and now on Report—I have been reassured that those who have genuine difficulty navigating the social security system have nothing to fear from the Bill. Indeed, it will raise awareness of the importance of early dialogue. However, I still have concerns about the complexity of the system and how it is administered, as I voiced at Second Reading, but that is for another day. As a member of the Work and Pensions Committee, I will continue to focus on that, as well as having regular dialogue on the subject with my constituents.
To conclude, I welcome the Bill and the fine tuning that has come about through Government amendments passed in Committee. I was pleased to serve on my first Public Bill Committee, and thank the Chairs, Ministers and all involved for its smooth running. I am happy to support the Government amendments put to the House today.
Madam Deputy Speaker (Caroline Nokes)
I call the spokesperson for the Liberal Democrat party.
Steve Darling (Torbay) (LD)
I start by assuring the hon. Member for South West Devon (Rebecca Smith) that my office has talked me out of mentioning the Waitrose cheesecake that was a hot topic throughout Committee. On a more serious note, I would like to explore the challenges in the Bill. As we have heard, fraud can only be a bad thing, as it robs the public purse, but we need to ensure that our approach is proportionate, and that is where the rub is for us, as Liberal Democrats.
First, I want to focus on the covid crisis. We all lived through that, and some of us were in hot seats. I was leader of Torbay council at the time, so it felt as if I was in the eye of the storm for some of those challenges. I am afraid to say that for many of us in this Chamber, it feels as if the Conservatives were asleep at the wheel, given the level of fraud that we saw taking place during the pandemic. The fact that £10 billion-worth of fraud occurred around personal protective equipment is shocking. Some £16 billion of fraud occurred around support for businesses. While it was extremely important that we supported businesses appropriately, the safeguards were extremely limited. One businessman in Torbay said to me that it was as if the Chancellor of the Exchequer had got handfuls of £50 notes, filled carrier bags across the town centre, and said to the criminal element, “Come and help yourselves.” The reality is that the money could and should have been put to good use. In my constituency, Torbay hospital is crying out for investment. We have a sewage scandal, and the Environment Agency could be supported in tackling that issue. We also have the cost of living crisis; we could support people in ensuring warmer homes. All that money could help with those things.
A colleague and good friend has already alluded to the carer’s allowance crisis, and the real challenge that it poses. More than 136,000 people—the population of the Torbay unitary authority area—are affected by it. There is some £250 million of cost on those people. We Liberal Democrats fear that the powers in the Bill could make things even tougher for those who have challenges to do with the carer’s allowance.
Members do not have to take it from me that the benefits system is broken; the Secretary of State for Work and Pensions, the Chancellor of the Exchequer and the Prime Minister have said that it is. If there is such agreement in Government that the benefits system is broken, why are we adding to this edifice? It is built on a foundation of sand, yet we are looking to pile more responsibilities on to it, without looking for the true, positive culture change in the DWP that we need.
Colleagues have alluded to the areas of debate around the Bill. I will touch on a few major concerns that we Liberal Democrats have. The opportunity that the Bill presents for Orwellian levels of mass surveillance of those who get means-tested benefits causes me grave concern.
David Davis
The hon. Gentleman has got to a point on which I wholeheartedly agree with him. Something like 9.8 million people will fall directly under the reach of this Bill; if we include their carers, landlords and a variety of other people, it is more than 10 million people. I would think that the number of fraudsters in that number is very small, but not vanishingly small, so we will put probably more than 9 million people under unnecessary surveillance. He is right to call that Orwellian.
Steve Darling
I concur strongly with the right hon. Gentleman.
Also of core concern to us is the lowering of the bar for being able to take money out of people’s bank accounts, and the opportunity to withdraw driving licences from offenders. However, as colleagues have said, the best practice document is missing. That was alluded to on a number of occasions. It is difficult to understand the true nature of this Bill if we do not know what that guidance will look like.
We also have real challenges around Henry VIII powers. Elements of the Bill should be written into it, but are not, so there are real issues there. We welcome the independent reviewer of the Bill, but the Secretary of State will be able to appoint their own independent reviewer; we do not welcome the Secretary of State effectively marking their own homework by making the appointment themselves.
Big Brother Watch, Age UK and a multitude of other charities have highlighted concerns about the Bill, such as the breakdown in trust that it could cause and the risk of amplifying the challenges faced by people with disabilities. It could also impact on some of the most vulnerable people in our society, such as those with learning disabilities. That causes us great concern; Liberal Democrats would like to see a real culture change. In our manifesto, we talked about co-design, which involves working with people who are benefits claimants and people with disabilities to make sure that the system is a better fit and more fit for purpose. As far as we are concerned, taking a more relational approach, rather than an adversarial one, is the way forward.
Neil Duncan-Jordan (Poole) (Lab)
I rise to speak in support of amendments 10, 11 and 12, which stand in my name. I would like to start, though, by placing on record my thanks to the Minister for Transformation, my hon. Friend the Member for Stretford and Urmston (Andrew Western), including for his willingness to engage in a discussion on the terms of this Bill. It has been extremely helpful, so I wanted to place that on record.
I also make it clear that my amendments do not in any way seek to undo or frustrate the Government’s legitimate aim of recovering public money from fraudsters and criminals. We absolutely need to do that to ensure that criminal behaviour does not undermine the benefits, legitimacy or standing of our welfare system. The Bill rightly seeks to tackle organised crime and online fraud, but worryingly it also ushers in dangerous new powers compelling banks to trawl through financial information.
Jon Trickett (Normanton and Hemsworth) (Lab)
I am grateful to my hon. Friend for giving way, and I support his amendments. The fact is that millions of innocent people whose behaviour has attracted no suspicion at all will be subject to intrusion into their bank accounts. Is it not odd that there is also access to bank accounts for the £40 billion of tax unpaid by tax avoiders, but that power is rarely used? In the last year for which I have seen figures, 300,000 people were suspected of tax avoidance, but only 1,000 had their banks investigated. Is it not the case that this legislation appears to treat wealthy tax avoiders differently from the poor?
Neil Duncan-Jordan
I thank my hon. Friend for his contribution. It is the very poorest in our society who will be most affected by this legislation. Banks will be able to trawl through financial information even when there is no suspicion of wrongdoing—that is the key point in this debate. The very poorest, including disabled people on PIP, older people on pension credit, carers and those on universal credit, will effectively have fewer rights to privacy than everyone else. I am also deeply concerned about the slippery slope of compelling banks to act as an arm of the state.
Ayoub Khan (Birmingham Perry Barr) (Ind)
I am extremely grateful to the hon. Member for tabling his amendments. We have the finest legal system in the world, and one of its principles is the presumption of innocence. As drafted, the Bill undermines that fundamental principle, which will raise stress and anxiety and undermine vulnerable people in our society. Does the hon. Member agree that that is the current position with the Bill?
Neil Duncan-Jordan
Yes, and I am going to address that point shortly.
It is not the purpose of banks to act as an arm of the state, and compelling them to do so sets a very dangerous precedent that we in this House need to be aware of. We also know that organised crime groups, which are responsible for more than £7 billion of large-scale fraud, will evade detection by spreading funds across multiple accounts, beyond the reach of the algorithmic scanning that will be used to flag overpayments. It will be welfare recipients who are caught up in the net of bank surveillance, regardless of whether they are suspected of fraudulent activity.
Richard Burgon (Leeds East) (Lab)
I congratulate my hon. Friend on his eminently reasonable and common-sense approach to this debate and on amendment 11. Does it seem to him, as it seems to me, that this legislation takes place in a wider context? Along with the proposed tightening of eligibility for personal independence payment, it moves us towards a hostile environment for benefit claimants, particularly disabled benefit claimants. We will end up treating them as suspects automatically. Does he agree that it was right for us to oppose this measure when the Conservatives wanted to do it? I tabled an early-day motion, signed by nearly 50 MPs, to that effect. We have to oppose this measure now. The best way to resolve it is by the Government accepting his eminently reasonable—
Madam Deputy Speaker (Caroline Nokes)
Order. That was a very long intervention. Perhaps we would be better off going back to Neil Duncan-Jordan.
Neil Duncan-Jordan
I thank my hon. Friend for his intervention. I will cover the connection between this piece of legislation and the Green Paper shortly.
Neil Coyle
Will the outcome for the individual disabled people my hon. Friend is concerned about—the vast majority of whom commit no fraud—be any different if these measures are implemented? They will not be affected, because they are not committing any crime.
Neil Duncan-Jordan
As I have tried to explain, the Bill introduces fundamental changes to the nature of our welfare system and its use.
David Davis
I am a signatory to amendment 11. In answer to the point that has just been made to the hon. Gentleman, if the banks use algorithms, they will have an error rate of at least 1%. That means 10,000 or more innocent people will be dragged through the system by this proposal.
Neil Duncan-Jordan
The right hon. Member brings me to my next point, which is the risk of a Horizon-style scandal on a massive scale, given the sheer volume of accounts that will be scanned. That is glaringly obvious. These new powers also strip those who receive state support of that fundamental principle of British law, the presumption of innocence, as the hon. Member for Birmingham Perry Barr (Ayoub Khan) said earlier.
Amendment 11 would ensure that the Government can tackle fraudsters, but would limit the use of an eligibility verification notice to cases where a welfare recipient is suspected of wrongdoing and not merely of error. That proportionate and necessary safeguard would prevent the corruption of our welfare system, which will turn it from a safety net—meant to offer dignity and support to those in need—into a punitive system, where accessing help comes at the cost of someone’s privacy and civil liberties.
The Bill grants the Department draconian powers to apply to a court to have people stripped of their driving licence if they have an outstanding debt, whether for overpayment, fraud or error. Amendments 10 and 12 would remove that power from the Bill. There are fairer and more effective ways to enforce the law. Analysis of the Bill has shown that where assessment deems that a financial deduction would cause hardship, the debtor can face losing their licence. That is not justice in my view, but a penalty for being poor.
I have heard the claims that this measure will be a last resort when the debtor has failed to engage over a period, but that overlooks the fact that non-engagement can be a symptom of hardship rather than wrongdoing. Many welfare recipients, including those with mental health conditions and caring responsibilities, find it difficult to navigate the complex bureaucracy of our social security system, and may be unfairly deemed not to have engaged with the DWP.
Jim Shannon (Strangford) (DUP)
It is important and necessary to have better legislation to look after people. I doubt that anyone in the Chamber has not been confronted by a constituent who has made an inadvertent mistake. Given the complexity of the paperwork and the reams of questions, it is beyond the ability of most people to respond. Does the hon. Gentleman share my concern, and that of many others, that if the system continues to be so complicated, it will inadvertently drive people into a position for which they are not responsible?
Neil Duncan-Jordan
I agree. I think that the complexity of our system lends itself to errors on the part of individuals who find it extremely difficult to navigate. In Committee, several witnesses explained that people avoid repayment for a variety of reasons, including not knowing where to get help, simply being overwhelmed by the whole process, or facing multiple debts. I hope that the Minister will provide further reassurance on that specific point relating to amendments 10 and 12.
All these challenges will only be made worse if the Government proceed with the planned cuts in disability benefits outlined in the recent Green Paper, which will affect more than 3 million families. The last Government stripped our welfare state to the bone during 14 years of deep cuts—disabled people are already far more likely to be in destitution and to rely on food banks—but spying on millions of people or piling cuts on to a failed system will not repair our welfare model. The Government must pause for thought, meet representatives of disability organisations, and build a fairer system with their consent and confidence. Our welfare state needs to provide support for those who need it, and the change that we promised as a Government must lead to a more compassionate and caring society—one that enables rather than penalises. These are the values that make us different from the last Government, and we should not forget that.
Several hon. Members rose—
Madam Deputy Speaker (Caroline Nokes)
Order. It would be helpful if Members tried to confine their speeches to five minutes or so, but I do not propose to introduce a formal time limit yet.
Esther McVey (Tatton) (Con)
I wish to speak in support of new clause 11, entitled “Publication of results of pilot schemes”. Make no mistake: this Bill allows for a massive expansion of state powers. It will permit mass financial surveillance of the public. It is a massive overreach by the state, so of course it requires close scrutiny. It requires the publication of those results, and then they must be analysed.
Let me put this in context. Before the covid years, fraud and error across the tax and benefit system were at an all-time low. Then, in 2020, after a state-imposed lockdown—another massive state intervention—unprecedented financial support was set up for millions of people, in a rush of panic, with the full support of Members on both sides of the House. I exclude myself from that, but very few Members opposed the arrangement, and it opened up all sorts of new vulnerabilities in the system.
This support was set up only because of a blanket stay-at-home mandate from the state. It was the state that opened up those fraud vulnerabilities, and it was the state that saw, as a result of those impositions, many millions more people claiming universal credit. Let me give the House the figures. In March 2020, 3 million people were receiving universal credit. By November that year 5.8 million were receiving it, and in January 2025 the number was 7.5 million. Just as the heavy-handed state intervention of lockdown left the public paying a very high price, I am concerned that the Bill, another heavy-handed state intervention, will also leave the public paying a very high price. As Big Brother Watch states, the Bill will introduce
“an unprecedented system of mass financial surveillance; create a second-tier justice system for people on the poverty line; undermine the presumption of innocence; result in serious mistakes risking the freedoms and funds of our country’s elderly, disabled and poor; and turn Britain’s once-fair welfare system into a digital surveillance system.”
I have said it before and I will say it again, lockdown was an experiment inflicted on the British people without their consent and that experiment failed. The Bill will be another such experiment on the British public.
John McDonnell (Hayes and Harlington) (Ind)
Sometimes in these debates, we are trying to influence those on the Front Bench; to be honest, on this legislation, I have given up on that. I just want to get on the record, for my constituents, why I am concerned about this piece of legislation and why I support amendment 11.
We have all prefaced our speeches by saying that we all want to tackle fraud. To follow on from the speech by the right hon. Member for Tatton (Esther McVey), in that process during covid, I think I was the first MP to raise the issue of the massive fraud that was going on with bank loans. When I wrote to the then Chancellor and to various Ministers, I received responses that had almost been dictated by the banks, saying that all the security measures had been put in place and that it was being administered effectively; we then discovered that it was, I think, £13 billion, although we recovered an element of that, so I am very wary about ensuring that public expenditure avoids the levels of fraud that we saw during that time.
I am concerned about this Bill, which takes huge steps constitutionally, legally and on civil liberties. Others have made similar points. Our tradition is that someone is innocent until proven guilty—that has been the legal principle from Magna Carta onwards. The investigation powers are usually triggered by some element of suspicion. This legislation rides roughshod over that long 1,000-year tradition.
On privacy, whatever assurances we are given about the Bill’s compliance with human rights legislation— I have my doubts—it introduces, for the first time that I have seen in this country on an issue like this, mass surveillance.
David Davis
The right hon. Gentleman goes right to the point I tried to make with the Minister. There are 25 NGOs supporting amendment 11. It is almost certain that if we go down this route, it will end up in court. I think the Government will lose on article 8, on the question of individual privacy.
John McDonnell
Following the right hon. Gentleman’s track record on issues like this—he has been proved right on virtually every occasion—I agree. In addition to the mass surveillance, the extent of the information that can be sought and interpreted from the Bill is extremely wide-ranging and open to challenge.
What has annoyed me is that we are now introducing legislation in advance of what we were promised by way of codes of conduct and operation. We have no idea how this will work out in practice without those codes. Members may recall that the codes set out detail on how the system would operate at every level, with the information seeking, investigatory powers and so on. We do not have those, but we are being told not to worry, because the other place will receive them—well, that is not our responsibility as MPs. Our responsibility is to deal with the matter here.
We also do not know how the “independent persons”, as they are described in the legislation, are to be appointed or how they are going to operate. The hon. Member for Brighton Pavilion (Siân Berry) raised the question of how their reports and recommendations will then be implemented. There is also the question of whom they will be accountable to and whether there is any accountability for those independent persons to this House.
Time and again, when we have introduced legislation like this in the past that has short-circuited the traditional protective constitutional and legal mechanisms, it has led to debacles and miscarriages. I warn Ministers that that is exactly what we are facing here. Reference has been made to issues with regard to the use of computers, models and algorithms. We seem to have learned nothing from where we have made those errors.
As I also raised on Second Reading, what is happening here is discriminatory. We are choosing a class of people—largely working-class people—who are claiming benefits, and we are targeting them. If there is a class of people we should be targeting who have a record of fraud and of claiming things that they should not, well, here we are. As the expenses scandal demonstrated, if there is one group of people we should be examining more closely, it is Members of Parliament.
I want to talk very briefly about the impact of these measures from a constituency point of view. As an MP for 28 years and a councillor for over 12 years—40 years in total—I have met lots of people who do not claim benefits to which they are entitled. They are often older people, but there are others as well. Why do they not claim? In my experience, it is because of the stigma attached to claiming benefits. With this Bill, we are adding a bit more stigma, which will act as a disincentive to those who genuinely qualify for benefits and should be coming forward. It is that terror of making an error, that fear of risking being penalised for claiming a benefit they may not be entitled to—or of being paid too much. There is a real fear among my constituents about such miscarriages.
Most of the constituents who come to our constituency surgeries have tried everything else by the time they get to us. They are the ones with the most chaotic lives. And they are the ones who get sanctioned time and again, not because of any deliberate act, but often because they have mental health issues, or because something in their life, prevents them from attending that interview, or from applying for enough jobs in time. What will happen to them? They will be dragged into this system again. At the moment, they come to us—this is largely the case in my constituency—because most of the advice agencies have been closed down thanks to the cuts that have taken place, and they come to us in desperation. This Bill will make people even more desperate. It will deter people who qualify for benefits from claiming, and it will cause real hardship and impose severe penalties on those who least deserve it. That is why I think this is a poor piece of legislation, and it will not be long before we are back here again to amend it, to restore some elements of civil liberties and protection for the poorest in our society.
Madam Deputy Speaker (Caroline Nokes)
I shall impose, with immediate effect, a four-minute time limit.
John Milne (Horsham) (LD)
When it comes to public money, everyone accepts the importance of preventing fraud; there is no dispute about that. The mere thought that our benefit system could be exploited loosens the cement holding our welfare system together. However, if we look back in history, there has been a track record of fraud recovery measures not delivering what was hoped. This measure will also probably never save the £1.5 billion that is expected of it, so I ask: will the alleged rewards of this legislation ever match the scale of the imposition on our civil liberties, and are we really going after the right targets?
We all want to catch deliberate and professional fraudsters, but they are precisely the people who are astute enough to change tactics, set up separate bank accounts, and avoid suspicion. Instead, it will be the innocent and the accidental claimants who fall into the trap. The implicit assumption is that we should trust in the DWP as a completely error-free organisation across the entirety of its massive operation. But the DWP does make mistakes. It makes mistakes all the time. And even when it knows that it has made a mistake, and it has been told so, it is very capable of making the same mistake all over again.
In my constituency of Horsham, Anthony and his husband were accused of providing misinformation to the DWP and were overpaid £10,000 as a result. Anthony protested without success. After a long fight the case went to appeal. The tribunal wasted no time deciding in his favour—it was an open and shut case. But then, earlier this year, Anthony and his husband were migrated over to universal credit. After confirming all details were correct, the DWP overpaid them again, and then sought to claw the money back over the following months. The DWP’s mistake, but Anthony pays the penalty.
The DWP has its rules, but real life does not run in straight lines. Real life is messy. How can we possibly rely on the DWP to mark its own homework when we know that there are just four fraud advisers per regional office to handle cases flagged by frontline staff?
Yes, there are some checks and balances within this legislation, but what is really needed is a profound cultural change within the DWP, and that is much harder to achieve. The common experience of people who have to deal with the DWP on a daily basis is that they feel that it is always looking to catch them out. Years and years of inflammatory rhetoric under a succession of Conservative Governments have convinced people to regard the DWP as their enemy, not their friend. If anything, the Bill digs that hole a little deeper.
What concerns me most about the Bill is its extreme overconfidence. It assumes that Government agencies always get things right and that individual citizens are to be automatically treated as objects of suspicion. In Committee, the Government were resistant to any amendments except their own, so I very much hope that they will reconsider today and accept the Liberal Democrat amendments.
David Pinto-Duschinsky (Hendon) (Lab)
I rise to speak against amendments 2, 4, 5, 6, 8 and 9, and new clauses 12 and 15.
Fraud in the benefit system affects us all. It costs us as a country almost £1 million an hour. It takes money from the most vulnerable in society and undermines the legitimacy of and public support for our social security system. However, many of the amendments proposed simply do not recognise the vital need for this legislation. Some, such as amendments 2 and 9, would hamstring the Bill by preventing us gathering key information. Others, such as amendments 8, 5 and 6, would limit the effectiveness of the Bill and make its powers more difficult to use. Others, such as amendments 4 and new clauses 12 and 15, would seek to delay its effects.
These amendments, however differently proposed, all suffer from the same pathology: they fail to take fraud seriously. We have heard a number of speeches today from opponents of the Bill, but we are yet to hear from them any serious practical suggestions about how we might tackle fraud. These opponents say that they are concerned to protect the vulnerable, but I say gently that they can offer no proposals on how to prevent the fraud that is stealing from the neediest in our society.
Many Members are coming from a genuine place of concern about how to strike the right balance between protecting the public purse on the one hand and the privacy and rights of claimants on the other. I think the Bill gets the balance right. The powers it provides are proportionate.
David Pinto-Duschinsky
I have limited time, so I will make progress.
The powers the Bill provides are proportionate, measured and ringed with safeguards. It is a mark of this that, as we heard from the Secretary of State on Second Reading, the Information Commissioner has stated that the Bill as currently drafted has addressed their previously stated concerns.
As well as being proportionate, the powers are necessary to fight the ever-more sophisticated frauds that we are facing. Over the past decade, financial institutions have extensively overhauled their use of technology and data and their approaches to the evolving fraud threat, yet the Government have not. It is illuminating, but perhaps not surprising, that while social security fraud has risen dramatically post covid, fraud volumes and losses in the financial services sector, including credit card fraud, have fallen according to UK Finance. The public sector has paid a steep price for not modernising its anti-fraud approach and failing to adopt industry best practices. It is a gap that this Bill seeks to address.
Most of all, the measures in the Bill are crucial for protecting the vulnerable and safeguarding the legitimacy of the system itself. Our social security system rests on public consent and a belief that money is fairly spent. Fraud and error chips away at this social contract, and it takes money from those who need it most. The public in Hendon and across the country expect us to take action. There is nothing progressive whatsoever about permitting fraud. The only people who benefit are the criminals who exploit our system and those who wish to undermine its role as a cornerstone of a civilised and fair society.
For the sake of the most vulnerable, the taxpayer, fairness and the system itself, I hope the House will join me in supporting the Bill and voting down those amendments.
Kirsty Blackman (Aberdeen North) (SNP)
There continue to be many problems with the Bill, but I recognise that the Minister and his team have had extensive conversations with the Scottish Government and made a number of amendments as a result. I welcome the communication between the two Governments and urge the Minister to ensure that the DWP team have extensive conversations in advance of the coming welfare Bill so that it will not need so many Government amendments on Report for how it interacts with Scottish legislation and Scottish systems.
I turn to new clause 1 on carer’s allowance. It would be completely fair to wait until a review has been done—there needs to be a significant look into that—as clawing back money from people without seeing the results of that review would be incredibly problematic. I am therefore happy to support the new clause.
On sickfluencers, I am concerned that although the shadow Minister has tried to draft new clause 21 to exclude people giving advice, it might unintentionally catch some of those people. On that basis, I am not keen to support it as I would be worried about people who offer genuine advice being caught up in that. However, I understand that she attempted to draft it carefully to try to avoid that.
I would be more than happy to support amendment 11 —the SNP will support it—on the suspicion of wrongdoing. I am thinking in particular about the speech made by the right hon. Member for Hayes and Harlington (John McDonnell). I was not going to mention the propensity of former MPs to claim things fraudulently, but in looking at who actually costs the taxpayer significant amounts of money, if the Government were to say, “We know that people who hold millions of pounds in offshore trust funds often dodge tax, so we are going to survey all their bank accounts,” I imagine that there would be some sort of uprising, particularly from some wealthier people we are aware of. But because the Government are saying, “It’s cool; it’s just poor people who will be impacted,” we are all expected to assume that this surveillance is fine. It is not fine; it is an absolute imposition on people’s lives. As many have said, it is treating everybody as though they are fraudsters.
Let us look at the amount of money set to be saved. The Government will save less money annually than the DWP makes in overpayments. Rather than imposing on so many people’s civil liberties, surely cracking down on DWP official error overpayments, which would save more money, would be a better place to begin. It is absolutely daft.
I completely agree with new clause 7, tabled by my colleagues the hon. Member for Brighton Pavilion (Siân Berry), particularly in relation to the reasonable expectation that people could understand that they had been overpaid. A constituent contacted me recently because they had a letter telling them that they are to be migrated to universal credit. They are terrified that they will be deported because the word “migrated” was used in that letter. They do not understand the language used by the DWP. Given that universal credit is so complicated to calculate, so many people could not reasonably have been expected to understand that they were being overpaid. The DWP should take that into account before looking at mass surveillance.
Mr Peter Bedford (Mid Leicestershire) (Con)
The Bill addresses the serious issue of fraud and error in our public services. I welcome the Government’s continuation of the work of the previous Government to protect taxpayers’ money and uphold the integrity of our welfare system. The amendments proposed by the official Opposition would not undermine the Bill; they would enhance it. Our amendments would preserve the fundamental principles of fairness and proportionality while strengthening the tools at our disposal to tackle wrongdoing.
In that spirit, I rise to speak in support of new clauses 8 and 21. New clause 8 is a measured and necessary proposal that would simply bring the Department for Work and Pensions in line with other Government bodies, such as HMRC and the Child Maintenance Service, which already have the power to issue arrest warrants for cases of serious fraud against the state. Why should it lack those enforcement capabilities when the crimes that it deals with are just as serious?
The taxpayer enters into a social contract with the state—a contract based on trust, responsibility and accountability. My constituents pay their taxes and quite rightly expect that those who cheat, lie or exploit the system will face the consequences. We in this House are the guardians of that social contract. If the public believe that we are turning a blind eye to fraud or failing to act decisively, that trust begins to erode and the social contract will be put at risk. Illegal actions must have legal consequences. In supporting new clause 8, the Government could send a clear and unequivocal message: fraud and deceit have no place in our society.
Turning to new clause 21, it has recently been highlighted that individuals are using social media to promote ways of defrauding the system, including through the Motability scheme. That is deeply troubling. Although Ministers have previously responded positively to my questions on that, the current version of the Bill does not go far enough. Unless the Government support our amendments, they will fail to take the concrete steps needed to address that evolving form of deceit.
This House has an opportunity today to work across party lines to further strengthen the Bill and reaffirm our commitment to protecting the social contract between the Government and those governed. Let us act with unity and resolve to reduce fraud, restore public trust and ensure that our systems work for those who truly need them and not for those who seek to abuse them.
Sarah Olney (Richmond Park) (LD)
Under the previous Conservative Government, fraudsters got away with claiming billions of pounds of covid support funds, as an eyewatering £39.8 billion went uncollected due to tax evasion and other criminal activity. While vulnerable members of our society have seen their benefits cut and our public services are in need of investment, it is not right that public spending has been misplaced into the pockets of fraudsters. I am therefore grateful for many of the measures in the Bill that will work to reduce instances of fraud. However, I have concerns about some of the broader measures regarding the powers the legislation would give the Department for Work and Pensions and the potentially intrusive impact that could have on the civil liberties of citizens.
I speak in support of new clause 23, tabled by my hon. Friend the Member for Torbay (Steve Darling), which would require a report to Parliament within six months on the causes and cost of public sector fraud during the covid-19 pandemic. The report would include an account of any fraudulent payments and a review of procurement practices during covid, including contracting for suppliers and the role of political appointments and personal connections in procurement decisions, as well as an assessment of the adequacy of Government oversight to prevent fraud against public authorities. Much of that work has already been undertaken by the Public Accounts Committee—I am a member, as I was in the previous Parliament—and it would be worthwhile for the Minister to take a look at some of our reporting on those topics.
If failings are found, the new clause would require an outline of corrective actions, including a statement to this House to acknowledge the findings and to set out actions planned to ensure that any failings are not repeated. With public trust in politics at alarmingly low levels, we must take all possible steps to ensure integrity and the highest possible standards in governance. The cronyism, rule breaking and sleaze scandals of the last Conservative Government did huge damage to public trust in politics and politicians in this country. The new clause would lead to an increase of accountability and I urge the Minister to accept it.
Even though I am glad to see the Government introduce measures that would crack down on instances of fraud, I have grave concerns about some of the broader measures in this legislation that would lead to an unacceptable increase in intrusion on individual privacy. That is why I speak in favour of amendment 2, which would revoke clause 74 and remove the requirement for banks to look into relevant claimants’ bank accounts. Some measures in the Bill raise significant concerns regarding the privacy of individuals, and I have heard from constituents who are alarmed at some of the powers that could be introduced with this legislation. I believe that fraud must be rooted out and that more should be done to prevent fraud from happening in the first place. However, clause 74 is an unnecessary and invasive step that I urge the Government to refrain from taking.
I have heard from people who are concerned about the powers granted in the Bill because it enables the Government to have direct access to individuals’ bank accounts and even enables the DWP to withdraw funds or revoke driving licences. That concern is particularly serious when it comes to vulnerable groups, such as the elderly, disabled people and those living in poverty, who could face devastating consequences as a result of wrongful penalties.
I welcome the Government’s commitment to cracking down on fraud. There were clear failures by the previous Conservative Government during the covid pandemic, which we saw highlighted in the PPE procurement scandal and the bypassing of the usual procurement rules via the VIP lane. It is essential that proper rules are in place to ensure that public spending is carried out in an effective, efficient and transparent way, and I am glad to support new clause 23, which would strengthen transparency and accountability on this issue. However, grave concerns about the intrusive powers that this legislation could introduce have been expressed across the House today, particularly those that allow the Government to require banks and other financial institutions to share client data, and as such, I urge the Minister to accept amendment 2 to revoke clause 74.
Siân Berry
There is a lot I could say, but I will mainly just commend to Members my new clause 7, which would remove official error from the most punitive measures in the second part of the Bill. I spoke against the whole suite of intrusive legislation in the second part of the Bill on Second Reading, and Green MPs still oppose it now. I was pleased to serve on the Public Bill Committee, and I will be supporting a number of other amendments that I also backed there, alongside the hon. Members from both sides of the House who proposed them. On Second Reading and in Committee I described how the Bill treats already stigmatised benefit claimants as suspects, not citizens, through blanket intrusion and surveillance. It is absolutely wrong that this legislation should go through in this form. I think the first part works, but the second part is absolutely out of order.
New clause 7, tabled in my name, is about fair play. It would bring a test for the recovery of universal credit overpayments caused by official error into line with regulation 100(2) of the Housing Benefit Regulations 2006, so that they could be recovered only where the claimant could have reasonably been expected to realise that there was an overpayment. Let us be in no doubt, mistakes by the DWP can have huge financial and psychological impacts on people who are receiving benefits, and the risk of harm is particularly acute with official error overpayments, which individuals have no way of anticipating. I point out that new clause 7 is equivalent to an amendment proposed by Labour Front Benchers during the passage of the Welfare Reform Act back in 2012, when the Government first started to recover universal credit overpayments.
Turning to a few of the other important amendments before the House today, I restate my support for amendments 2 and 5, in the name of the hon. Member for Torbay (Steve Darling). These seek simply to remove the totally indefensible bank spying powers. I express my support for amendments 10 and 12, in the name of the hon. Member for Poole (Neil Duncan-Jordan), which rightly seek to do away with the driving disqualification powers, which I have previously opposed. I also put on record my support for amendment 11, also in the name of the hon. Member for Poole, which rightly limits the banks’ spying powers to cases with existing suspicion of wrongdoing. I am pleased that the hon. Member for Liverpool Wavertree (Paula Barker) has taken forward amendments 8 and 9, which I tabled in Committee. My Green party colleagues and I will also be voting for new clause 1, in the name of the hon. Member for Torbay, on carer’s allowance and lessons learned.
It matters when we treat people who need a safety net as suspects. It matters when Governments invade privacy with a blanket intrusion that affects older people, disabled people and other minorities in a disproportionate way. And it matters that the powers proposed today extend to impoverishing citizens and punishing them for our own Department’s mistakes. Treating people with humanity and due process should be the default setting, not these intrusive new blanket laws, and I hope that Parliament will ask Ministers to dial up the competence, dial down the stigma and think again.
Ann Davies (Caerfyrddin) (PC)
Over the past few months, it has been one thing after another for the vulnerable, the sick and disabled people. The recently announced cuts to welfare will affect 6% of the population in Wales, according to Policy in Practice, punishing the sick and disabled. This Bill adds to that punishment by increasing state financial surveillance of welfare recipients. It is full of intrusive measures, from granting access to three months of bank statements, to allowing direct deductions from bank accounts without court orders and providing police with powers under the Police and Criminal Evidence Act 1984 to enter and search a property. That is not just my opinion: numerous charities and organisations from Age UK to the Child Poverty Action Group support Big Brother Watch’s recommendation to oppose eligibility verification powers under clause 74, for example.
Similar powers were proposed by the previous Conservative Government and considered a potential breach of privacy under the Human Rights Act. Labour MPs at that time were among critics of those powers. It is disappointing to see so few Labour MPs here today, but I thank those who have once again spoken up. I am glad to see amendments, including amendments 8 and 9 tabled by the hon. Member for Liverpool Wavertree (Paula Barker) and amendment 11 tabled by the hon. Member for Poole (Neil Duncan-Jordan), that seek to address such concerns, including by limiting or removing powers to compel banks to provide sensitive financial information.
Even the thought of this provision is causing real anxiety and distress, such as for my constituent Simon Mead and his family. Mr Mead’s daughter, who receives PIP due to the long-term effects of brain cancer as a child, and his son, who suffers from psychosis and schizophrenia, are extremely worried about the Government accessing their private financial decisions. It is already affecting their day-to-day life and decisions. When I wrote to the Government outlining Mr Mead’s concerns before the Bill was published, I was told that the Bill is
“not designed to cause distress or to undertake covert surveillance of disabled people, or any benefit claimant”.
Well, that is obviously not the case, is it?
Combined with restricting winter fuel payments, the refusal to abolish the two-child cap and the sweeping welfare cuts, many vulnerable and disabled people genuinely feel that they are being disproportionately targeted. This is a reality that the Labour Government must accept and address. The Bill further stigmatises people who we are supposed to protect—those who are entitled to state support—who are already suffering following recent UK Government decisions. As Members of Parliament, it is our job to better people’s lives and ensure that everyone in our community feels supported. We are here to serve and to serve all our constituents, which includes the vulnerable, the elderly, the disabled and the infirm. We are not here to cause further distress and hardship. We need to ensure that constituents have access to the help and services they need. Sadly, this Bill does the opposite.
Madam Deputy Speaker (Ms Nusrat Ghani)
That is the end of the Back-Bench contributions. We come to the Front Benches and first the shadow Minister.
Rebecca Smith
With the leave of the House, I will make a few additional comments. This is the perfect opportunity to respond to some of the points made about Conservative amendments and new clauses.
The hon. Member for Hendon (David Pinto-Duschinsky) was on a short time limit and was not able to take any interventions, but I want to speak to the points he made on including our new clauses—for example, new clause 12. He rattled off the other amendment numbers quickly, so I hope he will forgive me if I did not hear them all, but I believe that new clauses 12 and 15 were included. His implication was that the new clauses we tabled would delay the Bill being put into law. That would not be the case, because each of them is worded for after the Act comes into force. The new clauses would be additional safeguards on the cost implications for banks, annual reporting and the publication of an antifraud and error technology strategy that would make the Bill even better, rather than essentially being wrecking amendments. Regardless of the other amendments included in the hon. Member’s list, ours are certainly not in that vein.
The hon. Member for Aberdeen North (Kirsty Blackman) said that she was slightly unhappy about new clause 21 because those who genuinely help benefit claimants get what they are entitled to may inadvertently be caught by it. That is not our intention. We want only those who push people towards committing fraud to be caught. Citizens Advice and Improving Lives Plymouth, for example, which help people claim what they are entitled to, would not be caught by the new clause, because they would be involved in error only if a mistake were made, rather than through fraud. I appreciate what she said, but that was not our intention. The wording of our new clause covers that.
Concern was raised in Committee about the extent of bank account searches. In our view, other bank accounts used by those who commit fraud would not be checked under the Bill, so we probably need to go further to ensure that fraud is properly tackled. To be more light-hearted for a moment, if I may, anybody reading the report of the debate will see plenty of references to cheesecake, and I think I should explain why. Concern was raised in Committee about the fact that, under the Bill, an account’s individual transactions could be assessed and judged, so everybody would feel terrible if they bought a cheesecake from Waitrose—other shops are available—and that would be a problem in future. If anybody was wondering why we were talking about cheesecake, it related to concern about transactions being checked. At the time, the Minister kindly reassured us that the Bill would not provide for individual transactions to be checked; it would deal just with benefit payments and whether someone has capital that they should not have while claiming benefits. I hope that that is helpful.
Andrew Western
With the leave of the House, I thank all hon. Members for their contributions. In the time I have, I will try to respond to some of the points raised. I have listened closely to the concerns set out by Members from across the House, and I will of course ensure that they are taken forward as the Bill progresses to the other place, but today I will resist all non-Government amendments. I will make initial comments in response to several Members, before turning specifically to the nature of the amendments and new clauses.
The Opposition spokesperson, the hon. Member for South West Devon (Rebecca Smith), and the hon. Member for Mid Leicestershire (Mr Bedford), said that the Bill builds on the previous Administration’s work to tackle fraud and error. I have to say, I think that is a fairly generous interpretation of that work, not least because, as far as I can see, the previous Government introduced absolutely no powers for the Public Sector Fraud Authority to tackle fraud across the public sector, and, moreover, nothing on debt recovery. The only evidence we can find of any new powers the previous Government sought to introduce is in the eligibility verification space. I accept that they sought to do that, but they did so in a rather botched fashion, which was subject to significant criticism, and with none of the safeguards and oversight in place. We have now built those into the Bill. I absolutely agree with the Opposition spokesperson that the Government cannot be complacent in tackling fraud—and we will not be—but I say gently that, having allowed fraud and error in the welfare system to spiral to £9.7 billion at the time of the last election, the same cannot be said of the previous Government.
The Liberal Democrat spokesperson, the hon. Member for Torbay (Steve Darling), spoke of a broken welfare system. I do not want to be drawn into a debate on that, but a broken approach to tackling benefit fraud and error is certainly part of any problem that the Department faces.
Kirsty Blackman
Can the Minister reassure us that no action will be taken to stop social security payments until the human investigation has happened?
Andrew Western
I am happy to provide that assurance; the hon. Member has stolen my next line. I can say categorically that this is a data push only. No decisions will be taken as a direct result, other than a decision to look further into an account, and potentially initiate a human investigation, if needed.
I want to say a little more about amendments 10 and 12, tabled by my hon. Friend the Member for Poole, which relate to driving licences. He rightly said that welfare recipients may not be able to engage with the Department. For the record, nobody in receipt of benefits or paid through pay-as-you-earn employment will be in scope of the debt recovery powers and therefore of the power to suspend driving licences. Where we do seek to suspend someone’s driving licence, it is worth remembering that this is after we have made at least four attempts to contact them through our debt management team, and at least four further attempts through our debt enforcement team, and we have established their ability to repay by looking at three months’ bank statements. If, when we seek to deduct from that bank account, an individual has removed the funds that we know they have, it is only then that we would look into the possibility of suspending their driving licence. Even then, because this is very much a last resort power, we would seek to agree a repayment plan with them right up until the end. The court would set repayment terms if a driving licence was suspended. It is also worth saying that it is always a suspended decision, subject to compliance with an affordable repayment plan set by the court. As I say, this is a power of last resort. I hope colleagues are reassured to hear of the many steps before we reach that point and, most importantly of all, to hear that the power does not apply to current benefit recipients or anybody paid through PAYE employment.
The right hon. Member for Tatton (Esther McVey) mentioned new clause 11 and the publication of pilot scheme results. I would like to clarify for the House that we are not proposing any further pilot schemes as a result of introducing this legislation. Two pilot schemes have already taken place, so we know that our proposals work. We will be adopting a test-and-learn approach so that we can scale things up. The question of whether this mechanism will yield information that is helpful to us in our inquiries was settled by the previous Government.
Esther McVey
Have all the details and all the information from the only pilot schemes that the Government are prepared to run been published in their entirety?
Andrew Western
Information of that nature was published prior to Second Reading and is available to Members.
I turn to the amendments and new clauses that attracted the most attention in today’s debate. New clause 1, tabled by the Liberal Democrat spokesperson, the hon. Member for Torbay, pertains to the carer’s allowance. I pay tribute to the millions of unpaid carers across the country. This Government value carers highly, and recognise the vital and valuable contribution they make every day. Like others, I see that in my constituency work, week after week, and I am in awe of all that carers do.
This Government inherited a system in which busy carers, already struggling under a huge weight of responsibility, have been left to repay large sums of overpaid carer’s allowance, sometimes worth thousands of pounds. We need to understand exactly what went wrong, so that we can set out our plan to put this right. That is why we launched an independent review of earnings-related overpayments, and we were delighted that Liz Sayce agreed to lead that review, which will investigate how overpayments of carer’s allowance have occurred, what can best be done to support those who have accrued them, and how to reduce the risk of these problems occurring in future. The independent review is under way and is anticipated to conclude this summer.
But we are not sitting back; we are taking action now. We continue to review and improve our communication with carers to make it as easy as possible for them to tell us when something has changed in their life that could affect their carer’s allowance entitlement. Moreover, this Government introduced the largest ever increase in the earnings limit since carer’s allowance was introduced; the weekly carer’s allowance earnings limit increased to £196 from 7 April this year. It is now pegged permanently to 16 hours.
Anna Dixon (Shipley) (Lab)
Clearly, many carers have been affected by overpayments. Overpayment comes as a shock to many who are trying to work in order to bridge the gap between carer’s allowance and their family’s costs, and it has a significant impact on their mental health. Does the Minister share my gratitude to Liz Sayce for the work that she is doing to hopefully provide clarity for the many carers who are trying to juggle unpaid family care and work?
Andrew Western
I absolutely agree. Liz Sayce is doing excellent work, and I look forward to seeing the conclusions of her review in due course.
Turning to new clause 1, as I have said, the independent review that has been commissioned is expected to arrive at its conclusions this summer. It would be irresponsible for me to commit in advance to implementing all recommendations. As the House will understand, the recommendations will need to be given careful consideration when they are provided to the Department. Moreover, I do not believe that the new clause would have the effect intended.
Andrew Western
If the hon. Gentleman does not mind, I will not, as I am short of time. New clause 1 would prevent recovery of carer’s allowance overpayments via the new recovery powers in this Bill, but the DWP would still be able to recover carer’s allowance overpayments through deductions from benefits or through deductions from PAYE earnings. This would place carers in an unequal position in regard to overpayment recovery, with recovery depending on whether they were in receipt of benefits or in PAYE employment. Even if I believed that that was what the amendment intended, suspending recovery of all carer’s allowance overpayments until the independent review has concluded would be disproport-ionate. There are safeguards and protections for those with overpayments, including appeal rights, affordable repayment plans and, in exceptional circumstances, the option to waive the debt.
I turn to new clause 21, which the Opposition spokesperson, the hon. Member for South West Devon, spoke to, and I will refer to new clause 8, which proposes to introduce a new offence of fraud against a public authority. In my view, that is already covered by existing offences, making the amendment duplicative and unnecessary. Fraud is already an offence under the Fraud Act 2006, and the common law offence of conspiracy to defraud, regardless of whether the fraud is against public authorities or anyone else, is already in existence.
The Government amendments to clause 70 bring together the offences in sections 6 and 7 of the Fraud Act 2006 of
“possessing, making or supplying articles for use in frauds”,
with the offences of “assisting and encouraging” that are found in sections 44 to 46 of the Serious Crime Act 2007. That allows us to tackle the issue that Committee members were concerned about—influencer-style offences, in which a person provides the knowledge needed to commit a fraudulent act through internet videos or manuals.
Andrew Western
I will not. I took an intervention from the hon. Gentleman on this subject earlier, but I am short of time. [Interruption.] Had he stayed for the whole debate, I might have been more willing to do so, but I responded to his earlier invention.
In my view, we simply need to enforce existing law. Similarly, new clause 21 seeks to amend the Social Security Administration Act 1992 to introduce an offence of encouraging or assisting fraud. Again, in my view this is unnecessary, because that is covered by the Fraud Act 2006 and the Serious Crime Act 2007. The hon. Member for South West Devon asked for assurance that we would use the powers that we already have. As I said in response to interventions, I have commissioned work in the Department to look at how we can further use the powers that we have; in my view, historically, we have not taken best advantage of them.
Andrew Western
I am sorry, but I will not.
Turning to new clause 10, we want to ensure that the Government have access to a wide, appropriate and proportionate range of debt recovery powers, so that we have multiple methods of recovering money from those who have the means to pay but refuse to do so. However, new clause 10 is not required, as equivalent action is already provided for through existing legislation for the DWP, and by clause 16 of this Bill for the PSFA. Clause 16 clarifies that the PSFA is able to seek alternative civil recovery through the civil courts. In addition, there are direct deduction orders and deduction from earnings orders in the Bill, which could include liability orders.
I have largely covered amendment 11. In closing, I want to make a few observations about amendments 8 and 9, tabled by my hon. Friend the Member for Liverpool Wavertree (Paula Barker), but spoken to by other Members. In my view, those amendments would reduce the effectiveness of our debt recovery powers as proposed in the Bill, so I cannot agree to them. I recognise the importance of dialogue with customers all the way through the journey of debt recovery. As I set out in response to the concerns about the revocation of driving licences raised by my hon. Friend the Member for Poole, we will seek to engage with people at all stages of the journey. If we identified any vulnerabilities, we would cease recovery, and at all stages we would look to agree an affordable repayment plan.
I hope that I have addressed the majority of the points raised by right hon. and hon. Members, and I thank them again for their contributions. I thank the witnesses who gave their time to the Committee, and those who provided written evidence. Finally, I extend my thanks to the Clerks, the House staff and civil servants who have contributed to the passage of the Bill.
For too long, too little effort has been made to get a grip on public sector fraud, resulting in the totally unacceptable levels that we see today. With this Bill, we are taking the powers needed to act and to finally take the fight to the crooks and the con artists, from criminal gangs attacking our welfare system to covid fraudsters who stole from hard-working people in a time of national emergency.
This Bill is critical. It will save us billions of pounds, and it is part of a broader package in the Department to save £9.6 billion for the DWP by 2030. I hope that all Members feel able to support it today.
Question put and agreed to.
New clause 17 accordingly read a Second time, and added to the Bill.
The Secretary of State for Work and Pensions (Liz Kendall)
I beg to move, That the Bill be now read the Third time.
This Labour Government were elected on a mandate for change—to create more good jobs in every corner of the country, to drive up living standards for working people and to get our vital public services back on their feet. Delivering our plan for change means ensuring that every single pound of taxpayers’ money is wisely spent and goes to those in genuine need. That is what this legislation will help to deliver, with the biggest-ever crackdown on fraud against the public purse.
It is unacceptable that the Conservative Government allowed fraud against the public sector to spiral to £55 billion a year. That includes a staggering £7.4 billion a year of benefit fraud alone. It is unforgiveable that they failed to ensure that the Public Sector Fraud Authority was fit for purpose, or to properly update the DWP’s anti-fraud powers for 14 long years. When we think of all the new ways in which fraudsters and scam artists rip people off, including by using data and technology, that simply beggars belief. Today we say: no more.
Our Bill updates the powers of the Public Sector Fraud Authority so that it can effectively fight fraud across the public sector on behalf of Government Departments and public authorities. It also makes vital upgrades to the DWP’s fraud powers and sets out new powers to investigate fraud, so that for the first time, our serious and organised crime investigators can apply to the court for a warrant to enter and search the premises of suspected fraudsters, and can seize evidence such as computers and phones. There are updated powers to gather information, so that we can compel third parties such as airlines to give us information, and can require it to be delivered electronically, so that we can tackle fraud as quick as possible. Our new eligibility verification measure will enable us to get crucial data from banks and financial institutions to check if people are getting money they are not entitled to, and if they have more savings than the rules allow, or are fraudulently claiming benefits abroad when they should be living in the UK.
The Bill extends financial penalties to people who have fraudulently claimed any type of DWP payment, including grants and loans, not just benefits, and it gives us new powers to get money back from people who can pay but who have repeatedly failed to do so, bringing our powers in line with those of other parts of Government, such as the Child Maintenance Service and HMRC. All this is being done in a fair and proportionate way; the measures are tightly defined in the legislation, and there are strong safeguards and independent oversight, including through annual reports to Parliament and codes of practice, which we will bring forward in Committee in the other place.
I thank the Minister for Transformation and the Parliamentary Secretary, Cabinet Office, for steering the Bill through its Committee and Report stages, supported by excellent civil servants and House of Commons staff. I thank all members of the Public Bill Committee from right across the House for their detailed questions and thoughtful scrutiny of the Bill. They have done this country a good service, because this Bill provides us with the tools we need to tackle modern fraud in the benefit system and across the public sector, helping to save £1.5 billion over the next five years as part of the DWP’s wider action to save a total of £9.6 billion from benefit fraud and error.
People who work hard and play by the rules, and people who depend on our public services and vital benefits, deserve to have trust and faith in the system, and they are rightly angry when they see people abuse it. Our message is clear: if you knowingly defraud the benefit system or cheat our public services, whether you are a large or small company, a criminal gang or an individual, we will find you; we will stop you; and we will get our money back. This Labour Government will restore trust and fairness in the system and ensure that every pound of public money delivers for the British people and our country. I commend this legislation to the House.
Helen Whately (Faversham and Mid Kent) (Con)
Every penny of taxpayers’ money lost to fraud or error is money wasted, so we Conservatives support many of the measures outlined in the Bill, not least those that continue the hard work done by my colleagues in the Department for Work and Pensions prior to the general election. The Government have a responsibility to ensure that every penny they raise in taxation is spent well. That is fair to taxpayers, who have worked hard to earn that money. When it comes to welfare, at the heart of our system must be the principle that Government support should go only to those for whom it is intended. Every penny that does not undermines the entire system. It erodes public trust and support. That has put support for some of the most vulnerable people in society at risk. That is why, in government, we did the groundwork for the clauses of the Bill that enable banks to help crack down on fraudsters, recognising that while the state should never be able to see what someone spends their money on, it should be able to check whether they are entitled to the money that they are claiming.
The amendments we have tabled to the Bill are constructive, so I am disappointed that the Government have chosen not to support them. Videos from sickfluencers are hard to avoid when searching online about benefits, but rather than helping people to claim something that they may need and should rightly receive, the videos tell people how to game the system. We want taxpayers to get their money back, even if it has already been spent. Why should we tolerate people using social media platforms to help others commit fraud, and to help them cheat the tests that are there to ensure that support goes to those who need it? Why should someone who has committed fraud be able to keep their high-end television or luxury car, just because they spent their ill-gotten gains before the Department got to them? We are clear that both those things should be tackled, but sadly Labour has shown itself to be on the side of the fraudsters.
As I said at the outset, we back the overall purpose of the Bill and much of its content, but I hope that the Secretary of State’s colleagues in the other place will take note of the constructive approach we have taken and the arguments made, particularly those made so articulately by my hon. Friend the Member for South West Devon (Rebecca Smith) today and in Committee. I look forward to seeing the Bill improved before it may become law.
Public Authorities (Fraud, Error and Recovery) Bill
Wednesday 30th April 2025
(1 month, 4 weeks ago)
Lords ChamberPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 29 April 2025 - (29 Apr 2025)
Public Authorities (Fraud, Error and Recovery) Bill
Thursday 15th May 2025
(1 month, 1 week ago)
Lords ChamberPublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 96 Running list of amendments - 15 May 2025 - (15 May 2025)
Baroness Anderson of Stoke-on-Trent
That the Bill be now read a second time.
Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)
My Lords, I am proud to bring this Bill to your Lordships’ House with my noble friend Lady Sherlock. I am grateful for the engagement that we have had with noble Lords on the Bill so far and look forward to working with your Lordships as the Bill progresses. I also look forward to hearing the maiden speech of the noble Baroness, Lady Spielman, which I am sure will be excellent—good luck!
There have always been people who commit fraud. Sadly, this is not a new problem, but over the past decade fraudsters have become increasingly sophisticated in the techniques that they use to steal people’s money, using data, technology and a variety of scams. Banks and similar entities have transformed their ability to spot and stop fraud and to protect their customers’ money. They have invested in new technology and changed processes, but this Government believe that the public sector has not proactively followed their lead. In 2023-24, fraud and error against the public sector reached an astonishing £55 billion. That includes: fraud against our public services, including those who abuse the tax system; fraud by dishonest companies that use deception to win public contracts; and benefit fraud by criminal gangs and individuals. In 2024-25, benefit fraud and error stood at a staggering £9.5 billion a year.
Fraud against the public sector is not a victimless crime. It takes money away from vital public services, erodes trust and harms innocent people. It is ultimately public services that suffer, and it is taxpayers who are the victims of this crime. They are rightly incensed when their money lines the pockets of criminals. It is theft from the taxpayer—from every single one of us. Delivering this Government’s plan for change is possible only if we do more to ensure that taxpayers’ money is protected and spent wisely. The Government made a manifesto commitment that they will safeguard taxpayers’ money and will not tolerate fraud or waste anywhere in public services. This Bill is part of our plan for delivery.
I turn to the detail of the legislation before us. Part 1 of the Bill contains measures that gives the Public Sector Fraud Authority—I will refer to it as the PSFA for the rest of my speech—within the Cabinet Office powers for the first time to tackle fraud across the public sector on behalf of government departments and public bodies that do not have the capability, capacity or powers to do so. Noble Lords will know that the scope of the activity of the state is vast.
Fraudsters will attack vulnerabilities wherever they can find them, and the impact is not just on the state but on real people. For example, in a case referred to the PSFA earlier this year, a firm had received £370,000 in funding to provide skills training, having, it is believed, provided false or inaccurate details to create the false impression that the criteria for the funding scheme were met when in fact they were not. Not only does the fraudster gain, but the money is diverted from people who could legitimately benefit from it. In another example, a grant of £125,000 was awarded to a youth group focusing on community activities. It did not go to the intended purpose but was, it is believed, defrauded. That money would have had a direct impact on the ground in the community, but did not, because we were defrauded, as were that community.
At the moment, however, it is difficult for public authorities that have been defrauded, or the PSFA or other authorities, to take the kinds of actions that the public expect against these and other much larger frauds that take place. It is extraordinary that they cannot get the necessary information to prove the offences and do not have the powers to take enforcement action or recover funds.
Part 1 of the Bill puts this right. It builds the foundational structure for a long-lasting change in how public authorities take action on fraud where they cannot do so now. First, the Bill will provide the PSFA with powers to obtain search warrants from the court to enter premises and seize evidence as part of fraud investigations. So in the skills case I mentioned, the PSFA would have been able to go into the so-called provider’s premises and seize payroll and enrolment records to prove whether it was entitled to the funding. These powers will be used only when approved by the courts, and the police will continue to be responsible for arresting suspects if required.
Secondly, the Bill contains measures for the PSFA to compel businesses and individuals to provide information where there is a suspicion of fraud against the public authority, and to penalise them if they do not. In the youth group case, PSFA could have required business records to be provided using these powers. Separately, the Bill also provides powers to allow the PSFA to request communications from telecom providers using the Investigatory Powers Act 2016, authorised and overseen by the Investigatory Powers Commissioner’s Office. When fraudsters conspire to attack the state, this power will enable investigators to connect to their network and show who is involved. The Bill also enables information-sharing between the PSFA and other parties in the course of a fraud investigation, which is vital in tackling multi-agency cases.
Thirdly, the Bill introduces the power to impose civil penalties on behalf of other public authorities against those who have committed or have tried to commit fraud. These penalties can be used as an alternative method of taking action against fraudsters, compared to often lengthy criminal prosecutions. The introduction of civil penalties for fraud means that there can be meaningful consequences for breaking the law, even when criminal prosecution is not appropriate or viable.
Fourthly, the Bill will introduce new debt recovery powers for the PSFA, so that we can get public money back from those who can afford to repay but refuse to do so. This includes powers to recover fraud-related or error-related debt from an individual’s earnings, using a deduction from earnings order, or directly from financial accounts using a direct deduction order. These are broadly similar to existing powers used across government, including by HMRC. I reassure your Lordships’ House that there will be strong safeguards in place for these powers, to ensure that vulnerability is considered and deductions are affordable and fair. The PSFA’s authorised investigators and officers will be highly trained, to the same standards as the police, for the criminal powers in Part 1 and will be members of the Government Counter Fraud Profession, which sets high standards of professionalism, ethics and integrity that members must meet.
Finally, to address some of the fraud we saw over the pandemic, the Bill will double from six to 12 years the time limit for civil claims to be brought in alleged cases of Covid fraud, giving public authorities more time to investigate complex cases relating to those who exploited a national emergency for personal gain. It is an affront that some people used the time of a national crisis to loot the public purse, and this Government are committed to taking action, of which this is the first step.
Part 2 is focused on addressing fraud and error in the social security system. Here, the Bill will modernise, extend and strengthen DWP’s existing counter-fraud powers, bringing it in line with other bodies such as HMRC. It introduces new powers that will improve DWP’s access to important data that can be used to find and prevent fraud and error more quickly and effectively and, crucially, improve DWP’s ability to recover money from taxpayers. Taking each of these in turn, first, there are comparable powers to those I described for the PSFA, which will allow authorised investigators in the DWP to apply for and obtain search warrants to enter premises and seize evidence relevant to fraud investigations. These powers will be used by specialist DWP serious and organised crime investigators. This will reduce DWP’s reliance on the police and, as in the PSFA’s case, these powers will be used only when approved by the courts; the police will continue to be responsible for arresting suspects.
Secondly, the Bill will update DWP’s information-gathering powers for investigating fraud. At present, DWP has the powers to require information from only a limited list of third parties. This does not include key organisations and sectors that could help to prove or disprove suspected fraud—for example, airlines, which might hold travel records that are relevant to investigations of fraud conducted overseas. To add to that, there is limited ability to require responses to requests to be sent electronically; currently, DWP cannot make someone provide this information digitally. This approach is somewhat outdated in a digital age and underlines that the changes in the Bill are long overdue. The Bill widens who the DWP can compel information from, and it will enable us to require the information to be provided digitally by default. This is comparable to the information-gathering provisions I described for the PSFA earlier.
Thirdly, the Bill makes provisions for the DWP’s new eligibility verification measure, which will enable the department to require banks and other financial institutions to provide crucial data to help identify incorrect benefit payments that people might be getting as a result of not meeting the rules for their benefit—for example, if someone has too much in savings, which could make them ineligible for a benefit, or if they are fraudulently claiming benefits while living abroad when they should be living in the UK. This data will mean that we can identify potential incorrect payments much sooner for key eligibility criteria.
We know that people lead busy lives and sometimes genuine mistakes happen. That is why this measure is so important, as it will help to identify not only potential fraudulent cases that require further investigation but errors too, ensuring that the DWP can correct errors quickly, and preventing people building up large debts that they then need to repay. In response to considerable misinformation about this measure, I want to stress to your Lordships’ House that under the eligibility verification measure, the DWP will not be able to access people’s bank accounts or look at what they are spending, nor will it be able to share any personal information with banks. Furthermore, this data will be considered without the presumption of any wrongdoing. No decision about benefit entitlement will be made from the data gathered through this measure alone; and, crucially, any final decision about someone’s benefit entitlement will always be taken by a human being. The Information Commissioner has noted that this proposal addresses many of the concerns the commissioner held about the previous Government’s proposals.
The fourth element of Part 2 is about broadening DWP’s abilities to punish fraudsters using a financial penalty as an alternative to seeking prosecutions. At the moment, DWP can give financial penalties only in cases of benefit fraud. Part 2 extends our ability to use them in the cases of fraud against any type of DWP payment. For example, if we have a future grant scheme similar to the Kickstart employment scheme, we will be able to ensure that that money could be recouped. This will ensure that more fraudsters committing a wider range of fraud can be dealt with swiftly without going to court.
Finally, the Bill contains new debt recovery powers for DWP. These powers will enable the DWP to recover money in cases where a person owes the department money but is not in receipt of a benefit or in Pay As You Earn employment, where there are existing powers. This will be used only where people repeatedly refuse to agree to affordable voluntary repayment terms with DWP. In these cases, the Bill will enable DWP to obtain from banks the bank statements of these debtors, to verify that they have sufficient funds to pay. Having considered this information, DWP debt enforcement agents will determine what is an affordable deduction, with maximum limits for regular deductions set out in the legislation. DWP can then recover the money from their bank accounts, through either a one-off lump sum or regular deductions. This will be done in a fair and manageable way, with time for the person to make any representation, and the right to appeal. No one will be pushed into hardship because of this action.
As a last resort, if someone owes DWP more than £1,000 and puts their money out of reach of our other recovery methods, DWP can apply to the court to disqualify that person from driving for up to two years. This is similar to the powers the Child Maintenance Service has been able to use for the last 25 years in cases where a parent repeatedly refuses to make payments to support their child, and it has proved somewhat effective in encouraging debtors to engage with the process. A court will not be able to make a DWP disqualification order if it considers that the person needs a driving licence for work or for another essential purpose, such as if the person is disabled or a carer. This disqualification order will always at first be suspended, and repayment terms will be set by the court. A person will be disqualified from driving by the court only if the repayment terms the court has set are not met without good reason. This measure is for people who have repeatedly refused to engage with DWP’s debt management system and have actively frustrated the process of debt recovery. It is an important power that is designed to bring debtors to the table to agree voluntary, affordable and sustainable repayment plans with the DWP.
We are clear that an individual keeping money to which they are not entitled is serious and will result in serious consequences. These powers ensure fairness in debt recovery, seeking to guarantee that those who are no longer on benefit or in paid employment are not treated more favourably and able to evade repayment of money owed to the public sector.
Parts 1 and 2 come with strong new safeguards, including provision for independent oversight and reporting. The Cabinet Office and the DWP will commission His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services to undertake inspections on the use of the new investigations powers that both departments are using. The DWP will make a similar arrangement with His Majesty’s Inspectorate of Constabulary in Scotland and the Independent Office for Police Conduct will handle any serious complaints that arise from the use of the new powers of entry, search and seizure for the PSFA and the DWP. The Police Investigations and Review Commissioner will deal with similar matters for the DWP in Scotland.
Separately, the Minister for the Cabinet Office will appoint an independent person to inspect the PSFA enforcement unit’s use of the powers in the Bill. Their work will complement and build on the oversight provided by the inspectorate. The Secretary of State for Work and Pensions will also appoint an independent person to oversee the use and effectiveness of the DWP’s new eligibility verification measure in line with the legislation and the code of practice. Both independent persons are required to provide reports to respective Ministers which must be published and laid in Parliament.
Codes of practice will accompany relevant parts of the Bill and, where appropriate, will be consulted on. Drafts of relevant codes will be made available to noble Lords ahead of Committee. Across the Bill, provision is made for persons subject to the powers to make representations, request reviews or appeal against decisions. These routes will be clear and provide opportunities to challenge the Government’s approach.
Many of the measures in this Bill are not novel to government. Instead, they modernise existing powers and bring the DWP and the PSFA in line with other public bodies, such as HMRC. Overall, this Bill will help deliver the biggest crackdown on public sector fraud in a generation. It is expected to save £1.5 billion over the next five years as part of wider action in the DWP’s efforts to save £9.6 billion.
The Bill delivers the biggest upgrade to the DWP’s counterfraud powers in more than 14 years. It brings in new powers to tackle fraud right across the public sector by empowering the Public Sector Fraud Authority, and not before time. Our approach is tough but fair. It is tough on criminals who cheat the system and steal from taxpayers, and tough on people who refuse to pay back money, but fair on claimants, by spotting and stopping errors earlier and helping people to avoid getting into debt. It is fair on those who play by the rules and rely on the social security system, and it is fair on taxpayers, by ensuring that every pound is spent wisely, responsibly and effectively on those who need it. I beg to move.
Baroness Finn (Con)
My Lords, it is both a pleasure and a privilege to open my remarks by looking forward to and welcoming the maiden speech of my noble friend Lady Spielman. Throughout her career, she has embodied the highest ideals of public service: courage in the face of complexity, integrity under pressure and an unswerving commitment to the public good. We are fortunate to have her voice in your Lordships’ House.
The Public Authorities (Fraud, Error and Recovery) Bill arrives with a plain but powerful ambition: to protect public money from fraud. On this side of the House, we welcome that ambition, support it and wish to see it succeed. I have a note here to thank both Ministers, but I genuinely mean it when I say how wonderfully constructive they have been and how massively informative in the briefing sessions. I also thank the officials, who have patiently responded to numerous queries and questions posed.
But let me be clear: support for the goal must not mean silence about the means. As the Minister said, fraud is theft from the taxpayer and an insult to every citizen who plays by the rules. Every pound stolen is a pound denied to pupils in our classrooms, patients in our hospitals and families in need of homes. To tolerate fraud is to tolerate contempt for those who entrust us with their hard-earned money. We must act, but we must act wisely.
Before I entered your Lordships’ House, I worked across several departments of government, including the Cabinet Office during the coalition years when my noble friend Lord Maude of Horsham led vital reforms to introduce efficiency savings in government. We learned then what remains true now: fraud is not merely a technical failure; it is a cultural one. We encountered resistance. It was not indifference exactly, but something worse: a quiet preference for ignorance; a fear that exposing long-running frauds might implicate those who should have stopped them; a culture in which it was safer to overlook than to uncover. Ambition became cautious and initiatives dwindled to a timid “proof of concept” exercise. Today it is called “test and learn”, yet 15 years later one wonders how much more learning we really require.
What of the Cabinet Office’s role in this Bill? The Government propose granting expansive new investigatory and enforcement powers to the Public Sector Fraud Authority within the Cabinet Office. These powers include the authority to compel sensitive financial disclosures, seek court warrants to enter premises and seize evidence, access personal bank records without any duty to inform those whose accounts are being accessed and impose substantial penalties. All such powers are to be exercised administratively by officials ranked no higher than higher executive officer and without explicit ministerial authorisation.
Clause 3 permits officials to compel citizens to reveal extensive financial details. Clause 7 grants powers akin to those of police to seek warrants for searches and seizures. Clauses 50 and 53 enable officials to impose civil penalties without sufficient scrutiny. Yes, the Bill proposes an independent reviewer under Clause 64 to oversee these powers, but a closer look reveals that this reviewer possesses no statutory authority to halt or reverse potentially abusive or inappropriate decisions. Even more concerningly, their terms, resources and remit are entirely controlled by the Minister whose decisions they are tasked to oversee. Such arrangements risk creating oversight in name only—an illusion of accountability rather than genuine scrutiny. The Cabinet Office’s enforcement unit, we are told, will lead this charge. But who are they? How many officials are there in this unit? To date, we have been told it is 25, but will this information be published? What expertise do they possess and what data will they use? These questions remain unanswered.
It remains entirely unclear precisely what types of fraud these sweeping new powers will enable the Cabinet Office to investigate. The Government’s Explanatory Notes suggest that the Public Sector Fraud Authority will focus on fraud beyond the traditional domains of HMRC and the DWP. Yet this raises an immediate bureaucratic contradiction. If departments currently lack the powers or resources to tackle such fraud effectively, surely the logical step would be to empower them directly. Conversely, if departments already possess sufficient powers but prefer not to use them, we risk creating a perverse incentive for them to keep straightforward fraud cases in-house while transferring politically sensitive, legally complex or reputationally hazardous investigations on to the Cabinet Office—effectively outsourcing responsibility for difficult decisions.
Even more troublingly, the Cabinet Office is under no statutory obligation to accept cases referred by other departments, and the Government have provided no clarity at all regarding which types of fraud the Cabinet Office intends to investigate or decline. Compounding this confusion, the Cabinet Office has recently announced significant staffing cuts. We therefore face the surreal scenario of departments attempting to offload their most complicated and resource-intensive fraud cases on to another department that is undergoing headcount reductions and will therefore be ill equipped to pursue them. The inevitable outcome will be bureaucratic gridlock, with challenging cases bouncing endlessly between departments, responsibility blurred, accountability evaporating and serious fraud quietly slipping into administrative oblivion.
The scale of the problem we face is staggering. The National Audit Office reports that detected public sector fraud amounted to £3 billion last year, with the true scale estimated at possibly £28 billion. Benefit payments alone lost £10.2 billion to fraud and error, while temporary Covid schemes were exploited to the tune of £10.5 billion. Yet the Bill’s impact assessment forecasts just £22.8 million as a best-case scenario in financial return from the Cabinet Office’s new powers. We cannot allow a situation where the Cabinet Office is allowed to act like a second-rate bailiff, extracting modest sums through draconian means while ignoring the massive haemorrhage of taxpayer funds that continues in plain sight.
This side of the House supports the fight against fraud, but we will not support it blindly. Our goal must be a lean, sharp, just system that deters dishonesty, recovers stolen funds and never forgets the dignity of the citizens it serves.
I look forward to today’s debate and to Committee, where this House can do what it does best: improve legislation, ensuring that it not only sounds good in a press release but works effectively in the real world. We share the Government’s ambition and we welcome the Bill’s purpose, but we owe taxpayers something far better than good intentions. We owe them a system that truly works.
Baroness Kramer (LD)
My Lords, this is not my usual field, so I shall be listening with great interest to the various speeches, including the maiden speech of the noble Baroness, Lady Spielman. Stamping out public sector fraud, including public authority and welfare fraud, is clearly a priority. These are despicable crimes that undermine our public services and, in the end, hurt the most vulnerable. However, this Bill, at least to my eyes, has some serious flaws.
Part 1 focuses on investigation of fraud outside the tax and benefits system. As I read it, I was surprised to find that it has nothing to say on whistleblowing. I am certain that, without a powerful whistleblowing framework that keeps whistleblowers safe from retaliation and leads to investigation, most bad actors will escape investigation. If the Minister doubts me on the importance of whistleblowing, I ask her to look at the speeches by Nick Ephgrave, director of the Serious Fraud Office, who is even willing to incentivise whistleblowers because they are so vital. In April, he told the All-Party Parliamentary Group on Anti-Corruption and Responsible Tax that his number one need from parliamentarians is to get him more whistleblowers.
Whistleblowers identify where in the haystack wrongdoing is hidden and provide vital evidence. The noble Lord, Lord Livermore, is more frequently the Minister engaged in debates in which I am involved. In response to a question from me in February, he said:
“I met Tom Hayhoe, the Covid Counter-Fraud Commissioner … he told me that he is considering a whistleblowing mechanism to enable the public to draw attention to abuses they are aware of”.—[Official Report, 5/2/25; col. 690.]
I ask the Minister to go back and look at this issue, because, if she talks more broadly to investigators, she will discover this is a critical area which needs to be seized upon immediately.
On the second part of the Bill, I take on board the concerns of UK Finance that the Bill risks not achieving its objectives. The role given to banks to verify eligibility for benefits and recover money seriously needs a rethink to provide proper customer safeguards. It makes no allowance for people of low financial capability, for example, nor even for those hiding funds to escape domestic abuse. I am really concerned that it creates two classes of citizen: those with full rights in our society, protected by the FCA’s consumer duty, for example, and a lower class, defined as benefit recipients, who are investigated without cause and treated as a suspect class.
Listening to the finance industry, it is absolutely clear that bad actors, especially the gangs, will have no difficulty at all working around all the new rules and programmes. The Minister must be aware that any serious crackdown on fraud has to tackle the organised crime gangs who conspire to commit welfare fraud on an industrial scale. Last year, one gang alone was convicted of defrauding £53 million of universal credit. That was a very rare success, unfortunately. Since I cannot find it anywhere, can the Minister say today what percentage of welfare fraud is the work of these organised gangs? I suspect that the number is very large.
The main tool in this Bill is to initiate fishing expeditions and, from wide experience across the fields of investigation and fraud, they are the laziest and most ineffective way of fighting wrongdoing. If anyone doubts the capacity of the DWP to get schemes such as this one wrong, look at the carer’s allowance scandal, which particularly exercises my colleagues. My noble friend Lord Palmer of Childs Hill will elaborate, but 136,730 people are at present caught in outstanding debt for carer’s allowance overpayments which were not their fault, but for which their lives are being devastated. I fear that, in the way this Bill is crafted, they and people like them will be among the primary targets, even though they never actually committed fraud; they just failed to understand impossibly complex rules or to identify the DWP’s mistakes.
The DWP must of course crack down on fraud, but it needs to be informed by best practice. On that basis, I believe this Bill needs a significant rethink.
Lord Vaux of Harrowden (CB)
My Lords, it is always a pleasure to follow the noble Baroness, Lady Kramer, who I think was rather underplaying her expertise in her comments. There is a certain level of déjà vu about this Bill, as has been mentioned. Many of us spent a lot of time debating its predecessor, under the previous Government, and it is nice to see at least some of the band getting back together.
I acknowledge that this reincarnation has been significantly improved from the last version, and the changes go a long way towards dealing with many of the issues that Members from across the House raised last time round. I hope that my desire to clamp down on fraud is well known, and I completely understand the need to try to reduce the roughly £10 billion in annual losses to fraud and error that arise in the social security system. So I broadly support the strengthening of the powers set out in Part 1, although I share some of the concerns raised by the noble Baroness, Lady Finn.
I cannot help but suspect that concentrating on the capabilities and competence of the agencies that should be investigating and recovering fraud losses would be likely to achieve more. The utter uselessness of the National Investigation Service in recovering Covid fraud losses is a good example. It seems to have cost more to run than it has recovered, and I note from today’s Times that it is about to be closed down.
Most of my comments will concentrate on Part 2, which relates to the social security aspects. First, there is the question of the proportionality of the measures. I have been struggling to understand the impact assessment; like most of these things, it is an awful lot of pages and not a lot of information—it really is time the Government got their act together on impact assessments. As I understand it, the measures will initially raise less than £180 million a year, rising to £500 million after 2030. I would be grateful if the Minister can confirm the actual number, if I have got that wrong. Set against that are the direct costs to the department of around £42 million per year, and the costs that the measures will impose on the banks that will have to provide the information, which the impact assessment makes no attempt to quantify. Can the Minister provide any update on what those costs are expected to be and whether the banks will be reimbursed for them?
That net recovery is a very small proportion of the estimated losses: 2% to 5% recovery is a very small return when set against the imposition of what is a very intrusive power that will force banks to scan all their accounts for benefit payments and eligibility indicators. It is worth pointing out that this scanning requirement is not a one-off; it is potentially effectively continuous for periods of up to 12 months, which can be extended as and when. Let us be clear that, while the banks will provide information to the DWP only on those accounts and connected accounts which meet the criteria set out, in order to achieve that the banks will have to scan all accounts to find the information. The Government already have significant powers. What assessment have they undertaken of what could be achieved if those existing powers were used more effectively?
It would be much better to prevent fraud and error in the first place, rather than after the event. Is the Minister satisfied that the DWP is doing everything reasonable to that effect? Levels of fraud and error seem extremely high. Surely there is more we could do up front, which might remove the need for some of these changes. A redesign of benefits and claim processes, such as removing cliff edges—the carer’s allowance is a good example of that—or making the process clearer and easier could go a long way to reducing claimant error. For example, we know that the pension credit forms are so long that they put people off even applying.
Then there is the philosophical question of carrying out blanket surveillance without suspicion. This raises the danger of making benefit claimants feel like second-class citizens and spied on, and that we inherently distrust them. Disability groups have already raised this concern, and today’s report from the Work and Pensions Select Committee reinforces it. According to its chair:
“We heard evidence that the process … of engaging with the DWP … too often led to mental distress … Deep-rooted cultural change of the DWP is desperately needed to rebuild trust”.
It is quite hard to see how the measures in this Bill will contribute to rebuilding that trust. Another philosophical question is whether it is right to treat fraud and error in the same way, particularly when the error is by the DWP and not by the claimant.
The Minister rightly referred to some of the new safeguards that have been introduced into this incarnation of the Bill, and I will probe a few of them. A number of codes of practice must be issued under the Bill before actions can be taken. I was going to ask, “When can we see those?”, but I am very grateful that the Minister has confirmed that we will see them before Committee. Instead, I just ask: can they be sent directly to those of us taking part in this debate, and as soon as possible before Committee, so that we have time to digest them?
The Minister has explained that only very restricted information can be requested from the banks, and I agree that that is a significant step forward from what we had before. However, that could be undermined by the enhanced investigatory power clauses, which will allow much more intrusive information to be to be obtained if DWP has reasonable grounds for suspicion that a person has committed an offence. Does the existence of an eligibility indicator under the verification processes constitute reasonable grounds for suspicion? If that is the case, it would drive a coach and horses through the safeguard of restricting the information in the first place.
Related to that, what are the consequences of an eligibility indicator being raised? What further investigations need to be carried out before, for example, a benefit is put on hold? I have heard a number of times—it was repeated earlier—that a human must be involved in any such decisions, but I can find nothing that says that in the Bill. Can the Minister point me to where that is? I have also heard nothing about what level of human interaction that will constitute and what level of seniority and qualification is required.
I also welcome the introduction of the independent reviews of the exercise of these new functions. However, the provisions for these independent reviews are somewhat lacking: they do not set out the timings, they are very limited in scope and there is no definition of what would constitute an “independent person”. In particular, the independent reviewer will not be required to opine on the proportionality of the powers and their use, which is a very serious omission. I am sure that we will revert to those matters later in the process.
The eligibility verification rights are limited to three specific benefits—universal credit, employment and support allowance, and pension credit—which, again, is another improvement on the previous version. I was quite surprised by the inclusion of the last one, as the main issue with pension credit is that it is woefully under claimed, rather than there being too much money being paid out. I am interested to understand why that was included. Those three can be added to by regulation, so are there any plans for them to be added to?
There is also an obvious loophole in the eligibility verification process, because it applies only to linked accounts within each single bank. A fraudulent claimant can easily avoid that by having accounts in different banks. Does that mean that deliberate fraud is unlikely, in practice, to be identified under this Bill? That would somewhat reduce its point. Has that loophole been taken into account when calculating the expected savings?
As the noble Baroness, Lady Kramer, mentioned, the banking industry has also raised some concerns about the Bill, including—among other things—potential conflicts with its existing financial crime duties; possible tensions between the Bill and firms’ existing consumer duty and vulnerability guidance; the diversion of resources from wider economic crime capacity; and issues around safeguards for bulk data access. I would be interested to understand what meetings the Minister has had with organisations such as UK Finance to ensure that such concerns have been, and will be, addressed.
There are lots of other matters that I could raise, but given the time, I will raise just one more: the driving licence disqualification clauses. That seems extremely arbitrary, so I would like to understand more about the logic that was applied to that and what other measures might have been considered.
I acknowledge that the Bill has been greatly improved from its previous incarnation, but quite a lot of issues remain. The Minister has been generous with her time and, as always, constructive in her approach, so I very much look forward to further discussions and debates as we go through the next stages, as well as to the maiden speech from the noble Baroness, Lady Spielman.
The Lord Bishop of Lichfield
My Lords, I am very glad to see the name of the noble Baroness, Lady Spielman, on the speakers’ list for this debate; I look forward to her maiden speech and her future contributions to this House.
We all need to acknowledge the understandable frustration, felt from government downwards, about waste in public spending and fraud perpetrated at the public’s expense. It is right that expenditure be managed carefully, ensuring that people receive support when they need it, and eliminating fraud and error within the system as far as that is possible.
At the encouragement of my right reverend friend the Bishop of Leicester, who much regrets that he cannot be in his place today, I will focus on the second limb of this Bill, which concerns individual claimants of social security. This is a matter of morality. To support people into work, where they are able; to ensure that people can enjoy an acceptable standard of living when they cannot work or to top up their low income; and to deliver a fair and sustainable social security system now and in the future: these are all moral imperatives. Addressing fraud and error—ensuring that government can recover money when required—is also a morally vital matter of maintaining public consent, which should be a welcome outcome of this proposed legislation. Put simply, our social security system must both be fair and be perceived as fair by the public.
There is clearly work to do to rebuild trust in the system, which includes the trust of claimants that support will be there for them when they need it, and that they will always be treated with dignity. As one ingredient of a fair system, we need to ensure that people receive the benefits to which they are entitled. The Government’s efforts to encourage take-up of pension credit is a good recent example of that.
There may be circumstances when benefits are left unclaimed for good reasons, but most often this occurs when people do not realise there is support available to them. If this is about access to information, we must do more to inform. If it is about stigma, we must state clearly that our social security system, like our schools or our health service, is a public good on which people should not be ashamed to draw when required.
I welcome the department’s plans to review and improve its safeguarding practices through wider reforms on disability benefits. Ensuring that people are always treated with respect is a necessary step towards earning trust, and it is particularly timely—as the noble Lord, Lord Vaux, pointed out—that this debate coincides with the publication of the Work and Pensions Select Committee report on safeguarding claimants. Fraud, error and recovery will inevitably overlap with the department’s safeguarding responsibilities, and that committee’s report highlights some of tragedies that have happened to people—made particularly vulnerable by their circumstances—who interact with a system that can often feel complicated and impersonal. I wish the Minister and her department well in reviewing safeguarding and in making the important changes needed for the sake of those people.
The expansion of social security means that millions of people are potentially within the scope of this Bill. Half of all children live in a family that interacts with the system in some form, and there is concern that expanding the DWP’s recovery powers through direct deduction orders might risk affecting children at risk of poverty. It would be good to have the Minister’s reassurance about the affordability assessments to be made before recoveries occur.
There is considerable concern too, already voiced in this debate, about removing driving licences and the comparatively low threshold at which this could happen, even if court approval must be sought. This too could impact children who are not at fault for the actions of their parents, as they might miss out on activities, opportunities and vital services if their parents are no longer able to drive—this is particularly an issue in rural areas.
At a time of competing priorities and limited financial resources, a Bill that focuses on cracking down on fraud has arrived in this House before the publication of the child poverty strategy. In the diocese where I serve, I hear more about the latter than the former, and the Government should be wary that the Bill does not inadvertently limit their room for manoeuvre in reducing child poverty.
I also wish to express some concern or caution about the risk of overreliance on automated algorithmic systems to monitor the bank accounts of welfare recipients. With any reliance on automated systems, we know that there is a chance for error, presenting a risk of false positive matches. Errors resulting in wrongful benefits investigations would have profound consequences for some of the poorest people in society, disproportionately impacting disabled and elderly people, carers, single parents and those seeking work. While occasional human error is inevitable in the maintenance of a complex system, there is a need to ensure that we harness technology appropriately and always involve people in potentially sensitive decisions affecting them.
The Government have included in the safeguards for the Bill that there will be human intervention in further investigations—of course, I welcome that—but I urge them to clarify how they will ensure that there is indeed human oversight and whether a human being will be involved in the initial decision on whether to investigate an individual.
At their heart, the issues we are considering today are not only about money, they are about people. The Bill presents an opportunity to deal with one challenge facing the social security system, and I look forward to hearing how it ties in with other important issues in that area that the Government are seeking to address.
Baroness Alexander of Cleveden (Lab)
My Lords, I too look forward to the maiden speech of the noble Baroness, Lady Spielman, and I congratulate her on her having a debate to herself in that regard.
My antecedents rather precede me: I am a Scot, and we worry about money. I am a Presbyterian Scot, and we worry even more about money. Finally, I have endured more audit committees than I care to recall. I say to the noble Lord, Lord Vaux, that I was not here the last time he got the band together. As a newbie, I am glad to come to this debate.
I concur with the right reverend Prelate, who we have just heard from, on the underlying rationale of the Bill: the importance of fairness, building trust and upholding the integrity of the system. I want to explain why I think that has come into question. The public want prudence from the Government, an attention to waste and a tackling of the criminal gangs. The Bill is not the performative legislation that we have perhaps seen too much from all sides over the years. It is about modernising the legal framework, tackling the criminals and building confidence in the system and reliability and fairness into our social security system.
I concur with the noble Baroness, Lady Finn, that tackling fraud is as much a cultural issue as a legislative one, but I also disagree with the noble Baroness, Lady Finn, that we should not concentrate power in the Cabinet Office. It is not an error to build specialist expertise to support cross-government action. Indeed, building specialist expertise is an enabler of broader action.
It has to be right that all of government has access to the powers that the DWP and HMRC already have. It has to be right that the PSFA—I will not trouble your Lordships with the full acronym—should have the statutory powers and not be reliant, as it is now, on whoever brings information to its attention.
It is also right—and it has not been mentioned much today—that the Bill strengthens the specific enforcement powers for the £10 billion lost through Covid-related fraud. I will share just one anecdote with the House on this matter. I am, as declared in my register of interests, the British Council’s vice-chair. In Covid, when our teaching exam centres were closed, the FCDO provided a Covid-related liquidity loan of £200 million. The Treasury now wants it repaid in full, and the British Council happens not to have the resources to repay. So at this week’s board meeting we authorised cuts, closures and a VS scheme to help pay back that Covid-era loan. Those British Council employees who last month applied for the VS scheme want to know that the Government are being equally assiduous in chasing down the dodgy companies which deliberately mis-sold PPE to a nation at the heart of a national emergency.
I turn to Part 2 of the Bill, which I had assumed would be the most controversial. I want to address the issues we have heard about concerning the scale of fraud. The key insight, as others have said, is that fraud is low for most benefits: for personal independence payments it is zero; for attendance allowance it is zero; for the state pension it is 0.1%; for incapacity benefits 0.3%, and so on. The fraud rate for every benefit sampled is below 4%, with the exception of universal credit: for universal credit, the fraud rate is 11%. There is limited fraud in the system, but universal credit stands out. The overall scale of overpayment each year is £10 billion: three-quarters relates to fraud and 88% relates to universal credit. That is the issue that needs to be addressed. It has to be right to bring enforcement into the 21st century and not require the DWP, as the Minister has said, to rely on 20 year-old regulations that simply are not fit for purpose in a digital age.
They are also not fit for tackling organised crime. Here, I talk about the benefit gangs. This time, I turned away from the dry DWP statistics, and I turned to the court reports, and they are both frightening and illuminating. In May last year, just after Rishi Sunak announced the election and when the business managers in this place and in the other place were horse-trading which legislation would make it onto the statute book, in that very week, at Wood Green Crown Court, there was the case of five defendants who admitted stealing over £50 million from the taxpayer. It involved 5,000 to 6,000 fraudulent universal credit claims, with some people living, as we have heard, in Bulgaria. The putative claimants received the money for just two months, and then the gang kept the rest for themselves. These false claims were backed by an array of forged documents, burner phones and photoshopped pictures. The raids on one of the defendants’ flats turned up £750,000 in cash. It was billed as the UK’s biggest ever benefit scam.
However, this was not an isolated incident. In 2022, there were similar court reports and more bogus benefit claims and money laundered through cryptocurrency transactions. In fact, in late 2022, the Public Accounts Committee was demanding action—finally, here we are.
I will sum up the concerns that have been raised about the specific enforcement measures in the Bill. It is common ground that the DWP needs to harness data. It is almost common ground that the investigative legwork should not fall primarily to the police but to trained investigators. It is largely common ground that we need to move away from self-reporting by claimants as the basis for eligibility. I say to the noble Lord, Lord Vaux, that, quite simply, the public want the Government to check claimants’ eligibility.
So the question is whether we can be assured of the proportionality and effectiveness of the eligibility checks. Many of the fears that have been raised can properly be allayed, but there are one or two that I want to touch on. The DWP will not be able to access bank accounts, yet we must tackle the gangs. I disagree with the fatalism of the noble Baroness, Lady Kramer, that the gangs will evade anything that we do so we should not bother with deeper investigatory powers. The reality, as we all know, is that fraudsters have, in recent years, become increasingly sophisticated in the ways that they steal people’s money. The banks have risen to that challenge when it comes to their own customers, and we are simply asking them to step up in the same way on behalf of the taxpayer.
I urge the Government—this has come up—to be careful in the selection of the individual who oversees eligibility verification measures to ensure that they are independent. All noble Lords know that it is not easy to criticise a government department from the inside. Look at the experience of prison inspection over two decades: it is a challenge to speak up. I suggest that it is a role for a courageous leader, and I encourage the Minister, my noble friend Lady Sherlock, who will sum up, to look for someone like herself. In her former life, on the advocacy side, she was a fearless champion of fairness. In her summing-up remarks, I would welcome her assurance, as we have heard today, that the independent person’s annual report will be laid before the House and properly debated.
In conclusion, it must be right that fraud in the public sector is an evolving challenge and that legislation needs to keep pace. It is right to enable better recovery where public money has been stolen or overpaid. People want to see us tackle fraud, waste and criminality. By tackling those who exploit the system and recovering the money for those who need it, we will, as the right reverend Prelate said, uphold the integrity of the system and trust in government. I commend the Bill to the House.
Lord Garnier (Con)
My Lords, it is a pleasure to follow the noble Baroness. I hope I match some of her enthusiasm, but she may be disappointed.
I begin by drawing attention to my practice at the Bar, which includes acting for and against the Serious Fraud Office. It additionally involves advising on civil fraud matters. I am also the patron of the Fraud Advisory Panel—a charity with offices at and financially supported by the Institute of Chartered Accountants in England and Wales, and supported by a number of law, accountancy and forensic investigation firms, and related professionals and academics. In essence, it exists to improve professional and public awareness of fraud and what can and should be done about it.
Last month, the Home Office Minister, the noble Lord, Lord Hanson of Flint, kindly gave the keynote address at the FAP’s annual fraud conference and I am very grateful to him. I hope that noble Baronesses on the Treasury Bench will pass on my thanks for his taking the time and trouble to set out the Government’s thinking and intentions on tackling fraud.
I will not do much more today than express a few platitudes and then, in agreement with my noble friend Lady Finn, remind us to be careful what we wish for. As the noble Baroness, Lady Alexander, indicated in her powerful speech, fraud is an insidious crime. Because there are no broken bones or blood on the carpet, because it frequently requires a high degree of ingenuity and because, as often as not, the fraudster is mysterious—perhaps hiding in plain sight or far away behind a computer screen—the crime of fraud does not seem to attract public disapproval in the same way as crimes of violence. I regret that, sometimes, fraudsters are admired for their brains while their criminality is forgotten or ignored. In short, fraud is a nasty and brutal crime that can ruin lives, hurt the vulnerable and cause untold economic misery. Whether it is committed, and its consequences felt, here or abroad, it is universally to be condemned, as are the dishonest spivs and criminals who carry it out. Fraud accounts for 40% of crime in this jurisdiction.
In welcoming my noble friend Lady Spielman and in looking forward to her maiden speech, I warn her that I have, over the years, become something of a cracked record on the subject of economic crime and the need to increase the weapons that this jurisdiction has at its disposal to deal with it. I have argued long and hard, but not always successfully, for the increase in the ambit of the criminal “failure to prevent” regime. The Economic Crime and Corporate Transparency Act 2023 introduced provisions relating to the corporate failure to prevent fraud offences. Those provisions will come into force this coming September, so no one could accuse this or the previous Government of undue haste.
However, those provisions will affect only large organisations, defined as those meeting at least two of three criteria: a turnover of over £36 million, a balance sheet of over £18 million, or more than 250 employees. That, as I have never been slow to point out, covers only 0.5% of the United Kingdom’s corporate economy and is the equivalent of prosecuting only burglars taller than six feet six. I apologise to the noble Lords, Lord Vaux and Lord Cromwell, and to the noble and learned Lord, Lord Thomas of Cwmgiedd, because they have heard me make this tired joke endlessly, particularly during the Committee and Report stages of the Economic Crime and Corporate Transparency Bill. I am sure that they are heartily sick of it, but I am still unconvinced that that limitation was either necessary or sensible.
There are many large artillery pieces before us in the Bill, which are designed to smash fraud in the welfare system, in government more widely and in other sectors. But do those guns come with gunners and shells? In imperial China, the warlords who fought their local rivals knew that they could succeed because they had no fear of an empty cannon. If their revolt was against the Emperor’s rule, they could comfort themselves with the thought that heaven is high and the Emperor is far away. Local and effective action is required to defeat fraud. Is this Bill, like most criminal justice Bills, far too long, overcrowded with extraneous provisions and designed for its rhetorical effect rather than to improve the investigation and prosecution of fraud?
Until the police outside the City of London Police are once again resourced, staffed and trained to understand and deal with fraud—to gather the evidence and to present it coherently to the Crown Prosecution Service for it to prosecute—the types of fraud that do not currently attract the attention of the SFO, which is concerned with large and complex financial crime, will, I fear, continue to go largely ignored or be brushed aside. The duty officer at the police station will continue to sigh sympathetically and simply tell the poor victim to see a solicitor. If a large proportion of the 40% to which I have referred is beyond the capacity of the police to cope with, we will have a problem and your Lordships’ House should require some convincing that the measures in the Bill, well intended as they may be, will hit the target. Have the Government audited the work of the Public Sector Fraud Authority and do they have any empirical evidence that increased Cabinet Office involvement will achieve what is promised by the Bill?
The noble Lord, Lord Vaux, in his delightfully quizzical way, made some highly important and effective points, wrapped up in questions that this Government must answer. We all look forward, either later today or in Committee, to his receiving the answers.
Finally, I refer to some arguments raised in the other place about state interference in the private affairs of others without adequate due process. To take just one example, the now Independent but former Labour Member of Parliament, Zarah Sultana—so no political ally of mine—complained when the Bill was being discussed there that there are
“powers in the Bill that force banks to trawl through our private financial data, scanning for indicators of fraud and error—indicators that are not publicly disclosed—and flag those individuals to the Government. These powers will allow the Department for Work and Pensions to seize money directly from bank accounts without due process, suspend driving licences and even search properties and personal devices. They are not the hallmarks of a free and democratic society but the tools of an Orwellian surveillance state”.—[Official Report, Commons, 3/2/25; col. 611.]
Whether that Member of Parliament is exaggerating or not and whether she is right or wrong, the Government must meet those arguments with seriousness and persuade us that they are behaving in a proportionate and humane fashion in putting those measures into the Bill.
Like my noble friend Lady Finn, I am concerned that Ministers are giving themselves powers to take punitive actions without the intervention of the courts or adequate ability for respondents to make representations on their own behalf. This is not just a question of process but of constitutional propriety.
Finally—this question has been raised on a number of occasions this afternoon—will the Department for Work and Pensions’ driving disqualifications affect the cost of drivers’ post-disqualification vehicle insurance? We need clarification on this so that we are not double penalising those who fail to pay their DWP debts.
Lord Rook (Lab)
My Lords, I support the Bill and thank my noble friend Lady Anderson for her opening remarks. I am grateful also to other noble Lords for the sizeable support for the urgency of our situation and the aspirations of the measures in the Bill. I also look forward to the maiden speech of the noble Baroness, Lady Spielman, in just a few moments.
A hero of mine once pointed out to me that all financial documents are moral documents, and all financial policies are moral policies. While the measures that this Bill seeks to address are clearly fiscal, the motivations are rightly and justly moral. In the time available I will limit my remarks to the first part of the legislation.
I spent much of the Covid pandemic working with charities and churches, faith communities and local community groups, supporting the most vulnerable members of our community. While these organisations spent huge amounts of time and money to ensure that neighbours had food and pharmaceuticals, and worked to reduce loneliness and isolation and increase take-up of the Covid vaccines—among other heroic acts of service—other, unscrupulous actors took every opportunity to pick the public pocket, fraudulently redirecting essential emergency funding, purposed for the most vulnerable, into their own get-rich-quick scheme.
In a tragic turn, some of the same charities and community groups that saved lives in the pandemic have not themselves survived the Covid recovery. While these groups faced increased costs and diminishing donations, even greater demand for their services and near devastating cuts in government funding, the vast majority of those who defrauded the Government continue to enjoy the benefit of their ill-gotten gains, collectively to the tune of almost £10 billion.
Although, according to the NAO, more than £4 billion was lost through fraud and error through the Bounce Back Loan Scheme, and almost the same amount through the Coronavirus Job Retention Scheme, for many charities bouncing back has been altogether more difficult, and in some cases, impossible. In the longer term, many former employees in voluntary sector and civil society organisations have not retained their jobs and have been subject to redundancy. More worrying still, as the noble Baroness, Lady Finn, remarked, a criminal culture of fraud has been cultivated during and since those Covid years. The National Audit Office cites that this type of fraudulent activity has only grown in the four years since, and without action, it will clearly continue to do so for some time.
Decisive action is clearly needed, and the measures outlined in the Bill are precisely what is needed. I agree wholeheartedly with my noble friend Lady Anderson when she says that this legislation is both “tough and fair”.
The measures in the Bill are timely and necessary. They will enable the Cabinet Office to deal more effectively with cases of fraud and error outside of the benefits and tax systems. I agree with the noble Baroness, Lady Alexander, that it makes a great deal of sense to give these powers to the Cabinet Office, and to develop the necessary expertise to deliver them. These powers and processes, readily available to certain other government departments, will provide the Cabinet Office and Public Sector Fraud Authority with the capacity they need to pursue those who perpetrated Covid fraud, along with other instances in the future.
I hope that, at a time when all noble Lords are anxious to protect the public purse, this legislation offers a route towards effective action and an efficient means of redress. By providing the Cabinet Office and the PSFA with the necessary powers for information-gathering, dissemination of information, search and seizure and the collection of communications data, we will enable the Government rightly and fairly to identify where significant fraud has taken or is taking place.
By providing the rights and approving the methods by which to recover these moneys lost to fraudsters, and by providing a framework for Ministers to impose civil penalties, we empower the Government to take action to recoup losses and ensure that justice is done. Furthermore, as has already been pointed out, if banks are using ever more sophisticated digital resources and capabilities to reduce the painful impact of fraud on individual members of the public, it follows that government should work with banks to reduce the negative impact of fraud on the public more broadly.
By prolonging the timeframe within which Covid fraud can be investigated and the perpetrators dealt with, we can maximise the moneys returned to the public purse, bring to book those who continue to benefit from a crime against their country and their neighbours, and send a clear message that a toxic culture among some, whereby fraud is considered a lesser crime, will not be tolerated—without breaking bones or spilling blood, as the noble and learned Lord just said. As I understand it, only £1.5 billion of the Covid fraud moneys has so far been recovered, which means that there is a lot more to be done and a lot more time is needed.
Finally, as already stated, these measures are tough and fair. The Government’s insistence on oversight and safeguarding requirements is welcome and necessary. It clearly makes sense to use legislation such as the Police and Criminal Evidence Act and models of investigation and action that are established in law and already effective in practice. The proposal to use the HMICFRS as a specialist inspectorate, along with the appointment of an independent chair and oversight team in the PSFA, should provide proper oversight to ensure that the Bill is implemented effectively and fairly.
At a time when millions rely on food banks and wider social support from the kind of charities and civil society organisations that we have mentioned earlier—and which served so faithfully through the pandemic—every penny stolen from the Government is a penny that cannot be used to help the most disadvantaged to escape poverty. Those who have defrauded the public purse are not simply stealing from the Government’s bank account; they are stealing from their neighbours, from those most in need, from those who are more deserving of our support and most in need of our care. This Bill seeks redress at least some of the damage done by those who have all too easily defrauded the public in years gone by; puts vital measures in place to confront a worrisome criminal culture which has become all too prevalent in our country; and provides a means by which to deter and deal with such behaviour in future.
With this, we return to the start. Financial documents are moral documents, and financial policies are moral policies. As noble Lords together, I hope that we will provide moral leadership in passing this Bill. I commend it to the House.
Baroness Fox of Buckley (Non-Afl)
My Lords, I am sympathetic to the Government’s aspirations to tackle fraud and to reclaim money, in effect, ripped off from the public purse. Whether it is those grants for fake community schemes mentioned by the noble Baroness, Lady Anderson of Stoke-on-Trent, at the beginning or the more mundane benefits cheats, there is nothing more galling for the public than people who exploit the system. For those who work their guts out and struggle to make ends meet to see a minority claiming benefits that they do not have a right to and yet seeming to have a better standard of living than the people who are working so hard, it can be and is infuriating.
Yet I have some serious reservations about how the Government are approaching this, and parts of the Bill, at least, feel like a sledgehammer to crack a nut. There is a nagging feeling that the Government are going after low-hanging fruit and that it has become a distraction from the real culprits and deeper problems—indeed, some dodgy schemes created or allowed by the DWP. In the recent furore about the apparent ease with which some could use the Motability scheme to access fancy cars, for example, and to get state-paid insurance, excise duties, servicing and breakdown cover, the upset was, of course, not about a scheme that allows those with disability to access transport to aid their independence—the British public are fair like that; they want that. Rather, it seemed to me that the upset was because legitimate systems were set up by the private company that ran Motability that were there to be played. It was not fraud, but there were lax assessments and a management who never queried why its customer base swelled by 14.7% in the last year, and executives who were awarded eye-watering pay bonuses and who boasted that their scheme was the largest car buyer in UK and doing a public service by promoting electric vehicles to help deliver the transition to greener transport. Maybe that is why the Government turned a blind eye to what obviously needed to be tightened up. I therefore think that there is more going on when it comes to welfare being exploited than this Bill sometimes allows.
When I first heard about the Public Authorities (Fraud, Error and Recovery) Bill, no disrespect, but it sounded a bit dull, technical, workmanlike, and I thought, “I won’t bother with that; I’m not going to get involved.” The problem was that I then read it. There is a good reason why it has been labelled a Big Brother deal, a snoopers’ charter allowing mass surveillance of those who get means-tested benefits—we heard some of the concerns from the noble and learned Lord, Lord Garnier. I agree that one of the most contentious parts of the Bill, as we have heard from other noble Lords, is the eligibility verification measures, which, frankly, I find quite worrying.
The Government seem, however, to be quite matter of fact about this new requirement ensuring that banks and financial institutions trawl through their datasets to highlight where someone may not be meeting the specific eligibility criteria for certain benefits. Apparently, the attitude is that if it helps the DWP identify incorrect payments and verify or otherwise claimants’ entitlement to public money, it is okay—that is the justification—but I feel queasy. I also think that it is peculiar that we think it is okay for the DWP to outsource the dirty work to private third parties that are, first, unaccountable to the public but also being forced to do a job the DWP should be doing itself. Coercion is involved; the banks do not have a choice. They are not being asked whether they want to do this. They will be served with a special eligibility verification notice setting out the specific information that the DWP requires, and there will be penalty notices for non-compliance. This seems an example of huge state overreach. It will also mean that banks, building societies, et cetera will have to trawl through all account holders’ databases to identify which match search criteria supplied by the DWP—criteria, by the way, which are not available to us as legislators to scrutinise, nor, in fact, to the banks.
Therefore, I understand why Big Brother Watch, Privacy International and other civil liberties organisations have invaluably raised the alarm about what have been labelled “bank spying powers”. Ministers have responded by suggesting that this is alarmist hyperbole—a kind of “Nothing to see here”.
I appreciate that this Labour Government have drafted this Bill more tightly than the previous Conservative Government’s version. Yes, it is good that the Bill limits the powers of eligibility verification notices to request only information about accounts in receipt of three named benefits—that is good. However, from reading the Explanatory Notes it is clear that, while initially only those benefits will be looked at, the Bill contains the authority for the Secretary of State to expand the range of benefits covered at any time in the future, with Parliament reduced to a nodding-dog status rather than us being able to debate it.
I am sure that all these details will be subject to debate and amendments in Committee, but for now we should take a step back and note that, whatever smoke and mirrors the Government deploy, the fact is that some people on benefits—as well as, by the way, people with associated accounts, who may be their carers or guardians; that is, account holders who are not even on benefits—will be subject to having their private financial data pre-emptively monitored, intruded on by banks and other financial institutions, in case they are involved in fraudulent activity, all without their knowledge and all because of coercive orders given out by the state.
In the other place, there was an interesting amendment tabled by Labour MP Neil Duncan-Jordan. He sought to limit the exercise of an EVM to cases where the welfare recipient was suspected of wrongdoing and expressed concerns about
“the slippery slope of compelling banks to act as an arm of the state”.
The Government’s rebuttal of that amendment was revealing. Mr Duncan-Jordan was told that this would “undermine the measure entirely”, as powers in the Bill are not intended to deal with suspected fraud but to
“help check that claimants are meeting the criteria for their benefit and to detect incorrect payments at an earlier stage before any suspicion of wrongdoing has arisen”.—[Official Report, Commons, 29/4/25; cols. 243-251.]
This is suspicionless surveillance, which I do not think is a good answer to the problems that we are trying to tackle.
I argue that the Government should note that, on principle, we should not intrude on citizens’ bank accounts without very good reason. It risks an important commitment to the “innocent before proven guilty” point by treating all those on certain benefits as would-be criminals by default. Some might say, “Civil liberties be damned: it is all worth it to crack down on cheats and reclaim all that misappropriated money”. However, we must remember that, even by the Government’s own analysis, if this measure works—this unprecedented bank intrusion—it is expected to recover less than 3% of the estimated annual loss to fraud and error.
Beyond bank spying, there are parts of the Bill that also make me gulp. I will not go into most of them, but does the Minister think that boasting about the use of non-criminal penalties is appropriate? It is explained as a benign way of reducing the burden on the courts, which can be costly and time-consuming, and that civil penalties will show that there are meaningful consequences for breaking the law, as we heard at the beginning, even when criminal prosecution is not achievable—that is, there is not sufficient evidence to get a conviction. Should we be welcoming this non-optional use of civil penalties because they have a lower burden of proof, being on the balance of probabilities rather than beyond reasonable doubt? It is easier to convict and find someone guilty if due process is sidelined.
Other people have mentioned the danger of aligning fraud and error. Even though the Government go to great lengths to distinguish between them, when it comes to detection and recovery they are indistinguishably punitive. Also, too often, as we have heard from others, overpayment errors are the fault of the DWP, yet little attention is paid to this failure in the Bill. A freedom of information request has revealed that, in 2023-24, nearly 700,000 of the new universal credit overpayment debts entered on to the DWP’s debt manager system were caused by government agency mistake. Yet this Bill’s powers focus on making claimants pay the price. In an insightful article, Siân Berry MP quotes—someone whom I do not usually agree with—the CEO of the Public Law Project:
“No one is expecting the DWP not to make any mistakes. However, it is incumbent on the department to take responsibility for those mistakes, rather than pushing that burden onto people it should in fact be supporting”.
While this Bill is keen to punish even those who make unintended errors—perhaps not supplying the correct paperwork or missing deadlines—the Government could be accused of equal negligence.
In reply to lots of the issues raised today, the Government will tell us that much of the detail on safeguards, procedures, appeals and fines will be contained in three key codes of practice, yet not even drafts of those codes of practice were published before the Bill finished in the other place, and we will not get them—if we do—until Committee. This breaches the spirit of the official Guide to Making Legislation, which sets out the procedures by which a code of practice should be made available in order to properly consider the appropriateness of statutory provisions. We do not have them. I say to look to ourselves before we start overpunishing the most vulnerable.
I hand noble Lords over to someone far more edifying. I am delighted that I will be followed by the noble Baroness, Lady Spielman. I have long admired her and often agreed with her from afar. I hope that her credibility will not suffer from my endorsement, by the way—she may feel free to distance herself. I look forward to hearing her maiden speech and many speeches that she will make in the future.
Baroness Spielman (Con) (Maiden Speech)
My Lords, like so many who have stood up here for the first time, I am profoundly aware of the privilege it is to speak here and of the importance of using that privilege responsibly and well, for the public good. I have much to learn from all noble Lords.
I am especially grateful to my supporters and my mentor—the noble Baroness, Lady Wolf of Dulwich, and my noble friends Lord Finkelstein and Lady Bloomfield of Hinton Waldrist—and many other noble friends. I am beginning to understand the strength of collegiality and mutual support that characterises this House, and I hope that I will succeed in upholding this.
I sound very English, and I bear a German surname, but I come here with connections to many parts of the UK. My father was English, from the Midlands, and my mother is Irish. I was brought up in Glasgow, though I lost my childhood accent when I came south to study. I also came to know something of Wales over seven fascinating years on the board of the Wales Millennium Centre.
I am here because I have spent over 20 years working in the interests of children and young people. After some years in investment banking, I recognised—slightly belatedly—that my real interests lay in education above all else. I spent seven years as part of the founding management team at Ark Schools, an excellent academy trust, then nearly seven years as chair of Ofqual, the exam regulator, overseeing a full programme of qualification reforms. Most recently, I served for seven years as Ofsted chief inspector, where we made an inspection model based on professional dialogue, grounded in evidence and emphasising educational substance and integrity.
It may be a surprise that I am making my maiden speech on this Bill, but Ofsted inspects many services for children and young people and, in some cases, regulates them too. In its work, Ofsted sees many excellent things: often great services run by principled and highly skilled people, but also things that we would all wish did not happen and tend to avoid talking about, including fraud. More generally, Ofsted does sometimes have to report findings that are profoundly uncomfortable for those whose failings are exposed.
Incompetence is one dimension; ethical slippage is another. I use that term because fraud, which is the main focus of this Bill, sits at one end of an ethical spectrum. Some behaviour can be considered unethical to a greater or lesser extent. For example, it is worrying when the interests of children are subordinated to those of adults, contrary to the principles that underlie the policies of successive Governments. It is not criminal, but it can harm children. It is shocking that there are a few people in control of children’s education and welfare who choose to operate outside the law, sometimes even after a criminal conviction for the same offence. When ethical slippage is normalised, it becomes harder for other adults to sustain their own purpose and integrity. Cultures are corroded, and actual fraud becomes more likely.
To spell it out, when people see others around them successfully cheating a system, at least three bad things happen. First, and most immediately, it gives people an incentive to join the cheaters. This costs the public purse and the taxpayers who fund it.
Secondly, it corrodes mutual trust in communities. A sense of community derives in large part from a social contract founded in reciprocity: if we no longer believe that those around us will contribute to mutual support when they are able and draw on support only when they need it, we lose some of our sense of community. My noble friend Lord Finkelstein wrote very well about the importance of reciprocity in the Times this week.
Thirdly, we become cynical about public authorities if we see them as incompetent and ineffective at preventing, detecting or sanctioning the behaviours that are undermining our sense of community. A loss of confidence in public authorities is destabilising for government and hard to redress. Low mutual trust in communities and in government is not conducive to individual happiness.
All this makes it important to address fraud and error promptly and effectively, and I welcome the efforts of successive Governments to strengthen this work. Deterring fraud requires a high likelihood of detection, as well as meaningful sanctions where fraud is found.
I will not repeat what has been said by others today, but important points have been made. I will make a few observations from my own experience, having had ultimate responsibility for the regulatory sanctioning process in a range of cases.
The protections for individuals are, of course, very important, but they must be proportionate and properly balanced with a legitimate public interest of deterring and sanctioning fraud. Where protections are extensive and elaborate, the complexity and cost of taking a case of suspected fraud through to its conclusion are high. This can contribute to the creeping inertia highlighted by my noble friend Lady Finn.
For individuals, those strong protections can mean longer processes, and protracted processes are in themselves more stressful at the receiving end. If it becomes even more expensive to investigate a case, public authorities are forced to prioritise the most blatant and expensive cases over lesser and more marginal cases. For example, where the total loss from a fraud is small in absolute terms and where any meaningful recovery is unlikely, it is harder for a public body to justify the cost of investigation and lesser cases are pushed down the queue. Yet inaction in the lesser cases—the broken windows, if you like—still triggers the undesirable social and economic consequences that I have already talked about.
The aggregate benefits and costs of embedding strong individual protections must therefore be regularly reviewed and weighed against the wider public interest, not just in financial terms. This should, of course, include regular system-level sense-checking, and swift adjustment of schemes and processes where needed.
The agencies and bodies that do this difficult work have to be well supported. Among the millions of decisions made by public authorities, there will always be difficult and borderline cases. Where, say, a claim in such a case is properly refused, it can be easy for a disappointed claimant to paint the public body and the individual decision-makers as soulless and unfair. Yet that authority and its staff should not be casually vilified. True fairness to all citizens, young and old, and maintaining that all-important social contract, depends on those people having the skills and confidence to make those difficult calls—humanely but without partiality.
I emphasise to noble Lords that the success of these well-intended reforms depends on collective support for the people who carry them through. Without this, the reforms could come to little.
To end, I thank your Lordships for listening to me. My watchwords in my previous life were “substance and integrity”, and they will continue to be my watchwords here.
Baroness Coffey (Con)
My Lords, it is a huge privilege to follow my noble friend Lady Spielman after her exceptionally thoughtful, insightful speech to the House, indicating very clearly the experience she will bring.
It is no surprise that somebody obviously very bright who did a mathematics degree at Cambridge University became a chartered accountant. I understand she is super-fabulous at XL spreadsheets, a skill I am sure we can use to interrogate all sorts of statistics coming out. After a successful career in finance, she saw that particular moment that called her to try to improve lives, particularly those of young people. She took on a master’s, I think it was at the University of London’s Institute of Education.
Most people will know my noble friend Lady Spielman from her role as the chief inspector at Ofsted, but she also spent five or six years as chair of Ofqual. Speaking to people who worked with her at that time, one of the things that they particularly valued about her was her ability to bring together a top-class board to try to help through some of the challenging times and to make sure that Ofqual continued to be there, focused on the quality of education and, importantly, the young people it was there to serve—substance and integrity coming through again, as we saw in her role at Ofsted. My noble friend said to me that, in essence, making sure that children got the best start in life was key, and she believed that the way to achieve that, as we saw, was substance and integrity in the education they had, so that they were well prepared for the future.
We saw this in a different way because, before then, my noble friend had been a founding member of the Ark Academy. Anybody who has been to an Ark Academy school will know how brilliant they are, so that is a lifelong legacy of which she should be rightly proud. Perhaps going to Ofsted may have seen a slightly different approach on perhaps the harder side of some aspects of education, but I think that experience of what could be done is why we have seen the number of schools that are now excellent rise significantly. We have seen the educational attainment of children rise, which is not solely due to my noble friend, but, as a previous colleague of hers said, nobody knows education better in the round than my noble friend Lady Spielman.
I think it is fair to say that I had limited interaction with my noble friend when I was a Minister. I remember a couple of discussions and all I will say is that she had certainly acquired the teacher’s look. My parents were both teachers. She had a warm smile, as we have seen today, but she knew her stuff and she also knew how to get her point across.
Outside this House, my noble friend is currently a trustee of the Victoria and Albert Museum. She is obviously a lady of culture, but there is another element that I appreciate. My former MP is in this House as my noble friend Lord Young of Cookham. He used to be known as “the Baronet on a bike”. Well, we now have a Baroness on a bike. There is almost nowhere that my noble friend will go without it involving two wheels rather than four.
We saw in the quality of the debate today how my noble friend will contribute to many issues, and it is now to that that I turn. This Bill is important and I welcome the fact that we finally have something to get going. I say that with genuine passion and I congratulate the Government on getting under way. I am conscious that, under my Government, while I set out a strategy three years ago in May 2022, it contained the classic phrase “when parliamentary time allows”, and it was a frustration of mine that we did not get it going until quite late on and, as I will explain, in my view some of the measures had changed since I was in office as Secretary of State for Work and Pensions. It felt somewhat, to be candid, as if they had been watered down. That might be in recognition of some of the issues raised across this House, but, as the tone of my speech I hope will show, I do not think this Bill goes far enough, and I will be encouraging the Minister to look again at what they could perhaps do.
Let us get some statistics right. It has been well said by the noble Baroness, Lady Fox of Buckley, that we should think about where the DWP has not made sure that people have the money they are entitled to. I think that is in the region of £1 billion per year, 0.4% of the £292 billion that DWP paid in the last financial year. The figures are stark. I congratulate all the people at DWP; I am sure Ministers will take credit for it, and that is okay, but I know there is a great legacy of activities that we got under way, recognising that it was simply unacceptable to have fraud in our system of well over £7 billion. The figures that came out this morning show that fraud is estimated to be £6.5 billion, of which claimant error is £1.9 billion and official error for overpayment £1 billion. That fraud has come down from the previous financial year, from £7.3 billion for fraud and £1.6 billion for claimant error, so, unfortunately, claimant error appears to have gone up, as indeed has official error, in cash terms.
It is easy to get into stats about percentages and similar, and I understand why, but cash is real. When I was at the department, I probably got some of the policies that were presented to us today and I said, “We have to go further, because this is real money”. It is the difference about whether you build a hospital or not. It is the difference about the policy that has now happened about winter fuel payments. It is the difference about aid overseas. It is the difference—call me a traditional Conservative—about actually not spending that money but reducing our debt mountain and therefore some of the interest that we pay. Of course, it could then lead to other uses of spending, but it is important that we recognise that this is real cash.
That is why I am keen to point out that I understand why people have concerns about the variety of powers. I do not intend to comment so much on PSFA, but I hope the Government will take the opportunity to make it a slightly better, snazzier snap, as it were, in terms of making sure that the public know that we are actually serious as a Parliament about recovering money from criminals. Some of the powers that I have heard about seem somewhat draconian. However, given what I am about to say, perhaps I will not be quite so sceptical when we go through Committee.
With regard to the other significant amount, that is where the proposals—as has already been caught by the noble Lord, Lord Rook, and the noble Baroness, Lady Fox of Buckley—are actually about trying to avoid claimants making errors in the first place, although the definition of claimant “error” can sometimes be a bit generous, rather than being “fraud”. Nevertheless, we should do whatever we can to prevent people not necessarily having the right claim and make it easier to make sure that their records are up to date, otherwise we end up with the uncomfortable situation with, for example, carer’s allowance overpayments and people being expected to pay back a lot of money for not realising some of the changes. If there are ways that we can do more of that, that will be helpful.
I know the DWP already has the powers to go into HMRC and PAYE, and that has helped to tackle some of this, but powers are necessary to go further. As I say, even just the debt owed at the end of the last financial year was nearly £10 billion, and that is still a substantial amount of money that is owed from benefits.
In terms of thinking through, I could go on about, frankly, callous criminals trying to use the welfare system as a cash machine rather than thinking of the most vulnerable, whom it is there for. We need to make sure that this money is well spent and reaches the people that it is supposed to.
I know that Covid was particularly difficult. I am not going to go back over Covid history, but I will point out that the DWP has been good at trying to absorb and use technology. For example, over just one weekend we managed to stop £1.9 billion going to organised criminals—money we would never have got back. The DWP successfully prosecuted a gang for fraud that involved only—sorry to sound glib about it—£68 million. Nevertheless, it is that sort of sophisticated approach that has led to the DWP upgrading its powers and use of technology to make sure that taxpayers’ money goes to the people Parliament has decided deserve, need and should have that money. It is vital we keep that in mind.
There are a variety of things that could be done to identify and stop abuse of the system through retrospective claims and similar. It is important we continue with that.
On some of the powers people may not be aware of, we—sorry, I mean the DWP; it is still in my heart and my DNA—have the powers to go after named individuals, but it is a very time-consuming process. This is approach is intended to be somewhat more comprehensive, and this is why we need to go further.
Government technology has evolved so much, but the same is true for the criminal. The banks have written to us with their concerns about potential conflicts. I can assure the banks that there is no conflict concerning a Government and a Parliament that want to stop criminals getting money to which they are not entitled—money that has the potential to improve people’s lives.
There is one thing I agree with the banks on. The risk with the legislation as it stands is that could be too easy for criminals to quickly find a workaround that may not necessarily be obvious. One of the gaps in the legislation is that it tends to go after the bank accounts that benefits such as universal credit are paid into. I do not know about other noble Lords, but I have at least four bank accounts, and I can move money between them within seconds. These are issues we were looking to address, and I am not sure if they are covered in the Bill. You would be surprised to learn how many people—British citizens and others—are getting benefits in this country but are not living here and spending that money abroad. The Government should have access to such approaches, so that they can deal with this issue comprehensively.
As the noble Baroness, Lady Anderson, said, this is not about presuming someone is guilty. The issue at the moment with getting these extra bits of information is that you have to demonstrably show that you think the person is guilty. There is a mixture of issues at hand. There may be concerns from the ICO but, as I say, this is about taxpayers’ money that could be used better.
There is also a gap. I do not know why the DWP is not being given arrest powers, like HMRC. A lot of this legislation is supposed to be aligning the powers available to everybody, so I hope we can address that.
I am probably out of step with many others in the Chamber in this regard, but let us think in a different way. The British Crime Survey is about how people perceive crime—how they feel that they have endured crime—and 40% of crime now is fraud. We have done something to address that by making banks pay back money that perhaps should not have gone out of people’s accounts. Nevertheless, do not be surprised that fraud happens, but be pleased to some extent that the figure for fraud and error is now 3.3%. I would like to see it a lot lower, and a cash figure put on it, but we should be careful. There is a lot of scaremongering, but I genuinely believe that the British public want to make sure that fraudsters and criminals do not get a penny, and that the money goes to the most vulnerable.
Lord Sikka (Lab)
My Lords, it is a pleasure to follow the noble Baroness, Lady Coffey, and I take this opportunity to congratulate the noble Baroness, Lady Spielman, on her splendid and insightful maiden speech. I look forward to hearing more from her in this House.
A focus on fraud detection, prevention and recovery is most welcome, but I seek some clarity in this Bill. Since the abolition of the Audit Commission, the focus on efficiency and effectiveness of local government spending has been diluted. If we have not got the appropriate regulatory structure for public bodies, it is very difficult then to impose another structure and say that we are somehow going to deal with fraud. We have to remember that the public sector is not hermetically sealed from the private sector, and that the proceeds of fraud always go through financial institutions. When we look at those, we find that the regulator’s public interest duties are increasingly eclipsed by a duty to promote industry, growth and competitiveness.
The experience of tackling fraud in this country shows us that that is secondary to political conveniences. For example, existing laws are not really enforced, and successive Governments have gone out of their way to protect crooks. We are still waiting for an investigation into the 1991 closure of the Bank of Credit and Commerce International. It has not even begun.
In 2012, HSBC was fined $1.9 billion in the US for money laundering. The then Chancellor, George Osborne, and regulators combined to urge the US authorities to go easy on the bank. There has been no UK investigation into that to date. Despite requests which I made ever since I have been in this House, no statement has been made to explain the cover-up by Governments and why they tolerated criminal conduct by HSBC.
Frauds at HBOS going back over 20 years have yet to be investigated. The FCA, the SFO, the police and the Treasury passed the buck to Lloyds Bank, which promised a report by 2018. To this day, no report has bene published. In Written Answers to me in this House, successive Ministers have excelled at doing absolutely nothing.
There were fewer than five prosecutions of the enablers of tax evasion in 2023-24. Big accounting firms that advise the Treasury and the Government never get investigated for crafting tax abuse schemes. The Criminal Finances Act 2017 was introduced to tackle corporate tax evasion, but to this day no prosecution has taken place.
In December 2022, the Government sued PPE Medpro for alleged fraud, but the case has yet to be heard in the courts. England and Wales have a backlog of 75,000 Crown Court and 310,000 magistrates’ court cases. It is extremely unlikely, I am afraid, that we will be able swiftly to prosecute fraud.
Nothing in the Bill curbs the political expediency of cover-ups. Perhaps the Minister would like to comment on that.
The second part of the Bill, dealing with benefit fraud, grants the Government draconian powers to snoop on the bank accounts of the poor, old, sick and disabled. The Bill assumes that all recipients of benefits have criminal tendencies and must therefore be denied financial privacy. It empowers the DWP to compel banks and financial institutions to examine accounts of benefit claimants and provide specified information to help it verify the eligibility of benefits claimants.
The banks are required to develop algorithms to search and report information. The cost of developing these algorithms will be borne by banks and ultimately passed on to customers. Can the Minister say what the initial set-up costs and the annual operating costs for the banks, which will be passed on to customers, will be?
For the new unrestrained surveillance, no court order is needed, the affected individuals will not be told and there is no right of appeal against the surveillance. What information the DWP will require has not yet been specified. The Government have promised a code of practice but, as the Minister indicated earlier, that has not yet been published and will possibly not be capable of being fully amended in Parliament, if I understood the Minister correctly. It is likely to be presented as a fait accompli. The requested information probably would relate to some thresholds which, if exceeded, may generate suspicions of fraud. That is itself highly problematic. Suppose you give a loved one a large sum to buy a piece of furniture and that money lingers in their bank account for a while. Will they now be construed as having extra savings and therefore be denied universal credit? Will they be called fraudsters or whatever?
A mistake by the reporting bank could have severe consequences for wronged individuals. There are nearly 7 million claimants of universal credit, and an error rate of 1% could cause 70,000 people to lose universal credit. Can the Minister explain who will compensate the innocent people? Bearing in mind the recent Post Office scandal, the idea that computer systems are utterly reliable is simply unacceptable in this case.
The Bill does not promise legal aid to enable anyone who is negatively affected by the DWP’s actions to seek advice or represent themselves in the court. How are the poorest people then to get any justice? The DWP can apply to the court to disqualify a debtor from driving, which is absolutely bizarre—why driving licences but not, say, the ability to buy a mobile phone or even join a political party? It is bizarre.
The legislation would initially apply snooping powers to recipients of universal credit, pension credit and employment support allowance, but ultimately it is likely to be extended to all benefit claimants. At the moment, the Bill exempts recipients of the state pension, but it does not follow from that that the pensioners will in fact be exempt. For example, 1.6 million pensioners receive pension credit, which opens the door to winter fuel payment and housing and other benefits. Their bank accounts will come under scrutiny. Pensioners are not exempt, contrary to what some are saying. We are all one serious illness or accident away from possibly relying upon social security benefits. Ultimately, all of us will be affected, so it is no good selling the Bill by saying that we are targeting a minority—it targets everybody.
What is the extent of fraud that the Government refer to? The 2023-24 figures suggested that benefits were overpaid by about £9.7 billion, of which about £7.4 billion related to alleged fraud, which is based on extrapolation from a sample. That amounts to about 2.8% of welfare spending. The actual percentage of claimants who indulge in fraud is very, very small: 3.9% for housing benefit and 3.9% for pension credit. These small rates do not, in my view, justify powers for suspicionless snooping on the bank accounts of all claimants.
One has to ask whether the Bill is even necessary. For example, the DWP currently has the power to compel prescribed information holders to share data on individuals if fraudulent activity is suspected. HMRC already shares banking data with the DWP. Under the Proceeds of Crime Act 2002, financial institutions too must notify law enforcement agencies of suspicious activity.
Overpayment constituting fraud and error may also arise from the DWP’s own shortcomings. For example, the form to claim pension credit, which opens the door to winter fuel payment and other benefits for pensioners, is 22 pages long and asks 243 questions. The form to claim PIP is 50 pages long and has intrusive questions about matters such as bathing and personal cleaning. Many people would be embarrassed to answer those intrusive questions and then discuss them with absolute strangers. At what point does an incorrect answer become fraud? I hope the Minister will be able to tell us, because it is a vital question.
In principle, anyone receiving public money can commit fraud, but the Bill removes financial privacy only from the poor, old, sick and disabled. It is discriminatory. The normal assumption in law is that people are innocent until proven guilty. The Bill reverses that presumption. It makes a mockery of equality laws and is likely to fall foul of Articles 8 and 14 of the European Convention on Human Rights. Benefits can be received by Britons residing abroad and paid into a foreign bank account. The UK can never acquire the power to snoop on bank accounts subject to another country’s regulatory laws. Will the Minister confirm that anyone who puts money in a foreign bank account will be beyond the reach of the UK Government’s new snooping requirements? Could this encourage some people to deposit their money in foreign bank accounts and thus develop an avoidance strategy?
Under the Bill, banks become a de facto arm of the state and can no longer be relied upon to provide confidentiality to their customers. I think that that is a bad thing. As banks bear the cost of surveillance, they might be tempted to refuse bank accounts to recipients of benefits. That too would be a bad development. What safeguards exist to ensure that banks cannot do this? To avoid snooping, landlords might refuse to have benefits paid directly into their bank accounts, a policy that has been pushed by successive Governments, so will the Bill increase homelessness among the poor? Will the Minister publish a list of possible unforeseen consequences and how the Government are going to deal with them?
As an academic, whenever I did research and came to some policy recommendations, we always asked what might be the 20 or 30 arguments against our policy, and weighed up the options in light of that. Will the Minister help us to do that? The surveillance initiated by the Bill will not apply to thieves, tax dodgers, money launderers, scammers or company directors disqualified from holding office by malpractices. No one robbing a bank or committing identity theft is to be deprived of a driving licence, but those accused of benefit fraud will be. The Bill seems fairly unfair—at least it looks that way to me—and I urge the Government to rethink parts of it.
Lord Davies of Brixton (Lab)
First, I welcome the noble Baroness, Lady Spielman, to the House, particularly as a fellow spreadsheet lover. The Public Authorities (Fraud, Error and Recovery) Bill—can I call it PAFERB?—has significant implications for privacy, justice and the rights of vulnerable individuals. I welcome parts of the Bill, but there are significant concerns. I apologise to my Front-Bench friends for highlighting the problems and not the many things in the Bill which are to be strongly welcomed.
The concern is that the Bill will introduce an unprecedented system of mass financial surveillance. We should understand that this is something new. It undermines the presumption of innocence that anyone accused should have and it will disproportionately affect people who, by definition, are poor, whether because they have inadequate pensions, are disabled and find it difficult to get a job, or generally struggle to find employment.
Attempts have been made to paint a picture of the fraudster. To me, it is the person on a low income who is struggling to cope with their situation. Perhaps they are not as well organised as Members of this House and live in a state of chaos. That is the person I see being affected by this Bill. Clearly, fraud is wrong, but to paint the Bill as dealing only with bad-thinking people is misleading to the House. Who are the fraudsters? Under Part 2 of this Bill, they are people who are already in financial difficulties. Navigating the welfare system is already challenging. Those entitled to benefits will be only further deterred by the threat of surveillance and potential penalties that will exacerbate their difficulties.
There is a real concern, which I hope we can address in Committee, that the Bill will create a second-tier justice system for people on the poverty line, treating them differently from the rest of the population. We will no doubt be told of the extensive safeguards being put in place. Unfortunately, for those opposed to the principle of snooping, there is a Catch-22 here: the more safeguards you introduce, the more I worry that those safeguards are required and the proposals are problematic. To the extent that the safeguards weaken the effectiveness of the Bill, it raises the question of whether the measures are required at all. More safeguards clearly mean the Bill is less essential.
My first concern relates to the mass financial surveillance—make no mistake, that is what this involves—and the extensive powers being granted to the DWP to assess and monitor the bank accounts of benefit claimants. Such powers amount to what has been described as a “chilling” and “disturbing” level of intrusion, with a surveillance system that treats all claimants as suspects, without any evidence of wrongdoing. Those concerns have been expressed by speakers around the House. My major concern, which we will have to consider in detail—that is why it is so important that we see the codes of practice—is that some of the things that my noble friend said in introducing the Bill are not in the Bill. We need assurances on those issues before we can sign these provisions of the Bill off as acceptable.
The key to this is the lack of the need to demonstrate probable cause, which has been widely criticised by civil liberties groups, including Big Brother Watch. They argue, and I agree, that suspicionless financial surveillance treats all claimants as potential fraudsters, infringing their right to privacy without, I emphasise, having to demonstrate due cause. The concern is that this will set a precedent for further unwarranted state intrusion into individuals’ financial affairs in the future. The Information Commissioner’s Office has come back on the Bill and said that some of its concerns have been addressed, but emphasised the word “some”. It still has concerns about the Bill that we have to address.
My second concern is about direct deduction orders and the extent to which the legislation will allow the DWP to directly deduct funds from individual bank accounts without a presumption of innocence and what I would regard as proper due process. How can we allow an administrative body to exercise punitive powers without appropriate due practice? Decisions to recover funds or impose penalties should be subject to judicial oversight, to prevent miscarriages of justice. We should remember that the great majority of people who will be affected by the removal of the need for judicial oversight are poor, inevitably in difficult financial circumstances and often in a chaotic administrative state. It is bound to lead to hardship.
The Minister said in her introduction that a decision would always be made by a human. I am sorry, but the Bill does not say that. If you read the relevant clause in the Bill, you see that there is no requirement for a human to be involved. Again, this is an issue we must return to in Committee.
My third area of concern is the disqualification from driving and the fact that the Bill gives the Secretary of State power to apply to courts to disqualify individuals from holding a driving licence if they have been given too much in benefits and refused to repay the excess. I cannot conceive how anyone thinks this is anything like a good idea, except in trying to achieve a headline in the Daily Mail. Even in principle, how can the ability to drive a motor vehicle be determined by the debts that someone happens to owe to the state? The right to drive a motor vehicle should not be contingent in that way. It is a fact: either you are safe to drive or you are not safe to drive. That is the only criterion that should apply.
Even in practical terms, justice should always be applied in an even-handed fashion. Taking away a driving licence will have grossly disproportionate effects on different people. Those who rely on a car to get to work—not for work, but to get to work—will be much worse affected than those who can walk to work. People who run their children to school will be affected much more than those who live round the corner from the school. People who live in urban areas with good transport links, such as we have in London, will be much less affected than those who live in remote rural areas. How can it be just that this form of punishment— and it is punishment—should be handed out in such an uneven fashion? It will also inevitably lead to greater poverty and social problems.
The House has to consider this Bill with a precautionary perspective, highlight potential overreach by the Government and identify the risks to individual freedoms and privacy.
Someone asked the question: why have the banks not been asked whether they want these obligations? Well, they have been asked. UK Finance, which represents the financial industry as a whole, has provided us with detailed comments on the Bill—as it did on the previous occasion—from which it is clear that the industry does not want to do this. If it has to do it, and it accepts the right of the Government to make the requirement, it sets out a number of criteria that need to be addressed.
I am running out of time, even though I have more to say on other issues. The point that really strikes home is that the banks have a duty of care towards their account holders. They tell us that reconciling that duty of care with the obligations under the Bill poses considerable difficulties for them. We have to listen to them: they have been asked and they have expressed considerable practical reservations. My objections are based in principle, but they are still raising practical obligations.
Finally, this Bill on fraud and error is currently silent on the errors made by the DWP—I reflect here the remarks made to me by my noble friend Lady Lister of Burtersett, who regrets not being here today. She points out that in 2023-24, almost 700,000 new universal credit official error overpayment debts were entered into the DWP’s debt manager system. Research from the Public Law Project indicates that the DWP’s default approach is to recover all official error overpayments on universal credit, with relief dependent on individuals being able to request inaccessible discretionary measures. The Bill provides an opportunity to correct this unfairness, and my noble friend plans to table an amendment in Committee that would alter the test for the recovery of universal credit official error overpayments so that they could be recovered only where the claimant could reasonably have been expected to realise that there was an overpayment.
To conclude, there is much to welcome in this Bill. Public money should be used appropriately, but, ultimately, the measures have to be exercised with greater compassion than we have seen so far.
Lord Palmer of Childs Hill (LD)
My Lords, I congratulate the noble Baroness, Lady Spielman, on her maiden speech, and we welcome her to the House.
I rise as a Liberal Democrat to speak in firm opposition to the Public Authorities (Fraud, Error and Recovery) Bill. While we all share a goal of preventing fraud and ensuring the integrity of public funds, the Bill, under the guise of fraud prevention, risks entrenching mistrust, undermining civil liberties and further marginalising our most vulnerable citizens. The Minister said that the Bill seeks to challenge the fraud that lines the pockets of criminals—but it goes well beyond that. This legislation should concern anyone who values fairness, proportionality and compassion. My noble friend Lady Kramer spoke about whistleblowing, and I trust that the Minister will also focus on that in her reply.
I turn to those in receipt of carer’s allowance. Many of us in this House will have heard the harrowing stories of carers, often quietly heroic individuals, who face harsh penalties for minor and often unintentional administrative errors. They are not fraudsters; they are parents caring for disabled children, spouses supporting terminally ill partners or elderly people looking after loved ones with dementia. The reality is that carer’s allowance rules are notoriously complex: just a few extra hours of work or a slight rise in income can lead to an overpayment, which many do not even realise until months later, when they receive a demand to pay thousands of pounds.
Under the Bill, such individuals would face expanded surveillance, automatic bank deductions and potentially public shaming, all without clear distinctions being made between honest mistakes and intentional fraud. This is not justice—this is cruelty wrapped in bureaucracy. The Bill proposes sweeping powers to access banking data, as many noble Lords have suggested. Let us be clear: these are bank spying powers that would allow the Department for Work and Pensions to trawl through the bank records of millions of people, not because they are suspected of a crime but because they receive support they are legally entitled to. At a briefing with the Minister, I raised that in this Bill there is no mention of things that all accountants know about, such as the garnishing of bank accounts, which already exist for the collection of debts.
The powers constitute a fundamental assault on the right to privacy. They normalise mass surveillance of the poor, while doing nothing to address the significantly larger issue of tax fraud, which costs the Treasury nearly six times more than benefit fraud but receives a fraction of this attention. The noble Lord, Lord Sikka, referred to this. The problem is that the fine line between tax avoidance and tax evasion is sometimes a grey line. It is also how HMRC and its predecessor, Inland Revenue, tackle the problem when they find that someone has evaded tax. It is generally done by a financial penalty. I am reminded of the anecdotal story of the person told of the financial penalty for his unaffordable error who said, “Could I pay in cash?”.
Where is the proportionality that the noble Lord, Lord Vaux, pointed out earlier in this debate? As the right reverend Prelate said, affordability assessments are needed. Furthermore, the Bill dangerously conflates fraud with error. According to the DWP’s statistics, fraud accounts for just 2.8% of benefits expenditure, yet the narrative pushed by this legislation implies widespread deceit among claimants. In truth, many overpayments arise from the bewildering complexity of the system or administrative mistakes by the DWP itself, mistakes which cost the public £800 million last year. Is it right that someone with a disability who disclosed all their financial details in good faith can be told months later that they owe thousands due to a departmental oversight? Is it right that a carer on the brink of burnout is treated as a criminal because of a minor miscalculation?
One case shared by Turn2us was that of a woman in her 60s, housebound with several disabilities and complex mental health needs. After disclosing her private pension when applying for universal credit, she was told she had been overpaid and faced monthly deductions, even from her personal independence payment and non-means-tested benefit. Her crime was being honest in a broken system. Her punishment was perpetual financial stress and a complete loss of trust in the very institution meant to support her.
I understand the purpose of the Bill, but it is focused on those who can least afford it, and very often, those who can afford it are still going to get away with cheating the system. The Bill does not fix that system; it weaponises it.
Baroness Stedman-Scott (Con)
My Lords, I thank the Minister for her opening speech in outlining the purpose of and some of the details contained within the Bill, and for all the engagement from her and the noble Baroness, Lady Sherlock, who I think is in the running for a new job, closely followed by the noble Baroness, Lady Alexander. My noble friend Lady Spielman is hot on the heels. We greatly appreciate the engagement we have had, and it has been very helpful.
I also pay tribute to my noble friend Lady Spielman on her maiden speech. It was excellent, and I know that others in the House will join me in welcoming her to these Benches. I hope that my noble friend has got the message loud and clear: we are pleased to see her. The words that describe her—substance and integrity—are absolutely accurate.
I will be clear from the outset: this side of the House supports the principle of this Bill. Fraud against the state is unacceptable and tough measures that we can legislate for in this place to crack down on disreputable people and fraudsters who steal from the public purse are not just welcome but essential. We have a moral and fiscal duty to address this, and I echo the point raised so eloquently by the noble Baroness, Lady Alexander. The moral aspects of the Bill were also well referenced by the noble Lord, Lord Rook.
The proposals before us were, broadly, introduced to Parliament by the previous Government. I was disappointed that, in the other place, the Minister refused to acknowledge our shared ambition on this Bill. Although we are on the same page as the Government when it comes to preventing fraud, we have some serious and genuine concerns, and many questions about how this objective can be achieved, given the Bill before us.
One key question that these Benches have is on the level of ambition the Government have to combat fraud. Fraud is a very serious matter, which needs to be addressed robustly. We lose a total of £55 billion a year to fraud across the public sector, but the Bill before us is set to recover only £1.5 billion. This is 2.7%. Can the Minister tell us why the anticipated returns, as a target number, are so low? Perhaps His Majesty’s Government would like to go away, rethink the target and up their game.
The Government seek to target three forms of welfare benefit through the provisions set out in the Bill. Can the Minister tell us how much each of these benefits contributes to the overall figure for public sector fraud? Can she also provide a breakdown of these figures, covering all welfare streams, to the House for our review and in preparation for Committee?
Another question we have is why certain aspects of the Bill are not ready, notably the Cabinet Office proposals. We have seen this already with the Employment Rights Bill, to which literally hundreds of government amendments have been added to try to correct errors in the drafting of the legislation.
I could not have put it better than the noble Lord, Lord Vaux: His Majesty’s Government need to get their act together on impact assessments. Do we really think that it is a good idea to lose his skills and that of other hereditaries, on such important legislation? I leave that with your Lordships. The Bill is being introduced without key impact assessments being available. We have no impact assessment measuring the cost to banks or to the DWP, the projected return on investment or the cost per head throughout the entire process. As we do not have these assessments, we will be discussing proposals with much of the relevant information unavailable.
It would also be incredibly helpful for noble Lords to have a breakdown of the fraud figures that the Government referenced throughout the passage of this Bill in the other place. Knowing the details of the challenge we face will allow us to make a better assessment of where this Bill can be improved to better meet that challenge. I hope that the Minister can provide this information to the House soon. Having it to hand is vital in allowing us to do our jobs properly. It simply is not good enough that we should scrutinise these proposals without the information that we need to make an informed decision. I reiterate to the Minister that we want to work collaboratively with the Government to improve the Bill.
I will start by covering the chapter of the Bill that relates to the Cabinet Office. The intention of the Bill to combat fraud in government departments is noble, and we have already had unanimous support from across the House. However, we are concerned that these proposals do not go far enough, for reasons that I shall now outline.
The changes to the Public Sector Fraud Authority—like others, I will jump on the bandwagon and call it the PSFA—are a concern for us. This enforcement unit currently has 25 staff. The authority is rightly tasked with investigating fraud across every department—a massive undertaking. As the noble and learned Lord, Lord Garnier, raised, is the Minister confident that the PSFA’s resources are sufficient? I mentioned returns of 2.7% earlier; as my noble friend Lady Finn said, the returns specifically expected from the PSFA are far lower than that—around 0.002%. How much resource would the PSFA need to make returns of 25%? The Minister said that the Government will scale this operation, but we need to know how this will work if we are to approve the proposals now.
My noble friend Lady Coffey made the point that the Bill does not go far enough. Her point about percentages and cash is real, and we need to address it. If the PSFA is to be expanded to meet the increased workload it will soon encounter, can the Minister tell us how this appointment process will work and who will oversee it? Can she please outline the timelines we can expect for when she anticipates the PSFA will be scaled up, and how quickly it will be fit for purpose, effective and achieving results?
Furthermore, we have some serious questions over the independence of the PSFA. It is right that the Government are incorporating a provision in the Bill to make it an independent body. However, it is still subject to powers that go up to the Minister responsible in the Cabinet Office. Government departments are marking their own homework, and we have no actual guarantee that the PSFA will be independent. This should be in the Bill from the start and not down to the arbitrary discretion of the Minister. Can the Minister confirm that the PSFA would become independent from the Cabinet Office?
It is unacceptable, in our view, that the process of recourse for those who want to appeal should be in a straight line back to the Minister. As my noble friend Lady Finn said, recourse processes should be independent, and we want to again emphasise that recourse should be through an independent tribunal mechanism and not back to a politically appointed person—someone, clearly, with vested interests.
This all relates to a wider point about the ultimate purpose of the authority. The PSFA has an important task to perform, and we on this side of the House support the Government’s intention to introduce a six-year extension up to 12 years, but can the Minister give a timeline as to when it is expected to conclude its work? I wonder how the Government would react to a proposal of a sunset clause to the authority, so that there is no risk that these powers are held indefinitely beyond the period for which they are reasonably required.
Points were raised on whistleblowing protections by the noble Baroness, Lady Kramer, and the noble Lord, Lord Palmer of Childs Hill. As my noble friend Lady Finn has already made clear, the Bill relates to situations where people could be asked to make very difficult, stressful and worrying decisions. It is easy for us to talk about this in academic terms but whistleblowing is far from easy, and we need to do all we can to support those who stick their necks out to do the right thing.
The Government have made it clear that they believe that existing protections are enough, although a recent National Audit Office investigation into whistleblowing in the Civil Service highlighted serious shortcomings, showing that it is even harder than it has been to call out wrongdoing. The NHS has rightly strengthened its whistleblowing safeguards, and these issues are being addressed elsewhere in our state system. We on these Benches believe that the same support needs to be given to civil servants working in this sensitive area, covering both the Cabinet Office and DWP aspects.
I turn to the part of the Bill which relates to the Department for Work and Pensions. We on these Benches also firmly support measures to crack down on those people who abuse the welfare system. For some people in our society to steal from a system that is designed to support the most vulnerable is a truly despicable act, and we need to stop those who do that as a matter of urgency.
I have no desire to upset the noble Lord, Lord Davies, but I must say that the Minister the noble Baroness, Lady Anderson, mentioned driving licences; what about passports, too? The noble Baroness looks after child maintenance; I looked after it, under the guidance of my noble friend Lady Coffey, and we took away driving licences and we took away passports. How many do you think we took away? Less than five, because it was a deterrent. So, please, think twice before everybody knocks this. I want to make myself available to the Minister, because I have got a load of other ideas for deterrents, and I am telling you they will work.
The Bill proposes a substantial increase to the DWP’s workload and, from what I understand of the detail that the Government have outlined, the DWP can expect to receive thousands on thousands of signals from banks flagging potentially fraudulent activity. These will then have to be individually checked by a human being. The Government have rightly said that they will approach this with a deep attention to vulnerability. We must welcome this. This was also raised by the right reverend Prelate the Bishop of Lichfield, but does this mean that DWP civil servants will be checking not only the movement of money into an account but also whether the person in question is someone with a disability—in other words, perhaps someone with reduced capacity or someone who is at risk of being coerced? None of this detail is clear, and the Government have failed to publish an impact assessment showing the cost of this additional work.
It is vital that these wider considerations are taken into account. We need to distinguish between those who are committing fraud intentionally and those with reduced capacity and additional needs who may not realise that what they are doing is fraudulent. We also need to consider wider circumstances. If a suspected fraudster is in fact a woman trying to save money to escape an abusive relationship, we will be doing far more harm than good by stripping this money away. How can the Government ensure, under the provisions in the Bill, that vulnerable people will be supported and not debanked?
If the Government in fact intend to proceed in the way that I have outlined, we are talking about literally thousands of hours of additional work. Can the Minister please tell us how the DWP intends to meet this increased workload, how much it will cost and whether she is certain that the additional cost of meeting this demand will be worth the revenue we save by tackling fraud in this way? We shall be paying close attention to this as we progress to Committee.
I now want to say something about the use of artificial intelligence to improve investigatory performance—this was raised by the right reverend Prelate—and about technology, a point that was raised by other noble Lords. We would support the use of new techniques to improve efficiency, but they should be subject to close oversight. We are talking about personal, confidential financial information. Can the Minister assure the House that any use of AI will be subject to rigorous safeguards, and will she commit to coming before the House again to set out how these will work and how the Government will guarantee security to the owners of that data?
Many of the same questions remain over the role of banks. The Bill places a significant burden on banks, which, it appears, are being asked to devote resources to this system out of a sense of moral duty, as, in dedicating staff and systems to the Government’s plans, they forego considerable opportunity costs which will not be recovered. This may be right in principle, but for financial institutions the bottom line is always the determinant factor. Can the Minister please update the House on how much these new responsibilities will cost banks? I know that the figure will ultimately depend on demand, but can the Minister tell us the cost per head, which the department will, I hope, know? Do the Government have an impact assessment prepared for banks, showing them how much this will cost them? If more work than anticipated emerges, what arrangements are made for paying for this?
I am greatly concerned that these proposals are being put before the House while talks with banks are still ongoing. The Government have not come into this as prepared as I believe they should; we should know what the settlement is before we start discussing the Bill; and the fact that it is still a moving picture is deeply worrying when we are being asked to enshrine this in law. These are important questions, and I hope that the Minister can shed some light on them for the sake of business and, fundamentally, the taxpayer. We will be testing the Government in Committee on all these aspects.
Arguably, the most fundamental provisions in this Bill relate to enforcement. People need to know that, if they commit fraud, they face a genuine and real risk of retribution. One of the issues that we have identified is that the DWP will be able to assess activity only in one bank account—this point has already been raised—which is the bank account that benefits are paid into. As soon as the Bill is passed, fraudsters will realise that all they need to do is open a new bank account and move the money over; then they are completely safe. Bank accounts can be set up in minutes from a smartphone, as highlighted by my noble friend Lady Coffey, so a fraudster could circumnavigate the DWP and all the measures in this Bill on their phone in the space of a single Tube journey. They would be completely safe in the knowledge that the DWP legally cannot pursue them any further.
This brings me back to pilot schemes. Can the Minister please publish the results of these important schemes? I have a hunch that they might highlight some of these issues. Closing this loophole is the only way to make sure that the Bill works at all, which is another subject for debate in Committee.
Finally, on a very serious matter that is a plague on society, I turn to so-called “sickfluencers”. These are people who use social media sites to spread information on how to defraud the benefits system. This sort of behaviour simply has to stop. People across the country are gaining substantial online followings. People consume their videos instructing them on how to defraud the benefit system. Sickfluencers provide model-aware answers, highlight keywords and openly boast that their script will win a claimant the maximum number of points in their welfare assessment. We need to be clear that this sort of behaviour is designed to circumnavigate the rightful checks that are in place and enable fraud.
The Fraud Act 2006 and the Serious Crime Act 2007 provide a useful framework for tackling this, but we are concerned that those measures are not sufficient to police this sort of behaviour adequately. The Government have said that they want this Bill to modernise powers, and we believe that this is an area where modernisation needs to take place. We will therefore be paying close attention to this Bill in Committee and seeking cast-iron assurances from the Government. We simply want to ask what the Government will do to tackle this threat. How many sickfluencers have been detained under the current legal regime? Either the current legal framework is inadequate, or the powers are not being used.
In conclusion, I reiterate our intention to work with the Government to ensure that this Bill is fit for purpose. I look forward to hearing the Minister’s answers to the points that I have raised. We believe that the issues that we have highlighted are fundamentally important to making this Bill a success, and we shall be pressing them in Committee if needed. I can see why the noble Baroness, Lady Fox, concluded that this Bill was not so dull after all. I thank all noble Lords who have contributed to the debate thus far. We genuinely look forward to engaging with Peers, the Minister and her team as the Bill progresses.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I thank all noble Lords who have contributed to today’s thoughtful and decidedly not-at-all dull debate. Committee will be some fun indeed. It was a particular pleasure to hear the maiden speech of the noble Baroness, Lady Spielman, whom I welcome to the spreadsheet fan club. Frankly, I could have done with one of her spreadsheets to keep track of all the questions that I have been asked today. In the absence of that I am bound to miss some, for which I apologise in advance, but I will do my best. It is good to have her among our number, and I look forward to hearing more from her in future.
Perhaps we should start briefly with the challenge that the Bill is designed to address. As my noble friend Lady Anderson made clear at the start, public fraud is simply not acceptable—as the noble and learned Lord, Lord Garnier, said, fraud is not acceptable generally, but public sector fraud is also not acceptable. Fraud does not become a victimless crime because it is directed at the state: it will cheat the public purse of money that could be spent on public services, which could help this Government deliver an NHS fit for the future or invest in our children to give them the best start in life.
Listening to some of the examples given by my noble friends Lord Rook and Lady Alexander, it is so shocking that, during Covid, when people and charities were out there breaking their backs trying to serve people who were in desperate need, others were out there lining their pockets. It is a disgrace. It was very moving to hear from my noble friend Lady Alexander about what is happening when people are doing all that they have had to do in the British Council to pay that back when others do not want to pay back the money that they should be paying back to the state. That cannot be right.
I also think that fraud in our social security system is damaging in a different way, whether it is undertaken by individuals or organised criminals. I think the noble Baroness, Lady Kramer, asked what the breakdown of that was. I can tell her that, in 2023-24, of the £7.3 billion lost in fraud in social security, 6% was taken by organised gangs and the rest was taken by individuals.
Baroness Kramer (LD)
My Lords, is that the number of cases that were identified because there was enough evidence and people were arrested, or does she believe that that is an estimate of the total amount of organised fraud in the system?
Baroness Sherlock (Lab)
It is a percentage of the amount of fraud that was recognised. Clearly, we do not have figures for the amount of fraud of any kind that has not been identified or recognised. That was the figure for the amount we have on our books as organised fraud.
The reality is that, whether it is done by organised criminals or by individuals, this is not okay. It is not fair to taxpayers who fund social security, nor to the vast majority of people who claim only the benefits to which they are entitled. In my job, when money is as tight as it is now, I want every penny available for social security to go to the people who need it most.
This Government are determined to tackle the issue head-on with a Bill that will provide the right tools to protect public money and fight modern fraud, coupled with the right safeguards. The Bill is tough on those who commit fraud against our public services or our welfare state. In doing so, it gives reassurance to taxpayers. One of the side effects is that it will be helpful to DWP claimants who make genuine mistakes, by helping to spot errors earlier so they can avoid getting into lots of debt.
I thought the point made by the noble Baroness, Lady Spielman, about reciprocity was there. If people do not have confidence in our welfare state and the underpinning mutual shared obligations, that challenges our ability to maintain confidence and carry on supporting people in the future. We need to get this right, but we do not need to demonise people to do that. We just need to make it clear that people should get what they are entitled to, and, if they are not getting that, we should address it.
We believe this Bill strikes the right balance, giving the Government new powers proportionate to the problem we are tackling while ensuring that those powers are wrapped around with effective safeguards and protections to give confidence to Parliament and the country. Having said that, and having listened to the debate, I recognise that it is just possible that not everybody agrees with us—or, at least, not yet. We have some way to go. I have every confidence that, once I have fully explained this, there will be unanimity across the House—or near-unanimity at least, being a realist.
Having listened to the debate, it seems to me that there are a number of challenges. First, I offer a couple of truisms. There is no silver bullet to fraud. If there were one single thing to do, the previous Government would have tackled this, or some other Government would have done it. Tackling fraud is an accretion of a series of small decisions which, between them, add up to make a difference. Therefore, this Bill does what it does and does not do other things: it does not tackle bank robbers or tax evasion. It is a contribution, and I think it is an appropriate one.
Secondly, we have to be a bit careful that the best is not the enemy of the good. What is in front of us is action that this Government will take that has not been done before, and I commend it to the House. The challenges that we have seem to come in three broad categories: we are not going far enough, we are going too far, or there are some challenges in the way that we are doing this. I will briefly look at each in turn.
I start with the challenges that we are not going far enough, which have come from a number of noble Lords. The noble Baroness, Lady Stedman-Scott, and I have great respect for one another, but I say very gently that some of the critiques she has made of the Bill strike me as a little ironic, given that the last Government were in for 14 years and had all that time to take action. What did we get? We got one predecessor of one of these measures, which was put in at the fag end of the last Government and dropped into the other place after Committee, with none of the information that the noble Baroness is demanding from me—nothing at all, not even a requirement to produce a code of practice, never mind actually producing one, and absolutely none of the safeguards or protections. Now she is in opposition, I fully respect that it is the job of the Opposition to demand things of the Government, and she does a fine job of doing that. She also will not mind if, in turn, I occasionally throw back at her what her own Government failed to do. In this area, I think we are doing rather better.
Having got that off my chest, let us move on. It is worth saying that this Government are actually doing something. We committed to the biggest-ever savings package on fraud, error and debt at the Autumn Budget. Along with the Spring Statement, DWP fraud and error measures are estimated to achieve £9.6 billion of savings by 2029-30, of which up to £1.5 billion will be generated by this Bill. So this Bill is not all that we are doing, but it is an important thing that we are doing.
The noble Baroness, Lady Stedman-Scott, asked about cost. In the end, the costs of DWP working through these measures will be dependent on the munificence of the Treasury at the spending review, which I am not allowed to pre-empt. The impact assessment sets out our estimate and shows that around four times the benefit of every pound of our departmental spending will come back on scored measures to 2029-30.
On not doing enough, the noble Baroness asked about “sickfluencers”. She is right—it is the view of this department that we have the powers to deal with these crimes at the moment. We think the Bill will help the PSFA to do that at the same time. But, if she has ideas about other ways in which that could happen, I look forward to hearing them, along with her many other ideas for tackling fraud, which I have no doubt Committee will give us every opportunity to discuss.
While I am on the point, the noble Baronesses, Lady Kramer and Lady Stedman-Scott raised the question of whistleblowing. We absolutely agree; we want people to pass on information about fraudsters who are taking from our public services. We are open to keep looking at the best way to do that. We are working with partners such as Action Fraud to make it simple and easy for the public.
In the case of DWP, benefit fraud can be reported by the public online, by phone or by post—and, trust me, it is. But also, DWP staff have clear channels to report. On top of that, the PSFA will look into the possibility of being listed by the Department for Business and Trade as a body with which individuals can raise concerns around public sector fraud. That will help on that side.
While we are on the PSFA, concerns were raised by the noble Baroness, Lady Finn, the noble and learned Lord, Lord Garnier, and others about whether it is doing enough and about the scale. The PSFA’s enforcement unit is relatively new in what it does. The noble Baroness, Lady Finn, was a little a little bit harsh on test and learn. When the enforcement unit is as new as it is and will only with the passage of the Bill get the powers it needs to do any of these things, surely testing and learning is the right thing to do. If it can demonstrate clearly that results come from that, the possibility for scaling will be significant. I promise I am not making any assumptions of the Treasury.
The noble and learned Lord, Lord Garnier, asked whether the Government audit the work of the PSFA and whether the powers in the Bill will add anything. The PSFA publishes annual reports and has benefits audited by the Government Internal Audit Agency. Examples were given in my noble friend’s opening speech of where the PSFA currently cannot make the desired progress because it has not got the powers it needs. The Bill will give them to it.
That is, briefly, the case for not going far enough. Let us now do the going too far case. A number of noble Lords, including the noble Baroness, Lady Fox, to a degree, the noble and learned Lord, Lord Garnier, my noble friends Lord Davies and Lord Sikka, and the noble Lord, Lord Vaux, are concerned about possible infringements on the right to privacy or other aspects of the reach of the Bill. I am grateful to the noble Lord, Lord Vaux, for acknowledging the improvements made by the Bill. I raised a number of reservations when the last Government introduced their third-party data measure, because I felt that the powers were simply not proportionate and that there were not enough safeguards around them.
While I am here, I say to my noble friend Lord Davies that the fact that that we provide safeguards does not mean the powers are wrong. That is what safeguards are for. There are safeguards in all aspects of life. I will come back to that. It means that we want to be transparent and show people that powers the state is taking are used appropriately. That is what they are for. The noble Lord explained the limitations.
We are now limiting the benefits in scope. For all the measures there will be clear limits about what information can be requested, for what purpose, and how the PSFA and DWP will use it. That is all new, and the Bill introduces considerable oversight and reporting requirements.
I believe the Bill strikes the right balance and, in answer to my noble friend Lord Sikka, I am confident that it is complying with the Government’s duties under the ECHR. The Government’s detailed analysis on compatibility is set out in the published ECHR memorandum.
I need to take on a couple of noble Lords who have suggested that this is a sort of broad trawling expedition. It has been described as DWP going out there and trying to have access to everybody’s bank accounts—suspicion-snooping. That is a simple misunderstanding of the nature of the powers. Let me try to explain why. DWP will not be given access to people’s bank accounts by this measure, which is about banks being asked to examine their own data, which they already have and can already look at. They have been asked to provide DWP with the minimum amount of information necessary to highlight whether there is a possibility that someone may not be meeting a specific eligibility rule for a specific benefit. At the point the information is shared with DWP, no one is suspected of having done anything wrong. The presumption of innocence is still there.
Baroness Fox of Buckley (Non-Afl)
It is clear that the DWP does not want to see that data, but it will be telling the banks to trawl for the data. The Minister says that they already have the data, and that they would not be trawling for a government-mandated outcome before the DWP told them to do it. As the Minister was about to say, and I have stressed this before, it is true that there is no suspicion of anyone. The only reason the bank would be doing it is that a person is in receipt of a particular benefit. The bank therefore has to check whether the person is in receipt of that benefit—because it does not necessarily know that—by going through its databases on the eligibility criteria the Government are going to give it. So no one is saying that the Government are spying, but the banks are being asked to “spy”—it is a phrase, just a slogan. We understand the point; we just do not think you are satisfying us.
Baroness Sherlock (Lab)
I have heard accounts of people saying that disabled people will worry that DWP will know that they go to Pret and therefore cannot really need the money, et cetera, so it is important to make it clear that DWP will not have access to their bank accounts through this EVM.
DWP knows the bank accounts into which benefits are paid, so DWP will tell the banks to look specifically at the bank accounts into which those benefits are paid. It will tell them specifically the criteria they are looking for, and all they are being asked to provide is enough information to identify accounts which may, on the face of it, be in breach. Then, that information will be used along with other information that DWP holds, and it will be examined by—to reassure the right reverend Prelate the Bishop of Lichfield—a human being, who will make a decision on whether to investigate. There could be a number of outcomes. The outcome could be that the person may have had, for example, more money in their account than the benefit allows, but for one of the many acceptable reasons. There could be a perfectly good reason. The person may have made a genuine error, and that will be dealt with in a different way, or in some cases there may be evidence of fraud, and that might move into a fraud investigation.
I accept that some noble Lords may not think this proportionate. We believe it is proportionate, with those safeguards wrapped around it, but I want to be clear that we are arguing about the same thing, not about different understandings of what is going on at the time.
Lord Davies of Brixton (Lab)
My noble friend referred to an acceptable reason. Who ultimately decides what constitutes acceptability?
Baroness Sherlock (Lab)
This may be a matter that we might more usefully explore in Committee, but I shall give my noble friend a simple example. There are certain compensation payments that are not taken into account in terms of eligibility for benefits. They are excluded from the capital limits. So it may be that somebody has received a compensation payment. There is guidance about circumstances in which people may have money in their account. The point is that cases will be looked at individually before they are pursued. There is a requirement on fraud investigators to look at all information and chase down all avenues of information, so they will do that and make an appropriate decision.
Just to be clear, on benefits in scope, the initial use of the power is focused on three benefits: universal credit, employment support allowance and pension credit. The reason why is that that is where the highest levels of fraud are at the moment. The noble Lord, Lord Palmer, will have noticed that carer’s allowance is not on the list for the EVM. The two types of fraud and error we are targeting initially—breaches of capital and the living abroad rules—are significant drivers of fraud and error in those benefits. For universal credit, nearly £1 billion was overpaid last year as a result of capital-related fraud. Once fully rolled out, that measure alone will save £500 million a year. The state pension is expressly out of scope and cannot be added even by regulations, and that is sensible given that the rate of state pension overpayment is just 0.1%.
Somebody asked me whether we plan to add any other benefits. The answer is no. We cannot rule them out because fraud may change in the future and different benefits may be subject to different levels of fraud.
A number of noble Lords, including the noble Lord, Lord Vaux, the right reverend Prelate the Bishop of Lichfield and the noble Baroness, Lady Stedman-Scott, raised the use of AI and automated decision-making. To be clear, we are not introducing any new use of automated-decision making in the Bill, so no such new use will happen as a result of it. The DWP and the PSFA will always look at all available information before making key decisions about the next steps in fraud investigations or inquiries into error. Fraud and error decisions that affect benefit entitlement will be taken by a DWP colleague, and any signals of potential fraud or error will be looked at comprehensively.
Given the arguments made by those who think we are not going far enough, and by those who think we are going too far, we appear to be Goldilocks in this. I think we have got the balance right now. Goldilocks is not always right, I accept that, but I think we have landed in the right place because of the safeguards the Bill includes to ensure that its measures are effective and proportionate. Those safeguards provide protection but also accountability and transparency.
I will not go back over all the different kinds of oversight, but on the appointment process, I assure the House that the process for the independent people who will oversee EVM and the PSFA’s measures will be carried out under the guidance of the Commissioner for Public Appointments and will abide by the Governance Code on Public Appointments throughout.
I am grateful for my noble friend Lady Alexander’s compliments. I would suggest that she herself apply, but she might not qualify for the independence threshold entirely, as one might hope.
I shall say a brief word on safeguards. The Bill includes new rights of review and appeal. The DWP will still provide routes for mandatory reconsideration of decisions relating to overpayment investigations, followed by the opportunity to appeal to the First-tier Tribunal. For direct deduction orders, again, there are new routes for representation and review, followed by appeal to the First-tier Tribunal, while the court’s decision in relation to a disqualification order can be appealed on a point of law.
On driving licences, I take the point made by my noble friend Lord Sikka: why driving licences and not membership of a political party? I hate to break it him, but it is just possible that not being allowed to join a political party does not have the same deterrent effect as losing a driving licence—not for us, obviously, but we are not typical, although it is touch and go. I assure the House that this measure has been used for a long time in the Child Maintenance Service. As the noble Baroness, Lady Stedman-Scott, said, its effectiveness is shown in that it almost never needs to be used.
As a final reminder, this is about debt recovery. It is about people who, by definition, are not on benefits and not in paid employment. The reality is that if you owe DWP money and you are on benefits, the DWP can already deduct it from your benefits, and if you get a wage packet the DWP can deduct it from your wages. However, if you are none of those things—if you are privately wealthy, self-employed or paid through a company—and you owe the DWP money, the department does not have the same ability to go after that money as it does for those who are on benefits or in PAYE. The Bill gives the department the opportunity to use measures such as deduction orders and other tools to try to bring people to the table. If someone comes to the table to have a conversation, we will begin to arrange a payment plan. The other measures are there only if people refuse to engage and simply will not come along and do what they ought to do.
Lord Sikka (Lab)
Since my noble friend mentioned me, I think I am honour-bound to ask her a couple of questions. Will she confirm that foreign bank accounts will not be covered by any of the measures in the Bill?
Baroness Sherlock (Lab)
I think we should come back to the detail of how bank accounts are dealt with in Committee. I am meant to stop at 20 minutes and the clock is saying 19 minutes and 38 seconds.
Baroness Sherlock (Lab)
I will keep going for a bit.
A number of noble Lords asked whether the banks want to engage. We have been engaging very much with the banks. Meetings have been held by the DWP and Cabinet Office Ministers, some of which I have attended, with senior representatives of the finance industry, including UK Finance, individual banks, building societies and the FCA, and we continue to work closely with banks on the design and implementation of the relevant measures. We have set out the expected cost to banks where possible, and an impact assessment of the business costs of the EVM will follow, but that will depend on how the measure is designed and the way in which it will work.
On potential conflict with financial crime duties—this is important—the Government are working closely with UK Finance and the FCA to make sure the measures align appropriately with wider financial crime duties. That includes work on the development of the PSFA’s guidance and the DWP’s codes of practice for debt recovery and the EVM. We will make sure that works appropriately.
I think I am running out of time, but I will just say a word on carers. I absolutely agree with the noble Lords, Lord Vaux and Lord Palmer, and the noble Baroness, Lady Kramer, who mentioned the important contributions of carers. This Government are absolutely behind carers. We introduced the largest ever increase to the earnings limit in carer’s allowance. Crucially, this Government introduced a review. We commissioned Liz Sayce to lead an independent review into earnings-related overpayments of carer’s allowance. The review is expected to reach its conclusions this summer and we are looking forward to learning from that to make sure that any learning can be fed back into the way the department works.
Finally, I will say a word on safeguarding. I am sorry to say I have forgotten which noble Lord mentioned that the DWP Select Committee put a report out on this subject. We will look at it very carefully and, obviously, take close account of its recommendations. Long before that happened, we put out our Green Paper, Pathways to Work. The Secretary of State is very keen to make sure the DWP gets safeguarding right. We committed in that Green Paper to introducing a new department-wide safeguarding approach. It will be a very significant departure from the way things are done. We are going to work with stakeholders and consult to make sure we get that right.
To reassure noble Lords, the DWP looks carefully all the time at how we support vulnerable people. Decisions are taken individually and that is taken into account. Of course mistakes will be made on occasions, but as a department we place a huge store on making sure we understand the circumstances people are in and support then when they need help, and try to find the best way through for each individual.
Lord Davies of Brixton (Lab)
I am annoying the Whip. Does my noble friend have a response to the point I raised on behalf of my noble friend Lady Lister about the position of people who reasonably assume that the money received in error was rightfully theirs?
Baroness Sherlock (Lab)
I have a wodge of answers to questions asked by a lot of noble Lords, and I am afraid time has run out. But to be clear, we need to not ally fraud and error. This is just a data pull. If data comes from the banks to the DWP, it will be used with other data to make an individual assessment of someone’s position and appropriate decisions will be made at that point about how to deal with it. It may be an overpayment, a genuine mistake, an act of fraud, or there may be no problem. Cases will be looked at individually.
This Bill delivers on our manifesto commitment. It is expected to save £1.5 billion over the next five years as part of wider action at the DWP to save a total of £9.6 billion. The Bill will bring in new powers for the PSFA to tackle fraud and it will deliver the biggest upgrade to the DWP’s counterfraud powers in over 14 years. We believe it is proportionate and demonstrates that we will take action against those who willingly defraud our public services, providing the right tools so that we can step up to prevent, detect and deter criminal activity. I very much look forward to working with so many noble Lords across the House—it says here—during the passage of this important Bill. I look forward to seeing many of them in Committee. I beg to move.
Public Authorities (Fraud, Error and Recovery) Bill
Wednesday 25th June 2025
(2 days, 19 hours ago)
Grand CommitteePublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 96-I(a) Amendments for Grand Committee (Supplementary to the Marshalled List) - (3 Jun 2025)
Baroness Finn
Member’s explanatory statement
This would permit costs incurred by banks, as they are defined in the Bill, to be recovered.
Baroness Finn (Con)
My Lords, many congratulations to the noble Viscount on the birth of his granddaughter.
Amendment 122D, in my name and that of my noble friend Lord Younger, touches on a principle that we have returned to time and again during Committee: that those institutions asked to play a role in the delivery of public policy must be treated not as passive instruments but as valued and active partners.
Clause 95, as currently drafted, enables the Secretary of State to recover costs from those individuals committing wrongdoing or fraud that the Secretary of State “reasonably incurs” in the exercise of the powers set out in this legislation. That is both logical and fair. However, what it does not do, and what our amendment seeks to rectify, is recognise that banks, too, will incur costs in the process of complying with the obligations imposed by this Bill. Those obligations are not trivial. Banks will be expected to carry out eligibility checks, respond to requests for information and facilitate direct deduction orders. These are significant operational functions, requiring staff time, system changes and compliance resources. The financial and logistical burden on institutions, particularly smaller and mid-tier banks, should not be underestimated.
We have heard repeatedly throughout Committee that the effective functioning of this legislation depends on strong co-operation between government and the financial sector. If that is true—we believe that it is, notably from what we have heard from the Government so far on the test and learn exercises—we must be honest about the responsibilities that we are placing on banks and we must be clear that those responsibilities come with real-world costs.
We understand that this arrangement between the DWP and the banks is new and, as such, it is unclear how many cases there may be to deal with. It may be a huge number, or it may end up being fairly minimal. Of course, we hope for the latter. More likely, this is an exercise of checking and counter-checking between the banks and the DWP in order to ascertain clarity of wrongdoing or not. It therefore begs the question of resources and costs. Can the Minister give us some estimates of the likely number of cases involved? Who will pay for the costs of managing these cases? If it is the banks, what discussions, if any, have taken place on the amounts? Is there an understanding of what happens if the costs become too great a burden on the banking sector? Is there some agreement that, if costs exceed a certain amount, the DWP—ie the taxpayer—will pay the excess?
We do not think that it is good enough to say that banks must comply. We must also ask how they can comply and what support or protections the Government are willing to offer them in return. Amendment 122D would provide a simple but important clarification: that banks, as defined in this Bill, are entitled to recover the costs that they incur as part of fulfilling their legal obligations. This is not about profit; it is about fairness, sustainability, and operational feasibility.
Let us not forget that we are asking private institutions to assist in the delivery of public sector enforcement mechanisms. That is a departure from many traditional roles and it is only right that we recognise the cost implications of that shift. We would not expect public bodies to take on additional responsibilities without due consideration of the costs involved, nor should we expect that of banks. They are not merely pipelines through which government powers are to be channelled. They are regulated institutions, fundamental to our economy, whose engagement in this regime must be underpinned by a mutual understanding of expectations, limits and recompense.
We have rightly asked for high standards of data protection, compliance and verification. We have spoken about building confidence in the system and ensuring proportionality in the exercise of power. That confidence must also apply to those partners on whom the success of the Bill relies. If we expect efficiency, we must also provide clarity, including clarity about the financial impact of compliance.
The other significant and important point to raise here is the impact of opportunity costs. We know that the banks will dedicate staff, time and resources to undertake these tasks, which will prevent them from undertaking core duties that would otherwise make them money. We cannot just focus on operational costs; we need to focus on the benefits that banks will miss out on as a result of complying with the Bill. Can the Minister therefore set out to the Committee how the Government will calculate the opportunity cost? Can she confirm that these costs will be determined in partnership with banks and where the money for the reimbursement of these opportunity costs will come from?
In the spirit of pragmatism and partnership, I urge the Minister to consider how the principles of our amendment could be taken forward. It seeks a small change to the text but would be an important signal to those we rely on to help deliver the objectives of the Bill that they will be supported, not simply directed. We all want to see this legislation succeed; we have made that point many times. For that to happen, those on whom it places demands must have confidence that they are part of a fair, transparent and properly resourced framework. Amendment 122D would help us move one step closer to that goal. I beg to move.
Lord Palmer of Childs Hill (LD)
My Lords, Amendment 122D, tabled by the noble Viscount, Lord Younger of Leckie, and moved and spoken to so fully by the noble Baroness, Lady Finn, would permit banks to recover the costs that they incur, as defined in the Bill. The principle behind the amendment is to recognise that, while banks play an essential role in supporting public authorities to identify and recover funds lost through fraud or error, the operational and administrative demands placed on them can be significant. Allowing banks to recover reasonable costs would ensure that the burden of implementing these public service functions does not fall unfairly on private institutions and would support a collaborative approach between the Government and the financial sector.
However, it is important to ensure that any cost-recovery mechanism is transparent, proportionate—how often we keep using that word—and subject to appropriate oversight. Questions remain about how the “reasonable costs” mentioned in the Explanatory Notes for Clause 95 will be defined, who will determine the quantum that can be recovered and what safeguards will be in place to protect individuals from excessive fees. There must be a clear framework to prevent costs from undermining the overall financial benefit to the taxpayer or placing undue hardship on those subject to deduction orders.
As the Bill progresses, it will be vital to clarify these details—I hope the Minister will help do that—ideally through the code of practice and ongoing consultations with stakeholders to maintain fairness, accountability and public confidence in the system. I await the Minister’s response, to fill the gaps that the noble Baroness, Lady Finn, and I have outlined, particularly what “reasonable costs” is meant to mean.
The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I thank the noble Baroness, Lady Finn, for introducing Amendment 122D and the noble Lord, Lord Palmer, for his contribution. It is worth saying at the outset that the noble Baroness’s comments ran quite wide, encompassing some of the broader issues that we discussed in previous debates on the Bill.
New Section 80F, inserted by Clause 95, allows any reasonable costs incurred by DWP in recovering debt to be added to the total debt owed, and therefore for them to be collected through any means of recovery available to DWP. As drafted, the amendment would permit the Secretary of State, but not the bank, to recover any costs incurred by the bank as though it were part of the debt owed to DWP through methods of recovery such as deductions from benefit, et cetera, but without any requirement to pass any money recovered to the bank. I realise how hard it is to draft amendments in opposition—I have been there—so I believe it is possible that the intention of the amendment was to allow a bank only to recover any cost it had incurred when complying with its obligation under Schedule 5, so I shall address the amendment on the assumption that was the intention.
Officials have engaged extensively with key representatives from the finance sector, including UK Finance, and we are seeking to work collaboratively to ensure that the legislation enables banks reasonably to meet their legislative obligations without causing problematic burdens for them or unintended consequences for individuals. Indeed, changes have already been made to the Bill based on that engagement and feedback.
I agree that banks should be able to recover administrative costs associated with implementing a direct deduction order on behalf of DWP. These costs should be reasonable, providing some protection to debtors and consistent with existing legislation. In line with existing Child Maintenance Service recovery regulations, therefore, DWP will set the maximum limits for costs associated with implementing regular and lump sum deduction orders that banks can recover. Paragraph 24 of Schedule 5 further requires DWP to consult persons who represent the interests of the bank and any other appropriate persons in making the regulations.
On safeguards, banks are able to deduct any reasonable costs they incur when complying with a direct deduction order. In practice, that prevents a bank charging the debtor more than its costs. Paragraph 24 of Schedule 5 allows us to make provision about the administrative charges that can be imposed by banks. That power will be used to introduce a cap on the charges that can be imposed under this clause that can be adjusted in line with inflation to ensure that the charges remain reasonable at all times. I think we made that clear.
The code of practice spells out specifically what we will do in this area. I assure the noble Lord that we are discussing with the banks what is reasonable. This works in other areas. The code of practice says that banks may deduct any reasonable costs and that the costs that they can deduct will be limited by legislation and taken into consideration when the terms of the deduction order are done, to ensure that it remains affordable. I hope that, with those reassurances, the noble Baroness will feel able to withdraw her amendment.
Baroness Finn (Con)
I thank the Minister for her response. In closing, I want to reiterate that the Bill asks a great deal of banks, in terms not just of compliance, but of active participation in delivering government policy. That comes with real operational and financial demands, especially for smaller institutions, plus the opportunity cost for the time and resources that banks might be required to dedicate to these non-profit-making activities. I hear what the Minister says about the code of practice, but there is a difference between the code of practice and having something in the Bill. It makes an important change to ensure that banks, like public authorities, can recover the costs they incur when carrying out duties placed on them by legislation. We believe that it reflects a basic principle of fairness and partnership, which is a principle that we have returned to throughout this Committee.
I thank the noble Lord, Lord Palmer, for his support. He made the important point that oversight must be proportionate and transparent.
If we want this framework to work effectively and sustainably, we must ensure that those we rely on to implement it are not left bearing disproportionate costs. That should be absolutely clear. This is not about profit but about ensuring that compliance is feasible, resourced and built on mutual trust. I hope that the Minister will recognise the value of the amendment and the principle behind it. Those helping to enforce the law must be supported, not just expected to comply, and that should be in the legislation rather than the code of practice.
I appreciate the Minister’s remarks that discussions are ongoing with banks about how the demands will be incorporated and developed operationally. Can she confirm to the Committee whether this matter has been raised in the discussions and what assurances the Government have to date been able to give banks on this important question?
Baroness Sherlock (Lab)
I have been talking to the banks about everything but this is one of the less complicated parts. We are simply talking about the cost of making a deduction order. Banks are used to making deduction orders in relation to the Child Maintenance Service. On that, we agreed a fee and the banks can deduct reasonable amounts. We simply put a cap in. If anything has come out of the conversations that is relevant, I am happy to add it to a letter I give the noble Baroness. I should expect the matter we are discussing to work in a way analogous to how it has worked for the CMS, without difficulty.
“Overpayments made as a result of official error(1) Section 71ZB of the Social Security Administration Act 1992 (recovery of benefit payments) is amended as follows. (2) In subsection (1), for “The” substitute “Subject to subsection (1A), the”.(3) After subsection (1) insert—“(1A) The amount referred to in subsection (1) must not include any overpayment that arose in consequence of an official error where the claimant or a person acting on the claimant’s behalf or any other person to whom the payment is made could not, at the time of receipt of the payment or of any notice relating to that payment, reasonably have been expected to realise that it was an overpayment.””Member’s explanatory statement
This new Clause would bring the test for recovery of Universal Credit overpayments caused by official error into line with Regulation 100(2) of the Housing Benefit Regulations 2006 by providing that they can only be recovered where the claimant could reasonably have been expected to realise that there was an overpayment.
Baroness Lister of Burtersett (Lab)
My Lords, Amendment 123 is supported by the noble Baroness, Lady Bennett of Manor Castle, who is in the Chamber, and the right reverend Prelate the Bishop of Leicester, who regrets that he cannot be in his place. He was going to be replaced by the right reverend Prelate the Bishop of Manchester but he is also in the Chamber. I thank them anyway for their moral support, even if it cannot be practical. I also thank the Public Law Project for all its help with the amendment. I apologise that I was unable to attend Second Reading, but my noble friend Lord Davies of Brixton kindly gave notice of this amendment.
The amendment brings the test of recovery of universal credit overpayments caused by official error into line with the housing benefit provisions by ensuring that recovery can be made only where the claimant could reasonably have been expected to realise there was an overpayment. There is surely no better time to address official error overpayments in a Bill so appropriately named the “Fraud, Error and Recovery” Bill. However, it is currently one sided. Although it recognises the harms that both fraud and error cause in the social security system, it focuses only on the behaviour of claimants. It does not address the harms that result from the recovery of so-called official error overpayments. These are debts created because of mistakes made by the Department for Work and Pensions.
Unlike many other benefits, DWP can recover official error UC overpayments from claimants. This power was introduced in the Welfare Reform Act 2012 and represented a significant change to the position previously applied to most legacy benefits—that is, those that preceded UC. According to DWP data, in 2023-2024, 686,756 new UC official error overpayment debts were entered on DWP’s debt manager system. Is my noble friend the Minister able to give us any data on the circumstances in which official error overpayments occur and the average length of time before they are identified?
We are not just talking about numbers on a debt manager system. These DWP mistakes are having a serious impact on the lives of individuals such as D, who got in touch with me after hearing my noble friend Lord Davies raise the issue at Second Reading. D emailed me and we had a phone conversation. She told me that after her son was born, she was incorrectly told by DWP that she would be able to claim UC while her partner was studying for a master’s degree. Two years later, the DWP then told her that she was not eligible and that she now owed them £12,000—a “life-changing amount”, in her words. She has tried to dispute this through the tribunal system and the DWP complaints process. But even though the judge in the tribunal was sympathetic, the response has been that the DWP has the power to recover all overpayments, regardless of how they are caused. D now has £20 deducted from each UC payment she receives but no record from the DWP of how much she still owes.
It simply should not be the case that claimants such as D are paying the price for DWP mistakes. Public Law Project research demonstrates that the financial and psychological impact of overpayment debt recovery on individual claimants can be severe and is often associated with a particular sense of injustice. Understandably so, with individuals finding themselves unexpectedly in debt through no fault of their own.
The DWP’s default approach is to recover all overpayments regardless of how they are caused. The onus is on claimants to request discretionary measures, such as a waiver, but the DWP does not automatically tell them this. In 2023-24, only 75 waiver requests were granted; this equates to only 0.01% of overpayment debts registered that year. Could my noble friend tell the Committee what steps, if any, the DWP is taking to make waivers more accessible? In particular, would it consider following the example of the Department for Communities in Northern Ireland and automatically including reference to waivers in communications with claimants? Will it consider lowering the thresholds and evidential requirements to grant waivers?
In the Commons, the Minister referred to measures that were in place to mitigate the risk of harm associated with overpayment recovery. I welcome the introduction of the fair repayment rate, which I am sure my noble friend will mention. However, access to some of these safeguards is not an easy process for claimants to navigate. Moreover, as evidenced by research from the Public Law Project, Citizens Advice, the Trussell Trust and StepChange, and acknowledged by the DWP’s own guidance, those safeguards are not sufficient to prevent harm and hardship.
This was illustrated by a recent report from Policy in Practice about deductions from UC in general. It observed that many low-income households are already in crisis and at risk of deep poverty, prior to the application of deductions. I know that I do not have to explain to my noble friend the difficulties of trying to survive on universal credit and how low it is. That will still be the case despite the welcome, real-terms increase being proposed in the legislation currently before the Commons. Policy in Practice found that deductions risk placing households further from being able to afford the essential items of daily life. This is particularly the case for lone parents and carers.
Citizens Advice reports that fewer than 40% of its clients who contacted the DWP were successful in getting an affordability measure put in place, yet the DWP’s own guidance recognises that any recovery of an overpayment from any person in receipt of benefit is almost certain to cause some hardship and upset for them and their family. What criteria does the DWP use to decide what is an affordable deduction? Would the DWP consider agreeing an affordable and sustainable repayment plan with claimants before initiating recovery by way of deductions?
As I said, overpayment recovery is taking the individual below the amount that the DWP has assessed them to need, in a context where UC rates have already been shown to be insufficient to meet essential needs—a point emphasised by Policy in Practice. This is why I have tabled an amendment to bring the test for recovery of UC overpayments into line with the current test for housing benefit. It would ensure that UC overpayments caused by official error could be recovered only when individuals could reasonably have been expected to have realised that they had been overpaid. It places the onus on DWP officials to consider the fairness of recovery before initiating it. When UC was introduced, the then Labour shadow Minister for Employment considered this a just and fair test, which has been tested in case law.
This amendment would also create a clear incentive for the DWP to prevent these mistakes in the first place, which is a step towards a better-functioning social security system that gets things right first time. We ought to pay attention to the more than 30 charities that have written to the Secretary of State urging the Government to grasp this opportunity.
In introducing the Bill’s Second Reading, my noble friend stated:
“Our approach is tough but fair … fair on claimants, by spotting and stopping errors earlier and helping people to avoid getting into debt. It is fair on those who play by the rules”.—[Official Report, 15/5/25; col. 2346.]
But the current system is patently unfair to those who have been affected by an official error that they could not be expected to spot, and who have played by the rules as they understood them.
This is a fundamental question of fairness and of rights and responsibilities. If a government system makes mistakes, who should bear the consequences? Is it the system that caused the error and has the power to avoid it, or the service user who has no control over, or responsibility for, that mistake and, worse, is detrimentally affected by it? If we are serious about addressing fraud, error and the recovery of debt in the Bill, it would—for want of a better word—be an error on our part not to take action to end this unfair practice and source of economic instability for hundreds of thousands of families and individuals whom our social security system is there to serve. I beg to move.
Lord Verdirame (Non-Afl)
My Lords, I will speak in support of the amendment because it raises, as the noble Baroness, Lady Lister, pointed out, a question of principle. Should a person who received payments in error always be required to make restitution in full?
We are dealing with the application of this principle in the context of welfare payments, but it may be useful to keep in mind how this principle would apply in other contexts under our law. The default position is, as one would expect, that a party that has received money in error is obliged to return that money. However, it is also the case that our law has developed an important exception to this general position. This is known as the change of position defence, which was first recognised by Lord Goff in the case Lipkin Gorman v Karpnale Ltd 1991, where he said that
“the defence is available to a person whose position is so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively, to make restitution in full”.
In essence, where the person has changed their position, in good faith, in reliance on that payment—for example, by spending it—restitution in a non-welfare context may be denied in whole or in part.
As I said, it is an equitable exception that our law has developed over a number of decades and on the basis of various decisions. It is a complex area of law known as unjust enrichment, on which many doctoral theses have been written. The reason it has attracted so much attention is that there is a conflict of fairness. On the one hand, it seems right that the payer who paid in error should, in principle, receive the money back and that people should not derive benefit from someone else’s innocent error. On the other, it also seems wrong that someone who made no error and relied, in good faith, on that payment should be unduly penalised. The common law and equity seek to strike a balance between these two concerns with the change of position exception that I have outlined.
For welfare payments, we are dealing with a context where statute rather than common law applies; however, it seems that the concerns that the common law has sought to address in other contexts arise even more acutely. The people who received the payments are socioeconomically disadvantaged and very likely to have spent that money, as the case mentioned by the noble Baroness illustrates. Thus, they are very likely to have changed, in good faith, their position by relying on those payments. To ask them to return that money is particularly burdensome on individuals who are on benefits and without a safety net.
Section 71ZB of the Social Security Administration Act, which the amendment proposes to change, seems a very blunt instrument. It responds to that first concern—to ensure that the payer, in this case the taxpayer, should have their money back—but it does nothing to protect the bona fide recipient of that payment from being penalised unduly. For that reason, it seems a fundamentally unfair provision. It seems wrong that the protection that a bona fide recipient of a payment in error would enjoy in other contexts, including a commercial context, should not apply to the bona fide recipient of a welfare payment made in error. This amendment seeks to remedy that unfairness, and it has my support for that reason.
It is true that Section 71ZB gives the Government a discretion and I suppose it will be said that there is guidance that tells the Government to exercise that discretion, taking into account certain circumstances. But the good will of the payer is not sufficient and that certainly is not the position under the general common law on restitution. It is not just a matter of the payer having the good will not to pursue the recovery of the payment; there has to be more to recognise that the innocent beneficiary, too, has an entitlement to protection. It seems to me that this amendment seeks to provide that correction to Section 71ZB of the Social Security Administration Act 1992.
I will, of course, be interested to hear what the Minister has to say about the various mitigations that might exist, but at the moment I agree that, unless the mitigation is in statute, whatever guidance might be in place will not be sufficient. I would also like to take this opportunity to thank the Minister and her officials for the very informative briefing last week.
Lord Palmer of Childs Hill (LD)
My Lords, I support Amendment 123, tabled by the noble Baroness, Lady Lister of Burtersett, and others, which would bring the test for recovery of universal credit overpayments caused by official error into line with Regulation 100(2) of the Housing Benefit Regulations 2006.
At present, the Department for Work and Pensions is empowered to recover universal credit overpayments even when they result from its own mistakes—a policy introduced with the Welfare Reform Act 2012. This approach marks a significant departure from the previous position on legacy benefits, where overpayments arising from official error could be recovered only if the claimant could reasonably have been expected to realise that there was an overpayment. The current system places an unfair burden on claimants, many of whom have no way of knowing that an error has occurred yet are still liable for repayment. I am grateful for the legal expertise of the noble Lord, Lord Verdirame, on this, showing that it is a complicated matter, with many legal precedents that I trust the Minister will take into account.
The evidence we have shows that the recovery of official-error overpayments can have severe financial and psychological impacts, with some individuals facing destitution as a result of sudden deductions from their benefits. The amendment would restore a vital safeguard by ensuring that only those overpayments that a claimant could reasonably have been expected to notice are recoverable, aligning universal credit with the principles of fairness and justice that underlie our social security system. This change would not prevent the recovery of overpayments where there has been claimant error or fraud but would, I hope, protect honest claimants from being penalised for mistakes entirely out of their control.
Many people do not look too closely at the moneys that come into their bank or Post Office account. They receive it and they think it is what they should receive. Sometimes it is not enough and sometimes, as we are discussing here, it might be too much. But most people take it and use it. We used to have this problem with council house rents, where the benefits were paid to the householder and they sometimes had to make a choice: did they buy bread and food or pay the rent? They used it for bread and food and did not have the money for rent. The rents started to be paid direct to the local authority or housing association, in order to mitigate that. It tends to prove the fact that people do not notice: they take what is needed and receive it. I urge noble Lords to support this amendment, to ensure that the system is both compassionate and just. I commend it to the Committee.
Viscount Younger of Leckie (Con)
My Lords, in speaking for the first time today, I take this opportunity to offer my congratulations to the Deputy Chairman of Committees, the noble Viscount, Lord Stansgate, on the arrival of his grandchild; I think he had indicated that he or she had arrived. It is interesting to reflect that when we started off on day one of Committee there was either a wedding or a honeymoon or both— I forget—and this allows me to declare a small interest of my own, which is that my daughter is due to give birth in two weeks.
Viscount Younger of Leckie (Con)
Right now, however, I want to speak with a degree of sympathy for the principle underlying Amendment 123, tabled by the noble Baroness, Lady Lister, and supported, as she said, by the noble Baroness, Lady Bennett, and the right reverend Prelate the Bishop of Leicester. I realise that the latter two are not in their place, but I understand that there is a good bit of interest in matters being debated in the Chamber at present and it may be that that is the reason.
The amendment raises a fair and important point of principle—namely, that there must be a clear distinction between those who have wilfully defrauded the state and those who have received overpayments through no fault of their own and could not reasonably have known that those payments were made in error. The noble Baroness, Lady Lister, eloquently laid out the arguments. We do not dispute that it is right for the state to recover money where fraud or deception has occurred, nor do we oppose the robust recovery of public funds where a claimant has knowingly continued to receive payments to which they were not entitled.
However, the amendment speaks to the cases where, due to administrative error or system failure, a claimant has been paid more than they were due and where they had no reasonable means of knowing that an error had occurred. In those cases, I believe that we must proceed with care. It is not fair to treat an individual as if they had committed wrongdoing if they were in effect passive recipients of a departmental error.
While we support the spirit of the amendment, though, it is important also to assert that public money, even when paid out in error, does not cease to be public money. It does not become the property of the claimant simply by virtue of its mistaken disbursement. When the state overpays, be that through a clerical oversight, a system issue or human error, we believe that that money is still owed to the public purse. That point is crucial because these funds are not abstract; they are the same funds from which other benefits are paid. They are resources that should be available to support others in need, those who are waiting on payments or who rely on the timely and correct functioning of our welfare system. Every unrecovered overpayment is, in a sense, money that could otherwise have gone to another person in genuine need. I hope that the noble Baroness, Lady Lister, would agree with that.
While I share the concern that individuals should not be penalised for departmental mistakes, I would be cautious about supporting a provision that could be interpreted as writing off the recovery of all such payments. There must be safeguards to ensure that claimants are treated fairly, yes, but also a means to ensure that taxpayers’ money is recovered, albeit in a sensitive and proportionate way. This is where I listened intently and with interest to the remarks made by the noble Lord, Lord Verdirame, and the precedent that he said was set by law. I am the first to say that where there is law that has been laid down, it should of course apply.
This is where proportionality becomes key. The Department for Work and Pensions must take steps to distinguish genuine error from deception and it must act reasonably in recovery, offering a choice of, for example, repayment plans or hardship considerations and, where appropriate, writing off small sums, however that is defined, that would cost more to recover than they were worth. However, it is not unreasonable to expect that, where a person receives a payment to which they were not entitled, even by mistake, and is later made aware of that error, the money should be returned.
For fear of being described as naive, I would say that the vast majority of people are honest and fair and would, as I would put it, fess up to receiving money that they were not due or were not expecting and would take steps to return the money in full. It is those very people who should be supported for their citizenship and honesty, rather than turning a blind eye to those who would not have owned up and would definitely have kept the moneys erroneously paid out. It does not matter whether you are poor or not so poor; the moneys are still wrongly paid out. It is fundamentally a matter of honesty. The example given by the noble Baroness, Lady Lister, is a case in point and I listened carefully to what she said. Of course, it has to be handled extremely carefully and sensitively and I am sure that the department is well up to dealing with that. However, we should support those who do the right thing by making sure that those who do the wrong thing do not benefit. That is a strong message.
I suggest that, rather than inserting a hard and fast rule in primary legislation, there may be room for improved guidance and safeguards in the code of practice, or through the incorporation of more effective, independent oversight, to ensure that these cases are dealt with proportionately and fairly. This chimes with questions that have been raised in this very short debate, and by the noble Baroness, Lady Lister.
Can the Minister state what continuing steps the DWP is taking to ensure that moneys are paid out to the correct people at the correct time? If she has the figures to hand, can she enlighten us on the reasons for error? For example, how much error is due to human error and how much to systems breakdowns?
In summary, we support the intent of the amendment—to ensure that the system is not punitive where there has been no wrongdoing—but we hesitate to go so far as to say that such funds should not be recovered at all. So I hope that the Minister will take this opportunity to outline, in her response, how the department will make these distinctions. As she knows, we have also raised this matter on previous days in Committee, so I hope that she will use this chance to speak about what internal corrections or changes have been made—or will need to be made—when payments are made in error. I imagine that this could include a four-eyes principle of oversight of systems; one may already be in place, but I wonder how effective it is.
To conclude, we are faced with two distinct problems: first, how we treat those who have received payments in genuine error, so that they are protected from undue negative effects; and, secondly, how the department will address the mistakes that were made internally.
Baroness Sherlock (Lab)
My Lords, I am grateful to all noble Lords for their contributions to this debate.
As my noble friend Lady Lister explained, her Amendment 123 seeks to prevent the recovery of overpayments in universal credit and new-style benefits in instances where the claimant or their representative could not reasonably have been expected to realise that they had been overpaid. This would apply to the recovery of existing and future official-error overpayments. Although I understand my noble friend’s arguments, I regret that I am not able to accept her amendment. However, I will set out how this issue came about, what the department is doing about it and the way that we address it when it arises.
I will first take on the point made by the noble Lord, Lord Verdirame, which was referenced by the noble Viscount. We all of course obey the law, but, as I think the noble Lord said, common law is displaced by Section 71ZB of the 1992 Act, and, therefore, this is the law that we are currently applying. He suggested that it was a “very blunt instrument”, but it is not intended to be so. He may or may not find the way that I will describe how we deal with problems, when they come up, satisfactory, but I shall attempt to do that.
It is worth saying at the start that, as my noble friend indicated, the background to this is the Welfare Reform Act 2012, which was introduced under the coalition Government. That Act allowed all overpayments of universal credit, new-style JSA and new-style ESA to be recovered, regardless of the cause of the overpayment. The policy was introduced on the basis that money overpaid from the public purse should be recovered, with appropriate support—which I will come back to later—for anyone struggling with repayments.
Universal credit is what I gather is technically called a “dynamic benefit”: it supports people as they move in and out of work, or as their earnings change as they go up and down. I am told that part of the design consideration was therefore to operate in a similar way to the employer/employee relationship, which includes the recovery of overpayments. Having looked in Hansard at the Public Bill Committee debates at the time this was introduced, I saw that it was argued that, in practice, most overpayments of UC and new-style ESA and JSA would be recoverable to protect the public purse, but a decision could be made that part or all of the overpayment did not have to be repaid. It was argued that preventing DWP recovering official-error over- payments, as with old-style benefits, was not appropriate and that the system should allow a common-sense approach to the recoverability of overpayments.
That flexibility to recover overpayments of universal credit is, to some degree, crucial to allow the department to make corrections to an individual’s entitlement between assessment periods, because of the way that universal credit works. For example, if someone has a change of circumstances late in their payment period, they may be overpaid universal credit in that period, and that overpayment would need to be recovered from their payment in the next period. That flexibility clearly has to be retained.
I cannot comment on individual cases, as my noble friend will understand. However, we understand that overpayments, however they arise, can cause anxiety to those faced with repayments. In answer to the noble Viscount, the Government are very focused on improving payment accuracy in the first place and on preventing overpayments occurring through better use of data and continuous improvement activity. We are acting now and using learning from existing programmes; for example, insight from the DWP’s targeted case review of universal credit is already helping to shape continuous improvement and will support future preventive measures. The noble Viscount may recall that from his time in government.
Baroness Lister of Burtersett (Lab)
I am afraid it was remiss of me not to congratulate the Chair on the recent addition to his family and to send best wishes to his daughter—fingers crossed, and I hope it all goes well.
I thank all noble Lords who spoke, including the noble Lord, Lord Verdirame—he sounded so learned that I want to call him noble and learned—for his helpful contribution. There is something very comforting about having someone who knows the law coming in behind you and saying that this is a point of principle. I very much appreciated that, as well as the support of the noble Lord, Lord Palmer of Childs Hill.
I appreciated the sympathy expressed by the noble Viscount, Lord Younger of Leckie, but it felt a bit like doing contortions so as not to have to criticise what his Government introduced. I do not accept the argument about public money. It is not like there is little pot and that if some of that pot goes to someone who has been overpaid because of the department’s error, that money will not be there for other claimants. The talk about public money felt a bit like some of the arguments around taxation being theft and so forth because it is public, the “It’s our money, not their money” sort of thing. Anyway, I appreciate the sympathy with which he approached the question, and I appreciate my noble friend, as always, engaging fully with what was said. I am disappointed that the department is not willing at all to budge on this.
We have to remember that universal credit is complicated. It may have been sold to us by the previous Government as a simplification but, in fact, it is complicated and, therefore, not surprising if people do not understand the payment that goes into their bank account. Who understands how universal credit is worked out? The answer is not many people. That has to be borne in mind when we are talking about what it is reasonable to expect people to know and respond to. The noble Lord opposite talked about fessing up and realising they have got it wrong, but people may not realise they have got it wrong until it is brought to their attention by the department because, tardily—we will hear more about that when it comes to carer’s allowance—it is brought to their attention that the payment is wrong. It is a question not of hiding but of simply not knowing.
I understand that universal credit is a dynamic benefit and that the payments are different from what went before—it is different from housing benefit—but surely there could be a provision that allowed for repayment not to be made in certain circumstances. My noble friend talked about a right of appeal, but that is pointless in this situation. The person who contacted me, D, went to appeal. She had a lovely judge at the appeal who looked at what the DWP said and said, “I’d really like to be able to give you this, but I can’t because the law does not allow me to.” Everybody’s time was wasted. She was given undue expectations. My noble friend said that people are encouraged to contact the recovery team and work out a decent repayment rate. I am not involved in the day-to-day business of universal credit, but the organisations that have helped with this and asked me to put this forward know the situation, and that is not how they see it. What should happen in theory does not always happen in practice on the ground.
If nothing else, perhaps this amendment will encourage the DWP to look again at its procedures and the guidance to make sure that things are happening as they are supposed to happen so that the picture that my noble friend painted is an accurate picture of what happens on the ground. I will obviously want to read in more detail to see whether we want to bring this back. I very much appreciate my noble friend answering my rather nerdy questions. It is not the first time that we have exchanged nerdiness in this Room. With that, I will withdraw the amendment but will want to consider what we do on Report.
Viscount Younger of Leckie (Con)
I shall just pick up on what the noble Baroness said about universal credit and the fact that it is quite complicated. I hope she will agree that the old system, where there were six benefits, was particularly overcomplicated and that one of the successes of the past 14 years of government was that the six benefits became one. I hope she might accept that it is not quite so complicated and that, secondly, as I have been told and believe, if we had not done that then the system of paying out benefits would have been in severe trouble during the Covid period.
Baroness Lister of Burtersett (Lab)
I do not want to have a long debate with the noble Viscount about the pros and cons of universal credit because we would be here all night. I just point out that it may be simpler overall to have it all in one, but that does not make the one in itself any simpler. Some of the rules around universal credit are very complicated to understand because they do not always make sense. That was the point I meant to make. I am not saying that it was nirvana beforehand, but at least then an overpayment error made without the claimant knowing was not repaid, so in that sense it was better, but I will not go into any more detail about that.
The Deputy Chairman of Committees (Viscount Stansgate) (Lab)
I hope the Committee will allow me to express my thanks for the kind words expressed on the birth of my first granddaughter. I wish other grandchildren a successful arrival in the world.
Amendment 124
“Recovery of overpayments of Carer’s AllowanceThe Secretary of State may not exercise any of the powers of recovery under this Act in relation to a person who has received an overpayment of Carer’s Allowance until such time as—(a) the Secretary of State has commissioned an independent review of the overpayment of Carer's Allowance;(b) the review has concluded its inquiry and submitted a report containing recommendations to the Secretary of State;(c) the Secretary of State has laid the report of the independent review before Parliament;(d) the Secretary of State has implemented the recommendations of the independent review.”Member’s explanatory statement
This new clause would delay any payments being taken from people who the Government may think owe repayments on Carer’s Allowance until the independent review into Carer’s Allowance overpayments has been published and fully implemented.
Lord Palmer of Childs Hill (LD)
My congratulations to everybody. I shall speak also to Amendment 127 in my name. These amendments seek to delay any payments being taken from carers whom the Government believe owe repayments on carer’s allowance, something I have spoken about a lot during this Committee, until the independent review into carer’s allowance overpayments has been published and, crucially, fully implemented. It is a matter of justice and basic fairness that we do not penalise carers, who are the unsung heroes who support our most vulnerable, while the very system that created those overpayments is under independent scrutiny.
We know from recent figures that at least £357 million has been overpaid since 2019, with many carers accruing large debts that they were not aware of through no fault of their own, often because the Department for Work and Pensions failed to act swiftly on overpayment alerts or to communicate effectively with carers about their obligations. The independent review, commissioned by the Secretary of State and led by Liz Sayce, is tasked with uncovering how those overpayments occurred, how to support those affected and how to prevent such distressing situations in the future. Until we have the benefit of its findings and recommendations, it would be unconscionable to proceed with debt recovery that would push already struggling carers into future hardship.
Furthermore, Amendment 127 proposes that the implementation of what will then be the Act be delayed until the review’s findings are published and acted upon. This is a call not for indefinite inaction but for responsible and evidence-based law-making. The Government’s decision to commission this review is a recognition of the serious flaws in the current system, whether it is just one payment or a mass of payments, as we discussed on the previous amendment, and the real harm caused to carers, many of whom breached the earnings limit by only a small amount yet face life-changing debts. To proceed with the Act before we have learned the lessons from this debacle risks repeating the same mistakes and undermining public trust. We owe it to carers and to the integrity of our social security system to ensure that legislative changes are informed by a full understanding of the problem and a clear plan for preventing its recurrence. Let us show carers the respect they deserve by pausing, listening and acting on the independent review before we ask them to pay a penny more. I beg to move.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise extremely briefly and apologise to the noble Baroness, Lady Lister, that I could not be in the previous group as I was in the Chamber. I will take seconds to intervene in the interesting debate between the noble Baroness and the noble Viscount to say that, of course, if you have a universal basic income, that is an extremely simple system to administer that would not create any of these kinds of problems.
Anyway, I rise with great pleasure to follow the noble Lord, Lord Palmer of Childs Hill, and to back in particular Amendment 124, although I will be interested to hear the Minister’s response to Amendment 127. I felt I had to speak because I raised at some length in earlier discussions the case of Nicola Green. That is one case, but overall the Government have been clawing back £357 million. Hundreds of people have acquired criminal records in what I think most people would agree are entirely unjust circumstances, whatever the detail of the law. Some people now face debts of up to £20,000 or more.
This amendment—waiting until we have the review and not doing more damage to individuals’ lives and to the reputations of the Government and the Department for Work and Pensions—is a really simple, practical measure, and I commend the noble Lord, Lord Palmer, for doing this and for powerfully presenting his case. I also align myself very much with his tributes to unpaid family carers, who are doing so much in our society for what are, on a week-to-week basis, derisory sums of money for an incredible amount of labour.
Baroness Lister of Burtersett (Lab)
My Lords, I rise very briefly. My noble friend said that the department tries to move as quickly as possible when there is an error in payment, but, patently, that did not happen with carer’s allowance. Therefore, I am very grateful to the noble Lord, Lord Palmer of Childs Hill, for raising the issue. Part of the problem was that the DWP allowed the overpayments to accumulate until they were really significant and, given the way the cliff edge works, you could be a tiny amount over and end up having to repay the whole of your carer’s allowance. So it is a really important issue.
I want to ask my noble friend a question. Do we know when the review will be published? How quickly does the department hope to be able to move once it has been published? In a sense, that affects the practical impact of the noble Lord’s amendment.
Baroness Fox of Buckley (Non-Afl)
My Lords, I too rise very briefly. A number of us have raised this scandal throughout Committee and the Minister has rightly said, “Well, there’s an independent review, I really can’t comment until we get the findings”. I say, “If we can’t comment until we get the findings of the independent review, the Government shouldn’t be taking money from the carers. That would seem obvious to me. Let’s wait until we’ve got the findings of the independent review”.
However, this speaks to the moral dilemma that was very well articulated by the noble Baroness, Lady Lister of Burtersett. It is something that has been troubling many of us throughout Committee: the Bill fails to distinguish between the ways people are treated for error and for fraud. Through no fault of their own, they end up in some instances being criminalised and certainly subject to some quite severe powers. That has always felt morally unjustifiable.
Another point this raises is that, although we constantly say that the moral case for this is that the money must be reclaimed, many instances of error seem to be due to errors made by the DWP, yet there is never any clarity about how, morally, it might be asked to pay. I am not suggesting that it pays financially, but if we are saying that those who make an error must pay, I do not understand why the DWP has not, as part of the Bill, made it clear which errors made by the department or state bodies the public will be able to hold them to account for when they are made. The scandal of the carers has cut through with the public: people know about it and are discussing it, and they in no way think that these people are welfare scroungers, frauds or doing anything wrong. So I urge the Government in this instance to be very clear that they will not act, as this amendment rightly argues, at least until the inquiry has brought its conclusions into the public arena.
Lord Vaux of Harrowden (CB)
My Lords, I hope to be even more brief. I have sympathy for this amendment, but it is backward-looking, as it relates to situations that have already happened. We also need to stop them happening in the future. These problems have arisen because of a very badly designed benefit. It has a cliff-edge threshold. Cliff-edge thresholds will always be the ones that cause problems, so I really hope that we learn the lessons from this situation and stop applying cliff-edge thresholds to benefits. It does not work and is almost guaranteed to create problems of this nature.
Viscount Younger of Leckie (Con)
My Lords, these amendments are well intentioned—an expression I believe I used in the last group, but I mean it. I want to acknowledge from the outset that they speak to a principle that I believe we can all support: the importance of integrating independent expert advice into the policy and operational decisions that we take, especially in areas where there have been clear signs that something has gone wrong.
The ongoing concerns around carer’s allowance overpayments are a case in point. The issue has rightly attracted attention, both inside and outside the House, in particular last year, and I believe that the decision to commission an independent review is right. Where there are systemic weaknesses, whether in communication, process or oversight, they must be identified and addressed, and we should absolutely be willing to listen to expert recommendations to improve how the DWP operates in the future.
I want to recognise the principle behind these amendments: it would be wrong to ignore serious and credible concerns raised by carers, campaigners and the public. They deserve answers and a process that ensures that the mistakes of the past are not repeated. That is why the review matters, and I hope we will all welcome it when it reports. I add to the questions raised earlier about the timing and when it will come.
However, that brings me to the core of my hesitation with these amendments. Although they stem from an entirely legitimate concern, I fear that they may go too far in how they propose to respond to it. Amendment 124, as laid out eloquently by the noble Lord, Lord Palmer, would delay all recovery of carer’s allowance overpayments until the independent review had concluded and, crucially, all its recommendations had been implemented. Amendment 127 goes even further, effectively delaying the entire Act until those recommendations have been acted on.
I am not sure that this is a workable or proportionate course of action. We must remember that the review currently under way is, as I understand it, largely focused—this is an important point—on prevention. It asks how overpayments were allowed to happen in the first place, what lessons can be drawn and how the department can ensure that this does not recur. That is vital, but it is a forward-looking exercise: it is about improving systems going forward, not about deciding whether an overpayment that has already been identified should be recovered. The Minister might want to comment on my assessment of the review.
To put it plainly, if an overpayment has been made and the department has established this through due process, that money is owed to the public purse. The review likely will not and should not change that fundamental fact. We should not conflate the need to prevent future errors with the obligation to recover public funds that have already been incorrectly distributed. We are talking about money that could and should be supporting others in genuine need—to further a theme I made in the last group. While it is essential that recovery processes are fair and humane, it is also important that the recovery duty is not unduly delayed.
Baroness Sherlock (Lab)
My Lords, I am grateful to noble Lords for their contributions. Before I get stuck in, I say two things. First, I cannot believe that I failed to congratulate both the grandparents of old and the soon-to-be grandparents. I share in the joy that has arrived and is coming. I also take a moment to pay tribute to the millions of unpaid carers across the country—grandparents and many other kinds. This Government value carers very highly and we recognise the vital and valuable contribution that they make every day.
I turn to the carer’s allowance. When we came into government, it became clear that there were far too many cases where hard-working carers, on carer’s allowance, had been left with large overpayments to be repaid—sometimes worth thousands of pounds. As a result, the Secretary of State acted to commission an independent review of earnings-related overpayments of carer’s allowance to understand exactly what had gone wrong and to make the necessary improvements for the future. The review is well under way; in answer to my noble friend, we expect to receive the report from the independent review in the near future, possibly late summer—that is one of those nice, flexible, government seasons. I hope that it will be before we are all shivering in this Room rather than sweltering. We will publish the report and our initial response as soon as is practicable thereafter.
The Government set up the review because we are determined to deal with the problems that the system has created for carers. The Secretary of State is eagerly awaiting the report, and she will give the closest consideration to every recommendation. However, as the noble Viscount pointed out, no Government could commit in advance to implementing every recommendation of an independent review sight unseen. I suspect that, if I had announced today that I would be very happy to commit to every recommendation, the Committee might raise a sceptical eyebrow about the genuine independence of the review. In fact, I do not know what the review will say and therefore I am in no position to say what is going to happen or what the Government will do about it. Having gone to the trouble of commissioning it and picking somebody independent to do it—Liz Sayce—the Secretary of State will manifestly look carefully at what comes out.
To stop the use of the new debt recovery powers on any overpayments of carer’s allowance—as Amendment 124 would do—until each and every recommendation had been accepted and implemented would not be proportionate. Maybe I could reassure the Committee that the Government have not been treading water while waiting for the review; we have already taken steps to address the problems that carers have been experiencing. In response to the noble Viscount, letters are sent out with prominent statements about the need to let the DWP know about changes in circumstances, and we send texts to people following alerts about earnings payments from HMRC, again to encourage them to do that.
We have basically been reviewing all our communications to make it as easy as possible for carers to tell the DWP when there has been a change in their circumstances that might affect their carer’s allowance. Crucially, we introduced the largest increase in the earnings limit since carer’s allowance was introduced in 1976. The earnings limit is now 16 hours’ work at the national living wage, and over 60,000 more people will be able to receive carer’s allowance between 2025-26 and 2029-30.
There are safeguards and protections for those with overpayments, both in existing law and in the Bill, including review and appeal rights, affordable repayment plans and, in exceptional cases, waivers of the debt. Those safeguards ensure that all debtors, not just those with debts from claiming carer’s allowance, are protected.
I remind noble Lords that we are talking specifically about these debt recovery powers. As I have gone on about extensively, these are powers of last resort to be used only with debtors who are not on benefit, including carer’s allowance, and not on PAYE employment. They are to be used only with those who receive income via other means and who can afford to repay, but choose not to do so. This amendment would put people in that category in a better position than those who are on benefits or on PAYE.
Amendment 127, again because I cannot commit in advance to implementing the recommendations of the review, would be even more disproportionate, because it would delay the entire Bill from coming into force until that had happened. Given the benefits that the Bill is expected to deliver, not just in the social security system but in the public sector more widely, that cannot be proportionate. We know that billions of pounds are being lost to public sector fraud; delaying this Act coming into force would put at risk an estimated £1.5 billion of benefits over the next five years, as scored by the OBR. This would place pressure on the Government’s fiscal position and on taxpayers, who deserve to have the confidence that money is being spent by the Government reaching out to those who are entitled to it. The Bill introduces new and important safeguards, including independent oversight and new rights of review and appeal to ensure the proportionate and effective use of the powers. I believe that these protections are sufficient and that we do not need to wait for the outcome of the review simply to proceed with the rest of the Bill.
I also make the point that some of the measures in the Bill are crucial for preventing the types of errors that we found in relation to carer’s allowance. For example, the eligibility verification measure, although we are not proposing to use it in relation to carer’s allowance, will improve DWP’s access to important data to help verify entitlement, ensure that payments of the benefits it covers are correct, and prevent the build-up of large overpayments in those three key benefits. It is important that the DWP is equipped with the right tools.
I will comment on a few questions that were raised. The noble Lord, Lord Vaux, as so often, made an absolutely crucial point: this is a very unusual benefit. It is a cliff-edge benefit and, therefore, if somebody goes over it even slightly, for example on earnings, it can make a very significant overpayment appear. As the Chancellor said at the Budget, we do need to look at the current cliff-edge earnings rules. It might be that a taper, for example, could incentivise unpaid carers to do some work, and reduce the risk of significant overpayments. However, I need to manage expectations. Introducing a taper into carer’s allowance is not without its challenges and could complicate quite a straightforward benefit significantly. It would need a significant technical rebuild. The DWP has begun to do some scoping work to see whether an earnings taper in carer’s allowance might be a feasible option in the longer term. But that could take some years to come through: I ought to be clear about that.
The noble Viscount, Lord Younger, made some important points about understanding that there is a range of types of error that have arisen in relation to carer’s allowance. I remind the Committee that there is no recovery from carer’s allowance of official error: we are not talking about what is classed as official error. These are errors. I will have to look at the record, but it is possible that the figure that the noble Lord, Lord Palmer, mentioned related not just to overpayments about earnings but to all the overpayments in carer’s allowance. Perhaps he could clarify that at the end and, if I am wrong, I apologise and I will clarify that to him.
The reason that is important to clarify is that, looking back, from 2018-19 to 2023-24, there was a fluctuation in the number of overpayments. The values varied. The main cause of carer’s allowance overpayments is a claimant having earnings that exceed the permitted limit. In 2023-24, the causes of new overpayment cases referred to our debt management were as follows: 57% of cases related to earnings, which was a lower proportion than previously, when it was nearly 60%; 23.5% of cases were caused by a claimant who was not providing care any more; 3.1% were caused by breaks in care; 15.8% were for other reasons, which could be that the claimant was in prison, was in full-time education, was getting another benefit or had moved abroad, or the person being cared for had died. There was a range of reasons. So there is a range of reasons why somebody may be overpaid, not all of which are related to earnings.
The job of the Government is to use the benefits of the independent review and the insights it will give us to try to make sure that we make it as easy as possible for claimants to tell us when changes happen, so they do not make those mistakes. Also, we will look carefully at what other recommendations are made and we will do whatever we can that seems reasonable within the powers and resources we have to see how we can make this better. We have also made a number of steps already to try to improve things, including by sending out messages, communicating and raising that ceiling for earnings in the first place. Given all that, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Palmer of Childs Hill (LD)
My Lords, that was a very detailed debate, and a challenging one in some ways. I say to the Minister, from my time in local government, going round to people who were in council or housing association properties, that I often saw behind the clock the unopened envelopes from HMRC or the DWP. There is no excuse for people just ignoring it, but that is the real world. People do not always open envelopes that might have unfortunate things in them. As a chartered accountant, this is anathema to me, but the fact is that that was the reality of my 28 years on a local council. It was the case: people were not getting and opening the communication, even though it was properly given.
The Minister spoke about the taper. I can probably count on one hand how many recipients understand the taper. They know that they have received or not received a certain amount. The idea that everyone understands the taper is ridiculous.
What these amendments seek to do is purely to ensure that the completion of the review is done as soon as possible. I really do mean as soon as possible. If there is a delay in doing the review, I ask for that delay to be given to the claimants as well. Why should they not have a delay in dealing with it, if the Government cannot get their review together? Delays work both ways.
The Minister spoke about the review in the near future. The near future is so nebulous when people are being bullied on overpayments. The Minister asks about the £357 million. I honestly cannot give you the proper answer other than that I was given that figure as the overpayments since 2019. It is not immediate but it builds up like interest on a loan builds up.
“Fair process and human interventionWhen any automated system has been involved in decision making which will affect will affect overpayments recovered from an individual, no final decision shall be considered valid or acted upon unless—(a) the outcome of any process involving an automated system has been subject to meaningful and documented human oversight, such that a human decision-maker has reviewed, understood, and taken responsibility for the final determination, (b) the recipient has been provided with an individual explanation of the relevant decision in their case, including a clear explanation of how an automated system has impacted the decision,(c) the recipient has had the opportunity to make representations, and(d) the recipient is been given information about how they can challenge the decision.”Member's explanatory statement
This amendment seeks to secure fair administrative processes and meaningful human oversight for benefits recipients when they are subject to decision-making processes which include automated systems.
Baroness Bennett of Manor Castle (GP)
My Lords, I will put this amendment in the context of the discussion on the previous group. The noble Lord, Lord Palmer, and the Minister have been telling us regularly that this is all about people who do not engage. As the noble Lord said, he has seen people with a stack of envelopes behind the cheese board or whatever, but I have met many disabled people, particularly because of the demonstrations I have been on, for whom the arrival of the postman every day is a point of fear. People are absolutely terrified and are used to never receiving good news from the DWP. We have to acknowledge the context in which people are not engaging; it may be more than their mental health can take. We have to look at all these amendments in that context.
I warn noble Lords with subsequent amendments that I do not expect this group to take long, because we have already canvassed these issues extensively in terms of the use of algorithms and whether there is a human in the loop—to borrow terminology from another area of technology. Amendment 124A moves towards overpayments recovered from an individual. No final decision shall be considered valid or acted upon unless there is—the terminology here is important—
“meaningful and documented human oversight”,
and a human decision-maker has reviewed, understood and taken responsibility for the final determination. In some ways, this picks up the points made earlier by the noble Baroness, Lady Fox, about there having to be a responsible person in the DWP who can be held to account.
Under proposed new subsection (b), the recipient must have been
“provided with an individual explanation of the relevant decision in their case, including a clear explanation of how an automated system has impacted the decision”.
People need to know that there is this machine in the loop, so they at least understand what is happening to them, have a chance to make representations and are told how they can appeal if they want to appeal. We have canvassed these issues extensively. The amendment particularly addresses the situation that we saw in Australia with the enormous Robodebt scandal, with money being taken off people by a totally automated system. Many people knew that there were issues at the time and the Government in Australia kept being warned that this was going to be a problem. It was an unmitigated disaster, for which apologies had to be made, heads rolled and so on. This amendment is a sensible way in which to protect benefit recipients, as well as the Government from getting themselves tangled into things that they really do not want to get tangled in.
Finally, I suspect the Minister may say, “Well, this is going to happen anyway” but, if that is the case, why not put it into the Bill? I beg to move.
Lord Palmer of Childs Hill (LD)
My Lords, I will briefly address Amendment 124A, which seeks
“to secure fair administrative processes and meaningful human oversight”—
that is the point—
“for benefits recipients when … automated systems”
are used for decision-making. We have seen those problems with the Post Office and it happens all over.
The increasing adoption of algorithmic and automated decision-making within the public sector offers clear benefits in efficiency and consistency, but it also introduces significant risks, particularly around transparency, bias and the potential for unfair outcomes.
The Public Authority Algorithmic and Automated Decision-Making Systems Bill—that is a mouthful, is not it?—aims to regulate the use of these technologies, requiring impact assessments and transparency standards to ensure that decisions affecting individuals are accountable and subject to appropriate scrutiny. Amendment 124A aligns with those objectives by emphasising the need, as the noble Baroness said, for “human oversight”, especially where decisions have substantial effects on people’s lives.
It is essential that, when we embrace innovative technologies, we do not lose sight of the fundamental principles of fairness and accountability in public administration. Automated systems may be deployed in a way that mitigates risks to individuals and society and provides clear avenues for challenge and redress when errors occur. This amendment reinforces the importance of maintaining human involvement in critical decision-making processes, and ensuring that the rights of benefit recipients are protected and that public confidence in these systems is upheld. By supporting such measures, we can harness the advantages of automation while safeguarding against unintended consequences. I support this amendment.
Viscount Younger of Leckie (Con)
My Lords, there is a rather gloomy atmosphere here, but I am not quite sure why. My remarks will be relatively short. I find myself in a very unusual position—namely, I offer strong support for Amendment 124A tabled by the noble Baroness, Lady Bennett of Manor Castle. I do so not only because it incorporates vital safeguards but because it speaks to a principle that these Benches have highlighted and pressed for throughout Committee: that powerful tools must be matched by proper protections. I think we all agree with that.
This amendment could not be timelier. The use of artificial intelligence and automated systems is rapidly expanding across Whitehall, with departments increasingly deploying these tools to assist them in undertaking administrative tasks. There are clear benefits to this: efficiency, consistency and the ability to process large volumes of data quickly. AI can be a force multiplier. It can relieve overstretched teams and streamline basic tasks—I saw that when I was in post in the department—but it can never be a substitute for fair and human decision-making where individuals’ rights, entitlements and welfare are concerned.
The temptation to lean too heavily on automation is very real, particularly in areas such as social security where volumes are high and budgets are stretched. We have sought to highlight several times to the Government the additional workload and expense that we believe the provisions in this Bill will introduce for the department. Once we incorporate the need to consider additional needs, disabilities and those at risk of coercion—important safeguards that noble Lords across the Committee have supported—we start to face a massive workload. It is feasible, in light of this, that AI will increasingly be incorporated as part of this process, but we must ensure that this temptation is tempered by caution, principle and foresight. This amendment does just that; it makes clear that automation can assist, but not replace, the human judgment at the heart of a fair welfare system. Let there be light.
We are not legislating simply for this year, or even this Parliament. We are legislating for a system that must hold up under future Governments, under future pressures and in a future where Al capabilities are likely to expand even further. In just the past couple of years, we have all seen how dramatically these technologies have entered into our lives, often with little warning and even less scrutiny. The safeguards that we write into this Bill now are therefore not merely reactive, they are pre-emptive, and they are essential, a fact that groups such as JUSTICE have recognised and highlighted to us. That is why we have tabled our amendment with the same intent and near-identical wording. It is a proposal that we support wholeheartedly, and I commend the noble Baroness for bringing it forward at this stage.
The amendment would require four simple, yet fundamental things: first, that there is meaningful human involvement in any decision-making process that includes an automated element; secondly, that the individual affected receives an individual explanation, including how automation impacted their case; thirdly, that they are given a clear opportunity to make representations; and, fourthly, that they are provided with accessible information on how to challenge the decision. These are not high bars; they are the basic hallmarks of a just and humane administrative process.
There are also some important questions around accountability here. If there are no controls in the Bill on how AI is used, there is nothing, it seems to me, that would stop the department introducing this further as a matter of operational efficiency. However, this would have massive implications for the review process, which we have rightly discussed at length during Committee. If a decision is even partially informed by AI, who is held accountable? Could the civil servant in question blame AI instead of taking responsibility?
These are serious questions, and without proper safeguards in the Bill, we have no assurance from the Government that we could not, in the very near future, have a situation in which a person is attempting to review a case in which a mistake was made where the fault lies at the feet of a computer program, to put it bluntly. If we have clear human involvement in this process—guaranteed, not just promised—at least there is a person included in determining the final decision who can be held to account. This is a vital safeguard upon which the entire review mechanism would rest.
I can anticipate the response from the Minister: she will say that a human will always be at the end of a decision. However, it is not future-proofed, and I urge her to reflect on the long-term value of this amendment and to recognise that it would strengthen the Bill not only for today, but for the years to come. If the Minister can demonstrate to the Committee that these concerns will be protected against not only now, but in perpetuity—which is, of course, the effect of legislation when passed—I would be most grateful. However, from my perspective, I fear the Minister would struggle to meet this challenge because of how the Bill is drafted. I therefore believe there would be real value in the Government adopting this amendment to make sure that they, and the people they serve, are protected not only now, but into the future.
Baroness Sherlock (Lab)
My Lords, I regard that as a challenge. I am confident that I can assure the noble Viscount in the way that he wants to be. As I have said repeatedly—ad nauseum, to be fair—throughout Committee, the Government have a responsibility to tackle fraud and error and ensure that they are minimised. Fraud and error in the social security system were responsible for the overpayment of almost £10 billion in 2023-24. We recognise that there are opportunities for technology and data to help to identify potential fraud and error risks while also understanding the need to ensure their safe and effective use. I remind the Committee that, while the DWP is improving its access to relevant data through this Bill, we are not introducing any new automated decision-making measures in the Bill.
I will explain why this amendment is unnecessary, but I will pause briefly and digress. The noble Baroness, Lady Bennett, was commendably brief in her digression, and I will be commendably brief in mine. The Committee has at different points queried the role of automated decision-making, so I will put this point on the record. I start with the eligibility verification measure, a data-requiring measure to help the DWP identify where claimants do not meet the eligibility criteria for the benefit they are receiving. The DWP will review all information received, and DWP staff will make any decisions about entitlement where potential fraud or error is identified. No decisions will be taken using EVM data alone. Decisions about entitlement will be made only once the DWP has made further inquiries. Similarly, as previously debated, there will be no automated decision-making from the information obtained under the PSFA’s or the DWP’s information-gathering powers when we are investigating specific cases of suspected fraud. Again, decisions on the use of the new debt recovery powers will always be made by a trained member of staff.
Lord Vaux of Harrowden (CB)
Am I not right in thinking that that is about to change under the new Data (Use and Access) Act?
Baroness Sherlock (Lab)
I was just about to get to that point, if the noble Lord will bear with me. Further safeguards, which apply after a relevant decision is taken, are set out in data protection law, to be amended by Section 80 of the Data (Use and Access) Act. These include providing individuals with information about significant decisions made about them and the opportunity to make representations and obtain human intervention on the decision.
The noble Baroness, Lady Bennett, raised international comparisons and Australia. To be clear, the use of machine learning has led to legal action internationally, primarily because there were concerns about automated decision-making. That is not the case here, so I hope that reassures her.
This is not for this Bill and not for now, but the Committee has raised the fact that as, over time, AI will clearly be used a lot across government and the private sector, it is important that the Government make sure that all the right safeguards are in place. The DWP is leading the way on this, and the Department for Science, Innovation and Technology is leading several programmes of work to utilise the opportunities of AI and ensure that it is used safely. For example, the algorithmic transparency recording standard is a standardised way for public sector organisations to publish information about how and why they are using algorithmic tools. It is mandatory across central government for algorithmic tools that have a significant influence on a decision-making process with public effect or directly interact with the general public. The Government Digital Service is currently implementing the mandatory rollout of the ATRS in government departments and arm’s-length bodies.
Work is going on in this broad space, but I hope that I have reassured noble Lords that the current law and the provisions in this Bill give the noble Baroness reason to withdraw her amendment.
Lord Vaux of Harrowden (CB)
We have had this discussion a few times, but does the Minister accept that most if not all of the safeguards she has talked about exist not in law but in the codes, guidance and internal rules of the DWP? They could be changed at will by a future Government less robust in looking after people’s safeguards. Would it not be sensible to put something into the Bill to future-proof these safeguards? My concern is not what is happening now but what could happen in future.
Baroness Sherlock (Lab)
My Lords, I hope I have made the case, in speaking to the amendment that we have been discussing, that the law already provides those protections—or it will do so when the provisions of the data Act are implemented, if those changes have not already been made. For my money, we could not have been clearer that the Bill creates no new automated decision-making powers. DWP and fraud and error decisions are always made by humans. There is a debate to be had, broadly for the future, which is where the work being done by DSIT is really important. That is where protections across government to future-proof things need to be brought in—not in this Bill, which does not introduce any new automated decision-making powers.
Baroness Bennett of Manor Castle (GP)
My Lords, I thank all noble Lords who have taken part in this debate, in particular the noble Viscount, Lord Younger of Leckie, for his strong support, and the noble Lord, Lord Palmer. I thank the noble Lord, Lord Vaux, for his expert contribution, which essentially said what I was about to say in my summing up: we are not necessarily talking about what this Government are doing; we are talking about ensuring that the legislation is there to put controls on what future Governments do.
This is the second time in a week that I have basked in the warm glow of support from everyone except the Government; I could get used to it. It is as the noble Lord, Lord Vaux, said. If the Minister is saying that this will happen, why not put it in the Bill? I will go and have a look at what she said about the data Bill. I suspect that I am probably involved in that one, too—I have so many Bills at the moment that I slightly lose track. We will look at this carefully before Report.
This will be my final contribution in this Committee because I will shortly have to run to the Chamber. We have had very fruitful debates. It is a pity that such an important Bill was not discussed in the Chamber; it will impact on many of the most vulnerable people in our communities. It is crucial that we get the Bill right and that it is seen to have had the full and proper scrutiny it deserves, but I think everyone in this Committee has done their best and we have made a good foundation to take forward to Report. I beg leave to withdraw my amendment.
Baroness Sherlock
“(i) the period mentioned in section 71ZK(6)(a) for P to appeal against the outcome of the review has passed without P bringing an appeal, or”Member’s explanatory statement
This amendment is consequential on my amendment to clause 89, page 56, line 31.
“Offence of facilitating fraud through dissemination of information(1) It shall be an offence for any person, by any means including electronic communication or publication on the internet, to intentionally publish, communicate, or otherwise make available information, advice, or instructions that are reasonably likely to be used by another person to—(a) mislead or deceive public authorities for the purpose of obtaining welfare or social security benefits to which they are not lawfully entitled;(b) circumvent eligibility checks, income or capital assessments, or other lawful mechanisms designed to verify entitlement under any enactment relating to the provision of social security or welfare benefits in the United Kingdom.(2) A person commits an offence under this section if they know, or ought reasonably to know, that the information or guidance provided—(a) is intended to facilitate dishonest conduct under the Social Security Administration Act 1992, the Welfare Reform Act 2012, or any associated regulations, or(b) will likely be used to enable or encourage another person to obtain, or attempt to obtain, benefits through deception or misrepresentation.(3) It shall be a defence for a person charged under this section to show that—(a) the information was provided for a legitimate public interest purpose, such as journalistic reporting or academic research, and not with the intention of facilitating unlawful conduct;(b) they took reasonable steps to prevent the information from being used for unlawful purposes.(4) A person found guilty of an offence under this section shall be liable—(a) on summary conviction, to a term of imprisonment not exceeding 12 months or a fine not exceeding the statutory maximum, or both;(b) On conviction on indictment, to a term of imprisonment not exceeding 5 years or an unlimited fine, or both.(5) For the purposes of this section “information” includes written, audio, visual, or digital content, including content distributed via social media platforms, websites and forums.”Member’s explanatory statement
This new amendment would make it an explicit offence to facilitate fraud through the dissemination of relevant information online.
Viscount Younger of Leckie (Con)
My Lords, we have come to what I regard as one of the most important groups in this Committee. Amendment 125A addresses a growing and deeply troubling problem: the deliberate dissemination of information designed to assist others in committing fraud against the welfare system. It seeks, quite simply, a necessary and overdue safeguard to combat the rise of so-called “sickfluencers”.
I am sure that noble Lords across the Committee will be well aware that we are not the only ones discussing welfare today. Indeed, the Government face a serious challenge—a vote of confidence, perhaps—from their own Back-Benchers in the other place. This is a live subject and an important matter. We support the Government in their ambition to cut down the cost of welfare. It is clear from my perspective that some people need our help and are absolutely entitled to welfare payments, but we need to make sure that we draw the line in a place that makes sure that those who can work do so. I hope that chimes with the thinking of the Government as well. I take this moment to highlight that we are willing to support the Government in their ambition on this point specifically, subject to the three conditions that are: cutting the welfare budget, increasing the number of people in work and ruling out tax rises in the autumn.
When I raised the issue at Second Reading, the Minister said she would welcome proof with some examples, so I shall share some with the Committee to demonstrate the problem that we are talking about. On a YouTube channel called Mike Bolton Benefits Training, there is a series of videos in which Mr Bolton takes the viewer through the various stages of the PIP assessment process and provides scripts that can be used to score the maximum number of points. Mr Bolton bases these scripts on work that he has done with previous clients. In one video, he shares a script which he encourages viewers to recite when they are undergoing their PIP assessment, in answers to questions about accessibility. One answer that he recommends is the following:
“I always need a magnifying glass to read things like this form”.
That is simple and straightforward, and it leads to two points on the assessment. In another video, he outlines what someone would have to say in order to demonstrate that they had trouble reading and retaining information. Mr Bolton recalls the successful response that he and a previous client provided in answer to this section of the PIP assessment. The answer that he encourages the viewer to copy is:
“Even with my mum helping me, it takes a long time for me to read anything. She will sometimes read through something in just a minute, but it takes me five minutes or more before I am confident that I have understood what I am going through”.
In summing up, Mr Bolton says, and I quote him:
“What we have explained there is that, even with prompting, encouraging and explaining, she cannot read within a reasonable period of time, which would, of course, score a maximum eight points”.
There are even more egregious examples that I could draw on. A lady called Charlie Anderson with a YouTube channel in her name has a video called “Unlock the Secret Steps for WINNING Your PIP Claims—Step by Step Guide”, which runs to nearly two hours. Can your Lordships believe it? Ms Anderson goes further than providing a script to recite; she actually appears to encourage her viewers to live in a way that would score them a high number of points under the PIP assessment. For example, Ms Anderson encourages her viewers to stop washing themselves. She says in defence of this advice:
“We can maintain our personal hygiene without having a bath or shower. We do not have to feel guilty about this”.
Under the PIP assessment, you can score the full eight points if you cannot wash yourself at all—or, in this case, if you appear not to be able to wash yourself at all. If the person undergoing the assessment attends their appointment having not washed for several weeks because they have chosen not to, rather than because they are unable to, that is surely a form of fraud. The medical risks associated with not washing regularly are substantial, and providing this advice seems to be not only to encourage fraud but also to harm the viewer in the first place. If someone cannot wash because of their medical condition, that is something which should rightly be regarded and considered under the PIP assessment, but if someone is having to be convinced into not washing, that is clearly a decision that they are being asked to make in order to appear as if they have a serious medical condition—an important distinction that seems to me, again, tantamount to fraud.
Ms Anderson then seemingly encourages viewers to pretend that they suffer from medical conditions that they do not actually have. When discussing the washing and bathing element of the PIP assessment, Ms Anderson says, in advice to those giving an answer:
“This is your example: ‘My partner washes my hair for me because of my right shoulder’, and then say whatever the medical condition is that affects the right shoulder. That’s it. Keep it to being that simple”.
She then appears to encourage the viewer to pretend that they have arthritis, sharing tips on how they can convincingly claim that they have this condition. She says:
“This is really important. I’m right handed, so it would be my right side that’s more affected”—
that is, by arthritis—
“so you should giving advice always be clear on which side is worse”.
The example that Ms Anderson encourages the viewer to give to justify this claim is:
“When I get into the bath, my friend lifts my right leg into the bath for me in and out of the bath. Don’t forget the getting out bit as well”.
I turn to independence and questions in the assessment about going to the shops alone. Ms Anderson instructs the viewer to lie to their assessor about whether they can attend the shops and interact with the shopkeepers independently. She advises that the DWP assessor will ask whether the person under assessment goes to the shops alone and says that the viewer would likely say yes. Then she warns that the person will be asked if they speak to staff in the shop. She anticipates that the viewer is likely to say, “Yeah, I would say ‘hi’ to the shopkeeper”.
Baroness Fox of Buckley (Non-Afl)
My Lords, as we approach the end of Committee, it has been refreshing, even though we are not in the main Chamber, that there has been so much general consensual, constructive discussion. We have had a lot of interesting, erudite, probing amendments—erudite inasmuch as they have been thoughtful and have tried to get to the heart of what we think is happening with this Bill and what we need to see changed. It has been enjoyable working across parties, including the Front Bench, the Opposition, Back-Benchers, Cross-Benchers, non-affiliated Peers and so on.
I have got that out of the way so that I can say that I do not know why on earth the main Opposition are obsessed with sickfluencers and have tabled this amendment, and I therefore want to speak to it. One of the reasons is because I think the amendment misses the target completely and draws together some of the issues around why I have had some worries about the Bill in general. Let me explain. I am speaking against Amendments 125A and 129A, which focus on the problem of sickfluencers and those using electronic communications and the internet to help people “circumvent eligibility checks”.
This should not be made into any kind of criminal offence—with, according to the amendment, a threat of up to one year in prison—but we do have a cultural problem of encouraging and inciting increasing numbers to identify themselves as sick and in need of state support. I think that is where the focus should be, not on these malevolent so-called sickfluencers corrupting the nation. I am worried that these amendments miss the target and potentially distract our gaze from where we should be targeting.
For example, in relation to circumventing eligibility checks, I am sure noble Lords are aware of a recent story from Oxford University, which has admitted that, because of a long waiting list and a logjam for diagnosis in relation to ADHD, it has decided that it will use as supporting documentation a referral to a GP or to an NHS assessment service as sufficient for students to get special concessions in exams and assessments. This is one of our top academic institutions allowing young people to circumvent the eligibility checks that were there until recently. They can gain benefits from this much lower eligibility check, which is inevitably likely to incentivise self-diagnosis among those students. It is in that context that we have seen the growth of sickfluencers.
Videos with the hashtag “#mentalhealth” have amassed something like 17 billion views on TikTok over recent years, according to an academic study. But they have been about self-diagnosis, not about how we can rip off PIPs. They are, broadly, a cultural problem. My worry is that we are seeing the growth of what one psychiatrist has labelled the “mental health industrial complex”: increasing numbers of people prepared to enter into this discussion about what mental health is beyond the medical profession. That often comprises a plethora of therapists, who are unregulated, well-being experts and even mental health charities with huge budgets—some from government contracts—that have got us into a situation where increasing numbers of people are culturally incentivised to view the trials and tribulations of life and feelings of unhappiness and depression through the pathologised prism of medical labels. This is something that Tony Blair talked about last year, on which I uncharacteristically agreed with him.
These sickfluencers are leading to a huge spike in numbers adopting an identity of mental fragility and illness and creating an increasing cohort of citizens demanding official diagnosis statements, NHS interventions, pharmacological and therapeutic treatment and, of course, welfare support. That is fuelling and feeding into some of the controversies around personal independent payments, increasing the numbers on disability living allowance and so on.
I am trying to avoid that particular row about cuts in welfare, which are causing such consternation for the Government at the moment. My point is that it is not online sickfluencers—it is such a stupid word—who have created this culture of encouraging people to view themselves as in need of support. I have a lot of sympathy with the Health Secretary, Wes Streeting, who conceded that mental health conditions are being overdiagnosed, meaning that the number of working-age adults who we officially designate as incapacitated and in need of various forms of state support are being effectively written off as young people. It is to do with overdiagnosis. That is where all our energy should be. One of the reasons why I have kicked back against a lot of Part 2 of this Bill, some parts of which are draconian overreach, as a sledgehammer to crack a nut is that there is a much deeper problem in why the welfare bill is so huge that goes beyond people acting fraudulently in relation to benefits.
I would be more sympathetic if the Opposition had taken on the real problems here. Governments of all parties, the previous one and this, have pushed official awareness campaigns, which encourage ever greater numbers of people to see themselves as in need of welfare and provide a script for people to follow. I have written extensively about this in a different context. Children in playgrounds use the therapeutic language of mental ill health. They got that from adults. We have to ask what is going on.
Dr Alastair Santhouse, a neuropsychiatrist at Maudsley and author of a new book called No More Normal: Mental Health in an Age of Over-Diagnosis, notes that
“the more people are aware of a particular illness, the more people start to identify with the symptoms”.
Officially backed awareness campaigns are really problematic. I have just written the foreword to a new pamphlet entitled Suffer the Children: Why Having a ‘Mental Health Professional’ in Every School is not the Answer, brilliantly written by Lucy Beney. She notes that schools now have a veritable army of educational mental health practitioners, emotional literacy support assistants, mental health first-aiders and so on, and the outcome of this is more and more pupils describing themselves as suffering from mental ill health.
Lord Palmer of Childs Hill (LD)
My Lords, Amendments 125A and 129A relate to the prevention of fraud against public authorities, specifically by seeking to make it an explicit offence to facilitate fraud through the dissemination of relevant information online. I welcome these amendments because they deal with deliberate fraud, rather than chasing carers for errors. That is a difference that I would like to accentuate.
The Bill is designed to safeguard public money by reducing public sector fraud, error and debt, introducing new powers for the Public Sector Fraud Authority and enhancing the DWP’s ability to tackle fraud in the social security system. Amendment 125A seeks to strengthen this framework by targeting those who enable fraud through online channels, reflecting the reality that much fraudulent activity today is co-ordinated or facilitated via the internet. By explicitly criminalising the dissemination of information intended to assist fraud, the amendment aims to deter would-be facilitators and close a loophole that modern fraudsters increasingly exploit.
It is important, however, that such measures are balanced with appropriate safeguards to ensure that legitimate online activity is not inadvertently criminalised and that enforcement is both proportionate and effective. The Bill already provides for oversight, reporting mechanisms and independent review to ensure that the new powers are used appropriately. As we consider these amendments, we must ensure that our legislative response to online facilitation of fraud is robust enough to protect public funds while also safeguarding civil liberties and maintaining public confidence in the fairness of our legal system. In this way, I hope that the Bill and its amendments can deliver the Government’s commitment, which I believe they have, to tackle fraud without overreaching or undermining the rights of individuals and organisations operating lawfully online.
This is an important part of our discussions today because we are talking about deliberate fraud in the modern world, including online fraud, and we have had indications of personal situations from other speakers. This is about how things are moving in the digital age. These amendments are an important part of trying to tackle that, and I support them.
Lord Verdirame (Non-Afl)
My Lords, I was not planning to speak, but I thought I would say a couple of words. This is an important amendment and I support the objective that it is pursuing, although I also agree with the comments by the noble Baroness, Lady Fox, on being careful about using criminal law to deal with much bigger cultural and social problems.
However, the amendment needs some tightening in the subjective element, because at the moment it punishes a wide range of conduct. At one end of the spectrum, a person would commit an offence if they ought reasonably to know that
“the information or guidance provided … will likely be used to enable or encourage another person to obtain, or attempt to obtain, benefits through deception”.
There seems to me a rather loose connection between the person who would be committing the offence and the actual fraud; it is a bit too remote. At the other end of the spectrum, a person would commit an offence
“if they know … that the information or guidance provided … is intended to facilitate dishonest conduct under the Social Security Administration Act 1992”.
That does not strike me as a remote connection between the person whose conduct we would be criminalising and the actual dishonest conduct, so there needs to be a bit of tightening of the subjective element, making sure that it is more narrowly focused than it currently is.
Baroness Sherlock (Lab)
Again, I thank noble Lords for an interesting discussion—some of it even on the amendment.
The noble Baroness, Lady Fox, is right that sickfluencers are the Opposition’s favourite topic, but it gives us an opportunity to look at this element of fraud and how the Government deal with it. I will try to take us through it. This also gives me a chance to show the way in which our legislative framework provides a comprehensive basis to enable the DWP and the PSFA to address fraudulent activity against the public sector or the social security system.
In responding to the amendments, there is something that we need to acknowledge. The noble Viscount mentioned a broad spectrum and clearly this is, particularly online. The noble Baroness, Lady Fox, made this point on a previous day in Committee: there is a lot of advice online in all kinds of settings on how to claim disability benefits, and it can range from genuine advocates for disabled people to people in similar circumstances trying to tell other people what their experience has been to friends’ or family’s online content through social media. There is all manner of guidance out there, and we need to be very careful not to drag people who are not doing anything wrong into the debate.
While many people provide advice with good intentions, irrespective of how useful the advice is or how effective it will be, there are clearly some unscrupulous people who actively try to encourage or assist others in committing fraud against the social security system. Where activity can reasonably be countered, such as taking down websites or seeking the removal of posts that are unlawful, the DWP takes relevant action. We already collaborate with a range of government partners, including Action Fraud, the City of London Police and the National Cyber Security Centre to prevent fraudulent activity online.
There are legislative duties under the Online Safety Act for social media companies to remove harmful and illegal content, including content that encourages or assists others to commit offences. The Online Safety Act also allows us to work with Ofcom and its new trusted flagger process, and we have trusted escalation routes to report social media content on certain platforms.
We are committed to demonstrating that such behaviour should not be tolerated, and we encourage anyone who identifies material online—I include the noble Viscount, Lord Younger, in this—to report it through the available channels. These people should face consequences, but there is an existing legal framework to do so. Section 7 of the Fraud Act 2006 and Section 44 of the Serious Crime Act 2007 already make it a criminal offence for individuals to provide information on how to commit fraud. That includes influencers sharing and selling information online, such as fraud instruction manuals.
In addition, we are concerned that Amendment 125A could potentially complicate the legislative landscape. Adding a new offence would create overlap with existing legislation that could lead to confusion in prosecution or sentencing, and that is entirely avoidable. It also happens that, ironically, the amendment would actually shorten the maximum sentence for those convicted of the new offence; it would carry a maximum period of five years in custody but, if the noble Baroness, Lady Fox, does not like that, the current maximum is potentially 10 years under existing legislation.
I know that the noble Viscount acknowledged previously that public sector fraud hurts everyone and that he wants to tackle it and support us in doing that. I was surprised, therefore, to read Amendment 129A, which he tabled. The amendment would prevent the use of the powers in the Bill until we publish a review assessing the impacts of people who enable others to deceive a public authority to obtain social security or welfare benefits that they are not entitled to, or to circumvent eligibility checks. I clearly cannot agree that we should prevent the PSFA or the DWP using these important new powers to tackle fraud and error until we have published such a review. During that time, we could be out there investigating fraud, tackling error and recovering public money.
I encourage the noble Viscount to reflect on what he and his Government focused on when they were in power. This focus on people who share information online or through other means may not be the “silver bullet” as he hopes. We will continue to see determined and hostile actors trying to defraud the system. It is absolutely right that the department takes action to tackle fraudulent online content and has a deterrent, but the crucial thing to remember is that fraud itself cannot take place unless those seeking to defraud the welfare system manage to interact with it. That is why we have put so much effort into protecting the social security system directly. This provides the strongest chance of success, evidenced by looking at the significant value of such activity.
I really enjoyed the contribution by the noble Baroness, Lady Fox. There is so much that I would like to push back on but I do not think that I can keep the Committee here for long enough to get into some of the issues. To take a small one, however, she thinks that this Bill is a sledgehammer to crack a nut—I think it is a pretty big nut, and we want to tackle it. We will just have to agree to disagree on that. On her broader points, this Government recognise that there are too many young people who are genuinely struggling with their mental health and who need support. We want to make sure that they get the help that they need. We also recognise that, for many people, good work is good for good health, both physical and mental. We are now in a situation where one in eight of our young people are not in education, employment or training, and we cannot allow that to carry on.
We want to get out there and support people to get into the kind of work that will be good for them, but we want to make sure that those who genuinely cannot work are able to get support. That is the direction of travel for the Government and what our reforms are meant to be about.
The noble Viscount keep asking how many people the DWP prosecutes. As he will remember, the DWP is not a prosecutor itself. The department’s role is to refer cases to the appropriate prosecuting body, the Crown Prosecution Service, which selects the most appropriate offences to prosecute under. In 2023-24, fraud investigation teams in the DWP referred around 700 prosecution cases to the CPS and Crown Procurator Fiscal in Scotland. The department does not use the term “sickfluencer” and we do not have categories for that, so I cannot tell him how many cases fall under that description. We obviously do not comment on individual cases that we refer to the relevant prosecting body.
However, I understand the points that the noble Viscount is making. We are happy to continue to work in this space but, in terms of these amendments, just proposing what is in effect a complication of the landscape and a shorter prison sentence, while preventing the DWP and PSFA from using powers in this Bill to tackle fraud and error, will not deter those criminals; it will simply enable them to keep on going. I therefore urge him to withdraw his amendment.
Viscount Younger of Leckie (Con)
My Lords, I thank all those who have taken part in this short debate. As I said in my opening speech, this amendment reflects the reality that the vector of fraud is increasingly digital, but it also reflects something more fundamental: that our law must evolve to meet emerging threats, especially when those threats strike at the heart of public trust. We know that public confidence in welfare systems hinges on fairness, integrity and robust enforcement. We cannot let that confidence be eroded by silence in the face of digital abuse.
I say again—though I will not go into too much detail as I gave a long speech in opening this group—that we believe that this amendment is modest, measured and necessary. If the Government feel that the drafting can be improved, we stand ready to work with them. Judging from the Minister’s comments, that may not be the case. The principle must be accepted, however, because the damage being done is real—to public funds, to vulnerable claimants and to the credibility of the benefit system itself. As the Minister herself said, it is a nut; it is in fact quite a big nut. I believe it needs a sledgehammer or at least a reasonably big hammer.
On that note, I thank the noble Baroness, Lady Fox, for her comments. I listened carefully to her rather unexpected views on my amendments and, as she will guess, I did not agree with much of what she said. She came from an unusual and different angle. I will read Hansard to try to understand where she was coming from, but I agree with her and the noble Baroness that there are many other measures that must be taken to ensure that benefits, that is, universal credit or health top-up benefits, are given to the right people. The right amounts should be given to the right people. That is at the crux of the huge debate that is going on nationally at the moment and in the other place as we speak.
“Impact of Act on people facing financial exclusion(1) The independent person appointed under section 64(1) of this Act (independent review) must carry out an assessment of the impact of this Act on the number of people facing financial exclusion.(2) The independent person must, 12 months after the passing of the Act—(a) prepare a report on the review, and(b) submit the report to the Minister.(3) On receiving a report the Minister must—(a) publish it, and(b) lay a copy before Parliament.”Member’s explanatory statement
This new Clause would look into the impact of the Act on people facing financial exclusion.
Lord Palmer of Childs Hill (LD)
My Lords, Amendment 126 would require a thorough assessment of the impact of the Bill on people facing financial exclusion. While the Bill’s intent to safeguard public money and tackle fraud is clear and necessary, we must not overlook the reality that those who are financially excluded are often among the most vulnerable in our society.
Financial exclusion can mean lacking access to basic banking services, credit or affordable financial products, which in turn imposes additional costs and barriers on those least able to bear them. Without a clear understanding of how the Bill’s provisions, such as new powers to access bank account information or recover debts, affect this group, we risk compounding their disadvantage and inadvertently causing hardship to those the social security system is meant to support. An independent assessment as proposed in this amendment would ensure that the implementation of the Bill does not create unintended consequences, and they would indeed be unintended for individuals already struggling to access financial services. It will provide Parliament with vital evidence of whether the Bill’s measures are proportionate and fair and whether additional safeguards or support are required for those at risk of exclusion.
This is about not weakening our response to fraud but ensuring that our actions are just and do not undermine the financial resilience of those who are most at risk of falling through the cracks. I know that the Minister and others mean well, but I urge the Committee to support this amendment, which guarantees that our efforts to protect public funds do not come at the expense of the most financially vulnerable in our communities. It is a balance. We need to be very careful that in stopping fraud we do not push people in vulnerable communities further down into debt and disappointment. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, I add my support at least to the intentions behind this amendment. We have had a number of discussions in Committee on the potential impact of layering costs and bureaucracy on financial services providers that relate to a particular class of people. In doing that, we risk incentivising those providers to stop providing services to that class of people—in this case, benefit recipients—and thereby potentially increasing financial exclusion.
The intention behind this amendment is right and I support adding it to the scope of the independent reviewer. However, I was not totally clear whether this applies to the whole Bill or just to Part 1, because it refers to the independent reviewer under Clause 64(1), which relates only to Part 1. This should relate to the whole Bill on a cumulative basis, because the cumulative impact of all the elements of this Bill may lead to greater changes in the behaviour of financial services companies than the sum of the individual changes themselves. We need to find a way of making sure that this covers the whole Bill and the cumulative impact.
Secondly, the amendment would require only a one-off report after 12 months. I am not sure that that would be sufficient. If there are impacts, as I fear there could be, they are likely to accumulate over time as banks decide that this is more difficult and therefore stop providing services. As we have talked about before, this is a question not of active debanking but more likely of stopping providing services over time. If we are to review this, we need to look at the impact more periodically—not necessarily annually, but over a longer period. I support the intention, but the amendment may need tweaking as it stands.
Viscount Younger of Leckie (Con)
My Lords, I support Amendment 126, tabled by the noble Lord, Lord Palmer of Childs Hill, which would require an independent assessment of the impact of this Bill on those at risk of financial exclusion and, crucially, ensure that the findings of that assessment are made public and laid before Parliament.
The principle behind this amendment is very important. We have heard throughout the Committee’s deliberations from me, my noble friend Lady Finn and the noble Lord, Lord Vaux, about the real and pressing risk that some of the measures in this Bill could unintentionally deepen financial exclusion. As we have said several times, there is a risk that banks are made to feel concerned about their customers if they are subject to an EVN, or, as the noble Lord, Lord Vaux, has powerfully expressed previously and now, that banks could be deterred from taking on customers who are in receipt of benefits in the first place as a pre-emptive measure against the additional workload that this could demand.
As we do not yet have clarity from the Government about when and how often notices and demands will be made of banks, everyone is currently in the dark about how much of an additional workload this will mean for financial institutions. It is therefore entirely feasible that these institutions, which are, as we always need to remember, designed and operated to make money, could simply choose not to take the risks, impacting people who have not necessarily done anything wrong in the process. If we empower government to work more closely with banks to verify eligibility, recover funds and issue deductions, we must be equally mindful of the unintended consequences for those who sit at the margins of our financial system.
We appreciate that this amendment does not seek to obstruct or weaken the Bill. Quite the opposite—it offers the Government a constructive, concrete mechanism for assessing whether our enforcement framework is functioning in a way that is fair, proportionate and inclusive. This is an important measure, and I am sure that noble Lords across the Committee who have raised concerns about this issue will be somewhat reassured if the Government commit to undertaking a review as set out in this amendment.
We have heard Ministers reassure us that these powers will be used carefully and that the risk of harm is low. This amendment provides an opportunity to put those assurances to the test—not through speculation, but through evidence. Twelve months after this Bill is enacted, the independent reviewer would be tasked with producing a report examining the extent to which the measures we have passed are having an adverse impact on those already struggling to access or maintain financial stability.
In conclusion, this is not a burdensome ask; it is a safeguard. It would ensure that, as we work to strengthen our systems against fraud, we do not inadvertently erect new barriers for those who are financially vulnerable already. It would give the House and the other place the opportunity to revisit and respond to those findings, if and when action is needed. I therefore urge the Minister to consider this proposal seriously and to work with colleagues to ensure that the fight against fraud does not come at the cost of fairness or financial exclusion.
Baroness Sherlock (Lab)
My Lords, Amendment 126 would require the independent person, who will be appointed by the Minister for the Cabinet Office to review the PSFA powers under Part 1 of the Act, to carry out an additional assessment of the impact of the whole Act on the number of people facing financial exclusion. I hope that that clears up the question raised by the noble Lord, Lord Vaux. The reviewer is the one for the PSFA bit, and the impact would be for the whole Act, as the amendment is currently drafted.
I recognise the intent behind the amendment put forward by the noble Lord, Lord Palmer. I assure stakeholders in the financial sector—should they be watching—that we have heard the concerns that they have raised with us on these matters. I am confident, however, that this reporting on potential financial exclusion will not be necessary.
First, I want to talk a little wider and acknowledge that the Government recognise the place of financial services in the lives of millions of people and businesses across the UK. That is why we have already taken steps to give people greater protection against their bank accounts being closed, as part of our plan for change. To do so, the Government introduced rules under the Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025 that require banks to give customers at least 90 days’ notice before closing accounts. The rules stipulate that, when doing so, the bank must provide a clear explanation in writing as to why they intend to close someone’s account. That gives people clarity on why the decision has been taken and, crucially, more time to challenge such decisions through bodies such as the Financial Ombudsman Service. These changes have been made off the back of consultation with industry and will take effect from April 2026.
Moreover, there are statutory protections to protect individuals most in need. The nine largest UK providers of personal current accounts are required by law to offer basic bank accounts to individual customers legally resident in the UK who do not have a bank account or who are not eligible for banks’ other accounts. Banks are prohibited by law from discriminating against UK consumers by reason of a range of protected characteristics, such as sex, ethnicity, disability and belief, when individuals apply for access to an account. So, while firms rightly have strict obligations to ensure the legitimacy of a business and to protect against financial crime, the Government have focused on account closures as a priority, given the material impact that a loss of banking services has on a business already in operation. That is the broader context.
Secondly, our approach on this Bill fits with that wider Government agenda on tackling financial exclusion. The DWP and the PSFA are working closely with stakeholders from the finance industry, including UK Finance and the Financial Conduct Authority, to ensure that no one is inadvertently or unintentionally excluded from access to financial services. As such, we have made provision in the legislation, where appropriate, to try to ensure that this is the case. For example, the DWP’s eligibility verification measure amends the Proceeds of Crime Act 2002 to make clear to financial institutions that they are exempt from returning a suspicious activity report in certain circumstances, if the information they have is only as a result of a data match from EVM. UK Finance agrees that this is an important exemption.
Thirdly, where appropriate, the codes of practice seek to provide further detail about banks’ duties in this space. For example, the code of practice for the EVN also clarifies that eligibility verification notices and the data returned in compliance with them are not intended to indicate that the DWP has any suspicion of fraud or financial wrongdoing, or that an error has occurred. The determination of any subsequent wrongdoing will be made following a further review of this evidence alongside other evidence, and is for DWP to determine, not the banks. We continue to engage with the financial industry and across government on drafting this to ensure that we get the wording right in our codes of practice.
For the PSFA, while the code of practice for Part 1 of the Bill is focused more on the new civil penalties, the PSFA will, in due course, publish guidance on the other powers in Part 1. This will consider these issues from the PSFA’s perspective and in more detail. For respective debt recovery measures, the PSFA and the DWP will align with the government debt policy, as well as abide by the standards set out by the government debt management function and the debt management vulnerability toolkit to handle those at potential risk of financial exclusion.
The Government acknowledge that financial exclusion is a serious problem, which is why we are taking steps to provide people with additional protections and to clarify duties in the Bill. I am confident that we have the necessary protections for individuals from financial exclusion in the Bill and therefore do not think that the amendment is needed. I therefore ask the noble Lord to withdraw his amendment.
Lord Palmer of Childs Hill (LD)
As the Minister said, financial exclusion—people not having access to financial matters—can be dreadful, and that is what the amendment is meant to deal with. In answer to the noble Lord, Lord Vaux, I had sought for it to apply to the whole Bill and not just part of it. We have had a lot of debate, so I beg leave to withdraw the amendment.
“(3A) Sections 72, 73 and 74 may not come into force until the Secretary of State has published, and laid before Parliament, a report outlining the specific process through which information will be collected in order to fulfil the obligations made out in Chapter 1, Part 2, and in Schedule 3, and their anticipated costs.”Member’s explanatory statement
This amendment seeks to ensure that, before coming into force, Parliament had sight of the mechanisms through which information would be gathered and shared, and the projected costs associated with this.
Viscount Younger of Leckie (Con)
My Lords, for this group—the penultimate one in Committee—I thought that it would be helpful to noble Lords if I briefly read out what this amendment aims to do. It seeks to insert a new subsection to Clause 105, which states:
“Sections 72, 73 and 74 may not come into force until the Secretary of State has published, and laid before Parliament, a report outlining the specific process through which information will be collected in order to fulfil the obligations made out in Chapter 1, Part 2, and in Schedule 3, and their anticipated costs”.
Reading that aloud will allow me to explain the breadth of the amendment and what I am trying to do.
In essence, the amendment is an opportunity for us to question the Government on the mechanisms that they will use to recover funds, verify eligibility and work alongside the banks, to apply the provisions that have been set out in the Bill. I suspect that I am joined by several noble Lords across the Room when I say that, while the Bill—and the Minister’s remarks throughout these days in Committee—have helped to highlight the scale and purpose of the powers, we are still somewhat in the dark as to how these will really work in practice. We do not have clarity on how this will work operationally for banks and in the DWP, which is important for us to try to understand how this will work in practice. I accept what the Minister has said on certain occasions—namely, that a test and learn process is ongoing—and I suspect that she will probably say that in response.
Many of the concerns that I, my noble friend Lady Finn and many other noble Lords have raised over the past few weeks come out in how these systems are set up. Our discussion can only go so far when speaking about this in abstract; therefore, this amendment invites the Government, both now and ahead of Report, to set out how these provisions will work in practice and how the concerns that we have raised with the Government will be addressed. It may well be that my remarks will spur on a detailed letter from the Minister, to help us all in Committee in this respect.
We are still very unclear on how banks will be asked to comply with the provisions set out in the Bill. We have pressed the point numerous times that banks need to be involved in the discussions on costs and the recouping of costs, not only operationally but in relation to opportunity. Many questions remain about how this will work. First, how many notices will banks likely encounter per week, and how often will they be required to provide information to the DWP? Do the Government have an idea of how much the cost will be to banks per person in undertaking this process on behalf of the DWP? What will the EVN actually look like, and in what form will that be communicated? In what format will the banks be required to respond to this. I understand that, on a previous group today, the Minister attempted to answer some of these questions.
Anecdotally, I am aware that bank employees tasked with responding to HMRC are faced with millions of lines of data, which they stress is often of very poor quality. No account is taken for those who have died, address lines are often formatted in the wrong fields and personal information is incorrectly entered. Employees at the bank—not those in HMRC—have to trawl through all this information to check whether the person has died, or whether their surname is entered into a box meant for their postcode. This is an arduous task that takes hours to complete and diverts clever and capable employees from furthering the bank’s main objective of making money and contributing to our economy.
How these notices are made out, what they demand of banks and how the information is to be communicated in practice are important questions. We need to make sure that we are not imposing further undue costs on to banks. They are, as we have said many times, partners and not tools—they should not be asked to incur an undue cost in the fulfilment of public sector duties. Having a clear breakdown on how this system will work in practical terms, as agreed with the banks, is something that Parliament needs sight of before this Bill becomes law, because only then will we have some clarity on our questions in this matter.
Furthermore, we still need clarification about how a consideration for vulnerable people, with disabilities or who are at risk of coercion, will be adequately protected through the process of the exercise of the provisions in the Bill. We have been assured verbally by the Minister that these people will be considered—I accept that—but we have not really been told how. Further reassurances are required.
We have proposed—through amendments in my name and in those of my noble friend Lady Finn and other noble Lords, such as those tabled by the noble Lord, Lord Palmer—several practical models for how the Government would take adequate account of these factors when making a decision about pursuing the recovery of funds. Practically, this would require a lot more information to be accessed and reviewed about a person before the decision can be taken.
This is an important matter to consider in operational terms, as it would doubtless substantially increase the workload of the DWP in exercising these powers, requiring it to look at a good deal more than just numbers. However, making sure that we incorporate these additional needs and vulnerabilities into the process is vital, as we have said in the past. It is the only way in which we can make sure that we are not doing more harm than good, and that we do not cause further distress to those who should receive our help. On that basis, I hope that the Minister can set out how these considerations will be taken into account in practical terms, and how much additional expense and workloads she considers this would contribute to the DWP.
Finally, this is also an appropriate time for me to press the Government again on how the system will work across the banks. It is my understanding that the DWP can access information about the bank account into which the benefit payment is made, but no other. Can the Minister confirm whether that is the case or whether the DWP will also be able to access other accounts held in the same bank in the name of the person in question? As we have stated before, this legal limitation seems to be a serious issue, presenting a potential loophole that could be easily exploited by fraudsters, who could simply move money from one account to another, safe in the knowledge that the Government cannot legally pursue them any further based on legislation that they themselves introduced. Can the Minister also take this opportunity to outline operationally how this issue would be addressed, and whether she is considering changing this part of the Bill to shut down this loophole? Again, she may well prefer to write a letter.
The amendment serves as a timely and essential reminder that while the principles behind the Bill may be broadly accepted, its practical application still raises a host of unresolved questions, and we are being asked to sign off on a framework that will place significant new responsibilities on both the department and the UK’s banking sector, without having seen a clear operational blueprint. If the Government are to ask banks to take on a new role in data provision and verification, the Government must also be prepared to offer banks clarity, support and safeguards to prevent undue burden and to ensure accuracy in implementation. Equally, the processes by which vulnerable individuals will be identified and protected must be defined and made transparent.
I have given fair warning of some further questions about the letter from the noble Baroness, Lady Anderson, which sets out some of the figures on fraud that we asked for. I thank her for the letter and appreciate her sending it before the end of Committee. However, it raises further questions. I do not necessarily expect answers now, but I see that the Minister has a bit of paper in her hand.
First, the letter said of the figures:
“This estimate was calculated from taking total government spend and income for 2023/24 and deducting spend and income associated with known estimates and out-of-scope items. This revealed that around £560 billion of public spend and income was not subject to any fraud and error measurement in 2023/24”.
I raise this because I am confused about why we have £560 billion of public spend and income that is not subject to any fraud and error measurement. Can the Minister please clarify why this is the case? I suspect there is a simple answer. What steps are the Government taking to try to rectify this as soon as possible? It is a very big figure. Does the Minister anticipate that, within that £560 billion figure, there is some fraud or overpayment that we should be aware of?
Secondly, I was a little confused about the language used in the letter, which refers to and segregates “capital” and “abroad” overpayments. Can the Minister please clarify what these terms mean? I should probably know, but I do not. Furthermore, can she update the Committee on why “abroad” overpayments for pension credit are so high?
To conclude, can the Minister commit to making these operational details clear to the House ahead of Report, so that we can frame our important discussions at that stage on the basis of greater information than we currently have? Of course, that will impact and inform the amendments that we might bring back on Report. Setting out how this will work and how our concerns will be addressed might make life a bit easier for the Minister when she has to join us all again in a few weeks or so—I do not believe we have any dates yet—on Report. It would certainly give us clarity on what the Government envisage in practice for the provisions in this important Bill. I beg to move.
Baroness Sherlock (Lab)
My Lords, I am grateful to the noble Viscount for introducing Amendment 130. It would require the Secretary of State to publish a report on the mechanism used to request and return information under the information-gathering powers and the eligibility verification measure contained in the Bill.
The Bill and the codes of practice clearly lay out the type of information that will be requested under these powers and the expectations on financial institutions required to respond. It provides an appropriate level of detail for Parliament to scrutinise the proposed process while the technical details are under development in close partnership with industry. I should add that I will not be in a position to provide a level of technical detail that could enable those intent on committing fraud to circumvent the system or that could put the DWP’s systems at risk.
The DWP has already published an impact assessment that considers both these measures. It sets out the department’s latest estimates of the regulatory burdens they might place on businesses in Great Britain. The additional annual costs to new businesses compelled to respond to information notices issued under the information-gathering power in the Bill have been estimated to be less than £100,000 per year in total across all information holders. For the eligibility verification measure, initial estimates are that the set-up costs are anticipated to be around £40 million across the sector. We also expect that there will be some limited ongoing compliance costs for data holders. Further information on these estimates can be found in the published impact assessments.
We know there is more work to do with industry to consider these costs further. That is why the DWP has also committed to publishing a further updated impact assessment for EVM within 12 months of Royal Assent, to provide a more robust and detailed estimate of the impact on industry, which will take into account the ongoing work with industry. This will ensure that there is transparency on the costs as we move forward.
I reassure the Committee that burdens on businesses resulting from the measures in this Bill are a matter that this Government take seriously. We are committed to keeping requirements and costs proportionate and to a minimum. That key aim has been at the forefront of our close and regular engagement with the finance sector. We continue to work closely with UK Finance, the finance sector and other relevant stakeholders, including business representative organisations, on the delivery of these measures, to ensure that any digital solutions are workable and to minimise costs where possible.
Viscount Younger of Leckie (Con)
My Lords, I thank the Minister for giving some answers to my questions, particularly those that I raised about the letter—there is greater clarity now. Some of the answers I probably should have known.
I appreciate her comments regarding the plethora of questions that I have raised. I am choosing my words quite carefully, and I totally understand that I was on the other side of the fence on this, but I hope that I might speak on behalf of others who have spoken in this Committee and say that it is quite a challenge for us, when we are challenging the Government, when we cannot get answers. I understand why the Minister cannot give us the answers, and I speak on behalf of my noble friend Lady Finn from the Public Sector Fraud Authority angle and the DWP angle. This goes back to June and July 2024 when, clearly, we were not able to give too much information out because there was test and learn. I of course understand that we cannot put too much into the public domain for fear of aiding those who might be keen to perpetrate fraud.
What I am really trying to say is that this amendment was deliberate in trying to draw out some further answers. I understand where the Minister is coming from in saying that she cannot give precise answers to many of the questions that we have put. Perhaps we should leave it, on this last day in Committee, with a request to the Minister to look again at the questions that I have raised on this group to see what further answers might be possible before Report. At the end of the day, we have to be sure that the Bill is workable and can be understood by all, and that any loopholes are filled. That is probably my only wish.
Baroness Sherlock (Lab)
I am grateful to the noble Viscount for his understanding. Just to be clear, the questions that we are not able to answer are primarily operational ones. What I am therefore trying to do is to make it possible for Parliament to scrutinise the legislation and to answer everything that seems to be legitimate and appropriate, which Parliament can look at, at this stage. Perhaps it would be useful if we were to organise another session for Peers between now and Report, so that the questions can be put to us and we can go through them. That might allow me to answer questions in a less constrained manner than I can at the Dispatch Box. I will commit to looking through all the questions that have been raised by noble Lords in Committee to see what we have and have not been able to answer. We can try to regroup before Report and see where we get to, if that would be acceptable.
Viscount Younger of Leckie (Con)
I thank the Minister for those comments. Others who have taken part in Committee may also be able to add value—I am sure that they would.
I have a final comment before I sit down and indeed withdraw my amendment. I know that the department set out to produce a code of practice at least a year ago, and I am pleased to know that the code is being built up and improved upon as part of test and learn—so I just clarify that I am aware of that. In the meantime, I beg leave to withdraw my amendment.
“Repeal of this Act(1) Subject to the following provisions of this section, this Act is repealed five years after the day on which it is passed.(2) The provisions of this Act are not repealed in accordance with this section but shall continue in force if in each of those five years the total amount recovered through the provisions in this Act exceeds the amount expended in exercising these powers by a margin of £500 million per annum.”Member's explanatory statement
This is a sunset clause requiring that the net benefit of provisions in the Act must exceed £500 million per annum at the end of a period of five years, else the Act will cease to be in force.
Viscount Younger of Leckie (Con)
My Lords, we come to the final group, which I am pleased to open. I thank noble Lords who have participated in this Committee, particularly the noble Baronesses, Lady Sherlock and Lady Anderson, on behalf of my friend Lady Finn, and all the officials for their answers to remarks and questions. I know that spending hours in Grand Committee is not a massively appealing prospect, particularly on these rather hot and stuffy days. We probably all deserve a drink after this.
Over the course of these days, we have raised some important questions and concerns that we have for the Government on a Bill that, despite its technical title, is quite important. I feel that the Committee has come together on several key issues around safeguarding, proper independent oversight of these powers and the costs, as I said a moment ago, that we will impose on banks.
We have outlined areas of the Bill that could threaten the well-being of and access to services for benefits claimants, we have raised concerns over the powers granted to the PSFA and we have brought our remarks not only on these Benches but across the Committee back to the principle of that important word “proportionality”. While we need to tackle the issue of public sector fraud robustly, we must do so in a way that is nuanced, safe and effective. This is a significant Bill in respect of the problem that it is trying to tackle and the powers that it is seeking to grant. It deserves our full attention and scrutiny for that reason, and I feel that much of the debate that we have had reflects that point.
Amendment 131 is a sunset clause, requiring that the net benefit of provisions in the Act must exceed £500 million per annum at the end of a period of five years. Its basic purpose is to set a standard for the performance and return on investment made as a result of the provisions in the Bill. We have heard many times about the scale and scope of the challenge that we are facing with respect to public sector fraud. Amendment 131 seeks to bring us back to the fundamental principle that our purpose should be the recovery of public money in a way that genuinely benefits the taxpayer.
We have spoken a lot about costs over the past few weeks and today. It is important that we pursue this policy in a way that is cost effective and recovers money in a meaningful and tangible way. This is about being responsible with taxpayers’ money, and we must ensure that we get a return on investment to approach this issue sensibly and pragmatically.
We have agreed pretty unanimously on the principle of returning to the taxpayer money that has been gained fraudulently, but there is no point in pursuing the policy if it does not give us a sufficient return on that investment. In other words, this would set a benchmark for efficacy and cost-effectiveness. If these powers are delivering real value for money, then they would remain. If they are not, then Parliament must revisit them—hence the amendment.
The public rightly expect that the powers we grant to Ministers and departments are not only proportionate but demonstrably effective. They do not want systems that are costly to administer and burdensome to operate and yield little in return, nor should they be expected to accept them. This amendment would simply create a clear feedback mechanism. It asks that the Government show their working and provide an evidence-based justification for retaining powers that intrude on privacy, create obligations for banks and place additional burdens on both government departments and third parties. If the system is working and recovering public money effectively and efficiently, then, as I said earlier, there is no difficulty in meeting that threshold, but if it is not then we should have the courage and accountability to stand back and reassess.
Let us also be clear: the amendment would not automatically repeal the Act in five years’ time. It would allow for its continuation if and only if the system works. It would not constrain the Government’s ambition but demand proof of delivery—and what is wrong with that? At a time of tightening public finances and growing digital scrutiny, it is more important than ever that new powers are not just well intentioned but demonstrably worth while, and this sunset clause would help to ensure that. It would build a clear and measurable standard, and it would respect Parliament’s duty to monitor the impact of the legislation that it enacts. I beg to move.
Baroness Fox of Buckley (Non-Afl)
I shall say a few words despite my earlier promise and add to this moment of harmony. This is an interesting amendment to finish off Committee. I talked earlier about sledgehammers and nuts. I am concerned about civil liberties being constrained by the Bill. There are huge invasions of privacy and things that I worry about in terms of overreach of state power, but we can be assured all the time that this is about protecting public money.
When we describe everything from organised crime to fake charities getting money from the state and so on, understandably, we then think, “Are we trying to balance this out? Is it proportional? Do we have to make compromises on freedoms in order to crack down on it?” I am not yet convinced that that proportionality exists, and I know that we will pursue some of that on Report. What will remain of this Bill are those powers, but I am not convinced that the money accrued back will justify the kind of powers that the Government are giving themselves.
Baroness Sherlock (Lab)
My Lords, I am grateful to the noble Viscount for introducing his amendment and welcome the noble Baroness, Lady Fox, back to the debate.
I thank all noble Lords who have contributed. I hope that those who were not here will read it on the record. Notwithstanding the comments about our being in Grand Committee rather than in the Chamber, this has been a very good and interesting Committee. It has been the House of Lords doing its job: testing through the details, sifting through things and being able to make sure that I have answers to questions. I am very grateful for the way in which noble Lords have engaged, and I also speak for my noble friend Lady Anderson. I thank everyone for that and all those involved in supporting it.
While I understand that the noble Viscount rightly wants to hold the Government to account, I am afraid that this, in practice, is a wrecking amendment, and I will explain why for two clear reasons. Therefore, I obviously must oppose it. We have said repeatedly—although I recognise that we have not yet convinced the noble Baroness, Lady Fox—that the measures in the Bill are strong and proportionate. We have made clear that, to ensure that they are implemented safely, they will be rolled out gradually through a test-and-learn approach.
When we are scaling up these powers, there will be a period when the powers will not be fully rolled out and delivering the level of savings that they are expected to in the future. That means that we will not deliver the same savings profile at the start, compared to when the measures are fully rolled out. Setting an arbitrary requirement that we must see net recoveries of £500 million a year—or any other rigid financial threshold—undermines that approach and risks either our prematurely withdrawing measures before they are fully rolled out, or requiring the Government to roll out the Bill more quickly, which would give industry less time to adjust and risk the powers being implemented less effectively and less safely.
As noble Lords know, the Bill is estimated to deliver benefits of £1.5 billion by 2029-30, as certified by the Office for Budget Responsibility. That is made up of £940 million in savings related to fraud and error overpayments through the eligibility verification measure, and £565 million in additional debt recoveries from the debt measure. Our impact assessment clearly outlines how we will scale up our rollout to deliver these savings.
I highlight to the noble Viscount that that delivery profile has been certified by the OBR. Looking at that delivery profile, he will clearly see that we would not meet the £500 million in net recoveries benefits in 2026-27, and, under his amendment, the powers would cease to be available in five years’ time because of the failure to meet that threshold. That would simply undermine the Government’s efforts after year one and remove any incentive to invest in the delivery of these measures, knowing they would be gone in five years. Given those figures, it is not clear how the noble Viscount can have anticipated the Bill achieving net recoveries of £500 million each year, as is set out in his amendment, without also wrecking the Bill.
Secondly, by extension, this amendment overlooks the wider benefits the Bill could bring. For example, the Bill contains preventive aspects, and some measures may change attitudes towards fraud, error and debt by providing an important deterrent effect. I believe this amendment would remove the potential for positive prevention and deterrent effects.
I know that the noble Viscount thinks this matters. When we discussed our debt recovery measures in this Room last week, he said that it was
“about ensuring that there is an effective deterrent against repeated and deliberate non-compliance with efforts to recover public money”.—[Official Report, 18/6/25; col. GC 482.]
I agree with him; we need these powers to remain for exactly that reason. But, if the noble Viscount believes this, he must also accept that, by their very nature, where overpayments are prevented or deterred, they will, by definition, reduce the size of the pool and the amount of money we can recover over time. While I accept that we are a way off that reality, this may mean there will come a time when we cannot recover a net of £500 million a year thanks to the success of our detection and prevention efforts. But that does not mean that our counter fraud and error activity—or the Bill, for that matter—should just cease. Indeed, it would mean that the activity is working and should continue, to keep levels of fraud and error down.
Unfortunately, we cannot easily quantify all these effects, as they are complex, so although savings from measures such as EVM account for detecting the overpayment and preventing it continuing into the future, this would not contribute towards a recovery figure, as the amendment specifies. It is instead taken account of by the OBR in the AME savings for the Bill.
I know the noble Viscount does not want fraudsters to be able to get away with attacking our public services or the state to be unable to properly verify benefit eligibility, or to let it continue to be the case that debtors will be able to refuse to repay money belonging to the taxpayer. So I ask him to consider a different approach to hold the Government’s delivery to account.
To close, I assure the Committee that we are not complacent; we are committed to delivering the Bill and its savings. Moreover, we want to scale measures where they prove successful to, I hope, save more in the future. But, given that we are introducing new powers and requirements, we must also deliver safely, as I know we all want to. If noble Lords want to see more detail about when we expect to make the savings or to see the anticipated costs of the measure, these can be found in the published impact assessment, in which we have committed to monitoring and evaluation in the Bill to ensure that the new powers are delivering as intended. For the reasons I have set out, I ask the noble Viscount to withdraw his final amendment.
Viscount Younger of Leckie (Con)
My Lords, in winding up on Amendment 131, I say that, as I laid out in my opening remarks, we believe that the amendment would introduce a clear, common-sense standard: that the powers in the Bill should continue only if they deliver real, measurable value—a net benefit of at least £500 million per year. I appreciate the support of the noble Baroness, Lady Fox, in this respect.
Although we do not see this as a wrecking amendment, I listened carefully to the arguments put by the Minister, which I will read in Hansard, and I have to say that I see some merit in her responses. However, it is still the case—she alluded to this—that there needs to be accountability. Our aim is not to obstruct the Bill—we do not see the amendment as being wrecking—but the message has been put across that there needs to be a form of accountability. We have heard often during our deliberations that the Bill is part of a test-and-learn approach. If that is the case, there must be a test and a measure of success. Without them, we risk creating a framework that operates indefinitely without delivering the intended returns.
In closing, I leave a question—perhaps hanging in the air—for the Minister to answer. Will she consider bringing forward some further ideas for how success can be measured? That is what we are all about and I think we are probably on the same side of the argument as to how we can measure success. Whether it is £500 million or a sunset clause is not for me to say—it is part of the amendment that I have put forward—but there needs to be something. To that extent, I suspect that we will press this aspect on Report. With that, I beg leave to withdraw my amendment.
Public Authorities (Fraud, Error and Recovery) Bill
Monday 9th June 2025
(2 weeks, 4 days ago)
Grand CommitteePublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Amendment Paper: HL Bill 96-II(Rev) Revised Second marshalled list for Grand Committee - (6 Jun 2025)
Baroness Finn
Member’s explanatory statement
This amendment seeks to probe where the Government expects it would be appropriate for the Cabinet Office to retain a recoverable amount which has been recovered on behalf of another public authority.
Baroness Finn (Con)
My Lords, our amendments in this group seek to understand the sort of relationship the Government envisage between the PSFA and other public authorities, how the PSFA is to be resourced and sustained, and how we can incorporate greater independent oversight into how the PSFA will cover its costs.
Last week, our discussions covered the effect of the costs of counterfraud investigations undertaken by the PSFA on other departments and public authorities. As our Amendment 8 recognised, the Bill’s current proposals permit the recovery of costs by the Cabinet Office from public authorities, which could potentially be to their detriment. As we and the noble Lord, Lord Vaux of Harrowden, pointed out, this could create a direct disincentive for those authorities to do the right thing and could lead them to fail to refer cases to the PSFA.
As it stands, the PSFA, as constituted under the terms of the Bill, cannot undertake proactive investigations into public authorities even if it has information which constitutes reasonable grounds for an investigation. This places a massive burden of trust on public authorities to refer themselves to the Cabinet Office before an investigation can begin. This burden of trust is often open to abuse, as my noble friend Lord Maude of Horsham demonstrated to the Committee in his interventions last week.
The Bill creates an additional and major disincentive for public authorities to do the right thing and invite an investigation because, under the its terms, it is likely that they will also be left out of pocket. As we will no doubt hear again in the spending review later this week, money is incredibly tight. Why would any public authority invite the Cabinet Office to undertake an investigation into fraud in its department, given that this would likely cost it money—something the Government have not denied and something they are unwilling to protect against? Amendment 23 seeks to understand this question further and is intended to provide the Government the opportunity to outline when they believe the Cabinet Office would seek to retain funds recovered on behalf of another public authority.
Can the Minister assure the Committee that if the money allocated to a public authority is retained by the Cabinet Office following a counterfraud investigation, this will not come at the detriment of any policies, programmes or schemes the authority in question was planning or already had in progress? Counterfraud investigations should deter fraud, combat wrongdoing and recover funds. If money has been allocated to a public authority, it seems both sensible and correct that any money recovered should be returned to the relevant authority and not siphoned off into the Cabinet Office.
I understand that Clause 10 states that agreement must be reached between the Cabinet Office and the relevant public authority before any money can be retained by the Minister. However, if a public authority has been subject to a counterfraud investigation, is the Minister certain it will have adequate agency in this discussion to make the case that it should have its money returned to it?
Let us imagine that a council has been subject to a counterfraud investigation by the PSFA. The money has been recovered; those responsible have been removed from office and have been subject to penalties under the terms of the Bill. There is no reason to suspect the council is at risk of being defrauded any further, but the reputational damage has been done. The council may even have lost money to the PSFA under the terms of the Bill, stretching its budgets even more tightly. The council is in a desperate situation, but it has done the right thing. The PSFA is asking to keep the money it has recovered.
Is the Minister certain that, in negotiating with the Cabinet Office over this question, a council in this state would have the capacity, resources and, crucially, agency and perceived legitimacy to do so? What are the reasons the Cabinet Office would give to justify why it needs this money? Would this be a conversation the council could expect to do well in or is this pretty much a done deal—the PSFA will keep keep the money it has recovered and the conversation would be more of a formality? Clarity on these questions now will help us and public authorities understand where they stand in these discussions and the extent to which the Cabinet Office will seek to augment its own budgets as a result of claiming funds originally allocated to public authorities.
In a similar vein, our Amendment 25 seeks to ensure greater oversight of the amounts that can be claimed by the Minister when undertaking their functions and exercising the powers provided for in the Bill. The Minister in the PSFA appears to be in a position to determine their own costs and to recover them under the powers outlined in Chapter 4 of the Bill. Our amendment seeks to incorporate greater oversight in this process, and to ensure that there is a check on the Minister’s powers to recover amounts, by introducing a role for a recognised judicial authority. Requiring a court or tribunal to award the reasonable costs incurred by the Minister will prevent the Minister charging potentially unreasonable costs without appropriate oversight. In our view, this is a sensible measure; we hope that noble Lords will support it and that the Government will adopt it as a sensible check on the power of the Minister under this part.
Our amendments in this group provide the Government an opportunity to address some questions that we have around where the money recovered from counterfraud investigations goes and whether the Government are confident that the discussion between public authorities and the Cabinet Office on this question will be a fair one that ultimately benefits the taxpayer. Furthermore, our Amendment 25 seeks to incorporate greater independent oversight over the amount of money that can be recovered as costs to the Minister to make sure both that this is proportionate and reflective and that there are safeguards on the power of the Minister; I hope that the Government will seek to incorporate it. I beg to move.
Lord Palmer of Childs Hill (LD)
My Lords, I see the first amendment in this group as a purely probing amendment to try to clarify matters; I trust and have every hope that, in the debates on the Bill, they will be clarified.
I ask the mover of Amendment 25 and the Minister to clarify something. I wonder about the change to the end of the amendment, which says
“awarded by a court or tribunal in relation to costs”.
I would have thought that that was covered already under Clause 13(2)(b)(i), which refers to
“costs that are awarded by a court or tribunal on or in relation to a claim for a recoverable amount”;
I agree with that. Then there is sub-paragraph (ii), which is about the Minister exercising their powers. Is that not covered by paragraph (b)(i) without adding it to (b)(ii)? This is a purely technical point because I think that it is there already.
Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)
Good afternoon, my Lords. I think that we are going to be as speedy as we were last week; the Chief Whip will continue to approve.
The amendments tabled by the noble Baroness, Lady Finn, and the noble Viscount, Lord Younger, would create additional burdens for the court system. They would also challenge the future viability of the PSFA and, therefore, its central mission of tackling public sector fraud.
Before I move on, I want to respond directly to a point made by the noble Baroness, Lady Finn. I believe that what is at stake and what is really being contested here is a matter of approach. As I said in Committee last week, being invited in to investigate by a government agency ensures a collaborative approach. We are hoping that, by working with government agencies rather than imposing ourselves on them—this is what we are learning through our current test-and-learn approach—the agencies will engage with us, meaning that we will be more likely to succeed in getting the evidence base that we need to determine the fraud.
On the specifics, the powers in the Bill let the PSFA investigate fraud against the public sector. A key rationale for this must be the deterrent effect. The PSFA must, therefore, be able to recover the money lost so that it can be used for public good and ultimately show fraudsters that their ill-gotten gains will not stay theirs for long. It is only reasonable that an element of costs recovery for the PSFA is part of this process. Amendment 23 would remove the ability of the PSFA potentially to charge for its services in future. The PSFA will act on behalf of other government departments, developing the expertise and capability required effectively to investigate fraud and recover the money lost. Providing the option to keep some of the recovered funds, subject to agreement with the public bodies concerned, will help fund the development of this expertise and will provide value for money for government and the taxpayer.
I reiterate this point to provide a level of clarity on the issue highlighted by the noble Baroness, Lady Finn. The PSFA would seek to recoup its costs and not necessarily to retain all the funds awarded. We will agree a portion with the public agency that we are acting on when the PSFA takes the case. That will be agreed in advance.
Amendment 25 limits how the PSFA can recoup reasonable costs incurred in exercising the Chapter 4 recovery powers, meaning that only a court or tribunal can award them. There is already scope in Clause 13 for courts and tribunals to award costs in relation to a claim brought by the PSFA, as highlighted by the noble Lord, Lord Palmer. However, this amendment would limit the operational flexibility of the PSFA and create extra burdens on the court system if we had to keep going back to the courts for all costs. A key aim of the Bill is to minimise the burden on the courts while ensuring that there are ample safeguards and protections in place. We already stipulate in the Bill that any costs charged have to be reasonable; we will be transparent about how we work out reasonable costs in our published guidance. However, we should always remember that investigating fraud and recovering losses is an expensive business for the Government. It is not fair that these costs are shouldered by law-abiding citizens. If you have committed fraud against the state, you should pay for this.
On how the PSFA wants to charge for its services, it is important that we recognise that, regarding money between departments and the impact on value for money, it is not uncommon for departments to charge each other for their services. The impact assessment sets out how the powers in the Bill will support the PSFA to recover up to £53.7 million over 10 years under current modelling. A significant proportion of this would otherwise have been lost to government. We create value for money by bringing funds lost to fraud or error back to government so that they can be used for public good. I hope that that explanation reassures the noble Baroness, Lady Finn, and that she will therefore not press her amendments.
Baroness Finn (Con)
I thank the Minister for her response. On the point raised by the noble Lord, Lord Palmer, we are looking at amending Clause 13(2)(b), on the relevant costs awarded in subsection (1) by a court or tribunal. The costs that are reasonably incurred by the Minister exercising powers in Chapter 4 are not determined by a court or tribunal, and the amendment seeks to see whether the tribunal should also play a role under subsection (2)(b).
As we conclude the discussion on this group, I return to the central questions that our amendments seek to address—how we ensure that efforts to tackle fraud in the public sector are not undermined by asymmetrical powers and make sure that the outcome from the processes set out in this part of the Bill benefit the taxpayer. We are all agreed that fraud against the public purse must be confronted robustly, but in doing so we must not create a framework in which public authorities are financially penalised for their co-operation, nor one in which the Cabinet Office is both investigator and beneficiary, retaining funds without transparent justification or sufficient oversight. As we have discussed, the PSFA cannot currently initiate proactive investigations and the burden falls heavily on public authorities to refer themselves, even when doing so may lead to reputational harm and financial loss. That is not a system that encourages good behaviour; it is one that risks disincentivising it.
Our amendments raise two practical concerns: first, that funds recovered through fraud investigations should as a matter of principle be returned to the authority from which they were taken, unless there is a compelling and transparent reason not to do so. We are concerned that, while agreement between the Cabinet Office and the public authority is required in the Bill, the agency and ability of a public authority to make a legitimate argument for retention of recovered funds may be impeded following a fraud investigation. Secondly, we wish to ensure that any costs that the Minister seeks to recover in undertaking these functions must be subject to independent oversight and not left to ministerial discretion alone. I totally take the point that the Minister made about the cost and burden on the judicial system, but there is also the principle of fairness and independence.
These are not abstract points. They go to the heart of whether this legislation creates a fair and credible system, one that public authorities can engage with in good faith and that the public can have confidence in. Our role in opposition is not only to make suggestions as to how the Government could improve their proposals but to ask questions of the Minister and to seek further clarification on the points the Government have considered. I urge the Government, therefore, to reflect on these proposals. They do not diminish the aims of the Bill but rather strengthen them by ensuring that the powers it creates are matched by the accountability and fairness that must always underpin public service. On that basis, I beg leave to withdraw.
“(a) the period for appealing mentioned in section 60(2)(a) has passed without an appeal being brought, or”Member’s explanatory statement
This amendment is consequential on my amendment to clause 60, page 32, line 25.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, before I outline the amendments in this group, I will refer to government Amendments 30, 31, 104 and 105, as your Lordships will have noticed that these have been withdrawn from the Marshalled List. Together, these amendments had sought to ensure that there was no conflict between the prohibition on a bank telling an account holder that it had received a deduction order information notice from either the PSFA or the DWP in respect of the holder’s account and any possible subject access requests, and would limit how long the prohibition had effect. Unfortunately, we found that the wording of these amendments did not achieve the desired effect. For this reason, they have been withdrawn but we will retable them once they are compliant.
I turn to the amendments in question. The current drafting of clauses in Parts 1 and 2 of the Bill may inadvertently prevent the First-tier Tribunal from exercising its right to extend the amount of time a person has to make an appeal, where there is good reason to do so. Therefore, government Amendments 26, 60, 63, 64, 86, 87, 100, 101, 119, 120 and 125 seek to prevent this from occurring and to clarify drafting across the Bill.
These amendments ensure that the First-tier Tribunal maintains its ability to extend the time limit for an appeal where there is good reason to do so, at the discretion of the tribunal. These amendments do so across the provisions in the Bill where there is a route of appeal available. This will ensure the proper consideration of appeals and that the system is focused on fair judgments. I beg to move Amendment 26 in the name of my noble friend Lady Sherlock.
Viscount Younger of Leckie (Con)
My Lords, I note the Minister’s remarks about the withdrawal of some government amendments. I will not go through them all. I look forward to their redrafting. I start by making the small point that there is an element of unpreparedness to the Bill. I realise that there is quite a lot of work in progress. My understanding is that it is an unusual approach to take, to withdraw and then redraft. The Minister will probably say that I am going too far, and I therefore look to a further explanation of that point.
Putting that to one side, the amendments that the Government have tabled appear at least in principle to be sensible changes, which permit a tribunal to extend the time limit for bringing an appeal about a direct deduction order. This relates to a DDO appeal in the public sector section of the Bill but also, as I understand it, in the DWP section, as it applies to the eligibility verification notice in respect of the agreed arrangements between the banks and the DWP. Here I refer to government Amendment 87 in particular.
However, this provides me with an opportunity to do a bit of questioning. Can the Minister outline some of the situations in which the tribunal could consider it “reasonable” to grant an extension to the review period? I suspect she will say that this is up to the tribunal to decide, but it would be helpful to understand the obvious reasons—and some of the less obvious reasons—why the tribunal could offer some leniency.
I presume that the appeal process would include an appeal not just on the DDO but to delay a payment of the DDO and to seek a reduction in the amount payable per week, with the total amount payable over a longer period. Is there an expectation that a longer period has a maximum length of time applied and a cut-off? Otherwise, it could be endless.
In the process of considering and drafting this amendment, I am sure that the Government have had regard to precedent and to how this provision has been used in other Acts. I am aware that similar provision exists in other statutes and, if the Minister could share examples with us of where extensions have been granted to individuals, why and for how long, it would help and allow the Committee to understand the practical ramifications of this amendment. I hope that the circumstances are exceptional, but the wording used in the amendment is for it to be seen as
“reasonable in all the circumstances”.
I hope that that adds to my argument.
Are there parallels to be drawn and lessons learned—for example, from the child maintenance system, for which I had responsibility—where the paying parent is defaulting on DDO payments and the tribunal system is therefore involved? Can some analogies be created?
As I said earlier, there is merit in seeking to allow greater flexibility in granting an appeal. Individuals should have adequate opportunity to exercise this right, but within reason. The amendment is, to that extent, well intentioned and it is something that we support. However, we must also be alive to the risk posed by so-called bad actors. We must ensure that flexibility does not come at the cost of action. We need to make sure that this appeal system allows those with genuine concerns to be heard and recognised, while minimising opportunities for vexatious complaints that are designed to delay and clog up the system, rather than use it responsibly. For example, it could be easy for an individual to claim that he is not able to fulfil his obligations to pay his DDO because, he states, he is suffering from mental health problems or has fluctuating psychotic episodes. What is the tried and tested system for tribunals to assess these claims thoroughly and have the necessary powers to refute or rebut what may be deliberate and vexatious claims?
In seeking precedent here, what is the experience of appeals to tribunals in other sectors—on the volume of cases, the exceptions and the knock-on effect on courts’ resourcing and delays to all cases in the pipeline? It would be most welcome to have some further clarity from the Minister about the considerations that she has towards the amendment, particularly in reference to precedent, which gives us some idea of how this is going to work.
I finish by echoing the words from my noble friend Lady Finn, who said on the last group—and she is right—that fraud against the taxpayer must be confronted robustly. My arguments on this group form the basis of that.
Baroness Anderson of Stoke-on-Trent (Lab)
I thank the noble Viscount for his comments, some of which, as he will appreciate, will be explored in more detail as we get to the DWP part of the Bill, Part 2. We will explore all these issues in more detail later in Committee, including some of the examples that he seeks about how all the powers in the Bill have precedent already, although I will touch on some.
However, I will start by querying the noble Viscount and pushing back a little on the suggestion that we were unprepared with this Bill. There was a genuine drafting error. Mistakes happen; human beings are known for making them occasionally. Given the late tabling of some of the amendments, a level of genuine solidarity and collaboration across your Lordships’ House, about how we work and move forward, may be better judged.
Regarding some of the points made, I will start with the specific point about what kind of circumstances would be reasonable to extend the timeframe for appealing an overpayment notice. In all circumstances, it is wholly up to the tribunal to decide what would be a reasonable extension from one month. There are recognised principles to guide the exercise of discretion to extend time periods, or not, which the tribunal will consider. A three-stage approach is applied to consideration of any extension: first, assessing the seriousness and significance of the failure to comply with the time limit; secondly, considering why the default occurred; and, thirdly, evaluating all the circumstances of the case to enable the tribunal to deal justly with the application.
I will address the point made about civil penalties and examples of how they are used from the position of the PSFA. We will address this in more detail with the DWP as we move forward. There is precedent across government for civil penalties to be issued to the civil standard by officials delegated to by Ministers, instead of penalties being issued by court. Examples include the Environment Agency and the APHA. In instances where penalties are issued in the above manner, it is also standard practice across government departments such as the Home Office, the Environment Agency and HMRC for appeals to be made to a court or tribunal as the final route of challenge should an individual feel that a penalty, including the amount, is unfair or incorrect. We are seeking to emulate those powers for the PSFA.
In instances where penalties are not issued by officials and are issued via courts, the courts have the right to extend the specified period within which an individual or business may appeal a decision. This is part of the civil procedure rules. The noble Viscount touched on the Child Maintenance Service. As we progress through Committee, I will use it in many examples regarding the powers of the PSFA and how we will seek to use the precedent already established by the CMS.
With that, I hope that noble Lords will appreciate that these amendments are important to ensure that the Bill as it stands does not interfere with the tribunal procedural rules. Those rules are in place for good reason. While it was not our intention to impact the discretion that tribunals have on appeal timeframes, we want to bring absolute clarity to this. This also creates additional protections for people who want to engage their appeal rights. I therefore hope that your Lordships will support these amendments, which I commend to the Committee.
Baroness Fox of Buckley
Member’s explanatory statement
This amendment removes the power of the Minister to make direct deduction orders and instead provides for direct deduction orders to be made only by a court following an application by the Minister to the court.
Baroness Fox of Buckley (Non-Afl)
My Lords, in moving Amendment 27, I will speak also to Amendments 29, 62 and 75, which relate to debt recovery and concerns about the proportionality, even constitutionality, of the Bill’s use of direct deduction orders. I thank the noble Lord, Lord Palmer of Childs Hill, for his support in this endeavour.
The purpose of these amendments, and those in the later group starting with Amendment 102, is to transfer the powers of the Minister in Part 1 and of the Secretary of State in Part 2 to make direct deduction orders and deduction from earnings orders to relevant courts, whether the county court in England and Wales or the sheriff court in Scotland.
Before I look at the substance of this issue, I note that Amendment 29 addresses Clause 19(2) and paragraph 3(2) of new Schedule 3ZA, inserted by Schedule 5 to the Bill, whereby the Minister or the Secretary of State are required only to believe that a person holds the bank account in question. Other provisions require such belief to be reasonable, so inserting the word “reasonably” before “believes” would impose a reasonableness test. Not having such a test removes the balance of proper scrutiny and any threshold for a belief. This needs to be addressed to prevent unscrupulous intrusion. Meanwhile, Amendment 62 probes the circumstances in which orders can be restarted where they have been suspended, because I am confused about why that is necessary.
To return to the fundamental principles at stake in Amendments 27 and 75 in particular, and the broad theme, for centuries the rule of law and the separation of powers have ensured that a person is innocent until proven guilty and cannot be punished by political diktat. The Executive cannot arbitrarily take action against a person, even a debtor, in the manner that the Bill gives the relevant Minister. The Bill allows the Minister to order a bank to supply sensitive information for the purposes of debt recovery, without either judicial oversight or individual knowledge.
On our first day in Committee, we heard from the noble Baroness, Lady Finn, the shocking details of how Clause 7 allows relatively junior civil servants in the Cabinet Office to apply for a warrant to enter and search premises and seize anything they have reasonable grounds to believe has been obtained in the commission of fraud. If handing police powers to civil servants was not chilling enough, here are powers that facilitate the state raiding bank accounts.
Lord Palmer of Childs Hill (LD)
My name appears on these amendments because I and my party are worried about powers being given to Ministers rather than to the courts. This puts the power in the courts because “the Minister” does not necessarily mean the Minister; someone quite low down in the Civil Service could make this decision. I think it is open to abuse.
I hope that when the Minister replies she can perhaps tell me how this fits in with a garnishee order on a bank. Garnishee orders have long been part of our legal system, whereby a debtor can collect money from the bank direct with an order from the court. I am amazed that we can have such a Bill here—I brought this up at an earlier meeting with the Minister—without “garnishee” appearing in it, because this is part of our current legal system. I invite the Minister and the mover of the amendment to incorporate that in their reply.
Baroness Finn (Con)
My Lords, the amendments proposed in this group by the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer of Childs Hill, provide us with an opportunity to question the Government on the mechanisms they propose using to recover money. It is vital, as the noble Baroness said, that the powers provided for in this part are proportionate and sensible.
We are particularly interested in Amendment 29, which chimes closely with our belief that a reasonableness test should be incorporated as part of the exercise of powers. In this instance, the Minister must “reasonably believe” that a liable person holds an account with a bank before the bank can be served with an account information notice. We need to recognise that compliance with the provisions in the Bill, however proper and correct, will come at a cost to banks. This amendment seeks to impose a duty of due diligence on the Cabinet Office, which, as the party responsible for issuing the notices, should rightly be held to a high standard before it starts imposing responsibilities and costs on third parties.
As it stands, the Bill risks creating a situation in which the work that should really be done by the Cabinet Office is shifted over to banks. It is feasible that a civil servant in the PSFA, without the need to meet a reasonableness test, could send out information notices to dozens of banks and wait for them to come back to them to confirm whether or not the person in question does, in fact, have an account. I am sure that the Minister currently anticipates that civil servants will send out only a limited number of notices to the banks that they believe are relevant. However, it is not unrealistic to imagine that, during a busy period, someone in the Cabinet Office could be tempted to serve all the banks on their list with a notice and wait for them to revert, having done all the work. More importantly, there is nothing to prevent a civil servant from doing so. This is a serious point: it risks the workload being shifted from the Civil Service over to the private sector, burdening banks with non-profit-making tasks that they are legally obliged to undertake. The Cabinet Office’s civil servants must strive to reach the highest standards; the law should be clear on this point.
Amendment 62, also in the names of the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer of Childs Hill, speaks to a principle that we have identified in our Amendment 55; namely, that a person against whom a deductions from earnings order has been served should not be held to an indefinite order if it has been suspended. The Bill, as it stands, would allow an order to be restarted at any point. For the liable person—and, in the case of orders against a joint account, for the other person with money in the account—this would create a great deal of stress and uncertainty. It also grants the Cabinet Office the ability to wield a great deal of power over the liable person, with few checks. The Cabinet Office should have the power to recover funds from the liable person that has engaged fraudulently, of course, but, in our submission, it should not have the power to threaten a liable person with a suspended deductions order for an unlimited period of time.
If it makes the decision to suspend an order, the Cabinet Office should be tied to a specific period of time in which it can restart the order. The Cabinet Office should be held to this standard, and the liable person should be protected adequately. We disagree with the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer, that a suspended order should never be restarted, although we firmly agree on the principle that this power should be checked and should not be left open for an unlimited period of time.
I hope that the Government will consider these proposals as reasonable checks on the power of the PSFA in relation both to its ability to shift work over to third parties and to how it can wield these powers over liable people. We rightly expect the Cabinet Office to exercise these powers to a high standard. Ensuring that it does not outsource its workloads and that it concludes any checks or procedures within a certain time period are both proposals that speak to this high standard. I am sure that the Minister is confident that the officials in her department will meet these standards and, as such, that she will have no hesitancy in being able to back these proposals.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, given the tone of the debate that we have had so far, it may be helpful if I start by giving noble Lords some clarity on some of the issues that have been discussed.
Direct deduction orders are a mechanism by which public funds lost to fraud and error can be recovered directly from a liable person’s bank account. However, DDOs will be used only if the liable party has repeatedly chosen not to engage with the investigation and to come to the table. This is not the first and only mechanism for engaging to recoup funds; that is an important principle here.
At this point, it is also important for me to clarify exactly what is being said about junior civil servants. The people who will undertake this work are trained members of the counterfraud profession, and the PACE powers have to be approved by a magistrate. The appropriate safeguards are in place. While I am at it, I reassure the Committee that no algorithms will be used by the PSFA for anything to do with financial information gathering and the powers outlined here. I remind noble Lords that the liable person will be kept informed at the outset and throughout the process of a fund recovery.
Amendments 27 and 75 would, together, restrict the use of the direct deduction power, so that it can be used only following an application to the appropriate court. We agree with the sentiment that there should be protections in place to ensure that direct deduction orders are used proportionately and appropriately. However, this would place unnecessary and avoidable additional work on the courts, and reduce the effectiveness of the power and the amount of taxpayers’ money returned to the public purse. By this stage of the process, a liable person would have already agreed that the amount is recoverable or the courts would have made a final determination that it is.
Lord Vaux of Harrowden (CB)
The noble Baroness mentioned a moment ago that a direct deduction order can be made only when a person has already agreed that an amount is recoverable. Could she point out where that is in the Bill? I cannot find it anywhere.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I am assured that it is in the Bill. I ask noble Lords to bear with; as soon as that has been passed to me, I will highlight exactly where in the Bill it is.
It is in Clause 12. That was like magic.
Lord Palmer of Childs Hill (LD)
Could the noble Baroness explain again why a garnishee order—the collection of debt from a third party—is not mentioned in the legislation at all?
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, a garnishee order is used to obtain money directly from a third party. That is not the process that we are undertaking; we are regaining money directly from an individual, as opposed to a third party. I am happy to write to the noble Lord with more guidance on that, but that is my understanding.
I move on to Amendment 29, which would necessitate a “reasonable belief”, rather than a “belief”, that a bank account is held by the liable person prior to the PSFA requesting bank statements from the bank to inform decisions on direct deduction orders. In practice, the PSFA will already be operating at this level as it will already, through the course of its fraud investigation, have developed an overview of the liable person’s financial information.
In addition, having thrilled the Committee with my recitations from Managing Public Money last Wednesday, I am excited to be able to quote from another government page turner, The Judge Over Your Shoulder. All “public law powers” must be exercised with
“reasonableness or rationality—following a proper reasoning process and so coming to a reasonable conclusion”.
Making a Minister’s belief a “reasonable” belief therefore has no effect, because they are already subject to it.
In addition, Clause 19 lets the PSFA issue a general information notice to banks, which provides confirmation of the accounts that a liable person holds. The amendment is therefore not adding anything new.
Amendment 62 seeks to remove the ability to restart a deduction from earnings order once it has been suspended. For some context, a deduction from earnings order is a mechanism by which public funds lost to fraud and error can be recovered directly from a liable person who is not in PAYE employment. Having listened to the debate, I have some sympathy with noble Lords; however, it is important that the PSFA remains able to issue, vary, suspend and restart, or revoke a deduction from earnings order, for very human reasons.
We need to be able to suspend and restart a deduction from earnings order due to a temporary change in the liable person’s circumstances; for example, if they were temporarily hospitalised. People’s lives, as we know, can be messy; it is important that we have the flexibility to recognise that. Where it is more appropriate to revoke the order altogether, this is provided for in Clause 47.
The purpose of the amendment therefore overlaps with existing provision which gives the necessary flexibility while maintaining clear communication with both employers and liable persons, maintaining a fair and transparent debt recovery process. If this provision was adopted, an unfortunate consequence would be the end of such flexibility and the reluctance of anyone to suspend payments due to having to restart the process.
I hope that this explanation reassures noble Lords and that the noble Baroness will withdraw Amendment 27.
Baroness Fox of Buckley (Non-Afl)
My Lords, I have a number of points. It was very interesting that the Minister concluded in relation to one of these amendments that “people’s lives can be messy”. It is precisely for that reason that in saying that DDOs will be issued only due to a lack of engagement, without any consideration of why that lack of engagement might happen, it might well be because people’s lives are very messy, to quote the Minister. So I am not convinced by that at all.
Baroness Anderson of Stoke-on-Trent (Lab)
To reassure the noble Baroness, efforts to engage with a liable person would not be just a one-off hit. There would be over a dozen attempts, under my understanding of the Act. So it is not just a one-time effort to engage with each liable person. By the time we got to the process of a direct deduction order, there would have been multiple efforts to engage with the liable person.
Baroness Fox of Buckley (Non-Afl)
It is quite feasible that I have missed the multiple efforts in the reading of the Bill. Maybe it is there—it might be another bit that I have missed. But I do not think that is clear, so maybe that could be clarified.
I am sure that this is the intention—the problem is the principle. We were given the explanation that I thought we would be given: we are doing this directly and not going for judicial authorisation because the courts just have too much work on. I always worry about an explanation that says that it will cause too much work for the courts. On this basis, we may as well cut out sending anyone to a court and put them into prison—because that court process is so darned long-winded for everything, is it not? But we do not say that, because the court system sets in place safeguards to ensure that people are not unfairly treated. We do not have a direct situation where a Government of the day simply decide that the courts are dispensable with. That is the principle that I was trying to raise here, so I do not think that is a satisfactory answer.
I was also unconvinced by the argument, which I will go through, that HMRC already has powers to deduct money directly from bank accounts under Schedule 8 to the Finance (No.2) Act 2015. Actually, there are statutory safeguards, including the requirement that HMRC retains £5,000 in the debtor’s accounts, and guidance about who HMRC should deem as at a particular disadvantage. That is not in this Bill. It is part of that Bill, which was cited as a reassurance to me.
The comparison with child maintenance is also a false comparison. Child maintenance is money owed by one parent to ensure provision for their dependant who does not live with them. That differs greatly from an individual claiming money from, for example, the social security system, who potentially has been overpaid—as I keep pointing out, through no fault of their own. I do not think those two things count as equivalences at all.
I was grateful to the noble Baroness, Lady Finn, for the amendment on stop-starting DDOs. I have some sympathy with her approach in terms of them being permanently never allowed to start again. My nervousness with it is that it feels so arbitrary. The explanation given was that people have messy lives, which is fine, but I do not want to be in a situation whereby I am nodding through a system that means that people could keep having their direct deduction orders stop and start because of the messiness of government. We are told that it is the messiness of people’s lives, but it is not clear that that would be the only reason why this would occur; it is not in the Bill.
Of course, I shall not press my amendments, but I imagine that I will return with some of them on Report.
Baroness Finn
Member’s explanatory statement
This amendment seeks to specify a reasonable period of time for the recovery of an amount from a personal bank account, so as to protect the partners of liable persons from having an amount deducted from their joint account after five years.
Baroness Finn (Con)
My Lords, our amendments in group 4 are designed to improve the system of debt recovery that the Bill seeks to establish to make sure that adequate protections are given to the liable person, and that the Cabinet Office is held to a high standard in the exercise of the powers it is being granted. It is essential that we recover debt and combat fraud—I think that we are all agreed on that—but we must remember that in this Bill we are creating a system that will engage with and be run by real people. In these amendments we seek to tease out the practical problems that those real people might come up against while using this system. As we have heard, real people might well have messy lives. We have identified several potential such problems, and in this group we want to flag them to the Government so that they can make any changes needed.
Our Amendment 28 seeks to clarify the standards used by the Minister when determining whether or not they should make a direct deduction order to a joint account. The decision to make a deductions order from a joint account is a serious one, as it directly affects a person who is not liable, unless in cases which fall under Clause 18(3). The Minister must therefore be clear that certain conditions have been met before such a decision is taken, so that those who hold a joint account with the liable person are adequately protected from such an order.
The formula outlined in Clause 20(2) is a blunt tool, which we feel will struggle to operate fairly and effectively in practical terms. The formula assumes that the liable person’s interest in a joint account is of a fixed proportion, meaning that if there are two people holding a joint account, the Government will assume that 50% of the funds in that account relate to the liable person.
This has some obvious pitfalls, not least that, upon being informed that they are subject to a direct deduction order, the other account holder could move most of their assets out of the joint account, into a separate one. Say two people had a joint account with a balance of £50,000, split evenly between the account holders. Upon being informed that they were subject to a direct deduction order, the non-liable person could remove £24,999 of their funds into a separate account, leaving £25,001 in the joint account. Under the mechanism provided for in the Bill, the Government are to assume that 50% of these funds regardless belong to the non-liable person.
This mechanism risks creating an obvious loophole, in which the liable person, could, in essence, protect 50% of their assets by keeping them in a joint account. Conversely, the formula could have the reverse effect of penalising the non-liable person, if that person is due more than 50% of the assets in the joint account.
While the Minister is required under Clause 18(1) to assess the liable person’s beneficial interest, there is no requirement that they apply the deduction order to reflect this. Indeed, the Minister “must” presume that the liable person’s interest is proportionate, in line with this formula.
Our amendment makes it clear that the use of the formula to work out a liable person’s beneficial interest must only be a last resort. The Minister must make a proper assessment of the liable person’s beneficial interest before they resort to using the mechanism in Clause 20(2), which has many attendant problems, some of which I have highlighted.
Our Amendment 34 seeks to tie the Cabinet Office to a duty to provide notices to all other relevant persons within seven working days. At present the requirement is that the Cabinet Office undertakes this duty within a time period that it can itself determine. While the recovery of funds is of course right, we must consider the impact that this will have on the liable person. Indeed, it is highly likely that a deduction order will affect not only the liable person but other third parties who are not directly involved. For a person with a joint account, this will be the case.
The Cabinet Office is responsible for ensuring that the liable person and other third parties affected by a direct deduction order are informed of the fact as soon as possible. The Bill currently states that the notice must be given to the liable person
“as soon as reasonably practicable”,
but we believe that the Government should comply with this duty within seven days. Allowing this period to be determined by the Cabinet Office itself is not a secure guarantee, and the liable person should have a right to be informed of this fact within an explicit timeframe, both for their benefit and that of affected third parties.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I welcome the opportunity presented by this group of amendments to talk about some of the safeguards in the Bill for the recovery powers. The liable person will always be provided an opportunity to voluntarily repay, as I said in the previous group. The Bill affords them rights of making representations, and review and appeal to a court or tribunal. There are set maximum regular deduction rates and we have written into the legislation that deductions must be fair and affordable. Vulnerability will be considered at every step of the way and action taken where appropriate to tailor our approach accordingly.
As the Government have developed this approach, we have had to balance necessary and proportionate safeguards against the requirement for operational flexibility to efficiently and effectively recover money that the liable person should never have had in the first place—money that could and should have been used for the public good. I firmly believe that we have struck the right balance here. Unfortunately, the amendments tabled by the noble Baroness, Lady Finn, and the noble Viscount, Lord Younger, while well intentioned, will negatively impact our recovery activity while not providing any meaningful additional protections.
Amendment 28 would limit recovery from joint accounts if the liable person had a sole account from which the full amount owed could be recovered within five years. To reassure the noble Baroness, Lady Finn, what this amendment misses is that recovery from a joint account is already limited to the beneficial interest of the liable person. I understand her concerns about how that would be allocated but we believe we have a responsible medium here. The joint account holder is able to make representations on this matter to ensure that the funds taken into consideration are solely those of the liable person.
The amendment therefore limits the operational flexibility of the PSFA to undertake recovery action and provides no further protection to joint account holders. The time taken to recover will depend on the facts of the particular case and on the amount being recovered—five years may be suitable for some amounts but may not be where the PSFA is recovering substantially larger amounts and is seeking to do so over a longer period.
There may also be circumstances where repayment needs to take place over a longer period; for example, for those who are vulnerable or face hardship but none the less have the money to make repayments. It is important that the PSFA retains the flexibility required to recover a wide range of debts of varying amounts and to tailor repayments to the liable person’s circumstances.
Amendment 33A would require the PSFA to try to establish the joint account holder’s beneficial interest before using the formula defined in the Bill. This is duplicative and already provided for under Clause 20(3), which states that
“the presumption does not apply where the Minister has reason to believe that the liable person’s beneficial interest is different from the presumed share”;
that is, on review of the statements obtained for the account in question. As mentioned already, all joint account holders will have the opportunity to make representations as to their beneficial interest before any money leaves the account.
Amendment 34 would require the PSFA to provide the direct deduction order notice to the liable person within seven working days of it being provided to the bank. However, the current drafting already stipulates that the order must be shared
“as soon as reasonably practicable”.
I cannot foresee many circumstances where this would ever be more than seven days; after all, we want the money back. It is also important to maintain an element of flexibility to ensure that the banks have sufficient time to put in place the restrictions under Clause 26. This is to prevent the liable person from moving money out of their account and circumventing the debt recovery process.
Amendment 50 relates to applications to vary direct deduction orders and would compel the PSFA to set out its reasons behind any decision. This amendment is duplicative. The PSFA would be doing this anyway as a matter of good public law. The liable person should know why applications have been agreed or rejected, and it is necessary they know why if they are then to take up their review and appeal rights. The PSFA would also publish guidance on applications to vary, setting out its high-level approach.
Amendment 53 relates to the unfortunate circumstance where someone dies while a deduction order is in place. It would compel the PSFA to write to the next of kin or estate to confirm the cessation of the order. The Bill already stipulates that the order ceases as soon as the PSFA becomes aware of a death. This simply creates another administrative burden for the PSFA as it would be expected to hold information on next of kin or personal representatives—information that the banks themselves are unlikely to hold as it is not mandatory for this information to be given to banks by account holders.
The suggestion in Amendment 55 is an interesting one. It would prevent suspended direct deduction orders being restarted after a period of 24 months. This would impact the discretion that the PSFA could offer to those who owe money but have experienced an impactful, if temporary, change in their circumstances; for instance, through losing a job or undergoing medical treatment. It would also limit the operational flexibility of the PSFA, which would still have a duty to establish the most appropriate way of responding to such circumstances, balanced against the duty to recover money lost to fraud and error.
For example, someone may come forward to the PSFA after a DDO has been put in place and seek to negotiate because of a change in their circumstances. They may seek to engage directly and to negotiate their payments going forward but then fail to see things through. This could happen over a period of two years; we would then have to start the process all over again. Moreover, the Minister will already have the power to revoke a DDO if the liable person’s circumstances necessitate it.
I hope that these explanations reassure noble Lords and that the noble Baroness will withdraw her amendment.
Viscount Younger of Leckie (Con)
There is one matter that occurs to me in respect of Amendment 53. In the event of somebody’s death, where the deceased has been subject to a DDO, could this be included in the “Tell Us Once” service? That is, where a next of kin registers the death with the registrar, could the DDO be highlighted as part of the “Tell Us Once” service? Of course, this would include the highlighting of that revocation.
Baroness Anderson of Stoke-on-Trent (Lab)
I thank the noble Viscount for giving me the opportunity to reassure him that, yes, it can and it will.
Lord Vaux of Harrowden (CB)
On Amendment 55, I understand that 24 months may not be the right number, but it cannot be right that an order can stay open indefinitely so that, 10 or 15 years later, the PSFA can suddenly start taking money from the account again. There must be some sort of drop-dead point; I wonder where that should sit.
Baroness Anderson of Stoke-on-Trent (Lab)
I beg the leave of the Committee to consider that; I will reflect on it and come back in due course.
Baroness Finn (Con)
I thank the Minister. I thank my noble friend for bringing up the “Tell Us Once” service. A lot of people have said that it has brought them a lot of comfort after a relative has died; if this service could be incorporated here, that would be very good indeed.
In this group of amendments, we have made the case that, although the objectives of recovering public money, tackling fraud and commanding support are not in question, as we have constantly reiterated in Committee, the mechanisms by which the Bill proposes to do so raise legitimate concerns that cannot easily be brushed aside. I emphasise that our amendments do not seek to frustrate the intent of the legislation; on the contrary, they are designed to ensure that the framework being created is legally sound and operationally effective.
We are talking about powers that will reach into people’s bank accounts and affect the relationships that they have with innocent third parties, whether they be joint account holders or dependants; I heard very clearly what the Minister said about joint bank accounts but there are still issues here that may have to be worked through or thought about. This is a significant undertaking on behalf of the Government, and it comes with a weighty responsibility to get the detail right.
Today, we have raised not theoretical issues but practical, real-life scenarios where the Bill, as it is currently drafted, could cause confusion, injustice or unnecessary distress. We have heard how a blunt formula could allow assets to be shielded or, worse, wrongly seized. We have pointed to the risk of leaving innocent third parties in the dark. We have also highlighted the critical importance of transparency when powers are exercised and challenged. I should say that, in terms of the innocent third parties in the dark, the “Tell Us Once” commitment is most welcome.
It is not enough to say that the Cabinet Office will act reasonably. The law must require the Cabinet Office to do so. It must give people the right to be informed, the right to understand decisions made about them, and the right to challenge those decisions with the benefit of clear reasoning and evidence. We are not opposing the principle of direct deduction orders. We are simply asking for a system that reflects the complexity of real people’s lives and relationships, and that recognises that justice must not only be done but be seen to be done. We believe, therefore, that these amendments are proportionate, constructive and necessary. They would not weaken the Government’s ability to recover funds; they would strengthen the public’s trust in how that ability is used.
I say again: we support the aim of the Bill but, if we are to ask the public to accept a system of such reach and impact, we owe it to them to ensure that it is as fair, clear and humane as possible. I believe that our proposals today are a step towards achieving just that, and I hope the Government will give them the serious consideration they deserve. On that basis, I beg leave to withdraw.
Baroness Finn
“(11) In performing their functions under this section the Minister must have due regard to the operational and opportunity cost burden placed on the bank.”Member’s explanatory statement
This amendment would require the Minister to have due regard to the cost burden placed on the bank as a result of the use of powers granted to the Minister under Clause 19.
Baroness Finn (Con)
I apologise to your Lordships. The Committee will be fed up with hearing from me before the afternoon is out. No? Excellent.
We all agree that fraud against the public purse is wrong and must be tackled, but we must also be honest about who is being asked to do the work and at what cost. Banks are expected under the provisions in the Bill to dedicate staff, systems and time to support public sector fraud investigations or enforcement efforts. This may be in the form of complying with information notices, processing and applying deduction orders, or liaising with government departments. These activities are not core business functions for a commercial bank. They are not revenue generating. They do not serve the bank’s shareholders or contribute directly to its customers’ financial well-being. They are, in essence, a form of public service being performed by a private entity.
Here is the crux of the matter: every hour a member of the bank staff spends assisting with a public fraud case is an hour that they are not spending on risk management, product development, client service or revenue generation. That is a real and measurable opportunity cost: the bank is being asked to sacrifice its own commercial objectives to achieve a government policy goal. Regardless of the fact that this is a goal with which we all agree, we need to recognise that this is a burden on banks, even if it is in pursuit of a good objective.
Of course, banks have legal and moral obligations to help prevent criminal activity—and they do. However, we must be cautious about crossing the line between reasonable regulatory compliance and the outsourcing of state enforcement functions to private firms, without proper consideration of the attendant costs and effects that this could have.
It is also worth considering the cumulative effect. Banks are not only being asked to support fraud detection but simultaneously are dealing with sanctions enforcement and a growing raft of compliance burdens. The more we demand of banks in public service roles, the more we divert their resources away from their essential commercial purpose: financing the economy. So, while the fight against public sector fraud is essential, we must be alive to the costs that we are placing on others to carry it out.
Our Amendments 32, 38 and 54 would demand that the Minister has due regard to the costs that they are imposing on banks as a result of the exercise of their powers. We return to our core theme of proportionality: building into the Bill a regard to the cost burden on banks is a way that the imperative of tackling fraud is sensibly and responsibly balanced with the attendant costs that it imposes on private entities.
Further to this, our Amendment 33 would require the Minister to undertake a review of the costs being imposed on banks within 12 months of Clause 19 coming into effect. This amendment works alongside our Amendments 32, 38 and 54 in establishing the principle that the Minister must have due regard to the costs imposed on banks, and furthers this by demanding that the Minister undertakes a review of these costs a year after the provisions in the Bill come into force. In creating a duty to have due regard and combining it with the requirement for a review after a year, we have proposed sensible amendments which impose on the Minister an important obligation to the banks on which the Bill so heavily relies. We must make sure that, in our efforts to tackle fraud, we work alongside partners in the banking and financial sectors, not against them. These amendments will ensure that the Bill does that.
Finally, our Amendment 40 would ensure that the relevant bank is involved in determining the amount of money that it could recover to cover the costs incurred by complying with the demands under the Bill. At present, the Minister is able to unilaterally determine what a bank’s reasonable costs are. As I have outlined in my remarks, in complying with the Bill banks will incur not just an operational cost but an opportunity cost. Banks understand the complexity of their own systems; they know what it takes to divert staff from commercial roles to public service tasks. They are best placed to quantify the impact of compliance on customer service, internal risk management and technical infrastructure. To exclude them from this process of determining costs, to impose obligations without consultation or a mechanism for cost recovery, would be to create an asymmetric relationship in which the state demands and the private sector simply absorbs.
We are not asking for a blank cheque or for banks to name any figure they please, but there must be a structured and collaborative process, grounded in evidence, in which banks have a say in what their involvement truly costs and in how those costs are acknowledged and, where appropriate, reimbursed. This is therefore a sensible amendment which seeks to create that relationship between the Cabinet Office and the banks on which it relies. I hope the Government will consider it as a reasoned improvement to the Bill.
In conclusion, it is important that we do not overlook the practical realities of who is being asked to shoulder the burden of implementation. The provisions in this Bill place real and ongoing demands on the banking sector—not only in staffing and systems but in opportunity costs that affect banks’ ability to serve customers and grow the wider economy.
Our amendments do not seek to weaken the fight against fraud but to ground it in a framework of fairness, partnership and proportionality. By requiring that Ministers have due regard for the costs imposed, that those costs are reviewed and that banks have a say in assessing what they are owed, we introduce essential balance and accountability into this regime. These are moderate, practical and constructive proposals. If we are to maintain the willing co-operation of the banking sector in delivering the public good, we must also treat banks as genuine partners, not simply as instruments of policy. I hope the Government will take these amendments seriously, and I urge noble Lords to support them. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, I have amendments in later groups on the EVM section of the Bill with a similar effect to these, looking at the costs to the banks. This is not just about the impact on the banks, however. As many of us know from the experience of being politically exposed persons, when you put onerous responsibilities and costs on the banks that relate to a particular class of customers, you can create a disincentive for the banks to provide services to them. Most of us have probably had the experience of being PEP-ed, and it is not terribly pleasant. Here, if we are putting a load of costs on the banks that relate to benefit recipients, we make it less likely that those vulnerable people will be able to access banking services. The Government need to think about this quite carefully.
Baroness Fox of Buckley (Non-Afl)
My Lords, I was going to make a very similar point. We have to consider the serious consequences of the Government, in effect, turning banks into de facto government inspectors, as well as the unintended consequences such as those for politically exposed persons. Goodness knows that that has not gone well. It has created all sorts of chaos. I am very anxious about private institutions, in effect, being asked to do the Government’s dirty work in many instances.
I want to query, though, banks being able to charge for the hard work they do via new paragraph 8 in Schedule 5, in which there is a provision for the bank to be able to deduct a fee from the debtor’s account to meet its reasonable costs in complying with the order, which is a ridiculous situation. It amounts to state-backed approval of funds being taken directly from the bank accounts of private customers to deal with administrative retrieval of overpayments. By the way, the maximum amount that banks could charge would be set by the Secretary of State via regulations, which is also not reassuring. Although I do not want the banks to be used, I also do not want them to be able to charge their own clients to do the job that the Government have demanded they do. I feel very queasy about all this.
On the discrimination point, if these measures identify a range of types of bank clients who are causing more trouble than they are worth, the obvious decision will be to debank. It makes perfect sense that they would think, just like every other private sector organisation, “Do I really want people on benefits living in my house?” We have seen this discrimination time and again. There is a serious danger of unintended consequences here that the Government have to take seriously.
Lord Verdirame (Non-Afl)
My Lords, I did not speak at Second Reading, but the Bill has attracted my interest for the reasons a number of noble Lords have pointed out about procedure and due process. I share the concern about the risk of debanking en masse a group of individuals whom banks will view as not particularly good customers in terms of the money they deposit and as they now come with greater risks. I would also like to know what the Government’s thinking is on that issue.
Looking at this from the point of view of the bank, I am a bit concerned about the relationship between Clause 19(4) and Clause 19(10). Clause 19(4) says:
“The Minister may give an account information notice relating to an account only for the purpose of determining whether to make a direct deduction order in respect of the account”.
If the bank receives such a request for an account information notice, but for some reason considers there may be a different purpose in that request, what is the bank supposed to do? Clause 19(8) says:
“The bank must comply with a notice given under this section”.
However, Clause 19(4) puts a clear limit in terms of the lawfulness of giving an account information notice. Who is to assess whether there is any doubt as to the purpose of that account information notice?
In Clause 19(10), it says:
“Information given to the Minister in response to a notice under this section may be used by the Minister for the purpose of exercising the core functions but not for any other purpose”.
Of course, the core functions are wider than the purpose identified in Clause 19(4), which says that you can give an account information notice only for the purposes of determining whether to make a direct deduction order. But then, in Clause 19(10), that information may be used for wider purposes than enabling the taking of that decision.
That puts the bank in a bit of difficult position. It is told that it must comply with a notice but also that the notice must be only for the purposes of determining whether to make a direct deduction order. If it has any doubt, presumably it owes a duty to its customers and will have to consider how to behave in that situation. Further, it is also told that the information it will be providing may be used for wider purposes than simply the making of a direct deduction order. I would like to hear from the Government how they see the relationship between these various provisions in Clause 19, and where that leaves the bank in that kind of scenario.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, is it not always the case that you get the most difficult question just before you stand up? I am going to speak really slowly until I get a speaking note that gives me the appropriate answer.
I confirm that the Government are extremely mindful of the burdens this Bill places on business, including the banking sector. We want to ensure that it is not subject to disproportionate burdens or costs in complying with these measures. I will start by referring to the Bill’s published impact assessment, which sets out all the expected costs to businesses, including banks, of the PSFA measures. This has been green rated by the Regulatory Policy Committee and sets out the minimal expected costs to businesses where it has been possible to do so, including to banks for Part 1 of the Bill’s measures.
Throughout the development of this Bill, we have tried to strike the right balance between requiring actions from banks in a fair and proportionate way while achieving our policy intent of recouping vital public funds lost to fraud and error. This is why there has been sustained engagement with key representatives of the sector, including UK Finance, individual banks, building societies, HM Treasury and the Financial Conduct Authority. Some of this is reflected in government amendments that we will discuss later in Committee.
We know that the sector is supportive of the Bill’s objectives from the evidence provided by UK Finance in Committee in the other place. We have benefited from the sector’s operational insights, which have led us to table a number of amendments as a direct result to ease the implementation and delivery of the recovery powers. The PSFA and the DWP will, for their relevant measures, will continue to work closely with banks on the design and implementation of relevant measures, including consulting on relevant regulations.
Viscount Younger of Leckie (Con)
Can I just press the Minister a little more? I realise that, as she rightly said, we will explore these matters later in Committee—in particular, when we look at the DWP aspects of the Bill—but it would be helpful to have a bit more information on what the banks are thinking. What is their experience in terms of the work that has been undertaken so far? As the noble Baroness, Lady Fox, said—she is concerned about the so-called government inspectors approach taken by the banks—obviously, they are not doing this out of the good of their hearts. So it would be helpful to have a little more information, given that the work is by no means done; it is a work in progress. I have certainly been pulled up for calling this whole process a pilot scheme—I think that it is called “test and learn” or something—but some more information for the Committee at this early stage would be very helpful.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, it would be inappropriate for me to speak on behalf of the banks, and I do not think that noble Lords would want me to do so. But as far as I am aware—having said I will not speak for them, I am now going to—the banks are supportive of the approach we are taking. In terms of fraud, we are working very closely with them. The banks, however, want us to be as similar to HMRC as possible, and we are trying to do that. Given that those are regulations they currently work with in day-in, day-out, that is what we are trying to emulate. I think that is as far as I can go. The noble Viscount should be reassured that we are engaging directly with UK Finance regularly, and he might want to reflect on the evidence that it gave in Committee stage in the other place about how comfortable it was with this section of the Bill.
Baroness Fox of Buckley (Non-Afl)
I think it is fair to say that UK Finance and the banks, in terms of all the evidence that I have read, are obviously happy to sit down with Ministers to try and negotiate their way through this Bill. I do not think that is entirely fairly or accurately described as them being happy with this. They are being asked to do things by coercion in this Bill. I am not saying that word to be offensive. I mean they have not chosen to do it—the Government have told them they have to do it. In many instances, banks are required to do what the Government tell them in relation to their own customers or face penalties if they do not. Consequently, they are trying to negotiate the best of a bad deal. That is not quite the same as an enthusiasm for the Bill. I think that is worth noting, as we would not want to mislead.
Baroness Anderson of Stoke-on-Trent (Lab)
I remind the noble Baroness, Lady Fox, that what I actually said was that I did not want to speak on behalf of the banks. However, I find the word “coercion” a complete exaggeration and unnecessary. Just to clarify as well, the banks will not face penalties at any point in the Bill, unless I am to be corrected—and if I am wrong, I will correct the record. This is a process of trying to recoup government funds—taxpayers’ funds—to make sure that we get the money back. That is what we are trying to do and that is why this legislation is in place. We are working with the sector to make sure we can get our money back.
Baroness Finn (Con)
I think we all want to see a system that robustly tackles fraud against the public purse but that also recognises and respects the practical consequences of how it is delivered. The debate on the amendments in this group has shown that we need to be honest about the fact that in this Bill we are asking commercial banks to step beyond their core functions and dedicate staff time, infrastructure and internal resources to deliver outcomes for the state. When the public sector is asking the private sector to help to tackle public sector fraud, that is no small ask and should not be treated as such.
The noble Lord, Lord Vaux of Harrowden, and the noble Baroness, Lady Fox, have correctly highlighted the problems when you place onerous responsibilities on the banks in regard to a class of individuals. There is obviously a danger that it is going to make it less likely that vulnerable people can access services because the banks will just decide it is not worth the bother and will debank difficult or troublesome people. Those are very important areas to be worked through.
I really appreciate that the Government are still in discussions, but we are actually legislating here and now, and it is a bit uncomfortable that the discussions are obviously still ongoing while we are trying to refine the legislation. It would be good if we could keep this alive with what the banks actually want to conclude.
The amendments that we have proposed today on requiring due regard for cost, on ensuring review after implementation and on giving banks a voice in determining their recovery of the cost are all designed to introduce fairness, clarity and proportionality in what would otherwise be quite a heavily one-sided obligation. The amendments do not dilute the objective of the Bill, nor do they place unreasonable burdens on government. They recognise that the success of this policy depends on continued collaboration and good will from the financial sector, and that is something that cannot be taken for granted if banks are expected to absorb ever-growing public responsibilities without recognition or recourse.
We have heard much today about partnership in tackling fraud, but partnership requires reciprocity; it means listening, engaging and sharing responsibility—not simply offloading it. These amendments are an invitation to government to show that they understand that principle and to embed it in the Bill.
Before I finish, I thank the noble Lord, Lord Verdirame, for pointing the potential inconsistency in Clause 19, between subsections (4) and (10). We would be interested to hear how that will operate. This is not a question of principle—
Baroness Anderson of Stoke-on-Trent (Lab)
Before the noble Baroness—I hope—withdraws her amendment, I need to clarify something, as I misunderstood the advice that I received from my Box. I need to apologise to the Committee and to make it very clear that there are penalties up to £300 a day that could be on banks —but it is more likely to be £300 under Clause 53, which is why we are working with them on guidance and why there are ongoing conversations.
Baroness Finn (Con)
I thank the Minister.
To conclude, these amendments are not on a question of principle, because we all support the purpose. It is a question of practicality and fairness and maintaining a constructive relationship between the state and the financial institutions on which it relies. I urge the Government carefully to reflect on that relationship and urge noble Lords to support the amendments in the interests of a Bill that is both effective and equitable. On that basis, I beg to withdraw.
Member's explanatory statement
This amendment means that a regular direct deduction order given by the Minister for the Cabinet Office must specify the amounts to be deducted.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, these amendments all relate to the determination of deduction amounts for regular direct deduction orders. Government Amendments 35, 36 and 37 amend Clause 23 to ensure that a regular direct deduction order from the Public Sector Fraud Authority must specify the amounts to be deducted. Government Amendment 43 is a consequential amendment to Clause 26.
Government Amendments 110, 111, 112 and 115 make an equivalent amendment for regular direct deduction orders issued by the DWP under Schedule 5 to ensure that the order must specify the amount to be deducted. These amendments arise from the continued engagement that we are having with representatives of the finance industry, as I said in the last group, and seek to address their concerns.
In this case, concerns were raised that the Bill potentially placed an unnecessary decision-making responsibility on banks and financial institutions—specifically, a duty that they may be required to provide or make a calculation of the amount to be deducted when receiving a regular direct deduction order. They requested that we remove these implied duties if it was the Government’s intent to always specify amounts to be deducted. As this is the intent of the PSFA and the DWP, we agree with the proposed suggestion to remove the references to calculations and make it explicit that government should always specify the deduction amount. These amendments achieve that under both parts of the Bill, address this concern and clarify the duties on the banks when making a regular direct deduction. I therefore beg to move the amendments tabled in the name of my noble friend Lady Sherlock.
Baroness Finn (Con)
My Lords, the government amendments in this group are in principle welcome. They sensibly seek to simplify deduction orders and ease the operational burden they place on banks—which, let us be clear, are intimately involved in enabling the exercise of the provisions in the Bill. However, the real issue here is not with the content of the amendments but with the process that led to their necessity. These changes are not minor corrections, nor are they are clarifications. They alter the way in which deduction orders function and work operationally. They exist because the Government have belatedly taken on board feedback from banks and financial institutions—institutions that clearly, and surprisingly, were not properly consulted before the Bill was introduced. As I said in the debate on the previous group, this raises serious concern about how the Bill is being developed.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I appreciate the points raised by the noble Baroness, Lady Finn, specifically her questions as to why calculations for DDOs are in the Bill in the first place and why the need for this change did not come to light earlier. Referencing calculations is established practice in the context of employers making calculations for deduction from earnings orders, hence the drafting reflected here for direct deduction orders. Continued engagement with the financial sector has covered an array of content related to the Bill. As we have moved to discuss implementation, any issues raised have been considered and, where appropriate, acted on by officials in order to smooth the implementation of the powers.
This Government have been engaging extensively with the financial sector. It requested that we remove references to banks calculating amounts to be deducted through a regular DDO. This is because the banks felt that it would create an excessive burden that gave them too much responsibility for making decisions regarding deduction amounts. Utilising the deduction order information notices, the PSFA will already have a fuller understanding than the bank of the liable person’s total financial affairs. Along with its obligation to ensure that deductions are fair and affordable, it is right that the PSFA determines what the deductions will be, and it provides another safeguard. I therefore hope that your Lordships will support these amendments. I commend them to the Committee.
Member’s explanatory statement
This amendment is consequential on my amendment to clause 23, page 15, line 3.
Member’s explanatory statement
This amendment means that a lump sum direct deduction order given by the Minister for the Cabinet Office must specify the amount to be deducted.
Member's explanatory statement
This amendment, together with my other amendments to clauses 26 and 27 to the same effect, would replace the tag “first notice” with “pre-deduction notice”. This has no substantive effect but is intended to be easier to understand.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, this next group of government amendments seeks to bring further clarity to the process of engaging with banks on direct deduction orders. Government Amendments 41, 42, 44, 45, 47, 48, 49, 113, 114 and 116 seek to clarify the purpose of the previously named “first notice” by renaming it a “pre-deduction notice” for the PSFA and the DWP respectively. It is just changing the name, nothing more. These minor and technical amendments reflect that the Government are acting in response to feedback from the banking sector about the description of notices. It felt that the naming was confusing, so we have changed it. We appreciate the sector’s engagement.
Similarly, government Amendments 106, 107, 108 and 118 follow on from feedback from the sector for greater clarity on the approach to the issue and subsequent processing of the notices, and make the application of the powers easier for financial institutions to understand. They support the intention that all relevant parties impacted by the debt powers of the Bill are correctly notified of the action to be taken. I beg to move.
Baroness Finn (Con)
It is great to be having a dialogue with the noble Baroness. We welcome the Government’s amendments in this group which, taken together, amount to a series of technical clarifications and improvements to the Bill. As the noble Baroness said, they do not fundamentally alter the policy intent, but they help to tighten its operation, provide greater clarity and ensure that the provisions are more workable in practice. We broadly support these amendments and will not oppose their inclusion.
However, I note that even so-called technical amendments can have material consequences for those tasked with delivering the measures in the Bill—whether public bodies, private firms or individuals. It is important that any changes, however minor they may appear, are properly explained and fully understood by those affected.
I also take this opportunity to remind the Committee that, when a Bill is heavily reliant on secondary legislation and technical detail, as this one is, we must be especially vigilant in making sure that these fine-tuning amendments do not obscure bigger questions of transparency, proportionality and accountability. We will continue to keep a close eye on those issues as the Bill progresses. So, while we support this group of amendments, we urge the Government to maintain the spirit of openness and collaboration that they have shown so far as further changes inevitably arise, and to ensure that the cumulative impact of even minor adjustments is properly assessed. With that said, we are content to support these amendments.
Baroness Anderson of Stoke-on-Trent (Lab)
I take this opportunity to thank the noble Baroness, Lady Finn, for both her engagement and support for this group of amendments and her wider engagement on the Bill.
While these amendments alone are relatively minor, together they reflect the importance of the ongoing consultation with key stakeholders, which is intrinsically linked with a desire to ensure that the legislation is as clear, precise and straightforward to implement as possible. The PSFA has consulted departments, public bodies, academics and non-public sector groups over many years of policy work to identify and resolve gaps in debt management powers across government. The PSFA has continued to work with stakeholders to consult on these powers as they go through Parliament and is committed to continuing to do so during implementation. We have listened directly to feedback raised by the financial sector and are taking the steps necessary to bring the clarity it seeks. I therefore hope that your Lordships will support these amendments.
Viscount Younger of Leckie (Con)
In support of my noble friend Lady Finn and in the spirit of agreeing with what is going on, I just want to ask a probing question of the Minister that is perhaps a little unfair. As we have noticed, there are a number of government amendments here and there is work in progress. The agreement between the Government and the banks continues. Does she have any idea when this will end? In other words, as Committee progresses, should we expect further government amendments as the banks and the Government work together to nail down the detail of agreements concerning the Public Sector Fraud Authority and the Department for Work and Pensions?
Baroness Anderson of Stoke-on-Trent (Lab)
I thank the noble Viscount. I feel like these may be famous last words, but I am assured that we hope not to table any more government amendments in Committee.
Member's explanatory statement
See the explanatory statement for my amendment to clause 26, page 16, line 14.
Member's explanatory statement
This amendment is consequential on my amendments to clause 23, page 15, line 3 and clause 23, page 15, line 11.
Member's explanatory statement
See the explanatory statement for my amendment to clause 26, page 16, line 14.
Member's explanatory statement
See the explanatory statement for my amendment to clause 26, page 16, line 14.
Member's explanatory statement
See the explanatory statement for my amendment inserting a new clause after clause 36.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, we recognise that there can be extenuating and difficult circumstances where someone has to take over another’s personal and financial affairs, such as making a power of attorney. Government Amendments 46, 61 and 121 clarify the role of a legal deputy with regard to the direct deduction order provisions for the PSFA and the DWP. These amendments follow our ongoing engagement with the financial services sector, which sought clarity as to how it would carry out a direct deduction order where a legal deputy has been put in place. We have benefited from the operational insight of the banks and have tabled this amendment to ease the operationalisation of the recovery powers.
Government Amendment 61 inserts an additional clause after Clause 36 to ensure that the provisions about direct deduction orders in Part 1 operate effectively where a person acts on behalf of an account holder by virtue of a power of attorney or as a court-appointed deputy. The amendment has the effect that any direct deduction order provisions and requirements have to be carried out by any legal deputies of the liable person, ensuring that recovery action can still proceed effectively.
Government Amendment 46 is a consequential amendment to ensure that the restrictions to prevent someone frustrating the direct deduction order will also apply to a person acting on behalf of an account holder.
Government Amendment 121 makes equivalent provision for the DWP as government Amendment 61 does for the PSFA. This brings clarity to the financial institutions that have to deal with deputies. It also brings protections to the liable person, ensuring that they are not unfairly given a non-compliance penalty if it is in fact their legal deputy who is not engaging with us on repayment or attempting to frustrate a deduction order. I beg to move.
Baroness Finn (Con)
My Lords, we welcome the Government’s amendment to make provision for cases where an individual with liability under the Bill has a person with power of attorney appointed to act on their behalf. This is a pragmatic step recognising that in some circumstances an individual may not be capable of handling their own financial affairs, whether due to age, illness or incapacity, and that there must be a clear legal route for compliance and communication to proceed.
It is right that, despite these circumstances, we should continue to recover public money that has been gained through fraud, given that adequate safeguards are in check, which I and my noble friend Lord Younger will address later in Committee. We therefore support the principle behind this amendment. It brings a degree of clarity and certainty to what could otherwise be a difficult area and ensures that the processes set out in the Bill can still function effectively when a liable person is not acting for themselves.
However, we wish to raise a concern which we hope the Minister can provide reassurance on. While this amendment provides for cases where a power of attorney exists, it does not appear to make provision for what happens when no such power is in place. In reality, there will be vulnerable individuals who may not have granted a power of attorney and who may also lack the capacity to manage their affairs independently.
In such cases, how will the provisions about direct deduction orders, as set out in Part 1, continue to operate effectively? Who is to be regarded as liable under the provisions in the Bill? Who will be entitled to challenge a notice or a penalty? Without a mechanism to address this situation, there is a risk that enforcement could falter—or worse, that it could proceed inappropriately without proper safeguards in place for the individual concerned.
We would therefore welcome the Government’s thoughts on how such cases will be handled in practice and whether there are plans to issue guidance or put in place safeguards to ensure that vulnerable individuals without formal representation are not unfairly affected by the processes introduced by this Bill.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I thank the noble Baroness, Lady Finn, for raising those specifics and for the collegiate nature of her contribution, giving me enough time to get the appropriate reassurances from my colleagues. I also thank her because we have not yet really discussed the vulnerability protections that are in place, and this gives us an opportunity to do so. As we progress through Committee, there will be many opportunities to discuss this, but I welcome the opportunity to provide some level of reassurance now.
Existing government standards on vulnerability, such as His Majesty’s Government’s debt management vulnerability toolkit, will be utilised by the PSFA. Vulnerability assessments will be carried out at the start of each investigation. These will review any evidence of financial, social or personal vulnerability and then determine how best to engage with the personal impact and subsequent enforcement action. Vulnerability will be kept under regular review as a case progresses and the vulnerability assessment will be regularly updated. During debt resolution, the liable individual will have additional opportunities to identify vulnerabilities. Debt resolution policy will take vulnerable customers into account and there will be a range of adaptations and forbearances on offer to support them. We will publish further guidance on this issue related to vulnerabilities.
These amendments resulted from direct engagement with the finance sector. We have been keen to seek its insight on how to use these powers and to table amendments that bring clarity to its roles. However, these amendments also ensure that those who act as a legal deputy on behalf of an account holder must adhere to the terms of any deduction order put in place. They set out clear obligations for them and put protections in place for the liable person whose affairs are being looked after by such a deputy. I hope your Lordships will support these amendments.
Member's explanatory statement
See the explanatory statement for my amendment to clause 26, page 16, line 14.
Member's explanatory statement
See the explanatory statement for my amendment to clause 26, page 16, line 14.
Member's explanatory statement
See the explanatory statement for my amendment to clause 26, page 16, line 14.
Member's explanatory statement
This amendment removes an unnecessary requirement to seek representations from account holders before a direct deduction order is varied in circumstances where their consent is required in any event.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I turn to a group of amendments designed to remove duplication and bring greater clarity to certain parts of the debt recovery powers for the PSFA and the DWP.
Government Amendment 51 seeks to simplify drafting by removing an unnecessary requirement for the PSFA to seek representations on an application to vary a deduction order where, in order to make such a request, all account holders must have already consented. Government Amendments 52 and 117 seek to leave out redundant subsections to remove duplication. The subsections referenced outline that a bank must comply with a varied direct deduction order as per Clause 23(5) for the PSFA or new paragraph 7(5) in Schedule 5 for the DWP. However, Clause 23(5) and new paragraph 7(5) already state that a bank must comply with every direct deduction order. Government Amendments 98 and 99 remove unnecessary references to a payment or credit in Clause 85, both of which are within the relevant definition of “benefit” already as a result of Section 121DA(5) of the Social Security Administration Act 1992.
These amendments will help make the Bill as clear as possible, which I trust is welcomed by your Lordships’ Committee. I beg to move Amendment 51 tabled in the name of my noble friend Lady Sherlock.
Baroness Finn (Con)
My Lords, I will speak very briefly on this group of government amendments which make a number of technical and definitional clarifications to the Bill. We on these Benches broadly support the changes in this group. These amendments serve an important purpose in tightening the language of the Bill and ensuring that the provisions are legally coherent, internally consistent and practically operable. We recognise the importance of ensuring that statutory language is as clear and precise as possible, not only for those who will be responsible for implementing these powers but also for those who may be subject to them.
In some cases, these amendments address minor inconsistencies in wording; in others they bring greater alignment between different parts of the Bill or between this Bill and the existing legislation. These are the kinds of technical improvements that are important to ensure that legislation operates as intended and we welcome the Government’s attention to detail in this regard. It is, of course, always preferable for such clarifications to be made earlier in the process—sorry to spoil it; it was getting too friendly—but we appreciate that, particularly in complex Bills such as this one, a certain amount of refinement is inevitable as the provisions are examined more closely by Parliament.
While there is no need to dwell at length on what are by nature technical changes, we support the amendments in this group and are pleased to see the Bill improved through their inclusion.
Baroness Anderson of Stoke-on-Trent (Lab)
I thank the noble Baroness, Lady Finn. I simply end by stating again that the effect of these amendments is to clarify the drafting and remove redundant drafting that is already provided for. It is important that we have clear and precise legislation to aid implementation of these powers, all of which will be used to tackle the scourge of fraud against the public sector. Therefore, I hope noble Lords will provide their support to these amendments.
Member's explanatory statement
This amendment removes a provision that is redundant (because section 23(5) applies in relation to every direct deduction order).
Baroness Finn
Member's explanatory statement
This amendment would ensure reviews of decisions to make a direct deduction order are undertaken by an independent person.
Baroness Finn (Con)
My Lords, our amendments in this group seek to address an important point—the feedback loop which exists in the review mechanism for direct deduction orders. We believe that in order to have a legitimate review of a decision the review pathway has to be independent from the office which made the initial decision. We need to make sure that adequate checks and safeguards are in place so that the exercise of the powers under this Bill are both effective and fair. This is not only important from a political or constitutional perspective; it is the only way that we will create a legitimate and trusted system to combat fraud.
In practical terms, the Bill means that if a person affected by a direct deduction order or a joint account holder wishes to challenge that decision, the case is sent back to the very department that made it. This is not how we build confidence in public institutions nor how we meet the standards of fairness the public expect. This is, in essence, a legal framework which allows the Cabinet Office to mark its own homework. As the Government have made clear, the PSFA will remain a very small team for the foreseeable future. Under the system currently proposed in the Bill, close colleagues will be reviewing one another’s decisions. It is natural that one should expect this process to be independent but, based on the Government’s proposal before us, this can never be the case.
We on these Benches consider it an impossibility that a review system set up in the way the Government have set out can inspire confidence and hence command legitimacy. We have therefore tabled amendments in this group to give the Government the opportunity both to make these changes and to make the Bill operate with greater effectiveness and legitimacy.
Our Amendment 56 would compel the Minister to appoint an independent person to undertake a review of a decision when an application for a review is made. This amendment addresses the heart of our concern that, on receiving an application for review, the Cabinet Office should appoint an independent person to review what the Cabinet Office has decided. It should not be the case that the Cabinet Office reviews what the Cabinet Office has decided.
In our view, this is a common-sense amendment rooted not in politics but in principle. It reflects a widely accepted and fundamental tenet of good governance: those who exercise power should not also be the final arbiters of whether that power was exercised lawfully or fairly. Independent review is not a novel concept; nor is it controversial. To embed this principle here would be not radical but responsible—and it is essential if the Government hope to build public confidence in a new, far-reaching enforcement mechanism.
Building on that, our Amendments 57 and 58 would permit the independent person to reach a decision as to whether a direct deduction order should be upheld, varied or revoked. These amendments do not seek to hand the power to implement these decisions to the independent person; rather, they would ensure that they can make a determination on one of these three outcomes, which they must then communicate to the Minister, who must then share it with the applicant. We are not seeking to create a rival executive power or trying to strip the Cabinet Office of its authority. We are proposing a balance: the Government would retain ultimate responsibility, but that responsibility would be exercised in the light of a fair and independent review, not an internal second glance.
These amendments would ensure not only that the review process was made independent from the organisation that made the original determination but that the applicant would have sight of the decision that was reached by the independent person in relation to their case. This mechanism would ensure not only that the Minister, with their respective lines of accountability to Parliament, would maintain the power to implement a decision but that reviews of their actions would be truly independent and accessible to the liable person or joint account holder. Ensuring that the sweeping powers provided for in the Bill have proper, independent oversight mechanisms is fundamental to making sure that we balance the imperative of combating fraud with our responsibility to wield these powers proportionately and fairly. People must be assured that they can make a request for a review that will be independent and fair. This is the only way in which we can garner trust and create a system that is truly legitimate in the exercise of its powers.
Finally, our Amendment 59 sets out a proposal for how such an independent reviewer could be constituted as part of the Bill. As is made clear in proposed new subsection (2), the nominees for appointment to the position of the independent reviewer must, or should, undergo a pre-appointment hearing before the Public Accounts Committee; this would build in some accountability to Parliament ahead of the final appointment being made.
I emphasise that, although this amendment sets out just one vision of how the independent reviewer post could be formed, it speaks fundamentally in support of our view that the review mechanism built into the Bill must be independent of the Cabinet Office. The review process has the potential to impact significantly on how a deduction order is applied to a liable person or a relevant joint account holder. It is important that the process for review is effective, legitimate, independent and fair. The only way we can see this being achieved is through the incorporation of an independent review mechanism, a proposal for which we have set out in this group of amendments—Amendment 59 in particular.
Ensuring that liable parties can be assured of a fair review is a duty that we owe to those over whom Cabinet Office officials are exercising these powers. Providing a review process that relates back to the original body that made the decision is inadequate and, in our view, does not fulfil the obligation to provide effective avenues of appeal and redress. We must always remember that a person affected by a direct deduction order may have legitimate grounds to request a review of the decision. They deserve to know that, if they do so, they will be heard not by the same body that sanctioned them but by someone who is genuinely independent, impartial and fair.
The Government have argued that the powers in this Bill are necessary to tackle public sector fraud, but powers without independent scrutiny are at risk of creating overreach. If we are asking the public to accept strong measures in the name of fraud prevention, we must also guarantee that those measures will be exercised with proportion, accountability and justice. To allow the Cabinet Office to be judge and jury in its own cause does not meet that test. Our amendments, therefore, offer a sensible solution. They provide a pathway to restore confidence in the process—a pathway to fairness, legitimacy and the rule of law. I urge the Government to adopt them, and I urge noble Lords to support them. I beg to move.
Baroness Fox of Buckley (Non-Afl)
My Lords, I welcome the spirit of this group of amendments. I am not clear that I understand entirely how the independent review process might work, but I do understand the importance of having an independent review process; the case for this was made convincingly by the noble Baroness, Lady Finn.
Despite the fact that we are whizzing through these amendments at great speed, I do not think that it would be right to underestimate the huge amount of power that this Bill gives the Cabinet Office. There appears to be an atmosphere of consensual camaraderie, which it is pleasant to be involved in—it may be an atmosphere I am less used to—but I emphasise the amount of concern outside this Committee about the implications of this Bill. The people who are concerned are not all hucksters or fraudsters: they are ordinary people who have genuine fears around the possibilities of the absolutely unintended consequences of the Bill if we do not have adequate safeguards. So I am keen on anything that strengthens safeguards.
I hope, therefore, that the Government will consider these amendments seriously. I think that they are very helpful. I am particularly keen, of course, on the idea that liable persons, as they are described, deserve to have somewhere they can go to make an appeal. They deserve to know, as was suggested, that, if they have legitimate concerns, they will be heard. So much of what appears to be in this Bill happens behind the backs of liable persons, which creates an atmosphere of fear, suspicion and nervousness.
I do not think that people are just being paranoid here. Consider—this has been mentioned before and will no doubt come up again—the Horizon scandal. There is nothing more frustrating than feeling as though you have been treated badly somehow but you do not know where to go. You have nowhere to appeal to. It may be that you have a perfectly legitimate explanation for something. What we saw in Horizon was “computer says no”. What we could have here is the Cabinet Office, which has just imposed something on you, not taking any notice if you should go and complain. That is a very important part of this: people deserve to know that their concerns can be heard, and so on.
There is a danger in this discussion sometimes. I fear that, if one raises concerns about this Bill, there will be an inference that one is not taking fraud seriously. That is absolutely not the case. I have constantly made the point, for example, that I worry about the conflation of error and fraud. This does not mean to say, though, that, where there is genuine fraud, we should not want to clamp down on it as hard as we can.
But it is also fair enough that we need to have a system in which there is public confidence. To clamp down on fraudulent activity, we need a watertight, safeguarded Bill that targets fraud and does not pick up any number of non-fraudulent issues, which will undermine public confidence. The intention of these amendments is to help enhance public confidence that there is a mechanism through which an independent body can review a process that could be corrupted inadvertently by a department having the capacity to mark its own homework, and, in that instance, not always see the wood for the trees when people raise concerns.
Lord Verdirame (Non-Afl)
My Lords, I, too, have a few comments to make on these amendments. I very much support the intention behind them. I would like to understand a bit more about Clause 34 and how it will operate. Paragraph 219 of the Explanatory Notes says:
“This clause introduces a process for review of deduction orders by an authorised officer of a higher grade than the original decision maker upon application by relevant parties”.
As far as I can see, there is no mention in the legislative text of the authorised officer who conducts the review being of a higher grade. Perhaps I have missed it, and it is somewhere else; if so, I would be grateful to know where. If it is not somewhere else, it may be that the Explanatory Notes made that point on the basis of general principles of administrative law. Either way, it would be useful to know where that comes from.
My second point concerns the grounds for review, which are very narrow. Clause 34(4) says:
“An application for a review under this section may not be made on, or include, any ground relating to the existence or amount of a payable amount (unless the amount is said to be incorrectly stated in the order)”.
The grounds for appeal in the following clause are equally narrow. Is my understanding correct that the reason these grounds are so narrowly drawn is that there has already been a final determination of the payable amount by a court or tribunal—which was the reference to Clause 12 that we were given earlier on? Can the Minister give us some examples of grounds for review, given how narrowly drawn that provision is in Clause 34(4)?
Finally, I note that there is no time limit imposed on the Minister for carrying out the review. The applicant would have to put in an application within 28 days, but they might just sit and wait for the outcome of that review for an indefinite period. Would it not be a good idea to include a clear time limit on the reviewer—ideally the independent reviewer—or the authorised officer for that review to be concluded?
Lord Vaux of Harrowden (CB)
My Lords, I will say very briefly that I support the concept, at least, behind these amendments. It cannot be right that the Minister marks his own homework. The noble Lord, Lord Verdirame, talked about what it says in the guidance notes. I do not know whether this is the right mechanism but, at the very least, if a review is to be carried out by the department, it must be by somebody who was not at all involved in the original decision and is not answerable to anybody directly involved in the decision-making process. That needs to be set in stone somewhere, not just in guidance notes or whatever that can be changed at a whim by any future Government. This is one of the weaknesses throughout this. We have lots of safeguards, but they are all in codes of conduct, future statutory instruments or whatever; they are not set in stone in the law and therefore are not strong safeguards. That is a general thought.
I have a feeling that I know what the answer will be: if they do not like the outcome of the review, they can go to the First-tier Tribunal. But that is a big leap from going back and saying, “Can we have an independent review?”. A First-tier Tribunal is, effectively, a full legal process. We need something that works and in which people can have confidence at the first level, before needing to take it to the much more legalistic, costly and complicated process of the First-tier Tribunal. I think the Minister will say that that is the answer, but I am not sure that I agree.
Lord Palmer of Childs Hill (LD)
This is a popular set of amendments. I agree entirely that there should be an independent review. That is something that somehow has to be in the Bill. What worries me about the noble Baroness’s amendments is that they talk about an “independent person”. Those are the words in the amendment. An independent person is somewhat different from an independent review. I can see a wonderful job opportunity in having panels of independent persons who could be available to be appointed.
During the debate on this Bill, one has somehow to put flesh on the concept of an independent review, how it is set up and how people can make their complaints. One of the real problems of modern life is that, if you want to make a complaint, you have to be able to do it on a computer and use IT. Is there going to be a process whereby you do this in a letter form in some way or another? These amendments, in seeking to put right the lack of an independent review, latch on too closely to the concept of an independent person, which in my view is completely different.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I have lots of bits of paper, and they are all written in my handwriting, which means that it will be even harder for me to read them—so bear with me.
Amendments 56, 57, 58 and 59 would establish a new body with responsibility to conduct reviews of direct deduction order decisions. Under the current drafting, internal reviews can be requested to challenge, for instance, whether a direct deduction order is the most appropriate form of repayment or whether the deduction amount is fair and affordable. Internal reviews are important, as they provide a straightforward and affordable way for the liable person to present a challenge to direct deduction order decision-making. They are an impartial element of many review processes. Indeed, if we turn to cross-government precedence, we can look at Child Maintenance Service and HMRC deduction orders. Both of these include an internal review stage without necessitating the creation of another new body.
For DDO reviews, the reviewing officer will be a trained authorised officer of a higher grade than the original decision-maker. To answer the noble Lord, Lord Verdirame, that is in Clause 66(3) of the Bill. They would not have been involved in this case until a review had been requested. They may decide to uphold, vary or revoke the direct deduction order. This decision will be based on an assessment of the material held and any relevant new information provided by the liable person.
To reassure the Committee, as the noble Lord, Lord Vaux, anticipated, if the liable person disagrees with their decision, there are further appeal rights through the First-tier Tribunal. We specified the First-tier Tribunal for ease of access; no costs are awarded, and there is quick access to justice. We believe that that is a responsible option.
We believe that the amendments are duplicative, as there is already the right to independent review built into the legislation. Also, the proposals outlined in the Bill would not require the extra costs or resources that the application of these amendments would. I highlight Clause 64, which already creates the role of an independent person, who will have the responsibility of reviewing how the PSFA are using the powers and whether this is being done correctly, ensuring another layer of independence and safeguard.
On some of the specific questions, Clause 35 outlines the appeal process. The liable person can make representations before the DDO and then make appeals to vary the terms throughout engagement.
The noble Lord, Lord Verdirame, asked why the liable person cannot challenge the amount owed in the internal review. That was not quite his question, but this is the answer I have. All reviewing appeal options will clearly be signposted to the liable person throughout our interactions with them; the liable person will already have had opportunities to challenge the amount owed, either as a result of fraud, error or the application of a penalty, in the relevant court or tribunal proceedings. We believe that that provides more than ample opportunity to challenge.
While we want to let people present their positions, we also do not want them to be allowed to excessively frustrate the recovery process and cause unwanted delay in the return of vital funds.
Baroness Fox of Buckley (Non-Afl)
Maybe I should just clarify. I am not suggesting that the Cabinet Office is full of malign people out to behave badly, and I was not suggesting that they all need to be punished. I was more suggesting that the reason why it would be useful to have an independent review body was for exactly the reasons that fellow noble Lords have pointed out—that if people wish to challenge decisions that are made, it is very important they feel they can go to a body where they will not necessarily be working directly with the people who made the original decision, as has been described. No one is suggesting that there is an evil, scheming group there.
The comparison with the Horizon scandal that I was trying to make was about the sense of intimidation and fear when someone feels that they have been wrongly treated, then when they appeal or try and go to a body to sort it out and it ends up being the same people who punished them in the first place. Maybe I misspoke before, but it is this that I am concerned about—so I would like this independent review body to exist so that those who are liable have somewhere independent to appeal to, straightforwardly.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, in response to the noble Baroness, I state that there is the First-tier Tribunal opportunity, in terms of there being an independent process to go to. That is why we have put in place the additional safeguards with regard to the independent person who will be appointed to review all cases at their discretion, not at that of the Cabinet Office, as well as HMICFRS—so there is someone who has oversight. That is also why we are making ourselves subject to the IOPC for matters of complaints, as outlined in the Bill.
The noble Baroness raises a very important point about Horizon. I assure noble Lords that the Horizon scandal and how we ensure that it is not repeated has been central to this Government’s thinking on safeguarding. In light of the seriousness of events, the Government wish to proactively ensure the highest levels of oversight in new legislation, and that is why they exist in this Bill.
With regard to one of the points raised by the noble Baroness, Lady Finn, on the appointment of the independent person subject to a parliamentary pre-appointment hearing, the Government cannot commit to this at this stage. Cabinet Office guidance states that it should be discussed between the relevant Secretary of State and the chair of the relevant Select Committee. The Government want to make sure that the independent person is demonstrably independent and are exploring all available routes to achieve that. I hope that we will be able to discuss that further in due course, but with these explanations I hope that I have reassured noble Lords and that therefore they will not press their amendments.
Viscount Younger of Leckie (Con)
I just wanted a bit more clarity in terms of the Child Maintenance Service, which she alluded to. My understanding is that, if there is a problem with cases looked at by the CMS, they go up to a different level to ICE—the independent case examiner—and complaints are reviewed.
I am a little bit confused as to exactly what the Minister’s argument was. Backing up the argument from my noble friend Lady Finn, we are strongly looking for independence in the public sector. I was not quite sure whether the Minister was saying that it was okay because rather like the Child Maintenance Service there is an independence or if it is something else?
Baroness Anderson of Stoke-on-Trent (Lab)
I apologise if I was not clear. My point was that internal reviews are already a normal process within government. HMRC, the DWP and the Child Maintenance Service already adopt them.
Baroness Finn (Con)
I thank noble Lords and thank the Minister for her response. The noble Baroness, Lady Fox, may feel that this is consensual camaraderie. However, I can assure her that, while I am very grateful to the Ministers on the Bench opposite for their constructive engagement, I do not think there was very much consensual in what I said in my Second Reading speech on the powers of the Cabinet Office and various other parts of the Bill. I really did emphasise that I was very concerned about junior civil servants being granted sweeping powers, with the reviews and redress being carried out merely by a higher-grade official—the noble Lord, Lord Verdirame, made that point—within the same department and not by an external body. The concern has always been that the Cabinet Office is appointed as investigator, juror, judge and debt collector. The individual affected has limited power to challenge the decisions, and then only after the damage has been done. I have been very clear, I hope, on those concerns and will be clear as we carry on going through the Bill.
This debate has laid bare a crucial flaw at the heart of the Bill, one which speaks not just of good process but to the principle of fairness, accountability and trust in government. We cannot expect the public to accept that legitimate and fair review decisions as impactful as a direct deduction order can be undertaken by the same department that made the order the first place. Our amendments in this group offer a simple, reasonable and principled solution that, when a request for a review is made, that review must be carried out by an independent person or body.
I take the point made by the noble Lord, Lord Palmer, in this regard that we refer to an “independent person” but in Amendment 59 we refer to establishing a body to serve as an independent reviewer, so we are probing at the moment on how that might be set up, rather than being specific. The point is the independence of the body or the person. This should not be a colleague or a coworker and not someone in the same chain of command. No system of justice can command public confidence if it allows a single team to be judge and jury in its own cause.
Let us be clear. We are not seeking to tie the Government’s hands or strip departments of their operational roles; we are proposing a balanced and proportionate framework that keeps Ministers accountable to Parliament but ensures that the initial decision is subject to meaningful independent scrutiny. That is a safeguard for the individual and for the integrity of the system itself. This matters because the consequences of these powers will be real—they are sweeping powers, as I have repeatedly said—and immediate for the people affected. If those people are to have any confidence in the fairness of the system, they must know that their right to request a review is not simply a paper exercise. It is not good enough to say that this will be a small team and the risks are manageable. In fact, the small size of the PSFA makes the case for independence even stronger. Close colleagues reviewing each other’s decisions behind closed doors is a recipe not for fairness but for suspicion and mistrust.
Our amendments, particularly Amendment 56, place a simple duty on the Minister to appoint an independent person or body when a review is requested. Amendments 57 and 58 ensure that that person can reach a clear conclusion to uphold, vary or revoke the order and that the applicant is told what the decision is. Amendment 59 provides a model for how such a reviewer might be appointed, with proper parliamentary scrutiny.
If we truly believe in the legitimacy of these powers, we must also believe in the legitimacy of the mechanisms that hold them to account. A fair and independent review process is a necessity. This is not just a procedural issue; it is a test of whether this Government are serious about wielding these powers with proportionality, care and respect for the people over whom they are exercised. The public will not trust a system that allows the Cabinet Office to mark its own homework, and nor should they.
These amendments provide a path forward—a way to deliver a fraud prevention system that is strong but just, decisive but accountable, and both effective and legitimate. I urge the Minister to accept this principle of independence and to adopt these proposals or some version of them as important measures which would improve the system of review that the Government have presented. On that basis, I beg leave to withdraw.
(a) the period of 28 days beginning with the day after the day on which the person was notified of the outcome of the review, or(b) such longer period (if any) as the Tribunal considers reasonable in all the circumstances.”Member's explanatory statement
This amendment means that the tribunal can extend the time limit for bringing an appeal in relation to a direct deduction order of the Minister for the Cabinet Office.
Public Authorities (Fraud, Error and Recovery) Bill
Wednesday 11th June 2025
(2 weeks, 2 days ago)
Grand CommitteePublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 96-III Third marshalled list for Grand Committee - (10 Jun 2025)
Baroness Finn
Member’s explanatory statement
This would permit the applicant to request a review into the existence/value of the payable amount.
Baroness Finn (Con)
My Lords, our amendments in this group seek to strengthen the rights of the liable person in the review process, incorporate further consideration of the cost burden we are asking banks to shoulder and ensure that parliamentary scrutiny can be applied to any further changes the Minister makes by regulations to direct deduction orders. As has been the spirit of all our amendments, we have an ambition to work with the Government to make suggestions for improvement on the provisions they have set out. We believe that our amendments in this group are an effective way of ensuring that oversight, parliamentary accountability and collaboration with partners in the banking sector are made a firm part of the Bill, which will make it more effective in achieving our common aim.
Our Amendment 60A would leave out Clause 35(5). As noble Lords will know, Clause 35(5) as currently drafted restricts the ability of an applicant to request a review into the existence or value of the amount they are said to owe. This amendment seeks to remove that restriction and, in doing so, restore a basic principle of fairness and accountability in the administration of public funds.
It is an established principle of public law that individuals should have the right to challenge the basis of a financial demand made upon them by the state, not just how it is enforced but whether it is rightly due at all. Yet, as things stand, Clause 35(5) precludes that possibility. It denies the applicant the right to request a review of either the existence of the debt or the amount allegedly payable.
Let us consider the potential consequences of this. An individual could be told that they owe a significant sum without any meaningful opportunity to question the underlying calculation or whether the liability even exists. That is not the mark of a fair or just system. It may be argued that efficiency or administrative simplicity requires limits to review rights, but this must not come at the expense of natural justice.
In matters of financial liability, particularly when imposed by the state, a person must surely be entitled to ask, “Is this right? Is this fair? Can I see how this was calculated?” This amendment simply ensures that the door is not closed on those reasonable questions. Moreover, transparency and accountability benefit not only the individual but the public authority itself. The ability to request a review can act as a safeguard against error, build public trust and ensure that determinations are robust and evidence-based. It supports better administration, not weaker enforcement.
To summarise, this amendment does not seek to open the floodgates to frivolous challenges. It simply allows a person the right to question whether a debt exists and whether the amount is correct—rights that are fundamental in any fair system. I urge the Minister and noble colleagues to support this modest but important change.
Our Amendment 61A seeks to add proposed new subsection (2A) to Clause 37. The amendment is straightforward, modest in scope but essential in purpose. It would require that any regulations made by the Minister under subsections (1) and (2) which relate to the operation of direct deduction orders be accompanied by an impact assessment. This assessment would focus specifically on the projected cost and the operational capacity of the banks tasked with implementing these orders, and would require that this assessment be laid before Parliament.
The rationale for this amendment is simple: regulatory clarity, economic realism and operational accountability. When these powers are exercised through regulations, it is vital that that is done with clear regard for the third-party organisations that will be shouldering the cost. Banks and financial institutions play a crucial role in the administration of direct deduction orders, acting as the operational arm of the enforcement process. They must identify accounts, verify balances, execute deductions and respond to any errors or disputes. These are not trivial tasks. They involve significant back-office effort, compliance oversight, system changes and, crucially, legal liability.
I and noble Lords across the Committee made our thoughts and concerns on this matter clear at the previous Committee day earlier this week, although I should reiterate that we are asking banks to dedicate serious resources to undertake functions on behalf of the public sector. If we are asking banks to do this, we must commit to working with them, not despite them. Yet, under the current drafting of Clause 37, the Government are empowered to make potentially significant changes to the rules around these orders without any obligation to assess or disclose the impact those changes may have on the very institutions expected to carry them out. This amendment does not block those powers; it merely introduces a duty to consider and explain the consequences. In doing so, it reflects good regulatory practice and ensures Parliament can properly scrutinise whether such changes are proportionate, practical and economically viable.
Let us remember that unintended consequences are often the product of insufficient consultation and opaque regulation. Requiring an impact assessment is not burdensome red tape; it is a basic tool of sound policy-making. It gives banks the foresight they need to prepare and adapt their systems responsibly, and it gives Parliament and the public confidence that the Government have weighed the risks and costs before acting. To summarise, Amendment 61A is not about resisting enforcement or shielding account holders. It is about ensuring that the infrastructure behind enforcement is fit for purpose, and that the decisions taken in Whitehall do not create avoidable burdens in the banking system, which could ultimately impact consumers as well.
Finally, our Amendment 61B proposes the insertion of a new subsection (6A), requiring that the outcome of the consultations carried out under subsection (6) be laid before Parliament prior to the coming into force of any regulations made under Clause 37. This amendment seeks to strengthen parliamentary oversight and transparency in the regulatory process. Currently, Clause 37 allows for regulations to be made following consultation but does not explicitly require that the results or finding of those consultations be presented to Parliament before the regulations take effect. This risks creating a situation whereby Parliament and, by extension, the public have limited visibility into the views expressed by stakeholders during consultation and how those views have influenced the final regulatory decisions. The amendment would ensure that Parliament is fully informed of the consultation outcomes before regulations are implemented.
This is vital for several reasons. First, it supports the principle of accountability. Parliament should have the opportunity to scrutinise not only the content of new regulations but the process by which they were developed, including the concerns, evidence and recommendations raised by those consulted. Secondly, it promotes transparency. Stakeholders, including financial institutions, consumers and civil society, can see how their input has been considered and can hold the Government to account if the consultation appears to have been perfunctory or to have ignored key issues. Thirdly, this measure will encourage better-quality consultations by ensuring that the Government give proper weight to responses before finalising regulations. In short, this amendment is a commonsense safeguard to enhance democratic oversight, improve policy-making and build trust in the regulatory process concerning these important financial regulations.
These amendments collectively serve to reinforce fairness, transparency and accountability at every stage of the process, from ensuring individuals have the fundamental right to challenge financial liabilities to safeguarding that banks are neither overburdened nor overlooked, and guarantee that Parliament exercises proper scrutiny over any regulatory changes. The amendments embody a commitment to responsible governance and collaboration with all parties involved and improve the Bill’s effectiveness in delivering its goals while protecting the rights of those affected. I respectfully urge all noble Lords to support these sensible and necessary amendments so that this legislation can proceed, strengthened by clarity, oversight and justice. I beg to move.
Baroness Coffey (Con)
My Lords, I support my noble friend Lady Finn, particularly on Amendment 60A, because as we go through this process it feels as though the Government are trying to be judge and jury on whether the existence of an order should apply at all. I am conscious that it is important that the Government be allowed to get on and have this more straightforward way of collecting money that they are due, but it strikes me as pretty draconian that the question of whether a debt exists cannot be challenged—it cannot go for review. I appreciate we are debating the amendment, but I say by the way, in reference to the Explanatory Notes for Clause 34 on the process for review, that the legislation does not point to the fact that it is supposed to go to a higher-grade person; I am sure that it will be set out in guidance, which I hope will have statutory standing. It strikes me as odd that, having not been able to even challenge whether the order should exist, you cannot go to a tribunal about it, either. Ministers will know that I wish that parts of the Bill would go further in trying to get money back from people in a variety of ways, but in this area I do not agree with the approach of the Government and certainly agree with that of my noble friend.
Lord Vaux of Harrowden (CB)
My Lords, I was not going to speak on this group, but, as the noble Baroness, Lady Anderson, proved the other day, Amendment 60A is not necessary because Clause 12 sets out clearly that these orders can be used only where there has been a final determination of the amount owing by the court or where it has been agreed.
However, I support Amendment 61A. Frankly, it is becoming a bit of a weakness in an awful lot of areas that the impact assessments that come with legislation are regularly quite poor. It is incredibly important that, when we make regulations that will have impacts on people, we understand what those impacts are.
I have one other question that I probably should have dealt with by means of an amendment, but I have only just spotted something. Why are regulations made under Clauses 37(2)(c) to (f) subject to the negative procedure and not the affirmative procedure?
Lord Palmer of Childs Hill (LD)
My Lords, the amendments tabled by the noble Baroness, Lady Finn, and the noble Viscount, Lord Younger of Leckie, raise important considerations about procedural fairness and transparency in the implementation of the Bill. Amendment 60A, which would allow applicants to request a review into the existence or value of the payable amount, would provide a valuable safeguard, ensuring that individuals have an accessible means to challenge decisions where there might be uncertainty or dispute. This aligns well with the principle of natural justice and could help prevent errors going uncorrected.
Amendments 61A and 61B focus on the mechanisms surrounding direct deduction orders, emphasising the need for accountability and parliamentary oversight. Requiring an impact assessment to accompany any changes to the processing of these orders, as proposed in Amendment 61A, would encourage transparency about the potential costs and effects on banks’ operational capacity. Similarly, Amendment 61B’s provision that consultation outcomes must be laid before Parliament prior to implementation would ensure democratic scrutiny. Together, these amendments would contribute to a more open and considered approach, balancing the efficient recovery of public funds with the need for oversight and due process, and I support them.
Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)
My Lords, this has been a helpful and constructive debate. I shall just clarify some points that have been made and respond directly to some of the questions. I think I can answer them all; if not, I will reflect on Hansard.
Amendment 60A would enable the liable person to appeal against the existence and value of what they owe as a result of fraud or error as part of the appeal process for direct deduction orders. I remind noble Lords that direct deduction orders are used only if a liable person has opted not to come to the table and negotiate. This is not the first way in which we would have engaged; it is at the end of a process.
Baroness Finn (Con)
I thank the Minister for her response. As we draw this discussion to a close, I will return to the core principles that underpin the amendments: fairness, accountability and proper parliamentary scrutiny. We are dealing here with significant powers that affect people’s financial lives and impose responsibilities on third-party institutions. They must, at all times, be exercised with care and transparency. These amendments are about balance—ensuring the systems that we design to serve the public also protect the public.
Amendment 60A restores a basic yet essential right to question whether the debt exists and whether the amount is correct. However, I take note of the comments from the noble Lord, Lord Vaux, that this is potentially duplicative.
The Minister referred to Clause 66 and the authorised officer of a higher grade carrying out a review. The clause does not stipulate the level of the higher-grade official. I know that that is possibly nitpicking, but I think that it is still relevant.
Amendment 61A asks that, when regulatory powers are used to place operational burdens on banks, those impacts are first assessed and made transparent. It is a modest ask, but an important one. Banks are not silent agents of the state; they are commercial entities with obligations to their customers and regulators. As such, they deserve clarity, predictability and due regard from the institutions asking them to take on these roles. I disagree with the Minister that this is duplicatory, as the consultations with the banks are still ongoing. Therefore, we cannot say that we have reached any firm conclusions on what is going on.
Amendment 61B ensures that consultation is not merely a procedural check box but a meaningful process, the outcomes of which inform Parliament and shape decision-making. If we are to legislate well, we must know not just what is proposed but what has been heard and how that has shaped the result.
Together these amendments promote a better Bill that is robust, yet fair, efficient and accountable. They do not add unnecessary bureaucracy; they add safeguards. I end where I began—in the spirit of constructive improvement. These are reasonable, carefully framed proposals that aim to strengthen the legislation, not frustrate it. I hope that the Minister will reflect on them with that spirit in mind, and I urge the Committee to support the principle of these amendments as practical measures to ensure that the Bill works not just in form but in fairness. On that basis, I beg leave to withdraw.
“Deputies(1) This section applies where a person (a “deputy”) acts on behalf of an account holder (including a liable person) in relation to their account by virtue of—(a) a power of attorney, or(b) an appointment by, or an order of, a court.(2) The following provisions apply in relation to the deputy of the account holder as they apply in relation to the account holder—(a) section 17(7);(b) section 19(5)(b) and (c);(c) section 19(9);(d) section 19(9A);(e) section 21;(f) section 26(1);(g) section 28;(h) section 29(3), (6) and (8)(b);(i) section 30(3);(j) section 31(3);(k) section 32(2);(l) section 34;(m) section 35.(3) Section 29(7)(a) and (b) applies in relation to the deputy of the account holder instead of the account holder.”Member's explanatory statement
This new clause, together with my amendment to clause 27, page 17, line 12, ensures that the provisions about direct deduction orders in Part 1 of the Bill operate effectively where a person acts on behalf of an account holder by virtue of a power of attorney or an appointment by, or an order of, a court.
Baroness Finn
“(4A) The decision reached by the Minister under subsection (4) must be communicated to the liable person, with the reason given by the Minister provided in writing, as soon as is practicable.”Member’s explanatory statement
This would ensure that the liable person is provided with the outcome of the review of their representations by the Minister in writing.
Baroness Finn (Con)
My Lords, the amendments that we have tabled in this group seek to ensure greater clarity and communication between the liable person and the Cabinet Office; to ensure that costs are determined in conjunction with those who actually incur them; and to ensure that a suspended deduction order cannot be restarted over an unlimited period. These are principles that we outlined and argued for in our previous day in Committee, but they are important maxims and the only way in which we can construct in the Bill a system in which the public can trust.
Our Amendment 61C to Clause 40 seeks to insert proposed new subsection (4A), which would require that any
“decision reached by the Minister under subsection (4) must be communicated to the liable person … in writing”,
along with the reasoning for that decision. It would also require this to be done
“as soon as is practicable”.
This is a modest but important amendment. It would not alter the substance of the powers contained in Clause 40, nor would it constrain the Minister’s discretion. What it would do is place a clear duty of communication and explanation on the Minister once a determination has been made, ensuring that the person subject to that decision is properly and promptly informed.
This is not merely an administrative nicety; it is a matter of basic procedural fairness. If a person has exercised their right to make representations in response to enforcement action, often in situations of personal or financial vulnerability, it is entirely right and reasonable that they should be told in clear terms what decision has been reached and on what basis. Without such a provision, there is a risk of individuals being left in a state of uncertainty, unaware of whether their representations have been considered or why a particular outcome has been reached. This would not only be frustrating for the individual but could undermine confidence in the integrity and transparency of the process.
This amendment supports good administration. Providing a written decision with reasoning ensures that a decision is recorded, understood and open to further challenge if appropriate. It encourages clarity in decision-making and helps to avoid disputes or misunderstandings later down the line. It is also consistent with wider principles of public law. The right to be informed of decisions that affect one’s rights and obligations, as well as to understand the reasons for those decisions, is fundamental to administrative justice. Indeed, it is hard to see how meaningful accountability or the right to further appeal could exist without such a provision.
Let us not overlook the practical benefit. A timely written explanation provides certainty. It tells the liable person where they stand, where further action may be necessary and what their next steps, if any, might be. This amendment would not impose an onerous duty on the Minister; it would simply codify what many would consider to be best practice. It would bring clarity, transparency and fairness to the process. For that reason, I hope that the Government will consider this amendment and that noble Lords across the Committee will support it.
Our Amendment 61D is related to this principle of accountability and transparency. It would require the Minister to demonstrate in writing their consideration of a liable person’s wider circumstances upon request. At first glance, this may appear to be a procedural point, but, in reality, it speaks to a deeper principle: the right of an individual to know that their personal circumstances have been properly considered when a decision is made about them, particularly in a context where that decision could have serious financial and legal consequences.
Clause 41 rightly requires that the Minister be satisfied
“that the terms of the order … will not cause the liable person or a person within subsection (2) to suffer hardship in meeting ordinary living expenses, and … are otherwise fair in all the circumstances”
before authorising a deduction order. This is a welcome provision. It recognises that enforcement powers must be exercised proportionately and with an understanding of individual context. However, it is not enough to say that consideration will be given; there must also be a means of demonstrating that it has been. This amendment would address precisely that by ensuring that, where a liable person asks for confirmation of how their wider circumstances were assessed, the Minister is obliged to respond, in writing, setting out the outcome of that assessment.
The Minister might ask why this is necessary. The answer to that is because, without such a duty, the obligation to consider a person’s circumstances risks becoming a purely internal exercise—one that is neither visible nor verifiable to the person it affects. This undermines both transparency and trust. If the individual has no way of knowing how or whether their situation has truly been taken into account, the provision risks becoming hollow.
This amendment does not require a detailed statement of reasons in every case, nor does it impose an undue administrative burden. It says simply that, if the liable person asks, they are entitled to know how their situation was considered. That is not a radical notion; it is a matter of basic fairness, and it also supports better decision-making. When decision-makers know that they may be asked to justify their reasoning, they are more likely to give genuine and careful consideration to the facts, and when individuals receive that explanation, they are more likely to accept the outcome, even if it is not in their favour, because they can see that they were treated seriously and with respect. Moreover, it is consistent with principles of natural justice and administrative accountability. People should not be kept in the dark about decisions that affect them, especially when those decisions involve the exercise of coercive state powers over their finances.
Lord Palmer of Childs Hill (LD)
My Lords, Amendments 61C and 61D in the names of the noble Baroness, Lady Finn, and the noble Viscount, Lord Younger, seek to ensure that liable persons receive clear written communication regarding the outcomes of reviews and that Ministers demonstrate due consideration of wider circumstances when requested. This kind of transparency is crucial in practice, as it helps individuals to understand the basis of decisions affecting their finances and provides reassurance that their personal situations are being taken into account. For many people facing recovery actions, receiving clear, accessible information can make a significant difference in navigating the process and seeking further recourse, if needed.
Amendments 61E and 61F, alongside Amendments 62A and 62C, address important procedural and operational details that could impact on both individuals and employers. For example, limiting the scope of regulations as proposed in Amendment 61E may prevent regulatory overreach, providing clearer boundaries for those affected. Consulting employers on costs regarded as reasonably incurred, as proposed in Amendment 61F, encourages dialogue and can help to avoid disputes over financial responsibilities. Meanwhile, the provisions to restrict the restart of suspended deduction requirements after 24 months, as proposed in Amendment 62B, and to ensure written reasons for revocation of deduction orders, as in Amendment 62C, introduce important safeguards that promote fairness and clarity. In practical terms, these measures help to reduce uncertainty for both liable persons and employers, fostering greater trust and smoother administration. I support these amendments.
Baroness Fox of Buckley (Non-Afl)
My Lords, I wanted to reiterate my particular support of Amendments 62A and 62B, even though they do not go as far as my amendment in relation to suspended orders. The sense of a sword of Damocles hanging over people is something that we could do with getting rid of. That would be an easy thing for the Government to accept without in any way compromising the aims of the Bill.
In relation to the other amendments, which I broadly support, I want to emphasise something that I keep thinking as I read the Bill and sit through Committee. Many aspects of the legislation can create an atmosphere of fear, uncertainty and sometimes even paranoia about what is going on if there is a sense of secrecy. This could be alleviated with the opening up of human communication to explain reasoning. These are difficult situations. We are talking, in some instances, about people who have committed wrongdoing of some sort, but it is important that liable persons have a sense of understanding the process. Very often, the way that the process gets stuck behind closed doors has created all sorts of problems in parallel situations.
I want to emphasise how, if things are left to internal processes, it can reduce them to hollow box-ticking. Civil servants or whoever knowing that they can be answerable will ensure that better work is carried out. It will also help to smooth the way for people to take this Bill seriously and not see it as some grand state surveillance conspiracy. It is important, in order to give credibility to the fraud recovery at the heart of the Bill, that the Government are seen to be as flexible as possible about all parties being held to account for what would otherwise be seen as some quite draconian powers.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, all these amendments pertain to deduction from earnings orders—or DEOs, as I shall refer to them from here. DEOs are a mechanism by which the PSFA can instruct an employer to make deductions from the liable person’s salary in order to recover the money owed as a result of fraud or error. This power can be exercised only after the amount owed has been agreed by the liable person, a court or tribunal, or if the penalty appeal period has lapsed or an appeal has been finally determined. People can avoid their employers being contacted if they simply engage with us and pay what they owe.
DEOs are an established mechanism used by the courts, the DWP, the Child Maintenance Service and some local authorities. We have sought to emulate best practice and established processes to make it straightforward for the employers that have to implement them. There are safeguards for the liable person, such as a protected earnings amount of 60% and the requirement for deductions to be affordable and fair, as set out in Clause 41.
Before an order is made, the liable person will have the opportunity to make representation on the proposed terms. Amendment 61C would create an obligation for the PSFA to provide the reasoning behind its decision to proceed with a DEO following these representations. Amendment 61D would create a similar obligation for the PSFA to demonstrate that it has taken the liable person’s wider circumstances into account when determining the level of affordable and fair deductions. Both these amendments are duplicative as the PSFA would be doing this anyway, as a matter of good public law. As I outlined previously, guidance will also be published detailing what information will be supplied to the liable person as part of the wider decision-making processes.
Amendment 61E would limit the regulation-making powers in Clause 41(7) to establishing affordability considerations. We have striven to put as much detail into the Bill as possible, but there are elements where it is valuable to have a degree of flexibility so that further conditions or restrictions can be added to the measures to reflect wider societal, economic and technological changes. This amendment would severely limit the Government’s ability to adapt to these changes and impact the efficacy of this recovery method, thus potentially reducing the money lost to fraud that could be recovered in the future.
Amendment 61F would require that the PSFA consults with employers on the level of admin costs that they can charge the liable person for implementing a DEO. There are standard charges of £1 per deduction period allowed by the courts and other organisations that use DEOs. It is not for the PSFA to set up a different regime single-handedly, as it will be following established processes already used across government. If it is felt that changes to this charge should be made, they would need to be done in conjunction with the other bodies.
Amendments 62A and 62B would prevent a suspended DEO from being restarted after 24 months. We discussed the same matter on Monday, in relation to direct deduction orders. I confirm that I am still reflecting on the points raised by the noble Baronesses, Lady Fox and Lady Finn, and the noble Lord, Lord Vaux, which also apply to DEOs, and I am having meetings with officials on them. It is important that the PSFA has discretion in how it can react to individual circumstances counterbalanced against its duty to recover money lost to fraud and error in the most appropriate way. There is a balance to be struck and I shall report back on my reflections in due course.
Finally, Amendment 62C would require that, when the PSFA revokes a DEO, it provides the reasoning to both the liable person and their employer. In practice, this would be shared with the liable person as a matter of good public law to safeguard the public law duty of fairness in decision-making for the individuals subject to the orders. However, there are serious privacy considerations that could be undermined by providing such information to the employer. Upon the establishment of a DEO, the employer is not told anything about the DEO other than what is to be deducted from the liable person’s salary. This is the only information of relevance to the employer. Any other information would be a breach of privacy.
Regarding some of the other points raised, particularly by the noble Baroness, Lady Finn, I think it would be helpful to your Lordships if I assist them with some more information on safeguards. Regarding the safeguards in place for the use of DEOs, including preventing hardship, the Public Sector Fraud Authority has committed to the following safeguards: vulnerability assessments, maximum deduction amounts, opportunities for representation, reviews and appeals, and the ability to notify a change of circumstances. The PSFA will continue to utilise best practice from across government.
On the question of who determines the amount of debt owed, the Public Sector Fraud Authority’s investigation will calculate the debt owed to the Government as a result of fraud or error following an investigation into suspected fraud. The liable person will be notified of the recoverable amount. If they do not agree, a firm and final determination will be sought by a court or tribunal.
The noble Baroness, Lady Finn, asked what is meant by “among other things” in Clause 41. Clause 41(6) gives the Minister powers to
“make further provision about the calculation of amounts to be deducted”
in respect of DEOs. To be clear, to make further provision would not allow the Minister to qualify or change the provision, only to add specific conditions or restrictions that can be taken into account when calculating the amount to be deducted. As given as an example in Clause 41(7), the key consideration will be hardship and defining what constitutes hardship. It is important that the definition of hardship is not fixed, as what constitutes hardship today may look very different in, say, 10 years’ time.
The term “among other things” could also include other items that can be taken into account when calculating DEOs that are not so immediately obvious. For example, the regulations could be used in allowing for a different deduction rate around the Christmas period, when the liable person might have other outgoings that would not be reasonably foreseeable when the order was first given.
I hope that goes some way to assuring noble Lords about our safeguards and that the noble Baroness will feel able to withdraw her amendment.
Lord Vaux of Harrowden (CB)
My Lords, I listened to the Minister, and I listened to her the other day on the same subjects regarding DDOs. A question occurs. In many cases, the amount owed is set by the court. Why, then, does the court not decide how that amount should be repaid? Why do we have to go through all these processes and decisions by the departments rather than the court?
Baroness Anderson of Stoke-on-Trent (Lab)
The noble Lord makes a very interesting point, on which I will have to reflect and come back to him, if that is okay.
Baroness Finn (Con)
I thank the Minister and look forward to her reflections. In closing, I return to the core principle running through each of the amendments in this group: public confidence in enforcement powers depends not just on the ability to cover funds but on the manner in which those powers are exercised. The noble Baroness, Lady Fox, was also emphatic in this regard.
Whether they concern ensuring that decisions are properly communicated, that personal circumstances are demonstrably considered, that employers are consulted on the burdens placed on them or that enforcement is time-bound and proportionate, our amendments seek to build a framework that is seen as being as fair and accountable as it is effective.
We have not sought to unpick the intent of the Bill or to weaken the Government’s ability to recover what is owed. But we have sought to refine it responsibly and constructively, so that those affected by its provisions are treated with clarity, respect and procedural justice. We have argued, with these amendments, that decisions should be explained in writing, circumstances must be considered and shown to be considered, and powers must be bounded by purpose, not open-ended phrasing. I take the Minister’s points on “among other things”, but it is a rather clumsy way to write legislation. The fact that she introduced “among other things” and gave some examples shows that this should be more tightly drawn.
Baroness Sherlock
(a) the period of 28 days beginning with the day after the day on which the liable person was notified of the outcome of the review, or(b) such longer period (if any) as the Tribunal considers reasonable in all the circumstances.”Member’s explanatory statement
This amendment means that the tribunal can extend the time limit for bringing an appeal in relation to a deduction from earnings order.
Baroness Finn
“(2) “Help” is defined in this section as the provision of any information, advice or support which could reasonably be assumed to be intended to acquire payments which are, or, if the payment was not made, would have been, a recoverable amount, or with the result that a public authority is entitled to claim any other recoverable amount.”Member’s explanatory statement
This amendment would ensure that those seeking to aid fraud through the provision of any information, advice or support could be subject to a penalty.
Baroness Finn (Con)
My Lords, our amendments in this group seek to clarify definitions with a view to combating those who seek to encourage and facilitate fraud, and to incorporate further checks on the exercise of powers in this part of the Bill. Our Amendment 63A seeks to define “help” for the purposes of this clause, clarifying that it includes the provision of any information, advice or support that could reasonably be assumed to be intended to obtain fraudulent payments from the public purse.
This amendment may appear, at first glance, to be a matter of drafting, but it goes to the very heart of a growing, pernicious challenge that we face in safeguarding public funds—namely, the rise of individuals and groups who use online platforms to encourage, facilitate or instruct others on how to commit fraud against public bodies. These individuals do not necessarily commit the fraud themselves but they profit from or promote the circumvention of rules, frequently offering guides, tips or templates for making false claims for benefits, grants or other forms of public support. Some go further still by sharing videos, creating paid content or selling advice designed to enable abuse of the system. This is organised dishonesty masquerading as financial empowerment, and it is costing the taxpayer dearly.
Yet, as the law currently stands, there is a grey area around the liability of such actors. If they do not physically submit the fraudulent claim themselves, their role in enabling or encouraging fraud can be harder to pin down, unless we are clear about what constitutes help in this context, and that is precisely what this amendment would do. It defines “help” broadly and practically as
“the provision of any information, advice or support which could reasonably be assumed to be intended to”
secure a fraudulent payment or assist in one being made. Crucially, it also covers situations where the advice or support would, if acted on, result in a recoverable amount being owed to a public authority.
This is a necessary clarification—one that would put would-be facilitators of fraud on clear legal notice that their conduct is within the scope of enforcement. It would help to bring the architecture of the Bill into line with the realities of modern digital fraud, where facilitation often takes the form of social media content, forums or online transactions, rather than backroom collusion. It would also serve as a strong deterrent function. By defining the provision of such support as within the scope of a penalty, it would allow for enforcement against not only those who commit fraud directly but those who empower others to do so, whether for financial gain, notoriety or both.
Fraud against the public sector is not a victimless crime. It deprives vital services of much-needed resources and undermines public confidence in the integrity of our welfare and support systems. Tackling this threat requires more than good intentions; it requires clear definitions, enforceable powers and a willingness to adapt to new forms of criminality. This amendment would deliver precisely that by ensuring that Clause 50 is not hampered by ambiguity and that those who seek to game the system from the sidelines cannot hide behind the veil of plausible deniability. I urge the Minister and noble Lords to support this amendment as a practical, proportionate and targeted step toward a more robust framework for defending the public purse.
Amendment 63B is based on the simple principle that there should be a balance of oversight and determination when it comes to the exercise of these powers. We propose that the decision to impose a penalty under Clause 52, specifically in cases where no payment has in fact been made, should not rest solely with the Minister but should instead be made by the First-tier Tribunal. This amendment is founded on a straightforward and essential principle: where the Executive are empowered to impose penalties of potentially significant financial consequence, there must also be a mechanism of independent oversight. Determination and discretion must be balanced with transparency and accountability.
Clause 52(2) allows for a penalty to be imposed where no payment has been made based on what the Minister believes the person would have received had the conduct not been intercepted. In other words, the clause enables a financial penalty to be levied on the basis of a hypothetical amount determined solely in the opinion of the Minister. That is a considerable power. It allows for punitive action on the basis not of actual harm or financial loss but of a projection—that is, a judgment from the Minister as to what might have happened under different circumstances.
This is precisely where judicial oversight is most important. If a penalty is to be imposed based on counterfactual reasoning on what could have occurred but did not, surely the case for an independent expert body to assess that reasoning is overwhelming. This amendment would simply substitute the First-tier Tribunal for the Minister in this context. The tribunal already has competence and infrastructure to assess evidence, weigh intention and determine appropriate sanctions. It is an established part of our administrative justice system and is well equipped to adjudicate in complex or borderline cases where intent, probability and public harm are at issue. It also has a legitimacy in the eyes of the public that the Minister does not possess.
Such an approach has several benefits. First, it enhances procedural fairness. Individuals who face serious penalties, especially in cases where they did not actually receive any funds, should be entitled to a hearing before an impartial body rather than be simply the recipient of a notice based on ministerial opinion. Secondly, it promotes consistency and accountability. Tribunal decisions are subject to precedent and scrutiny. Ministerial discretion, by contrast, may vary from case to case and lacks the transparent reasoning that accompanies judicial decisions. Thirdly, it safeguards public trust. The public must have confidence that enforcement powers are being used fairly and not arbitrarily. Independent oversight gives legitimacy to the exercise of those powers.
This is not an argument against penalties, nor against enforcement; it is an argument for fair process and proper checks. The power to punish, even when no actual loss has occurred, must be subject to more than internal ministerial judgment. In short, where the Government propose to act based on what might have been, we must be particularly careful. The wider the discretion, the stronger the need for oversight. This amendment achieves that balance. It leaves the Government able to pursue wrongdoing but does so in a way that is consistent with our traditions of fairness, due process and independent adjudication.
Amendments 63C and 63D work together to incorporate the principle that the Minister sets out in writing the reason behind a decision reached, following a review. As we have stated several times, this mechanism is vital in ensuring that we establish clear lines of communication between the Cabinet Office and the liable person, allowing them to access information which they are legitimately and reasonably entitled to. It also allows the Minister to be held accountable for the reasons behind his decision when reached. These are principles that I have emphasised in earlier remarks, but this is a simple but important mechanism that would ensure clear communication, clarity and accountability at a minimal cost. I hope that the Minister and noble Lords consider this a reasoned improvement to the Bill as it stands.
Finally, our Amendment 64A seeks to incorporate greater parliamentary oversight of any changes made to the appeals process—a fundamental safeguard in the Bill that must be protected through proper oversight. Our amendment seeks to strengthen the safeguards around how changes may be made to the appeals process relating to penalty notices issued under the Bill. As the clause currently stands, subsection (6) provides the Minister with the power to make further provision about appeals against a penalty notice through regulations made at the Minister’s own discretion. Our amendment would remove that sweeping discretion and instead require that any further changes to the appeals process may be made only following an independent review and with the approval of a parliamentary committee of any recommendations arising from that review.
The justification for this change is both principled and practical. The power to levy financial penalties under the Bill is significant. Given the potential consequences for individuals and organisations, the integrity of the appeals process is absolutely central to the fairness of the regime. It is vital that those who are subject to penalties under the Bill feel confident that the means of challenging or appealing those penalties is robust, independent and protected from politicisation or erosion. That confidence depends in part on ensuring that the rules governing the appeals process are not liable to unilateral change by the very Minister responsible for enforcing the penalties.
This is not about casting doubt on the current Minister’s intentions but about future-proofing the system. Power should never be unchecked simply because we trust those who currently hold it. This amendment would put in place a sensible and proportionate safeguard whereby, before changes are made to the appeals framework, an independent review must be carried out and Parliament must have a meaningful role in assessing and approving those changes. When the state is empowered to impose penalties, it must accept the responsibility of making sure that appeals are independent, accessible and fair, and that the framework governing them cannot be rewritten without scrutiny. This amendment helps to ensure just that. It does not prevent change but ensures that change is evidence-based and democratically accountable. I therefore urge the Minister and noble Lords to support this amendment as a modest but essential safeguard for one of the most important pillars of any enforcement regime: the right to appeal.
In conclusion, the amendments we have brought forward in this group are united by a common theme: the need to balance effective enforcement with clarity, fairness and oversight. We recognise the importance of rooting out fraud and protecting the public purse. We support the Government’s efforts to ensure that those who abuse public funds, whether through direct claims or the encouragement of others, face appropriate consequences. However, our concern and the focus of these amendments are to ensure that, in pursuing that goal, we do not sacrifice the core principles of accountability, due process and democratic scrutiny.
Amendment 63A ensures that we face the modern reality of fraud facilitation head on, by clearly defining what it means to “help” to commit fraud. In doing so, it brings much needed clarity and enables enforcement agencies to act against those who profit from spreading dishonest tactics.
Baroness Fox of Buckley (Non-Afl)
My Lords, I will be very brief. I have a lot of sympathy with most of the amendments in this group, apart from Amendment 63A, which fills me with dread. Fraud facilitation sounds as though it is a new crime, but I do not think this is the right place to bring it in. I appreciate that it does not necessarily have a criminal penalty, but it is also not entirely clear what it is.
I know that the Opposition have been pushing the problems of “sick influencers” in another Bill—this is a bit of a theme—but I get very nervous about requiring the authorities to trawl through people’s social media accounts yet once more to see what they are saying, then to blame them for things that happen. When I think of examples that I have been shown of “sick influencers”—but there are others—there is a thin line between people who are trying to give hacks to individuals on how to fill in labyrinthine forms and cope with the welfare system and people who show them how to cheat. I therefore urge against this: it is a can of worms, which I would keep well away from.
There is also a danger that you will allow individuals to abdicate responsibility by saying, “I did it only because I was told to by the influencer who I saw on Instagram”. This goes against the spirit of due process and of taking responsibility.
Lord Palmer of Childs Hill (LD)
My Lords, Amendment 63A addresses the important issue of those who facilitate fraud by providing information, advice or support. It proposes that such individuals could be subject to penalties. I believe that this measure helps to close potential loopholes and hold accountable not only primary offenders but those who enable wrongdoing. From an individual’s perspective, this could strengthen the integrity of the system and act as a deterrent against abuse.
Amendment 63B seeks to prevent the Minister from unilaterally determining penalties for persons who have not received a payment, which is crucial to protecting individuals from unfair or arbitrary penalties that could cause undue financial or reputational harm.
Amendments 63D and 64A focus on transparency, accountability and procedural fairness—elements that directly affect the experiences of those subject to the Bill. Providing written reasons for decisions following a review, set out in Amendment 63D, would ensure that individuals fully understand the outcomes and the rationale behind them, enabling them to respond appropriately, or seek further recourse if necessary. Amendment 64A would remove the Minister’s sole authority to change the appeals process and would instead require independent review—we have discussed in previous sittings what “review” and “independent” mean—and parliamentary oversight. It would introduce vital protections for individuals and guarantee that any changes to how appeals are handled are thoroughly scrutinised, preserving fairness and maintaining public confidence in the system’s impartiality. On that basis, I support these amendments.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, these amendments all pertain to the scope, application and oversight of the civil penalties measures. The measures have been designed using established cross-government best practice so that the PSFA may effectively deter and recuperate money lost to fraud and include numerous safeguards for individuals and businesses.
I find myself in the unique position, so far in this Committee, of agreeing with the noble Baroness, Lady Fox, although maybe not for the reasons that she set out, on Amendment 63A, which would unnecessarily extend the legislation by adding a definition of “help” to Clause 50. The Fraud Act 2006 establishes the fraud offence, which includes an individual making
“a gain for himself or another”.
The Fraud Act does not define “help” in terms of making a gain for another. This is because the Act focuses on the “dishonest intent” of a fraudulent act. Under Clause 70(1)(c), the offence at common law of conspiracy to defraud is already punishable under the Bill. Clause 70(1)(b) includes and covers Sections 6 and 7 Fraud Act offences. This allows for penalties to be issued against the fraud “influencers” we have already discussed during the Bill’s passage. The offence at common law of conspiracy to defraud is also already included in our definition of fraud. It is therefore unnecessary to define “help” in order to use either the Fraud Act or this Bill, although I was very tempted to quote Beatles lyrics—that may just be the time of day.
Amendment 63B would amend Clause 52 by replacing the Minister with the First-tier Tribunal in cases where a fraudster attempts to take public money but is stopped before they receive the payment. There is existing precedent for not using the First-tier Tribunal as the first-instance decision-maker: for example, in the Home Office for the employment of illegal workers. The legislation also includes the right to appeal a decision to the appropriate court following the receipt of a final penalty notice—I will come on to that.
Amendment 63C seeks to broaden the requirement of Clause 58(4) beyond Clause 58(2)(c) so that it may apply to Clause 58(2)(a) and Clause 58(2)(b). This is unnecessary, as Clause 58(3) already requires the Minister to give notice to an individual if the penalty is upheld. While I recognise its intent, it is unnecessary to include Amendment 63D in the Bill. While there is no obligation under common law to provide an explanation for a positive decision—that is, to amend or cancel the penalty—authorised officers will do so as part of the review process. They will also provide an explanation for a decision to amend or cancel the penalty as part of the review process. The civil penalties code of practice and further guidance will support authorised officers.
Amendment 64A would add additional unnecessary complications to the legislation. It is the intent of the legislation not that regulations may be made to reduce or abolish the appeals provisions for penalty notices but that any further regulations may improve, streamline or make the appeal process more efficient. For example, appeals for civil penalties may be heard at the same time as appeals against debt recovery notices.
I turn to the specific points raised by noble Lords. In response to the noble Baroness, Lady Finn, I remind the Committee that the tribunal appeal is already in the process at a later stage, that of determining the penalty. Bringing the tribunal in earlier would add time and burden. I think that I have covered the other points in my speech, and the noble Baroness, Lady Finn, will remind me if I have not—she may be about to—but I hope that my explanations reassure noble Lords and that the noble Baroness will therefore withdraw her amendment.
Baroness Finn (Con)
I thank the Minister for giving answers to most of my questions, even if they were not entirely to our satisfaction. In closing, I return to the central purpose of this group of amendments: to ensure that the enforcement powers granted under this part of the Bill are clear in scope, fair in operation and subject to meaningful oversight.
Before I continue on to the other amendments, I will address the concerns of the noble Baroness, Lady Fox. The Minister states that the existing law is sufficient, but there is quite a lot of evidence, and anecdotal evidence, that sickfluencers, as they are called—sick influencers—are active and busy. How many people have ever been pulled up or—
Baroness Anderson of Stoke-on-Trent (Lab)
This is a point where I should say that there are two parts of the Bill. I am sure that, as Committee progresses, we will discuss sickfluencers. This part of the Bill is making sure that the PSFA has the powers to deal with similar online influencers—I do not think we can call them sickfluencers in relation to fraud—who are leading the charge. Obviously, the PSFA is seeking new powers and we hope to be able to use them. Therefore, I cannot provide the noble Baroness with the data for what prosecutions may or may not have been made up until this point. But we hope that, with new powers for the PSFA, that will be part of the work going forward.
Baroness Finn (Con)
I thank the noble Baroness. When we were seeking to introduce this definition of “help”—I take on board the concerns of the noble Baroness, Lady Fox—we were trying to presage the fact that this would come up in a later part of the Bill. I deliberately, in my opening remarks, did not reference sickfluencers, but the noble Baroness, Lady Fox, obviously understood where I was going with that. I am just not convinced about how effective the law currently is in this area.
Our other amendments respond directly to the challenges posed by modern forms of fraud and the expanding reach of administrative enforcement. Whether we are seeking to define what it means to help commit fraud in an online age, requiring that penalties based on hypothetical harm are assessed by an independent tribunal or ensuring that decisions and processes are explained clearly to those affected, these are not procedural niceties; they are essential guarantees of accountability and trust. We cannot afford to leave grey areas for those who seek to exploit the system from the sidelines and we also cannot allow the exercise of significant powers, particularly those that impact people’s livelihoods, to proceed without checks, explanation or independent scrutiny.
This group of amendments does not frustrate the aims of the Bill; it strengthens the Bill. It ensures that public funds can be protected in a way that is not only effective but proportionate, just and transparent. We are asking for three simple things: definitions that are clear so that enforcement can be targeted where it is needed most; penalties subject to oversight, particularly when no actual loss is concerned; and decisions and appeals processes that are robust, explainable and open to democratic scrutiny. These are reasonable, moderate and constructive proposals. They do not undermine the Bill’s purpose; they help it to stand on firmer constitutional and ethical ground. I urge the Minister and all noble Lords to consider them seriously and to support a set of changes that would not only improve this legislation but help to secure public confidence in the integrity of its application. On that basis, I beg leave to withdraw the amendment.
Baroness Sherlock
(a) the period of 28 days beginning with the day after the day on which the person is given the penalty notice, or(b) such longer period (if any) as the appropriate court considers reasonable in all the circumstances.”Member’s explanatory statement
This amendment means that the tribunal or court hearing an appeal against a penalty imposed by the Minister for the Cabinet Office under Chapter 5 of the Bill (penalty relating to fraud or penalty for failing to comply with requirements) can extend the time limit for the bringing of that appeal.
“Report on public sector fraud during COVID-19 pandemic(1) The Minister for the Cabinet Office must, within six months of the passing of this Act, lay before Parliament a report evaluating the extent of public sector fraud that occurred during the COVID-19 pandemic.(2) The report must include—(a) an account of fraudulent or erroneous payments made by or on behalf of public authorities, including but not limited to the Department of Health and Social Care and NHS England,(b) a review of how public procurement practices in place between March 2020 and December 2021, including—(i) the use of high priority and expedited contracting for suppliers, and(ii) the role of political appointments and personal connections in procurement decisions, may have contributed to fraud against public authorities,(c) the cost to the public purse of fraud against public authorities during the COVID-19 pandemic, and(d) an assessment of the adequacy of Government oversight and other measures then in place to prevent fraud against public authorities.(3) Where the report finds or concludes that there were—(a) failings in Government oversight and other measures then in place to prevent fraud against public authorities, or(b) any action or inaction by the Government which enabled fraud against public authorities,the Minister must make a statement to the House of Commons acknowledging these findings and setting out actions planned to ensure any failings are not repeated.”
Lord Palmer of Childs Hill (LD)
My Lords, Amendment 65 in my name would require the Minister for the Cabinet Office to,
“within six months of the passing of this Act, lay before Parliament a”
comprehensive
“report evaluating the extent of public sector fraud that occurred during the COVID-19 pandemic”.
The Liberal Democrats have long championed transparency, accountability and robust oversight of public funds. This amendment aligns with those values by ensuring that Parliament receives a clear, detailed assessment of how fraud had an impact on public resources during an unprecedented crisis. Without such transparency, we risk missing critical lessons that could inform future safeguards and improve the resilience of our public sector. The pandemic presented unique challenges that, unfortunately, created opportunities for fraud on a scale not previously seen. It is only right that we fully understand the scale and nature of the issue, not to assign blame but to strengthen our systems and protect taxpayers’ money.
This amendment reflects the Liberal Democrat commitment to evidence-based policy and open government. By requiring this report, we would promote accountability and ensure that future emergency responses are better equipped to prevent fraud, protecting public trust and ensuring that resources reach those who genuinely need them. There will be other events; we want to set the scene so that they can be dealt with. That is what this amendment seeks to do. I beg to move.
Baroness Coffey (Con)
My Lords, I rise to speak to this amendment because I was at the Cabinet table when Covid-19 hit this country. I am very conscious of the arduous activity that went on among brilliant civil servants but, of course, mistakes were made, as well as successes.
It is interesting to try to understand why the noble Lord, Lord Palmer of Childs Hill, wants to go into this matter further, recognising that, in Parliament, there have already been several Select Committee inquiries; one was specifically done on fraud. Of course, we also have the public inquiry that is under way, to which the Government are contributing. I am trying to understand the purpose of this amendment and this extra report, recognising that the Government will in no way make any comments until the inquiry has concluded.
My understanding is that the inquiry is still going to take evidence in 2026. For what it is worth, as I am sure the Ministers here will be relieved to know, I am absolutely convinced that this Bill will become an Act of Parliament well before the end of 2025. So there is something here of an odd overlap. I understand that this will continue to be a subject of interest.
This is quite a wide ranging-element. I know that fraud happened. There is no doubt of that. However, we also averted fraud in the DWP. We managed to stop £1.6 billion going out on one particular weekend by intervening. There were plenty of attempts at fraud and, unfortunately, there were successes. Some of those people who committed that fraud are now in jail, thanks to the endeavours of the Government.
The noble Lord, Lord Palmer of Childs Hill, talks about resources that the country may have been deprived of when addressing the issues of Covid. I can honestly say to your Lordships that no resources were set aside at all. This is one of the reasons why there have been considerable challenges on aspects of needing to repay the debt that may have been acquired due to spectacular extra financing, whether that was through businesses or about people who had never claimed benefits in their life before, making sure that they got the money that we believe they were entitled to. That was while recognising that some of the easements initially may have been subject to some fraud, but we also made every effort to try to stop it. I have already given an example of where, in one weekend, £1.6 billion was averted.
For that purpose, the amendment genuinely is unnecessary. The statutory inquiry, I hope, will not be the longest-running statutory inquiry because that is not what the country needs to consider. It would not be the best use of government resources to initiate their own further inquiry and honour this amendment.
Baroness Bennett of Manor Castle (GP)
My Lords, I am slightly torn. Yes, we have the Covid inquiry but we also have a country that faces ongoing risk. I was, entirely coincidentally, speaking this morning to someone who was expressing concern about stocks of medical supplies that the Government were holding or not holding. They are being told that the Government were waiting for the Covid inquiry to report and then would look at what might happen. I am afraid that the reality is, of course, that we do not have an influenza virus out there saying, “Just wait until the Covid inquiry has reported and then we can think about attacking Britain”. I am not sure that this is the right way forward, but we need to hear from the Government more generally—I understand that that may not be within the Minister’s portfolio—and maybe the noble Baroness could write to me at a future date. However, we need to think about being ready, in this age of shocks, for all the threats that could potentially hit us—particularly health threats. We should learn from the mistakes that were undoubtedly made under the previous Government. That is an important issue. We need to see more urgency from the Government. The answer of waiting until the Covid inquiry reports really does not hack it in this age when we are facing so many threats.
Baroness Coffey (Con)
Before the noble Baroness sits down, it is important to stress, when thinking of prevention of issues and being ready for them, that I am quite confident that the Government have continued a lot of the activity of the previous Government. I will give an example. Although it was for a short time, when I was Secretary of State for Health and Social Care we were being asked to write off hundreds of millions of pounds on Covid vaccines because we had, in effect, anticipated what could have happened. In the end, thankfully that was not needed. That is not a case of fraud, but the noble Baroness was stretching us into preparedness for the future. That is still a key module of the statutory public inquiry now under way. But it would be worth looking at some of the Select Committee investigations that happened, perhaps much more quickly, and some of the government responses that had been provided to them.
Baroness Finn (Con)
My Lords, while I recognise the concerns that underpin this amendment in the name of the noble Lord, Lord Palmer, it is both unnecessary and potentially duplicative, given the extensive scrutiny already taking place through existing and robust channels, as my noble friend Lady Coffey made clear. First and foremost, we must acknowledge that a comprehensive public inquiry is under way into the Government’s response to the Covid-19 pandemic. That inquiry, established under the Inquiries Act 2005 and chaired independently, has broad terms of reference, including examination of procurement processes, ministerial decision-making and the use of public funds. The amendment risks pre-empting, duplicating or even undermining that process by imposing a parallel and more narrowly framed exercise before the formal inquiry has concluded its work.
Let us be clear: the Covid-19 pandemic presented an unprecedented national emergency. Ministers, civil servants and public bodies were called on to make swift, high-stakes decisions in the face of an unfolding crisis. They did so with little warning, under extraordinary pressure and with the primary objective of protecting lives and livelihoods. In that context, decisions were taken at pace to ensure that vital supplies were sourced, support was distributed rapidly, and services could continue to operate. Was the system perfect? No—but to assume that those who contributed to the effort to tackle Covid were doing so for malign reasons is inaccurate. However, that is not to say that we should not seek to recover money where errors were made, and it is of course right that we take steps to realise this outcome, which has been the guiding principle of all our engagements with the Bill: public money should be recovered.
We should therefore make full use of the mechanisms that already exist to assess and recover losses. The National Audit Office, the Public Accounts Committee and internal departmental review bodies have all examined pandemic-related spending and made a series of recommendations, many of which are already being implemented. Indeed, the Public Sector Fraud Authority continues to track and pursue recoveries on this matter. To impose an additional reporting requirement through the Bill, especially one that compels Ministers to publicly acknowledge failings before the full picture is known, would not serve the cause of accountability; rather, it risks creating a politicised and partial process, which may generate more heat than light and overlap confusingly with the broader inquiry now under way.
Let us not lose sight of the bigger picture. The Bill is about strengthening the framework to combat public sector fraud going forward; it is not the right vehicle for relitigating decisions taken in the darkest days of a national emergency. The public inquiry will give us the full breadth and depth of insight that is needed, with the benefit of time, evidence and impartial examination. In the meantime, let us not cast unfair aspersions on public servants and Ministers who, in the face of enormous uncertainty and unimaginable pressure, acted on the whole with integrity, urgency and a profound sense of duty.
I urge noble Lords to recognise that the proper process is already in place and that we must allow it to do its job without prejudging its conclusions. For these reasons, I respectfully oppose the amendment.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I find myself agreeing with the sentiment behind the amendment in the name of the noble Lord, Lord Palmer. The Government are committed to investigating and combating cases of fraud and error in Covid-19 spending. If I touch on some of the things that the Government are already doing, perhaps he will be reassured that we are already taking this seriously.
The Bill will give the Public Sector Fraud Authority powers to conduct investigations, levy civil penalties and recover money. It also doubles the time limit for civil claims against Covid fraud from six to 12 years to ensure that we can continue to investigate. Although the proposed amendment to mandate a report on public sector fraud during the Covid-19 pandemic underscores the importance of accountability, it is unnecessary given the existing frameworks already in place. The question is whether appropriate reporting processes on Covid-19 spending have already been established—and I would argue that they have.
A dedicated Covid Counter-Fraud Commissioner has already been appointed to review losses of public money to fraud, error and underperforming contracts during the Covid-19 pandemic. Working collaboratively with departments and agencies such as the Public Sector Fraud Authority, His Majesty’s Treasury and the Department of Health and Social Care, the commissioner is focused on public funds lost to fraud, error and underperforming contracts during the Covid-19 pandemic.
The commissioner’s remit includes: assessing recovery efforts to date to determine where additional recoveries can be made and ensuring they are vigorously pursued; ensuring that maximum recovery efforts have been made and providing assurances on this to the public and Parliament; reviewing individual contracts to provide additional attention and reassurance on spending that is disputed; and, from this work, generating lessons and making recommendations for the future. By placing this responsibility with an expert dedicated commissioner who reports directly to the Chancellor and works in close co-ordination with key departments, the Government have ensured a clear and strategic approach to addressing pandemic-related fraud.
Given the breadth and focus of this work, introducing an additional ministerial reporting requirement would be duplicative and could divert resources away from ongoing recovery efforts. It risks creating unnecessary bureaucracy and delaying outcomes. We genuinely believe that the outcome the noble Lord seeks is already in place within government.
To touch on the debate, which was about the wider lessons to be learned from the Covid-19 pandemic, the Bill is specifically about fraud, but I am more than happy to meet the noble Baroness, Lady Bennett, to discuss resilience in the round and the work that the Government are currently doing, as I believe a private meeting would be a more appropriate forum. I hope that that these assurances reassure the noble Lord, Lord Palmer, and that he therefore feels able to withdraw his amendment.
Baroness Coffey (Con)
Before the Minister sits down, let me say that Tom Hayhoe, is, I think, six months through his contract. Do the Government intend to extend it beyond the fixed one year, and when does the Minister anticipate that he might share reports—he may already do that with Ministers, but when they will be shared with Parliament?
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, this is what I can say currently, but if there is additional clarification, I will come back to the noble Baroness. Mr Tom Hayhoe’s appointment is a fixed one-year appointment. He will be required to provide a report to Parliament, which will present lessons and recommendations for procurement in future during a time of national crisis, so he will be reporting on his efforts outside and within the Treasury.
Lord Palmer of Childs Hill (LD)
My Lords, I have a rearguard action on this amendment, because it seems strange to me—and it may seem strange to anybody among the public—that we can have a Bill called the Public Authorities (Fraud, Error and Recovery) Bill, but we do not recognise within that Bill one of the biggest efforts of fraud that occurred in this country during Covid-19. Those still rumble on—those billions of pounds. For a Bill called the Public Authorities (Fraud, Error and Recovery) Bill not to include those is a grave error.
There may be some crossover and duplication, but if there is, it does not matter, because it is in the Bill and the Government will not have to pursue things if they are being dealt with elsewhere. They may be dealt with elsewhere, but there has to be a backstop, and the backstop should be in this Bill. It will do no harm in future to have it in the Bill, even if other things may address the problems that occurred and could, sadly, occur again when another event takes place. Having said that, I beg leave to withdraw the amendment.
Baroness Finn
“Annual reporting: use of powers(1) The Minister must prepare and publish a report on the use of powers conferred on them under this Part within 12 months of the day on which sections 1 and 2 come into force, and annually thereafter.(2) Any report published under subsection (1) must be laid before both Houses of Parliament within seven days of its publication.”Member's explanatory statement
This amendment requires the Minister to publish an annual report on the use of powers conferred on them by Part 1 of the Bill, which must then be laid before Parliament within seven days of publication.
Baroness Finn (Con)
My Lords, our Amendments 67 and 68 in this group work together to introduce new clauses on annual reporting obligations under the Bill: first, on the use of powers conferred by Part 1 and, secondly, on the extent of fraud against public authorities. These are, on their face, modest amendments: they do not alter the structure of the Bill; they do not restrict the powers being granted; and they do not place unreasonable burdens on Ministers or departments. They are grounded in a principle that is both simple and fundamental to good governance: that Parliament and the public have a right to know how powers are being used and whether those powers are making a measurable difference.
Amendment 67 would introduce an annual reporting requirement on the use of powers conferred under Part 1. This part confers significant powers: powers to impose penalties, to recover funds, to compel the provision of information and to act across a broad range of public authorities. These are substantial tools in the Government’s arsenal against fraud and error, and we all agree that public money must be protected and those who exploit or defraud the state must be held to account.
But power must always be accompanied by oversight. The public has a legitimate interest in how these tools are used, how often, in what context and with what effect. An annual report will provide that vital lens of scrutiny. It will allow Parliament to see whether the powers are being exercised proportionately and effectively and whether any patterns or concerns are emerging that warrant further attention. Without such reporting, we risk creating a system where power operates behind closed doors: not necessarily abused, but unexamined; not necessarily misused, but not explained. That, over time, can erode public trust not just in anti-fraud enforcement but in the fairness and accountability of public administration itself.
This amendment would simply require the Minister to prepare and publish an annual report on the use of the powers granted under Part 1, beginning within 12 months of the commencement of Clauses 1 and 2 and continuing annually thereafter. The report must then be laid before both Houses of Parliament within seven days to ensure that this information is not only collected but promptly placed in the public domain.
This is not bureaucratic clutter; it is democratic hygiene. It provides Parliament with the tools that it needs to track the implementation of this legislation and to hold the Executive to account. It allows Select Committees, Members of both Houses and the public to ask informed questions and pursue necessary follow-up, where appropriate.
The second amendment, Amendment 68, complements the first by requiring an annual report on the estimated scale of fraud against public authorities, based on the Government’s internal estimates. We have heard repeatedly, both in this Committee and outside it, that public sector fraud is a serious and growing challenge, yet it remains notoriously difficult to quantify. Estimates vary, methodologies differ and the scale of undetected fraud, by its very nature, is hard to pin down.
Nevertheless, if we are to take the fight against fraud seriously, we must begin by being honest about the scale of the problem. This amendment would compel the Government to do just that—to report annually on their internal estimates of fraud against public authorities and to lay those findings before Parliament. Without a clear sense of the scale of fraud, we cannot effectively assess the return on investment in anti-fraud measures, we cannot identify which sectors are most at risk and we cannot hold departments to account for their own controls and responses.
Just as importantly, regular public estimates create pressure for improvement. When departments know that the levels of detected or suspected fraud will be publicly disclosed, they have a strong incentive to strengthen internal controls and to invest in fraud detection systems. The result is not only transparency but improvement in practice. This principle speaks to the heart of another one of our goals: that public authorities take increasing responsibility and ownership for identifying and tackling fraud internally. This amendment is a mechanism that would promote this.
It is worth emphasising that this amendment does not require, unfortunately at present, perfect precision. It does not ask the Government to do what is not feasible; it asks for a summary of internal estimates informed by the Government’s data, audits and risk assessments. That is both reasonable and achievable. However, I take this opportunity to call out that data should be improved. The variances in the estimates currently produced by the Government are massive, and it is clear that the Government themselves do not have a particularly accurate view of the challenge that we face. The Government must achieve more accurate data reporting in this area and make this available. We need to strive for a situation in which good, accurate data is provided to Parliament, not the wildly varying estimates that we currently see.
Ultimately, we cannot allow the state to hide behind averages, yet that is precisely what it does. It is all too easy for the Government to delay publication of the annual fraud landscape report; when it does appear, it risks being only the most convenient version of the truth—aggregated figures, smoothed-out estimates and numbers stripped of detail with no departmental breakdown, timeline or accountability. That is not transparency; it is evasion. A Government who lose billions to fraud cannot be allowed to drip-feed the facts on their own terms.
Together, these two amendments serve a broader purpose. They ensure that this legislation not just empowers the state to act but commits the state to account for how it acts and to explain whether its actions are having the intended effect. They are not burdensome or oppositional; they are the kind of clear, regular reporting obligations that should be part of the design of any legislation that grants wide-ranging enforcement powers and seeks to solve systemic problems. Let us remember that the effectiveness of anti-fraud efforts cannot be judged solely by the strength of powers on paper; it must be measured by their use in practice and by the visibility of that use to those whom the powers are ultimately meant to serve—the taxpayer and the public.
Transparency is not a hindrance to enforcement; it is an essential condition of its legitimacy. These amendments would not hinder the Government’s ability to act. On the contrary, they would enhance its credibility in doing so. They would signal to the public that the Government are not only determined to tackle fraud but willing to be open about their efforts and accountable for their progress. They would allow Parliament to play its rightful role in monitoring implementation, asking the right questions and proposing further refinements when necessary. In an age when public trust in institutions must be earned and re-earned, these small acts of transparency are the building blocks of that trust.
I urge the Minister and noble Lords across the Committee to support these amendments as practical, principled and proportionate contributions to a more transparent and effective anti-fraud regime. I beg to move.
Lord Palmer of Childs Hill (LD)
My Lords, these amendments are very close to my party’s heart. I warmly welcome Amendments 67 and 68, which would place an important emphasis on transparency and accountability by requiring the Minister to publish annual reports on the use of powers under Part 1 of the Bill, as well as on the estimated scale of fraud against public authorities. Too often, no one knows about the scale.
These measures represent a vital step forward in ensuring that Parliament and, by extension, the public, receives regular, detailed information about how these powers are exercised and the ongoing challenges faced in tackling fraud. Such openness is essential because it is openness that solves these problems, builds trust in the administration of public funds and allows for informed scrutiny and debate. From my party’s perspective, these amendments align closely with our long-standing commitment to open government and evidence-based policy-making. By mandating annual reporting, they would help to illuminate the practical impact of the Bill and provide the data that is necessary to assess whether these powers are effective, proportionate and fair. This ongoing oversight will be invaluable in refining approaches to fraud prevention and recovery and ensuring that public authorities are both empowered and held accountable.
I look forward to supporting these amendments as the Bill goes forward, as well as to continuing to work to strengthen transparency and public confidence in this important area.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I thank the noble Baroness, Lady Finn, for raising the important issue of the annual reporting of the PSFA on both the use of the powers conferred on it in the Bill and the extent of fraud against public authorities.
Under Clause 64, an independent person will be appointed through the office of the Commissioner for Public Appointments as a regulated appointment to oversee the use of the powers that this Bill conveys on the PSFA. We will appoint someone with the right skills and demonstrable independence. The independent person will proactively review the PSFA’s investigative functions and use of powers, which will culminate in regular reports being produced on an at least annual basis for the Minister for the Cabinet Office.
I know that the noble Baroness cares about ministerial oversight and accountability. The powers granted to the Minister for the Cabinet Office will be delegated to trained authorised officers; I can assure her that there will continue to be strong and regular ministerial oversight of their safe and effective use. Once the Minister has reviewed the report, it must be laid before Parliament. Reports will both provide assurance on where powers are being used appropriately and challenge where improvements could be made, ensuring that civil servants are using the powers in this Bill as intended. They will provide assurance that suspected cases of fraud are being investigated in accordance with the legislation, codes of practice and guidance; and that that is being done effectively in the pursuit of the intentions of the Bill.
The findings or summary of any and all independent oversight, including the independent person’s report, will be published on an annual basis in the interests of transparency. External oversight bodies will also report on the use of powers by the PSFA following inspections. These reports will be made publicly available. With regard to annual reporting on the extent of public sector fraud, the PSFA oversees the counterfraud performance of ministerial departments and public bodies. It already publishes a report on the extent of fraud against public authorities: the Fraud Landscape Report. I hope that that reassures noble Lords.
I want to address one point made by the noble Baroness, Lady Finn, on how the Government estimate the level of unknown fraud and error. The best available evidence suggests that the level of fraud and error in unexamined areas of government activity is between 0.5% and 5%. This is based on a Cabinet Office review of around 50 fraud and error estimates that includes every major department. Methods used across government to estimate the extent of fraud and error include statistical sampling, modelling and benchmarking. More detail can be found in the NAO report.
There are already provisions to review the use of powers the Bill conveys on PSFA and reporting relating to counterfraud activity across government. I hope that this explanation reassures noble Lords and that the noble Baroness, Lady Finn, will withdraw her amendment.
Viscount Younger of Leckie (Con)
The noble Baroness might expect one of us to intervene. I understand where she is coming from in terms of reports, because these amendments are basically focusing on the laying of reports. However, outside the Room I have asked in the past about the current level of fraud. The noble Baroness alluded to it, but perhaps she could confirm that at the moment, the estimated level of public sector fraud stands at £55 billion. I know that I have asked for this before but it would be very helpful to have a breakdown of how much public sector fraud there is when it comes to the DWP aspects of the Bill. I think I am asking about the same issues, but it would be extremely helpful to know where we stand right now as a base, in terms of the level and quantity of fraud, and any breakdowns.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I am more than happy to write to the noble Viscount.
Baroness Finn (Con)
My Lords, I thank the Minister for her response. In closing this group, I return to the central theme that underpins Amendments 67 and 68: that transparency is not an optional extra in the fight against public sector fraud but an essential condition of legitimacy, accountability and effectiveness. We are granting significant powers under the Bill, powers to recover, to penalise and to compel, but the exercise of those powers must not exist in a vacuum. The public, and indeed Parliament, must be able to see how those powers are being used and whether they are making a real, measurable difference.
Amendment 67 would ensure that the use of these new powers is reported on annually. It would allow us to track how these tools are deployed, where they are having an impact and where further improvement or scrutiny may be required. It would give Parliament, committees and the public a vital feedback loop, not to micromanage but to hold the system to account and ensure that it continues to serve its intended purpose.
Amendment 68 would complement that by shining a light on the scale of the challenge itself. If we are to treat fraud with the seriousness it demands, we must start by being clear-eyed about the extent of the problem. I am sure that internal estimates are already being produced within government; this amendment simply asks that they be published regularly and in good faith, so that we can judge our progress, measure impact and direct resources more intelligently.
I take the point the Minister made about the estimates ranging from 0.5% to 5%, but I am sure she will agree that, given the enormous amounts of these figures, that that 0.5% to 5% is a rather wide range of figures of billions of pounds. Would she like to expand on that and give me what the actual amounts in 0.5% to 5% might be?
Baroness Anderson of Stoke-on-Trent
It is suggested to me that the actual amount, as touched on by the noble Viscount, is at least £55 billion, but I will be writing to all members of the Committee who are present.
Baroness Finn (Con)
I thank the noble Baroness for her answer. Is that the 5% or the 0.5%? Anyway—
These amendments would not add bureaucracy for bureaucracy’s sake. They would build confidence, encourage departmental responsibility and improve operational performance. They would not be constraints on ministerial power, but a scaffolding of legitimacy around its use. Crucially, they would reflect the truth that we have heard echoed throughout the passage of the Bill, that public trust is hard won and easily lost. If we are to strengthen that trust, we must show not only that we are serious about tackling fraud but that we are equally serious about demonstrating how we are doing so and being accountable for the results.
Once again, these are reasonable, proportionate and practical amendments, and I hope the Minister will reflect on them not as additional burdens but as meaningful opportunities to improve the transparency, responsiveness and long-term success of this legislation.
I emphasise that I am not being a total nuisance in pushing on the quality of data. It is not a new phenomenon; I spent many years in the Cabinet Office tearing my hair out about the quality of data. The one thing that I learned when I was working for the noble Lord, Lord Maude of Horsham, when he was the Minister in the Cabinet Office, was that the quality of the data improves by greater transparency. I just make that point; it is not a criticism of the Government, but a criticism of the data process within government.
In conclusion, I urge noble Lords across the Committee to support the principles in these amendments and, in so doing, to support the kind of open and accountable government that underpins any effective public policy. I beg leave to withdraw my amendment.
Baroness Finn
“(A1) Investigatory and enforcement powers under sections 3 (information notices), 7 (entry, search and seizure powers), 17 (direct deduction orders), and 38 (deduction from earnings orders) of this Act shall not be exercised except as provided for in this section.”Member’s explanatory statement
This amendment, together with others to this Clause in the name of Baroness Finn, would ensure greater ministerial and parliamentary oversight when the powers provided for in this Bill are exercised by authorised officers on behalf of the Minister for the Cabinet Office.
Baroness Finn (Con)
My Lords, our amendments in this group seek to ensure accountability, oversight and the responsible exercise of powers under this part of the Bill. We have heard a great deal about the importance of tackling fraud, but powers alone do not constitute a policy. What matters is how those powers are used, by whom and under what form of oversight. In the current draft of the Bill, those questions are either ignored or answered in ways that place too much discretion in the hands of too few officials with too little scrutiny. It confers far-reaching authority: powers to compel private financial disclosure, to seek warrants for entry and seizure and to deduct directly from earnings or bank accounts. Yet these powers are not tethered to ministerial decision; they are to be exercised by civil servants of no higher rank than that of a higher executive officer, without public record or the consent of Parliament.
Amendment 68A seeks to begin to correct this. It would draw a clear line in statute that no investigatory or enforcement power of this kind may be exercised unless the conditions set out in the new clauses are met. This is the legal threshold that the original Bill failed to define. It would prevent the casual use of extraordinary authority and ensure that the powers granted are used only under procedures that meet the standards expected in a democratic state. Indeed, this amendment goes to the heart of a fundamental principle: where Parliament grants the Executive new and significant powers, particularly powers that interfere with individuals’ rights, privacy or property, those powers must be subject to robust oversight, clear safeguards and direct ministerial accountability.
Clause 66 deals with authorisation—that is, how investigatory and enforcement powers conferred by this legislation are to be exercised and by whom. But, as currently drafted, the clause does not go far enough to ensure that these powers are exercised only within the bounds of proper oversight and democratic legitimacy. Our amendment would make that explicit. It states that:
“Investigatory and enforcement powers”,
specifically those under Clauses 3, 7, 17 and 38,
“shall not be exercised except as provided for in this section”.
In other words, Clause 66 would become the gatekeeper. The amendment would make it clear that powers cannot be exercised by default; they must be authorised and controlled in line with the procedures set out by Parliament.
These are substantial powers. In the right hands, they may be justified to combat fraud, but without proper controls they are powers ripe for misuse or, at the very least, for eroding public trust in the system, and that is why this amendment is necessary. It would draw a clear line in statute that these powers must not be exercised outside the confines of Clause 66. It would anchor the use of those powers in a transparent and accountable framework, where Parliament and Ministers remain answerable for how they are applied.
Furthermore, it would ensure that responsibility for these powers remains with the Minister for the Cabinet Office—a Minister of State answerable to this House and the other place—and that they are not simply delegated indefinitely to a body of authorised officers operating with limited scrutiny or constraint. This amendment would not obstruct the Government’s efforts to recover public funds lost to fraud. It would ensure that, in pursuing that goal, we do not short-circuit the vital checks and balances that underpin good governance.
We have seen in other contexts what happens when enforcement powers are granted without sufficient parliamentary guard-rails: mistakes are made, trust is lost and legal challenge follows. This amendment is designed to avoid that fate by ensuring that Parliament retains a hand on the tiller and that those acting in the name of the state do so under lawful, accountable and proportionate authority. It is a modest and constructive amendment, but it speaks to a bigger principle: the rule of law demands not only power but control, not only action but accountability.
Amendment 68B works in the same spirit as Amendment 68A in locking in ministerial oversight and a clear line of accountability when these powers are used. It requires that the most serious powers—those involving seizure of property, disclosure of personal finances or deductions above £10,000—must be explicitly authorised by a Minister of the Crown. That is not bureaucracy but responsibility. It makes Ministers answerable for the exercise of power in their name. For lesser powers, the amendment requires sign-off by a senior civil servant—no longer a junior official, invisible and unaccountable.
The amendment then goes further still. It compels the Public Sector Fraud Authority to maintain a public register of every instance that these powers are used: who authorised them, when they were used and why. The register must be laid before Parliament. The result is not an illusion of scrutiny but real institutionalised oversight. This amendment seeks to introduce three essential safeguards. The first is ministerial sign-off for the most intrusive or high-stakes enforcement actions. The second is senior Civil Service oversight for all other investigatory powers under this legislation. The third is the creation of an annual publicly accountable register detailing when and how these powers are used.
Let us be clear: the Bill grants significant new powers to officials, including the ability to compel disclosure of personal financial data, to enter and search private premises, and to order the direct deduction of funds from individuals’ bank accounts or wages. These are not powers to be taken lightly; they go to the heart of personal privacy, financial autonomy and, potentially, due process. We have mentioned this a lot during these days in Committee, but we must always remember that these are real powers that will be used against real people in the near future.
Under this amendment, certain especially intrusive powers, such as requiring disclosure of personal financial records, applying for search and seizure warrants, or imposing deduction orders above £10,000, would require explicit approval from a Minister of the Crown. That is not bureaucracy for bureaucracy’s sake; it ensures that decisions with the potential to impact individuals lives in a profound way are not made lightly or by junior officials acting in isolation. This is a proportionate safeguard. It does not stop these powers being used, but it ensures that they are used only when a Minister is satisfied that the action is lawful, necessary and justified—and, crucially, is willing to stand behind that decision in Parliament if challenged. This line of accountability is vital for proper oversight, but it also protects the Minister.
Given the extent and scale of the powers we are discussing, civil servants operating in the name of the Minister but without their knowledge or explicit authorisation is not a responsible set-up. When decisions of this influence are being made on behalf of the Minister, it is also, for the Minister’s sake, vital that they have oversight of what is being done in their name. With this amendment, we avoid the possible scenario of a Minister being hauled before a committee or inquiry and being asked to justify actions of which they had no knowledge. This is important for oversight and accountability, but it is also surely a protection that the noble Baroness would welcome.
For all other enforcement powers, the amendment would require authorisation by an official at senior Civil Service grade or above. This ensures that decisions are taken not at a junior level without experience or understanding of the risks involved but by someone who can weigh up the public interest, the risks of error and the rights of the individual. This is a safeguard that ensures that decisions of this gravity are, rightly, taken by those with experience, and it prevents junior civil servants from falling victim to genuine mistakes that, regardless, have life-altering impacts for those affected.
The third part of this amendment proposes something equally important: a transparency register maintained by the Public Sector Fraud Authority. This register would document the use of these powers, who authorised them, when and on what grounds, and it would be laid before Parliament annually. This is not just an administrative measure but a mechanism of democratic scrutiny. It allows Parliament and the public to see how often these powers are used, by whom and with what justification. It helps to ensure that the powers are used proportionately, not indiscriminately. It provides a deterrent against misuse and it strengthens the legitimacy of the very fraud prevention system we are seeking to bolster.
I support the Government’s ambition to tackle fraud and error in the public sector but, in doing so, we must never forget the old truth: power without accountability breeds mistrust. If we are to ask the public to accept stronger enforcement powers, we must meet that with stronger transparency and oversight. This amendment does just that. It enables action but ensures that action is always tied to accountability. It protects individual rights while enabling the state to recover public money. Above all, it reflects the principle that, where significant powers are exercised by officials, someone at the highest level must be answerable for their use.
Baroness Fox of Buckley (Non-Afl)
My Lords, I consider these three amendments as probably three of the most important amendments that have been tabled so far. I congratulate the noble Baroness, Lady Finn, for explaining why so well. They reflect a number of other concerns—it is not as though we have not heard them before—and articulate well the sense of responsibility that we should all have in this Room, as we scrutinise the Bill, in terms of the enormous amount of power that this legislation gives the state. It is why ministerial and parliamentary oversight is important and cannot, in any way, be neglected.
An astounding amount of power has been created in the name of tackling fraud. I sometimes think that it is disproportionate. Regardless, one would be much more reassured if there was at least the knowledge that this was always done by and answerable to Ministers and Parliament. Parliamentary oversight of something as powerful as this is essential and has been reflected in a number of amendments.
I have some other quick points. I thought that the noble Lord, Lord Palmer of Childs Hill, made a compelling argument for the Covid inquiry. It is true that, when I tell people that I am working on a fraud Bill, without exception they say, “The Covid stuff?” I say, “Possibly not; it is not there”. I listened and heard what the noble Lord said about why it is not appropriate, but I wanted to note that.
Of course, it was an extraordinary period for all the reasons that have been explained, but it has become almost impossible since to work out who said and did what to whom. In other words, there is little in the way of tracing accountability and being clear about ministerial sign-off, so I think the transparency register is a brilliant idea. It is clear; if you have these powers, let us see who signed off. No Minister should be frightened of that, because it is important for public accountability and, as has been said, is a way of ensuring that you are not held accountable for things that you did not sign off. It is a much clearer way of understanding it.
I am rather bemused by the final amendment, Amendment 68C. In my background reading, I have read a lot about the crisis in people who are sceptical about the Bill, who are worried that there are no people who are suitably qualified to see its powers through, so the way that this amendment has been posed seems sensible to me.
It is ironic, because there is an argument familiar to those who have been following the schools Bill about whether everybody who stands in front of a group of pupils needs to be qualified or not. “Not always” is my opinion, as somebody who was a teacher for many years. We should not be too rigid, because that is the nature of teaching. I was qualified, but that did not necessarily guarantee that I was a brilliant teacher. I know that qualifications do not necessarily guarantee anything but, in an instance like this, it seems absolutely right that the people entrusted to carry out these powers have the appropriate qualifications for what are complicated, complex financial matters. I therefore support all three amendments, which I think are very important.
Lord Palmer of Childs Hill (LD)
My Lords, I am also pleased to express support for Amendments 68A, 68B and 68C, which collectively strengthen ministerial and parliamentary oversight of the powers exercised under the Bill by authorised officers on behalf of members of the Cabinet Office, as other noble Lords have said. Ensuring that robust oversight mechanisms are in place is essential to maintaining public confidence in how these significant powers are deployed. By enhancing scrutiny, these amendments help to guarantee that such powers are used appropriately and proportionately, reducing the risk of misuse or error.
Amendment 68C, which requires investigators to hold professional qualifications comparable to those of officers in the Department for Work and Pensions Fraud Investigation Service is particularly welcome. They need professional qualifications. This commitment to professionalism and expertise safeguards the integrity of investigations and reinforces trust in the system. From our perspective, it is crucial that those entrusted with such important responsibilities are properly trained and qualified, ensuring fairness and consistency in enforcement. Together, these amendments produce a more transparent—we always come back to transparency—accountable and professional framework for combating fraud within public authorities.
Let it see the light and, when it does, there is a way of controlling it. Too often, whoever are in government think they know best and ask, “Why do we have to make ourselves open to scrutiny?” But it is that scrutiny, that existence of light from beyond, that makes the legislation fit for purpose. I support these amendments.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, all the amendments in this group relate to Clause 66, which defines an authorised officer. It would be a fair assessment of the position of the noble Baroness, Lady Finn, that she does not trust that, in her words, “junior civil servants to use these powers appropriately”. I will reassure her and the Committee that, first, it is not seniority that is key; it is professionalism and experience. The PSFA has already committed to training its authorised officers, who will utilise powers as set out in Clause 66, and authorised investigators, who will use the PACE powers in Clause 7, to predefined standards as set out by the government counterfraud profession investigator standard guidelines. This will align the PSFA with those using similar powers in other government departments such as HMRC and the DWP.
The team at the PSFA are serious people. Current members of the PSFA’s enforcement unit include former police officers and civil servants who have worked in investigatory roles across a number of government departments. They have experience of conducting counterfraud investigations and bring with them a wealth of relevant experience, skills and knowledge. I was tempted to get all their CVs to read out, but I thought that that may prolong Committee a little.
First, the powers in Clause 7 can be used only by authorised investigators specifically authorised to use the PACE powers and not authorised officers. The amendment requiring that those powers can be exercised only as provided in Clause 66 would render Clause 7 unusable.
Secondly, although the Minister will delegate the operation of these powers to authorised officers, the Minister will retain accountability and strong oversight. There will, of course, be strong ministerial interest in the effective, safe and value-for-money use of these powers. Noble Lords will know that I cannot speak for all future Ministers, but the current Minister meets individually with the chief executive of the PSFA very regularly.
Thirdly, the proposed delegation of powers in this Bill to authorise officers follows precedent elsewhere, including in HMRC and the DWP.
Fourthly, the amendment also calls for records of decision-making. In criminal investigations, the PSFA is already bound by legal obligations to record decisions and will do so through a dedicated case management system and the internal review process. The PSFA will have similar processes for civil cases.
Finally, the powers in the Bill are subject to review by an independent person as specified under Clause 64, and will be subject to inspections by His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services. Inspection reports will be publicly available and those by the independent person will be laid before Parliament.
I think it would be helpful if I gave some additional clarity on some issues raised by noble Lords. The Civil Service grade that an authorised officer would be required to hold has been a theme of some debate in your Lordships’ Committee, so I think some clarity will be helpful. The Bill does not stipulate a grade that an authorised officer needs to hold. The grade is less critical than the training they undertake. However, the PSFA anticipates that, in practice, all authorised officers will be of at least HEO grade. This is comparable to other organisations such as HMRC and the DWP. Clause 66 does, however, stipulate that a review must be conducted by an authorised officer at least one grade senior to the officer involved in the initial decision.
Baroness Finn (Con)
I thank the noble Baroness for her response. In closing, I will return to the core proposition that underpins the three amendments that we have brought forward in this group, that the legitimacy of power lies not in its breadth but in its accountability. The Bill seeks to equip the Government with the means to tackle a serious and evolving threat to the public purse, but the scale and sensitivity of the powers it confers demand that we legislate not only for action but for responsibility. I am very grateful for the support of the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer.
I will correct one thing before I continue. I did not mean to imply that I do not trust relatively junior officials to exercise these far-reaching powers properly. The nature of what I am concerned about, and what these amendments seek to address, is the accountability of those civil servants for their actions to the Minister and therefore to Parliament. I am concerned that not enough direct accountability is built into the PSFA. I know we referenced the independent reviewer, but the independent reviewer is looking at the actions afterwards and is not directly accountable to the Minister for the actions of the officials. We are all aware of what happened with the Horizon scandal, and it is that sort of that scenario that we are seeking to avoid.
Amendment 68 would establish a clear statutory foundation for the exercise of investigatory and enforcement powers, ensuring that these are not left to broad discretion or quiet delegation but are explicitly bound by the structures and intentions set out by Parliament. That clarity matters. It protects the integrity of the system but also protects those within it from the charge, or the risk, of acting beyond their mandate.
Amendment 68B would strengthen that structure by ensuring that certain intrusive or high-stakes decisions are subject to senior oversight, and that those decisions are visible to Parliament and, where appropriate, to the public. It is a safeguard for the individual, but also a protection for Ministers, who ought not to be asked to account for actions they neither authorised nor even knew of. The transparency register it proposes is not simply a record-keeping tool but a mechanism of democratic accountability and a signal to the public that these powers will not be exercised in darkness.
Amendment 68C would complement both previous amendments by insisting on professionalism. It asks, quite reasonably, that those entrusted with powers to investigate, search, seize and compel be qualified to do so. These are serious, often life-altering powers; they must be wielded by people who understand not just the legal thresholds but the ethical and human responsibilities that come with them.
Together, these amendments would provide the structure and safeguards that the Bill so plainly lacks. They do not remove powers; they make those powers defensible. They do not oppose the work of the Public Sector Fraud Authority but would give it legitimacy. If Parliament is to authorise intrusion into personal records, entry into homes, seizure of property and the imposition of financial penalties, it must be satisfied that those powers are used lawfully, proportionately and by people who are properly trained to use them. These amendments are not decorative; they are the minimum requirement for a just and serious law.
The state must be equipped to confront fraud, but it must do so in a way that preserves trust in the institutions it seeks to defend. That trust is not automatic; it is earned through transparency, proportionate action and clear lines of accountability. These amendments offer a constructive, proportionate and carefully designed way to embed those principles into the fabric of the Bill. They do not oppose the Government’s aims; they reinforce them by ensuring that enforcement is not only strong but legitimate in the eyes of those it affects.
When we grant the Executive the tools to act on our behalf, we also assume the duty to ensure that those tools are used wisely, lawfully and with proper scrutiny. These amendments are our opportunity to meet that duty, and I urge the Minister and noble Lords across the Committee to support them. I beg leave to withdraw.
Baroness Finn
“Fraud risk management duties for public authorities(1) This section applies to public authorities responsible for spending schemes or programmes involving total annual payments or disbursements exceeding £100 million (“relevant spending schemes or programmes”).(2) A public authority to which this section applies shall—(a) register each relevant spending scheme or programme with the Minister for the Cabinet Office via the Public Sector Fraud Authority before the start of each financial year;(b) conduct and submit to the Authority a fraud risk assessment for each registered scheme, detailing identified fraud risks and planned mitigations;(c) prepare an annual fraud measurement plan specifying the methods by which fraud rates will be determined, including representative sampling or comparable statistically valid methods, to ensure robust estimation of fraud and error rates.(3) The Authority shall—(a) independently verify each public authority’s reported fraud rates annually, employing rigorous audit, sampling, or comparable statistically robust methods;(b) publish annually, in a dedicated report laid before Parliament—(i) the fraud rates reported by each public authority;(ii) the independently verified fraud rates determined by the Authority;(iii) an assessment of the accuracy and effectiveness of each public authority’s fraud risk management measures.(4) Each public authority shall publish in its annual accounts—(a) its submitted fraud risk assessment;(b) the fraud rates as determined independently by the Authority;(c) an evaluation rating (Red-Amber-Green) assigned by the Authority reflecting the public authority’s compliance with and effectiveness of its fraud risk management duties.(5) The evaluation rating assigned by the Authority under subsection (4)(c) shall assess—(a) adequacy and accuracy of fraud rate measurement methodologies;(b) effectiveness of implemented fraud risk mitigations;(c) compliance with statutory duties set out in this section.(6) Where the Authority finds significant discrepancies between reported fraud rates and independently verified fraud rates, or otherwise finds significant inadequacies in the public authority’s fraud management practices, it shall issue a notice requiring the public authority to—(a) submit within 30 days a detailed action plan specifying corrective measures;(b) implement corrective measures as directed by the Authority within a timeframe specified in the notice.(7) Compliance by public authorities with their obligations under this section shall be subject to audit by the Comptroller and Auditor General, and the findings shall form part of their reports to Parliament.”Member’s explanatory statement
This new Clause seeks to impose stricter fraud risk management duties on public authorities that oversee spending schemes exceeding £100 million annually, by requiring these authorities to register schemes, conduct fraud risk assessments, measure fraud using robust methods, and publish findings. The Public Sector Fraud Authority would verify reported fraud rates, publish comparisons, assign performance ratings, and enforce corrective actions for poor performance. Compliance would be subject to independent audit and parliamentary scrutiny.
Baroness Finn (Con)
My Lords, if Amendment 68 demands that the Government publish the scale of the fraud, Amendment 68D goes further. It would require public authorities to understand where fraud risks actually lie. Without that, any national figure is a guess: unverified, unanchored and easily manipulated.
The reason that this matters is not theoretical. It has already gone wrong. HMRC once claimed that just 3.6% of R&D tax credit claims involved error or fraud. After proper scrutiny, the truth emerged: 16.7% of all claims were in fact fraudulent or incorrect, costing the taxpayer over £1.1 billion a year. This was not an isolated failure. The National Audit Office found that of 63 official fraud and error assessments conducted since 2014, nearly half were unreliable. That covered £224 billion of public spending. No Government can claim to be serious about fraud while tolerating this level of ignorance in their own accounts.
Amendment 68D would stop all that. It would impose specific legal duties on every public body that spends more than £100 million a year. It would introduce a new clause placing clear, enforceable fraud risk management duties on public authorities responsible for major spending programmes. It would set out a practical and proportionate framework for improvement in the Bill, improving fraud risk management in public authorities and allowing clearer oversight of how departments are working to counter fraud in their own operations. This builds on the principle that we made clear on the first day in Committee: that the Bill should encourage public authorities l to develop their own counter-fraud capabilities and cultures. The PSFA should be a mechanism through which this process is facilitated, not offloaded.
Our amendment seeks to further incorporate this purpose in several ways. First, it would introduce a registration requirement. All public authorities overseeing schemes with annual disbursements over £100 million would be required to register those schemes with the Public Sector Fraud Authority at the start of each financial year. This would ensure visibility and that large, high-risk schemes do not fall through the cracks. Secondly, it would require each public authority to assess fraud risks involved and submit those assessments, which would be a detailed analysis, to the Public Sector Fraud Authority. This practice would work to further a public authority’s appreciation for the risks it faces and the measures it is obliged to take, and would share out the workload of the PSFA by allowing risks to be identified early and early intervention to occur.
Thirdly, the amendment would require authorities to prepare an annual fraud measurement plan, using statistically valid methods, not guesswork or unverified assumptions. If we are serious about reducing fraud, we must be serious about measuring it properly. What gets measured gets managed.
Fourthly, and crucially, the amendment would give the Public Sector Fraud Authority the power to independently verify each public authority’s reported fraud rates and to publish its findings side by side with the authority’s own figures. That transparency is vital. Parliament and the public deserve to know not only what departments say about their fraud levels, but what an independent review actually shows. It must evaluate the quality of the public authority’s fraud risk controls, and then assign them a green, amber or red rating. These ratings will need to be published annually in each authority’s accounts. This drives accountability and allows Parliament to see at a glance where strong practice is in place and where urgent action is needed. When there are significant discrepancies or poor performance, the amendment would empower the authority to require corrective action and brings in the Comptroller and Auditor-General to provide independent audit and scrutiny.
This is about embedding a whole-system approach to risk, from the point of registration to external audit. This holds public authorities to account not only for the fraud they suffer, but also for the action they take to identify and prevent it. These are clear and reasonable demands, and they should be welcomed by the Minister as a complementary system which would make the work of the PSFA easier and more effective.
This is not red tape; this is basic stewardship of public money. If a private sector organisation with £100 million in outgoings failed to properly assess risk, measure loss or independently verify results, we would call it negligence. Why should the public sector be held to a lower standard? This amendment offers a road map to real improvement, not through centralisation or command and control, but through transparency, accountability and independent oversight. It would create a clearer line of sight from fraud risk to fraud response, helping us to target prevention, improve data and strengthen public confidence.
In conclusion, Amendment 68D seeks to deliver something that the Bill must ultimately be judged by—not the breadth of powers granted to central government but the clarity and strength of the systems we put in place to prevent fraud in the first place. This amendment is not about adding burdens; it is about embedding responsibility. It would ensure that public authorities responsible for large-scale spending schemes take ownership of their fraud risks and are held accountable for how they assess, monitor and manage them.
Lord Palmer of Childs Hill (LD)
My Lords, I warmly welcome Amendment 68D, which proposes a comprehensive and rigorous approach to fraud risk management for public authorities overseeing significant spending schemes. The amendment reflects a proactive commitment to safeguarding public funds by requiring authorities managing more than £100 million annually to register their schemes, conduct thorough fraud risk assessments and use robust methods to measure and report fraud. Such measures are vital to identifying vulnerabilities early and taking meaningful action to prevent loss, which aligns closely with my party’s values of transparency—which I keep coming back to—and responsible stewardship of public money.
Moreover, the role assigned to the Public Sector Fraud Authority in verifying fraud rates, publishing comparisons and enforcing corrective actions would introduce a much-needed layer of independent oversight and accountability. The requirement for independent audit and parliamentary scrutiny would further strengthen this framework in ensuring that these responsibilities are not only carried out diligently but openly reported and reviewed. The amendment offers a significant opportunity to improve fraud prevention at scale, protect taxpayers and build public trust in how government spending is managed.
I fully support this proposed step forward. I relate this to my time on Barnet London Borough Council, when I chaired the audit committee. The idea that audit can make things work better and that scrutiny and bringing things into the open will form better department management as well as better control of finances was the premise of the world I lived in when I chaired the committee for eight years. I therefore support the amendment proposed by the noble Baroness, Lady Finn.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, tackling public sector fraud is a foremost priority for this Government. Amendment 68D raises interesting points. It seeks to put some of the work that the PSFA does with departments and public bodies to improve their management of fraud on a statutory basis, and to explicitly have it cover all government schemes or programmes over £100 million.
While we have been debating the fraud investigation activities of the Public Sector Fraud Authority, for which we believe there is a very strong case, we have understandably not given as much time to the wider responsibilities the PSFA already holds, as detailed in its published mandate—which is wonderful bedtime reading, as per my theme; I like to give bedtime reading on each day in Committee. This is not part of the Bill, but it might be useful for noble Lords if I spend a moment to update the Committee on the other work of the PSFA.
The PSFA works with departments to improve their understanding of fraud and to improve their action on the risk of fraud through a range of modern techniques. Fraud investigation is, of course, only one part of this. Alongside this, public bodies need effective capabilities to understand and reduce the risk of fraud, through tools such as fraud risk assessment and fraud measurement, which this proposed amendment covers, and also through intelligence, fraud prevention, deterrence, process design, the use of data and analytics, fraud detection and the shaping of an organisation’s culture.
I would like to set out some key principles around how the Government approach fraud risk. Accounting officers within departments are responsible for managing public sector organisations’ risks, including fraud. Each organisation faces a range of fraud risks specific to its business, from internal and external sources. Managing Public Money—also a fascinating read—already sets out that, for any new major area of spend with high fraud risk, departments shall assess the risk of and impact from fraud at the outset. This identifies the potential for fraud and the different impacts that fraud could have for the spend area.
In high-risk areas, once spending is approved, this results in the development and continued maintenance of a detailed fraud risk assessment. High-risk areas would be the highest areas of government spending where fraud measurements are not yet in place and which have been identified as high risk by a mandatory initial fraud risk assessment process. The PSFA was introduced with a published mandate that openly sets out how it will work with departments and public bodies and what is expected of all parties. Government departments and public bodies must comply with this mandate. The mandate sets out that public bodies must use initial fraud impact assessments, in line with Managing Public Money, submit quarterly data returns on the levels of fraud and error they find and report on their progress against their action plans and key metrics.
Departments and public bodies are also required to ensure that they adhere to the counterfraud functional standard. This is independently assured by the Public Sector Fraud Authority on a rolling basis. The functional standard outlines the expectations for managing counterfraud, bribery and corruption activity. It clarifies the basics that public bodies should have in place, promoting efficient, coherent and consistent management across the public sector. The PSFA’s published mandate enables it to conduct expert reviews on public bodies’ fraud work. To date, the PSFA has reviewed 31 public bodies against the counterfraud functional standard. The PSFA’s mandate also requires it to publish a report on fraud across government annually. This includes the levels of detected fraud and corruption and associated error in departments and public bodies—excluding tax and welfare, as these are published elsewhere. Fraud measurement exercises are used as a tool to understand fraud risk in the highest areas of loss.
The Government have also created a high fraud risk portfolio, in line with the PSFA’s mandate, that details the highest risk areas of government spending where there are not yet fraud measurements in place. The Government decided that schemes on this portfolio should undertake fraud measurement exercises and report these to the centre. This is currently being tested with the current schemes on the portfolio, where it is operating on a “comply or explain” model, enabling us to assess the burden and impact of this approach. The PSFA will continue encouraging and supporting departments to do more targeted measurement. Just last year, the government counterfraud profession launched its first qualification for fraud measurement practitioners.
The amendment also recommends that all the findings are reported to the National Audit Office, in the form of the Comptroller and Auditor General. The PSFA’s mandate already enables the PSFA and the NAO to work very closely to share information on public body performance in dealing with fraud:
“The PSFA will openly and regularly update on its activities and the data it holds to the National Audit Office (NAO). This will include performance data and the compliance with mandatory processes and data requests”.
In addition, this is an area that the Public Accounts Committee has paid keen attention to, and the PSFA has committed to share the high fraud risk portfolio with the committee on reading-room terms.
I hope that the collective measures I have outlined reassure noble Lords that the Amendment 68D would serve only to replicate responsibilities and duties that already exist and that the noble Baroness will therefore withdraw the amendment.
Baroness Finn (Con)
My Lords, as we close the debate on this amendment, let us return to first principles. Public money must be protected, not just recovered after it is lost. That protection starts not with more powers but with stronger systems—systems that encourage responsibility, enable scrutiny and reward transparency.
Amendment 68D would be a practical, proportionate step towards that goal. It sets out a clear set of duties for public authorities that manage major spending schemes—duties that mirror the kind of basic risk management we would expect from any serious organisation handling significant funds. It is not, as I have emphasised, about adding layers of bureaucracy but about lifting the standard of governance across government. It is about saying to departments and public authorities, “If you are entrusted with large sums of public money, you must also be prepared to demonstrate how you protect that money from fraud, and you must do so in a way that is transparent, measurable and independently verifiable”.
This amendment is not just good policy; it is good practice. It would ensure that those with front-line responsibility for major schemes understand and own their risk landscape. It would support the PSFA by creating a consistent baseline of risk information and freeing up its capacity to focus on oversight and intervention, rather than firefighting. It would give Parliament and the public a clear view of where fraud controls are working and where they are not.
The red/amber/green system offers not just transparency but motivation. It highlights good performance, surfaces areas of concern and gives departments an incentive to improve. That is how you change behaviour: not by wishful thinking or ministerial Statements but by law. If a department reports low fraud rates and the authority finds something very different, it must act. It must issue a notice, demand an action plan and ensure that changes are made. If no action is taken, the Comptroller and Auditor-General can audit compliance and report to Parliament. That is what proper fraud prevention looks like. It does not wait for the scandal; it creates a system that sees the risk before the damage is done.
Amendment 68D is not an optional refinement; it is the core of the Bill’s purpose restored. Without it, we will once again be left with false confidence, unreliable data and billions lost in plain sight. In short, this amendment is a road map for better practice—one that I believe both Parliament and the Government should support. I beg leave to withdraw.
Baroness Finn
Member’s explanatory statement
This amendment seeks to probe the Government’s openness to specifying that the chair of the Public Sector Fraud Authority should be independent.
Baroness Finn (Con)
My Lords, our amendments in this group seek to probe the Government on how the PSFA is constituted; they will, we hope, allow some greater clarity on what sort of body the Government are trying to construct. We seem to have a halfway house between an arm’s-length body—an ALB—and an internal team, which fails to meet established appointment practices and to incorporate clear lines of accountability and oversight. I emphasise at this stage that these are probing amendments because I am perplexed about the status of the PSFA—that is, whether it has the status of an executive agency, an ALB or what—and about what the definition might be.
Amendments 68E and 68F seek to clarify that the chair of the Public Sector Fraud Authority should be not merely a non-executive member but an independent non-executive member. This touches on a question that goes to the very heart of the authority’s credibility: who watches the watchdog? The Public Sector Fraud Authority is being established to play a leading role in detecting, deterring and recovering fraud against the public purse. It will hold a range of enforcement powers and a remit that spans across Whitehall and beyond. For such a body to command confidence, not just among Ministers and departments but in Parliament and with the public, it must be seen to operate with integrity and impartiality, and that starts at the top.
This amendment probes the Government’s willingness to state, in the Bill, that the chair of this powerful body must be independent. Here, independence does not mean hostility to government, nor an automatically dissenting voice; it means freedom from internal departmental influence and the credibility to challenge poor practice where it may occur, including within the Cabinet Office itself.
As currently drafted, Schedule 2 states that the Minister is to appoint non-executive members, but that does not guarantee independence. By inserting the word “independent”, this amendment would send a clear signal that the Government recognise the importance of public trust and that scrutiny is not a threat to good governance but a precondition of it. Other public oversight bodies set a useful precedent: the National Audit Office, the office for Budget Responsibility and the Financial Conduct Authority. All of them understand that independence at the top is essential to their authority. If the PSFA is to live up to its remit, particularly when it may need to challenge entrenched practices or politically sensitive departments, then it, too, must have that independent leadership accountable to a Minister who is accountable to Parliament.
Lord Davies of Brixton (Lab)
My Lords, my noble friend Lord Sikka very much regrets not being here today, for totally understandable personal reasons.
Lord Davies of Brixton (Lab)
Could the noble Lord wait, please?
As the noble Lord has reminded me, my noble friend’s amendments are in the next group. My noble friend Lord Sikka will not be here and the lead amendment will not be moved; however, the issues raised in those amendments are directly relevant to this group. In order for us obtain further clarification, it would be helpful to the Committee if my noble friend the Minister could, in our discussion on this group, give a broad indication of the response that would have been made to the following group so that those Members who are interested can consider what has been said and take a view on whether the specific issues that would be raised in the next group, but are germane to this group, should be raised on Report. I think that it would be helpful to have the matter that would be raised in the following group clarified in answer to this group because, to be honest, they totally overlap.
Baroness Bennett of Manor Castle (GP)
My Lords, I will speak now, as I think it is probably the appropriate moment; I am sorry if I have jumped in over the noble Viscount, Lord Younger. On the next group, I was going to apologise to the noble Lord, Lord Sikka, and say that I would have signed his amendments had I seen them and organised myself in time; however, the noble Lord, Lord Davies, is absolutely right that the two groups fit together.
There are just a couple of things that I want to say in relation both to the amendments addressed by the noble Baroness, Lady Finn, and to those tabled by the noble Lord, Lord Sikka. Independence is absolutely crucial but I am not sure that writing in the word “independent” is quite the right way to approach this. I am not a lawyer but how you define whether someone is independent strikes me as a difficult task; it might exclude someone who has donated a large amount of money to a political party in order then to be appointed to that job, for example, but there are a lot more finer cases than that. This is why I preferred the amendments put down by the noble Lord, Lord Sikka, which would allow a review by the Treasury Committee; to me, that is genuinely independent oversight of a body to ensure that it is independent. None the less, I will address this group of amendments, together with those from the noble Baroness, Lady Finn.
I will pick up the points made earlier by the noble Baroness, Lady Fox, who is not currently in her place, about the level of public distrust that has arisen since the situation with Covid procurement. I was recently on LBC television talking about defence procurement—a subject that is very much in the news at the moment—when I was quite surprised to see, across a broad political spectrum of people, the level of distrust that there is around government defence procurement and the issues that have arisen in that space. As the noble Baroness, Lady Finn, said, these are really important issues of public trust. We know that we have a huge problem with public trust in our institutions at the moment.
Lord Palmer of Childs Hill (LD)
My Lords, I am pleased to support these amendments, which, once again, seek to enhance the independence, transparency and accountability of the Public Sector Fraud Authority. By probing the Government’s openness to specifying that both the chair and the non-executive members of the authority should be independent—whatever that means—Amendments 68E and 68F reinforce my party’s commitment to ensuring that public bodies operate free from undue political influence. Independence at these levels is crucial for maintaining public trust and guaranteeing impartial oversight of fraud prevention and recovery efforts.
Furthermore, Amendments 69A and 71A, which seek to clarify and limit ministerial powers around appointments and eligibility criteria, would strengthen the governance framework of the authority, promoting fairness and transparency in its leadership. The requirements in Amendments 74A and 74B for timely publication of annual reports and controls on authorising authentication would help to ensure openness and proper organisational integrity.
Finally, Amendments 74C and 74D would confirm that the Minister retains responsibility for functions even when extended to the authority, which would balance operational independence with necessary political accountability. Collectively, these amendments embody my party’s values of good governance and robust oversight, which are essential to protecting public funds and enhancing the effectiveness of fraud prevention. I heartily support these amendments as part of the transparency to which we are committed.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I thank noble Lords for raising the important issues of independence, recruitment, reporting and powers should the PSFA become a statutory body. The purpose of creating a statutory body is to place individual enforcement decisions at arm’s length from Ministers, but we have been clear that, while the PSFA enforcement unit is small, creating a new statutory body is not proportionate, so the Government will not commence Schedule 2 in the immediate future.
The approach in Schedule 2 adheres to published guidance in the Public Bodies Handbook. It follows the same approach used elsewhere, such as Schedule 1 to the Victims and Prisoners Act, which established the Infected Blood Compensation Authority. Amendments 68E and 68F seek to insert “independent” before the description of the chair and non-executive directors. These are ministerial appointments, but I remind your Lordships that the Government have been clear that, should the PSFA be established as a statutory body, its enforcement decisions would be fully independent of the Minister. To ensure this, the chair and non-executives will be public appointments and will follow the Cabinet Office Governance Code on Public Appointments, which is overseen by the Commissioner for Public Appointments. This will ensure that their recruitment is transparent and includes an independent member on the recruitment panel. This is similar in approach to the Infected Blood Compensation Authority, which uses the same legislative language. Amendment 69B seeks to insert words to a similar effect in respect of the chair appointing the chief executive and executive board members, so it is linked to these amendments.
In respect of Amendments 71A and 74B, which seek to remove the Minister’s power to make regulations on the eligibility rules for members of the PSFA and to prevent the PSFA from authorising a person who is not a board member of the authority authenticating its seal, it is important to note these are common provisions in the creation of public bodies. The seal is the means by which the PSFA will be able to enter into deeds and contracts, such as leasing property, and authenticating the seal just means signing next to it to show that the deed has been approved. Although authentication would usually be done by a board member of the PSFA, we have built in a degree of flexibility so that it can be delegated, for instance to its legal officers, should the need arise. As noted, the Infected Blood Compensation Authority and other public bodies such as the independent monitoring authority, established in the European Union (Withdrawal Agreement) Act 2020, have similar provisions. They serve to improve the efficacy and administrative efficiency of such public bodies.
As to Amendments 74C and 74D, which would see the Minister retain responsibility for the exercise of functions in the Act after they have been extended to the PSFA, and Amendment 69A, which would make the chief executive and other executive members’ ministerial appointments, I refer your Lordships to my earlier point. One essential reason in setting up the PSFA as a statutory body would be to remove any perception of potential political interference. These amendments would be counter to that policy intention.
Finally, Amendment 74A would require the PSFA to publish its annual report within three months of the end of the financial year. The Bill currently stipulates, in paragraph 12 of Schedule 2, that this should be as soon as reasonably practicable after the end of each financial year. That is for good reason. The accounts will need to be reviewed by the Comptroller and Auditor-General, whom we would then need to commit to this timeline. Additionally, Erskine May, our own guidance on reporting, notes that accounts, together with an NAO report, must be laid no later than the following January. A statutory PSFA would follow Erskine May, as well as His Majesty’s Treasury’s guidance on Managing Public Money and the annual Government Financial Reporting Manual, to ensure that its report follows best practice.
I turn to the specifics of the points that have been touched on. The noble Baroness, Lady Finn, asked why eligibility regulations under paragraph 6(1) of Section 2 are useful. The ability for a Minister to lay eligibility regulations in respect of a board’s membership is a common feature in setting up public bodies. They can be used, for example, to safeguard independence, ensure expertise at its inception, or improve public trust by excluding certain individuals or demanding certain attributes. Examples might include barriers against those who are currently politically active, or have conflicts of interest or criminal convictions.
With regard to powers being exercised on a Minister’s behalf and safeguarding, there are numerous safeguards built into the Bill, such as independent oversight of all the provisions by external bodies. There are also obligations to obtain the permission of the courts for debt recovery and rights of appeal to the First-tier Tribunal. Furthermore, authorised officers will be civil servants, obliged to follow the Civil Service Code, which requires that they act solely according to the merits of the case.
In response to my noble friend Lord Davies, I am more than happy, especially given the circumstances with our noble friend Lord Sikka, to write to him with all the points of the speech I would have responded with, and I am happy to share that with all Members of the Committee—that pertains to group 9.
I take the opportunity to reassure the noble Baroness, Lady Bennett. Will any roles be outsourced? No—we are clear that they have to be authorised officers as defined in Clause 66: they have to be civil servants.
I hope that, with those reassurances, noble Lords will not press their amendments and we can move forward to the next group.
Baroness Finn (Con)
My Lords, as I emphasised at the outset, across this group our amendments have been probing in nature, and I am grateful for some of the clarity that the Minister has given. We are seeking clarity, not confrontation. We are trying to establish whether the Government see the authority as a truly independent body with the authority to challenge where needed, or simply as a well-staffed extension of the Cabinet Office. In seeking those answers, we are also pressing for a model of governance that ensures effectiveness, credibility and accountability from day 1.
At the heart of our amendments is a simple but critical question: how do we make sure that the watchdog has teeth and is not quietly tethered by ministerial influence? Amendments 68E and 68F speak to the need for independence at the top through a chair who is genuinely independent, free to challenge, credible in doing so and accountable to the Minister. We know from other public oversight bodies that institutional trust starts at the top so, if the Government truly believe in empowering the PSFA to be a fearless voice in the fight against fraud, they should have no hesitation in embracing the modest strengthening of the governance framework.
Likewise, Amendments 69A and 69B ask fair and important questions about how the PSFA’s executive leadership will be chosen. We are not seeking to strip the chair of responsibility; we are asking whether there is a clearer, more robust process that would enhance the authority’s legitimacy and avoid the risk of it becoming either too insular or too directed from above. Ensuring that executive appointments are overseen by a group of independent non-executives, rather than a single individual, is possibly an act of good governance. I am grateful to the Minister for clarifying that the independent non-executive appointments will follow the guide for public appointments.
Amendment 71A, meanwhile, takes on a different but equally significant concern: the breadth of ministerial regulation-making powers over eligibility for authority membership. In a body designed to scrutinise government spending and investigate fraud, the power of a Minister to decide who is eligible to serve—and more worryingly, who is not—is a red flag. The Government may never intend to use this power in order to silence critical voices or to manipulate the composition of the authority, but the mere fact that such a power exists could undermine confidence in the PSFA’s independence. This amendment seeks simply to close that door before it becomes a problem; it should not really be necessary if the full OCPA guidance is being followed.
The final amendments in the group, Amendments 74A to 74D, reinforce the need for clarity, transparency and constitutional responsibility. Whether it is ensuring the timely publication of reports, safeguarding who may speak for the authority with the official seal or distinguishing between operational delivery and retained ministerial accountability, these changes are about shoring up the credibility of the entire framework. Together, these amendments ask the Government to take seriously the institution that they are creating.
I know that the noble Lord, Lord Sikka, did not move his amendments; I am grateful for the comments from the noble Lord, Lord Davies of Brixton. I want to take the liberty, if I may, of saying that a lot of what the noble Lord said chimes with the need for public accountability and transparency, as well as with a number of the points that we have been making. Although we recognise the vital importance of oversight, we have concerns that some of the amendments might create an unnecessary, burdensome framework that might impede the PSFA’s operational effectiveness; for example, the requirement for all meetings to be open to the public could present a significant operational concern. However, we understand the purpose and principle behind what the noble Lord, Lord Sikka, is trying to do.
Turning back to this group, these amendments ask the Government to take seriously the institution that they are creating. If the Public Sector Fraud Authority is to succeed—we all want it to—it must be allowed to operate with genuine independence, proper oversight and clear lines of public accountability. That is not bureaucracy or delay; it is simply how we build a body that the public can trust and on which Parliament can rely. We offer these proposals not to frustrate the Government’s ambition but to strengthen it by ensuring that this new authority is not only operationally capable but constitutionally sound. I urge the Minister to reflect on the questions asked and to work with us to ensure that the governance of the PSFA lives up to the seriousness of its mission. I beg leave to withdraw.
Lord Vaux of Harrowden
““reasonable grounds” do not include generalisations or stereotypes of certain categories of people, for example that members of a particular social group are more likely to be involved in fraudulent activity than others, irrespective of whether they are made through entirely automated, partially automated, or non-automated processes;”Member's explanatory statement
This amendment, and another in the name of Lord Vaux of Harrowden, clarifies that people cannot be investigated for fraud based on stereotypes and generalisations, be this through the use of algorithms, human assessment, or a combination.
Lord Vaux of Harrowden (CB)
My Lords, we have been debating Part 1, which gives substantial powers to the Cabinet Office when the Minister has reasonable grounds to suspect fraud, and we are about to kick off on Part 2, which gives substantial powers to the DWP. Those include police-style powers to enter private premises, search them and seize property, as well as powers to demand information. Those are potentially very intrusive powers, so it is essential that they can be exercised only when it is genuinely appropriate to do so.
The two amendments in this group cover both Parts 1 and 2, and they provide essential clarification as to how the DWP and PSFA should interpret the legal threshold for most of the investigative powers in the Bill, which is the requirement to have “reasonable grounds” of suspicion of fraud.
The amendments are intended to ensure that, when the DWP and PSFA are exercising their investigative powers under this Bill, reasonable grounds do not include generalisations or stereotypes of certain categories of people—for example, that members of a particular social group are more likely to be involved in fraudulent activity than others. Investment in data analytics and other emerging technologies, such as AI, for fraud risk detection is inevitably, and probably rightly, increasing. The Government have signalled their intention to turbocharge AI and to mainline AI into the veins of the nation, including the public sector.
The Government are, as we speak, trying to pass the Data (Use and Access) Bill, which would repeal the current ban on automated decision-making and profiling of individuals. The DWP has invested heavily in artificial intelligence, widening its scope last year to include use of a machine-learning tool to identify fraud in universal credit advances applications, and it intends to develop further models. This is despite a warning from the Auditor-General in 2023 of
“an inherent risk that the algorithms are biased towards selecting claims for review from certain vulnerable people or groups with protected characteristics”.
The DWP admitted that its,
“ability to test for unfair impacts across protected characteristics is currently limited”.
There are real concerns about the inaccuracy of algorithms, particularly when such inaccuracy is discriminatory, when mistakes disproportionately impact a certain group of people. It is well evidenced that machine-learning algorithms can learn to discriminate in a way that no democratic society would wish to incorporate into any reasonable decision-making process about individuals. An internal DWP fairness analysis of the universal credit payments algorithm, which was published only due to a freedom of information request, has revealed a “statistical significant outcome disparity” according to people’s age, disability, marital status and nationality.
This is not just a theoretical concern. Recent real-life experiences in both the Netherlands and Sweden should provide a real warning for us, and are clear evidence that we must have robust safeguards in place. Machine-learning algorithms used in the Netherlands’ child tax credit scandal learned to profile those with dual nationality and low income as being suspects for fraud. From 2015 to 2019, the authorities penalised families over suspicion of fraud based on the system’s risk indicators. Tens of thousands of families, often with lower incomes or belonging to ethnic minorities, were pushed into poverty. Some victims committed suicide. More than a thousand children were taken into foster care. The scandal ultimately led to the resignation of the then Prime Minister, Mark Rutte.
In Sweden in 2024, an investigation found that the machine-learning system used by the country’s social insurance agency is disproportionately flagging certain groups for further investigation over social benefits fraud, including women, individuals with foreign backgrounds, low-income earners and people without university degrees. Once cases are flagged, fraud investigators have the power to trawl through a person’s social media accounts, obtain data from institutions and even interview an individual’s neighbours as part of their investigations.
The two amendments that I have tabled are based on paragraph 2.2 of Code A to the Police and Criminal Evidence Act 1984, in relation to police stop and search powers, which states that:
“Reasonable suspicion cannot be based on generalisations or stereotypical images of certain groups or categories of people as more likely to be involved in criminal activity”.
These amendments would not reduce the ability of departments to go after fraud. Indeed, I argue that by ensuring that the reasonable suspicion is genuine, rather than based on stereotypes, they should improve the targeting of investigations and therefore make the investigations more effective, not less so.
The Bill extends substantial intrusive powers to the Cabinet Office, the PFSA and the DWP, and those powers must be subject to robust safeguards in the Bill. The use of “generalisations or stereotypes”, whether through automated systems or otherwise, should never be seen as grounds for reasonable suspicion. I hope the Minister will see the need for these safeguards in that context, just as they are needed and exist in relation to stop and search powers. I beg to move.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Lord, Lord Vaux of Harrowden, and to speak in favour of Amendments 75A and 79A, to which I have attached my name and which noble Lords will see have rather broad support in political terms—perhaps not the broadest I have ever seen but it is certainly up there. I must also pay tribute to Justice, a cross-party law reform and human rights organisation that is the UK section of the International Commission of Jurists, which has been most determined in ensuring that these issues are raised in this Bill, in this context.
I have already addressed these issues in the Chamber in a number of amendments to the Employment Rights Bill that I tabled and spoke to. I am not going to repeat all that I said there, but I cross-reference those amendments. If noble Lords want to find out more about this issue, there is an excellent book by the researcher Shannon Vallor, The AI Mirror, which is a useful metaphor for understanding the risks whereby we live in a biased society in which those biases risk being reflected back to us and magnified by the use of artificial intelligence and algorithms. That is very much what these two amendments seek to address.
The noble Lord has already given us two international examples of where using AI, algorithms, stereotypes and generalisations in investigations has gone horribly wrong. I have to add a third example, which is the infamous case in Australia of “Robodebt”. That was an automated debt recovery and assessment programme, from the rough equivalent of the DWP, that was exercised in Australia. There was controversy before and through its implementation, and it was an unmitigated disaster. I point the Minister and others to the fact that there was a Royal Commission in Australia which said the programme had been
“a costly failure of public administration in both human and economic terms”.
I note that the House of Representatives in Australia passed a public apology to the huge number of people who were affected.
In a way, I argue that these amendments are a protection for the Government, that this will be written into law: there is a stop that says, “No, we cannot allow things to run out of control in the way we have seen in so many international examples”. I think these are truly important amendments. I hope we might hear positive things from the Minister but, if not, we are going to have to keep pursuing these issues, right across the spectrum. I was very taken: Hansard will not record the tone of voice in which the noble Lord, Lord Vaux, said that the Government wish “to mainline AI”, but it is important to note that a concerning approach is being taken by the Government to the whole issue of artificial so-called intelligence.
Baroness Fox of Buckley (Non-Afl)
My Lords, as part of the unusual alliance, I think that now is a good time to reflect on where we are in the Bill. We are now talking about powers targeted at recipients of universal credit, employment and support allowance, and pension credit. Relevant accounts that can be flagged to the Government include any account
“into which a specified relevant benefit is paid”.
Approximately 9.4 million people are in receipt of a benefit currently specified by the Bill—one in eight people in the UK. This already risks creating a two-tier society in and of itself, in which certain groups are subjected to intrusive financial monitoring by the state while others are not.
I was very pleased to see these two amendments because I worry when I consider that, last year, two-thirds of claims flagged by a DWP algorithm as potentially high-risk were, in fact, legitimate. We are now talking about the use of algorithms in relation to the group of people I talked about, so I am happy to support the noble Lord, Lord Vaux, and the noble Baroness, Lady Bennett of Manor Castle, on Amendments 75A and 79A.
The key thing here is to stress something that has already been discussed at great length throughout our debates on the Bill, which is what we consider “reasonable grounds”. The noble Lord, Lord Vaux, has raised reasonability throughout. Generally, but not consistently, the investigator powers in the Bill are exercisable only when there are reasonable grounds for suspicion that, for example, fraud has been committed. Reasonable grounds are a safeguard to protect individuals from baseless state interference and fishing expeditions. They uphold the rule of law by preventing arbitrary state power but “reasonable” requires clarification once we go into the context of the role of technology, which is at the heart of the Bill; that is one of the reasons why I have put my name to these amendments and will raise other amendments in relation to algorithms later on in Committee.
These amendments are safeguards to ensure accountability; to ensure that we are clear about the basis on which algorithms are used; and to ensure that we do not allow them to become the basis of lazy caricatures and stereotypes. Examples have been given by other speakers on this group, but I anticipate that it is possible that the Government might well cite the Equality Act as a guard against such discrimination. However, it is important to note that, although the Equality Act does lots of very good things, it will not necessarily help us here because not all prejudice is reducible to protected characteristics. In fact, attitudes to people on benefits in general and sections of the white working class do not fit into the Equality Act, so it is important that we do not just rely on another piece of legislation here.
Also, if we are going to say that AI algorithms, into which a potential discriminatory nature can be built—as has already been explained—were to make mistakes and discriminate against any group that is covered by the Equality Act, we would be clogging up the Equality Act with lots of legal challenges based on this Bill. I think that using the “reasonable” test for algorithms and ensuring that there is a commitment to no discrimination on the face of the Bill is a very valuable way of countering that.
Viscount Younger of Leckie (Con)
My Lords, as the noble Lord, Lord Vaux, said, we are moving towards the DWP elements of the Bill, although I suggest that these particular amendments are more of a hybrid between the Cabinet Office and the DWP. As I think the noble Baroness, Lady Fox, indicated, the DWP elements in scope are universal credit, the ESA and pension credit.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, it does not look as though we are ending on an easy group for me. Amendments 75A and 79A, tabled by the noble Lord, Lord Vaux of Harrowden, and the noble Baroness, Lady Bennett of Manor Castle, cover the same ground in Parts 1 and 2. The amendments would add a definition of what cannot constitute “reasonable grounds” in the legislation, setting out certain factors that will not constitute reasonable grounds for suspicion.
Although I understand the intention behind the amendments, I want to assure your Lordships that stereotypes and generalisations would not be considered reasonable grounds for starting an investigation or issuing an information notice. Under the information powers, an information notice may be sent only when an authorised officer has reasonable grounds to suspect that a relevant offence has been committed. An authorised officer must genuinely suspect that the fraud has been carried out by the individual, and that belief will be based on an objective assessment of facts, information and/or intelligence. “Reasonable grounds” are a standard test used by other organisations, including the police, and it is clear that they cannot be based on a hunch or the types of personal factors listed in the amendments.
The DWP has well-established safeguards to ensure that this test is applied properly in practice, with authorised officers documenting all reasoning for their decisions, including the basis for their suspicion, and through the Bill the PSFA will implement comparable safeguards. Management checks provide further internal assurance, and both the PSFA and the DWP intend to appoint His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services to independently inspect the use of these powers.
Finally, DWP guidance for authorised officers is also included in the new draft code of practice, which has been made available to noble Peers as a working draft prior to consultation. The PSFA will draft guidance on the lawful use of its information powers, which will cover this issue.
I will review the specific points made, especially regarding automated processes, and will probably end up writing to noble Lords on the questions I do not cover, but I will give a flavour of the Government’s thinking. Do the PSFA or the DWP use automated processes that enable generalisations and stereotypes when gathering information about individuals? No, we do not. The DWP does not use automated processes to decide whether an information notice will be issued, and the PSFA will not do so when the power is granted. An information notice may only ever be issued by an authorised officer, who must carefully consider whether it is necessary and proportionate to do so and document their reasons.
Regarding artificial intelligence in fraud and error, given what is being debated in the Chamber, I feel that we have two AI conversations going on. The DWP has a responsibility to ensure that fraud is minimised so that the right payments are made to the right people at the right time. Fraud controls are vital to reduce waste and protect taxpayers’ money. Advanced analytics, including machine learning, will play a critical role in tackling fraud, error and debt.
There is currently one fraud error and error machine-learning model in full deployment on universal credit advances, and others are at various stages of testing and development, designed to prevent fraud in the highest areas of loss. We have been careful to implement a supervised machine-learning approach and incorporate human intervention to consider the case and make further inquiries if necessary. Our use of advanced analytics does not replace human judgment. The Bill does not introduce automated decision-making.
To improve our approach and assure Parliament and the public of our processes, we intend to develop fairness and analysis assessments, which can be published through the annual report and accounts process. We will ensure that the fairness analysis assessment sets out the rationale for why we judge the models to be reasonable and proportionate, but without divulging the detail of our fraud and error controls, which would put the department’s security at risk.
The noble Viscount will know better than me that two proofs of concept were completed by the last Government on this issue. So there is proof of concept on EVM, but we are clear, especially from the PSFA side, that we will continue with a test and learn approach to this, and will report back with any other developments. As I said, DWP decisions on fraud and error will be made by a human. I will review his other questions to see whether I need to write to him. I hope that that gives a level of reassurance to noble Lords, and that the amendment can be withdrawn.
Viscount Younger of Leckie (Con)
I appreciate the answers that the Minister has given. I also appreciate that there are more answers to come, but could she add to the answer in writing about the timing for the remaining proofs of concept: when they are going to be completed? I see that as being germane to the rolling out of this process.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I will add that to the list of things to write to noble Lords about, if that is okay.
Baroness Fox of Buckley (Non-Afl)
It is very reassuring, of course, to hear the Minister, absolutely correctly, insist that individual officers will not choose who to discriminate against. When I supported this, I was not thinking that the officers of the state would necessarily be wandering around with their own prejudices and saying, “nick them” or “investigate them”. I would want to imagine that that would not be the case.
What I think we are talking about here—and this is because the use of technology is so profoundly important to what the Government want to do—is the latent biases in the training data. The connections made between data points are notoriously inaccurate and can be arbitrary, so we are seeking some reassurance here, and I will come back on this in another group. In relation to the accuracy and inaccuracy of algorithms, as I said, last year, two-thirds of the claims flagged by the DWP algorithm as high risk were legitimate in the end, so this is not a foolproof method. Consequently, I am not entirely convinced or satisfied that the Minister has quite answered what the concerns were—certainly that I was raising.
Baroness Anderson of Stoke-on-Trent
I am so sorry to have disappointed the noble Baroness, but I will be writing to all Members to answer the questions I have outlined.
Baroness Bennett of Manor Castle (GP)
My Lords, I am sorry for the Minister’s knees: I apologise in advance. But before she theoretically sits down, in her response, she said that the DWP is essentially relying on existing practices and that this is going to be a continuation of practices that exist in the DWP. In that context, it is important to raise the fact that the Equality and Human Rights Commission has opened an investigation into the treatment of disabled and chronically ill people by the DWP, which suggests that there are real issues here. I note in this context that the EHRC had been going to come to an arrangement with the department, but then decided that the situation was so serious that it had to open a formal investigation. I guess what I am asking is: can the Minister assure me that what is being proposed in the Bill is going to take into consideration previous issues and, hopefully, correct them?
Baroness Anderson of Stoke-on-Trent
The noble Baroness will be very aware that we now have several days of Committee before us on stage 2 of the Bill, and I look forward to discussing this and many issues with her as the Committee stage progresses.
Lord Vaux of Harrowden (CB)
My Lords, I thank all noble Lords who have taken part in this short but informative debate. I seem to be getting a bit of a track record. I thought my previous record was managing to get an amendment signed by both the noble Baroness, Lady Bennett, and the noble Baroness, Lady Noakes. I might even have surpassed that with this one. I am not sure quite what that says.
I am partially reassured by what the Minister has said, and obviously I am sure that she and her team will follow the safeguards that she has talked about. But those safeguards are not in statutes. For example, she talked about decisions being taken only by humans in relation to putting out information requests. That is not the case. The code of conduct refers only to decisions that will affect benefits, not the information request side of things, and it is only in the code of conduct, which can be changed at will. I am uncomfortable here.
We are talking, particularly with the eligibility verification process, about very large amounts of data, potentially on 9.9 million people. Who knows how many will flag up eligibility indicators? But without a shadow of doubt, the department will be using some form of algorithmic or AI tool to decide which of those are the ones the department wants to concentrate on. If that is the case, that is where the bias can creep in. If bias creeps into the algorithm or the machine learning tool and comes up to a person, it is easy to say “computer said yes” or “computer said no” and not to question the data coming to you.
I am not totally comfortable that there really are the safeguards at the moment. We are going to come to the human interaction at a later stage of the debate, so I will not go further into that. To be honest, I suspect that the Netherlands, Sweden and Australia probably had similar safeguards. They did not work. I cannot say for certain, but most departments believe that they are doing the right thing and that the safeguards are working. But they did not in those cases, and real problems were caused to vulnerable people.
I will withdraw the amendment but this is something that we will definitely come back to. Just in passing, I also welcome the noble Viscount, Lord Younger, to the right side of the fence with us. I beg leave to withdraw the amendment.
Public Authorities (Fraud, Error and Recovery) Bill
Monday 16th June 2025
(1 week, 4 days ago)
Grand CommitteePublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 96-IV(a) Amendments for Grand Committee (Supplementary to the Fourth Marshalled List) - (13 Jun 2025)
Lord Sikka
“(6) P is liable for all errors arising from the information provided.”Member's explanatory statement
This amendment seeks to clarify which party is liable for the consequences of providing incorrect information.
Lord Sikka (Lab)
My Lords, there are four amendments in this group. Three are mine; the fourth belongs to the noble Lord, Lord Vaux, and is of a different kind altogether, so I shall let him address that one. I shall just speak to Amendments 76, 78 and 79.
Amendments 76 and 78 seek a statement from Ministers about liability for errors. The Government will be demanding information from banks about the transactions, income and wealth of individuals who have never committed any crime or misdemeanour. Such individuals should have the right to know that they have been targeted and treated as second-class citizens. They would be denied financial privacy simply because they are poor, old, sick, disabled and unfortunate. They may wish to lobby their Member of Parliament against what they might regard as unjust law.
Amendment 79 asks that all the parties affected by the information notice must receive a copy of that notice. If the measure about curbing fraud on the public purse is really appropriate, because the Government are really concerned about how the public purse is being depleted, perhaps it should have been applied first to Members of this House and the other House. After all, who can forget the expenses scandal? Yet this idea of surveillance of bank accounts is applied not to Members of this House or the other House but only to those who receive benefits. Again, that indicates that something is not appropriate.
Throughout the passage of this Bill, Ministers have said little about who will be liable for the consequences arising from any errors in the information notices issued by DWP or in the information supplied by banks to DWP or about the erroneous assessments and decisions that might be made by DWP’s reliance on that information. Who would be liable for this new flood of errors? Unlike in the past, this time millions of people would be subject to surveillance; it is not on a case-by-case basis but en masse. If erroneous assessments are made, what compensation would they be entitled to, especially as those affected will not be able to afford legal advice? The Bill does not provide free legal advice to the victims who may be affected by errors made by DWP or the banks.
The Government have yet to say how many bank accounts would be subjected to surveillance. If people have half a dozen bank accounts, that could be 60 million-plus bank accounts. If those accounts have just 10 transactions a year, that is 600 million transactions. How many transactions are banks going to trawl through, and what sense will they make of it? I am sure that the Minister will give us that information today.
In view of the large volume of notices, bank accounts and transactions, errors are inevitable. The DWP already makes thousands of errors every year, and now it will be issuing even more information notices, which means inevitably more errors. It will be issuing information notices without any personal knowledge of the affected benefit claimants or their exact personal circumstances before it reaches a judgment. A 1% error in matters relating to universal credit could affect 75,000 people and ultimately have life-affecting consequences for thousands of individuals. Banks make errors too in the normal course of their business. The Post Office scandal shows that no computer system or algorithm is ultra safe. So, the Government must be prepared and have some idea of what errors will be made, how many will be made, how many people will be affected and what kind of compensation may be payable.
There is a warning about things to come from Australia, where what has become known as the Robodebt scandal happened against a background of scapegoating welfare recipients. People received letters saying they owed thousands of dollars in debt for wrong claims relating to benefits. Those so-called wrong claims were made because the algorithm used by the government departments and the banks was considered to be error prone. More than 500,000 Australians were affected by the policy and were forced to repay amounts by taking out loans, selling their property and using their savings. Just like in the Post Office scandal, many were named and shamed. People were made to feel like criminals. Eventually, the courts declared the policy to be illegal, and billions of dollars have been paid in compensation. Is that the fate that awaits this country too?
I am sure that the Government have been ultra careful with the Bill, but no matter how careful they are, errors will happen. Given the DWP’s record, people will be wrongfully prosecuted, moneys will be wrongfully clawed back and people will be scarred and will suffer. Banks will make errors too in the provision of information. So, each party needs to be aware of the liability position, and that is exactly what my amendment seeks to ensure. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, my Amendment 77 is, as the noble Lord, Lord Sikka, has just said, slightly different from the others. I thought about degrouping it, but I decided that life was too short.
Amendment 77 would introduce a reasonableness test—a discussion we have had before—so that an authorised officer must “reasonably” consider that it is
“necessary and proportionate to require the specified information”,
rather than just “consider” that it is necessary and proportionate. We have had a number of debates about a reasonableness test as we have gone through the various days in Grand Committee. Ensuring that an authorised officer should “reasonably” consider, rather than just arbitrarily “consider”, is an important safeguard against misuse of these powers.
Last Monday, the Minister, the noble Baroness, Lady Anderson, argued against a similar change in Amendment 29, saying:
“In addition, having thrilled the Committee with my recitations from Managing Public Money last Wednesday, I am excited to be able to quote from another government page turner, The Judge Over Your Shoulder. All ‘public law powers’ must be exercised with
‘reasonableness or rationality—following a proper reasoning process and so coming to a reasonable conclusion’.
Making a Minister’s belief a ‘reasonable’ belief therefore has no effect, because they are already subject to it”.—[Official Report, 9/6/25; col. GC 159.]
The Judge Over Your Shoulder—known by the rather inappropriate acronym JOYS—was a new one on me, so I looked it up. The Government describe this exciting publication as:
“Guidance to help you navigate the legal frameworks within which public bodies, particularly Government, make decisions … Currently in its 6th edition, it is used to communicate with clients on what to expect when working with government lawyers, allowing for effective collaboration and lowering the risk of legal challenge. The guidance is highly regarded across the legal profession”.
Most importantly, it goes on to say:
“The guidance remains a lay person’s guide to Administrative Law”.
So I am afraid that the noble Baroness’s argument does not hold up to scrutiny. The document is not even official guidance for civil servants; it is merely a lay person’s guide, has no legal status whatever and cannot be used as evidence that public law powers must be exercised with reasonableness or rationality. Unless the Minister can come up with something that actually has some legal force on civil servants and Ministers, the need for these reasonableness tests, which we have been debating throughout this Bill, remains.
As I have said before and will keep repeating, the noble Baroness will not always be in her position. While I completely believe that she would ensure that these powers are exercised reasonably, that may not always be the case for future Ministers or future Governments. We need to legislate for the future, not just for the present situation, so safeguards should be on the face of the Bill to be effective. In my view, a requirement to act reasonably is a very important safeguard.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure briefly to follow the noble Lord, Lord Vaux, who made a typically powerful case. I echo his comments, particularly on the need for safeguards on the face of the Bill. We need only look across the Atlantic to see how badly things can go wrong and how important it is that there are laws on which future Governments—I am not at all referring to this Government—can be held to account.
I support all the amendments in this group, but I will focus particularly on Amendment 79, in the name of the noble Lord, Lord Sikka, which would insert:
“A copy of the information notice must be sent to the parties affected by the notice”.
In considering that amendment, I looked at reports today from the horrific case of Nicola Green, the mother of a teenager with cerebral palsy, who was pursued by the DWP for more than a year, having been accused of fraudulently claiming nearly £3,000 in carer’s allowance. The DWP—this is the point of the story that is relevant to this amendment—wrote to her employer without her knowledge to try to take money from the pay of this part-time college worker who works less than 14 hours a week. That is a demonstration of how people need awareness so that they can know what is going on. To finish the story of Ms Green, last month the tribunal judge ruled in her favour and said that she had done absolutely nothing wrong. The DWP did not attend the hearing and then said that it was planning to appeal against the judge’s ruling. A few days ago, the Guardian got involved and Ms Green has now been told that she will not be pursued and she will receive information on how she can claim for compensation.
That is one case, but what we are looking at here is when a case is getting started, if we assume that there are reasonable grounds, as the noble Lord, Lord Vaux, has outlined should be put on the face of the Bill. If the DWP asks for this information and it has got something horribly wrong and has misunderstood the whole situation, as we know happens all too often, the claimant who knows about the information request will be in a position—hopefully, without going through the year of turmoil that poor Ms Green has gone through—to be able to stop the matter at that point.
Amendment 79 is, therefore, a terribly important amendment. I hope that we might hear from the Minister an ironclad, watertight statement that this will happen anyway, but if that is not what we hear, I will encourage the noble Lord, Lord Sikka, to bring the amendment back on Report, because it is an absolutely crucial issue.
Lord Palmer of Childs Hill (LD)
My Lords, these amendments in the names of the noble Lords, Lord Sikka and Lord Vaux, on the information-gathering powers of the DWP, provide greater clarity and safeguards regarding the collection and consequences of information requests under the Bill.
Amendments 76 and 78 both address liability and aim clearly to establish which party is responsible for any consequences arising from the provision of incorrect information. This clarification will, I hope, be important in ensuring that all parties understand their responsibilities and the potential implications of their actions, thereby promoting fairness and reducing uncertainty.
Viscount Younger of Leckie (Con)
My Lords, I offer my support for most of the proposals in this group of amendments, which strike me as largely thoughtful, proportionate and consistent with the principles that we have returned to time and again throughout this Committee stage: clarity in law; accountability in process; and fairness in the exercise of power. As we know, we have spent three days carefully scrutinising the powers set out in this Bill—powers that are, by any measure, significant. In that context, it is right that we continue to ask whether the safeguards accompanying these powers are sufficient and, where they are not, how they could be strengthened in a practical, proportionate and legally coherent way. We believe that these amendments are consistent in furthering that principle.
First, I have taken note of the cautionary tale arising from the Australian experience, as raised by the noble Lord, Lord Sikka. Amendments 76 and 78, which seek to clarify liability for errors or omissions in information provided under Clause 72, are rooted in a basic but essential legal principle: parties need to know where responsibility lies. If someone is being compelled to provide information under threat of penalty, it must be clear whether they or a third party acting on their behalf will be held liable for any inaccuracies. Without clear statutory guidance, we risk confusion and, worse still, unjust outcomes where individuals may be penalised for honest mistakes or information errors outside their control. These amendments would address that problem in a measured way by introducing transparency and clarity into the process.
Amendment 77 addresses a slightly different but equally important concern. As the noble Lord, Lord Vaux, outlined so eloquently, we are focusing on proportionality and reasonableness in the exercise of investigatory powers. The amendment would insert a reasonableness test requiring that an authorised officer must reasonably consider the request for information to be necessary and proportionate. To my mind, this is simply good law. It reflects what is already expected in broader public law standards, but writing it clearly into the legislation would give both officials and the public confidence that such powers are bound by objective legal norms. It would strengthen decision-making, improve accountability and, perhaps most important, provide a clearer basis for redress if powers are exercised in an overly broad or inappropriate manner. However, I note from the remarks made by the noble Lord, Lord Vaux, that we cannot—or should not—say, “Oh, joy of joys”, in respect of the guidance provided.
With clarity established as to where responsibility lies, by necessity a process will have to be put in place and be tested to make sure that there is oversight and sign-off. If the Minister is not minded to accept Amendments 76 and 77, can she outline in detail what the process is? If she cannot do so, I ask her to write to me and to copy in all those noble Lords who are involved in today’s Committee. The Minister may say that this is all part of the as-yet-unfinished “test and learn”, but a full answer is requested. I think I have picked up that she may be able to enlighten us in this respect at the beginning of this fourth day in Committee. I hope so.
However, I must express my concerns and ultimately oppose Amendment 79 in the name of the noble Lord, Lord Sikka, on the grounds that it risks undermining the effectiveness of the very system that we are seeking to strengthen—although I note the example given, the sad story of Ms Green, highlighted by the noble Baroness, Lady Bennett. The amendment would require that a copy of every information notice issued under Clause 72 be sent to all parties affected by that notice, including, crucially, the individual who is the subject of the investigation.
Fraud investigations, particularly in the social security context covered by Clause 72, often rely on timely access to accurate information before the subject of the investigation is made aware. This is not a matter of secrecy for secrecy’s sake; it is a matter of preserving the integrity of the evidence and preventing interference with the process. If a person suspected of fraud is notified that they are under investigation or even that information about them is being requested from a third party, there is a very real risk that they may destroy or tamper with evidence, close accounts, alter records or otherwise act to frustrate the inquiry before it has a chance to develop properly. This is not speculative; it is a well-established principle in law enforcement and regulatory practice. It is not clear when this notice would be sent, but there is an assumption in the amendment in the name of the noble Lord, Lord Sikka, that it would be sent immediately—perhaps he could clarify that when he winds up—in which case, I rest my case.
There is a reason why investigators, whether in HMRC, the police or other regulatory bodies, are often permitted to conduct inquiries without giving advance notice to those under scrutiny. To do otherwise, as I said, would be to tip off the very individuals whose conduct is in question and, in doing so, jeopardise the ability of investigators to properly undertake their duties. Investigators would be hampered at the outset, fraudsters would have an early warning and those operating within the system in good faith, including civil servants, local authorities and partner organisations, would find it significantly harder to detect and prevent abuse. This is particularly true in cases of organised or sophisticated fraud, where timely access to third-party data may be the only way to build a case before the trail goes cold. It is also true in cases where vulnerable individuals, perhaps manipulated by others, may be at risk of harm if alerted prematurely. I will return to that theme later today.
Of course, we must always strive for fairness and accountability, but there is a distinction between eventual transparency and instant notification. There are appropriate points in the process when the subject is made aware of action against them and can engage in a process of review, but to mandate notification at the earliest investigative stage before facts are even established would, I believe, give potential wrongdoers an unearned advantage. Therefore, I respectfully suggest that the practical consequences of this amendment would be counterproductive and potentially damaging to the very goals of the Bill. We need a fraud enforcement system that is lawful, proportionate and fair but also capable of operating effectively in the face of growing and increasingly complex threats to public finances. That is why I cannot support this amendment.
To conclude, a balance must always be struck between individual rights and the broader public interest. In this case, that balance lies in ensuring that information requests are reasonable, that liability is clear and that powers are used with restraint and purpose but not in mandating disclosures that could derail legitimate investigations. I therefore welcome Amendments 76 to 78, but I am afraid that I urge caution about and ultimately oppose Amendment 79.
The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I thank all noble Lords who have contributed to this short debate and I welcome the Committee to Part 2 of the PAFER Bill. We are on to the DWP and it will be a joy to travel in this ship together with my happy fellow travellers. Before answering the specifics of the amendment, I want to reflect on some of the comments made by my noble friend Lord Sikka, because he helpfully highlighted a couple of the confusions that have permeated some of the discussion around the Bill.
The Bill contains a number of different measures and, in most cases, they apply to different people. In his speech, my noble friend spoke as though these information-gathering powers applied to all those people to whom, for example, an eligibility verification notice will be sent. In fact, that is not the case at all. A number of the amendments coming up next are about the eligibility verification measure, so I will return to any comments about it then. These information-gathering powers are quite different. They are specifically aimed at people of whom there is a reasonable suspicion of fraud by a named individual. This is a particular category of person.
Clause 72 makes provision for expanded information-gathering powers. There are existing powers in the Social Security Administration Act 1992, but they enable DWP to compel information only from a set list of organisations. That approach is restrictive and can delay or prevent the gathering of information that is relevant to proving or disproving a criminal benefit fraud investigation. So new Section 109BZB, inserted into the 1992 Act by this Bill, will update those powers to enable DWP to obtain relevant information from any information holder in respect of a DWP criminal investigation. That kind of information can be vital in proving or disproving an allegation of fraud.
Amendments 76 and 78, tabled by my noble friend Lord Sikka, concern liability for incorrect or incomplete information provided by an information holder in response to an information notice. The Bill is clear that information providers must comply with the information notice and should also be aware of their own data protection obligations in doing so. Information about those obligations will be included in the code of practice, and the information notice must specify the potential consequences for failing to comply.
Section 111 of the Social Security Administration Act 1992 sets out offences for intentionally failing to provide required information, as well as delaying or obstructing an authorised officer. In those circumstances, DWP can take action. So introducing a separate statutory liability for all errors is not necessary and would, in my view, actually place an unfair burden on information holders, particularly when mistakes are unintentional or minor.
Amendment 77, tabled by the noble Lord, Lord Vaux, would insert “reasonably” into subsection (1)(b) of new Section 109BZB. I hope to persuade the noble Lord that we in fact have a very good case here. I think that it will be easier to write. There may be some disagreement about his comments about JOYS—this will be another theme, I think; I suspect that “Ode to Joy” jokes and other joy jokes will abound. But I will write, because I want to talk specifically about the amendment that he has tabled today and how that affects the DWP parts of the Bill.
The current drafting of subsections (1)(a) and (1)(b) of new Section 109BZB in Clause 72 sets out that, prior to issuing an information notice, an authorised officer must have “reasonable grounds to suspect” that a DWP offence has been committed and must consider it “necessary and proportionate” to require the information. Both those steps have to happen, so I would argue that the drafting already captures the intent of the amendment. We have been doing this for some time. The department already has these information-gathering powers, with well-established training and guidance in place to ensure that they are used appropriately and in line with the existing law.
Authorised officers are trained and accredited before they can use those powers and they have to adhere to the code of practice. The existing guidance makes it clear that they have to consider all the facts, justify their decisions and record their reasoning. That will apply in the same way to the new expanded powers as it does to the current powers. For those reasons, we are confident that the principle of reasonableness is clear in the drafting of Clause 72 and we further support it. I can see that the noble Lord is itching to get to his feet.
Lord Vaux of Harrowden (CB)
I understand the noble Baroness’s point. It was because it said “reasonable grounds” in the first half that the fact that it was missing in the second half—paragraph (b)—stuck out: you have to have reasonable grounds, but then you just have to consider. But my point is more than that. Let us imagine the worst-case scenario, where a future Government decide to go for an all-out DOGE approach to whatever. I have no doubt, as I said, that the noble Baroness and the department at the moment will follow the guidance, et cetera, that she laid out, but that is just guidance and it can be torn up on a whim. If a new Government decide to go all out, there is no reasonableness safeguard; they can just say, “We consider it necessary”, and there does not need to be any reasonableness attached to that. That is the concern. It is not about now; it is about where we might be in a year or five years’ time that worries me.
Baroness Sherlock (Lab)
I see where the noble Lord is going with this and I am happy to pick up the conversation outside. I do not think that the distinction is big enough for it to be a problem, because the reality is that a reasonable suspicion is not just a hunch: it has to be based on an objective test, it requires up-to-date and accurate information and it must be something that an ordinary reasonable person would consider a legitimate cause for suspicion given the same information. So, for information gathering to be legal and justified, the intrusion into a person’s privacy must be necessary, proportionate and in accordance with the legislation. We think that that is belt and braces, but I am happy to pick that up with the noble Lord because I think that we want the same thing. The only question is: do we need any more ways of saying it?
Finally, Amendment 79, in the name of my noble friend Lord Sikka, would require DWP to copy the information notice to all parties, including the subject of the information request. The noble Viscount, Lord Younger, has explained the obvious reason why this is the case: since these powers apply only to named individuals about whom there is a reasonable suspicion of fraud, telling somebody at the outset could clearly prejudice the investigation and potentially enable them to conceal or destroy evidence.
Baroness Bennett of Manor Castle (GP)
I thank the Minister for giving way. It is important that we identify something here. I mentioned that case study because there are, of course, many carers in this situation. As I understand it, the DWP is considering prosecuting carers where it regards the outstanding sum to be more than £5,000. In November, the Guardian reported that more than 250 unpaid carers were potentially facing prosecutions for fraud under DWP guidelines. I fully acknowledge the points made on this—the noble Viscount, Lord Younger, made some useful points—but I think that there are two different sorts of case here. There are undoubtedly criminal gangs organising frauds, where, yes, you would not want to do so in those cases, but in the cases of these carers you know that it is one person and this may cause issues. There are two different use cases here that might need to be approached in two different ways.
Baroness Sherlock (Lab)
Obviously, I am not going to comment on individual cases. As the noble Baroness will be aware, there is an inquiry going on into the carer’s allowance on which we hope to report in the near future, so we will learn more from that.
Let me be clear here: this is the question of whether somebody should be told in good time that they are being investigated. Clearly, that would be a problem. There is a reason why that precise problem is recognised in data protection legislation, which sets out the circumstances in which the DWP and other government departments can process data for law enforcement purposes without notifying the relevant data subject.
To pick up the noble Baroness’s point, it is not as though somebody would never know because, if a fraud investigation uncovered reasonable suspicion of fraud, at some point, for a case to go anywhere, there would have to be an interview under caution with the person suspected of it. The conversation about what had happened would take place at that point, so it is not as though they are never going to know about it; they would have to know about it. We are talking about how they are told, including in what way and at what time. Although I understand where my noble friend Lord Sikka is coming from, the reality is that his proposal would make it impossible to investigate fraud effectively and would allow those who wish to avoid appropriate action on their problems the opportunity to get away with it.
The final comment from the noble Viscount, Lord Younger, was about oversight. As with the review of investigations, the oversight of these measures will be carried out by His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services. I hope that that reassures him.
I hope that all that has helped to assure the noble Lords and that, on that basis, they will withdraw or not press their amendments.
Lord Sikka (Lab)
I am very grateful to everyone for their contributions to this debate. I want to come back on a couple of issues.
I fully understand the arguments made against Amendment 79, but at the moment the individual becomes aware that something is afoot only much later in the day. Individuals rarely have time to seek legal advice. They often cannot afford legal advice. Early notification that they are subject to scrutiny, especially when they have never committed a crime and are just under suspicion, would mean that they may be able to save the DWP some time, effort and money on needless investigations. They may even be able to go to the local citizens advice bureau or somewhere else to get some advice. Leaving it until a much later stage inevitably means that there will be a lot of psychological stress for people. They will probably throw in the towel, a bit like the sub-postmasters, and think, “I’ve got to get off this merry-go-round. I will plead guilty even though I am not, because I cannot really contest anything with the Government”. So, I understand the arguments made, but I think that the current position of not telling the benefit claimants much earlier on really will lead to problems.
The Minister referred to the information provider’s duty for data protection and so on, but I have a concern, given that the DWP will make errors. It has a history of making thousands of them. Given that banks make errors in providing information, once DWP officials have received the information from the bank, they have to interpret that information and make sense of it. There will be misinterpretations, which will have serious consequences for the people affected.
The question to which I still have not heard an effective answer is: who will be liable? Who will pay the compensation? Will it be the public purse? Will it be the banks? The DWP will have a statutory relationship with the bank and hence can demand information, but banks are normally required to preserve confidentiality or financial information, and a bank will not ask anything from the individual concerned. It cannot at that point be said to owe a duty of care to somebody with whom it does not actually communicate, especially when that duty of care is eroded by the Bill. So the question remains: who will foot the bill, which could run into billions of pounds, if we end up with a similar situation to the one in Australia? I hope that the Minister can clarify that situation about who will foot the bill.
Viscount Younger of Leckie (Con)
Before the noble Lord sits down, I want to raise something, which is more of a question to the Minister and the team behind her. When I was in post, I became perhaps infamous, particularly when I did not understand something, for asking for a flow chart, and I wonder whether this is such a case where a flow chart would be extremely helpful. By that I mean that, when a process starts, what happens? One answers yes or no to questions and then it follows through with the safeguards included. I would find that incredibly helpful, and I suspect the team has one already. If there is one, I would find it helpful to see how the system works and where the safeguards are.
Baroness Sherlock (Lab)
I have never seen a flow chart, but some of these powers are not necessarily part of the same process, so they would not necessarily appear on the same piece of paper. But if I have any other way of explaining it, I would be very happy to do that.
Since I am on my feet, I reiterate that if the DWP is asking for information about an individual and it gathers information, it will most likely be doing so from a number of sources. An authorised officer will then review the information, and if there is felt to be a case for fraud, they will then interview the suspect under caution, who will be given the opportunity to get appropriate advice. There will be a process of engaging and discussion, but even before it gets to that stage, it is entirely possible that somebody will have reached out to find out the reason why an overpayment has been made. So, there are plenty of opportunities, and this specific amendment relates specifically to the extension of an existing power, which is used only when there is reasonable suspicion of fraud by a named individual. So, I do not think this amendment would help achieve the kind of things that have been discussed, and I urge the noble Lord to withdraw the amendment.
Lord Sikka (Lab)
I am very grateful to the Minister for that reply, which gives us plenty to think about—and perhaps a flow chart would be helpful in due course. For the time being, I beg leave to withdraw my amendment.
Lord Palmer of Childs Hill (LD)
My Lords, I give my wholehearted support to the stand part notices in the name of my noble friend Lady Kramer who, as noble Lords might gather, is in the Chamber for the Employment Rights Bill—I should perhaps also be there, but that is why noble Lords have me and not my noble friend Lady Kramer.
The opposition to Clause 74 and Schedule 3 standing part of the Bill is both principled and pragmatic, and would ensure that the Public Authorities (Fraud, Error and Recovery) Bill strikes the right balance between combating fraud and protecting the rights and dignity of individuals. The removal of the requirement for banks to examine claimants’ bank accounts, proposed in both Clause 74 and Schedule 3, would restore a vital safeguard for personal privacy and prevent an unnecessary intrusion into the lives of those who rely on public support. This approach would uphold commitments to civil liberties, ensuring that anti-fraud measures do not come at the expense of fundamental rights, as mentioned by the noble Lord, Lord Sikka, on the previous group. I commend my noble friend Lady Kramer’s leadership in recognising that the fight against fraud must never become a pretext for overreach and unwarranted surveillance.
Equally, Amendments 79B and 80, supported by my noble friend Lady Kramer and others, would wisely align eligibility verification safeguards with those already established for suspected fraud and, crucially, would limit the use of such powers to cases where there is genuine suspicion of wrongdoing. These changes will prevent fishing expeditions—I am sure that there will be fishing expeditions—and protect innocent welfare recipients from undue scrutiny.
My own Amendment 89 to Schedule 3 would ensure that the Bill applies only to the benefits explicitly listed and would further clarify and limit the scope of these powers, which could be pretty heavy, providing certainty and reassurance to the public. Together, these amendments would strengthen the Bill, making it more proportionate, transparent and just. I urge your Lordships to support this package, which embodies the best traditions of parliamentary scrutiny and my party’s belief in both fairness and effective government.
Lord Vaux of Harrowden (CB)
My Lords, I speak to my Amendment 79B and thank the noble Baroness, Lady Kramer, for her support for it. It is a very simple amendment that would make the giving of an eligibility verification notice subject to the same safeguard that already applies to all the other information-gathering powers within the Bill—namely, that the Secretary of State must be satisfied that issuing an EVN is necessary and proportionate for the purpose for which it is issued.
The Minister will no doubt have noticed that I have taken the liberty of inserting “reasonably” into the amendment, as we have just been discussing. Otherwise, the wording is aligned with the safeguard in Clause 3(1)(a), in relation to the Cabinet Office Minister requiring information, and to the wording in Clause 72, in relation to the Secretary of State for the DWP requiring information about suspected fraud under new Section 109BZB(1)(b). This safeguard applies everywhere in the Bill whenever the required information relates to suspected fraud. Rather strangely, however, it does not appear in Schedule 3, where there is no suspicion. That seems the wrong way round. Surely it is even more important that the giving of an information notice should be necessary and proportionate in cases where there is no suspicion.
I am assuming that this omission is in fact an oversight and that, given that it appears everywhere else in the Bill, the Minister will simply accept it. If not, she will need to explain why the exercise of these important and intrusive suspicionless information-gathering powers should not have to be, at the very least, necessary and proportionate in the same way as the exercise of the other information-gathering powers have to be. I will take a little bit of convincing, I am afraid.
Lord Davies of Brixton (Lab)
My Lords, I will speak to my Amendment 80. There is a certain amount of overlap with other amendments not just in this group, obviously, but in other groups. The mysteries of the grouping of amendments are beyond my pay grade, but we are in a situation where we are bound to discuss the same subject again and again—and, I suspect, again. I will read with interest what my noble friend the Minister said in replying to the previous debate. At the conclusion of all these overlapping debates it would be useful to the Committee if she could write a letter explaining how this whole thing fits together.
Lord Verdirame (Non-Afl)
My Lords, I agree with many of the concerns that have been expressed in connection with this group, but I will say a few words specifically in support of Amendment 79B in the names of the noble Lord, Lord Vaux, and the noble Baroness, Lady Kramer. As it stands, paragraph 1(1) in new Schedule 3B affords a very broad discretion to the Secretary of State. It says that the Secretary of State may, for the named purposes,
“give a person of a type mentioned in paragraph 2 a notice … requiring the person to take the following steps”.
On its face, this is an unfettered discretion—or, rather, it is a discretion limited only by the purpose. Other than those purposes, the discretion does not, on its face, have a limit. The power that the Secretary of State has under this clause is very broad because, on receiving those notices, the banks or financial institutions will have to take those two steps. Perhaps later we will explore the step in connection with the eligibility indicators, which is potentially quite intrusive.
It seems to me that the language proposed in the amendment would identify a standard—reasonable satisfaction—that would have to govern the exercise of this discretion. In that respect, together with a number of other amendments also proposed by the noble Lord, Lord Vaux—but particularly in the context of this power—the amendment seems extremely sensible. I urge the Government to consider it and, in due course, accept it.
Baroness Bennett of Manor Castle (GP)
My Lords, I attached my name to the Clause 74 stand part notice tabled by the noble Baroness, Lady Kramer, and Amendment 80 tabled by the noble Lord, Lord Davies. The stand part notice is a simple solution, but the amendment of the noble Lord, Lord Davies, effectively, has the same impact, which is ensuring that you can investigate only when there is cause to investigate. I do not care which way it is done, but it is very clear—I associate myself with every word said by the noble Lord, Lord Davies of Brixton, here—that we are now at the sharp end of the Bill. As the noble Lord said and as I understand it, this is unprecedented in British law. This is going trawling; it is a fishing expedition and a mass intrusion. As the noble Lord said, quoting the DWP itself, it is about “‘persons unknown’ at scale”—that is an extremely telling phrase.
To put this in context, today the High Pay Centre put out its annual report on fat cat pay, which exposed what a hugely unequal society we have. It found that, on average, the top payees in organisations were getting 52 times as much as the median paid worker. The most extreme case of this that it found was the security and waste group Mitie, whose CEO was being paid 575 times the median salary of the workers. That is a comparison to the median but of course we know that many of those Mitie workers will be on the minimum wage or very near the minimum wage, and they will be in receipt of the benefits explicitly identified in the Bill. They will face their bank accounts being trawled through without their knowledge, while the CEO, with that lovely and enormously high pay level, does not face the same intrusion. This is a fundamental inequality in our society that is actively dangerous in terms of building the divisions within society.
The noble Lord, Lord Palmer, powerfully introduced the clause stand part notice, but I note his Amendment 89, which would ensure that the Bill may be used only in relation to the benefits listed in the Bill. I will not do the full Henry VIII story but, as is very obvious—it was made clear in the briefing I think we all received from the Justice organisation—with the Henry VIII powers, the Government can extend this to any other benefit. The one that immediately comes to mind, given how much it is in the headlines at the moment, is the personal independence payment—PIP—and the issues and the level of fear that already exist around that. I cannot remember the specific occasion, but I suspect that the Minister will have joined me, under the previous Government, in questioning Henry VIII clauses. This would shut the door on a Henry VIII clause, and it urgently needs to be done. I commend the noble Lord, Lord Palmer, for identifying that and putting the amendment down.
Baroness Fox of Buckley (Non-Afl)
My Lords, we have heard some important and powerful speeches. I broadly support all the amendments in this group. There is concern outside the House around these eligibility verification notices—people are genuinely worried about them and they are, I think, right to be—but I want to ask the Minister something directly. This Bill has been dubbed “the bank spying powers Bill”. There has been a lot of publicity about it. I know that campaigns such as Big Brother Watch have been gathering up signatures. There was an article in the newspapers today about it. I have heard Ministers, in debates, describe those kinds of descriptions as over-the-top hyperbole and say that it is absolutely ridiculous to talk in this way.
I think that paranoia is inevitable when things are not accountable or clear. I just want to say that I genuinely do not understand how the highly complex monitoring that this Bill demands, in order to provide information to the DWP, can happen unless it uses the processing of the data of all bank accounts. If you ask a bank to provide information on a group of people, the only way it can find out who that group of people is is algorithmically—I will come back to this—which means looking at the data of all bank accounts. That is one of the reasons why the idea of spying powers is raised. Have I got that wrong? Can the Minister clarify whether that is hyperbole and what the reality is? That would be especially helpful before I speak to my amendments on algorithms so that I do not make a mess of what I say.
Lord Sikka (Lab)
My Lords, I support all the amendments in this group, but I want to make a brief comment on Amendment 89. It is inappropriate for the Government to have powers to extend to and include other benefits, because each benefit may well have a different dynamic as to whether there is a possibility of fraud. If you look at the DWP statistics, you will see that some of the other benefits have a very low incidence of fraud; it is universal credit that is out of line, compared to the rest. I do not think that the Government should be allowed powers to add to those three benefits. That would be highly draconian. If the present Government, or a future one, feel that there is a need, they should bring primary legislation. At that time, we can also take the opportunity to smooth the rough edges of this Bill, which might have become visible by then.
Baroness Finn (Con)
My Lords, I rise to speak to this group of amendments, beginning with the Clause 74 stand part notice in the name of the noble Baroness, Lady Kramer, which was moved by the noble Lord, Lord Palmer. In our view, Clause 74 is not only necessary but foundational. It establishes the power to issue eligibility verification notices, which enable authorised officers to request information relevant to verifying a person’s entitlement to public funds or services. This is not an ancillary function; it is a mechanism that enables the Bill to work.
We broadly support Amendment 79B, which proposes the addition of a reasonableness test to the Secretary of State’s power to issue eligibility verification notices under Schedule 3. Throughout this Committee stage, we on these Benches have consistently returned to a set of core principles that should underpin the powers granted by this Bill: proportionality, accountability and clarity in the exercise of discretion. This amendment is very much in keeping with those principles. It would not constrain the function of the powers in question; instead, it would help to ensure that they are used lawfully, wisely and in a way that retains the confidence of both the public and those institutions asked to assist in their implementation.
Specifically, this amendment would require that the Secretary of State be “reasonably satisfied” that issuing an eligibility verification notice is both necessary and proportionate to the objective of identifying incorrect benefit payments. That is, by definition, not an unreasonable bar. It is not designed to frustrate the aims of the Bill or delay the work of the Government. On the contrary, it would simply formalise the expectation that the powers conferred under Schedule 3 should be exercised with care and justification.
This point is particularly relevant when we consider the position of banks and other financial institutions, which may be required under this provision to provide customer information. For those institutions, it is critical that the system is seen to be operating within a clear and lawful framework. They are being asked to co-operate in a sensitive and complex process. Ensuring that the Secretary of State is “reasonably satisfied”, and that this standard is explicitly in the Bill, would help to provide clarity, legitimacy and protection for all parties involved. As the noble Lord, Lord Vaux, and the noble Baroness, Lady Bennett, made clear on the previous group of amendments, legislation needs to be made for the future and, as such, reasonableness safeguards must be on the face of the Bill.
Moreover, this amendment would reinforce public confidence in the system. When members of the public know that strong powers, such as those that allow government access to eligibility-related data, are being exercised only after a specific, documented and reasonable assessment of necessity and proportionality, they are far more likely to view those powers as legitimate. Trust, as we know, is a critical currency in any enforcement regime.
This amendment would not obstruct the use of eligibility verification notices. It would simply require that they be issued on the basis of reasonable grounds, with a clear and proportionate purpose. It would bring consistency to the Bill, reassurance to the institutions involved and greater credibility to the broader anti-fraud effort that we all wish to support.
We oppose Amendment 80, which would substantially limit the exercise of eligibility verification notices under Schedule 3 to the Bill by requiring that they may be issued only where the welfare recipient is already suspected of committing a DWP offence. I suggest that this amendment risks undermining the core function of eligibility verification and, in so doing, would weaken the entire framework that the Government are proposing to put in place to detect and prevent fraud. Let us be clear about the purpose of the eligibility verification power: it is not primarily an enforcement power but rather a tool of assurance and risk management, designed to help to identify cases where payments are being made incorrectly.
The core problem with this amendment is that it conflates suspicion with verification. It assumes that an authorised officer must already suspect a DWP offence before reviewing financial data. In practice, however, it is often the financial data itself—the information provided in an account—that gives rise to that suspicion in the first place.
I turn to Amendment 89. We support the principle behind this amendment, which seeks to ensure that the powers contained in this Bill—substantial powers, we must all acknowledge—are exercised only in relation to the specific benefits explicitly listed in the Bill. This is not a wrecking amendment, nor one that seeks to undermine the Government’s legitimate goal of strengthening our response to fraud and error. Rather, it is about ensuring that when we legislate new powers, they are accompanied by a clear, democratic mandate and appropriate parliamentary scrutiny. The provision that this amendment seeks to remove would grant Ministers the ability, by regulation, to extend the application of these powers to further benefits beyond those originally listed. I submit that such an extension should not be done by regulation alone but rather with the explicit consent of Parliament through primary legislation or a tightly scrutinised process.
The powers outlined in Schedule 3, including access to personal financial information, the issuance of eligibility verification notices and the ability to act on suspicion of fraud, are not minor administrative tools. They represent a significant expansion of state capacity to inquire into private affairs in the name of public interest. That may well be justified in many cases, but it is only right that Parliament retains control over when and how these powers are extended to new areas of social security.
Supporting this amendment means drawing a line in the sand that the list of benefits to which these powers apply is not open-ended and that any extension should come back before Parliament for proper consideration. If, in future, a compelling case is made to include additional benefits, let that case be made here, in public, with scrutiny and accountability. That is how we ensure confidence in the law, in enforcement and in our broader welfare system.
This is not about resisting action on fraud but about ensuring that the tools we use to combat fraud are clearly grounded in public consent, which gives the system legitimacy. It is about protecting the balance of power between executive action and legislative oversight.
We have made the argument throughout Committee that clarity, transparency and accountability must be woven into the fabric of the Bill. This amendment speaks directly to those principles. It ensures that the powers in this legislation are not allowed to expand by stealth but only by clear, deliberate parliamentary decision.
I hope that the Minister will see this not as a restriction but as an opportunity: to reinforce the legitimacy of the powers the Government seek and to show that we are committed not only to effective fraud prevention but to the principled governance of that process. For that reason, we support this amendment.
Finally, in addressing the stand-part notice of the noble Baroness, Lady Kramer, on Schedule 3, we understand that this is an area of concern for many noble Lords across the Committee, but we do not feel that removing the schedule from the Bill is necessarily the most constructive way to go about this in Committee.
I appreciate that this is probing, and we therefore hope that the Government will use this opportunity, in responding to the stand-part notice of the noble Baroness, Lady Kramer, to address the concerns that we and many other noble Lords have raised in Committee, even if we do not support the noble Baroness’s stand-part notice.
Baroness Sherlock (Lab)
My Lords, I am grateful to noble Lords who spoke on this. I promise not to speak for long on this but, since it is the first time we have discussed the eligibility verification measure, I will, for the record, try to explain how it works, and, I hope, help the noble Baroness, Lady Fox—I apologise for my failure to explain it to her hitherto. I will have a go at doing that, and I will talk to the amendments as we go.
Clause 74 introduces new Section 121DB and Schedule 3B to the 1992 Act. They contain the provisions for the eligibility verification measure, which enables the Secretary of State to issue a bank or other financial institution with an eligibility verification notice, or EVN, which will help the DWP identify incorrect payments in the social security system. Ensuring that the right person is paid the right amount at the right time will help prevent both fraud and genuine errors, meaning that people do not accidentally build up debts, with all the concern that that causes.
As I set out at Second Reading, this is a data-requiring measure. It will enable the DWP to ask for data from banks to help identify incorrect payments and verify eligibility for specific benefits. It is about requiring banks to look within their own data and provide limited, relevant information on the accounts they have identified that match the eligibility indicators provided by the DWP. Just to clarify, we will ask the banks to look at accounts into which we make benefit payments, and we will give them the criteria, which clearly can only be things related to eligibility for the benefits under question.
That limited information will help the DWP to identify where claimants do not meet eligibility criteria for the benefits they are receiving. Getting access to information is key to addressing the whole fraud and error challenge. But if your Lordships think about other areas, we have seen how the DWP getting access to data such as earnings information from HMRC has massively reduced income-related overpayments. In fact, if you look at people on PAYE and universal credit, earnings-related fraud and error have pretty much been wiped out by getting access to earnings data directly from HMRC.
I will speak to Schedule 3 in a few moments. Let me look first at Amendment 79B from the noble Lord, Lord Vaux, which seeks to ensure that an EVN may be issued only when the Secretary of State is satisfied that it is necessary and proportionate to do so to achieve the aim of identifying incorrect benefit payments. This is the nub of it. Clearly, I agree that the power must be proportionate and necessary before we use it. We are bringing forward the legislation because we believe it is necessary, and we have already taken enormous steps to ensure that it will be used proportionately.
The reason it is necessary is that taxpayers deserve to know that every pound of their money is being spent wisely, and that benefits are being paid to those who need them and are legally entitled to them. This measure will improve the DWP’s access to important data to help verify entitlements, to ensure payments are correct, and to stop overpayments building up and debt accruing.
The National Audit Office made a telling point in the Commons at the evidence stage, basically saying, “If you want to enforce the eligibility criteria that Parliament has set, such as capital limits, you have to provide the DWP with a tool that goes a bit further than just asking people”. We do not know of other ways to get the necessary information to be able to pursue the kind of overpayments and fraud that are out there. However, I just remind the Committee that the measure has been designed with hugely strict safeguards, most of which are in the Bill, and they are supported with further detail in the code of practice, of which noble Lords have seen a draft, to ensure that the power is being used fairly and proportionately. The legislation sets out the benefits in scope, of which more later, and the type of information that can and cannot be shared under the power, and includes provisions to bar financial institutions from sharing transaction information or special category data.
Baroness Bennett of Manor Castle (GP)
My Lords, the Minister made a powerful point about the position of the current Opposition. As she identified, the old-age pension being covered in the former iteration of the Bill caused an enormous amount of concern. Obviously, all the groups we are talking about are potentially vulnerable, but old-age pensioners are particularly vulnerable and prone to be stressed and worried about this situation. Can the Minister assure me that the Government will not put the old-age state pension underneath the Bill?
Baroness Sherlock (Lab)
My Lords, I am grateful to the noble Baroness for giving me the opportunity to recover my voice and to say that not only will we not do it but the Bill says explicitly that the measure cannot be used on the state pension, so there is no question of it being used for that.
The case load is really straightforward. Fraud in the state pension is so low that it is the one area where the NAO does not qualify the accounts. We have to have a rationale. The reason we have chosen these three benefits initially is specifically because they are the areas where fraud is significant, and we know the information is out there that could make a difference. I can absolutely reassure the noble Baroness on that point: without amending primary legislation, this measure cannot be used on the state pension, and the Government will not do that. Any subsequent Government would have to change the law to be able to do it. I am grateful to the noble Baroness.
Viscount Younger of Leckie (Con)
My Lords, I intervene briefly to add a little history on the reason we included pensions. As the noble Baroness, Lady Bennett, may know, there is some fraud in the pensions area, to the tune of £100 million. This, I admit, is not as much as the £9.5 billion in welfare fraud that the Minister cited, but I just wanted to put the record straight; there was a reason for including pensions.
Secondly, you can have it one way or the other. We thought it would be good to put all benefits in scope in primary legislation, but I accept that another way of doing it is to limit it to the three benefits, as this Government have done, with a view to having secondary legislation for including others. I understand that.
Baroness Sherlock (Lab)
I am grateful. The noble Viscount is quite right: there is some fraud in the state pension. It was a judgment about proportion, having compared the size and value of the case load. It is very small. The fact that the affirmative procedure is used means that there will have to be a debate. The Government cannot simply on their own start investigating new benefits without anyone knowing about it, so that makes a difference.
The Bill is clear that, to help make this measure proportionate, only the minimum amount of information necessary is shared with DWP by the banks. That can include only details about the account, such as an account number and sort code; details to identify the individuals, such as names and dates of birth; and details about how the individuals appear to be breaching the eligibility criteria for their benefit. But still at that point, no one is suspected of having done anything wrong; the presumption of innocence remains, because further inquiries are needed to establish whether a benefit has been incorrectly paid.
Some people may have disregards in place that mean they are allowed to have more money than is normally used in the benefit rules. For example, normally you are allowed to have only £16,000 maximum in capital to be entitled to universal credit, but there are reasons why you might have more than that. Some forms of compensation payments are disregarded, for example. There may be a perfectly good reason, which will be investigated at that point—and that will be that. Others may have made a genuine mistake that has led to an overpayment of benefits, which it is important to correct as quickly as possible for the individual and the organisation.
However, there will be some cases, especially in the early stages, that ultimately lead to fraud being identified; that conclusion will never be drawn from these data alone. As is the case now, any claim where a suspicion of fraud arises is referred to our specialist investigation team, which has to undertake a thorough investigation, following all reasonable lines of inquiry before any determination can be drawn.
Just to reassure my noble friend, whether he accepts it or not, in fraud and error cases, decisions on entitlement will be made by a DWP staff member.
Lord Davies of Brixton (Lab)
It is clear that we are talking about two different stages here. The first intervention into the bank accounts of individuals will be done algorithmically. The DWP will provide the banks or whoever with the set of criteria that they should apply, and the banks will run it through their computers and that will throw up cases. No individual will be involved at that stage. Cases that are highlighted then referred to the DWP are the ones where human intervention will start. But there are the two stages, and the human intervention is at the second stage, not the first.
Baroness Sherlock (Lab)
I think that we are going to repeat ourselves at each other. This is essentially a data-requiring measure—it is a data push. The data is coming across to DWP, and that data will be used with other data, and where there is an indication that there may be an overpayment, it will be dealt with either by reaching out to the individual or, if there is a possibility that it is fraud, it will be referred for a fraud investigation. Any decision on benefit entitlement and fraud and error is made by a DWP staff member.
Lord Davies of Brixton (Lab)
I hope that the Minister will forgive me for making the point, but it is crucial. The bank will send a data file with cases that it has flagged. Will cases from that data file be identified by humans or by the DWP algorithmically?
Baroness Sherlock (Lab)
I think that we are talking at cross-purposes here. The information will be sent across to DWP, and DWP will take information on an individual and, if there is a signal that an individual may have a breach in eligibility criteria and may have more money in their bank account than is permitted, that information will be looked at and taken together with other information and a DWP staff member will make a judgment about what to do about that. I do not think that I can be any clearer than that.
Viscount Younger of Leckie (Con)
I am standing up to be helpful to the Minister. For fear of being rather like a long-playing record, I think that a flow chart would be incredibly helpful—so I am pressing my case for a flow chart. That is all that I shall say.
Baroness Sherlock (Lab)
My Lords, I am not a flow chart gal, but if anyone is capable of turning this into a useful flow chart, I shall have a look into it.
I fully accept, being an observant person, that not everybody in the Committee agrees with these measures. It is clear that they can make a difference to tackling fraud and error. We think that they are proportionate, but I accept that some Members do not think that, and that is obviously completely legitimate. We simply take a different view.
In the next few groups of amendments, we get to look at different aspects of how that would work, but it is the Government’s view that the scale of fraud is such that it needs to be tackled. If there were other, simpler ways in which to do it, we would have used them by now. This is a source of data that will help us to tackle fraud and error in overpayments, which we do not have at the moment. We do not see any other suitable ways in which to do it, so we think that it is proportionate. We have wrapped it around in safeguards as much as possible.
Baroness Fox of Buckley (Non-Afl)
The Minister has been very helpful. There are obviously disagreements philosophically, but what is confusing is that the financial service representatives have suggested that this is a trawling exercise—the quote given was of a “fishing exercise”. The Minister has stressed, “Don’t worry: when we go to the banks and ask for this information, it is suspicionless. We are not treating people as though they have done anything wrong; we are simply finding out”. That is a huge admission that the state—the Government—is going to the banks and demanding that they provide information for no other reason than that these people are on benefits.
Lord Vaux of Harrowden (CB)
I will jump in quickly before the Minister continues. She has been very helpful in explaining how this is going to work. I should say, as I have before, that I think this is infinitely better than it was when we saw it a year or so ago—I just put that on the record again. However, there are two questions about how it works on which I would like clarification.
First, I think the Minister indicated that the banks would not have to trawl all bank accounts, but I do not think that that is right. The logic must be that the DWP provides the criteria that it wants to look at, which is whether someone is in receipt of benefits and, secondly, whether there is a flag. In order to identify whether they are on benefits, the banks will have to trawl through all the accounts to find that out. That seems a necessary step—they have to spot the indicators in the accounts.
More importantly, though, this is not a one-off exercise under the Bill. They do not just send it once and then go away. The Bill allows for these things to be periodic within 12 months, and they can then be extended. I am interested to understand what the Government intend by “periodic”. Under the way that it is currently written, they could be saying, “I want you send us this data every day—or indeed every hour or minute—for the next 12 months”, and they could then extend it. What is the plan in terms of the periodicity of this?
Baroness Sherlock (Lab)
Let me deal with the noble Lord first, because that will be quick and I am conscious of the time—I have already gone over the 20 minutes. The DWP will tell the banks, “We have a reference number and these are the accounts at your bank into which we pay benefits; please look only at those accounts, not those of anyone else”. I have been saying this all the way along the line, but I have clearly failed to get this across. The noble Lord may recall the previous discussions when we were asked why you could not look at every bank account, and the reason is—
Lord Vaux of Harrowden (CB)
I am still not convinced that that is correct. I think that what happens is that there is an indicator that goes with the payment of the benefit, and we are then asking the banks, first, to identify all accounts where that indicator exists—so they have to look at all accounts to identify which those are—and, secondly, for those accounts, whether there are any with an eligibility indicator that is flagged. My reading is that it is in fact quite clear, and it is also clear in the code of conduct and the other stuff.
Baroness Sherlock (Lab)
In as much as we will say to the banks that we would like them to look at the accounts into which we pay benefits and will give them the reference numbers. Clearly, it is up to the banks how they identify those. I think it unlikely that they will take each bank account, look at it individually and make a decision, but it is up to them. We simply want them to look at those bank accounts and to tell us whether, within those bank accounts, they believe that the particular eligibility indicator that we have given them is correct.
Regarding frequency, we will negotiate that with the banks. The previous Government looked at an earlier iteration of this and ran two proofs of concept to establish that it would work and be effective. We now have to take the powers in order to be able to start doing this. So, we have agreed that we will work with a small number of banks and work out bit-by-bit how this works, bring over information as we can manage it, make sure that the system works, and build up as we go. We will determine from that how often we will need to do that and how it works. That has to be determined; we could not determine that in advance because we need the powers in the Bill to be able to start the process.
In response to the noble Baroness, Lady Fox, it is a question of proportionality. Clearly, we already ask the Revenue to tell us how much people earn in order to determine whether or not they meet the earnings criteria for, for example, universal credit. We could simply allow people to tell us, but when we did that, some of them got it wrong; many of them made mistakes; sometimes it changed, and sometimes they deliberately did not tell us. So now, we simply get information directly from the Revenue.
We think that the power is proportionate. Whenever someone compares it to something that feels disproportionate, such as spying or putting bugs in everyone’s houses, I think that we can either claim that this is a mass surveillance power like China would use and then wonder why people are getting paranoid about it, or, while I do my best to be specific about what we are trying to do, we can all try to have a measured conversation about whether or not it is reasonable, while fully accepting that for some people the line will be in a different place than for others for reasons of both philosophy and proportionality. I fully accept that.
I have done the best I can in 25 minutes. On that basis, I urge noble Lords to agree that the clause stand part.
Lord Palmer of Childs Hill (LD)
My Lords, I thank the Minister for that tour de force. I am afraid the problem is that we all have different ideas about what is proportionate. From what I have heard, I do not think what the Government are suggesting is proportionate, and that is where the problem arises. I come from the feeling that there is a presumption of innocence, and this seems to me almost a presumption of guilt.
The Minister has not taken the point about the nervousness of banks. If a bank gets even a modest inquiry—anyone who has a bank account knows that this happens if there is a certain inquiry on your bank account—signs go up in the algorithm used by the bank saying, “We’ve got to look at this”. Anyone who is a Peer or an MP knows that their affairs can be looked at more closely just for that very reason. I hope that, on Report, we can deal in greater detail with how nervous the banks will be about what is proposed. I hope the Minister can come back and give us reassurance from real banks—joint-stock banks—that have said how they view this. I think they will view it wanting to be on the safe side.
However, at this stage, I will not press my noble friend Lady Kramer’s clause stand part notice.
Lord Vaux of Harrowden
“(9) Before giving a person an eligibility verification notice, the Secretary of State must be satisfied that the costs that will be incurred by the person in responding to the eligibility verification notice will be proportionate and reasonable for that person to incur, or the Secretary of State must agree in advance to repay all or some of the costs to the person.” Member's explanatory statement
This amendment is intended to probe how the Secretary of State will ensure that they do not impose undue costs on the banks and to what extent the banks will be able to recoup these costs.
Lord Vaux of Harrowden (CB)
My Lords, I hope that my Amendments 81, 89C and 91 are fairly self-explanatory and that we are getting into more detailed points, which might be easier, rather than points of philosophy.
Amendment 81 relates to the costs that the eligibility verification process will impose on the banks and other financial institutions that must respond to the notices. It is intended to probe how those costs will be treated. We have already had various debates on third-party costs at earlier stages in Grand Committee, but in relation to the DWP clauses around eligibility verification, there is an important difference, which is that, so far, the Government have not made any real attempts to quantify the impact that the EVM process will have on the banks or other financial institutions.
The impact assessment says about the EVM:
“The cost to Data holders has not been estimated at this stage; estimates will be included in a subsequent IA”.
It goes on to give a bit more detail of the impact on third parties, banks and institutions, saying:
“There will be transition costs and on-going costs for businesses. The impact assessment outlines some indicative costs to business, however at this stage we are unable to provide a robust assessment of business costs for validation. This is because the operational solution for the measure is currently being developed, alongside further engagement with banks. We have committed to work in partnership with banks to develop the most appropriate implementation route. Estimates will be included in a subsequent IA”.
Later, the IA refers to set-up costs to banks of around £41.25 million, although that is not based on any substantive evidence.
The Bill itself is entirely silent on the costs of the eligibility verification regime to banks and other financial institutions, and how they might be treated. As we have discussed, this is not about the impact on the banks alone; it is also about the possibility of the unintended consequence of making banks less willing to provide services to benefit claimants. We had a long debate on that previously, and I shall not repeat the arguments.
Amendment 81 would require the Secretary of State to satisfy themselves that the costs to the banks will be proportionate and reasonable or, where that is not the case, to agree to repay some or all of the costs to the banks. This is not a situation where the costs can be recovered from the fraudster, because there may be no fraudster. The banks will, effectively, be working for the Government in this case, so it is appropriate that the Government should cover any unreasonable costs.
Amendment 91 also looks at the costs of the EVN regime. It would add to the scope of the annual independent review—as an aside I very much welcome that independent review; it is a big step forward in the safeguards around this—so that it would now also report on whether the use of EVNs has been proportionate to the costs incurred both by the department and by third parties such as banks. As I have said, there has been no meaningful attempt yet to evaluate the costs to third parties, particularly because the work is ongoing to work out what those will be, so there must be some mechanism to ensure that the costs are proportionate, and the independent review would be the logical and sensible place to do that.
Amendment 89C is more technical; it is designed to deal with a concern raised with me and others by UK Finance. This concern is that the existence of an eligibility indicator might constitute grounds to suspect fraud and therefore impose obligations on the bank to take actions such as closing or freezing the account or issuing a suspicious activity report under the various obligations that the banks already have. It is worth hearing what the impact assessment has to say in this respect. It says:
“In discussion with the banking sector, the Department has been clear that any data received under this measure should not be seen as indicative of any financial crime. Many claimants will have a legitimate, authorised reason to hold savings in excess of capital benefit rules (disregards for injury compensation, for example) and in many cases, overpayments could have been caused by genuine claimant error. Given this, the Department has been clear that there should be no action to risk claimant bank accounts because of the measure”.
So that sounds good. Part 2 of Schedule 3 already goes some way towards this, but UK Finance has made it clear that it does not see the existing wording in Part 2 of Schedule 3 as adequate, as it covers only the suspicious activity report element. UK Finance agrees that there has been extensive engagement with DWP on this but makes the point that, despite this engagement, there is currently no agreed deconfliction on banks’ financial crime obligations. The amendment simply says that information that results from a EVN should not be treated in that way, and should not of itself be treated by the bank as grounds to suspect fraud. The “of itself” is important there. I will be interested to hear what the Minister has to say, given the industry’s remaining concerns. Why does she disagree with UK Finance on this?
An alternative way of dealing with this concern would be to ensure clear guidance from the FCA, which does not seem to be happening. Why are the Government not simply pressing the FCA for such guidance? Amendment 83, tabled by the noble Lord, Lord Davies of Brixton, does something similar, with reference to conflicts between the Bill and the duty of care that banks owe to their customers, and I look forward to hearing what he has to say in that respect. I beg to move.
Lord Davies of Brixton (Lab)
My Amendment 83 is a probing amendment. I want to know more about the Government’s thinking on this. As the noble Lord, Lord Vaux, indicated, this is sparked by the comments of UK Finance, which represents, broadly speaking, those who will have to comply with this legislation, interrogate customers’ bank accounts and provide the DWP with information, so its views are very germane. It submitted a briefing for Second Reading, and a number of its points still stand, except to the extent that there has been any engagement between the DWP and UK Finance since Second Reading. I would be interested if the Minister could brief the Committee.
It is still, however, relevant to mention my points. I will focus on one in particular, as my amendment does. UK Finance raised a range of concerns that need to be taken seriously. I will outline them, just to put this into context. It is concerned about the potential conflict with its duties to deal with financial crime. It regarded this as a diversion from its capacity to deal with economic crime, and it was concerned that there were insufficient safeguards for bulk data access. I would be interested if the Minister could address those issues, either now or in correspondence.
My amendment focuses on the other point that it raised. It said:
“Risks of financial harm: Tensions between the Bill and firms’ existing obligations under the FCA’s Consumer Duty and Vulnerability Guidance could result in harm to vulnerable consumers. Bad actors learn workarounds quickly, so the powers may end up impacting most acutely people inadvertently making—or subject to—errors”.
That is a massive criticism of the Bill’s provisions, and it is important that it should be addressed explicitly, either in correspondence or in reply to this debate. I want to paraphrase in very broad terms the attitude of UK Finance towards the Bill. The truth—although it would not say it in quite these terms—is that it does not like it. It wishes that it was not here because of the pressure that it would place on it in all sorts of ways. That is outlined in its briefing.
I will address more directly the issue of financial harm to vulnerable customers. The Government need to say extensively and explicitly how they expect financial institutions to reconcile their undoubted duty of care towards their customers and their obligations under the Bill. To put this into context, the Child Poverty Action Group says that
“the eligibility verification measure would mean people face more suspicionless surveillance and intrusion into their privacy simply by virtue of being benefit recipients. We believe it is fundamentally unfair and potentially unlawful to subject these families to surveillance that the rest of the population does not face, simply because they are on a low income”.
I already quoted the concerns of Helena Wood of CIFAS. There is no doubt that the provisions of the Bill will be of massive concern to individuals, and that should be a major issue in how the Government implement the Bill—I have made plain my objections in principle—and how it will be handled in relation to vulnerable customers.
I have an amendment—let us hope we get to it on Wednesday—about the affordability assessment. Having an affordability assessment is not my idea; it is in the Government’s briefing note, but they do not explain what they mean by it. We will have a debate on Monday about the nature of that affordability assessment. But that in itself will put pressure on customers. Just being there, it will create pressure, particularly for people struggling with poverty and who have problems with their mental health.
It is essential that the affordability assessment will be able to understand the individual circumstances, but the process of implementing that assessment will in itself create harm for the consumer. I cannot see an easy way through on this, but the Government need to address the issue and tell us what they will do to ensure that this conflict is avoided.
Baroness Fox of Buckley (Non-Afl)
My Lords, there was extensive conversation about the role of banks in the debate on a previous day in Committee, and I probably got carried away with my own hyperbole when I said that they were being coerced into being involved, on which the noble Baroness, Lady Anderson, corrected me. However, I think we can say that they are compelled to be involved and that financial penalties, which will become increasingly punitive, will be levied if they do not do as the Government request. If they get those penalties, the cost might not be an issue but there would certainly be reputational damage. We need to have some context here and recognise that the banks are not queuing up to do this. That is an important point, which the noble Lord, Lord Davies of Brixton, has made. There is a reluctance about some of the things that are happening with the Bill, which I think the Government can admit to.
In all the literature they have produced and in conversations we have had so far, the Government have reassured those of us who are worried about privacy. We are constantly being reassured that there are limitations on the type of data the banks will share. On the other hand, the way in which the Government are dealing with that is by saying that the banks will be fined—there will be a penalty—if they overshare or if they provide inaccurate information, so I fear that this penalty will, again, have the impact of pushing the blame or responsibility on to banks for any errors.
That makes me nervous, because it is not clear to me how they will not see anyone on benefits as just a pain in the neck for them, since they will now have to go through the exercise of checking, which they are being compelled to do or they will be fined or get into trouble, and if they get the information wrong or hand over the wrong information, they can be fined again. Inevitably—this is why I am interested in these amendments—the banks will associate these eligibility verification notices and the work being asked of them for those on benefits, and they will view such people as creating more work and more jeopardy.
I also think the banks are being held responsible for things they should not necessarily be responsible for. I would be interested to know how the Minister feels, because I think it is a reasonable query at this point to ask, “Isn’t there a problem with private banks being asked to be government inspectors?” I think it was one of the MPs who said that the purpose of banks is not to act as an arm of the state. How should private banks respond to the fact that the state is asking them to do a huge amount more in relation to this clamp-down on DWP welfare fraud? It seems to me that, ultimately, we are asking the banks to do what the Government should be doing, and the banks will get the blame if things go wrong. They are the ones who will be doing the surveillance, no matter which way we look at it.
Lord Palmer of Childs Hill (LD)
My Lords, I warmly welcome the spirit and substance of these amendments, which would collectively strengthen the Public Authorities (Fraud, Error and Recovery) Bill by ensuring that our approach to tackling fraud is not only effective but fair and—that word again—proportionate.
Amendment 81 from the noble Lord, Lord Vaux of Harrowden, rightly probes how the Secretary of State will prevent undue costs being imposed on banks and seeks to clarify the mechanisms for cost recovery. This, I believe, is an essential safeguard, ensuring that our financial sector partners are not overburdened by compliance costs, which could ultimately impact customers and the wider economy.
Similarly, Amendment 91, which calls for an independent review of the eligibility verification powers with a focus on the proportionality—that word again—of costs incurred by both the department and banks, is a welcome step towards transparency and accountability in the implementation of these new powers.
I am particularly supportive of Amendment 83, which would place the duty of care that financial services providers owe to their customers at the forefront, ensuring that data sharing with the DWP does not override these fundamental responsibilities. This is a crucial point. While we must be resolute in our effort to combat fraud—on which I am sure we all agree—we must not do so at the expense of the trust and the rights of individuals. It is a very fine line to draw.
Amendment 89C from the noble Lord, Lord Vaux, would remove the risk that the mere existence of an eligibility indicator could trigger unnecessary action against account holders, thereby preventing unintended harm to individuals.
Taken together, these amendments would ensure that the Bill’s powers are exercised with restraint and with full regard to the interests of both institutions and individuals. We must not let it trigger unnecessary actions against account holders under the Proceeds of Crime Act. I support these amendments in their entirety.
Viscount Younger of Leckie (Con)
My Lords, I speak in support of Amendments 81 and 91 in the name of the noble Lord, Lord Vaux, which seek to introduce proportionate and principled safeguards into the operation of eligibility verification notices: namely, that the Secretary of State must first be satisfied that the costs to the person receiving the notice are reasonable and proportionate, or else agree to reimburse those costs in whole or in part, and that this be subjected to an independent review. This is not a marginal or administrative detail; it goes to the heart of how we structure and sustain effective partnerships between the Government and the private sector, and particularly to how we treat the banking sector as a key actor in the fight against public sector fraud.
Throughout our deliberations on the Bill, my noble friend Lady Finn and I have returned time and again to the importance of ensuring that the powers are exercised responsibly, with due regard to proportionality and fairness. This amendment is a natural extension of that principle. It recognises that, when we ask third parties—in this case, banks and financial institutions—to support fraud detection by responding to eligibility verification notices, we are asking them to divert time, resources and personnel to do so. This of course comes at a cost, and it is only right that these costs are acknowledged and handled fairly.
As has been said, the banking sector plays an essential role in supporting government anti-fraud objectives. Banks will help to identify irregularities, flag risks and support enforcement action. But if we want this co-operation to continue and to deepen, we must treat banks as strategic partners, not simply as tools to be leveraged without regard to impact. This amendment would ensure that we are not shifting the financial burden of fraud prevention on to the shoulders of institutions that are neither the source of the fraud nor the primary beneficiaries of its reduction. It would also introduce a basic but important fairness test, that if costs are disproportionate, they should be recognised and potentially reimbursed.
Given the scale and frequency with which these powers may be used under the new framework, we should recognise that banks may be required to undertake substantial internal data searches, compliance checks or system queries, potentially at short notice. As the noble Baroness, Lady Fox, pointed out in her excellent remarks, to do so effectively, banks will need to allocate skilled staff and technological resources. It is only reasonable that we ensure that such work is feasible and fairly compensated where appropriate. Furthermore, the precise detail on how this mechanism will work is still vague from the Government.
I shall not mention flow charts again, for fear of being shouted down, but maybe we need a spreadsheet—although perhaps I shall be shouted down on that basis. Can the Minister give some detail as to how the “test and learn” with the banks is going as regards the operability of the system? In particular, what are the anticipated costs to the banks? It is understandable that the Government may not be able to answer this, as they may say that it will depend on the number of potential cases emerging and issues emanating for each case, which will vary. However, I would imagine—and I think that I said this at Second Reading—that the ongoing test-and-learn process will be able to highlight an average per case cost. If there is no information available, how do we know that the costs are not astronomical or even unsustainable for the system established? I hope that the Minister can enlighten us on that.
Baroness Sherlock (Lab)
My Lords, I am grateful to all noble Lords who have spoken on this group of amendments.
Amendments 81 and 91 in the name of the noble Lord, Lord Vaux, speak to the costs that banks may incur as a result of this measure and asks whether they are proportionate to the savings achieved. Let me say, first, that we acknowledge that, clearly, there will be new requirements on banks as a result of this proposed legislation. It is right that additional asks on banks are scrutinised, and I am grateful to the noble Lord for giving the Committee the opportunity to do that. I can assure the Committee, first, that we are bringing the legislation forward precisely because we believe that it is necessary; and, secondly, that we have taken steps to make it proportionate. We have already been through why we think that it is necessary, in our debate on the previous group, so I will not dwell on that again; let me just say that, given the scale of the savings and the lack of alternatives, we think that this legislation is necessary and that the safeguards make it proportionate.
Various noble Lords asked about the cost. We have estimated, based on initial consultation with industry sources, that the set-up cost will be around £40 million across the sector and that there will be some limited ongoing compliance costs for data holders; further information on that estimate can be found in the published impact assessment. We recognise that there is more work to do with industry to consider the costs further. That is why we committed to publishing a further, updated impact assessment within 12 months of Royal Assent: to update the estimate, taking into account the ongoing work with industry, and to ensure that there is transparency on the costs as we move forward. I assure the Committee that the Government take burdens on business seriously. We are committed to keeping requirements and costs proportionate and to a minimum; this has been a key aim at the forefront of our close and regular engagement with the finance sector.
We are not starting from scratch here. As we have discussed, the previous Government tested this approach through two proofs of concept. We know that it works. We continue to work closely with UK Finance and the finance sector on the delivery of a policy to minimise costs; I can reassure my noble friend Lord Davies both that there have been a number of meetings and Bill forums with UK Finance in recent weeks and that it will carry on working closely with us.
A few banks—a small group of them—are already working closely with us on the design and build of the digital solution that will be used to facilitate the transfer of information, in order to ensure that it is developed in a way that works for the sector. I just want to put on the record our appreciation to those banks for their valued input.
Let me say, however, that the Government can be held to account. The independent reviewer must consider whether the measure has been effective at helping to identify incorrect payments. The independent reviewer could also report on the burdens and costs that financial institutions might experience as part of that assessment. If financial institutions believe that Government are overreaching, they also have the right of review and appeal. Financial institutions can use the reviews and/or formal appeals processes to dispute an EVN, including if they determine that complying with an EVN would be unduly onerous. This is set out clearly in Parts 3 and 4 of new Schedule 3B, as inserted by the Bill. For those reasons, we believe that the amendment is not necessary.
Amendment 83 would require financial institutions, when asked to provide data to the DWP under this provision, not to provide it if they reasonably consider that doing so would conflict with their duty of care towards their customers. My concern is that this amendment assumes that we are asking banks and other financial institutions to look into the individual data that they provide to the DWP. That is absolutely not the policy intent. Let me again remind the Committee that information shared by financial institutions is done so without suspicion or presumption of any wrongdoing on the part of the claimant.
This type of data-sharing is not new to government. The Government already have similar powers to request data from financial institutions or third parties. Noble Lords will be aware, I am sure, that HMRC has the power to obtain data at scale from banks on interest-bearing accounts to support its work in gathering up taxes from all of us. For financial institutions, the duty of care owed to their customers includes obligations on a range of matters, including treating their customers fairly, taking reasonable steps to protect their customers against fraud and scams and providing fair-value services. There is nothing within the eligibility verification measure that would affect or impede these duties from being fulfilled.
This amendment would also have a practical impact: it would put greater burdens on financial institutions. The EVM is simply a data-requiring power; it does not ask financial institutions to make any assessments about the data shared. Asking them to do that would fundamentally change the basis of the policy and increase the burdens on them. I have already said that we have been working closely with the finance industry, and I can assure the Committee that we will carry on doing so.
I speak finally to Amendment 89C, which seeks to remove the risk that information that arises only as a result of complying with an EVN could by itself cause a bank to have to take specific reporting action against the account holder under the Proceeds of Crime Act 2002. I am grateful to the noble Lord, Lord Vaux, for raising this, and I hope to persuade him that the current provision already addresses this issue.
As I have said, the EVM is a data-requiring measure; it is not decision-making power. Information is shared by financial institutions without suspicion or presumption of any wrongdoing on the part of the claimant or account holder. EVM information will be used by the DWP to support our normal processes to help verify a claimant’s eligibility for the benefit that they are receiving. However, to give certainty on this point, we have already created an exemption in Schedule 3 that amends the Proceeds of Crime Act 2002 to make it clear that failure to disclose offences will not be committed if the information that the individual or institution has is only as a result of an EVN. To be clear: if the only reason that the institution has the information is as a result of an EVN, they will not be guilty of a failure to disclose offence under POCA. We have reflected this point in the EVM code of practice. This recognises that, while EVNs are not intended to indicate any wrongdoing, the DWP cannot legislate categorically for whether a person knows that there is other information a financial institution may be aware of.
We are not in a position to dictate to someone else whether they must or must not know or suspect something. This amendment seeks to prevent a person from knowing or suspecting that an offence is being committed if the information that leads them to that conclusion has arisen solely as a result of EVM. In other words, it seeks to legislate for a person’s state of mind—whether they know or suspect something—which we do not think is the way to do it. Our provision maintains the focus on the information available and aligns with the existing POCA exemption for information obtained, for example, as a result of carrying out specific immigration checks.
I always try to explain things in language that I would understand. My understanding is that, as currently drafted, the clause says that you cannot be guilty of a specific offence if you do not report somebody under SARS where the information comes only from an EVN. This amendment would fully exclude someone’s ability to suspect someone who may be acting suspiciously, and that cannot be possible. I hope that that makes sense to the noble Lord, Lord Vaux. He may want to reflect on it and come back to me, but that is the reason why we think that this is not the way forward and why what have done is the right way. I therefore believe that the current exemption, as drafted, is sufficient and aligns with the DWP’s intent that data returned by financial institutions does not in itself suggest any suspicion of fraud.
I will address some of the other comments made, starting with those of the noble Baroness, Lady Fox. I accept that there is a question about what is appropriate out there, but banks already have to do a range of things, including, as I said, HMRC having to report on interest-bearing accounts. We believe that the burdens are proportionate. After the set-up costs, we will see the details to be worked through with them, but once the systems are set up, we do not believe that this will be an extensive burden. Therefore, we hope that that will not be too much of a problem.
Lord Vaux of Harrowden (CB)
My Lords, I thank all noble Lords who have taken part in this debate and for their support for my amendments. We tabled these cost amendments primarily because we do not know what the costs are but we know that things will evolve in the future, and therefore it seems sensible that the independent reviewer should at the very least have a look at that. The Minister used the word “could”, but I would still like that to be “should”. We may well come back to that point at a later date.
The Minister mentioned that, when we are sending an EVN in, we are not requiring the banks to look into the data that is being provided to the DWP. That is naive. I do not think that any bank will ever just trawl through, pull a load of data out and send it up without checking it, because there are liabilities here to the banks. If they send a load of stuff up that is incorrect and people suffer as a result, guess who will end up getting it in the neck? It will be the bank that provided the incorrect data. It comes back to the debate we had earlier on the amendment in the name of the noble Lord, Lord Sikka, about who is liable. That is slightly naive; there are genuine, real costs here. The banks will be required to review, check and make sure that what they are providing does not cause them problems with their customers, hence the questions on breach of duty of care.
With respect to Amendment 89C—the UK Finance amendment, if we want to call it that—the Minister said that she would try to persuade me. I need to look at what she said more closely to see whether I have been persuaded. However, to be brutally honest, it is not me she needs to persuade—it is UK Finance. I urge her to have further discussions with UK Finance as soon as possible on this matter, because it seems that it is still exercising financial institutions and the industry. There is a lot in the impact assessment to say that they should not have a problem with this, and the Minister has given an explanation as to why she does not think they should, but they are still worried about it, so the department and the Minister still have work to do to make sure that UK Finance is comfortable. If it is uncomfortable, that is not a good way to start this relationship.
The Minister said that the job of the FCA was not to endorse government guidance, and I agree, but that is not what I was asking. The FCA should provide guidance to the industry that says, “If you provide this information, it does or does not have this effect”. It is for the FCA to give guidance in that respect, rather than endorsing what government guidance says. It ought to be proactive. To be honest, it should be involved in this process to make sure that it is happy that this does not cause a problem to the industry, and give guidance to the industry accordingly. Again, I hope that that discussion is going on.
I touch, finally, on the debanking issue, because it has been raised. It is a bit of a misnomer. The bigger concern to me is not that people’s bank accounts will be withdrawn—that is unlikely. More likely is that banks will become less willing to provide future bank accounts. It is not active debanking, but a slow erosion of willingness to provide services to particular groups of people. We have seen for ourselves as PEPs that banks do not like to provide us services as a result of the PEP rules. It will not be any different here. If we make it more difficult and expensive to provide accounts, it will slowly erode over time. It is not debanking in the sense of the closing down of Nigel Farage’s bank account approach, but more the erosion that I worry about.
Having said all that, I think that we will come back to one or two of these issues at the next stage. I beg leave to withdraw the amendment.
Baroness Fox of Buckley
“(4) The Secretary of State must publish the eligibility indicators.”Member’s explanatory statement
This amendment requires the Secretary of State to make public the eligibility indicators against which the banks are required to check their customers’ accounts.
Baroness Fox of Buckley (Non-Afl)
My Lords, my Amendments 82 and 88 attempt to bring much-needed transparency and clarity to how and why banks are being asked to check their customers’ bank accounts via EVMs. I also support Amendment 89ZA by the noble Lord, Lord Vaux.
Amendment 82 would require the Secretary of State to make eligibility indicators publicly available. As noble Lords will have gathered by now, I am opposed to eligibility verification notices in general and in principle. However, if they are to remain in the legislation, we need to maximise the transparency around them to guard against overreach. Amendment would 88 requires codes of practice to
“to include scrutiny provisions about the algorithms used by banks and the effectiveness of the eligibility verification measure”
in this clause.
At present, there is insufficient oversight in the Bill. We know that algorithms are central to the Bill. That is in line with the Government’s commitment to turbocharge data analytics and AI into public services in general and fraud risk detection in particular. Under this Bill, thousands of decisions regarding the collection and review of the private financial information of people receiving benefits will be—de facto at least—automated. That is a high-risk way to facilitate making decisions; especially those of a sensitive nature. Yet there is no other way for banks, building societies and so on to conduct the benefits eligibility checks that the Bill compels them to do without an algorithmic system—we have already touched on that—but the Bill does not include the specific eligibility search criteria of the algorithm involved. These amendments seek to address this lack of oversight.
The Explanatory Notes offer examples of search criteria, such as capital holdings or the legal limits of stays abroad, but there are no provisions to limit the criteria or provide transparency on them. That lack of transparency makes me question whether the Government are using the most appropriate mechanisms for their ends here, given the complexity of benefits eligibility per se, individuals varied circumstances and the sheer scale of the population’s financial accounts, joint accounts and so on.
It is unclear, and certainly no evidence has yet been provided that I am convinced by, why the Government think that banks are better placed than the DWP to conduct these complex assessments, especially when it involves outsourcing unconsented automated surveillance to third parties such as banks. These are all things that we have already discussed, so what I am specifically looking at here are the difficulties in relation to what we are asking banks to do.
There is no information in the Bill specifying who is responsible for supplying the algorithms required for this surveillance. Can the Minister clarify whether the DWP will provide third-party organisations such as banks with its existing search methodology? Will third parties be responsible for developing and deploying their own? I can understand that this might be being worked on. I have gathered from some of the things that the Minister has already mentioned that these technical issues might still be being resolved. However, it is not clear in the Bill who or what will decide on the algorithms, and there will be no accountability in relation to what we ask those algorithms to do.
In both the cases that I have given, we need to be able to probe how the powers will be put into practice. Can the Minister tell us how much testing has been done on the systems the banks will use? If it has not been done so far, when will we have it?
I do not understand why the Bill does not have provisions for quality assurance checks or a periodic review of these new automated systems. Without such quality checks, it seems inevitable that inaccurate information will be flagged and mistakes will occur, at great human cost. We heard similar concerns from the noble Lord, Lord Sikka, today. The noble Lord, Lord Vaux, referenced the Netherlands’ child tax credit scandal, which led to, for example, more than a thousand children being taken into foster care. That was because of algorithmic problems and a particular use of algorithms, with precisely the same ends of tackling fraud. Surely the Minister can see that the constant scanning of millions of accounts in relation to often complex queries and claims will make false positive matches for fraud highly likely.
I was trying to listen to what the Minister said earlier about how no decisions will be taken. Maybe we can clarify all that finally here, in terms of my concerns. I am worried that, as a result, a significant number of false positives will lead to account holders’ personal details being wrongly flagged up to the Government for further investigation, which in turn may incur further privacy intrusion—let alone penalties.
There have been problematic previous schemes that we should learn the lessons from. Take for example financial institutions’ suspicious activity reports, or SARs, which are used to combat money laundering—a laudable aim. But these SARs already have problems. A 2017 study of a sample of the largest banks found that, of approximately 16 million reviewed, 640,000 SARs were filed, yet only 4% of them resulted in law enforcement involvement.
Then there is a DWP pilot: the housing benefit accuracy award initiative, which was used to produce a risk score for housing benefit claimants that was then used as the basis for review of housing benefits by local councils. The algorithm flagged approximately 400,000 cases a year, identifying most of them as high-risk cases. As a consequence, councils were required to conduct file case reviews of those flagged, which involved invasive checks of bank statements, payslips, rent, et cetera. I know someone who was a victim of this and can testify to how awful that experience was. Benefits were suspended where claimants were not compliant or able to produce evidence to support their claim. But data obtained from the DWP by Big Brother Watch, which has been absolutely heroic in alerting the public to the problems associated with the Bill, showed that only one in three people on housing benefits subject to review were in fact being paid the wrong amount. That meant that 200,000 people were placed under suspicion at the hands of an algorithm, despite having done nothing wrong. The algorithm risks are amplified tenfold in the Bill—we should be taking this much more seriously in terms of scrutiny.
On recording how people’s data will be assessed and not relying solely on algorithms, we are given assurances in the Explanatory Notes—the Minister has been clear about this—that
“a human will always be involved in any further inquiries and any decision taken afterwards that might affect eligibility or benefit awards”.
But these assurances are not an adequate safeguard alone, as we have already touched on in earlier groups. On one hand, there is a tendency for human deference to algorithmic outputs—we have all heard the phrase, “The data does not lie”—and I fear that that is what will happen. On the other hand, courts are currently required to presume that computer systems operate correctly, placing the onus upon defendants to provide evidence that the systems they are implicated by are flawed.
There is also the small matter of staffing and resources. With many thousands of accounts being flagged to the DWP under the proposed system, it is not clear what is feasible in terms of the scale and nature of human involvement, or whether it will be genuinely meaningful. The Minister only moments ago assured us that members of the DWP would always be involved. Maybe this is the kind of job creation scheme that the Government are involved in, but it seems that that is an awful lot of civil servants who will be required if fraud is happening everywhere, and so on and so forth. So I worry.
Indeed, the impact assessment on the Bill acknowledges that the DWP may have to slow the volume of data requests to manage the potential volumes, because there will be so many. If a human decision-maker does not have enough time to properly review a decision—which is my fear—as may well be the case with the deluge of data that DWP will expect to receive from banks, the human input cannot be properly regarded as meaningful.
Lord Vaux of Harrowden (CB)
My Lords, I have Amendment 89ZA in this group—I still do not understand the numbering system that the Public Bill Office uses.
Before I move on to that, I want to make a couple of comments on the two amendments that the noble Baroness, Lady Fox, just raised. I have to say that I am a bit cautious about Amendment 82, because if you tell everybody what the eligibility indications are, it becomes very easy to avoid them. There is also a massive, gaping loophole in the Bill, which is that it covers only one bank at a time. I do not know—I would be quite interested to understand from the noble Baroness—whether, having received data from individual banks, the DWP will be amalgamating and therefore will be able to track the sort of concept that, if you have £8,000 in this bank account and £8,000 in that bank account, that puts you up to the £16,000 that would trigger the eligibility indicator. But there is a gaping hole there and, if you publish everything you are looking for, it makes it so much easier to get around it. So I am a little cautious about that one.
I am much more sympathetic to at least the spirit behind Amendment 88. We had a long debate the other day around the issues of machine learning, bias, stereotyping and generalisation creeping into decision-making processes, and there is more to do in this Bill around the safeguards around the use of automated decision-making. I know that the noble Baroness will talk about the code of practice, but that is very specific. It requires a human element only where the decision could impact on benefit eligibility. So it does not include stepping into the next phase of an intrusive investigation using the powers in Clause 72, for example. So, whether or not Amendment 88 is the right way to go, there is definitely more that we need to think about in terms of safeguards around the use of algorithmic or machine learning—or AI or whatever—trawling through this, and a number of amendments later cover the same ground a bit.
Amendment 89ZA is very simple. It simply says that applicants for benefits should be informed at the time of their application that information relating to their bank accounts may be provided to the Secretary of State, and that people who are already in receipt of benefits are informed within three months of the commencement of the Bill.
The information-gathering powers that this Bill creates are a significant step, and are carried out without any suspicion of fraud, so it must be appropriate and fair that people are informed that their bank account information may be provided to the department. I cannot actually see any reason for not accepting this one; it would improve transparency and also make those who are considering fraud think twice if they are being told that their bank account details could be accessed. In fact, I mean “provided”, because technically they are not accessed but provided.
As a general principle, as set out in our data protection laws, people have the right to know where their data is going and how it is being used, and I really cannot see any reason why this situation should be any different.
Viscount Younger of Leckie (Con)
My Lords, I wish to speak broadly in support of Amendment 82 in the name of the noble Baroness, Lady Fox of Buckley. This amendment goes to the heart of something that we should all be able to agree on: that the public have a right to know the rules by which they may be judged and that those tasked with making assessments, such as banks, should not be left to act on unclear or unpublished guidance.
This amendment would require the Secretary of State to publish the eligibility indicators that banks are expected to use when checking their customers’ accounts under the new regime. In plain terms, it asks the Government to set out clearly, before these provisions are enforced, what criteria are being used to determine eligibility. This chimes with the opening remarks made by the noble Baroness, Lady Fox. It is difficult to see how a system of such potential consequence to individuals and to financial institutions alike can be implemented fairly, if the basis on which it operates is not published and understood in advance.
We have heard throughout the debates on this Bill about the need to balance effective fraud prevention with the protection of individual rights, proper due process, and clarity for institutions involved. Amendment 82 speaks directly to that balance. If banks are to play a front-line role in identifying accounts or individuals under suspicion, they must be given unambiguous and publicly available guidance to avoid the risk of overreach, error or unjustified intrusion. We cannot have a system where accounts are flagged or actions taken on the basis of indicators that are withheld from public view. That would be both untransparent and unjust.
We should not legislate for a regime that affects people’s access to their financial resources or that places duties on banks to act in quasi-investigative ways, without knowing exactly how those judgments are to be made. This is not a wrecking amendment—it does not oppose the broader framework of the Bill. It merely insists that, before new powers are exercised, the public and partners involved in delivery know the criteria. That is not too much to ask. In fact, it is the very least we should expect in a system rooted in fairness and good governance. Again, this echoes the remarks made by the noble Baroness, Lady Fox.
To pick up on remarks made by the noble Lord, Lord Vaux, there is a balance to be struck between not giving too much away in the interest of transparency so that fraudsters are given fuel to manipulate the system. Can the Minister say where that balance should be struck, as balance there must be?
Similarly, I speak in support of Amendment 88, also in the name of the noble Baroness, Lady Fox. I believe it represents a sensible and timely addition to the schedule. As we have discussed throughout the passage of this Bill, the use of data and automated decision-making, particularly through algorithms, is becoming an increasingly central feature of fraud detection and eligibility verification. That in itself is not a problem; it is a reflection of the complexity and scale of modern fraud threats. But it also means that we need clear and consistent standards for how these tools are developed, deployed and scrutinised. The cautionary tale from the Netherlands, highlighted by the noble Baroness, Lady Fox, is very much noted. I am sure that the Committee has noted it.
This amendment goes to the heart of the need for standards. By requiring the code of practice to include mechanisms for the scrutiny of algorithms used by those in receipt of eligibility verification notices, typically banks, it creates a shared framework for oversight. This is particularly important when algorithms are applied across several discrete institutions, each of which may have slightly different internal systems, standards or even risk profiles. Without a common baseline, we risk inconsistency, a lack of accountability and potential harm to individuals through opaque or poorly calibrated processes.
Moreover, new sub-paragraph (g) proposed in this amendment rightly extends that principle of scrutiny to the powers themselves, and we must also be willing to assess whether they are effective and 100% secure in their specified and sole objective. We must also be willing to assess whether they are proportionate to the outcomes that they set out to deliver. In short, this is a practical amendment rooted in the principles of clarity, consistency and continuous improvement—perhaps part of the test and learn. It does not obstruct the Government’s goals; it helps to make them more credible and accountable, we believe.
I express my support for Amendment 89ZA in the name of the noble Lord, Lord Vaux of Harrowden, which I believe strikes a careful and important balance between transparency, accountability and the effective operation of the powers contained in this schedule. At its core, this amendment does something quite simple but significant: it ensures that individuals applying for or receiving relevant benefits are clearly informed—that is, in writing—that information relating to their bank accounts may, under certain circumstances, be shared with the Secretary of State. This is a matter of basic transparency and fairness. I note that this is being proposed at the time the benefit is applied for, and I might describe it—perhaps putting words into the mouth of the noble Lord, Lord Vaux—as part of an induction process when one applies for any benefit in scope. In other words, fair warning is given that a benefit that comes from the taxpayers’ pocket has responsibilities attached to it. Perhaps this should also be placed in the code of practice, and I ask that question of the Minister.
If we are to entrust public authorities with powers of this magnitude—which allow for sensitive financial data to be accessed without the individual’s active consent—surely it is right that we also commit to informing individuals of the possibility that those powers might be used. This is not about compromising investigations or alerting fraudsters in advance; it is about ensuring that people understand the system that they are entering and can act responsibly and lawfully within it. Providing this information up front reinforces personal responsibility. As I said earlier, it says clearly to the individual, “If you are claiming public money, there is a legitimate expectation that your eligibility may be subject to verification”. It allows claimants to know the rules of engagement in advance, and it ensures that they cannot claim later to have been caught unawares.
At the same time, I recognise, and I think the noble Lord does as well—I hope he does—that this amendment must not inadvertently encourage more sophisticated methods of deception. It is a fine line to walk, and this chimes with my earlier question to the Minister. We must not turn transparency into a user manual for fraud, but I believe that this amendment is framed carefully enough to avoid that risk. It does not disclose when, how or under what criteria information will be requested—only that it may be. That is, I believe, a proportionate step. Ultimately, this amendment supports the legitimacy of the wider regime, and I therefore support it and hope that the Government will see it as a constructive addition to the schedule.
Baroness Sherlock (Lab)
My Lords, I am grateful to all the noble Lords for their comments. Amendment 82, tabled by the noble Baroness, Lady Fox, would require the Secretary of State to make public the eligibility indicators, as set out in EVNs. Although I understand the point that she is making, I am firmly of the view that making public the eligibility indicators will be counterproductive, for reasons alluded to by the noble Lord, Lord Vaux. It is set out very clearly in the Bill that all eligibility indicators have to link to the eligibility criteria for those benefits that are within the scope of the EVN measure: universal credit, pension credit and ESA. Those eligibility criteria are widely available for anyone to see, including on the GOV.UK website. The DWP does its utmost to ensure that customers who claim benefits are clear on the relevant criteria, and they are reminded many times throughout their claim of the need to report changes of circumstances against these key criteria. This is important because there are people out there who are not fraudsters but who make genuine errors, and we do all we can to help people understand the eligibility rules and ensure that changes of circumstances are reported.
As the noble Viscount alluded to, there is a fine line between transparency and making things easier for fraudsters, but I do not want to publish the specific eligibility indicators that we will set out in an EVN, because to do so would actually help those who want to commit fraud to circumvent the measure. We know from all kinds of sources that there are people out there who study every single rule and piece of information we put out to try to work out how to get around them and get money to which they are not entitled. The Committee would obviously want us to do everything we can to avoid that. So, to protect the effectiveness of this measure and to help stop fraud, we do not think it appropriate that we publish the eligibility indicators.
Turning to Amendment 88, also from the noble Baroness, Lady Fox—
Lord Vaux of Harrowden (CB)
Before the Minister moves on to Amendment 88, I asked about the cross-comparison with datasets from different banks; this goes to the point that the Minister has just been making about it being easy to commit fraud. To what extent will data from bank A be amalgamated with data from bank B to discover whether, when combined, there is an eligibility indicator flag?
Baroness Sherlock (Lab)
An EVN can be used only in relation to the bank account into which the benefit is paid. Therefore, that would be a specific bank account in a specific bank. Of course, the DWP’s authorised investigators have and use a range of sources where they have a suspicion of fraud, and there is a range of mechanisms out there to look at what other information can be gathered in order to make that judgment. I can see that I have not hit on what the noble Lord was asking for.
Lord Vaux of Harrowden (CB)
In the situation where there would be a suspicion of fraud, you have bank A—actually, I suppose it would not have provided the information, would it?
Baroness Fox of Buckley (Non-Afl)
I apologise for jumping up and down. This is the confusion I have in relation to this area: if you are a fraudster and you are watching this Committee very carefully, as the Minister indicated they are doing—I am sympathetic to the idea that I am perhaps being naive in publishing, “Here you are, fraudsters, this is what you should do”—it seems to me that what you would do is set up multiple bank accounts. In fact, I think it was the Minister for Transformation, Andrew Western MP, who conceded
“that we will not have full sight of somebody’s accounts if they bank with more than one institution”.—[Official Report, Commons, Public Authorities (Fraud, Error and Recovery) Bill Committee, 6/3/25; col. 237.]
So it seems to me that the fraudsters are over there playing the system.
This is a Bill that gives enormous powers, about which I worry. It seems that the eligibility criteria should be known in order for them to be accountable. I do not want to be naive, but the people who actually need the eligibility criteria are those people who might, by error, breach the eligibility criteria, but also, democracy requires it because we need to know how to hold this legislation to account. The fraudsters—the people who are deliberately going out of their way to rip off the welfare system—already know how to play this, if that makes any sense. Even as I was tabling the amendment, I was aware of the fact that I am not saying, “Let’s give the game away completely”; however, we cannot just say, “We can’t tell you anything in case the fraudsters find out”, when there are real loopholes here that the fraudsters are going to exploit anyway.
Lord Sikka (Lab)
Related to that, as far as I understand it, some benefits can be paid into foreign bank accounts but they are totally beyond the scope of the Bill, so, presumably, if there is fraud there, it will never really be tackled. Secondly, is it permissible for a UK-resident benefit recipient to request that the benefit be paid into a bank account in the Cayman Islands, the Bahamas, Cyprus or somewhere else?
Baroness Sherlock (Lab)
Just to be clear, this measure is attacking both fraud and error. It looks at overpayments, whatever the source. It is simply one tool among many that is available to the DWP and which will help produce a source of information, which will help to identify incorrect overpayments. Having got that information, the DWP will use the full range of powers and the information available to it. If any fraudsters are sitting down on a quiet Monday afternoon and watching this Committee, they should be warned: the DWP has lots of sources of information; it will investigate them; and it successfully prosecutes many people for fraud. The DWP will use this and other powers to pursue what is there. However, this measure alone has been scored by the OBR to save up to £940 million over the next five years. No single measure will be foolproof alone; it will play its part alongside a range of measures and processes to help root out fraud.
I will have to write to my noble friend Lord Sikka on the Cayman Islands. I do not have them at the back of my mind at the moment, I am afraid, but I will let him know if there is an issue over there.
I say to the noble Baroness, Lady Fox, that I fully accept that there is a line between giving all details in public and tackling fraud. We have given out a lot of information and a lot of protections here, and we have found ways of making sure that there is oversight. One reason for having oversight is that there are things that we will never be able to put out in public; it is important that somebody has scrutiny and can report to Parliament, independent of the department, on how these powers are being used. We would hope that that picks up the remaining areas of concern.
I turn to Amendment 88, also in the name of the noble Baroness, Lady Fox. I will address in turn the two points that it raises. The first is the requirement for the code of practice to include information about the ways in which scrutiny can be applied to the methods that a financial institution may use to identify relevant accounts, for the purposes of the eligibility verification measure. This is not a matter for a code of practice. The criteria that financial institutions must use to identify relevant accounts are described in paragraph 1(2)(b) of new Schedule 3B to the Social Security Administration Act 1992. Accounts must simply meet two tests in order for information to be shared by the financial institution with the DWP: first, the account must receive a relevant benefit payment or be linked to that account; and, secondly, the account in question must meet the criteria that the DWP sets out in the eligibility verification notice. Financial institutions operate in many ways. It must be for each individual financial institution to determine how it identifies relevant accounts.
The key point here is that the EVM asks banks to return specified data only where those two tests have been met. It is a data-requiring power; we are not asking banks to do anything more than that. Again, I remind the Committee that it is the DWP that will review all the information received and DWP staff who will make any decisions about entitlement where potential fraud or error is identified. No decisions will be taken using EVM data alone; decisions about entitlement will be made only once the DWP has made further inquiries.
On that point, the Bill does not introduce any new use of automated decision-making. The DWP will examine data received from banks under the new power, alongside other data received, to determine whether there has been an incorrect overpayment. As is set out in our personal information charter, which is publicly available, the DWP uses automated processing in some decision-making to help us deliver efficient services. The DWP will not make any decision that has significant effect based solely on automated processing unless the law allows this, and claimants will be informed if we make any such decision.
I turn to the second issue in this amendment. It would require the code of practice to contain information about measures that would enable scrutiny of the effectiveness of the EVM. This is, again, an important issue but not one for the code of practice. However, I completely agree with the noble Baroness, Lady Fox, that we must assess how effective the EVM is; that is why, under Clause 75, the independent overseer of the measure must consider the extent to which the exercise of the power has been effective in helping to identify incorrect payments of relevant benefits.
Finally, I turn to Amendment 89ZA, which raises the issue of informing claimants that the EVM may be used to require the sharing of information about their relevant accounts with the DWP. Let me take a moment to update the Committee on the ways in which the DWP will inform claimants and relevant account holders about the measure; I hope that this will reassure the noble Lord, Lord Vaux. The DWP has a personal information charter that sets out how it uses and stores personal information. It is publicly available, and claimants are explicitly directed to it at all times when the DWP requests their personal data. We will update the DWP personal information charter to make it clear that the EVM may be used to require the sharing of their personal information; that commitment is made clear in the draft code of practice, which noble Lords have seen.
This amendment suggests that we should inform claimants either at the start of their claim or within three months of the EVM becoming operational. Our approach of updating the personal information charter means that customers are much more regularly informed about the EVM; this is because claimants are regularly directed to the document throughout their claim. For the benefit of the Committee, I can confirm that claimants are explicitly directed to it in all DWP claim forms; in change of circumstance and uprating letters; in recorded telephone messages; in DWP agents’ telephony scripts; on digital online services; and in other products where the DWP collects personal data. As noble Lords will know, the draft code of practice, which will be publicly consulted on, makes clear that all those who hold a personal account into which a relevant benefit is paid should be aware that information about them and their relevant accounts may be shared by a financial institution with the DWP if the eligibility indicators specified in an EVN are met.
Lord Vaux of Harrowden (CB)
There is a big difference between pointing someone towards a data protection statement—let us be brutally honest: how many of us have ever read one?—and telling people that their bank account details can be provided to the DWP as a result of having this particular benefit. Nobody has ever read a data protection statement, and I do not suppose that they ever will.
Baroness Sherlock (Lab)
To be clear, their bank details cannot be accessed by the DWP under this measure; their bank details can be accessed by the DWP under its other powers. I know that the noble Lord knows this but I want it to be clear for the record because there is a lot of misunderstanding out there; I hope that he will let me finish my sentence. The DWP cannot access people’s bank accounts using this measure or look at transaction data. It does not see what they spend their money on or any of that. It can simply ask banks to let it know whether a particular criterion is met. I take the noble Lord’s point; we think that this is adequate, but he does not, so I am afraid that we may just have to agree to disagree on this one.
Regarding the noble Lord’s other point, on how much data and how many different banks will be involved—and when—we had two choices in doing this: test and learn, which is the subject of much comment; or the alternative, which is a big bang involving all the banks going out together at once, getting their data, bringing it in and going through it. We decided not to do that, as we thought that it would be irresponsible. Test and learn means that, for the first 12 months of the rollout, we will initially work closely with a smaller number of banks and financial institutions, identifying any possible areas for concern, allowing them to be addressed and sorting out teething problems. The measure will then gradually be rolled out with all the relevant financial institutions. The impact assessment says that, in the first year—2026-27—we expect a rollout rate of around 2%, going up to 25% in 2027-28. The idea is that you start very small, make sure that it works, iron out the problems and then grow it as it goes on.
I think it was the noble Baroness, Lady Fox, who mentioned that the data could be slowed down. We do not want to bring in data that we cannot process; we want to bring in data that is appropriate. We will bring it in and manage it, as we are able and resourced to do. I hope that that reassures noble Lords; I encourage the noble Baroness, Lady Fox, to withdraw her amendment.
Viscount Younger of Leckie (Con)
I want a bit of clarity on test and learn. We have had two exercises, which have reached proof of concept. I am confused now because the Minister is, I think, indicating that there are test and learn exercises still to begin. How many are ongoing and how many are due to begin?
Baroness Sherlock (Lab)
Clearly, I am expressing this really badly, because I have said it about 17 times and still have not explained it clearly.
When the noble Viscount was a Minister—perhaps it was his predecessor—under the previous Government, they were working with banks to find out whether the proof of concept worked. The answer is that, yes, it does. Test and learn is about saying, “We’re now going to build this up and operate it at scale. How do we do it? What does it look like?” Bit by bit, we will work with a small number of banks; try it out; make sure that the processes, the data pushes and so on work properly; and work with a small number of people who also understand how the sector works as a whole. Then, when it is working, we will roll it out to a wider number.
I am sorry if I have not been explaining that clearly, but that is the difference. The proof of concept asks: can it be made to work? The answer is yes. The test and learn asks: what is the best way to set this up so that the systems will work and so that we get the right information at the right time—a time when we are able to work it properly? I hope that that has helped.
Baroness Fox of Buckley (Non-Afl)
I give many thanks to noble Lords for their contributions to this debate. In some ways, it has clarified quite a lot for me; in some ways, I am completely confused. I will go off and read the debate, reflect on it then work out how to bring this issue forward on Report.
I thank the noble Viscount, Lord Younger of Leckie, for his supportive remarks in general and the insights that he brought; they are much appreciated. I thank the noble Lord, Lord Vaux, for drawing attention to my dilemmas around transparency. I want there to be more transparency but, as I said, I do not want to be associated with being an idiot—well, that ship might have sailed—in relation to giving the game away. Transparency is important in politics and in terms of trust in a new Bill that will bring about a huge change in the way the state is viewed, in terms of how it relates to citizens on benefits and so on. One of the reasons for this confusion and difficulty is that this Bill insists on treating fraud and error indistinguishably. That is one of the dangers with it. Fraud is one thing, but people who are inadvertently overpaid when errors are made are treated with the same piece of legislation. That is why it was helpful of the noble Lord, Lord Sikka, to remind us earlier that there are people who will play the system—that is one thing—while there are other people who could inadvertently be treated like criminals.
Lord Vaux of Harrowden
“Reasonable grounds for suspicion
5A The existence of an eligibility indicator alone does not constitute reasonable grounds for suspicion for the purpose of section 109BZB (1)(a) of the Social Security Administration Act 1992.”Member's explanatory statement
This amendment would ensure that an authorised person would need more evidence than the existence of an eligibility indicator alone before exercising more intrusive investigations.
Lord Vaux of Harrowden (CB)
My Lords, Amendments 84 and 85 attempt to strengthen important safeguards around the use of information that is gained through an EVM. The Minister has quite rightly said that the scope of the information the banks can provide in response to an EVM is tightly limited. She is right, and that is a very significant improvement to the previous incarnation of the Bill. As currently framed, the only information that can be provided to the Secretary of State by the bank is specified details about the account, such as sort code and account number; specified details about the account holder, such as name and date of birth; and specified details about how the account meets the eligibility indicators. It is also clear in the Bill that transaction data or special category data may not be provided. So far, so good and, as I said, it is a great improvement.
But there is another important potential loophole here. Clause 72 gives the Secretary of State the power to require much more intrusive information if the Secretary of State
“has reasonable grounds to suspect that a person has committed, is committing or intends to commit a DWP offence”.
So, if the existence of an eligibility indicator alone would meet the threshold of “reasonable grounds to suspect”, then the tightly drawn restrictions on the data that banks can provide under an EVM become somewhat meaningless. It will just move on to the next phase almost automatically. We have had a lot of discussion around automation, and I agree with the noble Baroness, Lady Fox, that given the volumes of data that will be provided over time, it seems extremely likely that it will—in fact, it is extremely unlikely that it will not—be processed automatically by the DWP, which will choose which ones to investigate more deeply. We have heard about the human elements and will come on to those in the second amendment in this group. but the code of practice does not cover the transfer from EVM to Clause 72’s more intrusive data searching.
Nothing in the code of practice or the Bill would prevent this eligibility indicator being used as reasonable grounds to suspect and, therefore, the Clause 72 provision being triggered with no other safeguard. There may be many reasons why the existence of an eligibility indicator might be entirely innocent. The impact assessment and the noble Baroness have given the example of authorised disregards and genuine error—and genuine error on the part of both the individual and the department. So it seems that, before exercising the robust and intrusive powers under Clause 72, much more should be required, or at least more should be required, than just the existence of an eligibility indicator alone, and I stress “alone”. That is what Amendment 84 tries to achieve, and I think this is probably in line with what the noble Baroness intends, so I hope that this or something like it will be acceptable.
The second amendment, Amendment 85, deals with another critically important safeguard. In response to various concerns raised about the use of algorithms, algorithmic processing, the use of AI and so on, the noble Baroness has stated very clearly that information must be reviewed by a human person before action is taken, and a previous group discussed how bias and stereotyping can creep into automated systems—I will not repeat that. But again, the human element—the human review—does not appear anywhere in the Bill. There is a reference to human decision-making in paragraph 4.31 of the draft code of practice:
“No data source is perfect or infallible. That is why in fraud and error, a human will make any final decisions that affect benefit entitlement, and any indications of potential fraud or error will be looked at comprehensively”.
But this does not set out any level of seniority or qualification, and it covers only final decisions that affect benefit entitlements and not, for example, decisions to affect the intrusive investigative powers that Amendment 84 is looking at. More importantly, the code of conduct can be changed at will by the department; there is no parliamentary oversight or what have you.
As I have said before, I do not doubt the noble Baroness’s intentions in this respect, but the Bill will outlast her tenure and indeed her party’s tenure. Future Governments or Ministers may not have vulnerable people’s interests at heart in the same way that she does. Imagine a future Government applying a DOGE-style approach to this.
The requirement for any decision to be taken by a suitably qualified and senior human is such an important safeguard that I believe it must be in the Bill and not left to the whim of any future Government who might wish to simply automate the whole process—and they could do that: they just change the code of conduct. The issue is not about decisions that affect benefit entitlement alone; as I say, appropriate human review should cover also the use of the more intrusive powers under Clause 72, and the code of conduct does not cover that at all.
I am very happy to discuss the wording, but the principle of suitably qualified and senior human review before decisions are taken is, for me, one of the key safeguards. I hope the noble Baroness will be able to look sympathetically at this amendment, especially as all it does, I think, is to codify what she has consistently said will be the case. I beg to move.
Lord Verdirame (Non-Afl)
My Lords, I will be very brief. I very strongly support everything that the noble Lord, Lord Vaux, has said on these two amendments. They are some of the most important amendments that have been debated today because they go to a very fundamental principle. The power in Clause 72, with the new Section 109BZB, is quite significant, and we need to have limits to the exercise of this power in the Bill, both as regards the reasonable grounds—that is Amendment 84—and as regards the human decision-maker. I will not repeat the noble Lord’s reasons because I thought he put his case so compellingly, but I am very much in favour.
Lord Palmer of Childs Hill (LD)
My Lords, I am also pleased to welcome Amendments 84 and 85, tabled by the noble Lord, Lord Vaux of Harrowden, which serve to strengthen the safeguards within the Bill.
Amendment 84 would ensure that an authorised person must have more than just the existence of an eligibility indicator before embarking on more intrusive investigations. We believe this is a vital protection against overreach, ensuring that individuals are not subjected to unnecessary or disproportionate scrutiny based on limited evidence. Such a safeguard is entirely in keeping with my party’s principles of fairness and proportionality—that word again—and it will help to maintain public confidence in the system by ensuring that investigations are always grounded in robust evidence.
Amendment 85, which requires that information received following an eligibility verification notice is reviewed by an appropriately senior person before any changes to benefits or intrusive investigations are commenced, is equally welcome. This amendment introduces an important layer of oversight and accountability, ensuring that decisions with potentially significant consequences for individuals are not taken lightly or without proper consideration. By embedding these checks and balances into the Bill, we would be not only protecting the rights of claimants but upholding the integrity of our counterfraud efforts. I confirm other comments about how important these amendments are, and I hope that we can carry them forward to Report if need be.
Viscount Younger of Leckie (Con)
My Lords, I rise to speak in support of speak in support of Amendments 84 and 85 in the name of the noble Lord, Lord Vaux of Harrowden. These are thoughtful, proportionate and necessary additions to this schedule, and they speak directly to the themes that we on these Benches, and many across the Committee, have consistently returned to throughout Committee: clarity, fairness and safeguards for the individual in the exercise of significant state powers.
Amendment 84 seeks to ensure that the mere presence of an eligibility indicator is not, in and of itself, treated as constituting reasonable grounds for suspicion, as required under new Section 109BZB(l)(a) of the Social Security Administration Act 1992, before certain investigatory powers can be triggered. This is of fundamental importance. The Bill proposes a system whereby data provided by financial institutions, under an EVN, may trigger further investigatory steps. But what is an eligibility indicator? It is, in essence, a flag: a signal generated through algorithmic or rule-based analysis that a particular feature of a person’s financial behaviour may be anomalous or potentially inconsistent with benefit entitlement.
As I have said before, we must be absolutely clear: an eligibility indicator is not a finding of fact. It is not, in itself, evidence of wrongdoing. Amendment 84 simply ensures that the existence of a flag must be the beginning of a process and not the end of one; that further evidence or analysis must be applied before escalation; that human judgment must play a role, as has been mentioned today; and that when the state exercises its powers, especially when those powers touch on privacy, dignity or the right to subsistence, it does so on the basis of reasonable grounds. This is a proportionate safeguard. It respects the need to act on suspicious patterns, but it also respects the rights of the individual and the integrity of the system.
Amendment 85 builds on this principle by adding an additional layer of oversight—namely, that any action to suspend or amend a person’s benefits or to initiate intrusive investigatory steps must first be reviewed by a person of appropriate seniority and experience, authorised by the Secretary of State. Again, this is not an attempt to frustrate or delay the enforcement regime—it is a recognition that decisions on subsistence-level support must be taken with proper scrutiny by individuals equipped with the training, authority and awareness to make such decisions with the necessary care.
We must also remember that these are not abstract powers. They affect real and often vulnerable people, whose entire financial well-being may rest on the outcome of these decisions. A mistaken suspension of benefits, based on an unreviewed flag or misinterpreted data, can mean missed rent, no food on the table or the spiral into debt and instability. Also, it is possible that, if the system did not work as intended, individuals who suffered wrongful financial detriment—or, worse, reputational detriment—could take legal action.
If we are to maintain public trust in these powers, it is vital that there is confidence in not only their lawfulness but their soundness. A requirement that an appropriately senior official reviews and signs off on such actions is not a high bar. It is, in many ways, the least that we should expect of a responsible and accountable system. Can the Minister confirm, as she did the other day in respect of the Cabinet Office debates, the exact level of an appropriately senior official?
I should add that this chimes with remarks I made in our debate on a previous group about the need to have a so-called four eyes principle of oversight by a human being on decisions made—a fail-safe system for the monitoring of decision-making. The noble Lord, Lord Vaux, outlined the arguments in this respect very well. Together, these amendments would provide what so many across the Committee have called for: safeguards that ensure that the system operates justly as well as efficiently. They would not remove powers or obstruct action. They would embed standards of evidence, scrutiny and accountability into the decision-making process—standards that we would demand in any area of public life where the stakes are this high.
Baroness Sherlock (Lab)
I am grateful to all noble Lords. The noble Viscount just described these amendments as thoughtful and necessary. I think that they are characteristically thoughtful, but I hope now to persuade the noble Lord, Lord Vaux, that they are not in fact necessary. This is a good one, so I offer the noble Lord this.
First, to be clear, Amendment 84 would require an authorised person to need more evidence than just that provided through the EVM before carrying out an investigation under new Section 109BZB, which is to be inserted into the Social Security Administration Act 1992 by this Bill. I agree that the fact that an account meets an eligibility indicator set out in an EVN does not on its own constitute reasonable grounds for suspicion and cannot on its own be used as grounds for exercising fraud investigation powers under new Section 109BZB of the Act. The meeting of an eligibility indicator does not mean that a benefit has necessarily being overpaid. As I have made clear before, the EVM information does not come with a tag of suspicion attached.
The fact that an account meets an eligibility indicator does not mean that there are any grounds for suspicion of fraud or other offences; it does not even mean that a benefit has necessarily been overpaid. Paragraph 3(1) of the EVM legislation makes it clear that eligibility indicators indicate only that a benefit may have been, or may be, incorrectly paid. Whenever the DWP reviews a claim following the receipt of EVM information, it will initially look into its own systems to cross-reference between the data received via the EVM and the information that the customer has previously provided to the department. The DWP’s existing powers under Section 109 of the Social Security Administration Act 1992 can be used only where there is a reasonable suspicion of fraud, and only DWP-authorised officers will be able to request information under new Section 109BZB.
The requirement for reasonable suspicion before exercising powers under new Section 109BZB is set out in that section. This means that, before a case is referred to an authorised officer for a criminal investigation and these information-gathering powers are used, certain criteria must be considered: there must always be a reasonable suspicion of fraud, and all information requested must be necessary and proportionate for the investigation.
Amendment 85 would require information received following an EVN to be reviewed by an appropriately senior person before a person’s benefits can be amended or suspended, or before further investigatory powers can be used. Again, I hope to persuade the noble Lord, Lord Vaux, that this is not necessary. First, as I said, the eligibility verification measure is a data-requiring power, not a decision-making power. We have been clear that the limited data shared by financial institutions does not suggest any wrongdoing on its own. Data will be used, if appropriate, by DWP officials to make further inquiry and to ensure that the benefits being received are correct in line with the claimant’s circumstances and the relevant benefit eligibility criteria.
Obviously, the noble Lord does not specify what “an appropriately senior person” is. Let me assure him that these DWP officials are already trained to make these decisions, and they do so every day as part of the DWP’s business-as-usual activity. Decisions on claims and applications are made by trained officials on the Secretary of State’s behalf every day. This applies across many of the DWP’s processes with claims and applications; those decision-makers are usually administrative or executive officer grade.
When fraud is suspected and DWP wishes to use the power under new Section 109BZB of the Social Security Administration Act 1992, this can be used only by a DWP authorised officer of executive officer grade who has been trained and accredited. Only these authorised officers are able to request information under these powers, and they must always have reasonable grounds to suspect a DWP offence and consider it necessary and proportionate to require the specified information.
In all cases, before any decision is made, officials will look at any indications of fraud and error comprehensively. For example, DWP will look within its own systems to check for any inconsistencies between the data received via EVM and the information the customer has provided to DWP. There could, for example, be a disregard in place, which means that a claimant can have more money than normally allowed under the benefit rules. Alternatively, a DWP staff member may reach out to the claimant to request further information. In such cases, an appropriately trained and skilled staff member will make any decisions that affect benefit entitlement or changes to a claim. The suspension of a claim would be used only as a last resort and only after repeated attempts to contact the claimant and checking for any known vulnerabilities. I hope that, in the light of that, the noble Lord is reassured and will feel able to withdraw his amendment.
Lord Vaux of Harrowden (CB)
My Lords, I thank all noble Lords who have taken part in this debate for their support on this. I welcome the clear statement from the noble Baroness that she agrees—which is a very good start—that the eligibility indicator in itself would not be reasonable grounds. I need to go back and carefully read what she said to understand exactly what is guidance, what is code, what is Bill, et cetera. But I am reassured by a lot of what she says.
I suppose my caution still comes back to this point: my worry is not with the noble Baroness but with a Government in five or 10 years’ time of a rather different hue and with slightly less squeamishness, shall we say, about some of this stuff. Are these safeguards robust? We are giving substantial new powers to the department, therefore these safeguards need to be robust and not changeable at will by a future Government. That is what I want to dig into and understand a bit better when I go back into this. So we may come back to this, and I hope we will discuss it further between now and Report. But, in the meantime, I beg leave to withdraw the amendment.
Baroness Sherlock
(a) the period of 14 days beginning with—(i) the day on which the eligibility verification notice was given, or(ii) if the person seeks a review of the notice under paragraph 13, the day on which the person is notified of the outcome of the review, or(b) such longer period (if any) as the Tribunal considers reasonable in all the circumstances.”Member’s explanatory statement
This amendment means that the tribunal can extend the time limit for appealing against an eligibility verification notice.
(b) such longer period (if any) as the Tribunal considers reasonable in all the circumstances.”Member’s explanatory statement
This amendment means that the tribunal can extend the time limit for appealing against a penalty imposed for a failure to comply with an eligibility verification notice.
Lord Sikka
Member’s explanatory statement
This amendment and another in the name of Lord Sikka seeks to restrict the DWP’s powers in relation to eligibility verification solely to bank accounts held in the name of the benefit claimant only.
Lord Sikka (Lab)
My Lords, good laws should consider unexpected negative consequences and eliminate them before any legislation is implemented. One consequence of the Bill could be that it might increase homelessness and financial exclusion. This arises because DWP’s powers of surveillance apply to bank accounts to which benefits are paid even though the account is not wholly under the control of the benefit claimant. These include bank accounts in the name of landlords and others. I am sure the Minister will be able to give us more information about how that will be dealt with.
A perennial problem is that some landlords and letting agents might refuse to let property to individuals receiving housing benefit or housing costs payments through universal credit, as they fear that rent might not be paid in full or on a timely basis. Housing benefit is usually paid directly to the tenant but, under certain circumstances, it can be paid directly to the landlord. Examples include circumstances where the tenant is unable to manage his or her finances, and may be considered to be vulnerable because of addictions, medical conditions, learning disabilities or physical disabilities. There may be evidence that the claimant consistently does not pay the rent and uses rent money to fund other aspects of his or her lifestyle. The claimant may well have fallen eight weeks behind in rent payments. Under these circumstances, benefits can be paid directly to the landlord. Of course, if the benefits are overpaid, the DWP already has powers to recover the overpayment from landlords without extended surveillance of the bank accounts. It is not clear, therefore, why the Government are taking on additional powers.
Under this Bill, the landlord’s bank account receiving the benefit will become subject to an information notice and related surveillance. It is not clear what the information notice sent to the landlord’s bank account would want to know. It cannot be whether the landlord has excessive savings or income above some ceiling, as the balance of that account and transactions leading to that balance have no influence on the claim of the tenant for any benefit. The money is paid to the landlord on behalf of the claimant whose circumstances are nothing to do with the financial position of the landlord. The landlord’s bank account, or accounts, may contain transactions about the letting business, rental payments from other tenants, tax payments, savings, investments, dividends, capital transactions and more. Such transactions are nothing to do with the benefit claimant whose rent is paid into the landlord’s bank account. Can the Minister explain what the DWP would want to know about the landlord’s bank account?
Faced with erosion of financial privacy, a landlord might refuse to have benefits paid directly into his bank account and refuse to let property to anyone receiving benefits, as that would be the only way of retaining financial privacy. The result could be increased homelessness. This is the fear that many disabled people have already expressed to me at various meetings, especially as their accommodation is adapted to their needs. They fear that other landlords would not incur the expenditure to provide them with suitable accommodation. It would be helpful if the Minister would explain whether landlords can refuse to have benefits paid directly into their bank accounts, and what would prevent them refusing to let property to people on benefits.
Of course, it is not just landlords who face this surveillance. For a variety of reasons, benefit claimants may be unable to open or manage a bank account. Many banks refuse to open a bank account for individuals sectioned under the Mental Health Act. Indeed, I have experienced that problem directly because, in my family, we have a person who has recently passed away who was sectioned, but no bank would give him a bank account. Every bank that we visited on the high street said, “Sorry, he cannot have a bank account”. Under these circumstances, the only option is to have a joint account into which some money or the benefits are paid. However, that person, the other bank account holder, then comes under surveillance. As I understand it, the third party whose name is on the joint bank account would definitely be subject to an information notice or surveillance. This will persuade many to refuse to be a joint bank account holder. In the case of a joint bank account, the money attributable to the benefit claimants may not easily be determined without detailed investigation. It is not quite clear what the bank would tell the DWP, because the bank can only look at a bank account; it cannot tell which money belongs to the claimant and which money to somebody else.
Can the Minister explain how the joint account holder’s money would be separated from that of the benefit claimant’s? Faced with loss of privacy, joint account holders may terminate their involvement, causing hardship and financial exclusion. Of course, the Government can insist that no benefit claimant is denied their bank account; that would go some way towards alleviating this problem—but no other Bill actually insists on that. What assessment has been made of the unexpected negative consequences, and what steps are the Government taking to eradicate them?
Lord Palmer of Childs Hill (LD)
My Lords, I welcome Amendments 89A and 89B, tabled by the noble Lord, Lord Sikka, which seek to ensure that the Department for Work and Pensions eligibility verification powers are restricted solely to bank accounts held in the name of the benefit claimant. The noble Lord, Lord Sikka, said a lot about this, and I agreed with it. These amendments are a measured and proportionate response to concerns about the scope of data-gathering under the Bill. By limiting DWP powers in this way, we would provide vital reassurance to claimants and their families that only their own accounts, not those of partners, relatives or unrelated third parties, will be subject to scrutiny. This approach would uphold the important principle of privacy and ensures that the fight against fraud does not inadvertently cast too wide a net, potentially impacting innocent individuals.
Further, these amendments would reinforce the Bill’s existing safeguards, which already stipulate that eligibility verification notices may be issued only for the purpose of identifying incorrect payments of relevant benefits and only in relation to accounts in receipt of specified benefits. By making it explicit that only the claimant’s own accounts can be examined, we would strengthen public trust in the system and demonstrate our commitment to fair and proportionate use of government powers.
So many people have joint accounts and accounts with more than two names on them, and I am not sure what would happen in those circumstances. You can see that, when Tom Bloggs or Sarah Bloggs have an account, there may be a reason to look at them—but if it is held by Sarah Bloggs and Tom Jones, what happens then? There is a danger here that people will be brought into the net, because accounts held in several names are very common, and I am not reassured from what I have read that they will not be dragged in in some way. I support the amendments from the noble Lord, Lord Sikka, in this case.
Viscount Younger of Leckie (Con)
My Lords, I shall speak briefly to this group. For once I shall be helpful to the Government, as I rise to speak in opposition to Amendments 89A and 89B in the name of the noble Lord, Lord Sikka.
These amendments would limit the scope of Department for Work and Pensions eligibility verification powers, as we see it, so that they apply only to bank accounts held solely in the name of the benefit recipient, including joint accounts from scrutiny. I recognise the intention behind this proposal, which is to protect privacy and the financial autonomy of those sharing bank accounts with benefit claimants—the noble Lord, Lord Sikka, very eloquently set out his stall—but I respectfully argue that the amendments would create a significant and problematic loophole in the integrity of the fraud and error detection system.
Let us be clear: if these amendments were adopted, a person under investigation for suspected misrepresentation of assets or income could very easily shield those resources simply by transferring them into a joint account, potentially with a spouse, relative, or even a third party. Under the proposed wording, such an account would then fall outside the reach of the DWP’s verification powers, regardless of whether the claimant retained full control over the funds or continued to benefit from them. Perhaps the Minister can help me and the Committee in understanding how the DWP test-and-learn mechanism might have highlighted such an issue, and how it might have provided such a solution.
This is not a theoretical risk. We know from operational experience that individuals engaged in fraudulent activity will often use exactly such mechanisms to conceal income or capital. The ability to move money to a joint account is a clear weakness that could be exploited by those who—we must remember—are believed to have stolen money from the taxpayer.
Under the current drafting of the Bill, the Government rightly allow verification of accounts held by or accessible to the claimant, including joint accounts. This does not mean that third parties will have their data or finances indiscriminately accessed. There are safeguards in place. The department will not be able to view or interfere with every joint account at will, only those, as the Minister indicated earlier, where eligibility indicators suggest a relevant connection, and only where necessary to verify benefit entitlement. These powers are proportionate and targeted.
The amendments, however, would tie the hands of investigators, even where there is a clear and compelling reason to examine whether the claimant has access to or control over funds that affect their entitlement. In so doing, they would introduce a gaping loophole in the very process that is meant to protect taxpayer money and ensure fairness across the system. Let us not forget the public interest at stake here. We are talking about a welfare system that supports millions of people, but also one that must command public confidence and demonstrate that it is both compassionate and resilient to abuse. Creating a known and easily exploited blind spot, as these amendments would, risks undermining that confidence and inviting avoidable losses to fraud or error.
Moreover, this is not a question of criminalising or persecuting people who live with others or hold joint accounts for legitimate reasons. It is about ensuring that where state funds are being claimed on the basis of need, the system has a fair and proportionate—to use that word again—ability to verify the facts, including the assets and income to which the claimant may have access.
No one benefits from a system where loopholes are left open, least of all the people whom the welfare state exists to support. These amendments may be well intentioned, as I said earlier, but they would weaken the ability of the department to carry out its responsibilities effectively, and in doing so would undermine both the fairness and sustainability of the benefits system. I therefore urge noble Lords not to support these amendments. Let us uphold the principle that verification powers should be robust, proportionate and resistant to manipulation—and not inadvertently create a rule that the dishonest can use to their advantage.
Finally, I feel that I might have written a speech for the Minister, but I am sure that she will tell me that I am completely wrong and, perhaps, rebut some of my points.
Baroness Sherlock (Lab)
My Lords, I thank noble Lords, especially the noble Viscount, for doing some of my work for me; I am very grateful. I cannot support my noble friend’s amendments, but I am grateful to him because he has raised a point that people need to understand, and this Committee is exactly the right place to understand the issue.
It might be worth taking a step back. There will be two ways of getting information. We could either go to banks and say, “Here is Mr John Smith, please give us everything you know about him”, but then we would have to give personal information about the individual to the banks, which they do not have. Or we could do what we have decided to do, which is to say: “This is the account into which we pay the money. Please give us the information from that account according to these criteria”. We have gone with the second, because we will not be giving out personal information to financial institutions. However, that does have some consequences, which I will go through one at a time.
First, DWP benefits can be—indeed, are—paid into joint accounts held by one or more individuals. It is therefore essential for financial institutions to share information about joint accounts and any linked accounts that include a relevant benefit payment. Perhaps the most critical reason why we need joint accounts to be in scope of the EVM is that both pension credit and universal credit are household benefits; by that, I mean that eligibility for these benefits will depend on the circumstances of those in the household, including incomes and savings held by both account holders, not just by one individual. It is therefore vital to receive information on joint accounts.
In cases where the relevant benefit is paid into a joint account, information about both account holders and other linked accounts may be shared by the financial institution with the DWP. Again, I have explained why: it is because we cannot give out personal information about them. Once the information is shared, the DWP will then identify the benefit claimant and delete any information that is not relevant to the claim. That is made clear in the code of practice, which noble Lords have had a chance to see; this will be relevant in a moment to the points that the noble Lord made about landlords.
It is worth pausing here. Unlike previous iterations—it may be that the noble Lord is thinking back to some of those—this measure specifically excludes certain accounts from its scope: business accounts, credit card accounts, mortgage accounts, and a lot of other accounts that were previously in scope but are not anymore.
On landlords, if a benefit is paid into a landlord’s account then, yes, that will come back, but, basically, the test will then be: is the account or person a benefit claimant? If not, the information will be discarded and destroyed. Although it is possible, for the reasons I have explained, that a landlord’s account could be identified by a bank if it matches the eligibility indicators and is not a business account, the DWP can easily identify landlords having a housing benefit paid directly to them once we have received the data from a bank. The DWP will screen out these cases and disregard their data. I hope that that assures the noble Lord and that he can in turn assure those who were concerned.
The question of appointees is something that I raised under a previous iteration of this; I simply have not been able to find a way around it. Corporate appointees and businesses are excluded, but, for personal appointees, we simply have not been able to do that. Of course, the appointee’s account will have the benefit paid into it, if the benefit is relevant. The only thing you could do is exclude anyone you knew was an appointee, but then many appointees are claimants in their own right, so you simply could not do that either.
All I can say is that, by receiving from institutions, we will filter out any information that is not relevant; I hope that that will reassure the noble Lord. We are interested only in information on benefits paid by the DWP to benefit claimants; that is for them. If the appointee is holding the benefit for that individual, that is in scope—of course it is—but not if it is for other purposes; likewise goes for landlords. Those with powers of attorney will be treated in the same way as appointees. Again, if the money is for the benefit claimant and it is about that, we can look at it; if it is not, we cannot. I hope that that will reassure my noble friend and that he can withdraw his amendment.
Lord Sikka (Lab)
I thank the Minister and the noble Viscount, Lord Younger, for their illumination of, and contribution to, this issue. I am not really that convinced by their replies, to be honest. The reason is that a landlord can simply say, “I just won’t rent a property to anyone on benefits”. That way, the whole bank account—into which not just the benefit claimant’s benefit but other things go—is outside the scope of any DWP inquiry.
In time, we would notice that the amount of accommodation, especially for disabled people, had shrunk because of this piece of legislation. I think that many people would be dissuaded from becoming joint bank account holders with somebody who receives benefits for the same reason: they value financial privacy. We have to remember that this Bill is removing financial privacy only from people who are generally old, sick, disabled or unfortunate—everybody else can enjoy financial privacy. That would be the response.
So, in due course, there would be very heavy and negative social consequences. As I said earlier, the Minister can alleviate some of these by ordering banks or by creating legislation that says that the banks cannot refuse anyone a bank account. That way, many more people can have a bank account and the landlords, family members and friends may well be less likely to be subject to surveillance. This is something I will mull over for the next stage, but, for the time being, I beg leave to withdraw this amendment.
Lord Sikka
Member’s explanatory statement
This amendment seeks to clarify whether the Government will take account of the views of recipients of the benefits in question in any independent review of eligibility verification measures.
Lord Sikka (Lab)
My Lords, there are three amendments in this group. Amendments 91A and 91B are tabled by the noble Lord, Lord Vaux, and the noble Baroness, Lady Kramer. All three seek to strengthen the review into the impact of eligibility verification on vulnerable persons. I will just speak to my Amendment 90.
Amendment 90 seeks to clarify whether the Government will take account of the views of recipients of the benefits in question in any independent review and suggests that this would be best achieved by ensuring that at least 50% of the review body is elected by benefit claimants. The proposed review under the Bill is welcome, even though it creates another quango. One difficulty is that regulators and reviewers are all too often appointed to advance political aims and objectives rather than serve the people. One needs to look no further than regulators of water and energy—the Independent Water Commission is currently reviewing the water industry, but its terms of reference exclude consideration of public ownership of water, even though that is favoured by many, including those who are experiencing high customer bills and sewage floating in rivers at the bottom of their gardens. I am seeking the representation of the people directly affected.
All too often, Governments claim that regulatory and review functions are best carried out by individuals with some experience of the field. None has more experience of the field than benefit claimants—after all, they are directly impacted. They will know the frustrations of answering 243 questions to apply for pension credit; they will also be subjected to financial surveillance and may be concerned about that. They are also affected by the DWP’s errors, including erroneous prosecutions, as we heard earlier. They have direct experience of that, and are therefore eminently qualified to directly participate in the review process.
This Bill refers to an independent review by a reviewer, but that reviewer will essentially be a political appointee. The review team is unlikely to include benefit claimants or someone experiencing hardship due to benefit cuts, confusing DWP forms or inconsistent application of DWP rules. Such a person and his or her team are unlikely to be able to bring the daily experiences of benefit claimants into the review. It is vital that the experience of the people on the receiving end of this legislation is brought directly into the review—their words and their worldview, not filtered through what was heard by somebody on some regulatory body or review commission. Quite often, there are cosmetic consultations or token discussions with the affected people. That is not really appropriate here.
Amendment 90 would empower benefit claimants and enable them to elect individuals to carry their worldviews into any review. The person so elected would be accountable to the claimants, whereas the proposed reviewer would not be accountable to any benefit claimant. There is absolutely nothing that they can do about it—they cannot force that person to consider their worldviews deeply. I fully appreciate that extending democracy may well be a contentious issue, even in Parliament, and that empowering people may well be contrary to some government department’s policies. Nevertheless, I would like to see greater representation of benefit claimants in any review that is carried out under the Bill. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, I will speak to Amendments 91A and 91B in my name in the group, and I thank the noble Baroness, Lady Kramer, for her support in this.
As the noble Lord, Lord Sikka, just said, these two amendments are designed to expand the scope of the independent review and the powers of the independent reviewer. I was very pleased to see the introduction of an independent review around the EVN powers; it adds an important safeguard. But as drafted, the scope of the review is quite limited, covering only whether the exercise of the powers has complied with Schedule 3B and with the code of practice, and whether it has been effective in identifying or assisting in identifying incorrect payments. It does not cover any of the other impacts that the exercise of the powers might have beyond that; we talked in the previous group about the costs, for example.
We have previously discussed and raised concerns about the effects that the Bill could have on vulnerable people, so I will not repeat those again—we have had quite a lot of debates around it. However, the possibility of those impacts on vulnerable people is both real and important, so it should be considered once those powers are in force, and, frankly, the obvious place for that is the independent review. So Amendment 91A would simply add an assessment of the impact on vulnerable persons to the scope of the independent review.
Amendment 91B is about the powers of the independent reviewer to obtain information. As it stands at the moment, they have no information-gathering powers. All the Bill says is that the Secretary of State “may” disclose information to the independent reviewer, and that is not good enough. For the independent review to be meaningful, the reviewer must have the legal ability to obtain all the information that he or she considers necessary to carry out the review. That is what Amendment 91 attempts to achieve: to allow the independent reviewer to request whatever they feel necessary to carry out the review, and to put a requirement for the Secretary of State to disclose what is requested. I rather hope that neither of those is particularly controversial as amendments go.
Just generally, I should say that these are the last amendments that I have tabled, which may relieve the Minister, so I just wanted to say that I hope that she accepts the spirit in which all of them have been put forward. I accept that the Bill is much less concerning than its predecessor was, and I hope that she sees the amendments as generally constructive, aimed primarily at ensuring that the safeguards against misuse of these powers are both robust and, importantly, permanent. I will be very happy to meet with her between now and Report to see whether we can find common ground on some of them.
Lord Palmer of Childs Hill (LD)
My Lords, it is another sort of spirit that I want at the moment.
I am pleased to welcome these thoughtful amendments, which significantly enhance the transparency, accountability and fairness of the Bill. Amendment 90 from the noble Lord, Lord Sikka, seeks to ensure that the voices and experiences of benefit recipients are taken into account in any independent review of eligibility verification measures. This is a vital step in building trust and legitimacy for these new powers, ensuring that those most affected have a say in how the system is reviewed and improved. Listening to recipients will provide invaluable insights, helping to identify unintended consequences and ensuring that the system remains responsive and humane.
Similarly, Amendments 91A and 91B are tabled by the noble Lord, Lord Vaux of Harrowden, and my noble friend Lady Kramer, who is busy in the Chamber on the Employment Rights Bill, where I should have been. These are crucial safeguards. Amendment 91A requires that the independent review specifically considers the impact of eligibility verification on vulnerable persons, ensuring that our most at-risk citizens are not overlooked or disproportionately affected. Amendment 91B strengthens the review process by obliging the Secretary of State to disclose all information reasonably requested by the independent reviewer rather than leaving disclosure to ministerial discretion. These changes will create a more vigorous and effective oversight regime, fostering public confidence that the powers are being exercised justly and transparently. I support these amendments.
Viscount Younger of Leckie (Con)
My Lords, in speaking for the Opposition, I should say that there is quite a bit to say, but I have cut down my remarks in the interests of time. I think the Committee will be pleased to hear that.
I regret that once again I oppose an amendment by the noble Lord, Lord Sikka, whose proposed change to Clause 75 seeks to replace the appointment of an independent person with that of a
“panel, at least 50% of which is … elected by recipients of the benefits in question”.
Although I understand the sentiment behind this proposal—namely, to ensure that the voices of benefit recipients are heard in the process of oversight—I respectfully submit that this amendment is not the right way to achieve that goal. It is very democratic in spirit but unworkable.
I will begin with the practicalities. This amendment, if accepted, would introduce a highly complex, costly and poorly defined mechanism for oversight. The idea of electing panel members from among benefits recipients across all forms of social security is, on the face of it, well-meaning, as I said, but in practice it presents serious challenges. Who would organise and administer such elections? How would the eligibility to vote or stand be determined? What benefit types would qualify and what mechanisms would ensure proportional representation across regions, demographics and types of support? Those questions are not trivial; they go to the core of whether such a panel could ever be considered credible, workable or legitimate in the eyes of the public, including the very claimants it is intended to empower. I also suspect that it would take an age to establish. Those are rather harsh remarks, but I wanted to make those points.
Moreover, we must ask what value this mechanism adds that is not already achievable through more conventional, proven models of independent oversight. There are already established ways to ensure that claimants’ experiences and perspectives inform the design and review of eligibility verification processes through public consultation, user engagement panels, stakeholder round tables and the commissioning of qualitative research from trusted bodies. Those are the serious proposals the Minister must consider, and I am sure she will, in the formulation of the Bill.
The proposal put forward by the noble Lord, Lord Sikka, is surely a probing one, although I do not think he said that—but it does not stand up to scrutiny. For example, we must also consider the principle at stake here. Although it is right that we take account of the views of claimants whose lived experience is, I admit, vital in shaping fair and effective policy, it is not clear why 50% of an independent review body should be drawn exclusively from that group and no other. If the logic is that those affected by a policy should have a say in reviewing it, then surely one should equally argue that those funding the system—namely, taxpayers—should have a similar right to elect members or, indeed, that professionals with technical expertise in fraud prevention, digital systems or legal due process should be the ones appointed. In other words, this proposal risks becoming an exercise in representational logic that ticks a few boxes but is ineffective.
On the other hand, Amendment 91A in the names of the noble Lord, Lord Vaux, and the noble Baroness, Lady Kramer, speaks to principles that we on these Benches have returned to time and again, which I will not repeat now. Clause 75 establishes an independent review of how the Secretary of State’s powers are being exercised. It is only right and essential that when we assess how these powers are working in practice, we also assess how they are affecting those who are most at risk of being overlooked, misunderstood or wrongly penalised by the system. That is precisely what Amendment 91A would ensure. It would add a single but vital criterion to the scope of the review—the need to examine the impact on vulnerable persons, not as an afterthought or a footnote but as a formal and explicit part of the oversight process.
Why does this matter? We know from evidence, experience and common sense that those with vulnerabilities are more likely to struggle with complex paperwork, to misunderstand official communications and to have irregular financial arrangements that do not fit neatly into bureaucratic templates. Those individuals are not necessarily gaming the system; they are trying to get by. But unless the operation of the Bill is sensitive to their needs, they could too easily become the collateral damage of a system designed to root out frauds. Let us be clear: it is entirely possible to take tough action on fraud and take care not to harm vulnerable people in the process. It is not a question of either/or; it is a matter of how we build safeguards into the system so that it delivers justice, not just efficiency.
Amendment 91B, also in the names of the noble Lord, Lord Vaux, and the noble Baroness, Lady Kramer, addresses a critical point of principle—namely, that the independent reviewer must be genuinely independent. At present, Clause 75 allows the Secretary of State to determine what information may be disclosed to the independent reviewer. In our submission—and, I suspect, in the views of the noble Lord, Lord Vaux, the noble Baroness, Lady Kramer, and other noble Lords—this is not the way to construct a genuinely independent mechanism of review. We cannot have a system in which the Secretary of State can control the flow of information to the independent reviewer. We believe that this amendment would restore some balance.
Baroness Sherlock (Lab)
My Lords, my noble friend Lord Sikka’s Amendment 90 would require the independent oversight of the EVM to be carried out by a panel of people, at least half of whom would be elected by recipients of benefits in the scope of the measure.
First, I can clarify for the benefit of the Committee that the independent person in the Bill could be an individual, a group of persons or a panel. However, in appointing the person, we want to be clear that the Government will follow the direction of the Governance Code on Public Appointments throughout the process. In accordance with that code, it is for the Secretary of State to appoint an appropriate person or persons to the role of independent overseer, as set out in Clause 75, because, as the code says:
“The ultimate responsibility for appointments and thus the selection of those appointed rests with Ministers who are accountable to Parliament for their decisions and actions”.
However, the process will be overseen by the Commissioner for Public Appointments to ensure that it is robust and fair; this is in line with precedent.
My noble friend accused us of allowing some forms of politics to invade these decisions. I must say that the Secretary of State has a track record of appointing well-respected and experienced people to review the DWP’s work, even when that kind of oversight is not required. For example, in December she appointed Liz Sayce, the former chief executive of Disability Rights UK and formerly chair of the Social Security Advisory Committee, to lead the independent review into overpayment of the carer’s allowance; she also wanted Charlie Mayfield to lead a joint DWP and Department for Business and Trade review into the factors behind the growing levels of inactivity. I can assure the Committee that we will similarly look for relevant and independent expertise in this area. Clearly, the independent reviewer will have the discretion to engage with not only benefit claimants but any other key stakeholders whom they may consider appropriate, and we do not need to legislate for them to exercise that discretion.
The review must consider the extent to which the Secretary of State has complied with the legislation and the code of practice. The independent overseer will then consider the extent to which the Government have complied with the many safeguards outlined in the legislation and the code. So, the independent review is in the interests of all those who receive a payment for a relevant benefit and will help ensure that their rights are protected.
Amendment 91A in the name of the noble Lord, Lord Vaux, would require the independent reviewer to include in their annual report any impact that the EVM may have on vulnerable persons. Although I obviously agree that the DWP needs to consider carefully the vulnerabilities that our customers may have, I do not think that this amendment is necessary given the nature of the measure and the existing safeguards, including the oversight and reporting provisions. Again, I remind the Committee that this measure will actually help some of our customers, including those who are vulnerable. We know that people make genuine mistakes; access to this important data will help us find those mistakes sooner and enable us to correct them. Detecting overpayments earlier will help prevent claimants accruing large debts to the department in cases where an overpayment is recoverable.
The key issue is that this is just a data-requiring power. It will simply require a bank to share limited information where benefit-receiving accounts meet the eligibility criteria specified in a DWP notice. The process of a bank sharing data through this measure will have no direct impact on the person’s claim of vulnerabilities. The measure is not about targeting anyone; it is about ensuring that claimants are paid the correct amount of benefit. It is only then that, under the DWP’s long-standing business-as-usual processes, people may experience changes to their benefit award—for example, where, following further inquiries, it is determined that the payment is not correct or that they do not meet the eligibility rules for the payment.
A major aspect underpinning the issues raised by the noble Lord, Lord Vaux, is a broader question as to how the DWP supports vulnerable people in those processes. Layers of support already exist in the DWP to ensure that customers who are vulnerable or have complex needs have the right support put in place. DWP staff regularly conduct vulnerability checks and are proactive on this; when we do identify vulnerable individuals, we ensure that they receive the necessary support and adjustment. We have specially trained staff to support our most vulnerable customers, and they have access to a wide range of guidance to support them. Across our various benefits and services, colleagues record any support needs provided by the customer to ensure that, whenever a claimant speaks to the DWP, it is aware of how best to help them. As I have already set out, in cases of fraud and error, a DWP staff member will be the one making decisions affecting benefit entitlement.
Finally, I remind the Committee that the independent reviewer will report annually on how the powers have been exercised in line with the legislation and how effective they have been at identifying incorrect payments. They will be able to cover any issues they deem relevant, including the impacts the measure is having and what that means for DWP customers. Asking the independent reviewer to assess impacts on vulnerability would, by necessity, take the scope of the review far broader than the EVM, as it would need to focus on wider parts of DWP business. To accept this amendment would therefore fundamentally change the scope of the annual review.
Lastly, I understand what the noble Lord, Lord Vaux, is trying to achieve with Amendment 91B, but I do not believe it is necessary. The legislation already allows the Secretary of State to disclose information to the independent reviewer for the purpose of the reviews under new Section 121DD, and I assure the noble Lord that the DWP will of course work openly and collaboratively with the independent reviewer. We will provide them with the information requested and work with them to help identify the information they need to complete their review, sharing this under the existing provisions.
Should any incentive be needed, if the independent reviewer did not consider that they had received all the information they needed, the report they published and laid before Parliament would no doubt reflect this. It would be clear for Parliament to see and scrutinise it and hold the Government to account on it. However, I am confident that that situation will not arise because our deterrent will be quite enough. Nevertheless, to provide further assurance to the Committee that the Secretary of State will provide everything relevant, I am happy to commit to make this clear in the code of practice for the measure, but I would rather not legislate unnecessarily.
To close, I know that the noble Lord knows that the inclusion of this oversight matters to the whole Committee; it matters to me as much as it matters to him. The Government have not resisted calls for transparency and have a strong track record of working openly with independent reviewers, such as the independent review of carer’s allowance overpayments.
Since the noble Lord, Lord Vaux, mentioned that Amendment 91B is his final amendment, I want to say that I very much take his amendments in the constructive spirit in which they are intended. This is what the House of Lords Committee is for—to make sure that we pursue the aims of the Bill and that we do so in the most constructive and appropriate way possible. I look forward to carrying on engaging with him. For now, I hope that my noble friend Lord Sikka, whom I am sure I will see in future, will feel able to withdraw his amendment.
Lord Sikka (Lab)
My Lords, I am very grateful to the Minister and the noble Viscount, Lord Younger, for their contributions. The argument that something is costly and timely has been made for centuries against universal suffrage, but somehow we overcome that objection and recognise that people can be elected on to all sorts of bodies. In the rest of Europe, workers are elected on to company boards; nobody said that is costly and time-consuming. Perhaps we are yet to catch up with that kind of democratic revolution.
Regarding the cost, I understand the point made, but what has not been asked is: what is the cost of not doing it? There is also a cost associated with not doing something—in this case, not bringing the direct experience of those impacted by this legislation: those whose lives may be ruined, who may be named and shamed in the neighbourhood, who may perhaps end up losing somewhere to live or who cannot buy food or anything. There is a huge social cost that is basically being ignored. The cost of not doing it is more injustice and more exclusion.
Of course, if the Government want to reach a halfway solution, they could bring the NGOs and civil society organisations representing the disabled, poor, old and sick into this review, but that is not what I think I heard from the Minister—although I hope that, in time, that will be thought through again. Nevertheless, I wanted to fly the flag for democracy and public accountability. For the time being, I beg leave to withdraw my amendment.
Public Authorities (Fraud, Error and Recovery) Bill
Wednesday 18th June 2025
(1 week, 2 days ago)
Grand CommitteePublic Authorities (Fraud, Error and Recovery) Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 96-V Fifth marshalled list for Grand Committee - (17 Jun 2025)
Lord Vaux of Harrowden
“(2A) The functions are exercisable only when accompanied by an authorised person from the police force.”Member’s explanatory statement
This amendment seeks to restrict investigators’ powers of entry, search and seizure to situations when they are accompanied by an authorised person from the police force.
Lord Vaux of Harrowden (CB)
My Lords, I shall be brief. When we discussed a previous group on Part 1 that was similar to this, I believe the Minister stated that those using search or other powers would always be accompanied by a police constable, so I suppose I am looking for confirmation that that is the same in this case. If it is, I am curious to know why we really need the powers and why it cannot be left to the police to exercise them.
I have one other, more important question. On the powers in Clause 76, under the DWP powers, new subsection (4)(i) refers to
“section 117 (reasonable use of force)”.
Slightly oddly, I have just discovered that that was not included in the powers for the PFSA, so can the Minister explain why the DWP thinks it needs to be able to use reasonable force when the PFSA did not? I beg to move.
Lord Palmer of Childs Hill (LD)
My Lords, as we consider Amendments 92 and 93 from the noble Lord, Lord Sikka, moved by the noble Lord, Lord Vaux, on his behalf, it is important to reflect on the balance between effective fraud prevention and the safeguarding of individual rights. Amendment 92 proposes that investigators’ powers of entry, search and seizure should be exercised only when accompanied by an authorised member of the police force. This approach could provide an additional layer of oversight and reassurance to the public, but it may also introduce operational complexities that could affect the speed and efficiency of investigations into public sector fraud.
Similarly, Amendment 93 seeks to require court authorisation before the Secretary of State can appoint authorised investigators. This would introduce judicial oversight, which is a well-established safeguard in many areas of law enforcement, and it could help to prevent the potential misuse of investigatory powers. But it may also add—as I said before—procedural steps that could delay urgent investigations, possibly hindering the recovery of stolen public funds, which is what this debate is all about.
Both amendments raise important questions about proportionality and accountability. I look forward to hearing the views of colleagues and the Minister on how best to achieve the right balance in this legislation, and I await their contributions.
Viscount Younger of Leckie (Con)
My Lords, I also wish to be brief and will cut down my notes, but this is a good opportunity to raise a number of points. I am very pleased that the noble Lord, Lord Vaux, has spoken to Amendments 92 and 93, as supported, or added to, by the noble Lord, Lord Palmer.
I share the principle that underpins Amendment 92 in the name of the noble Lord, Lord Sikka—that the powers of entry, search and seizure provided for in Clause 76 must be exercised responsibly and proportionately, with proper regard for the rights of individuals. However, my main point here is that, while the amendment aims to provide a safeguard by requiring investigators to be accompanied by a police officer when exercising these powers, I suggest that we need to balance that safeguard with a degree of practicality. If the use of these powers is deemed serious enough to require a police presence, one might reasonably ask an obvious question: why would the police not simply carry out the action themselves, under existing powers—I think that was the point that the noble Lord, Lord Vaux, made—rather than acting in an accompanying or supporting role? If these powers are to be used more routinely—for example, to support the investigation of lower-level but still costly fraud—do we risk placing a significant administrative and resource burden on our already overstretched police forces? I could say more on this, but I will not.
Amendment 93, also in the name of the noble Lord, Lord Sikka, seeks to insert an additional layer of judicial oversight into the appointment of authorised investigators by requiring that their authorisation is subject to court approval, rather than left solely to the discretion of the Secretary of State. Without going into the detail, I support the principle behind this amendment.
I will conclude by asking some questions of the Minister on process, which has been a consistent theme on this side in our previous four days in Committee. I am not expecting answers now; it is really to put down the questions along the themes that I have just spoken to. We have had some verbal reassurance from the Government that these powers will be used against property and not people. I am not quite sure how reasonable force can be applied against property but, more than this, it is clear from the text of the Bill that this is not legally guaranteed. Reasonable force could be wielded against people by DWP officers; I hope that the Government can provide more clarity on the balance of that. Can the Minister confirm that these powers could in fact be used against people, as well as property? That is quite an important point. Again, the argument is about whether the police or the DWP may be required. In addition, can she give us some more information as to why she believes these powers need to be granted to civil servants in the DWP?
I say again that the police are the recognised authority, who have legitimacy, in the eyes of the public, to exercise and apply PACE powers. I feel that the Government have a duty to defend, quite strongly, why they want to grant these sweeping powers to members of a government department such as the DWP. We have a police service for a reason: officers are trained, regulated and experienced in using these powers appropriately. If fraud is suspected, particularly at a serious level, is it not right that it should be investigated by the police and not delegated to civil servants?
My concluding comment is that we should be cautious about expanding investigatory powers without a clear and compelling case. My final question to the Minister is: what justification is there for bypassing the police? That plays into my main question, which is: whither the police and whither the DWP?
The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I thank noble Lords for their comments and questions. I will speak first to Amendment 92. The amendment would undermine the policy intent of this part of the Bill, so we cannot accept it. The DWP leads investigations into social security matters and, as a result, our staff are better positioned to search for items relevant to these investigations—the things that they deal with, such as benefit claim packs or documents related to fraudulent identities. Requiring the police to be present for all DWP search and seizure activity, including investigative tasks related to securing criminal evidence, would erode the anticipated obvious benefits of the measure to both the DWP and the police. Crucially, it would divert the police away from focusing on the crime within our communities that only they can deal with and dealing with the human victims of those crimes.
These powers allow the DWP to apply to a court for warrants to enter a premises, conduct search and seizure and apply for and exercise production orders, with or without the police present. That clarifies the point made by the noble Lord, Lord Vaux. They provide the DWP with greater control over its own operations and ensure that police time is not spent undertaking administrative tasks on the DWP’s behalf.
However, I reassure the Committee that safeguards are in place to govern the use of these powers. First and foremost, court approval must be granted for all warrants. The requirements for a DWP warrant application will be as strict as those for a police warrant application. Furthermore, the DWP intends to exercise these powers exclusively in cases involving serious and organised crime. This is not novel. Similar powers are already being used by HMRC, the Food Standards Agency and the Gangmasters and Labour Abuse Authority, which can undertake search and seizure activity without needing to be accompanied by the police.
Amendment 93 would impose unique obligations on the courts that they do not face in respect of other government departments with similar powers. PACE powers do not require the individual exercising them to be appointed by the court and there is no clear reason for the DWP to be any different. DWP-authorised investigators, like others who exercise PACE powers, will be subject to the PACE code of practice relating to search and seizure activity and will be required to follow the same procedures and processes as the police when submitting a warrant application to the court. These are not standards set by the DWP; they are set out in PACE, which all bodies exercising these kinds of law enforcement powers must adhere to. Specialist training must be successfully completed before authorisation is given and only then can an authorised investigator exercise these powers on behalf of the Secretary of State. That approach ensures that the correct responsibilities are attributed to the Secretary of State and the courts.
On the question relating to the PSFA, I am advised that it is not that a constable necessarily has to be present, but somebody with those powers, who may not be a police officer but could be from the National Crime Agency, the Serious Fraud Office, et cetera. As I said, the police do not always have to be there, if it is not necessary. There will be occasions when it will be necessary. For example, the previous Government published a fraud plan in which they recommended that powers of not only search and seizure but arrest be taken. We have decided not to take those powers, so if there needed to be an arrest, we would need to have police officers with us. If there were a risk of serious violence, again, the police would need to be present, but not otherwise.
On the question of force, the provisions set out in Clause 76 provide powers under PACE to enable DWP serious and organised crime investigators to apply for a search warrant to enter a premises, search it and seize items, with or without police involvement in England and Wales. The clause also enables authorised investigators to apply to a judge for an order requiring an individual suspected of social security fraud to provide certain types of sensitive information when relevant to the criminal investigation. It also provides for the use of reasonable force to conduct a search, such as breaking open a locked filing cabinet to search for materials. The clause provides that these powers can be used by an authorised investigator who is authorised by the Secretary of State.
To be clear, a warrant provides for the powers that can be deployed when that warrant is exercised. Our authorised investigators in DWP will not use reasonable force against people, although they may use it against property, such as breaking open a locked filing cabinet to retrieve a laptop or other evidence. However, the reason it has to be here is that, when the DWP applies for a warrant, that warrant must cover any activities that may need to be undertaken by either the DWP or the police, so although our investigators will not use reasonable force against people, it may be necessary for the police to do so when they are accompanying the DWP. That is why the legislation is drafted that way. If it were not, police out there on our warrant would not be able to use reasonable force and there may be occasions on which they need to do so. I hope that that clarifies matters for the noble Lord.
Lord Vaux of Harrowden (CB)
Can the Minister explain why the DWP needs that power but the PSFA does not? The two clauses in the Bill are otherwise identical and differ only in respect of the reasonable force element. If the PSFA does not need it, I do not understand why the DWP does.
Baroness Sherlock (Lab)
The expectation is that we will be dealing with different kinds of crime. We are talking about serious and organised crime, where we will go out looking for evidence. We believe we do need these powers. If there is another argument behind that I am happy to write to the noble Lord. I have explained why the DWP needs them, and we clearly do need them in these circumstances because without them we could not conduct this work. The DWP has lots of experience because we already do this work; the police just have to go out with us, to be there and to do the searching. So we know what we need and therefore we know that we need these powers. If there is anything else I can add on the PSFA, I will write to the noble Lord.
Viscount Younger of Leckie (Con)
The Minister may have just answered my question, which is a slightly opaque one, perhaps. Is it a good assumption that in any search of a property by the DWP when it suspects fraud, members of the DWP will always go prepared with the necessary back-up, including the police or members of the NCA, if they suspect it is going to be a challenging search—or is that wrong?
Baroness Sherlock (Lab)
As I said, the police might need to be present if we felt there was a risk of any serious violence. If it was felt there might be a need for arrests or, as the noble Viscount has suggested, there was a possible risk of violence, the police would be asked to accompany DWP officers. I have given those assurances, so I hope the noble Lord will withdraw the amendment.
Lord Vaux of Harrowden (CB)
My Lords, I thank everyone who has taken part in this short but, I hope, illuminating debate. I have concerns about these police powers being given to civil servants and I do not think I am alone in that respect. I am comforted, to some extent, by the fact that these will be used only in the cases of serious and organised crime. I wonder whether the solution, therefore, is to put that in the Bill and put that safeguard in place, because I think that would comfort most people who have the concerns that we have. Perhaps that is something that the Minister might be willing to discuss between now and Report. That said, I beg leave to withdraw the amendment.
Baroness Sherlock
Member’s explanatory statement
See the explanatory statement for my amendment to Schedule 4, page 101, line 15.
Baroness Sherlock (Lab)
My Lords, government Amendments 94 to 97 are minor and technical in nature. In England and Wales, the common law does not permit access to material protected by legal professional privilege under any circumstances. However, relying on this common-law exclusion would not extend to Scotland. In addition, a different definition of legal privilege applies in Scotland. To ensure that the original intent is maintained, this position is now set out in a single provision within new Schedule 3ZD.
These amendments make it explicit that if the information being sought relates to personal records which involve confidentiality of communications that could be maintained in legal proceedings in Scotland, it cannot be seized, copied or obtained, et cetera. This ensures that the same protections for information of this type apply in Scotland as they would in England and Wales. I hope that these amendments are clear and I beg to move.
Lord Palmer of Childs Hill (LD)
My Lords, as we turn to government Amendments 94 to 97, I wonder, as I always do when there are lots of government amendments to their own Bill, whether enough thought has gone into it in the other place.
I know that these proposals are primarily technical, with the key aim of simplifying the drafting of new Schedule 3ZD to the Social Security Administration Act 1992. Government Amendment 96 introduces a single clear prohibition on the seizure or examination of information of legal privilege. This streamlining could help to clarify the legal position for both investigators and those subject to investigation, ensuring that the Bill’s provisions are easier to interpret and apply in practice.
Clarity in legislation is always desirable, especially in complex areas such as fraud investigation, where the rights of individuals and the needs of public authorities must be carefully balanced. At the same time, it is important to consider how these amendments interact with the Bill’s wider objectives of safeguarding public money and equipping authorities with the tools needed to tackle fraud and error effectively. Ensuring that information which is subject to legal privilege is properly protected is a long-standing principle within our legal system. These amendments appear to reaffirm that commitment without substantially altering the Bill’s intent. I have no problem in agreeing with what should have been in the Bill at the beginning.
Viscount Younger of Leckie (Con)
My Lords, my remarks largely chime with those made by the noble Lord, Lord Palmer. The Committee will be relieved to know that this is my shortest speech. I offer some measured support for these amendments. They address the important principle of the protection of legally privileged material, and in a way that simplifies and clarifies the drafting of this part of the Bill.
The right to legal professional privilege is, of course, a cornerstone of our justice system. That principle should be unambiguous in legislation of this kind. These amendments seek to express that safeguard more clearly through a single consolidated position. There is certainly merit in that. A simplified and consolidated statement of the limitation on investigatory powers in respect of privileged material is likely to be easier to apply in practice and could reduce the risk of inadvertent overreach.
Baroness Sherlock (Lab)
My Lords, I am grateful for the support and take the chiding in the spirit in which noble Lords intended it.
Government amendments are a key part of the legislative process. Noble Lords will have seen them from time to time, allowing for the refinement and improvement of Bills as they move through Parliament. It is critical that the Bill’s provisions comply with the distinct legal jurisdiction of Scotland. Every effort has been made to ensure that this is the case. We have worked closely with the Office of the Advocate-General for Scotland and with officials in the Scottish Government.
Following an additional review of the Bill prior to Committee, the Office of the Advocate-General for Scotland identified the need for a minor amendment to ensure that the powers would operate in Scotland as intended. We felt it was important to make the law clear in the Bill. I am grateful for noble Lords’ grace on this.
Baroness Sherlock
Member’s explanatory statement
See the explanatory statement for my amendment to Schedule 4, page 101, line 15.
“Material subject to legal privilege
10 Nothing in this Schedule confers power to— (a) require any person to provide information, or(b) seize, remove, take a copy of or otherwise record anything,in respect of which a claim to confidentiality of communications could be maintained in legal proceedings.”Member’s explanatory statement
This amendment, together with my other amendments to Schedule 4, simplifies the drafting of new Schedule 3ZD to the Social Security Administration Act 1992 by creating a single prohibition on the seizure etc of information subject to legal privilege.
Member’s explanatory statement
See the explanatory statement for my amendment to Schedule 4, page 101, line 15.
Baroness Sherlock
Member’s explanatory statement
This amendment and my other amendment to clause 85 remove unnecessary references to a payment or credit, both of which are within the relevant definition of “benefit” already as a result of section 121DA(5) of the Social Security Administration Act 1992.
Member’s explanatory statement
See the explanatory statement for my other amendment to clause 85.
Baroness Finn
Member’s explanatory statement
This amendment would ensure that the Secretary of State did not have the power to direct the independent person to review only certain timeframes.
Baroness Finn (Con)
My Lords, Amendments 99A to 99C have been tabled, as ever, in the spirit of constructive scrutiny and with the aim of strengthening one of the more significant accountability provisions in the Bill: the independent review process set out in Clause 88.
These amendments are modest, reasonable and necessary. They are not designed to undermine the intention of Clause 88 but quite the opposite: to give that clause the clarity, independence and rigour that an effective review mechanism surely must demand. Fundamentally, they seek to correct the text in the Bill as drafted, as this would not provide for a proper independent review process of the exercise of powers under this part of the Bill. As we have been clear throughout these days in Committee, having a proper, full and independent review mechanism is an essential requirement to balance the powers granted.
Let me begin with Amendment 99A. As currently drafted, new Section 109J, to be inserted by Clause 88, allows the Secretary of State to direct the independent person to review only certain timeframes, saying in subsection (1):
“The Secretary of State may give the independent person appointed … directions as to the period to be covered by each review under section 109I”.
This, in our view, strikes at the heart of the independence that the clause is meant to enshrine.
If the Secretary of State can determine the scope of the review in such a narrow and discretionary fashion, deciding what is in and what is out, we risk reducing the entire review process to something partial and predetermined. An independent reviewer must have the freedom to examine the full timeline of events, decisions and outcomes as they see fit, not just the periods that a Minister deems relevant. This amendment would remove the power for the Secretary of State to constrain that scope. It would ensure that the independent person can review what needs reviewing, not merely what it is convenient to review.
Further to this, Amendment 99B addresses another area in which we believe the clause falls short of its intended purpose. As present, new Section 109J(3) states:
“The Secretary of State may disclose information to the independent person”.
We do not think this is adequate. For a review to be meaningful, the reviewer must be empowered to access all relevant material. It cannot be left to the Minister to determine what relevant information may or may not be disclosed to the independent person for review. By replacing “may” with “must”, this amendment would impose a basic but essential duty for the Government to co-operate with their own independent review mechanism. This should not be controversial. If the review is to be credible both in substance and perception, the provision of relevant documents, data and records must be a legal obligation, not a voluntary gesture. Our amendment would ensure that the independent reviewer could operate with true independence and without the bias that the discretionary drafting currently in the Bill implies.
We must appreciate that if the Secretary of State can direct the scope and scale of these independent reviews, they cannot truly be called independent. As noble Lords across the Committee will know, the outcome of such a process is only as good as the information that is put into it. I am sure that this Minister would not allow biased information or timeframes or seek to direct the independent reviewer. But, as noble Lords have previously made clear in Committee, we must legislate for the future and future Ministers. This cannot be done on the basis of guarantees alone. I trust the Minister implicitly, but I do not know—indeed, none of us in this Committee knows—that we could always say the same about her successors. It is important that we ensure that this independent review process is independent from day one and there is no risk of it becoming a rubber-stamping body used to sign off favourable reviews on the back of limited information and narrow timeframes.
Finally, Amendment 99C would compel the appointment of independent persons to carry out reviews in England, Wales and Scotland. The Bill in its current form allows the Secretary of State to do so but does not require it. We think that is a mistake. Public sector fraud is not a phenomenon confined to one part of the United Kingdom. If we are serious about building a coherent and credible national response, it follows that there must be consistent independent scrutiny across all three nations. Leaving this to ministerial discretion opens the door to uneven practice and potential political selectivity. By making the appointment of independent reviewers mandatory across the nations, we would create a consistent framework for accountability —one that reflects the devolved landscape while still holding the centre to account.
Taken together, these three amendments seek to reinforce what I believe the Government want to achieve: an independent, well-informed and effective review mechanism. They would ensure that reviews are not unduly limited, that reviewers are not kept in the dark and that all parts of the UK are covered by the same standards of transparency. In short, these amendments would close the gaps that could otherwise turn an accountability provision into an optional exercise. I hope the Minister will reflect carefully on their intent and consider how they might help deliver a stronger, fairer and more credible oversight process. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, I rise briefly to add my support to the first two amendments in this group. While I agree with removing the discretion of the Secretary of State, Amendment 99A does not say what the period of the review should be. I suggest that it should be the same as the period of the review for the eligibility verification notices, which is annual, and that that is what should be in the Bill. It would be useful to hear from the Minister what the Government are proposing in that respect.
Lord Palmer of Childs Hill (LD)
My Lords, as we consider Amendments 99A, 99B and 99C, spoken to by the noble Baroness, Lady Finn, it is clear that these proposals are focused on the mechanisms of independent review and oversight within the Bill. Amendment 99A would ensure that the Secretary of State cannot limit the independent person’s review to only certain timeframes, thereby supporting the principle of comprehensive and impartial scrutiny. Amendment 99B would require the Secretary of State to provide information to the independent person for the purposes of a review, which could strengthen the independence and effectiveness of the review process. Amendment 99C would compel the Secretary of State to appoint independent reviewers not just in England but also in Wales and Scotland, ensuring a degree of consistency and regional representation in oversight arrangements.
These amendments appear to reinforce the Bill’s commitment to robust oversight and transparency, aligning with the existing provisions for independent inspection and review already outlined in the legislation. At the same time, it will be important to consider whether these changes might introduce additional administrative complexity or affect the flexibility of the Secretary of State to respond to evolving circumstances. As ever, the challenge is to strike the right balance between effective oversight and operational efficiency. I look forward to hearing the views of the noble Baroness, Lady Sherlock, on whether these proposals best serve the aims of accountability and good governance within the framework of this Bill. It is amazing what changing the word from “may” to “must” can do, but it can make a big difference and I wait to hear the Minister’s reply.
Baroness Sherlock (Lab)
My Lords, I am grateful for the contributions to this short debate. I hope that I can answer the questions that have been raised.
The first and most important piece of information is to remind the Committee that in the Commons my honourable friend the Minister for Transformation made it clear that His Majesty’s Inspectorate of Constabulary and Fire and Rescue Services will be commissioned to inspect the DWP’s criminal investigation powers for England and Wales and HMICS for Scotland. I hope that that is helpful. I can reassure the noble Baroness, Lady Finn, that the reason why we chose HMIC is that for more than 160 years it has been carrying out independent scrutiny of law enforcement in England and Wales, including the police. There is no danger whatever that it will be any kind of box-ticking exercise, if HMIC is doing it. I am sure that she can be reassured on that front.
I hope that that shows the level of commitment that we have to the level of scrutiny. If we want to do it properly, HMIC is the body to scrutinise powers of this seriousness. But we have worked closely with HMICFRS and HMICS. We intend to operate in the same way as other law enforcement agencies that are subject to inspections by those bodies. What will happen is that, prior to each inspection, the DWP and the inspectorate body will mutually agree the period that the inspection will cover. That is to make sure that the inspection can cover all necessary activity that has been undertaken, which is a common way of operating. We have no reason to believe that it will not operate well in this case.
We understand that sharing information is essential and will obviously not seek to misrepresent or hold back any relevant information. The legislation as drafted allows us to share all relevant information. But it is essential that the Secretary of State retains discretion—for example, being able to choose not to provide information that may be particularly sensitive and where sharing it could have a detrimental impact, such as on the outcome of an active case. The DWP will fully support and co-operate with the inspection bodies and its reports will make clear if we did not do that. But we want to do so, to make sure that we can deliver on these powers to the right standard.
I am grateful to the noble Lord, Lord Vaux, for answering one question for me. There will indeed be inspectorates. HMICFRS will cover England and Wales and HMIC will cover Scotland to enable us to have a different reviewer in the two places. I hope that, given those reassurances, the noble Baroness, Lady Finn, will not press her amendments.
Baroness Finn (Con)
My Lords, I thank the Minister for her reply. As we draw this debate to a close, I return to the fact that these amendments are rooted in the core values of fairness, transparency, independence and accountability. I thank the noble Lords, Lord Vaux and Lord Palmer, for their support, although I know that the noble Lord, Lord Vaux, has not supported Amendment 99C.
The independent review mechanism outlined in Clause 88 should be one of the central safeguards of the Bill. It should ensure that the powers conferred are used proportionately, effectively and in the public interest. As it currently stands, that mechanism risks being weakened by loopholes and discretionary clauses that leave too much power in ministerial hands. I note the response about HMIC, but it still goes to the core that we want this Bill as a standalone and that those loopholes are necessarily closed.
Amendment 99A speaks to a fundamental concern: the right of the Government to define the terms of their own scrutiny. That is not a mark of confident democracy. A review that can only examine certain timeframes selected by the very people being reviewed is not a genuine safeguard; it is a managed narrative. True independence means giving the reviewer the authority to follow the evidence wherever it leads, not wherever the Secretary of State allows.
Amendment 99B is in many ways even more foundational. What is the value of appointing an independent person if that individual can be denied access to the very information that they need to do their job? We cannot have effective oversight if it depends on the good will of the department being examined. I take note of what the noble Lord, Lord Palmer, said. There is a huge difference, as I know well from my own time in government, between the words “may” and “must”. “Must” is a minimal expectation if we are to uphold the principles of openness and integrity. Anything less risks turning independence into theatre and accountability into a form without substance.
Amendment 99C is about consistency. I appreciate that the noble Lord, Lord Vaux, considers it unnecessary. However, if fraud knows no borders between England, Wales and Scotland, neither should scrutiny. We cannot rely only on the Secretary of State’s discretion to decide whether an independent review happens in one nation but not another, because that creates potential confusion and disparity and the appearance, if not the reality, of selective transparency. This is a probing amendment and I appreciate what has been said, which I will pick up on later. What we are aiming for is a duty to appoint independent reviewers across the devolved nations so that trust is not patchy but uniform across the United Kingdom.
When taken together, these amendments must represent a clear and coherent vision that government power must be matched by government accountability. That review must be more than just process. It must be meaningful, showing that we do not fear scrutiny but welcome it, because it is through scrutiny that public trust is earned and retained. The Government have rightly set out to tackle fraud and protect public money, but if the public are to believe that this effort is both rigorous and fair, the checks that we place on those powers must be equally robust. These amendments deliver that balance, not to obstruct but to uphold the values that any confident, responsible Government should share. I urge the Minister to consider the purpose and principle that these amendments seek to preserve. Let us not pass up the opportunity to make this legislation stronger, fairer and more trustworthy. I beg leave to withdraw the amendment.
“Consideration of vulnerabilities(1) The Secretary of State must have due regard for the external circumstances pertaining to a person under investigation in respect of the mental capacity, economic circumstances, and physical and mental health of the claimant, particularly where the claimant is or may reasonably be considered a vulnerable person.(2) For the purposes of this section, a "vulnerable person" includes, but is not limited to, individuals who—(a) lacks mental capacity within the meaning of the Mental Capacity Act 2005;(b) are in receipt of, or have been assessed as eligible for, support relating to mental or physical health conditions;(c) could be reasonably regarded as vulnerable to domestic abuse or coercion.(3) The Secretary of State shall ensure that a fair and reasonable assessment of the claimant's circumstances is conducted before any deduction is applied.(4) The assessment under subsection (3) may consider evidence provided on behalf of the claimant, including medical reports, financial information, and input from authorised support workers or representatives.(5) All decisions to deduct welfare payments shall be documented, with explicit reference to how the claimant’s vulnerability was considered. (6) The records under subsection (5) shall be made available to the claimant upon request and subject to audit by an independent body.”Member’s explanatory statement
This new clause would ensure that, before a deduction was applied, due regard was given to the wider circumstances and vulnerabilities of the liable person, which they would have to document, to be made available upon request by the claimant.
Viscount Younger of Leckie (Con)
My Lords, Amendments 99D and 109ZA are in my name. Amendment 99D seeks to ensure that, before a deduction order is applied, proper and fair consideration is given to the wider circumstances of the person under investigation, especially where there may be indicators of vulnerability. It is an amendment rooted not in obstruction but in principle and in pragmatism. It recognises that, if we are to give public authorities powerful tools to detect and recover fraud, we must also ensure that those powers are exercised with fairness and, crucially, the full understanding of the person’s situation.
Many individuals who fall under investigation may be living with complex challenges. I know that we touched on these matters earlier in Committee, but some of these issues are worth repeating. Some individuals may lack the mental capacity to understand what is being asked of them; others may be suffering from physical or mental health conditions that impair their ability to manage forms, deadlines or correspondence; and still others may be experiencing domestic abuse, coercion or forms of control that make it difficult or even impossible for them to make independent financial decisions. These people do not, certainly as yet, have a deputy, proxy or power of attorney in support. They remain in sole charge of their accounts.
I am sure that noble Lords across the Committee would welcome reassurance from the Government, first, on how these people will be identified and, secondly, how the system and process will cope and adapt to reflect their needs and, where needed, to protect them. These are not on-the-edge cases; they are realities that front-line officials in the department and around the country encounter every day. If we are not careful, precisely these individuals may end up most at risk of enforcement action—not because they are wilfully defrauding the system but because they simply did not or could not understand what was expected of them.
We must therefore be careful to differentiate error from intent to defraud. There will be cases where a person under investigation may not have understood what he or she was supposed to be doing but is technically fraudulent. This is exactly what this amendment seeks: it would require that the Secretary of State has due regard to the mental capacity, economic circumstances and health of the claimant, especially where there are indicators of vulnerability. It would also ensure that a fair and reasonable assessment of the person’s circumstances is conducted before any deduction is applied. I should say that this is not about softening our stance on fraud; it is simply about targeting it accurately and responsibly.
The amendment also places emphasis on the evidentiary basis of decisions. It allows for medical reports, financial statements and input from support workers or advocates to be taken into account. Importantly, it also creates a clear paper trail by requiring that decisions to deduct are documented with reference to how the claimant’s vulnerabilities were considered. That documentation must be made available upon request and be subject to independent audit. I argue that this is important and not a form of bureaucracy—before noble Lords get up.
So we come back to understanding how the test-and-learn operation and exercises will take account of this. Could the Minister give us some detail on how such cases will be identified and on the other questions that I asked earlier? I also ask her to help the Committee to understand what the Government will access in terms of information relating to these wider circumstances. We see it as vital that this information is taken into consideration.
At this stage of the Bill, it is also right that we ask what kinds of protections the Government intend to put in place for vulnerable people generally. This extends to the Cabinet Office aspects of the Bill. I realise that my noble friend Lady Finn may have raised these questions earlier, but what process will be followed to ensure that mental capacity is assessed? What training will investigators have to recognise signs of coercion or distress, and what mechanisms will be available to review decisions, particularly where someone’s vulnerability has been overlooked? These are not academic questions; they go to the heart of what kind of enforcement regime we are creating and how confident the public can be that it will act justly, especially where people are least able to defend themselves.
I turn to Amendment 109ZA. It is well established that the Government themselves recognise that disabled people face higher living costs than their non-disabled counterparts. We have had many debates in the Chamber that have highlighted these issues. We know that these costs are not optional; they are the result of essential needs—specialised equipment, personal care and accessible transport—and higher utility bills, among other things.
Baroness Fox of Buckley (Non-Afl)
My Lords, I warmly welcome these amendments in the name of the noble Viscount, Lord Younger. I appreciated the detail that he went into because it is important that we remember that these direct deduction orders are real instruments of power. I am interested in how they will be used differentially, because I do not want them to be a blunt instrument. Therefore, it is worth remembering and considering those who might be on the receiving end of them.
In an earlier group discussing search and seizure, I had been considering speaking but was in some ways put off, because I thought that the search and seizure measures were only meant for organised criminal gangs. As was pointed out, if that was in the Bill maybe it would be more reassuring. It is difficult to know how many people will be affected by the same powers. We want to differentiate, surely, between the vulnerable and an organised criminal gang. There are those who are technically fraudulent, but it is because they have made a mistake, and so on.
I particularly thought of that because I listened to a vivid documentary recently about bailiffs and people who had got themselves into all sorts of distress and debt, with bailiffs kicking down their doors. I had that caricature in my head, and I do not want that to happen to those people. I am not suggesting the search and seizure measures will lead in that direction, but we should always think: who is on the receiving end of these powers? How did they get into that situation? How does the Bill make a distinction so that we do not, on the one hand, have a one-size-fits-all approach? On the other hand—this is a slight anxiety I have— I do not want us to simply get into a situation where we are saying that, because people are on welfare, they are vulnerable. That is equally a caricature, and I do not think it is helpful for us to see people always in a victim role.
I would be interested—that is why I welcome this group—in making the distinctions and learning how the Minister envisages us making the distinctions between the multitude of people on welfare when these powers, which are quite severe in many instances, are going to be applied. How will that happen? Who makes the decision? I think that is why these amendments are very useful.
Lord Palmer of Childs Hill (LD)
My Lords, I am pleased in this instance to express my strong support for Amendments 99D and Amendment 109ZA, tabled by the noble Viscount, Lord Younger, and the noble Baroness, Lady Finn. I have not been quite so firm in my support for others, but Amendment 99D would ensure that, before any deduction is applied to recover debt overpayment, due regard is given to the wider circumstances and vulnerabilities of the liable person. There would be a requirement for this assessment to be documented and available to the claimant on request.
This is a vital safeguard that would place fairness and compassion at the heart of the debt recovery process, ensuring that individuals are not pushed into hardship without a proper understanding of their personal situation. It aligns with my and my party’s commitment to a welfare system that is both effective and humane, recognising that people’s circumstances can be complex—gosh, they certainly can be—and that a one-size-fits-all approach to debt recovery is neither just nor practical.
Amendment 109ZA—we have a wonderful numbering system—would further strengthen these protections by requiring the Minister to consider the additional costs of living with a disability before making a direct deduction order. This would be an essential step in ensuring that disabled people, who often face higher living expenses, are not disproportionately affected by debt recovery measures. Both amendments reflect the principles of proportionality and sensitivity that should underpin all government action in this area. They represent a significant improvement to the Bill’s framework for tackling fraud and error while safeguarding the dignity and well-being of the most vulnerable.
Unlike the noble Baroness, Lady Fox, who said she was a bit hesitant on this, I urge the Committee and the Minister to support these amendments, which would ensure that the pursuit of public funds is always balanced with compassion and respect for individual circumstances. At this stage of the Bill, as mentioned by the noble Viscount, these measures need to be introduced so that we can perhaps on Report include them in the Bill.
Baroness Sherlock (Lab)
My Lords, I am grateful to the noble Viscount for his amendments and to all noble Lords who have spoken. We all want to ensure that, when someone who is subject to these debt recovery powers is vulnerable, we are aware of that and take appropriate steps to treat them as we should. Before I turn to the individual amendments, I shall recap on how direct deduction orders will operate and what safeguards are there, as this is relevant to the debate.
These powers are vital to recovering funds that are owed by debtors who are—just to remind the Committee—by definition not on benefits or PAYE. If they were, we would have other ways to deal with them. These are people who have some other source of income, owe the DWP money and have simply refused to engage with us at all, at any stage. That does not mean that none of them is vulnerable—of course, they may be—but this is the category of people that we are talking about. The department has long-standing powers to recover public money that has been wrongly paid in excess of entitlement, through deductions from benefits or earnings, but not for those in that category.
There are important new safeguards for these powers. They are there only as a last resort. First, before they can be used, multiple attempts at contact must be made, of different types. We must make at least four attempts to contact someone, at least twice by letter. We not simply trying once and giving up. We must have really tried to engage with people who simply do not engage with us all.
Secondly, when a direct deduction order is necessary, the DWP must be satisfied that any deduction, whether a lump sum or a regular deduction, will not cause the debtor, other account holder or their dependants hardship in meeting ordinary living expenses. That means that, legally, the DWP must ensure that there is enough money remaining in an account after a lump sum deduction to allow the debtor to meet their essential living needs.
In response to the noble Viscount, deductions must be fair in all the circumstances. This would include consideration of any vulnerabilities or additional costs related to living with a disability. The noble Viscount helpfully outlined what some of those will be. The point is that they must be particular to the individual. Each individual’s circumstances will be different. As the noble Baroness, Lady Fox, pointed out, not everybody who is poor is vulnerable, not everybody who is on benefits is vulnerable and not everybody who is disabled is vulnerable, necessarily. We need to understand their circumstances to know what is fair and ensure that they will not be pushed into hardship by a deduction.
Thirdly, to ensure that the deduction is made in that way, the amounts will be decided following an affordability assessment based on information shared by the debtor’s bank and any subsequent representations made by the individual or their representative if they need someone to speak for them. Legislation sets out the maximum amounts that can be deducted for regular deduction orders.
Fourthly, the Secretary of State can vary or revoke direct deduction orders in the light of a change of circumstances—for example, if the debtor had a change of income, made a new claim to benefit or something else of significance happened. Fifthly, when a direct deduction order is made, notice must be given to the bank and all holders of the account in question. If an order is still upheld after a review, or after considering information that has been presented, an individual who is not happy with that has a right of appeal to the First-tier Tribunal.
Finally, I remind the Committee that a code of practice for the new powers has been made available for noble Lords to review. This sets out revised guidance on ways to identify and support those who are vulnerable. Ahead of public consultation, our team continues to work on the code collaboratively with key stakeholders, including charities such as Surviving Economic Abuse and the Money and Pensions Service. These are important safeguards which I hope will alleviate noble Lords’ concerns.
On Amendments 99D and 109ZA, it is worth looking at what these amendments would do in practice. While we all share the desire to protect vulnerable groups, these amendments would place additional legal duties on the DWP to consider the impact of any vulnerabilities that a debtor may have, even when it could not be reasonably possible for the DWP to know. These requirements would be imposed without providing any new ways for the DWP to obtain that information.
As I have said, the direct deduction order power is one of last resort, aimed at those who are not on benefits or in PAYE employment, where all reasonable attempts to engage with the individual have failed. These are individuals who have not responded to repeated contact from the DWP’s debt management officials about their debt. In the absence of meaningful engagement from the debtor or their representative, the DWP will not be aware of their current personal circumstances. This puts the DWP in a difficult, if not impossible position, regarding the obligations that the proposed amendments would impose.
However, we need safeguards. The new safeguards that are introduced in this Bill, which I outlined at the start of my speech, alongside the existing safeguards and departmental processes for supporting those who are vulnerable, reflect a better approach to protecting vulnerable people. I shall now set out some of those existing safeguards and processes that are outside of this Bill, for the record.
Layers of support already exist within the DWP to support those who are vulnerable or have complex needs. They include proactive vulnerability checks at different points in the customer journey, and where vulnerable individuals are identified, to ensure that the necessary support and adjustments are put in place. Where any additional support or adjustments are identified by a DWP official or are disclosed by the individual, they are recorded on DWP systems to ensure that all officials know how best to support them.
Viscount Younger of Leckie (Con)
My Lords, I am very grateful for the thoughtful and supportive contributions from the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer, which we have heard throughout this debate. As it draws to a close, I want to return to the fundamental values that underpin Amendments 99D and 109ZA.
I will not repeat everything I said before but, briefly, these amendments are not about hampering fraud enforcement but about ensuring that where serious powers are granted—powers that allow the state to intervene directly in someone’s financial life—they are exercised with the kind of care, discretion and humanity that should be the hallmark of any public authority in a just society.
Amendment 99D asks a simple but fundamental question: how do we treat those whose circumstances may mean that they did not or could not understand or apply the rules? As the Minister herself said, rightly, we all want the same thing. Fraud must be pursued, but, as the noble Baroness, Lady Fox, alluded to, we must not collapse the distinction between error and intent, between misunderstanding and malice. The law and those who enforce it must have the tools to see the difference.
Amendment 109ZA builds on this principle of proportionality; it addresses a reality that we all know—that disabled people may face higher costs of living by virtue of their condition. As I said earlier, the direct deduction order, if applied too bluntly, can turn an already stretched household into one facing crisis, and we must ensure that these powers are used with sensitivity. This is exactly what my Amendment 109ZA provides: a measured and sensible requirement.
I appreciate the very sensible explanations that the Minister produced. I appreciate what she said and the fullness of her remarks. I shall make sure that I read all her remarks in Hansard to see whether they satisfy the concerns expressed in the amendments that I have tabled. I appreciate the fullness of what she has produced. Both these amendments provide something important. They place a protective guardrail on otherwise broad and serious enforcement powers. They ask us to apply judgment, not just rules, and to recognise vulnerability and not just liability. Separately, I also appreciate the safeguards that the Minister spelled out towards the end of her remarks.
Broadly, people will support fraud enforcement when they believe it is fair, and they will support recovery powers when they trust that those powers will not be used to punish the vulnerable alongside the guilty. This is where the balance needs to be struck.
I shall also look at Hansard because the Minister gave us a helpful explanation in terms of the balance required in the obligations placed on the DWP, and at whether in fact my amendments are too onerous or a bit overreaching. I would like to reflect on those questions. We may come back on Report with something, or we may not. In the meantime, I beg leave to withdraw the amendment.
Baroness Sherlock
“(i) the period mentioned in section 71ZK(6)(a) for P to appeal against the outcome of the review has passed without P bringing an appeal, or”Member’s explanatory statement
This amendment is consequential on my amendment to clause 89, page 56, line 31.
(a) the period of one month beginning with the day after the day on which P is notified of the outcome of the review, or(b) such longer period (if any) as the Tribunal considers reasonable in all the circumstances.”Member’s explanatory statement
This amendment means that the tribunal can extend the time limit for bringing an appeal in relation to an overpayment notice.
Baroness Fox of Buckley
Member’s explanatory statement
This amendment removes the power of the Secretary of State to make direct deduction orders and instead provides for direct deduction orders to be made only by a court following an application by the Secretary of State to the court.
Baroness Fox of Buckley (Non-Afl)
My Lords, in moving Amendment 102, I shall speak also to Amendment 122. I thank the noble Lord, Lord Palmer of Childs Hill, for putting his name to these amendments.
These amendments are similar to those that I tabled in an earlier group in relation to Part 1. In this instance, they focus on removing the power of the Secretary of State to make direct deduction orders and instead suggests that DDOs be made only by the relevant court following an application from the Secretary of State.
Throughout Committee, the noble Lord, Lord Vaux, has helpfully stressed that, when we are having this discussion, particularly in this environment, it is very difficult to imagine a Minister other than the noble Baroness, Lady Sherlock, who I do not think of as a malign person. In this instance, this is not helpful, because as a Committee we must always take a decision based on what we think could happen in future—what powers are being created—and therefore we bring to bear as much as we can the safeguards as a Committee.
I think that we can all agree, and we keep saying this, that it is important to note that the powers are in pursuit of a legitimate aim: here, to reclaim overpayment of money paid to welfare claimants. Following the previous group, we should not say that a welfare claimant, if they have defrauded the state, should be treated with kid gloves—I am not suggesting that. But whenever new state powers over the individual are created, a legitimate aim is not enough to mean that we should not have a more granular probing of the powers that have been created, which is why we as a Committee need to insist that powers are tightly drawn to guard against arbitrariness and limited to what is necessary and proportionate. When the Government award themselves powers, as they do in this part of the Bill, to intrude on the privacy of anyone’s bank account, check on its contents and remove money, there needs to be a strong legal justification. As yet, I am not convinced that we should not make it the job of the courts to best determine and assess when this is appropriate.
In an earlier group, on search and seizure powers, the Minister reassured the Committee that we do not need to worry because this would happen only with court approval. I am suggesting that we might need court approval here. The DWP characterises DDOs as a power of last resort, which can be exercised only when the Secretary of State has given the debtor a reasonable opportunity to settle the debt and notified them of the possible use of the powers. I felt that the Minister’s helpful explanation earlier really brought this to life.
On the other hand, there is no definition in the Bill of what, for example, a reasonable opportunity threshold might be. Ironically, one of the safeguards presented by the DWP is a check on affordability, in terms of fairness. This takes the form of account information notices. I know that we will have a number of amendments on that issue, but I want to dwell on this now, because these safeguards are one of the most egregious aspects of the Bill. To consider whether the debtor can afford to have funds deducted before the Secretary of State makes a DDO, page 105 of the Bill tells us that
“the Secretary of State must obtain and consider bank statements for the account covering a period of at least three months”.
One requirement of the account information notices is that the bank must not notify the account holder—or anyone associated with them, for that matter. Surely this, as I have mentioned in previous contexts, puts the bank in an invidious position of being compelled to breach any professional confidentiality that it owes its customer, even if its customer is a debtor, based on the word of the Government telling it that the account holder owes the DWP money. Compelling banks to hand over bank statements secretly, however benign the motives in relation to affordability checks—all without any external oversight, such as judicial authority —needs to be probed in terms of its efficacy and ethics, which is what these amendments try to do.
Before issuing a DDO, the Secretary of State must give the debtor and any joint account holder notice of the proposed order and invite them to make representations, as the Minister explained earlier. On the basis of these representations, the Secretary of State will decide whether and on what terms to make the DDO, and may do so only if satisfied from bank statements and representations that the order is fair and that the liable person, the account holder and their dependants will not
“suffer hardship in meeting essential living expenses”.
That sounds so reasonable but, in reality, it hands extraordinary discretion to the Secretary of State, as there is no threshold to determine what constitutes hardship or essential living expenses. I am sure that, if we went around the Room, we would have various versions of what we need to live on and would argue over it. Who decides what is fair in this instance? I suggest that at least having an external court look at this would be more appropriate.
Perhaps we would put such qualms aside, if these powers applied only to overpayments caused by deliberately fraudulent behaviour. I can see why going hard on fraudsters might be popular, but these powers to seize funds directly from bank accounts without judicial scrutiny will also apply to individuals who have been overpaid as a result of making a mistake when filling out one of those notoriously complex claim forms, who have failed to update a change in their circumstances, or who may just be struggling to navigate the system in general. Such errors—that is what they are—account for almost a quarter of overpayments. They include errors caused by the DWP’s own actions, as the carer’s allowance scandal revealed, but it is the likes of unwitting carers who will be on the receiving end of these powers, yet the negligent DWP staff who made the mistakes are nowhere caught by the powers that we are discussing.
I say this not to have a go at the staff, in that instance, but to note, as we have talked about previously, that we do not need a one-size-fits-all situation. That was the point that the noble Lord, Lord Palmer, made and it is very important. All sorts of people will be caught up—people making mistakes, vulnerable people and some fraudsters—but they will all be treated the same.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise briefly to support the amendments so powerfully, and with considerable detail, explained by the noble Baroness, Lady Fox of Buckley. I want to cross-reference a couple of things. I was unable to be here for the whole discussion on the last group in this Committee but I came in and heard the Minister reassuring us that there are layers of support in the DWP for identifying the vulnerable and that there is regular vulnerability training.
I have to contrast that with one of my last contributions in this Committee and this Room, talking about the horrendous case of Nicola Green. I try to share as much as I can of what I am doing in the Chamber so that it is available to the world. I have to say that the little parliamentary video of that exchange, with its less-than-ideal lighting—no offence to anyone who is doing their best they can with the television—has, you could reasonably say, gone viral, because there is a flood of comments of people saying what the DWP has done to them. I cannot attest, of course, to the truth of every one of those comments, but there is a profound problem of trust with the DWP.
I fully acknowledge that the Minister, when she was on the Opposition benches, and I have often spoken out strongly on this matter. The Government actually called an inquiry into the DWP’s treatment of disabled people after the EHRC expressed concern that equality had been breached. That is the context in which we are looking at these amendments.
The noble Baroness is calling for people to have a day in court—to be able to have a genuinely independent voice in our greatly respected courts and put the case. If they indeed have committed fraud and can afford the repayments, or it is not a complete error by the DWP, or the DWP is at fault or is not being realistic about how much people need to eat and live, the court will make a ruling. That, surely, is regarded as a basic principle and right in our law.
Lord Vaux of Harrowden (CB)
My Lords, I will speak briefly to Amendments 102 and 122, which would require the Secretary of State to apply to the court for a direct deduction order—a DDO. I confess that I am struggling a bit to understand the circumstances in which the Secretary of State would be able to make a direct deduction order, as the Bill is drafted. I hope the Minister will be able to help me.
When we discussed the DDOs in relation to Part 1 of the Bill, the noble Baroness, Lady Anderson, correctly pointed out that a direct deduction order could be made only in circumstances where either there had been a final determination of the amount of the liability by a court or the person concerned had agreed that the amount was payable. I agreed then that that was an important safeguard, as it is a significant restriction on when the DDO process could be used under Part 1. I asked why, if the court was making the determination of liability, we did not just leave the court to determine the way in which it should be repaid, rather than requiring new powers for the Minister to make that decision. The noble Baroness was kind enough to offer to write to me on that, and I very much look forward to receiving her letter.
However, I think the same issue may arise here, except that I am struggling to find the definition of the amount recoverable described in paragraph 1(1) of new Schedule 3ZA, inserted by Schedule 5 to the Bill. Can the Minister please explain how the amount recoverable is determined, and by whom? Does this part have the same safeguard as Part 1, which is either final court determination or agreement by the person concerned, or is it at the discretion of the Secretary of State? I can see, in Clause 89, that the person must have been convicted of an offence or agreed to pay a penalty. That raises the question: does this DDO regime apply in cases or error, or not? Presumably, in cases of error there will not be a conviction or a penalty, so it does not apply in the case of error, but I am confused.
I cannot find anywhere the amount being determined by a court; that is where I am struggling a bit. If the recoverable amount has not been decided by the court, then the amendment in the name of the noble Baroness, Lady Fox, is likely to be necessary. That is particularly important because, just as it does in Part 1, for understandable reasons, the appeal process to the First-tier Tribunal against a DDO prevents a person appealing with respect to the amount that is recoverable. If that is the case, and the amount recoverable has not been determined by a court, I think there is an issue here.
Lord Palmer of Childs Hill (LD)
My Lords, I am proud to support Amendments 102 and 122, which I tabled alongside the noble Baroness, Lady Fox of Buckley. Amendment 102 proposes that the power to make direct deduction orders should rest with the courts following an application from the Secretary of State, rather than allowing the Secretary of State to impose such orders directly. This change would introduce an important layer of judicial oversight, ensuring that deductions from individuals’ bank accounts are made only after careful, independent consideration of the evidence and the circumstances.
Although the Bill includes safeguards such as affordability and vulnerability checks, as enumerated by the Minister, and rights to representation and appeal, placing the final decision in the hands of the court would further strengthen public confidence in the fairness and proportionality of the debt recovery process. Amendment 122 is consequential on this approach, ensuring consistency throughout the Bill. By requiring court approval for direct deduction orders, we uphold the principle that significant intrusions into personal finances should be subject to the highest standards of scrutiny and due process. This is particularly important given the potential for hardship and complexities that can arise in cases involving joint accounts or vulnerable individuals. I hope the Minister can address that when she replies.
These amendments do not seek to undermine the Government’s legitimate efforts to recover public funds lost to fraud or error but rather to ensure that such efforts are always balanced with robust protections for individual rights. I urge fellow noble Lords to support these amendments as a constructive step towards a more transparent and accountable system, and I am very pleased to have signed this amendment in the name of the noble Baroness, Lady Fox.
Viscount Younger of Leckie (Con)
My Lords, I have a degree of sympathy for the amendment in the name of the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer of Childs Hill. It touches on a value that I know many of us across this House instinctively support: namely, that powers which interfere with the person’s finances should be subject to proper oversight and scrutiny—in other words, by a court and not by a politician. Let us start with that.
The principle underpinning the amendment is sound. When the state seeks to impose a direct deduction from an individual’s account, that is no small matter. It affects not just policy outcomes but people’s daily lives, and we should never lose sight of that. Much was spoken about that in earlier groups. I am sure that the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer, have suggested introducing a requirement for the court to authorise such a deduction because it reflects the gravity of that particular action.
However—there is a however—although I support the sentiment, I have reservations about the practicality, and I am afraid that the remarks from the noble Baroness, Lady Bennett, have increased my concerns. Requiring every direct deduction order to go through the courts will prove burdensome to the judicial system and may risk making this part of the regime so slow and administratively heavy that it becomes inoperable in practice. That would not only undermine the Government’s legitimate aim of tackling fraud effectively and speedily, but could also result in delays and uncertainty for claimants and public authorities alike. Just to be helpful to the Minister, can she enlighten us on the current state of the backlog in the courts—which is a message she might expect me to give—and how, therefore, Amendment 102, for example, might not be helpful to the process?
I have another question about an appeals process. Everyone, I believe, has the right to an appeal, but how would this work, given the status of the courts? That is a question for the Minister to ponder over. We are, after all, talking about a mechanism intended to recover public money in a targeted and efficient way. If every deduction, regardless of scale or complexity, must first pass through court proceedings, we risk erecting a barrier that stifles the entire process. There must surely be a way of reconciling the desire for oversight with the need for operational efficiency—a challenge that I lay down to the noble Baroness, the Minister.
So, while I cannot support the amendment as currently drafted, I agree that the principle of independent oversight should not be overlooked. There may be better ways of embedding that principle in the system through enhanced safeguards; clearer audit mechanisms; greater efficiency and speed—that is, in expediting the DDOs; and improving transparency around how deduction decisions are made and reviewed.
I recognise this from all who have spoken, and I have listened carefully to all the speeches. I believe that these amendments, and particularly Amendment 102, starts a valuable conversation; even if its solution is not quite the right one, its motivation certainly is. I hope that the Minister can reassure the Committee that the Government recognise the need for these powers to be exercised responsibly but also sensibly so that they can operate effectively, and that they are open to exploring proportionate mechanisms of accountability that simply do not grind the system to a halt, and if so—a very simple question to end on: what could this system be?
Baroness Sherlock (Lab)
My Lords, I am grateful for some really good questions. These are exactly the kind of questions the Lords Committee should be asking on these sorts of issues, and I hope to give decent answers.
Should I ever get round to writing a book, somewhere in the credits it will say “Definitely not a malign person”. I am very grateful to the noble Baroness for that. It is the best compliment I am going to have today —you have to take them where you can find them in this business—so I thank her very much.
Amendments 102 and 122, as we have heard, want to restrict the use of the direct deduction power to circumstances where a court has determined it necessary and appropriate. I thought the noble Baroness, Lady Fox, made her argument very clearly; I hope to try and persuade her that she does not need to press these amendments because I think we have a good case on this.
Lord Vaux of Harrowden (CB)
The noble Baroness has not answered one question that I had. My understanding from Clause 89 is that these DDO rights—or however one describes them—can be used only where a person is convicted of an offence under this Act or any other enactment, or agrees to pay a penalty under Section 115A of the 1992 Act. Does that mean, therefore, that this does not apply to situations of error and that it is only fraud?
Baroness Sherlock (Lab)
I apologise; I forgot to answer that. No, it does not. These measures apply to any kind of overpayment but, as I described, they are only matters of last resort. We have to have gone through all the other possibilities and people must simply have failed to engage. So this really will happen only if somebody is absolutely not engaged with us at all. As is the case with deductions from benefits or deductions from earnings, they are available as a tool for overpayments, whether or not they will be used.
Baroness Fox of Buckley (Non-Afl)
I thank the noble Lords who spoke on these amendments for appreciating—even if they did not support—the spirit of what they are trying to do. Despite that, I do actually want to do this rather than just wanting the spirit. But I know that the noble Viscount, Lord Younger, feels that it will not work practically. But we have had a slightly contradictory answer there, because they are either absolutely the last resort and will hardly ever be used—in which case they will not clog up the court system, to be fair—or they will be used a lot more, which means that there is all the more reason for them to go through the courts, if they will be used liberally from the point of view of a safeguard. So I did get confused about that.
Some thoughtful points were made. The noble Lord, Lord Vaux, usefully probed the Minister—in a way that I was not able to—on exactly when and in what circumstances. These questions about the distinction between error and where the overpayment came from matter in relation to the powers that have been created.
Baroness Sherlock (Lab)
I am sorry to interrupt—I never get to say that anymore. I thought it might be helpful for the Committee if I clarified. The noble Lord, Lord Vaux, referred to Clause 89; that actually refers to administrative penalties and recovery for non-benefit payments, not for benefit payments. I should have made that clear. I am sorry to interrupt the noble Baroness, Lady Fox, in full flow—please carry on.
Baroness Fox of Buckley (Non-Afl)
It is very helpful for these things to be clarified. As noble Lords can see every time we are in Committee, I have so many pieces of paper, so I appreciate that and am not saying that I am on top of all the detail.
However, I think it is important, in the spirit of the way that the noble Lord, Lord Palmer, was motivated to support these amendments, that this is not just about the detail; there is an important principle here. I really liked the viral film mentioned by the noble Baroness, Lady Bennett of Manor Castle, because people do care about this Bill and what its impact will be, and we have to be able to answer all the questions as the legislators who are debating it. People know that we are involved in this, and I sometimes feel that it is unclear exactly what will be acquired by all these powers.
The problem with saying that these powers will hardly ever be used is that these powers are going in the statute book, so they can be used. I am not going to talk about bank statements again, but the reason I raised them on this group is because, before a DDO can be introduced, you have to check bank statements through the mechanism of the affordability checks that we will go on to discuss, and that is a breach of privacy. If we are giving the DWP the power to do this, we need to have a check. The way we have done that historically is to rely on the courts to take money. As this is related, I am trying to see whether this could be a useful check to make sure that these powers are not exploited.
We have plenty of time to go, so I think some of us may come back with a version of this amendment—potentially better worded—when we get to Report. It is not just to fly the flag for civil liberties but, as I think the noble Lord, Lord Palmer, said, a need to have trust in the system. If the Bill is to be taken seriously by people who do not just think that it is draconian and who do not do the caricatures that the Minister wants, it must be watertight in its safeguards and protections, as well as in the powers that it creates. Those two things have to live together; otherwise, it will be discredited before it even hits the statute book.
Viscount Younger of Leckie (Con)
I just want to pick up on something quite interesting that the noble Baroness said, which leads me to ask a question of the Minister. I am not expecting an answer now. It is to do with the capacity or number of cases. I have no idea how many DDO cases could end up going to the courts, but it may be more than the noble Baroness, Lady Fox, thinks. I am just reminded of my experience of the Child Maintenance Service: it looks at those people who we know can pay and who are not paying, and they go all the way to the courts. There are many thousands. I rest my case by saying that there is a danger that the courts could be clogged up, but it would help the Committee to have some idea, perhaps in writing, of the number of cases that would or could go to court as a consequence of these amendments.
Baroness Sherlock (Lab)
I will write to the noble Viscount. As he knows from his experience with the Child Maintenance Service, as each form of enforcement comes into view, more and more people simply pay without it being necessary, so a sort of funnel comes down. If we have any information about scale, I would be happy to write.
Member’s explanatory statement
This will prevent the DWP from being able to compel banks to disclose the bank statements of benefits recipients to decide whether to issue direct deduction powers.
Lord Palmer of Childs Hill (LD)
My Lords, I move Amendment 103 on behalf of my noble friend Lady Kramer, who is in the Chamber. We are all playing ducks and drakes with where we are. The amendment was tabled by my noble friend and the noble Baroness, Lady Bennett of Manor Castle. It would prevent the Department for Work and Pensions from compelling banks to disclose the bank statements of benefit recipients in deciding whether to issue direct deduction orders.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Lord, Lord Palmer of Childs Hill, who has clearly and eloquently outlined the reasons for this amendment, which the noble Baroness, Lady Kramer, tabled, and to which I attached my name. The noble Lord talked about the risk of loss of trust in public authorities. We should also look at the other side of this: the loss of trust in banks. People may have heard the acronym GDPR. People might not know all the ins and outs but they think that anything to do with bank accounts is private stuff. They want to trust that if their information is with the bank, it is not going to be handed out to anyone else. We have a situation whereby, although the situation has improved in recent years, still 2.1% of Britons are unbanked. That figure is significantly higher for the under-25s. It is also higher in some regions and nations; for example, Scotland.
We have to think not just about the impact on attitudes towards the DWP. I thank the Minister for acknowledging in her response to my previous contribution that the department has a long way to go. However, bank statements contain all sorts of information beyond what is relevant to anything the DWP knows about. For example, people may find themselves in a difficult situation after a relationship has broken down, and their bank statement may reveal all kinds of things about their personal life that they really do not want anyone else to see. There may be purchases they consider embarrassing. They do not want anyone else to see them. Getting the whole copy of the bank statement is not going to provide just information relevant to what the DWP is doing or not, or any other income and so on. There is going to be a lot of other material as well. As the Bill is currently written, it is disproportionate, as the noble Lord, Lord Palmer, said.
Baroness Fox of Buckley (Non-Afl)
Very briefly, I absolutely support the amendment. I raised some of my concerns when moving my amendment in the previous group. When I heard that bank statements could be requested, I thought it was not true and I kept having to check it. I thought, “This cannot be right”, because throughout the passage of the Bill we have been assured by the Minister, “Oh, no. We do not want any details. We are only going to have the name. There is no surveillance”. I then thought, “Oh my God, they can get the bank accounts of individuals, allegedly to check whether they have enough money in their bank account, saying that they are doing it only because they are being nice to them”.
I am of the generation who think that if you lose your bank account, there is serious jeopardy. In other words, I would never show my bank accounts around. I am paranoid about anyone seeing my bank accounts. I worry about that sort of thing, although it is not that I have anything to hide—just to note. As the noble Baroness, Lady Bennett, indicated, you can find out from people’s bank accounts what their politics are, their trade union affiliations and their sexual preferences —all sorts of things. On the idea that the DWP will not be looking at that but will just be checking how much money you have, it cannot do that. It is essential that we think twice about this.
These account information notices also apply to joint bank accounts. I know that we are going on to discuss joint accounts in a minute, but that means that those pots of intimate, private, sensitive and granular information held within a bank statement can be revealed about individuals who are not on benefits, who are not debtors, who are not involved at all—they simply share a joint account. I would like this removed from the Bill. It is too scary.
Viscount Younger of Leckie (Con)
My Lords, I thank the noble Baronesses, Lady Kramer and Lady Bennett of Manor Castle, for tabling this amendment. I recognise the spirit in which this proposal is made—a desire to ensure that the use of direct deduction powers is subject to proper scrutiny and does not override individual rights without appropriate justification.
However, I must express some serious reservations about the effect that this amendment would have. By removing the ability of the DWP to request relevant bank statement information from financial institutions before issuing a DDO, we risk undermining the very evidential foundation that should underpin the use of this power in the first place. If we are to give Ministers and their departments powers to recover money owed to the public purse—a legitimate policy objective that is supported on all sides of this Committee—we must also ensure that those powers are exercised responsibly and on the basis of proper evidence. Access to account information, under strictly controlled conditions, is part of what makes that possible. Without it, the risk is not simply inefficiency or delay. The greater danger is that deduction decisions could be made with incomplete or inaccurate information, leading to inappropriate enforcement action or simply to missed opportunities to recover legitimately owed funds. Neither outcome would serve the interests of fairness, nor would they deliver good value for public money.
We have heard throughout Committee about the importance of a system that is not only robust but proportionate and just. I entirely agree—as our amendments and interventions thus far have made clear. However, for a system to be proportionate, it must be informed, which requires access to evidence. I reiterate the concerns that we raised on these Benches at Second Reading. Schedule 3B (1)(2) (b)(i) makes it clear that an eligibility verification notice, which would serve to identify or help to identify fraud, can be applied only to the bank account
“into which a specified relevant benefit has been paid”.
As my noble friend Lady Stedman-Scott set out at Second Reading, we are concerned that this creates a substantial loophole which could be exploited by fraudsters who are, as the government amendments have suggested, able to find out whether they are being pursued by the DWP through an information request. This is a real issue. It seems a likely and obvious outcome that such a person could move money between the relevant account and another, held with different bank, to avoid scrutiny.
We submit that for this to be an enforcement regime, there cannot be any loopholes or workarounds which may permit a fraudster to hang on to the money that they have stolen from the taxpayer. As we stated at Second Reading, the Bill as set out suggests that the Government will be tied up in a legal bind, ensuring in statute that they cannot verify or ultimately pursue the recovery of funds that are not held within the account specified. However, with the right safeguards and with responsible communication of information, there is surely a way in which this regime can be constructed that is responsible and fit for purpose.
We believe that the Government must expand their capacity and ability to access further bank accounts held in the name of the relevant person to prevent them simply opening another account and moving money around, which, as the Bill is currently drafted, seems to be a clear and easy way for them to avoid both proper scrutiny and will prevent the money being recovered. Perhaps the Minister will say whether parallels can be drawn with the current system set out between HMRC and the banks for the recovery of tax resulting either from overpayments or tax fraud, which I am sure she will say works. That may be helpful.
Finally, I want to respond briefly to the concerns raised about whether these provisions amount to a snoopers’ charter—a charge that has been raised throughout the passage of the Bill. It is right that we scrutinise the scope of these powers carefully, but it is also important to be clear about what the Bill does and does not do. In our view, the Bill sets out defined and limited circumstances under which verification measures may be used. It cannot be doubted that an informed and fair decision on deduction orders can be reached only if it is grounded in accurate and up-to-date information. I believe that it is for the Government to make it absolutely clear in Committee how these safeguards on process will function in practice and how transparency and accountability will be maintained. I understand the sensitivities involved in accessing bank data. That is why these safeguards and oversight mechanisms are important.
With that, I hope that noble Lords will reflect on whether the amendment achieves that balance, and I look forward to the Minister’s response on how the very valid concerns that it speaks to can be addressed.
Baroness Sherlock (Lab)
My Lords, I am grateful to all noble Lords for their contributions. As we have heard, this amendment would remove the requirement for banks to provide information to the department in response to notices, including bank statements, for the purposes of making a direct deduction order. However, getting this information from banks, including relevant bank statements, is not only instrumental to the effectiveness of the direct deduction power—it is crucial as a necessary and important safeguard to ensure the affordability of deductions, which is why we cannot accept this amendment.
I remind the Committee that the recovery powers proposed under the Bill are ones of last resort. They are for those not in receipt of benefit or in PAYE employment who have other income streams or capital and who repeatedly refuse to engage with the DWP to agree an affordable repayment plan. Without the information shared by the bank, the DWP would have no means to consider the debtor’s financial circumstances and would therefore be prevented from meeting other obligations and vital safeguards in the Bill, such as establishing an affordable deduction rate and avoiding causing hardship.
Put simply, if we do not know how much money someone has, we risk taking more than they can afford to repay at that time. The DWP is working collaboratively with the Money and Pensions Service on “ability to pay” checks, using bank statements and, where possible, the standard financial statement principles, to prevent financial hardship. These checks will consider the debtor’s essential living expenses, such as housing and utilities, and the Bill provides that direct deduction orders must not cause the debtor hardship in meeting these expenses.
Using bank statements in this way allows the deduction to be affordable and fair based on the individual circumstances, rather than a blanket approach of leaving a set amount in the account which, if not set high enough, could prevent the debtor from meeting those essential costs. The information gathered through these notices is proportionate and other provisions in the Bill restrict the use of bank statements obtained under this power. They are solely for the purposes of recovering the money that is owed. I say to the noble Baroness, Lady Fox, that it is a legal requirement not to use the information for any purpose other than debt recovery. That is spelled out in paragraph 3(10) of new Schedule 3ZA, inserted by Schedule 5 of the Bill.
I also remind the noble Baroness that all this can be avoided, including obtaining information from a debtor’s bank, if the individual agrees to get in touch to discuss and agree an appropriate repayment plan. In that case, we will not need bank statements because we can talk to them and ask for appropriate evidence, and they can provide evidence of other kinds, if that is sensible.
I will just pick up on a number of things. We are not interested in looking at what people spend their money on. It is worth reminding the noble Baroness, Lady Fox, and the Committee that we have said different things at different times because there are different measures in the Bill. For the EVM over here, there is no transaction data—absolutely not, under any circumstances—and I say to the noble Viscount, Lord Younger, that we are looking only at the bank account into which we pay benefits. Fresh sentence: over here, the DWP’s debt recovery powers are aimed at different people, who are not on benefits as, by definition, the EVM is only for those on benefits. It is aimed at people who are not in PAYE employment, who owe the department money and who will not engage. If at least four attempts have been made to contact them but they simply have not got in touch, we can start to use the powers. In that case, we do have the power under our debt recovery powers to go to any bank account that they have; we are not limited to the bank account into which we pay benefits. As I have just said, we are not interested in looking at what people spend their money on. The power can be used to recover debt only in cases where somebody is not in receipt of benefits, as I have described.
Lord Palmer of Childs Hill (LD)
I thank the Minister very much for responding in that manner, but it is rather like a court case where they say that the jury should disregard what happened. Once the information is out there, human nature makes it very hard to avoid it. If you are the DWP and you look at a bank account and see something that you should not, it is hard then to ignore it. The nature of man and woman is not to ignore things that they see. I am afraid that that just came to my mind: it is like these television dramas where the barrister or lawyer raises points, and the judge says, “The jury should disregard that”. You cannot disregard what you see in a bank statement even if you decide that you should not really have seen it. This is a very dangerous precedent, and I do not think the Minister is living in the real world.
Baroness Sherlock (Lab)
I just remind the noble Lord that these DWP staff are authorised fraud investigators and they work on our fraud teams. In the nature of their work, as it is for anybody who works in fraud or law enforcement, they will end up seeing information, in the course of an investigation, that is not relevant. If he thinks that that means that that information will necessarily get into the outside world, then I ask him to rethink that. Our staff are professionally trained. They are professionals who operate under professional standards, authorisations and accreditation. They know what their job is. If staff come across information and the law quite clearly says that it may be used for only one purpose, it will be used for only that purpose.
Lord Palmer of Childs Hill (LD)
I am sorry, but this does not take account of rogue members of the DWP. I am sure that 99.99% are exactly as the Minister says, but the idea that everyone will observe those rules is—I say again—not the real world. I beg leave to withdraw the amendment in the name of my noble friend Lady Kramer.
Baroness Sherlock
Member’s explanatory statement
This amendment, together with my amendments to Schedule 5, page 108, line 1 and Schedule 5, page 108, line 5, requires a notice under paragraph 5(1) of new Schedule 3ZA to be given to the bank in question.
Member’s explanatory statement
See the explanatory statement for my amendment to Schedule 5, page 107, line 12.
Member’s explanatory statement
See the explanatory statement for my amendment to Schedule 5, page 107, line 12.
5A “(1) Before any direct deduction order under this Schedule is made, the Secretary of State has a duty to consider its effect on any person who—(a) is a victim of domestic abuse, or(b) the Secretary of State reasonably believes to be at risk of domestic abuse.(2) For the purposes of this paragraph, “domestic abuse” has the meaning given by section 1 of the Domestic Abuse Act 2021.”
Lord Palmer of Childs Hill (LD)
My Lords, the amendment seeks to ensure that, before any direct deduction order is made under this schedule, the Secretary of State must consider the effect of such an order on any person who is a victim of domestic abuse, or whom the Secretary of State reasonably believes to be at risk of domestic abuse.
While the Bill rightly includes very important safeguards, such as affordability and vulnerability checks, and limits on the amounts that can be deducted to protect debtors from undue hardship, these general measures may not provide sufficient protection for those experiencing or at risk of domestic abuse, whose circumstances are often uniquely precarious and complex. Victims of domestic abuse frequently face financial control and instability, and the imposition of a direct deduction order could inadvertently place them at greater risk, either by exacerbating economic hardship or alerting an abuser to their financial situation. It is therefore essential that the Secretary of State has a specific statutory duty to assess the impact on this particularly vulnerable group before any order is made. By adopting this modest amendment, we would strengthen the Bill’s existing safeguards and ensure that the most vulnerable are not further disadvantaged by well-intentioned recovery mechanisms. I urge noble Lords to support the amendment in the interests of justice, compassion and the protection of those at risk. I beg to move.
Viscount Younger of Leckie (Con)
My Lords, I offer my strong support for Amendment 109, tabled by the noble Lord, Lord Palmer. It proposes a vital and compassionate safeguard that ensures that, before any direct deduction order is made, proper consideration is given to whether the individual involved is a victim of domestic abuse—or certainly at risk of it.
We know that domestic abuse too often includes economic and financial control. Perpetrators may take over access to bank accounts, manage benefit claims in their partner’s name or use coercion to extract money. For victims in these circumstances, a deduction order made against a joint or controlled account is not just a technical enforcement step but can be catastrophic and expose them to further harm, deepen their financial insecurity and reinforce the very cycle of abuse that they are trying to escape. The amendment puts in place an essential duty that, before such a deduction is imposed, the Secretary of State must ask a basic question: is this person safe? Are they vulnerable specifically to domestic abuse? Could such action cause caused further harm? I am sure the Committee will realise that these comments are not new. This is not about creating loopholes but about making sure that we do not inadvertently punish the very people who most need our protection. If our system is to be just, it must distinguish between those who are deliberately defrauding the system and those who are themselves being defrauded, manipulated or coerced in private and invisible ways.
I fully recognise—others may raise this point—that this kind of information is not always easy to obtain. As we know, domestic abuse is often hidden, and victims may be reluctant or unable to disclose it. But that is not a reason to avoid the responsibility. On the contrary, it is precisely why we must build protective considerations into the decision-making process. So, if a red flag is raised—whether through third-party evidence, existing support services or patterns in the account—the system must be capable of pausing, asking the right and necessary questions and adjusting course. That is surely not an undue burden; it is what we should expect of a responsible, modern enforcement regime.
Of course, I also note that the Government already have duties under the Domestic Abuse Act 2021—I expect we will hear this from the Minister—and under the wider Equality Act to consider how their decisions impact vulnerable groups. But this amendment gives practical effect to those duties in the specific context of direct deduction orders. It does not create new rights out of thin air; it reinforces and operationalises obligations that the state already carries.
So I ask the noble Baroness two questions. In the system and process designed, and having reached proof of concept with the banks—at least on two occasions; I refer back to previous comments—who is responsible for recognising these issues in respect of account holders? Is it the banks? To what extent do they know such detail about their account holders? Or is it the DWP? Is it more likely to know of such matters? Obviously, in the discussions leading up to and beyond the decision to give out benefits, such issues surely would have emerged. Perhaps the Minister can enlighten us on the precise responsibilities here.
Perhaps the Minister can also confirm that the banks would not see the analysis of vulnerability as a key part of their responsibility—that is linked to my previous point—but that their role is simply to raise a red flag with deliberately limited data, as has been outlined, where there is that match of an account holder in receipt of benefits who also has £16,000 or more in an account.
The final question, which chimes with questions asked on perhaps day 4 of Committee, is: how often are such checks carried out by banks, as requested by the DWP? Or—I need to be put right again; forgive me—is the algorithm such that a flag is raised on a 24/7 basis by an algorithm that does a match? Then a report is given to the bank’s responsible person—let us call him the banking manager.
There is a thread running through this debate about how to balance power and protection. Indeed, it is an issue on which noble Lords across the Committee agree; therefore I warmly welcome this amendment from the noble Lord, Lord Palmer, as it provides us with another opportunity to test out the Government and raise our concerns. This amendment is principled, proportionate and practical. I hope the Government will take it seriously, in the spirit it is meant, and reflect carefully on the values it enshrines. I believe it gets to the very essence of what the Bill is about. With that, I look forward to the answers from the Minister.
Baroness Sherlock (Lab)
My Lords, I am grateful, as ever. The subject of Amendment 109, put forward by the noble Lord, Lord Palmer, is very much as it was in the fourth group, with the earlier amendments in the name of the noble Viscount, Lord Younger. The Committee agrees on the objective in that area and we are simply going to talk about the best way to achieve that.
I thank the noble Lord, Lord Palmer, for raising this issue but again, for reasons not dissimilar to those articulated earlier, his amendment is not the best way to achieve this. However, I hope I can give him the assurance that he is looking for.
The DWP very much understands the importance of this issue. The noble Viscount is right that we have statutory obligations, but it is also embedded in the department. All our front-line staff are trained in addressing the issue of domestic violence, the training is regularly refreshed and we engage with stakeholders: the department take it very seriously.
We are committed to continuing to support victims and survivors of domestic abuse whenever they interact with the department. We have experience in this area, as well as existing guidance and processes for supporting victims of domestic abuse. As I say, the training our front-line management staff receive includes assessing affordability and identifying and dealing with vulnerable customers.
My officials have been looking in detail, specifically at how victim survivors could be impacted by the measures in the Bill, and working closely with key stakeholders, including the charity Surviving Economic Abuse, to ensure that the code of practice sets out the right approach to mitigating risks for victim survivors of domestic abuse. The current draft of the code of practice includes steps officials will take to identify signs of domestic abuse, where possible, to identify risks and to support the individual.
However, although I recognise the important intent behind this amendment, the fact is that it would apply to anyone affected by a direct deduction order, including debtors and non-debtors. Similarly to the earlier Amendments 99D and 109ZA from the noble Viscount, Lord Younger, it does not require or enable the DWP to take any action to identify possible impacted individuals or provide any new means by which the DWP could do so.
Lord Davies of Brixton
Member’s explanatory statement
This amendment requires the Secretary of State to undertake an affordability assessment before making a direct deduction order.
Lord Davies of Brixton (Lab)
My Amendments 109A and 109B address the twin issues of affordability and minimising social harm. Amendment 109A deals with the Government’s proposed “affordability assessment”, which is my term, not the Government’s. Amendment 109B requires a de minimis amount to be left in an individual’s bank account following the application of a deduction order. Neither amendment breaks new ground and both are within the terms of government policy. If we are going to pursue this policy, it has to be transparently fair and minimise social harm, which is the purpose of my amendments.
It needs to be stressed that both amendments are strongly supported by UK Finance, which is the collective voice for the banking and finance industry. These are the people who will have to undertake the hard work of implementing this policy, so their views should be taken seriously. I am not a natural proponent of UK Finance—I have spent much of my working life criticising insurance companies and banks for how they treat people—but it is a relevant participant in this process and its views should be taken most seriously.
On Amendment 109A, as I mentioned, there will be an affordability assessment. It is pretty well hidden—there is no reference to it in the Bill—but paragraph 52 of the Explanatory Notes states that direct recoveries
“will only happen once affordability and vulnerability checks have been carried out”,
so there will be checks. There is a more explicit reference in paragraph 723, which states specifically that
“prior to pursuing a direct deduction order”,
the Secretary of State will consider
“the affordability of recovery”.
That affordability assessment is an inherent part of the legislation, even though it is only implied in the Bill rather than required explicitly. My amendment is a probing amendment to press the Government on whether it would be better to have this in the Bill.
To paraphrase the Government’s position as I understand it, recovering benefit overpayments through the debt recovery measure will be a last resort and the Minister may make a direct deduction order only if satisfied that it will not cause a liable person to suffer hardship. Maybe the Minister could put the intention of the legislation into the Government’s words. UK Finance has said that it welcomes this intent but is concerned that the existing safeguards may not provide the level of protection that vulnerable consumers need in practice. Perhaps it knows its customers better than we do.
For this measure to be effective, an affordability assessment is essential: one that is carried out by the DWP and is accurate and realistic. I understand that the DWP is working with the Money and Pensions Service to flesh out the detail of the process. It is obviously essential that the DWP can understand the circumstances of vulnerable customers to ensure that the affordability assessment is fair and will not lead to social harm.
We know that organisations such as the Money and Mental Health Policy Institute—I declare an interest as a member of its advisory panel—the Money Advice Trust and Citizens Advice have been campaigning for some years for improvements in government debt practices. This is not a new problem. I mentioned in the previous sitting the comments made by the House of Commons Public Accounts Committee, but it is relevant to repeat them. It said that the DWP
“does not understand well enough the experience of vulnerable customers and customers with additional or complex needs … We remain concerned about the potential negative impact on protected groups and vulnerable customers of DWP’s use of machine learning to identify potential fraud”.
This goes back to an earlier debate but it highlights that the evidence to hand is that the DWP is not very good at assessing affordability. It is reasonable, by means of proposing this amendment, for the Government to explain how the affordability will be assessed. If the proposals do not appear to be adequate, I will want to return to this issue on Report.
Similarly, Amendment 109B is a probing amendment. It lacks much of the detail that a specific proposal would need but proposes that there should be a de minimis amount left in an individual’s account following the application of a deduction order. The intention is that individuals should not be left without access to essential funds and should not suffer undue hardship.
This is not a new proposal because there are other circumstances in which debts owed to the Government, where the Government have powers to extract money from people’s bank accounts, permit a de minimis amount. There are the comparable HMRC direct recovery of debt measures where there is a de minimis balance of £5,000. There is a similar arrangement in Scotland. Scottish law is a mystery to me, but there is a parallel arrangement under Scottish law that, in circumstances where debts can be taken, they have to leave at least £1,000.
The problem arises—talking about both sorts of deduction orders—that there is a possibility of extracting money and leaving the individual with no income whatever to meet routine payments such as rent. Because the bank account is frozen, they may also have made prior commitments and, when those arise and these private arrangements seek money from the bank account which has been driven down to zero by the deduction order, the individual is left in an extremely difficult situation as debts that they have incurred are not able to be met. There is also the issue of money for routine costs. If someone depends on their bank account to feed their family and the account is driven down to zero, that will also incur considerable and unwarranted hardship.
It is quite clear that, following existing practice, this legislation should permit a de minimis amount to allow routine financial transactions to continue where barring them would cause social harm. There is a particular problem that, once the 28-day period has been triggered during which people can object to the proposed deduction order, the account is effectively frozen. In fact, it is frozen until the end of the unlimited period the DWP has in order to reply to the appeal against the deduction order. There is potential for considerable social harm and that is why it is important that at least some agreed sum of money is left. I suggest £1,000 in my amendment but I am really raising the issue in principle.
If the Government can come back on Report with a proposal along the lines I suggest, that would be good. If they do not, I will seek to raise this issue. Both these amendments seek to avoid social harm, and I hope the Government will take the points on board and come back on Report with suitable amendments to avoid the problems identified, not just by me but by bodies in membership of UK Finance which deal with the customers who will be caught by these provisions.
Viscount Younger of Leckie (Con)
My remarks will be brief. I thank the noble Lord, Lord Davies of Brixton, for tabling Amendments 109A and 109B, which seek to introduce further safeguards into the process by which direct deduction orders are applied. These amendments are clearly driven by a legitimate concern. I am sure it is one that we all share; no one should be pushed into destitution—note that word—because of enforcement action taken by the state. We on these Benches broadly support the intention behind these amendments. As we expand the state’s ability to recover funds lost through fraud, we must do so in a way that is measured, proportionate and fair. We agree that the person on the receiving end of a direct deduction order must be treated with dignity and that the enforcement should never push a person below the threshold of subsistence.
However, while we agree on the principle, the Bill as currently drafted already contains sufficient protections to give effect to that principle. These amendments propose going further. As the noble Lord, Lord Davies, set out, they would hard-wire specific mechanisms into the legislation itself with a mandatory affordability assessment and a fixed, safeguarded amount of £1,000 to be left in a person’s account. While we understand the motivation behind these proposals, we are not persuaded that they strike the right balance.
First, on the affordability assessment, the key question is not whether such considerations should be made—they absolutely should be—but whether placing a rigid requirement in the Bill is the best way to achieve it. Secondly, regarding the safeguarded sum, the proposal to set a fixed floor of £1,000 may be well intentioned but risks creating unintended consequences. For some individuals, that figure may be appropriate, but for others with significantly higher levels of debt or multiple fraudulent claims—of which there are a few, I am afraid—it may act as an unjustified barrier to recovery. A blanket threshold does not easily accommodate the complexity of individual circumstances.
We must not forget what this system is designed to do. We are talking about the recovery of public funds that were obtained unlawfully. These are not arbitrary deductions, but actions taken in response to fraud—in some cases, large-scale fraud—committed against the public purse. These funds belong not to the state in the abstract but to the taxpayers, the public and the people who rely on our public services. I remind the Committee of our duty to recover them on their behalf. We must exercise this power responsibly and we believe the Bill enables that. We must also ensure that we do not design a system that is so laden with friction that it fails to deliver on its core purpose of upholding the rule of law and restoring funds to the public where fraud has occurred.
These amendments raise important points, and we welcome the values that underpin them. We are committed to ensuring that the system is fair, proportionate and humane. We are confident that the existing provisions in the Bill, supported by robust guidance and operational safeguards, provide a sufficient framework to achieve those goals without introducing additional complexity that may compromise the system’s effectiveness.
Before the Minister thinks that I am writing yet another speech for her, I have some questions for her, which may also be helpful to the noble Lord, Lord Davies. Take the case of someone who has taken money fraudulently but finds himself destitute through his own actions and might otherwise be on the streets, homeless —or worse, hungry. What help can the state give to him? What options are there? As a basic, I presume that he will still be eligible for universal credit, albeit, as the noble Lord, Lord Davies, said, it would be subject to an agreed deduction for his misdemeanours. He would therefore still get support, assuming that he is not allowed to keep the £1,000 in his account. As the noble Lord said, the money and advisory services are there, and Citizens Advice is there. They are there to offer advice, but what support is there for such people in extremis? The Minister may say that the household support fund is also there and could be called upon, but that fund is subject to local help and is in the gift of local authorities to give out. Would destitute people come into that?
In conclusion, we do not support these amendments, but I thank the noble Lord, Lord Davies, for prompting this important and short debate. We look forward to working together to ensure that the final system strikes the right balance between fairness and firm recovery of debt.
Baroness Sherlock (Lab)
My Lords, I am grateful to my noble friend Lord Davies for raising this, and to the noble Viscount for his observations. I agree with my noble friend that affordability assessments should be conducted—he has made that clear, and we certainly want to do that as we think it is important—before a direct deduction order is issued, but we regard this amendment as unnecessary and duplicating existing provisions.
Paragraph 6 of new Schedule 3ZA, inserted by Schedule 5 of the Bill, provides that recovery must not cause hardship to the debtor, any joint account holder or dependant, and must be fair. Paragraph 3 requires the DWP to obtain, via an account information notice, bank statements covering at least the most recent three months in order to help make that assessment.
Further detail on how affordability will be assessed will be set out in the code of practice, a draft of which is available to Members; I am sure that my noble friend has had the opportunity to see it. It sets out the principles that will apply when affordability is assessed. They include ensuring that essential living expenses and other reasonable financial commitments are identified and protected. Officials are working closely with organisations such as the Money and Pensions Service to develop the code and, as required by Clause 93, a formal public consultation will be conducted on the draft before it is first issued.
As I have already outlined, affordability assessments must and will take place prior to enforcing a deduction order. These checks use banks statements, allowing DWP officials to consider expenses such as housing and utilities, enabling the deduction to be affordable, fair and based on individual circumstances, rather than a blanket approach of leaving a set amount in the account which could, if not set high enough, prevent the debtor from meeting those essential costs, as the amounts will vary from person to person.
For regular direct deduction orders, paragraph 6(3) of new Schedule 3ZA requires that any regular deductions made by the DWP each month must not exceed 40% of the monthly average amount credited to the account during the last period in which statements were assessed. Regulations will be made under paragraph 24(2)(d) to further set a maximum rate of 20% for all cases that have not arisen due to fraud.
These figures are maximums, rather than fixed deduction rates. Deduction rates will vary as officials take any affordability, hardship factors or other relevant circumstances into consideration. This approach mirrors that already used effectively in the DWP’s existing powers of deduction from earnings or benefits, and it is not obvious why it should be different in these circumstances. Given the safeguards outlined, requiring that £1,000 be left in one or more of the liable person’s bank accounts in every case where a DDO was sought is unnecessary, as the safeguards will already achieve the outcome intended by this amendment.
Regarding the specific questions, I reassure my noble friend that we are alive to the concerns of UK Finance, which we meet regularly. We are working with MaPS and relevant debt sector organisations on this. He mentioned a comparison with HMRC. HMRC has confirmed that its power is a one-off deduction of a tax debt, not a regular deduction. As a result, it does not assess customers’ affordability as part of the process. Its safeguard instead requires it to leave a minimum of £5,000 across the customer’s accounts to stop taxpayers being left with insufficient funds to cover basic needs. We are taking a different approach: we are assessing affordability, and we will have clear sight via bank statements of the debtor’s ability to repay.
In addition to the work we are doing with MaPS, we are working with relevant stakeholder organisations to make sure that our communications with debtors are clear, to help them understand what we are doing and to engage in the best possible way.
I remind the Committee that before any deductions are taken, account holders will be notified and given the chance to make representations. They can provide relevant information about their financial position and evidence relevant to affordability. Even at that stage, the department’s preference is to reach an agreed position with the debtor. If reasonable payment terms can be agreed and they are maintained by the debtor, the DWP will not make a deduction order.
My noble friend and I clearly want the same thing: to make sure that any recovery is affordable. We have taken different routes, but I hope that what I have said today will help him to accept that our route is doing the job and, in the light of that, he will withdraw his amendment.
I am sorry, I forgot to respond to the noble Viscount about destitution. I may have to come back to him on that, because it would depend very much on somebody’s circumstances. Although the household support fund is locally determined, some directions, steers and guidance are given by the centre by the DWP to local authorities. But the fund is significantly there to help with the cost of living. In relation to someone who is destitute and has committed fraud, people may still, if they have an ongoing entitlement to benefit, have been subject to a loss of benefit penalty as part of a process. So it would very much depend on the circumstances. But if I can find anything else useful, I should be happy to put that in writing to the noble Viscount.
Lord Davies of Brixton (Lab)
I thank the noble Viscount and my noble friend the Minister for comments on my amendments. It has been useful to receive a coherent assessment and description of how this process will work. I will read carefully what was said and consider whether it is an issue that needs to be pursued at a later stage. I thank those who have spoken. I beg leave to withdraw my amendment.
Baroness Sherlock
Member's explanatory statement
This amendment means that a regular direct deduction order given by the Secretary of State must specify the amounts to be deducted.
Member's explanatory statement
This amendment is consequential on my amendment to Schedule 5, page 108, line 39.
Member's explanatory statement
This amendment means that a lump sum direct deduction order given by the Secretary of State must specify the amount to be deducted.
Member's explanatory statement
This amendment, together with my amendments to Schedule 5, page 111, line 7, and Schedule 5, page 111, line 15, would replace the tag “first notice” with “pre-deduction notice”. This has no substantive effect but is intended to be easier to understand.
Member's explanatory statement
See the explanatory statement for my amendment to Schedule 5, page 110, line 19.
Member's explanatory statement
This amendment is consequential on my amendments to Schedule 5, page 108, line 39 and Schedule 5, page 109, line 8.
Member's explanatory statement
See the explanatory statement for my amendment to Schedule 5, page 110, line 19.
Member's explanatory statement
This amendment removes a provision that is redundant (because paragraph 7(5) applies in relation to every direct deduction order).
Member's explanatory statement
This amendment ensures that a bank must comply with a further information notice.
(a) the period of one month beginning with the day after the day on which the appellant was—(i) given a copy of the direct deduction order, or the varied direct deduction order, in a case within sub-paragraph (1)(a) or (b), or(ii) notified under paragraph 12(3) or, where a review was sought, paragraph 18(6), in a case within sub-paragraph (1)(c), or(b) such longer period (if any) as the Tribunal considers reasonable in all the circumstances.”Member's explanatory statement
This amendment means that the Tribunal can extend the time limit for bringing an appeal in relation to a direct deduction order of the Secretary of State.
(b) such longer period (if any) as the Tribunal considers reasonable in all the circumstances.”Member's explanatory statement
This amendment means that the Tribunal can extend the time limit for appealing against a penalty under Part 2 of Schedule 5.
“Deputies
22A (1) This paragraph applies where a person (a “deputy”) acts on behalf of an account holder (including a liable person) in relation to their account by virtue of—(a) a power of attorney, or(b) an appointment by, or an order of, a court.(2) The following provisions apply in relation to the deputy of the account holder as they apply in relation to the account holder—(a) paragraph 1(7);(b) paragraph 3(5)(b) and (c);(c) paragraph 3(9);(d) paragraph 3(9A);(e) paragraph 5;(f) paragraph 11(1); (g) paragraph 12;(h) paragraph 13(3), (6) and (8)(b);(i) paragraph 14(3);(j) paragraph 15(3);(k) paragraph 16(2);(l) paragraph 18;(m) paragraph 19.(3) Paragraph 13(7)(a) and (b) applies in relation to the deputy of the account holder instead of the account holder.”Member's explanatory statement
This new paragraph ensures that new Schedule 3ZA to Social Security Administration Act 1992 operates effectively where a person acts on behalf of an account holder by virtue of a power of attorney or an appointment by, or an order of, a court.
Lord Davies of Brixton (Lab)
We have an issue on this proposal to remove driving licences from people who fail to pay their debts to the DWP. We effectively had a debate on the issue at Second Reading, and I am sure that there will be a debate on this at Report. The purpose of having another prolonged debate at this stage, when situations and positions are so clear, is limited. Although there are clear arguments about effectiveness, and it was advanced that the experience of the child maintenance system, where such a power exists already, indicates the success of the policy, the problem is that we do not have a clear counter to that. We know what we know: very few driving licences are deducted or abolished because of action by the Child Maintenance Service. Is that because it is an effective policy and everyone complies, or because it is rarely used because it is ineffective? We simply do not know. The proponents of the proposal here will say that that demonstrates the policy’s effectiveness, but I think it is reasonable to continue to express doubts about that. However, that is a separate issue.
My objection, fundamentally, is about the philosophy of what is being achieved here and about the nature of state power. I am sure we all agree that the state should have the power to decide who is safe to drive on the public roads. I have no problem with that; that is the responsibility that we as a community have entrusted to the state. The issue is whether that right should be used for other purposes. Is the fact that you can or cannot have a driving licence related to other factors? In my view, it should not be used for other factors; that is an overextension of state power, which is the fundamental reason why I oppose this part of the Bill and why I am suggesting that the clause, and consequently the schedule, should not be passed. This is an issue of principle, as I have explained, and I am sure that we will return to it on Report—so enough said.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Lord, Lord Davies of Brixton, and speak to this stand part notice, also signed by the noble Lord, Lord Sikka. The noble Lord, Lord Davies of Brixton, set out the question of principle about whether we allow access. I will make a couple of practical arguments and one point of comparison.
I start with the practical arguments. I was just thinking back to the second-ever vote that the Green Party won in either House of Parliament, which was an amendment in the name of my noble friend Lady Jones of Moulsecoomb calling for a review of rural bus services. Losing your driving licence might be an inconvenience, if you live in London—in most parts—but, if you live in the depths of the countryside, it effectively totally traps you in a situation where huge practical disadvantage will happen in your life.
It is worth noting that Clause 92 allows the disqualification of a licence for two years. I acknowledge that this is by a court—it is different to what we were talking about before—but I also acknowledge that the option of jail is available here. I am not quite sure how a court will make a judgment—if it is a really serious offence, where will you place those issues? My comparative point is to note that, back in 2023, the then national lead for the police for fatal crash investigations, Andy Cox, made some very strongly worded statements about people who get 12 points on their licence. He said that too many people were using exceptional circumstances to get out of losing their licence. In fact, one in five people who end up with more than 12 points on their licence in three years succeed in pleading exceptional hardship and therefore do not their licence and can continue to drive.
The really important point here is that, as the national lead for fatal crash investigations pointed out, some people in that situation go on to kill on the roads. We have a situation where people who are driving dangerously and illegally are able to keep their licences, which is quite a contrast to people who have not been accused of doing anything wrong on the roads but may potentially be suffering from that penalty.
Again, we are talking about something that is potentially hitting recipients of benefits, and I rather suspect that a lot of those people who manage to plead exceptional hardship in court, and keep driving with 12 points on their licence, have a fair amount of privilege in their life and can employ fairly expensive lawyers to keep driving. There is a real imbalance there, which should be cause for concern to the Committee.
Viscount Younger of Leckie (Con)
My Lords, I oppose the proposition that Clause 92 and Schedule 6 should not stand part of the Bill. Clause 92 provides for disqualification from driving to be a sanction that is available in the most serious and persistent cases of benefit fraud, where a recoverable amount remains unpaid despite all reasonable efforts at recovery.
I do not wish to step on the Minister’s toes by speaking in defence of this provision. Perhaps I should anticipate another speech that she will be making—we will probably be in broad agreement. However, we must be clear that this is not about punishing people arbitrarily but about ensuring that there is an effective deterrent against repeated and deliberate non-compliance with efforts to recover public money. We have a precedent for this, as we noted at Second Reading. The same mechanism exists in the child maintenance enforcement regime. We have learned from that experience that deterrents do work—or we think that they work. I will return to that in a moment. Fewer than five driving licences were seized under those powers, because the power to impose a disqualification was sufficient to prompt compliance. It was a last resort that rarely had to be used, precisely because it was effective in changing behaviour before reaching that point.
In the spirit of trying to be helpful to the Government here, what evidence can be produced that the threat of taking away a driving licence is indeed a deterrent? One statistic could be the number of cases of non-payment from those people whom we know have the ability to repay unlawfully gained moneys but who resolutely refuse to do so and are on the cusp of having their licences taken away. To ascertain the numbers that may have miraculously fallen at this point is one way of defining whether the deterrent has worked. One might assume that any numerical drop in non-paying numbers immediately before a licence withdrawal defines that deterrent. I listened carefully to the remarks from the noble Baroness, Lady Bennett. Perhaps the fall could be seen to be larger in rural areas, as the deterrent would be more significant there than in urban areas. The Minister may be able to enlighten us on this or add that to a letter that hopefully will be coming our way.
This is about proportionate enforcement. Clause 92 does not create a routine sanction. It does not apply automatically. It is not triggered for minor mistakes or for those who are acting in good faith. It exists as a targeted and time-limited measure, for use only when all other routes have been exhausted and when the liable person is wilfully refusing to repay money, which—let us not forget—has been obtained unlawfully.
Some may argue that disqualification from driving is a severe consequence—the noble Baroness, Lady Bennett, has made that point. However, we must weigh that against the seriousness of fraud against the public purse. This money could have been used to fund front-line services, support the vulnerable or maintain trust in the welfare system. Those who persistently abuse the system must know that there are consequences for their actions, which will be followed through. This clause provides one such consequence that is proportionate but effective.
We have been consistent throughout Committee in saying that enforcement must be fair but credible. If the consequence of not repaying fraudulently obtained benefits is no more than a polite letter and no meaningful follow-up, then we send entirely the wrong message. Clause 92 helps to restore that balance. It does not criminalise poverty or target vulnerable people. It sets out a power that, in exceptional cases, can be used to bring about compliance when other tools have failed. I therefore oppose the removal of Clause 92 and Schedule 6 and urge colleagues to do the same. I am interested to hear the remarks of the Minister.
Baroness Sherlock (Lab)
My Lords, I thank noble Lords and thank the noble Viscount for doing some of my job for me, for which I am always grateful.
I want to try to explain why the Government are doing this. Clause 92 inserts new Section 80C into the Social Security Administration Act 1992 to enact the “disqualification from driving” power. Schedule 6 inserts new Schedule 3ZB into the 1992 Act, containing the substantive provisions of the “disqualification from driving” power introduced in Clause 92. The introduction of this allows the DWP to apply to a court to disqualify a person temporarily from driving if they persistently and deliberately fail to repay their debt. It is therefore essential to boost the DWP’s ability to recover public money.
However, it is worth being clear that this is a power to deal with a small subset of debtors who are persistently frustrating the recovery practice—I will come back to that in a moment. Preventing an evasive debtor from driving unless they repay is within the Government’s control in a way that they cannot circumvent. While it will be used as a last resort, it is an additional and effective tool in cases where debtors simply refuse and evade repayment. As I think I said at Second Reading, the latest results from the UK transport survey showed that 74% of adults have a driving licence. Debtors are unlikely to want to be inconvenienced by being unable to drive. They can avoid disqualification and any other enforcement action by making voluntary repayments.
Schedule 6 sets out when the power may be used and how it will operate, including rules on the operation of suspended and immediate disqualification orders, variation and revocation of orders, as well as the grounds on which an order may be appealed. Appeals may be made to the appropriate court on points of law, including the terms of an order or the court’s decision to make, not make, vary or revoke an order. In accordance with Clause 90, this power will be used as a last resort and, as outlined in Schedule 6, only for the most serious cases for debts with at least £1,000 outstanding. The aim is to deter debtors from deliberately choosing to evade repayment, such as by moving their capital out of reach when they have the means to pay.
Only when all other attempts at recovery have failed, including the new direct deduction order, will DWP be able to apply to the court for a suspended disqualification order. If the court agrees that the debtor had the means to pay but did not repay without a reasonable excuse, it will order the debtor to make what it assesses to be affordable repayments. The debtor can avoid being disqualified by making these repayments set by the court. Only if the debtor does not comply with the court’s repayment terms can the DWP apply for an immediate DWP disqualification order. It is at that point—again, only if the court agrees—that the debtor can be disqualified from holding a licence for up to two years.
Before either a suspended or immediate order can be made, the debtor will have an opportunity to be heard by the court. It is important to note that the court cannot make either a suspended or an immediate order if it considers that the debtor has an essential need for their licence, such as that they need to drive as part of their job or to care for a dependant.
The role of the court throughout this process is an important safeguard, which we have included to ensure a balance between taking robust action against those who deliberately evade recovery and preventing undue hardship. We recognise that stopping someone from driving is a serious step, so my department has built in several other safeguards to give debtors every opportunity to avoid that. For example, missing a single instalment will not normally result in an immediate disqualification order and, even where someone becomes disqualified, they can get the right to drive back when they start making their repayments and the court considers that repayments are likely to continue. But persistent evaders who have the means to pay their debts will no longer be able to evade paying.
In response to my noble friend, I think he is challenging me as to why this is a good and effective means of doing it. I accept that it is unusual, but there is a small subset of the most evasive debtors: people who could pay and just will not. They might be, for example, debtors who transferred their money into cryptocurrency, or fraudsters who moved their capital to offshore accounts that the DWP cannot easily get at because they are outside our jurisdictions. It simply does not seem appropriate. If we cannot do anything else, there is one thing the state can do: suspend or remove their driving licence to pull them to the table. There may be some people for whom this is the only thing that works, so we want to keep it there in our armoury.
The power has been used effectively by the Child Maintenance Service. I do not know whether we can go into enough detail in the CMS debt management data to find out whether I can answer the questions that the noble Viscount is asking, but I will have a look at that. But certainly the Child Maintenance Service believes that this is an effective tool for bringing people to the table when nothing else works.
The Bill includes strong safeguards. The power will not and cannot be used where someone cannot afford to pay. The Bill is clear in paragraph 1(4) of new Schedule 3ZB, in Schedule 6, that the court must be satisfied that the person failed to pay “without reasonable excuse”. That clearly excludes cases where they do not have the means to pay the debt. Of course, the debt must also be of a certain value. Clause 90 says that it must not be “reasonably possible” to recover via other methods, including direct deduction orders, and that this can be used only after they have been given reasonable opportunities to pay.
Viscount Younger of Leckie (Con)
I appreciate the noble Baroness’s very full response. This is more of a probing question. We have obviously been debating and talking about driving licences. The ultimate punishment or sanction is prison, but we obviously do not want to exercise that if possible, both for the individual and because we do not want to clog up prisons. But what other sanctions could there be? We have been talking about driving licences, but I know that, in the Child Maintenance Service, taking away passports was raised as a possible sanction. What thoughts does the noble Baroness have on that front?
Baroness Sherlock (Lab)
We are not proposing removal of passports on this occasion.
Lord Davies of Brixton (Lab)
I thank noble Lords who took part in the debate. I thank the noble Baroness, Lady Bennett, for her support. I am disappointed that the Conservatives, the party of individual freedom, did not see fit to support my argument.
There are a couple of issues that could be helpful to the debate which is likely to take place on Report. If it is possible to get further statistics from the Child Maintenance Service about people who were threatened and then gave in—I cannot totally see how that is possible—that would be good.
There is also the issue of the discriminatory nature of the punishment between different groups of people. As I have made clear, that is a practical objection, which is not why I am against this measure at heart. It would be useful in debate to know more of that practical question. As I have read the paper so far, it is about people who require a driving licence to carry out the functions of their job. However, my noble friend the Minister said that it would cover people who need to drive to work. Perhaps she could interrupt me if she is able to clarify.
Baroness Sherlock (Lab)
It is up to the court to determine if someone has an essential need for a licence. We have deliberately drawn it broadly so that the court can make that determination. Examples were given of somebody who needed a car to go to work or maybe had essential caring responsibilities. In response to the noble Baroness, Lady Bennett, I raised the possibility of somebody who lived somewhere so remote that there was no public transport. Again, that would be a case that they would make to the court. The position is deliberately drawn broadly to allow the court to make that determination.
Lord Davies of Brixton (Lab)
Thank you; that is helpful. I withdraw my objection to Clause 92 standing part of the Bill.
Member's explanatory statement
This amendment and another to clause 105 in the name of Viscount Younger would compel final codes of practice to be laid before Parliament, before the provisions in the Act could come into force.
Viscount Younger of Leckie (Con)
My Lords, we now turn to what I believe is the last group for today. I will speak to Amendments 122A, 122B and 122C, which largely concern the code of practice and matters relating to the codes of practice as set out in Clause 93.
These amendments are not only sensible but vital if we are to ensure that the framework for exercising these powers is both transparent and democratically accountable. Fundamentally, our amendments recognise that the code of practice is not a peripheral procedural matter; it is a foundational document. It will guide how sensitive and powerful enforcement powers are exercised. It will shape the expectations placed upon investigators, the protections afforded to individuals and the standards against which public officials will be held. In short, it will govern the operational culture of the entire system.
Amendment 122A would ensure that the final version of the code is laid before Parliament before these new provisions in the Bill can come into force. I feel it is important at this stage to reiterate that we are being asked to grant significant new powers, including powers of entry, search, seizure and direct deduction, and it is therefore wholly appropriate that Parliament sees, and has the opportunity to scrutinise, the final version of the rules that will help determine how those powers are used. We welcome that, and thank the Minister—I perhaps should have said this earlier—for making good on her promise to release draft versions of the code to noble Lords ahead of Committee, although we feel that it is even more important that we have a binding assurance from the Government that a final version of these documents will be made available to Members of both Houses ahead of the Act coming into force.
Amendment 122B would further strengthen this by requiring a public consultation on the draft code before it is issued. I have a feeling that the Minister may have confirmed this earlier; nevertheless, I raise it now and await her reply. Consultation is not just a box-ticking exercise, it is a vital part of democratic policy-making, especially in areas where the state will be interacting with vulnerable people, seizing property or accessing private data. Consultation allows front-line practitioners, civil society groups and those with lived experience to offer their perspective and to flag where guidance may be unclear, safeguards may be weak and unintended consequences might arise. We must not underestimate the value of that input.
We have said many times that our primary goal and function throughout Committee is ensuring that the Government come out with a Bill that is ready to go. We want a public authorities Act that combats fraud effectively and deters criminality in the future but also works for the people who will undertake and be subject to its provisions. It really is important that we get all these balances right and that we incorporate these review mechanisms now, so that the Bill is ready to go once it becomes law.
Finally, Amendment 122C would ensure that any subsequent change to the code is not only laid before Parliament but subject to parliamentary review. This is a particularly important point, because it speaks to the danger of incremental change, where guidance can be revised behind closed doors, without scrutiny or proper debate. These codes are not trivial; they are the operational blueprint of this entire regime. If we in this House and the other place are to fulfil our role as scrutineers and custodians of civil liberties, we must retain the ability to oversee how these powers evolve.
If the Government’s position is that these powers will be used proportionately, lawfully and with care, they should have no difficulty in agreeing that the rules that govern them should be open to parliamentary oversight, public consultation and full transparency. That is not a constraint; it is a safeguard for both the public and the state.
As I have said before, we are of course all agreed on the need to tackle fraud, but we must also agree on the need to exercise these new powers with clarity, accountability and respect for the values that underpin our legal and constitutional system. We believe that these amendments would help to ensure that. I urge the Minister to accept them, or, at the very least, to recognise their merit and return with similar provisions that enshrine the same principle.
Parliament broadly supports what the Government are doing, and if the Government intend to exercise these powers responsibly, with adequate safeguards, consideration and the principle of proportionality that I and my noble friend Lady Finn have returned to several times in Committee, I assume and hope that Parliament will have no problem supporting what the Government do in their code of practice. However, parliamentary oversight, to ensure that the Government are tied to these important principles not just now but in the future, is an important safeguard which we feel must be made explicit in the Bill.
In conclusion, these are reasonable, proportionate and constructive proposals. They would not hinder the Bill’s effectiveness; rather, they would make the Bill more effective once it comes into force. I see that, miraculously, there is no one else wishing to support—I am sure it is no reflection on my remarks—but I genuinely look forward to the Minister’s closing remarks. I beg to move.
Baroness Sherlock (Lab)
My Lords, in the absence of a crowd of supporters, I thank the noble Viscount for setting out his amendment so clearly. I hope that my remarks will reassure him and give him the confidence that he does not need to press ahead with these amendments.
Amendments 122A, 122B, 122C and 129 seek to compel the Secretary of State to conduct a public consultation on the DWP’s code of practice for the debt recovery powers, to lay a final code before Parliament before the powers in this Bill come into force and to subject any changes to the code to parliamentary review. Amendment 128 would require the Minister for the Cabinet Office to lay a code of practice before Parliament on the administration of penalties before the PSFA’s powers under Part 1 can come into force.
The provision made for a code of practice in Clause 93 is important for the DWP’s debt recovery measures, providing transparency and reassurance on how the debt recovery powers will be operationalised. However, we think these amendments duplicate existing provisions in the Bill and therefore are not necessary.
The DWP’s code of practice on debt recovery powers will complement the provisions in the Bill, setting out guidance and key principles, including how and when the new recovery powers will be used. Extensive collaboration continues to take place with a wide range of stakeholders, including the Money and Pension Service, the charity Surviving Economic Abuse and the finance sector, to develop this code of practice. The purpose of this engagement is to ensure the code provides relevant operational guidance on matters such as vulnerability and to give clarity for debtors subject to the powers and their representatives. We are grateful to all organisations for their helpful collaboration and guidance.
Drafts of all the DWP codes of practice have been made available for review by noble Lords upon request. While there is no requirement on us to provide drafts of these codes alongside the legislation or even to legislate to produce one, we understand their importance and want to be transparent with Parliament. This is also why new Section 80D(6), as inserted by Clause 93, already requires us to carry out a formal public consultation before the first code is published and to lay each issued version before Parliament. In response to the noble Viscount’s questions, the Government are consulting on all codes. Both the DWP and the PSFA will publish them before first use.
We have already said in terms of the debt, this will be done before the new debt powers in Part 2 of this Bill are used. However, I should note that Amendment 129 as drafted would prevent all the other provisions in the Bill that are not subject to the debt code of practice coming into force until the debt code was issued. I am not sure if that was the intention of the noble Viscount, but it would obviously be disproportionate and unnecessary.
It is also not clear from the amendment what parliamentary review of future changes to the code would entail but I am going to assume the noble Viscount would like Parliament to have the opportunity to challenge or scrutinise the code each time it is updated. If so, that would not be necessary or proportionate. The code will be revised periodically to keep it up to date with operational considerations and processes, and the Bill makes provision for each issued revision to be laid before Parliament.
The noble Viscount mentioned the importance of Parliament seeing the rules. It is worth understanding that the debt code of practice does not contain statutory provisions, nor does it place obligations on others. Rather, it sets out how the department will operationalise the new recovery powers. The Bill clearly sets out in considerable detail the legal obligations introduced. Other substantive provisions set out in regulations will, of course, be subject to normal opportunities for parliamentary scrutiny. I am also unaware of any precedent for revisions to a code of this nature to be considered by Parliament or subject to its approval.
Amendment 128 takes us back to the PSFA in Part 1 of the Bill. Noble Lords will recall that we have already discussed Clause 62, which makes provision for the PSFA to produce a code of practice that will explain how and why civil penalties will be calculated and imposed to ensure the powers are used transparently and reasonably. This clause stands part of the Bill.
A draft of the PSFA code of practice has also been provided to noble Lords, as was promised in Committee in the other place. As I mentioned, the PSFA intends to consult widely on the code of practice prior to the publication of the finalised draft, which will be before the first use of the penalty powers. Indeed, Clause 62(4) states:
“The Minister must lay the code of practice, or any reissued code of practice, before Parliament”.
I have outlined that the provisions already in the Bill go above and beyond what is required for legislation of this kind because we recognise the importance of the code of practice and have done so in the spirit of transparency. With those assurances, I urge the noble Viscount to withdraw his amendment.
Viscount Younger of Leckie (Con)
My Lords, the codes of practice are documents which we feel, from how the Bill is drafted, are being treated as ancillary—I set out my stall on that earlier—when, in truth, they are central. These codes will be the compass by which investigators navigate the use of intrusive and sensitive powers, they will be the primary reference point for those administering the system and those subject to it, and they will set the standards by which the system is judged.
Having said that, I have noted the Minister’s responses and reassurances, particularly on the publication of the codes, if I heard her correctly, so I appreciate all that. I will look further at the purpose behind our Amendment 129, and I take her point on that. I am not in the business of wrecking the Bill—I know she did not say that—and will reflect before Report on that amendment and the responses the Minister has given to the other amendments. I appreciate all her responses. With that, I beg leave to withdraw my amendment.