Wednesday 25th June 2025
(1 day, 22 hours ago)
Grand CommitteePublic Authorities (Fraud, Error and Recovery) Bill 2024-26 View all Public Authorities (Fraud, Error and Recovery) Bill 2024-26 Debates 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.