Public Authorities (Fraud, Error and Recovery) Bill
(1 day, 8 hours ago)
Lords ChamberRead Hansard Text Read Debate Ministerial Extracts
16:22 - Division on Amendment 2 - Ayes: 200 / Noes: 194 - Amendment 2 agreed.
17:59 - Division on Amendment 21 - Ayes: 139 / Noes: 186 - Amendment 21 disagreed.
Baroness Kramer
“(e) creating a whistleblowing reporting channel for cases of fraud against public authorities which—(i) guarantees confidentiality and anonymity if requested,(ii) includes clear definitions of who is a whistleblower in cases of fraud against public authorities,(iii) provides a process to update whistleblowers in cases of fraud against public authorities, and(iv) protects whistleblowers in cases of fraud against public authorities from retaliation and detriment.”
Baroness Kramer (LD)
My Lords, I have tabled Amendments 1 and 20 in this group to raise again the issue of whistleblowing. Sadly, I do not think it is necessary to repeat in any detail why the existing whistleblowing framework is completely inadequate. We have to look only at the scandals of the Post Office, contaminated blood, Letby, the Hillsborough cover-up, the fake costings for HS2, the mis-selling of PPI, mini-bonds and now car finance. Those are just a few of the very real outrages and tragedies that could have been nipped in the bud if we had had a system that, in actuality and effectively, protected whistleblowers who spoke out and ensured the investigation of their disclosures. Most importantly, the victims of these many scandals would have been spared, but also the taxpayer would have been protected from huge compensation payouts.
I believe strongly that the Public Sector Fraud Authority, sitting as it does under the Cabinet Office and with its investigative powers, is very well placed to be the hub of a proper framework—I would call it an office of the whistleblower, but that is not a precious issue—and at least to act as a hub for whistleblowing protection and investigation across the whole of the public sector. It could provide proper guidance to government departments and agencies, set standards for proper whistleblowing protection and redress, ensure investigation when appropriate, and provide the consistency, clarity and ease of use that are essential to effectiveness.
I realise that the amendments I have tabled are inadequate to this task, and what I seek from the Government is a conclusion that there is real progress in this direction. The Government have increasingly recognised the importance of the issue, and the Minister herself—I have to give her real credit—has commendably talked about the importance of whistleblowing. Collectively, the House has made progress in the Employment Rights Bill on limiting the abuse of non-disclosure agreements and in the Armed Forces Commissioner Act in developing a whistleblowing framework for the commissioner which will possibly extend to all of defence.
In the context of fraud and whistleblowing, we currently await the second part of the Fisher review of disclosure and this Bill contains provisions for an independent review of the Minister’s functions, so there are tools available to the Government. For this Government, as for any other, there is always the risk that, without change, new scandals will occur and those would then be laid directly at their door. Nobody wants that. This is an area where all parties should be co-operating and not competing. I look forward to hearing the Minister’s reply and hope to conclude that progress is seriously being made.
Baroness Finn (Con)
My Lords, I begin by thanking both Ministers opposite, and noble Lords from across the House, for their engagement with us on the substance of this Bill since we entered Committee. We have had some very valuable discussions and I welcome that the Government have approached this with a view to compromise and listening to noble Lords from across the House on the Bill. I hope we can conclude Report in the same spirit and I look forward to the discussions we shall have in these sessions.
We on these Benches welcome that we are starting Report by discussing an important issue, and I thank the noble Baroness, Lady Kramer, for bringing forward these two amendments. Both amendments speak to a common principle that individuals who come forward with evidence of wrongdoing should be able to do so safely, confidently and with the assurance that their actions will lead to meaningful action rather than personal detriment.
The decision to do the right thing and report wrongdoing is far from an easy one for anyone to make. To come forward with evidence of fraud is often to put oneself at considerable risk of losing employment, damaging one’s reputation or straining relationships. If we expect people to do the right thing then it is incumbent on us to ensure that the system does right by them in return. Whistleblowers are very often the first line of defence against fraud. They can identify irregularities and provide information that would otherwise remain hidden—information that the Public Sector Fraud Authority will need in order to act swiftly and effectively. That is why it is so important that individuals know that they will be listened to, supported and protected. Only then will they feel able to come forward and only then will we be able to tackle fraud before it escalates.
In addition to the channels set out in Amendment 1, this principle links directly to the second amendment before us, Amendment 20, which proposes the establishment of an office of the whistleblower for public sector fraud. The purpose of such an office would be to oversee and safeguard the process of whistleblowing, to ensure that concerns are acted on and that those who raise them are not left exposed or ignored. We understand that the noble Baroness has likely brought this proposal to emphasise the importance of the issue rather than to suggest this particular structure as the final answer. We shall, of course, be very interested to hear how the Minister will meet the challenge set on this question.
As the noble Baroness, Lady Kramer, set out, whistleblowers can operate effectively only when they know that their efforts will not be in vain, that the authorities will respond and that the risks they take will not go unacknowledged. In the specific context of this Bill, that raises a very practical question that relates to the amendment we have brought to Clause 2. If a whistleblower were to bring actionable evidence of fraud to light, would the Public Sector Fraud Authority be able to act on it directly, or would it still have to wait for a formal invitation from the relevant department or authority before beginning an investigation? Our reading of the Bill suggests the latter, and if that is the case then the system risks leaving whistleblowers stranded, even when they have provided precisely the sort of information that this legislation is intended to uncover.
Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)
My Lords, so we begin Report. I thank all noble Lords for their genuinely constructive engagement on this important Bill, as we seriously engage in efforts to protect taxpayers’ money—something I know every Member of your Lordships’ House cares vehemently about. I especially thank the Opposition Front Benches, who have given much of their time to make sure this works. I hope that they will see, through the responses from the Government today, that we have tried to listen and make as many amendments as possible to make sure this Bill is effective and will work in practice.
Once again, I warmly welcome the amendments tabled by the noble Baroness, Lady Kramer, on the important issue of whistleblowing, as I did in Committee. The noble Baroness is committed and diligent in this area. As ever, she has proved to be tenacious and determined, but with due cause, ensuring that we can prevent some of the appalling scandals she named.
It is clear that protections for whistleblowing are a key aspect of counterfraud investigations. A 2023 National Audit Office report into whistleblowing showed that a total of 41 organisations employing civil servants recorded and reported 939 concerns over a three-year period. Fraud was consistently the most common category, representing 39.9% of all concerns across the three years. It is only right that the PSFA closely considers its role in this landscape. As such, I am pleased to have an opportunity to place on record our efforts since your Lordships last debated the issue. We are listening to your Lordships’ House. We are doing everything we can to ensure that both this legislation and the work of the PSFA are as effective and impactful as they can be.
Officials across government have come together to understand what can be done in the public sector fraud whistleblowing space. In particular, the PSFA Bill team has worked with the other Bill teams, where this important issue has also been raised recently in your Lordships’ House, to ensure that departments work in partnership to deliver a coherent response.
As a result, I am pleased to give the noble Baroness, Lady Kramer, a series of commitments this Government can make. First, to ensure that this important issue continues to be taken forward effectively, officials will continue co-ordinating across the whistleblowing landscape to identify areas where the PSFA can add value, such as joint guidance documents on public sector fraud. The PSFA will also seek to work closely with officials in the SFO and HMRC. HMRC has deployed a whistleblower incentivisation scheme and the SFO has developed proposals for a similar scheme. The PSFA and the SFO have already agreed to identify areas where they can support each other’s work on whistle- blowing. Once Jonathan Fisher’s review is published, the PSFA will work with other government departments to consider, and where possible adopt, his whistleblower recommendations.
I am also pleased to announce that as soon as is practicable—likely to be within 12 months of the powers being first used—the Government will ask the independent reviewer, who will be appointed under Clause 65 of this Bill, to conduct a review of the PSFA’s use of whistleblowing in cases of public sector fraud.
The PSFA will also endeavour to publish updates on whistleblowing in public sector fraud in its annual reports, where appropriate. Those reports will be used as an opportunity to communicate routes available for whistleblowers on public sector fraud. Also, once this Bill becomes law, PSFA will seek a place on the DBT prescribed persons list under the Public Interest Disclosure Act 1998.
I look forward to future engagement on this issue. Given the commitments I have outlined and the necessity of maintaining the focus of this legislation, I hope that the noble Baroness, Lady Kramer, will not press her amendments.
Baroness Kramer (LD)
My Lords, the Minister has described some real momentum. As I say, we would always want more; when we put down amendments, we have an ideal target in mind, but this is an area where progress matters. I thank the Minister and I will indeed withdraw my amendment.
Baroness Finn
“whether at the request of that public authority or, where the Minister considers it necessary in the public interest, on the Minister’s own initiative.”Member's explanatory statement
This would enable the Minister for the Cabinet Office, through the PSFA, to undertake proactive investigations or recovery actions in respect of suspected fraud against a public authority, without requiring a prior request from that authority, while preserving the authority’s own fraud functions under subsection (5).
Baroness Finn (Con)
My Lords, I began by thanking the noble Baronesses opposite for their constructive engagement with us on the Bill. Our meetings with the Ministers have been genuinely useful, and I welcome the spirit of good faith and collaboration with which the Minister has approached our discussions. Tackling fraud against the public purse is a shared ambition across this House and it is in that constructive spirit that we have brought forward the amendments in this group.
As drafted, Clause 2 provides that the Minister may
“investigate or take enforcement action in respect of suspected fraud against another public authority … only at the request of that public authority”.
In other words, the Public Sector Fraud Authority can act only if invited to do so; indeed, that was the word used by the noble Baroness in Committee. This is an extraordinary limitation to place on an organisation whose very purpose is to root out fraud across government. The Bill seeks to confer considerable powers of investigation and enforcement upon the Cabinet Office, yet the exercise of these powers is ultimately hamstrung by the restriction in Clause 2. The effect is to create a PSFA that is at once empowered and yet toothless: an authority that has wide-ranging powers on paper but which cannot use them unless those potentially under scrutiny choose to permit it.
It cannot be right that a public authority suspected of fraud has the power to decide whether to be investigated. To rely on departments or agencies to invite in the PSFA to look at themselves or their work is, frankly, far too weak. There are obvious disincentives: the reputational risk, the potential embarrassment and the possibility of drawing attention to failings that might otherwise have gone unnoticed. As my noble friend Lord Maude of Horsham notably observed in Committee, assuming that departments will voluntarily expose their own shortcomings is a triumph of hope over experience.
If we are serious about protecting the taxpayer, the PSFA must be able to act proactively—to initiate investigations where credible concerns arise and not to wait passively for a polite invitation that may never come. I have been in government and I know how these things work. We cannot rely on good will; we must be both forthright and proactive in tackling this issue, which is an offence against every single person in this country.
Fraud against the taxpayer is not a matter to be settled or not by an informal phone call between Permanent Secretaries, as we were told could currently happen. Such a situation must be backed up by a statutory mechanism that ensures action is taken swiftly and decisively. Of course, such discussions can and should happen in the first instance, but there needs to be a way to compel such action if necessary. Our amendment would therefore enable the Minister for the Cabinet Office, through the PSFA, to undertake proactive investigations or recovery actions in respect of suspected fraud against a public authority on their own initiative, where it is in the public interest to do so. It would preserve the authority’s own internal fraud functions under subsection (5) but would finally give the PSFA the power it needs to do its job properly.
This amendment is not about centralising control or creating a culture of interference. It is about closing a glaring loophole, one that every complacent official and every fraudster will otherwise see coming a mile off. It is about ensuring that when the PSFA becomes aware of fraud that awareness marks the beginning of an investigation and not the point at which the system grinds to a halt while waiting for consent to be granted.
Alongside this, and in the same spirit of strengthening accountability, we have tabled a second amendment—one which we raised in Committee and return to today—as we believe the Government should take this opportunity to outline how they are working to create a counterfraud duty and culture across public authorities. Amendment 19 would require that, where a recovery made under Clause 10 exceeded £50,000,
“the public authority on whose behalf the amount was recovered must conduct an internal review into the circumstances giving rise to that recovery”
and provide that review to the Minister within three months of completion.
This is a practical, proportionate proposal to ensure that public bodies learn from their mistakes. It seeks to prevent the creation of a pass-the-buck-to-the-PSFA mentality. The PSFA cannot and should not become a convenient dumping ground for departmental failures. Fraud and error often originate within the systems and processes of individual departments. Responsibility for preventing and detecting it must therefore remain with them. I hope, in her remarks on this Amendment 19, that the Minister can set out to this House how this culture is being created, and how authorities are going to be held accountable for the mess in their own houses without simply leaning on the PSFA.
This is a big opportunity for us to get this right. If we want to tackle fraud, then we cannot create a mighty but toothless body with expansive powers on paper but which has no power to go after fraud when it should. We risk creating a situation in which the PSFA is legally unable to tackle fraud, and where it goes unchecked when it is known about but not formally referred to the PSFA. The noble Baroness may stand up and say that she expects many cases to be referred to the PSFA, but this misses the central point, which is that the PSFA must be able to tackle all fraud of which it becomes aware and can have a role in stopping. It is not a question of which cases are referred to the PSFA, but which cases will be missed because the PSFA was not invited to go in after it. This is simply not good enough. We must be really clear now in giving the PSFA the power to tackle wrongdoing proactively. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, I speak very briefly in support of Amendment 2. Before I start, I would like to echo the words of the noble Baroness, Lady Finn, about the exemplary engagement on this Bill, which has been extremely constructive. I am very grateful to both noble Baronesses for that.
The Bill as it is currently written creates a range of powers for the Minister of the Cabinet Office to investigate fraud against public authorities and to recover amounts, but the Minister can use those powers only in relation to other public authorities if requested to do so by that public authority. That does seem somewhat perverse. It is not uncommon for those who manage organisations to hide the fact that they have been subject to fraud, because they could be criticised for allowing that fraud. We could have a situation where the Minister has reason to believe that a public authority has been the victim of fraud—perhaps a whistleblower has tipped them off, as in the last group—but, despite having reasonable suspicion, the Minister would not be able to use these new powers. I do not see how that makes sense. If these new powers are to be effective in reducing fraud, it must make sense that the Minister can use them in any situation reasonably considered to be in the public interest, not only when the public authority requests them.
Baroness Fox of Buckley (Non-Afl)
My Lords, I find myself in a difficult position: I am not usually one to want to give more power to Ministers of State or bodies like the PSFA. However, I am very sensitive to contemporary events in which local authorities have not necessarily always been open about things happening on their watch. I am thinking of things like the grooming-gangs scandal: things happen, and they are covered up. I therefore want to be in a position where the correct authorities can intervene if they suspect something wrong is happening. In that sense, I do with some trepidation support Amendment 2.
However, I also want to emphasise the importance of the second amendment in this group, Amendment 19, because one of the things that is absolutely crucial to building trust—which I know the Minister has emphasised this Bill can do—is that we have transparency, that we are able to see wrongdoing and that it is open for the public to find out what is happening locally. Otherwise, a culture of secrecy could well continue. These amendments are sensible in engendering real trust in the process moving forward.
Lord Palmer of Childs Hill (LD)
My Lords, our principle generally is that the lowest level of government should make those decisions. To put it up to central government would be overloading central government. It would be like “Yes Minister” with a row of civil servants—bless them—dealing with something that has been sent up from the local authority or public body which did not need to be sent up. Although I have sympathy with what the amendments are trying to do, the idea of loading central government with issues that can be dealt with responsibly at a lower level seems to be against what we are trying to do in this House. So, respectfully, we will not be supporting these two amendments.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, fraud against the public sector takes money away from vital public services, enriches those who seek to attack the Government and damages the integrity of the state. This Bill is part of the Government’s response to this urgent and challenging problem. The Bill gives functions and powers to the Minister for the Cabinet Office, which will be exercised by authorised officers and investigators based in the Public Sector Fraud Authority.
I hope it will assist your Lordships’ House if I remind noble Lords of the PSFA’s mission. The PSFA is the UK Government’s centre of expertise for the management of fraud and associated error against the public sector. It leads the Government’s counterfraud function, which brings together the approximately 16,000 people who work in government departments and public bodies to fight fraud. The standards and guidance that the function creates, led by the PSFA, must be used in central government and can be used more widely in the public sector and beyond to improve the robustness of how we understand, prevent and respond to fraud.
These two amendments would make significant changes to the Government’s intention in bringing forward this Bill on how the PSFA works. They would change the impact of the Bill and are unnecessary to be put into law, so we cannot accept them.
On Amendment 2, the noble Baroness, Lady Finn, offered a version of this amendment in Grand Committee that simply deleted line 10, which I resisted because removing that line without putting something else in its place would have created uncertainty and potentially conflicted with the preservation of public authorities’ own fraud functions in Clause 2(5). It is clear this draft has been influenced by the debate on the original, and I thank the noble Baroness for it; however, the new version goes further and dramatically changes the impact of the Bill.
Amendment 2 would create an extensive new power for the Minister for the Cabinet Office and change the relationship between the PSFA and the public authorities it works with. The Government’s intention is that the PSFA offers a public sector fraud service, collaborating with public authorities which have been attacked by fraudsters to take action to investigate, enforce and recover the funds. Collaboration is vital in the Government’s fight against fraud. Noble Lords will be aware that last month the Government announced that, in the previous 12 months since April 2024, over £480 million was prevented from going into fraudsters’ pockets. Driving this kind of cross-government collaboration is what the PSFA is for. We can do more, which is why we need the Bill, but the PSFA is already working.
I firmly believe that the normal mechanisms of government can ensure that counterfraud co-operation happens, as it is already happening in the work of the current pilot unit in PSFA. In issues of national importance, there will also be some moral and public pressure for something to be done, so I believe it is not necessary for the Minister to have a directive power in law to investigate on their own initiative. We truly believe that the collaborative approach outlined in the Bill combined with the normal operations of government will ensure the PSFA has the access it needs.
The definition of public authority in Clause 71 is broad and this amendment would affect different public authorities differently. For central government departments, it would mean that a Minister below Secretary of State level could direct and override Secretaries of State. For local authorities, the amendment would mean a new power for central government to take over a responsibility without their consent. The Local Government Act 1999 already has powers to this effect, and we do not want to create a new one specifically for fraud.
Amendment 19 would require departments to conduct an internal review if, following a PSFA investigation, it is confirmed that they have lost more than £50,000 to overpayment or fraud. All losses on this scale should already be investigated and reported on. There are established audit, assurance and reporting processes for this. In addition, the facts of this case would already have been established by the PSFA, and learning taken from it would be shared across government to aid the prevention of fraud. This amendment would create an extra burden on the department and replicate the work of the PSFA. It is unnecessary, as its core aim will be addressed through other activities. Therefore, after my very persuasive arguments, I encourage the noble Baroness, Lady Finn, to withdraw her amendments.
Baroness Finn (Con)
I thank the Minister for her incredibly persuasive arguments. We are clear that this is an unacceptable settlement if the PSFA can act only if invited by the very body that may have failed. That is not a system of scrutiny; it is an invitation to inertia. It cannot be right that officials in a department where fraud is suspected should have the power to decide whether to be investigated. The DWP does not wait to be invited before it goes after benefits cheats, and there is no reason why public officials should be held to a different standard.
The Government are proposing to create an authority with wide powers on paper but no real agency in practice—a watchdog told to bark only when asked. In short, it should be called out for what it is: a farce. Fraud against the taxpayer is not a matter for polite phone calls between Permanent Secretaries; it demands action that is statutory, swift and unambiguous. When credible evidence of fraud arises, that must be the starting gun for any investigation, not the moment the system looks away.
Our amendment gives the PSFA the ability to act proactively, with proper safeguards, wherever fraud occurs. If we are serious about protecting public money, we cannot design a system that waits to be asked before doing its job. I am not satisfied that the response from the Government meets the conditions set out, and therefore I want to test the opinion of the House.
Baroness Finn
“(4A) Where an information notice names or describes a person in accordance with this section, the notice must include a clear statement that the person specified is not necessarily guilty of the suspected fraud.”Member's explanatory statement
This amendment would ensure information notices issued to banks and financial institutions include a clear statement that the person to whom the information relates is not necessarily guilty of suspected fraud.
Baroness Finn (Con)
My Lords, I will speak to Amendments 3 and 4, tabled in my name and that of my noble friend Lord Younger of Leckie. Both concern the information-gathering and information-sharing powers in this Bill, and both are designed to ensure that those powers are exercised with fairness, clarity and restraint.
The first amendment to Clause 3 would require that any information notice issued to a bank or financial institution includes a clear statement that the person named or described in that notice is not necessarily guilty of the suspected fraud. This is an important safeguard. As noble Lords will recall, Clause 3 enables investigators to issue information notices to banks when there is a reasonable suspicion of fraud. That is a proper and necessary power which is central to the operation of the Bill, and we do, of course, accept that. However, it is equally vital that the use of that power does not inadvertently imply culpability on the part of the individual concerned. Particularly in the early stages of implementation, when departments and financial institutions are still adjusting to these new processes, there is a real risk that an information notice could be misinterpreted as a formal accusation of wrongdoing. A simple, clear statement of non-culpability within the notice would prevent that risk. It would protect innocent individuals from reputational harm, ensure that they are not subject to debanking or any action from the side of the bank, ensure transparency in the use of investigatory powers, and demonstrate that the Government are determined to act fairly as well as firmly in the pursuit of fraud.
This is a small addition, but one with significant practical effect. What may seem a technicality in legislation can have a tangible effect on people in the real world—those who will be affected by the words we use and that we approve in this Bill. Clarity on this question would be a small change for the Government, but it could avoid risking some serious and damaging circumstances for those outside this place who have done nothing wrong, but who may nevertheless be presumed to have done so without the sort of clarifications we are suggesting. We therefore hope the Government will look closely at how such a clarification might be built into the final version of the Bill.
The second amendment, to Clause 5, concerns the disclosure of information once it has been gathered. As the Bill stands, Clause 5 allows the Minister to disclose information to another person for the purposes of exercising the powers in the Bill, but it gives no definition of or limitation as to who that other person might be. That is an extraordinarily broad formulation. Our amendment would simply require the Secretary of State to specify, by regulations, the persons or categories of persons to whom such information may be disclosed. This would provide a transparent and accountable framework that allows for flexibility but still ensures that Parliament has visibility of how and where sensitive data can be shared.
We are not seeking to obstruct the legitimate flow of information between public bodies. On the contrary, we recognise that effective information exchange is essential to combat fraud across the public sector, but we must ensure that these powers are not open-ended. We trust the present Minister to use them responsibly, but as noble Lords have often reminded us, we are legislating for future Ministers and Governments, and the safeguards we build in now will protect individuals for years to come.
These are not amendments on which we intend to divide the House. We bring them back to ensure that these important issues are not lost as the Bill progresses, that the Government meet the challenge they raise, and that appropriate assurances or refinements are provided before the Bill leaves this House. Both proposals are constructive. One protects individuals from being unfairly stigmatised when information about them is sought; the other ensures that personal information, once obtained, can be shared only within clear, regulated limits. Together, they speak to a single principle: that strong powers must always be matched by strong safeguards. We therefore hope that the Minister will take these concerns in that spirit and consider how best to address them as the Bill moves forward. We look forward to hearing her response. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, I rise briefly to add my support for Amendment 3, which would require any information notice to include a statement that the notice does not imply that the person named is guilty of fraud. This is important because a bank that believes a person is guilty of fraud must take actions that may include closing or freezing accounts, issuing suspicious activity reports, and so on.
This has been an area of much discussion as the Bill has gone through Committee, and I know that the financial services industry has raised a number of concerns. Many of those concerns have been dealt with by amendments tabled by the Minister, but this amendment would put it beyond doubt. It adds no onerous obligations, so I urge the Minister to accept it.
Baroness Fox of Buckley (Non-Afl)
My Lords, throughout Committee, concerns were raised about the amount of information-gathering power the state will have, particularly the relationship between banks and the information that could be gained. I cannot emphasise enough the plea that these amendments make, particularly Amendment 3: that it is important when such power is being accrued that we do not forget very important principles such as “innocent until proven guilty”.
There is no doubt that if you have information that suggests that somebody could be guilty of fraud, that does not make them guilty. Unless there is a constant reminder that they are being investigated or information is being gathered, they will potentially be subject not only to stigmatised attitudes but to debanking measures and discriminatory actions, as we have just heard.
I really hope the Minister can reassure us that we are not going to be glib about the impact of the powers the Bill accrues to the state, which could destroy innocent people’s lives. That might not be the Government’s intention, but it could be an unintended consequence. Therefore, this amendment is very important, and we need guidance or reassurance, or to hear the ways in which this could be dealt with.
Lord Palmer of Childs Hill (LD)
My Lords, we are in a world of information-sharing and information-gathering, and this is where that starts and stops. Amendment 3 would ensure that
“information notices issued to banks and financial institutions include a clear statement that the person to whom the information relates is not necessarily guilty of suspected fraud”.
Amendment 4
“would limit the persons to whom information may be disclosed by requiring the Secretary of State to specify eligible persons in regulations”.
In our view, these are sensible safeguards and regulations. On that basis, we on these Benches broadly support the amendments.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I appreciate the noble Baroness, Lady Finn, bringing forward these amendments again. I find myself agreeing with the concerns outlined by the noble Baroness and other Members of your Lordships’ House. I reassure all noble Lords that we are already undertaking this work, and that the safeguards are in place.
On Amendment 3 and the issue raised by the noble Baroness, Lady Fox, we will be including specific information in guidance for authorised officers to ensure that information notices advise the information-holder that the investigation is ongoing, and no inference should be drawn that the individual specified on the notice is guilty. This amendment is therefore not required as it is already our intention to do this, and it will be achieved in guidance.
Turning to Amendment 4, I again assure the noble Baroness, Lady Finn, and other Members of your Lordships’ House that I agree with the intention of the amendment, which is why there are already safeguards in the Bill that restrict the disclosure of information. Clause 5 details that:
“Information can only be disclosed for the purpose of exercising the core functions”.
This restricts to whom and for what purpose the information can be disclosed. However, also including a prescriptive list of persons who can have information disclosed to them would further restrict the intent of the clause and the effectiveness of its scope in exercising the core functions detailed in Clause 1 of the Bill.
I hope to further reassure noble Lords that the PSFA’s enforcement unit would also have memoranda of understanding for each person it would be sharing information with, as well as maintaining a data protection impact assessment to ensure that this information is shared and held in adherence to data protection legislation. We have taken every step to ensure that there are appropriate safeguards in the disclosure of information, while balancing this with making the powers relevant and effective for an investigation. I hope that this reassures noble Lords and that the noble Baroness will withdraw her amendment.
Baroness Finn (Con)
My Lords, I am grateful to the Minister for her response, to the noble Lord, Lord Palmer, for his support, and to the noble Lord, Lord Vaux, and the noble Baroness, Lady Fox, for their support for Amendment 3.
These are, on the face of it, small and technical matters, but they go to the heart of how the Bill will operate in practice. The smallest drafting choices, the subtlest omissions, can have real consequences for individuals caught up in these processes. We cannot allow the system to treat people as wrongdoers when nothing has been proven or concluded. The language of the Bill must make that absolutely clear. What may seem a flippant technicality in this Chamber can, in the real world, determine whether someone is wrongly stigmatised, denied banking services or placed under suspicion without cause. That is why these details matter, because fairness, clarity and restraint are not afterthoughts; they are the foundation of public confidence in the powers that this Bill creates. I thank the Minister for her engagement and hope that, as the Bill progresses, these small but important safeguards might be reflected in the final drafting. On that note, I beg leave to withdraw the amendment.
Baroness Finn
“(5) Within six months of the day on which this section comes into force, the Minister must prepare and publish guidance setting out the process by which authorised investigators are appointed in accordance with section 7(3).”Member’s explanatory statement
This amendment clause would require the Minister to set out the process by which authorised investigators are appointed in statutory guidance.
Baroness Finn (Con)
My Lords, this amendment, tabled in my name and that of my noble friend Lord Younger of Leckie, seeks to insert a new subsection in Clause 7 requiring the Minister to publish, within six months of Royal Assent, statutory guidance setting out the process by which authorised investigators are appointed under this part of the Bill.
Clause 7, as it stands, is one of the most powerful provisions in the Bill. It confers on authorised investigators a suite of powers drawn from the Police and Criminal Evidence Act 1984—powers that are usually reserved for police officers. These include the ability to apply for search warrants, seize property and access computerised information. These are not trivial powers; they allow the state to enter homes and businesses, seize personal possessions and compel the disclosure of data. Yet, as currently drafted, Clause 7 defines an authorised investigator as
“an individual who is authorised by the Minister to exercise the powers conferred by this section”.
It is, in effect, circular: an authorised person is whoever the Minister authorises. There is no clarity, no set of criteria and no publicly available process to explain how these individuals are selected, trained or held accountable.
If we are to grant powers of this magnitude—powers that mirror those of the police—Parliament and the public are entitled to know who will wield them and on what basis. The police are subject to detailed recruitment standards, codes of ethics and training requirements, all of which are set out in published documents such as the National Recruitment Standards-Eligibility Criteria for Police Recruitment and Consistent Recruitment Practices. Those standards exist for a reason: because with greater power comes greater responsibility. We should expect nothing less from the Public Sector Fraud Authority or from any civil servants who are to exercise PACE powers on behalf of the Minister. The public will rightly expect the same degree of rigour, impartiality and transparency that they would from a police officer acting under similar authority.
The amendment therefore asks for something very modest: a requirement that the process by which such authorisations are made be set out in guidance published within six months of this provision coming into force. That guidance would need to explain who is eligible, how individuals are assessed, what qualifications or training they require and what oversight mechanisms apply. In doing so, we would provide reassurance to Parliament and the public that these powers will not be exercised lightly and that those who wield them will be suitably qualified, appropriately vetted and properly accountable. We are, after all, creating a precedent here. These powers will not exist in isolation; they could endure for decades, exercised by future officials in future departments. It is therefore essential that we get the governance right at the outset and that we put clear expectations on the record and, ideally, in the Bill.
This is an area where guidance can make a real difference. It would strengthen the operational credibility of the new regime, improve transparency and protect the reputation of the PSFA. It would also provide Ministers with a clear framework to defend and justify their appointments in future. I hope, therefore, that the Government will look carefully at this proposal and, if they cannot accept it today, that they will bring back their own amendment at Third Reading to ensure that the appointment and oversight of authorised investigators meet the same professional standards and ethical safeguards that we rightly demand of our police. I beg to move.
Baroness Fox of Buckley (Non-Afl)
My Lords, after Committee this was one area of the Bill that I literally had nightmares about. I think a really dangerous precedent is being set here. I am rather disappointed that the noble Baroness, Lady Finn, will not divide the House on this, because this is one area where inadvertently handing over police powers to civil servants could completely backfire and cause real, serious problems.
I was talking recently to a group of people about some of the problems within the police force. Even though we have vetting and training, there are serious and well-documented problems of corruption, in some instances, or misbehaviour—I hardly need rehearse them. These police officers are charged with enormous privilege to act on behalf of the state. Therefore, we know that even when we have such safeguards in place, people with power can abuse that power.
In this instance, this Bill, however well meaning, intends to give similar powers to people when we have no idea what their training will be, whether they will be vetted and what qualifications there will be. Therefore, this amendment is entirely appropriate. It is rather modest, but it does at least seek to provide some safeguards for what is happening here, which is that the state is setting up a civilian population to act as police officers. To be honest, the public do not know about it. It is shocking. Whenever I have told anyone that this came out in Committee and that it is contained in the Bill, it is the thing that has shocked people the most. I hope not just that we can receive reassurances but that concrete responses are brought forward by the Minister as to what can be done to ensure that this does not go very badly wrong and backfire.
Lord Palmer of Childs Hill (LD)
My Lords, clearly, it would be best if something such as who these investigators are was in the Bill so that we have more detail. What we are being offered by these amendments is to require the Minister to outline in statutory guidance the process for appointing authorised investigators. This is by no means as good as having it in the Bill, but I believe that statutory guidance has to be carefully considered, because who is appointed to investigate should be decided not just with a flick of a pen but with more careful consideration. We on these Benches are broadly supportive of this amendment, because we believe it would add additional transparency to the appointment process.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, it is essential that any individual authorised to use the powers enshrined in the Police and Criminal Evidence Act 1984 is competent to discharge their duties under the law. We are committed to ensuring that this is the case for the authorised investigators created by the Bill. However, for legislation to require the publication of guidance on an internal appointment process is not only unnecessary but inconsistent with established practice in this area across other government departments. Government departments with similar investigative powers—for example, HMRC, the Home Office, Defra and even the Food Standards Agency—are not required to and do not publish statutory guidance on this point.
Let me reassure your Lordships’ House that Ministers take their responsibilities seriously. It is for this reason, as we have consistently affirmed, that no investigator will be authorised to exercise these powers until the Minister is entirely satisfied that they possess the requisite training and expertise. This training will cover: proficiency in relevant aspects of PACE, particularly the legal framework and applications of Section 8 and Section 9, and PACE codes of practice as far as they apply to the PSFA’s powers; proper procedures for applying for and lawfully executing warrants, including entry, search, seizure and handling digital information; and proper handling and retention of and access to evidence. Crucially, they will be trained in safeguards for individual rights during investigations and warrant execution, and in the proper handling and retention of and access to evidence.
Training will be provided by the College of Policing by means of a series of bespoke training courses, the first of which has commenced this week. Individuals will be required to demonstrate proficiency in all relevant facets of PACE before the Minister will authorise them as authorised investigators, with particular emphasis on the legal framework alongside its accompanying codes of practice. These authorised investigators will be members of the government counterfraud profession, and they will be required to meet the appropriate professional standards.
Therefore, I urge noble Lords to consider that the existing framework, bolstered by our commitment to rigorous training, already provides necessary assurances and that an amendment to codify this is unnecessary. I reassure and remind noble Lords that these powers cannot be exercised in any specific case unless a court has granted a warrant—the ultimate safeguard. I hope that this explanation reassures noble Lords and that the noble Baroness will therefore withdraw her amendment.
Baroness Finn (Con)
My Lords, we will not seek to divide the House on this amendment. I am sorry to disappoint the noble Baroness, Lady Fox, for whose support I am very grateful, but we will look in later groupings today at safeguards on the PACE powers granted to civil servants.
The amendment speaks to an important point, one that we have raised repeatedly throughout the passage of this Bill. We are granting serious powers to officials under this legislation—so-called authorised investigators, who will be able to exercise these powers, some of which are drawn from the Police and Criminal Evidence Act. We can never forget that these are not minor administrative tools; they are police-level powers to search, seize and compel. If we are to trust such authority to civil servants then Parliament and the public deserve full oversight of how those powers are used and, quite simply, by whom. That is the question this amendment asks and it is one that must be answered clearly before this framework is implemented.
The process for authorising investigators, the standards they must meet and the accountability mechanisms that apply are not small matters of drafting detail; they go to the heart of public confidence in this regime. We appreciate that the Minister can tell us now how this process will work, but some sort of formal, documented statement setting this out would be immensely helpful as a way of us having this beyond the Minister’s word. While I trust the noble Baroness completely, we do not know if we can always trust her successor or her successor after that. Setting this out would allow everyone to know the standards and process and would ensure that these are being met, not only now but in the future.
In short, I am grateful to the Minister for her response, but I hope the Government will reflect seriously on this issue and possibly come back with something at Third Reading. The powers in Clause 7 are significant and so too must be the safeguards that accompany them. On that basis, I beg leave to withdraw the amendment.
Member's explanatory statement
This amendment, and my amendment to clause 9, page 7, lines 38 and 39, would remove provision that is no longer needed because of the general data protection override in section 183A of the Data Protection Act 2018, which was inserted by section 106(2) of the Data (Use and Access) Act 2025 and came into force on 20 August 2025.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I was on my honeymoon last week, which is why our amendments were tabled in the name of the noble Baroness, Lady Sherlock. This time last week I was in Santorini—I told the noble Baroness I would get that in—and I think I have done awfully well to get to group 5.
The provisions of a Bill that recently passed in your Lordships’ House have a direct impact on how we draft and interpret legislation across government, including this Bill. As a result, we no longer need to state in the Public Authorities (Fraud, Error and Recovery) Bill that provisions authorising the processing of information do not override existing legislation. This is now a routine requirement across all government Bills. We are therefore making a series of amendments across Part 1 and Part 2 of the Bill to ensure that the rules and safeguards set out in the new Act are properly implemented throughout the Bill. The amendments to the PAFER Bill are a necessary step to align with this new legislation, bringing legal clarity and consistency across all legislation. These are technical but required amendments. I beg to move.
Baroness Finn (Con)
My Lords, we understand that these amendments are technical in nature, designed to ensure that the Bill is properly aligned with the changes made by the Data (Use and Access) Act 2025. We therefore appreciate that these are tidying amendments that do not alter the policy substance of the clause but simply ensure legal coherence. I thank the Minister for bringing them forward—and I hope she enjoyed her honeymoon.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, my honeymoon was fabulous.
I am grateful for the support of the House on these consequential amendments, following the Data (Use and Access) Act coming into force. I hope that noble Lords will provide their support to these amendments.
Baroness Sherlock
Member's explanatory statement
See the explanatory statement for my amendment to clause 9, page 7, lines 32 to 34.
Baroness Sherlock
Member's explanatory statement
See the explanatory statement for my amendment to clause 19, page 12, line 32.
The Minister of State, Department of Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I cannot help thinking that if one of us was in Santorini and the other one was here tabling amendments, I may have got the raw end of the deal—although it is possible that my noble friend’s husband might not agree with that.
The government amendments in this group contain a series of further safeguards for individuals who are subject to the new debt recovery powers in Parts 1 and 2 of the Bill, specifically in relation to direct deduction orders to recover from bank accounts and deductions from earnings orders to deduct from PAYE salaries in Part 1. Before I address them, I add my thanks to noble Lords from around the House for what has been a constructive consideration of the Bill so far. I hope that these government amendments will help to add to that sentiment.
Government Amendments 8, 9, 93 and 94 seek to clarify the obligations of financial institutions not to disclose that they have received an information notice under the new power enabling direct deduction orders—DDOs. Under the debt recovery provisions in Parts 1 and 2, financial institutions are prohibited from informing account holders that the PSFA or the DWP has requested account information. This is to militate against attempts to avoid the powers—for example, by moving money out of the account before a DDO is issued.
These amendments clarify that the prohibition ends three months after the notice is given to the bank, or sooner if a pre-deduction notice is subsequently given. Three months is long enough for the DWP or the PSFA to have assessed a debtor’s ability to repay and the affordability of repayments, and to issue a first notice as appropriate. These amendments remove any doubt as to how long the prohibition lasts, ensuring the requirement is proportionate and not overly burdensome.
It is only during the time that account information is being considered that the prohibition applies. Once the information has been properly assessed and any pre-deduction notice given to the bank, account holders can be told that the information was requested. Where a DDO is proposed, the account holder, and a joint account holder if applicable, will be notified in writing by the PSFA or the DWP of their right to make representations regarding the proposed deductions before any are taken.
Government Amendments 12, 13, 98 and 100 are in response to our further engagement with the financial services sector. They seek to clarify the responsibilities of the PSFA, the DWP and financial institutions with specific regard to legal deputies who might be managing the affairs of a debtor subject to a DDO. Since Committee, we have continued to benefit from the insight provided by the financial services sector, and we want to provide as much clarity as possible on respective roles and responsibilities. These amendments will help ensure that the implementation of these measures is straightforward and that the Government can recoup money lost to fraud and error in an efficient and effective manner. Government Amendments 12 and 13 simplify the drafting of Clause 37 and remove redundant provisions. Amendments 97 and 98 do the same thing for Schedule 5.
Government Amendments 14 and 99 are consequential to Amendments 11 and 96, limiting the suspension of DDOs, which I will come to in a moment. They mean that, where an order has been suspended for two years and is revoked, the PSFA and the DWP will now have an obligation to inform a deputy, if there is one in place.
Government Amendments 15 and 100 create a requirement for a bank to provide the PSFA and the DWP with the details of any deputy acting on behalf of an account holder, where these are known to the bank, when certain notices or orders are issued to them. This was implicit before but, at the request of the banks, we are making it explicit that this includes the name and address of the deputy.
Collectively, these amendments are important to ensure that roles and responsibilities are clear for the minority of cases where there is a legal deputy in place when the PSFA or the DWP uses DDOs.
Government Amendments 11, 18, 96 and 99 address an issue raised at Second Reading by lots of noble Lords. I am happy to be able to respond to those comments here. The Government are committed to being fair and transparent in the use of these new powers, and it is completely reasonable that, where an individual has an order in place and it is suspended, it should not be suspended indefinitely. We are therefore introducing new provisions under government Amendments 11, 18, 96 and 99 to remove that uncertainty for those individuals so that they know exactly where they stand and to ensure that an order cannot be restarted if the suspension goes on for more than two years. I am grateful to noble Lords for having raised this.
It was never the Government’s intention for a suspension to be indefinite, but it is right to offer greater clarity and certainty in the law itself. The PSFA or the DWP will inform debtors of any changes to their payment arrangements. If an order is suspended, the debtor will be notified. In cases where a DDO is revoked, both the account holder and the relevant bank will receive written confirmation from the PSFA or the DWP. That reflects our continued commitment to supporting individuals in managing their debt and introduces important safeguards to ensure transparency and fairness.
I turn to the final government amendments in this group, Amendments 10 and 95. I again thank those in the financial services sector who have worked closely with us in the development of this Bill. We are committed to working collaboratively with the sector to ensure that the Bill enables banks to meet their legislative obligations while minimising burdens where possible.
The cost of meeting obligations under the Bill has been an area of interest to the House, and noble Lords have made the point in earlier debates that those helping to enforce the law must be supported. I agree with them on this. Therefore, these government amendments remove from Clause 26 and Schedule 5 the requirements on financial institutions to prevent account holders closing their accounts upon receipt of a pre-deduction notice or DDO from the PSFA or the DWP.
The original policy intent was to reduce opportunities for debtors to frustrate the DDO process, and that remains our objective. However, this requirement would not stop debtors who are persistent in evading repayment simply redirecting their funds to another account. We know from our engagement with the financial sector that complying with the requirement to prevent account closures risks creating a significant burden for some banks.
We reflected on that feedback and the fact that both parts of the Bill already contain further safeguards against bad actors who might wish to take action to frustrate a DDO. In Part 1, Clause 27 places a restriction on the account holder not to do anything that might frustrate the effect of the pre-deduction notice or the order. If they do, they become liable to pay a civil penalty. In Part 2, Schedule 6 contains provisions for the DWP to apply to the court for a suspended disqualification from driving order in the most serious cases where, for example, someone persistently fails to pay by frustrating a DDO.
Removing the requirement for financial institutions to prevent account closure upon receipt of a pre-deduction notice or DDO avoids placing new, costly burdens on some banks while still enabling the DWP and the PSFA to address effectively the small number of debtors who deliberately and persistently evade repaying taxpayers’ money. I beg to move.
Baroness Kramer (LD)
My Lords, obviously we are pleased to see these amendments. We want to look much more closely to understand how far they go to meet some of the concerns expressed by my noble friend Lord Palmer earlier in the process of the Bill. I have an amendment in a future group that reflects our deep concern, particularly at the absence of transparency. The very thought that the original legislation essentially meant that people would have no idea that account statements had been handed over to the investigators—not only during the period when the investigation might be active but they would be permanently kept uninformed that their information had been handed over—felt to us like a complete breach of the rights of the individual, fundamentally breaking the bond of trust between a banking institution and its account holders.
We will want to look closely at these amendments and their implications. We may return to this issue at a later stage, but at this point we are glad that the Government are taking steps to deal with some of the features that most concerned us.
Lord Davies of Brixton (Lab)
My Lords, I expressed considerable concern about this part of the Bill in Committee. I have studied the amendments that have been put forward and, like the noble Baroness who has spoken on behalf of the Liberal Democrats, will reserve my position, since we can come back to this. The amendments, which we have been told came forward last week, seem like an improvement, but the question is whether they are sufficient. It is easy to spot what is there; the most difficult part of the process is spotting what is not, and I need a bit more time to achieve that. So, although I am in no sense speaking against the amendments, I am reserving my position on the overall effect of this clause and the objections that I raised in Committee. I will say a bit more on the next group of amendments, which are more germane.
Baroness Finn (Con)
My Lords, the amendments in this group all relate to the duties placed on banks and other financial institutions in connection with debt recovery and information notices. Broadly speaking, the amendments represent a constructive and welcome set of clarifications from the Government. They respond directly to a number of issues raised in Committee about transparency, fairness and proportionality in the way that these powers are exercised.
On the Government’s amendments limiting the period during which a bank is prohibited from informing an account holder that it has received an information notice, we on these Benches see that as a largely sensible change. The amendment means that after three months or sooner, if a further notice is received under Section 21, the prohibition on informing the account holder will lapse. That is an improvement. It ensures that investigations cannot drift indefinitely in silence, while still protecting the integrity of live inquiries.
However, we would welcome confirmation from the Minister that when no action has been taken within that period then the department considers the case effectively closed or dormant. If a person is made aware that an information notice has been issued in respect of their account and they were in fact involved in some sort of fraud, then being made aware of this fact would compromise an investigation if it was ongoing, as that person could take action to avoid scrutiny. If the Minister could therefore clarify for us that, after this three-month period, a live investigation would not be affected through the sharing of this information then we would be content with this proposal.
I turn to the Government’s amendments removing the requirement for banks to prevent an account being closed outright where a deduction order has been made. This achieves the same policy outcome as the original drafting, ensuring that sufficient funds remain available for recovery, but it does so in a more proportionate and administratively practical way. The bank will still have to preserve the specified sum, but without being forced into the position of acting as an involuntary custodian for the rest of the customer’s affairs. That strikes the right balance between protecting public money and minimising unnecessary interference in personal banking arrangements.
We warmly welcome the amendment addressing suspended direct deduction orders. This is one that we pressed strongly in Committee, and we are very pleased that the Government have responded and taken us up on our suggestion, which was also supported by many other noble Lords, such as the noble Lord, Lord Palmer of Childs Hill, and the noble Baroness, Lady Fox of Buckley.
As drafted originally, the Bill would have allowed an order to be suspended indefinitely, potentially leaving someone in limbo for years, uncertain whether it would ever be reactivated. That was clearly unsatisfactory. The new provision rightly ensures that, if an order has been suspended for more than two years, it must be treated as revoked and all relevant parties notified. That is a fair and proportionate solution that restores clarity and finality for the individual concerned.
Baroness Sherlock (Lab)
My Lords, I am grateful to the noble Baroness, Lady Finn, for that constructive response, and to other noble Lords for giving us the benefit of the doubt here. I can assure my noble friend Lord Davies that the government amendments were tabled a week ago, as is the requirement. If it gives him any encouragement, they have been seen by UK Finance, which welcomed them. We were seeking to respond to concerns that were raised.
I will pick up on a couple of points made by noble Lords. I can tell the noble Baroness, Lady Kramer, that we are talking here specifically about action in relation to the recovering of debt from debtors. I want to reassure the House that this does not mean that a DWP debtor will not be aware that action might be taken. Clause 91 of the Bill requires the debtor to be told in advance, in writing, that bank statements may be obtained without further warning to assess whether money can be taken directly from their bank account via a DDO if they do not contact DWP to discuss repayment.
In response to other queries, these measures do not stop a bank telling a debtor if no action is proposed. In response to the noble Baroness, Lady Finn, we believe that three months is enough notice for DWP and PSFA to reach a conclusion, either that we issue a pre-deduction notice or a DDO, if we need it. We believe that that is sufficient, which is why that number is there.
Somebody—and I am afraid I have already forgotten who; do not be my age—asked what happens if an order has been suspended for two years. It cannot be restarted: it will be legally revoked. Where appropriate, the process can be started again from the beginning. For direct deduction orders, that would mean fresh bank statements had to be obtained to carry out a current affordability assessment rather than relying on ones from the beginning, and all relevant correspondence would have to be sent out again.
Where a suspended order is subsequently revoked by DWP or PSFA, a notice will be sent to the debtor and any other relevant parties, informing them that this has happened. If an order were revoked and DWP or PSFA were no longer pursuing an action, in the case of a DDO, DWP or PSFA would notify the account holder and the bank in writing, setting out that the order has been revoked. Debtors will also be told if their order has been suspended and an equivalent process applies to PSFA in respect of deduction from earnings orders.
The noble Baroness, Lady Finn, made an important point about deputies being in place. That is absolutely right. I can reassure her that DWP has clear processes for flagging vulnerability and making sure that that is taken into account. But obviously, in a sense, once the deputy is in place they have the obligations that would originally have been there for the debtor, so the debt has to be pursued in the appropriate way.
I hope that has answered the questions noble Lords have raised. Again, I hope it shows the Government’s willingness to engage and to be constructive in amending the Bill where possible. I hope that those clarifications will reassure noble Lords that the protections in the Bill operate as intended and that we will work effectively with our banking partners. As such, I hope noble Lords will support these amendments.
Baroness Sherlock
“(9A) The prohibition in subsection (9) ceases to apply—(a) at the end of the period of 3 months beginning with the day on which the account information notice or general information notice is given to the bank, or(b) if earlier, when the bank is given a notice under section 21(1).”Member’s explanatory statement
This amendment would limit how long the prohibition on a bank telling an account holder that it had received an information notice in respect of the holder’s account has effect.
Baroness Sherlock
(a) secure that no transaction takes place (except for any deduction under the order) which would result in the amount in the account falling below the specified amount, or, if the amount in the account is already below that amount, falling any further, or(b) take the action set out in subsection (2).”Member’s explanatory statement
This amendment would remove the requirement for banks to prevent the closure of an account when given a notice under clause 21(1) in relation to a proposed direct deduction order, or a direct deduction order under section 17.
Baroness Sherlock
“(3) Where the requirement is suspended for a continuous period of two years the regular direct deduction order in question is to be treated as having been revoked at the end of that period.(4) Where a regular direct deduction order is treated as having been revoked by virtue of subsection (3), the Minister must give notice to that effect to—(a) the bank to which the order was given,(b) the liable person, and(c) in the case of a joint account, each of the other account holders. (5) Subsection (3) does not prevent the Minister making a further regular direct deduction order in respect of the same liable person and account.”Member’s explanatory statement
This amendment means that where the requirement to make deductions and payments under a regular direct deduction order made by the Minister is suspended for a continuous period of two years it may not be re-started.
Baroness Sherlock
Member’s explanatory statement
This amendment is consequential on my amendment to clause 37, page 22, line 30.
Member’s explanatory statement
This amendment removes an unnecessary provision.
Member’s explanatory statement
This amendment is consequential on my amendment to clause 32, page 19, line 31.
“(4) Subsection (5) applies where—(a) a bank is given—(i) an account information notice or a general information notice under section 19,(ii) a notice under section 21,(iii) a further information notice under section 31, or(iv) a direct deduction order, and(b) a deputy acts on behalf of an account holder of an account to which the notice or order relates.(5) The bank must give the Minister the name and correspondence address that it holds for that deputy (unless the bank has already provided that information).”Member’s explanatory statement
This amendment would require a bank to give the Minister details of any deputy acting on behalf of an account holder to which certain notices or a direct deduction order relate.
Baroness Finn
“(6A) The outcome of consultations conducted under subsection (6) must be laid before Parliament before any regulations under that section may come into force.”Member’s explanatory statement
This amendment would ensure that the outcome of consultations required by section 38(6) is laid before Parliament prior to the implementation of regulations.
Baroness Finn (Con)
My Lords, the amendments in this group focus on one central theme: ensuring proper scrutiny, transparency and accountability in how the powers granted under this Bill are exercised. These amendments are about ensuring that, as we build a powerful new framework for tackling public sector fraud, we also build in the right checks, balances and reporting duties, not only for Ministers but for the departments, banks and public bodies that will have to deliver the regime day to day.
The first of these amendments to Clause 38 would require that the outcome of any consultations held before making regulations on deduction orders be laid before Parliament before those regulations come into force. That is a reasonable step. Clause 38 already obliges Ministers to consult such persons as they consider appropriate, but, as things stand, there is no requirement to publish the results of explain how the Government have responded to the views expressed. This amendment simply ensures that Parliament can see the evidence and feedback underpinning any regulatory change. Banks and financial institutions will be at the forefront of implementing these powers: their experience and operational insight will be vital. Parliament should therefore be able to see what those institutions have said, what works, what does not, and what the likely impact of proposed changes will be before new rules take effect.
Alongside that sits our amendment requiring that any future regulations under Clause 38 be accompanied by an impact assessment covering the projected costs and effects on banks and financial institutions. As we have said throughout the passage of the Bill, the partnership with the financial sector must be one of collaboration, not imposition. An impact assessment is not an obstacle: it is a basic instrument of good governance. It ensures that decisions are informed by evidence, that burdens are proportionate and that Ministers, Parliament and industry all have a shared understanding of the practical consequences of what is being proposed.
Our third amendment, after Clause 64, would take that principle one step further. It would require the Minister, within 12 months of these provisions coming into force, to conduct a review of the administrative and compliance costs imposed on the banks by this Bill, including staffing, reporting and opportunity costs. This is about fairness and being realistic. We are asking the financial services sector to play a major operational role in this new system: to respond to information notices, process deduction orders and help recover public funds. That is legitimate for the purposes of the Bill, on which all noble Lords broadly agree, but it comes with a cost. Parliament has a right to know what that cost is and whether it is being managed proportionately and effectively.
At a higher level of oversight, our next two amendments would introduce annual reporting requirements. The first would require the Minister to publish an annual report on the use of the powers conferred under Part 1 of the Bill, setting out how often they have been used, in what context and with what results. This is about shining a light on the operation of the regime itself, how these new powers are working in practice, how effective they are in recovering public money and how proportionately they are being exercised.
The second would require an annual report on the overall extent of public sector fraud: a single, authoritative assessment of the scale and nature of the problem across government. The Public Accounts Committee, the National Audit Office and indeed the Government themselves have all acknowledged that the current picture is fragmented and inconsistent. Without reliable data, it is impossible to design effective policy, measure progress or target resources where they are most needed. An annual report would help close that gap, improve accountability and ensure that both Parliament and the public can see whether we are making headway against the problem.
None of these proposals is designed to delay or frustrate the Bill. We are not seeking to divide the House on these amendments. What we seek is assurance that the Government recognise the importance of these issues, that the machinery of the Bill will operate transparently, that Parliament will be kept informed and that those upon whom these duties fall will be treated fairly and proportionately. They are therefore constructive and common-sense measures. They would strengthen parliamentary oversight, improve the evidence base for future policy and help ensure that the strong powers created by the Bill are matched by equally strong safeguards and accountability.
I hope, therefore, that the Minister will reflect on these proposals in that spirit and that, as the Bill proceeds, the Government will bring forward their own commitments to embed these principles of transparency, consultation and reporting in the way that these powers are used. I beg to move.
Lord Davies of Brixton (Lab)
I have already taken the opportunity to reiterate the concerns I have expressed about parts of the Bill. I find myself in the somewhat against-the-grain position of agreeing with much of what was said on behalf of the Opposition. Amendment 26 seems to me entirely reasonable, given the level of concern that has been expressed about the extension of government powers over matters that are essentially personal. Although we are not going to vote on these amendments, I very much hope that my noble friend the Minister, in replying to the debate, will give a clear assurance that these workings—which, it has to be said, go into new areas of state control—will be looked at on a continuing basis and not automatically become a matter of routine.
Lord Vaux of Harrowden (CB)
My Lords, I am generally supportive of all the amendments in this group, but particularly Amendments 17 and 22. This Bill, and particularly this part of it, impose a range of onerous obligations on the banks and other financial institutions that are affected by it and that have to respond to information notices and so on. But nowhere does the Bill provide for how the costs that arise from those obligations should be dealt with, or for how to ensure that they are proportionate.
Amendments 17 and 22 simply add an important level of review and transparency, which would allow us to ensure that the costs being imposed on those institutions are reasonable and proportionate. The very fact of the requirement to prepare impact assessments and to review the costs of compliance should of itself ensure that these costs are kept at the forefront of the Government’s mind when using these powers. I therefore hope that the noble Baroness will accept Amendments 17 and 22.
On Amendment 26, I absolutely support the concept. I am just slightly confused as to whether it is not already covered by Clause 65, but I support the principle.
Lord Palmer of Childs Hill (LD)
My Lords, there are five of these amendments. Amendment 16
“would ensure that the outcome of consultations required by section 38(6) is laid before Parliament prior to the implementation of regulations”.
Amendment 17 is a proposed new clause, which
“would ensure that changes to the means through which deduction orders are processed are accompanied by an impact assessment”.
Amendment 22, which has received some support, would require the Minister to undertake yet another review:
“of the costs banks are having imposed upon them by Part 1 within 12 months of the new section coming into effect”.
Amendment 26 proposes another new clause, requiring the Minister
“to publish an annual report on the use of powers conferred by Part 1 of the Bill, which must then be laid before Parliament”.
Finally, Amendment 112 is a proposed new clause that
“would require the Minister to publish an annual report on the estimated scale of fraud against public authorities”,
which must again be laid before Parliament.
This would be a pretty hefty tome of things to be laid before Parliament: a book all by itself. Whereas these Benches welcome measures that increase clarity and accountability, is it necessary to prescribe additional reporting mechanisms beyond those already established? Our focus has been on ensuring that existing processes are effectively implemented. I do not think they always are, but that is what has to be done. They also have to be accessible, rather than imposing formal obligations that may not meaningfully enhance anything. I understand the thrust of these amendments, but they would produce a tome of regulations—with a line of civil servants to deal with that—yet provide no meaningful improvement.
Baroness Anderson of Stoke-on-Trent (Lab)
I thank the noble Baroness, Lady Finn, for raising the important issues around annual reporting and the PSFA—both the use of powers conferred on it by the Bill and the extent of fraud against public authorities—as well as her point on the implementation of direct deduction orders, particularly concerning the regulations, the publication of consultation outcomes and the impact these powers may have on the banking industry. While I agree with the intent behind these amendments, unfortunately they are duplicative or would otherwise create an unnecessary burden for the PSFA. I will address each in turn.
Amendment 16 would require that the outcome of any consultation required by regulation-making powers for direct deduction orders in Clause 38(6) is laid before Parliament prior to the implementation of regulations. This amendment is duplicative: where a consultation is required, the Explanatory Memorandum of the relevant statutory instrument must detail and consider the outcome of that consultation exercise. Furthermore, the Cabinet Office consultation principles also set out that where a consultation concerns a statutory instrument, His Majesty’s Government should publish responses before or at the same time as the instrument is laid. We completely agree with the noble Baroness, which is why the provisions are there.
Amendment 17 seeks to hold the PSFA to commit to
“an impact assessment covering projected costs and effects on the operational capacity of banks”,
should any changes be made to the means by which deduction orders are processed by way of regulation, as set out in Clause 38. This amendment is also duplicative, as statutory instruments require that the impact on the relevant sector is considered and set out in the Explanatory Memoranda—even if that is to say no impact is expected—with reasons given as to why. Where the impact is expected to exceed £10 million, a full and separate impact assessment must be prepared and published alongside the SI.
The Government are extremely mindful of the burdens this Bill places on businesses, including the banking sector. We too want to ensure that they are not subjected to disproportionate burden or costs in complying with these measures, and we want to assure noble Lords that the PSFA is working on how to effectively operationalise the recovery powers in partnership with representatives of the banking sector. Throughout the development of the Bill, we have tried to strike the right balance between requiring actions from banks in a fair and proportionate way and achieving our policy intent of recouping vital public funds lost to fraud and error. That is why there has been sustained engagement with key representatives of the sector including UK Finance, individual banks, building societies, His Majesty’s Treasury and the Financial Conduct Authority. We know that the sector is supportive of the Bill’s objectives from the evidence provided by UK Finance in Committee in the other place. We have benefited from the sector’s operational insights and, as discussed on the previous group, we have tabled a number of amendments as a direct result, to ease the implementation and delivery of the recovery powers.
Amendment 22 would require the PSFA to undertake a review after 12 months on the cost to banks of complying with provisions under Part 1 of the Bill. The Bill’s published impact assessment—which sets out all expected costs to business, including banks, from the PSFA’s measures—has been green-rated by the Regulatory Policy Committee and sets out, where it has been possible to do so, the minimal expected costs to businesses, including banks, of the measures in Part 1 of the Bill. Provisions already exist under Clause 24 for banks to be able to deduct administrative costs that would offset what the review would report on. This amendment would create disproportionate administrative burden on the PSFA when, candidly, it should be using its resource to pursue those who defraud the public purse.
Amendment 26 would require a report on the use of powers by the PSFA to be published and laid in Parliament. I know the noble Baroness genuinely cares about ministerial oversight and accountability of officers using these new powers. I assure her that in addition to the reports that will be commissioned from inspectorates —such as His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services—the independent person appointed in line with Clause 65 will proactively review the PSFA’s investigative use of the powers, including their efficiency and effectiveness. We have previously stated that these would be annual reports, and they will be laid before Parliament.
Lastly, I turn to Amendment 112, on annual reporting. This would require the PSFA to publish and lay in Parliament an annual report on the extent of fraud against public authorities based on the Government’s internal estimates. The PSFA already oversees the counterfraud performance of ministerial departments and public bodies and already publishes a report on the extent of fraud against public authorities through its fraud landscape reports. These set out levels of detected, prevented and recovered fraud and error as reported by departments and public bodies to the Government’s Counter Fraud Function’s centre of expertise. For transparency, these are now published online. We expect the next one to be published before the end of the financial year and can commit to sharing this with Members who have spoken in this debate.
I think I have touched on all the points raised, although there was a question from the noble Baroness, Lady Finn, on other safeguards. It may be helpful to reassure your Lordships’ House that we have the following additional safeguards in place. Authorised officers and investigators will be trained extensively and will be permitted to use the powers only once the training has been completed. They will follow detailed procedures and have strong guidance; for instance, on how to assess and handle potentially vulnerable suspects. There will be rights to make representations, request an internal review and appeal decisions through First-tier and Upper Tribunals across the civil penalty, debt recovery and information gathering powers. In addition, we will consult on and publish a code of practice detailing the calculation and application of penalties issued where fraud is found and where there is non-compliance with the information sharing and gathering requirements and debt recovery powers within the Bill.
I hope that reassures your Lordships’ House and the noble Baroness that we are already taking steps to achieve the same aim, and she can therefore withdraw her amendment.
Baroness Finn (Con)
My Lords, I thank the Minister for her remarks. I also thank the noble Lords, Lord Davies of Brixton and Lord Vaux, for their support for some of the amendments. I thank the Minister for the consideration she has given as well.
At the heart of this debate is a simple but important point: if we are to make the system work, we have to work with the banks, not simply through them. They are, in effect, being recruited as operational arms of the state, helping to investigate, enforce and recover public money. That partnership brings responsibilities on both sides. These amendments were never about creating obstacles; they were about ensuring that transparency, consultation and accountability are built into the process. The banks are being asked to play a vital role, and we must show them that their experience, concerns and costs will be reflected in how the Government engage with and implement the Bill. I beg leave to withdraw the amendment.
Baroness Sherlock
“(3) Where the requirement is suspended for a continuous period of two years the deduction from earnings order in question is to be treated as having been revoked at the end of that period.(4) Where a deduction from earnings order is treated as having been revoked by virtue of subsection (3), the Minister must give notice to that effect to—(a) the liable person, and(b) the employer to which the order was given.(5) Subsection (3) does not prevent the Minister making a further deduction from earnings order in respect of the same liable person.”Member's explanatory statement
This amendment means that where the requirement to make deductions and payments under a deduction from earnings order is suspended for a continuous period of 2 years it may not be re-started.
Baroness Finn
“Fraud risk management duties for public authorities(1) This section applies to public authorities responsible for spending schemes or programmes involving total annual payments or disbursements exceeding £100 million (“relevant spending schemes or programmes”).(2) A public authority to which this section applies shall—(a) register each relevant spending scheme or programme with the Minister for the Cabinet Office via the Public Sector Fraud Authority before the start of each financial year;(b) conduct and submit to the Authority a fraud risk assessment for each registered scheme, detailing identified fraud risks and planned mitigations;(c) prepare an annual fraud measurement plan specifying the methods by which fraud rates will be determined, including representative sampling or comparable statistically valid methods, to ensure robust estimation of fraud and error rates.(3) The Authority shall—(a) independently verify each public authority’s reported fraud rates annually, employing rigorous audit, sampling, or comparable statistically robust methods;(b) publish annually, in a dedicated report laid before Parliament— (i) the fraud rates reported by each public authority;(ii) the independently verified fraud rates determined by the Authority;(iii) an assessment of the accuracy and effectiveness of each public authority’s fraud risk management measures.(4) Each public authority shall publish in its annual accounts—(a) its submitted fraud risk assessment;(b) the fraud rates as determined independently by the Authority;(c) an evaluation rating (Red-Amber-Green) assigned by the Authority reflecting the public authority’s compliance with and effectiveness of its fraud risk management duties.(5) The evaluation rating assigned by the Authority under subsection (4)(c) shall assess—(a) adequacy and accuracy of fraud rate measurement methodologies;(b) effectiveness of implemented fraud risk mitigations;(c) compliance with statutory duties set out in this section.(6) Where the Authority finds significant discrepancies between reported fraud rates and independently verified fraud rates, or otherwise finds significant discrepancies in the public authority’s fraud management practices, it shall issue a notice requiring the public authority to—(a) submit within 30 days a detailed action plan specifying corrective measures;(b) implement corrective measures as directed by the Authority within a timeframe specified in the notice.(7) Compliance by public authorities with their obligations under this section shall be subject to audit by the Comptroller and Auditor General, and the findings shall form part of their reports to Parliament.”Member's explanatory statement
This new Clause seeks to impose stricter fraud risk management duties on public authorities that oversee spending schemes exceeding £100 million annually, by requiring these authorities to register schemes, conduct fraud risk assessments, measure fraud using robust methods, and publish findings. The Public Sector Fraud Authority would verify reported fraud rates, publish comparisons, assign performance ratings, and enforce corrective actions for poor performance. Compliance would be subject to independent audit and parliamentary scrutiny.
Baroness Finn (Con)
My Lords, this amendment, tabled in my name and that of my noble friend Lord Younger of Leckie, seeks to insert a new clause establishing clear fraud risk management duties for all public authorities that oversee major spending programmes—that is, those involving annual disbursements exceeding £100 million. The purpose of this amendment is straightforward but fundamental. It is to ensure that the Public Sector Fraud Authority does not become, as it very easily could, an external body to which departments can simply outsource responsibility for managing fraud risk, rather than taking ownership of it themselves.
We have heard a great deal, rightly, about the scale of public sector fraud and the cost to the taxpayer, but as we look to the future, the real question is not simply how the PSFA will investigate or recover those losses; it is how we build a culture of counterfraud across the public sector—one in which every department, agency and accounting officer takes personal and institutional responsibility for preventing fraud at source.
This amendment aims to do exactly that. It would require all public authorities responsible for large spending schemes—those worth more than £100 million a year—to register those schemes with the PSFA, conduct fraud risk assessments and prepare annual fraud measurement plans. Those plans would have to use robust, statistically valid methods to estimate fraud and error rates, such as representative sampling or equivalent techniques. The PSFA would then independently verify those reported figures, publish an annual report comparing departmental self-assessments with its own verified data and assign each authority a red, amber or green rating to reflect the adequacy of its fraud management arrangements. Those ratings and the underlying data would then be published, both in each department’s annual accounts and in the PSFA’s report to Parliament.
Finally, where there are significant discrepancies or failings, the PSFA would have the power to require the relevant authorities to submit an action plan within 30 days setting out how they will correct the deficiencies. Compliance with these duties would then be subject to audit by the Comptroller and Auditor-General, bringing this entire framework within the scrutiny of Parliament.
This is a serious proposal that goes to the heart of what we have been saying throughout the passage of the Bill. Fraud is not a problem that can be solved by a single agency, however capable. It must be the business of the entire public sector. We cannot allow a situation to develop where departments and public bodies come to see the PSFA as an external safety net—somewhere they can pass the buck to when something goes wrong. If we are not careful, that is precisely what will happen. Officials will say that fraud is the PSFA’s job, Ministers will reassure Parliament that the PSFA is on the case and, in the meantime, the very culture of accountability that we are trying to build will start to erode.
This amendment reverses that logic. It would make counterfraud a statutory discipline—something that must be embedded, measured and reported on within each department and public authority. It would give the Minister for the Cabinet Office the information and oversight that they need to see at a glance where problems lie across government, and it would allow Parliament, through the Comptroller and Auditor-General, to see how public money is being protected and where it is being put at risk. In short, it would ensure that no official, no Permanent Secretary and no department can hide behind the PSFA. It would place responsibility exactly where it belongs—on those who spend and manage public money.
This approach also has a longer-term benefit. If departments develop and strengthen their own internal counterfraud capability, the need for PSFA intervention should gradually decline. That is what success should look like: not a PSFA burdened with firefighting every scandal across government but a public sector that has learned, embedded and internalised the discipline of fraud prevention. That is the culture shift we need. It is how we stop treating counterfraud as an emergency response and start treating it as an essential part of good public administration.
This amendment would give practical effect to that ambition. It would give the PSFA oversight, the Minister visibility and Parliament the means to scrutinise what is and is not being done across the system. If the Government are serious about tackling fraud at scale, then this is how they can demonstrate it: not by concentrating power in one central authority but by building a resilient, accountable and transparent network of fraud management across the public sector.
The amendment would strengthen not just the Bill but government itself. It would embed responsibility where it belongs and ensure that accountability, transparency and culture change go hand in hand. I beg to move.
Baroness Fox of Buckley (Non-Afl)
My Lords, one reason why I support the intention of the Bill is that I have become concerned that major fraud with public money has gone unchallenged for too long. One of my worries about the Bill is when it goes after low-hanging fruit—that is much more in relation to people on benefits, which we will discuss later on Report.
This amendment seems prepared to challenge what has become complacency about public money and waste and seeks to find a mechanism to ensure that it does not become yet another box-ticking bureaucratic exercise. While I am worried about even more bureaucracy, the intention behind the amendment is serious and rightfully puts the focus on where we should be worried: where people in public life have become utterly negligent with the taxpaying public’s money and feel that they will not be penalised. I am happy to go along with this, because I too worry that the PSFA will otherwise simply be a box-ticking exercise—somewhere where these matters will not be fully accounted for and discussed with the public. I will support the amendment should it be pushed further.
Lord Palmer of Childs Hill (LD)
My Lords, I found it difficult to believe that this was being required of us today. Amendment 21 requires each public authority’s reported fraud rates annually, employing a rigorous audit and sampling comparably statistically robust methods. That assumes that public authorities are not running any systems whatever themselves. The whole principle of government is that you do not do everything centrally, from central government, but you pass some things down to the individual public authorities.
For many years, I served as the chairman of the audit committee on the London Borough of Barnet, where we rigorously looked at spending proposals, as I imagine do all public authorities. The amendment says that the public authority must
“register each relevant spending scheme or programme … before the start of each financial year”.
It is meant to be for those exceeding £100 million annually, but for most schemes from public authorities—think of the new railways, for example—the figures never stack up by the time you get to the end of the programme. If it is expected that they will have to identify them at the beginning of the programme, numerous exceptions will be found to those programmes.
This amendment does not hold water. It takes away from all the public authorities the authority and vigilance that they are meant to assume themselves. We cannot support this amendment.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, the noble Baroness, Lady Finn, is entirely right that public authorities responsible for spending taxpayers’ money must manage their fraud risks carefully. While we expect the enforcement powers in this Bill to be a powerful force against public sector fraud, prevention of fraud by designing spending programmes and fraud controls in the first place is the most important tool that we have.
I shall set out the work that the PSFA already does to hold public authorities to account for their fraud risk management performance and set out some ways in which we can go further. I hope that, in doing so, I shall convince the noble Baroness that her amendment is unnecessary. It is already a requirement for major new areas of public spending to have a fraud risk assessment; that is set out in both Managing Public Money, which tells accounting officers their duties, and the Treasury’s Green Book, which details how to appraise a project. The PSFA scrutinises those fraud risk assessments, holding departments to account both for the absence of risk assessment and for fraud risk assessments that do not meet the standard. Some 31 organisations have so far been through the PSFA’s rigorous assurance regime.
The highest-risk government schemes receive additional scrutiny of their fraud risk management practices on a regular ongoing basis. The highest risk here is not justified only with reference to the size of spending, although that is important, but with the scale of fraud risks that a programme faces. That is in addition to the PSFA’s broader scrutiny of departmental performance and capability. The PSFA assesses and holds public bodies to account for: their compliance with the counterfraud functional standard; the make-up of their counterfraud workforce and level of investment; the ambition and performance against their impact targets; and their ability to collect and report to the PSFA on all frauds against them.
The PSFA publishes the fraud landscape reports. These outline the main risks and issues across government, including the levels of detected fraud and corruption, and associated areas in departments and public bodies, excluding tax and welfare, as these are published elsewhere.
However, publishing fraud risk assessments, as this amendment calls for, would provide a how-to guide for fraudsters. The PSFA works closely with the National Audit Office, which can, as it chooses, offer independent scrutiny and has done so in reports, such as Using Data and Analytics to Tackle Fraud and Error, in July, and An Overview of the Impact of Fraud and Error on Public Funds for the New Parliament 2023-24, in November last year. In short, much of what the noble Baroness calls for in this amendment is already happening, but she is quite right—as this is fundamentally a question of protecting taxpayers’ money—that we can go further, so we are.
First, fraud measurement is most sophisticated in HMRC and DWP, where detailed audits and sampling are possible and proportionate. In other areas of government, effective fraud measurement is typically prohibitively expensive. Fraud is a hidden crime, but the noble Baroness is right that we need to do more here. The PSFA is pressing for a fraud measurement plan to be put in place for the highest-risk schemes across government, and we will make those highest-risk schemes report to the PSFA on their levels of fraud and error. This will include what has been estimated, detected, recovered and prevented. We are now also asking the highest-risk schemes to report on levels of counterfraud resourcing so we can assure that resourcing matches the threat.
Secondly, accountability is critical. The PSFA will redouble its efforts to hold departments to account for substandard fraud risk management. Where fraud risk assessments are of poor quality, where departments are falling behind on the counterfraud standards or where counterfraud workforces are insufficient or made up of the wrong skills, Cabinet Office Ministers and their departmental counterparts will ensure accountability and drive improvement. The action that the noble Baroness calls for is therefore already under way or is something that we recognise as a gap and are taking action on.
The noble Baroness is right to call for action, but the appropriate place to pursue that action is not in this legislation but through the PSFA’s published mandate, which we will look at again in light of the noble Baroness’s points to check that it is fit for purpose. I would welcome a discussion with her and my officials on what changes to our published mandate would achieve her goals—the invitation will obviously also be open to all noble Lords who have an interest.
We are trying to make sure that the counterfraud landscape is fit for purpose across departments. We are both listening to the comments of your Lordships’ House as well as progressing with the Bill. I therefore hope that that provides reassurance to your Lordships’ House and specifically to the noble Baroness, and I hope that she can withdraw her amendment.
Lord Gove (Con)
My Lords, I listened with the close interest to the Minister’s response, which it seems to me can be crystallised in a few words: that my noble friend Lady Finn is absolutely correct; her amendment is on the button, but officials in the Cabinet Office regard it as simply too much work to implement and do not want to have this actually in the Bill, but to have some sort of arrangement, some side deal or side letter to address it. When we are dealing with sums of public money as significant as those acknowledged in the legislation, surely it would be better to accept the amendment because the Minister has acknowledged that it is spot on and there is not a single element in the logic put forward by the Opposition Front Bench with which she takes issue.
The only possible objection that the Minister raised is that a public assessment of fraud risk would be a how-to guide for fraudsters. Surely the fraudsters do not need support; it is other departments that need support in dealing with this issue. If she cannot accept the logic and power of the amendment, will she commit to coming back to the House within six or 12 months and reporting, if it is the case that the proposal that she puts forward is inadequate, that she will accept the amendment put forward by my noble friend Lady Finn? As is clear from the paucity of the arguments provided for her by her officials, there is no gainsaying the force with which my noble friend Lady Finn made her case.
Baroness Anderson of Stoke-on-Trent (Lab)
I have a huge amount of time and respect for the noble Lord, which is why I am smiling. He knows better than to suggest that I can bring forward and accept an amendment in 12 months’ time, after the legislation has already passed. However, he is right, and I agree with the principle and intention of everything the noble Baroness, Lady Finn, proposes. My argument is that this is wrong vehicle. It is the published mandate and the role of the PSFA as it exists—which was established by the previous Government—that we should open up, to ensure that it is fit for purpose as a cross-government vehicle and outlines its clear objective. That is the offer that I made to the noble Baroness.
Baroness Finn (Con)
My Lords, I thank the Minister for her remarks and the careful consideration she has given this issue. I am really disappointed that the noble Lord, Lord Palmer, has decided that he can no longer support the amendment. He warmly welcomed a similar amendment in Committee, describing it as
“a comprehensive and rigorous approach to fraud risk management for public authorities overseeing significant spending schemes”.—[Official Report, 11/6/25; col. GC 243.]
At its core, this amendment is about building a culture of responsibility and transparency across government—one in which fraud prevention is owned by every department and every accounting officer, not simply outsourced to the PSFA. We cannot afford a system in which the authority becomes a convenient safety net, while departments step back from the task of managing their own risk. As we said in Committee, let us return to first principles: public money must be protected, not just recovered after it is lost. This must be a whole-of-government effort, driven by evidence, accountability and openness. Departments need to know how they are performing and Parliament needs to be able to see this. That means regular, comparable data that is published, verified and available for scrutiny by both Houses.
We appreciate the Minister’s response and the spirit in which it was given, but I agree entirely with my noble friend Lord Gove: we do not believe that the reporting requirements set out in her answer are adequate. We need to see real movement on how these efforts are assessed—which departments are performing well, which are falling behind and how that performance is being improved. This information must be made public and open for review, and we know that this can be done without compromising ongoing investigations.
Transparency and accountability are not threats to enforcement; they are its foundation. This amendment goes to the very heart of what this Bill should be about: creating a genuine culture of responsibility across the public sector when it comes to tackling fraud. For too long, fraud management has been treated as a technical or procedural exercise, buried within internal reporting chains and obscured by bureaucratic complexity. The effect has been that too many departments and agencies see fraud as someone else’s problem, something to be passed up to the centre or delegated down to a third-party body such as the PSFA. However, the fight against fraud cannot be subcontracted. It has to begin and end with the public authorities themselves, which are entrusted with billions of pounds of taxpayers’ money.
Our amendment seeks to ensure that accountability is clear, transparent and public. It would require departments not merely to report internally but to publish their own risk assessments, have their fraud rates independently verified and be held publicly to account for their performance. In the long run, the success of the PSFA should not be measured by how much it does but by how little it needs to do because public authorities have developed the systems, culture and leadership to manage fraud effectively themselves. Yet as the Bill stands, that is not the direction of travel. This amendment is therefore essential to shift the incentives away from centralised dependency and towards departmental ownership, transparency and responsibility.
I am extremely grateful for the offer of further discussions from the Minister, but this is a matter of principle and effectiveness. We cannot have great power, as the Government are proposing, without great responsibility. I therefore wish to test the opinion of the House.
Member's explanatory statement
This amendment, together with my amendment to clause 66, page 35, line 30, would mean that the Minister must provide information where the information is reasonably required for the purposes of independent reviews carried out under clause 65.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I now turn to government Amendments 23, 24, 68 and 69, regarding the disclosure of information to the independent reviewers. These amendments rightly respond to the challenge put forward in Committee by noble Lords, including the noble Lord, Lord Vaux, and the noble Baronesses, Lady Finn and Lady Kramer, to provide all relevant information to independent reviewers. I am pleased to make these amendments today to demonstrate this Government’s commitment to supporting the independent reviewers in the PSFA and the DWP to carry out robust and transparent reviews.
On the PSFA side, government Amendments 23 and 24 will oblige the Minister to disclose all reasonable information to independent reviewers appointed under Clause 65 for the purposes of carrying out the review. The independent reviewer will determine what information is reasonably required. With regard to the DWP, in Committee my noble friend Lady Sherlock made it clear that the DWP Secretary of State will provide the independent reviewer of eligibility verification measures with all relevant material so that they can carry out their review. Recognising the underlying concern and to clarify our intent, we are today bringing forward government Amendments 68 and 69, which oblige the Secretary of State to disclose necessary information to the independent reviewer of EVM for the purposes of carrying out the review.
To be clear, for both sets of amendments substituting the word “must” for the word “may” does not signal a change in our approach. The Government have always been committed to providing all relevant information that is reasonably required to the respective independent reviewers to support the open and transparent use of powers and to promote accountability. These amendments today reinforce that commitment and make it crystal clear.
I hope that these amendments reassure your Lordships’ House that the Government will provide all relevant information to the independent reviewers, and I encourage noble Lords to back them. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, we have a lot of discussions in this House about the difference between “may” and “must”. I think in this case it is very important. It is essential that the independent reviewers, who are such an important safeguard throughout this Bill, are provided with all the information that they require, so I am delighted and thank the Minister for putting forward those amendments. My joy, however, is not unbridled, because she has caveated the “must” with
“where the information is reasonably required”.
Nowhere in this does it tell us who decides what is reasonable in this case. That opens the possibility of disagreement between the independent reviewer and the department, or the Minister, as to what is reasonable. That is regrettable. It would be better if the independent reviewer decided what they wanted, was given everything they required and it was up to them to decide what was reasonable. This provides the opportunity for doubt and disagreement, and we will come on to that in a later amendment next week. However, overall, I welcome these amendments.
Baroness Finn (Con)
My Lords, we on these Benches warmly welcome these amendments in the name of the noble Baroness, Lady Sherlock. They reflect the very same concerns that we raised in Committee about the scope and strength of the independent reviewer mechanisms provided for in the Bill, specifically the ability of those reviewers to request and be granted access to the information they need to do their job properly. We are grateful that the Government have recognised this point in relation to the Cabinet Office section of the Bill.
The amendment before us to Clause 66 ensures that, where information is reasonably required for the purposes of an independent review under Clause 65, the Minister “must” provide it rather than “may”. That is a critical distinction, as the noble Lord, Lord Vaux, pointed out. A reviewer cannot be independent or effective if their access to information is discretionary, subject to the good will or convenience of the department being reviewed.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I am grateful for the contributions of noble Lords to this group. I will respond specifically and reassure the noble Lord, Lord Vaux, about who will decide and how it will be decided what constitutes relevant material for the independent reviewer under Clause 65 and what happens if they disagree.
The independent reviewer under Clause 65 will determine what information is reasonably required from the PSFA. They must be able to demonstrate to the Minister that the information requested will allow them to carry out the review and how. What is and is not relevant for the independent EVM reviewer is a matter of fact. Information must be given to the reviewer only if it will allow them to carry out their functions as prescribed by Section 6 of new Section 121DC of the legislation. If required, the independent EVM reviewer must be able to demonstrate to the Secretary of State that any information they request will allow them to carry out their review.
There may be rare examples of information that the Minister or Secretary of State may not share, such as information relating to national security, should they deem that it would be unreasonable to do so. Should there be a disagreement between the Minister and the independent reviewer, a resolution mechanism will be agreed between the reviewer and government. Ultimately, the Minister may not disclose the information, and in extreme cases, any ministerial decision to withhold information could be subject to judicial review. The independent reviewer will also be able to comment on any information withheld from them in the report which will be laid before Parliament.
In response to the questions from the noble Baroness, Lady Finn, as to why “must” is not across the Bill and why the DWP has not echoed this requirement in Clause 89, this is, as the noble Baroness has mentioned, going to be debated in a forthcoming group. However, I note that this divergence arises from the construction of Part 1 of the Bill. Unlike the DWP, the PSFA has one clause, Clause 65, relating to all independent reviewers. We have noted that we intend to meet the duty of Clause 65 by appointing a new independent reviewer to review PSFA use of powers and by commissioning HMICFRS—I am not sure what is easier to say, the full name or the acronym—to conduct inspections of our new investigative powers and end-to-end case processes.
We are keen to let the independent reviewer whom the Government will appoint have access to all reasonable and relevant information, which may include live cases. We would not want HMICFRS to consider live cases given the significant disclosure burden. However, in the PSFA’s case, given the small volume of cases, we believe that we can handle that challenge should an issue arise. With DWP, it really is in terms of scale and access to live cases. With the PSFA, we think that we can manage the difference.
I hope that those points have reassured noble Lords. Obviously, we will continue to debate some of these issues next week. I am grateful for this short debate and any support for the government amendments. I hope others will support these important amendments, which will help to improve transparency and promote accountability.
Baroness Sherlock
Member’s explanatory statement
See the explanatory statement for my amendment to clause 66, page 35, line 29.
Baroness Finn
“Independent reviewer: reviews under Part 1(1) The Minister may by regulations establish a body to serve as an independent reviewer for the purposes of undertaking reviews under Part 1 of this Act.(2) Regulations made under subsection (1) must provide that any person appointed as Chair of the body must attend any pre-appointment scrutiny hearing held by the Public Accounts Committee of the House of Commons, or any successor committee.(3) Regulations under this section are subject to the affirmative procedure.”Member’s explanatory statement
This new clause would allow the Minister to establish an independent review body to undertake reviews under section 34.
Baroness Finn (Con)
My Lords, the main focus of my remarks in this group will be on Amendment 35. This amendment, in my name and that of my noble friend Lord Younger of Leckie, would insert a new clause after Clause 70 to require the appointment of an independent reviewer to assess how the Public Sector Fraud Authority uses the PACE powers—the investigatory powers derived from the Police and Criminal Evidence Act 1984, which the Bill proposes to confer upon it.
Under the amendment, the independent reviewer would be tasked with examining how these powers are used in practice, including their effect on police time, their operational impact, whether they have improved the efficiency of investigations and whether any complaints or disciplinary issues have arisen in relation to their use. The reviewer would report to the Minister within five years of the powers coming into force and annually thereafter, with those reports laid before both Houses of Parliament.
We have brought this amendment forward as a genuine compromise. We on these Benches want to work with the Government to ensure that the Bill succeeds in its purpose, which is to strengthen our national effort to combat fraud and to deliver a substantial and lasting reduction in losses to the public purse. We are not opposed to giving investigators the tools they need to do that job, but if the Government are still intent, as we understand they are, on extending PACE powers to civil servants within the PSFA, then those powers must be accompanied by robust and transparent oversight.
This amendment is designed to provide precisely that. It is a balanced and proportionate measure that ensures accountability without hampering operational effectiveness. The Government have been clear in their reasoning for granting these powers. They have said that it will save police time and resources, that it will allow investigators to act more efficiently, and that powers will be used responsibly and, where necessary, in conjunction with the police. Our amendment would simply hold the Government to those assurances. It asks them to demonstrate through an independent review mechanism that that these powers are indeed delivering on the objectives they have set out.
If the Government are confident that the PSFA will use these powers effectively and responsibly, and I have no reason to doubt their confidence, then they should have no hesitation in supporting this amendment. It would help them prove their case. The amendment gives the Government five years before the first review—ample time for the new arrangements to bed in, for the PSFA to become established, and for the data to show whether the powers are working as intended. Thereafter, annual reporting would ensure continued transparency and accountability.
It is clear that this amendment is not an attempt to frustrate the Bill—quite the opposite. It is an attempt to make it stronger, fairer and more credible. Oversight and review are not obstacles to effective governance; they are its foundation. If these powers are to be trusted, they must also be tested. We are therefore offering the Government a constructive path forward to accept a mechanism that ensures evidence-based assessment of how these powers are used, whether they are proportionate, and whether they are delivering measurable benefits.
If the Government’s case is correct that these powers will save police time, strengthen enforcement and be exercised with care, then this amendment would simply enshrine a process that will confirm that success. It is a sensible, good faith proposal that supports the Government’s stated objectives and ensures that Parliament and, indeed, the public can have confidence that this expansion of powers is justified, proportionate and effective.
If the Government are confident in their case, they will support this amendment. It is drafted to aid them, not to hinder. It is to help them demonstrate transparently and independently that these powers are being used well and wisely. If they are not minded to support us, I hope that the Minister will take this opportunity to set out to the House what alternative proposals the Government are considering to address these concerns. If the Government have no alternative, then I ask the Minister whether we on these Benches might come back at a later stage with a new amendment designed to address them. We cannot forget that we are talking about substantial powers which will be wielded against people in this country outside these walls. If we do not legislate responsibly now, we risk the well-being of those people to whom we all owe a duty. I beg to move.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, it could almost be that we are back in Committee. It is the “Baroness Finn, Baroness Anderson show”. I do not think many people would pay, but still.
I welcome the continued and unwavering commitment of the noble Baroness, Lady Finn, to independent oversight. I once again reassure her that the Bill as it stands delivers rigorous and robust safeguards and oversight, addressing the intent behind these amendments efficiently without the need for duplicative amendments.
On Amendment 25, internal reviews are important as they provide a straightforward and affordable way to present a challenge to decision-making. They are an impartial element of many review processes. Under the current drafting, internal reviews can be requested to challenge, for instance, whether a direct deduction order is the most appropriate form of repayment or whether the deduction amount is fair and affordable, as well as the use of other powers in the Bill. The reviewing officer will be a highly trained authorised officer of a higher grade than the original decision-maker. They may decide to uphold, vary or revoke the direct deduction order. This decision will be based on an assessment of the materials held and any relevant new information provided. Crucially, should a review not provide satisfaction, there are further independent appeal rights through the First-tier Tribunal.
On Amendment 35, the independent oversight of the use of the powers under Part 1, including PACE powers, is so central to the passage of this Bill that we already have clauses in place to mandate it. As we have said, Clauses 65 and 66 require that an independent person appointed by the Minister undertakes reviews of the use of powers contained in this legislation. The independent person will conduct reviews to consider whether the exercise of the powers is in keeping with the legislation, codes of practice and relevant guidance. They will produce a report of their findings for the Minister, including any recommendations they deem appropriate. The Minister is then required to publish the report and lay it before Parliament.
As we have stated, the Government intend to meet the duty imposed by this clause in two ways. First, the Government will commission His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services—HMICFRS—to inspect the PSFA’s use of the new investigative powers, including end-to-end investigative processing. Secondly, the Government are creating a new position for an independent person to whom the PSFA oversight team will report. The independent person will carry out reviews and report on whether the PSFA’s use of the powers in this Bill is in keeping with the legislation, codes of practice and relevant guidance, and consider areas where HMICFRS or other oversight bodies have not already reported. The employment of an independent person will also fully comply with the Cabinet Office Governance Code on Public Appointments, which is overseen by the Commissioner for Public Appointments. Clause 66 provides for the arrangements of timing of reviews between the Minister and the independent person.
In summary, the amendments are duplicative at heart. The right to independent assessment is already built into the legislation, via appeal and in the form of the independent reviewer to be appointed to review the use of the Bill’s powers under Clause 65. These would not require the addition of extra costs, people or processes that Amendments 25 and 35 would entail.
However, the Government note that Amendment 35 specifies particular areas of focus for a reviewer beyond what is in the Bill. Your Lordships’ House has also raised other areas that it would like an independent reviewer to consider. We have been clear that the independent reviewer appointed under Clauses 65 and 66 will have discretion to decide how and where they focus their reviews. Even so, to ensure that the House’s concerns are heard, I am committing to compiling a list of all the concerns raised here and in the other place to put before the independent reviewer for consideration once appointed. I will also request that the independent reviewer meet with all parliamentarians who have raised areas where they think his or her work should be focused. That way, the independent reviewer and the report they will lay before Parliament will be certain to meet Parliament’s priorities for scrutiny of the use of these powers. Given these assurances and this additional option, I hope the noble Baroness will withdraw her amendments, as the purpose is already met by the Bill as it stands and the commitments that I have just made.
Baroness Finn (Con)
My Lords, as this is the final group today, I will be brief. I thank the Minister. I was going to say, “I wish to make it clear that we intend to test the opinion of the House on Amendment 35”, which will be called on the second day of Report. Given what the Minister has said, we will reflect on that, but I am giving notice that we may still intend to test the opinion of the House. We believe that this is a well-drafted and constructive proposal that seeks to work with the Government in their efforts, and that it should form an integral part of the Bill. We can see how what is proposed marries up with that.
The amendment goes to the heart of the balance between empowering members of the Public Sector Fraud Authority effectively and ensuring that the use of powers is subject to proper, transparent oversight. We believe, as the Minister has said, that there is genuine scope for compromise. Our aim has always been not to constrain the Government but to ensure that, where such significant investigatory powers are granted, they are exercised with the appropriate safeguards, transparency and oversight that we think are essential if we are to maintain public confidence and protect individuals while still enabling the PSFA to pursue fraud effectively.
The Government have chosen a test and learn approach to the Bill—sorry, I have to do this—which has replaced the former proof of concept. Such an approach must be accompanied by clear provisions to report and evaluate those tests, ensuring that the learning happens in the right way. Meeting the Government’s own test for the use of PACE powers is a key part of that framework, and that is what our Amendment 35 seeks to achieve. But I thank the Minister for her words, and we will reflect. I beg leave to withdraw the amendment.