Public Authorities (Fraud, Error and Recovery) Bill

Baroness Alexander of Cleveden Excerpts

2nd reading
Thursday 15th May 2025 Lords Chamber

[Baroness Alexander of Cleveden (Lab)]

My Lords, I too look forward to the maiden speech of the noble Baroness, Lady Spielman, and I congratulate her on her having a debate to herself in that regard.

My antecedents rather precede me: I am a Scot, and we worry about money. I am a Presbyterian Scot, and we worry even more about money. Finally, I have endured more audit committees than I care to recall. I say to the noble Lord, Lord Vaux, that I was not here the last time he got the band together. As a newbie, I am glad to come to this debate.

I concur with the right reverend Prelate, who we have just heard from, on the underlying rationale of the Bill: the importance of fairness, building trust and upholding the integrity of the system. I want to explain why I think that has come into question. The public want prudence from the Government, an attention to waste and a tackling of the criminal gangs. The Bill is not the performative legislation that we have perhaps seen too much from all sides over the years. It is about modernising the legal framework, tackling the criminals and building confidence in the system and reliability and fairness into our social security system.

I concur with the noble Baroness, Lady Finn, that tackling fraud is as much a cultural issue as a legislative one, but I also disagree with the noble Baroness, Lady Finn, that we should not concentrate power in the Cabinet Office. It is not an error to build specialist expertise to support cross-government action. Indeed, building specialist expertise is an enabler of broader action.

It has to be right that all of government has access to the powers that the DWP and HMRC already have. It has to be right that the PSFA—I will not trouble your Lordships with the full acronym—should have the statutory powers and not be reliant, as it is now, on whoever brings information to its attention.

It is also right—and it has not been mentioned much today—that the Bill strengthens the specific enforcement powers for the £10 billion lost through Covid-related fraud. I will share just one anecdote with the House on this matter. I am, as declared in my register of interests, the British Council’s vice-chair. In Covid, when our teaching exam centres were closed, the FCDO provided a Covid-related liquidity loan of £200 million. The Treasury now wants it repaid in full, and the British Council happens not to have the resources to repay. So at this week’s board meeting we authorised cuts, closures and a VS scheme to help pay back that Covid-era loan. Those British Council employees who last month applied for the VS scheme want to know that the Government are being equally assiduous in chasing down the dodgy companies which deliberately mis-sold PPE to a nation at the heart of a national emergency.

I turn to Part 2 of the Bill, which I had assumed would be the most controversial. I want to address the issues we have heard about concerning the scale of fraud. The key insight, as others have said, is that fraud is low for most benefits: for personal independence payments it is zero; for attendance allowance it is zero; for the state pension it is 0.1%; for incapacity benefits 0.3%, and so on. The fraud rate for every benefit sampled is below 4%, with the exception of universal credit: for universal credit, the fraud rate is 11%. There is limited fraud in the system, but universal credit stands out. The overall scale of overpayment each year is £10 billion: three-quarters relates to fraud and 88% relates to universal credit. That is the issue that needs to be addressed. It has to be right to bring enforcement into the 21st century and not require the DWP, as the Minister has said, to rely on 20 year-old regulations that simply are not fit for purpose in a digital age.

They are also not fit for tackling organised crime. Here, I talk about the benefit gangs. This time, I turned away from the dry DWP statistics, and I turned to the court reports, and they are both frightening and illuminating. In May last year, just after Rishi Sunak announced the election and when the business managers in this place and in the other place were horse-trading which legislation would make it onto the statute book, in that very week, at Wood Green Crown Court, there was the case of five defendants who admitted stealing over £50 million from the taxpayer. It involved 5,000 to 6,000 fraudulent universal credit claims, with some people living, as we have heard, in Bulgaria. The putative claimants received the money for just two months, and then the gang kept the rest for themselves. These false claims were backed by an array of forged documents, burner phones and photoshopped pictures. The raids on one of the defendants’ flats turned up £750,000 in cash. It was billed as the UK’s biggest ever benefit scam.

However, this was not an isolated incident. In 2022, there were similar court reports and more bogus benefit claims and money laundered through cryptocurrency transactions. In fact, in late 2022, the Public Accounts Committee was demanding action—finally, here we are.

I will sum up the concerns that have been raised about the specific enforcement measures in the Bill. It is common ground that the DWP needs to harness data. It is almost common ground that the investigative legwork should not fall primarily to the police but to trained investigators. It is largely common ground that we need to move away from self-reporting by claimants as the basis for eligibility. I say to the noble Lord, Lord Vaux, that, quite simply, the public want the Government to check claimants’ eligibility.

So the question is whether we can be assured of the proportionality and effectiveness of the eligibility checks. Many of the fears that have been raised can properly be allayed, but there are one or two that I want to touch on. The DWP will not be able to access bank accounts, yet we must tackle the gangs. I disagree with the fatalism of the noble Baroness, Lady Kramer, that the gangs will evade anything that we do so we should not bother with deeper investigatory powers. The reality, as we all know, is that fraudsters have, in recent years, become increasingly sophisticated in the ways that they steal people’s money. The banks have risen to that challenge when it comes to their own customers, and we are simply asking them to step up in the same way on behalf of the taxpayer.

I urge the Government—this has come up—to be careful in the selection of the individual who oversees eligibility verification measures to ensure that they are independent. All noble Lords know that it is not easy to criticise a government department from the inside. Look at the experience of prison inspection over two decades: it is a challenge to speak up. I suggest that it is a role for a courageous leader, and I encourage the Minister, my noble friend Lady Sherlock, who will sum up, to look for someone like herself. In her former life, on the advocacy side, she was a fearless champion of fairness. In her summing-up remarks, I would welcome her assurance, as we have heard today, that the independent person’s annual report will be laid before the House and properly debated.

In conclusion, it must be right that fraud in the public sector is an evolving challenge and that legislation needs to keep pace. It is right to enable better recovery where public money has been stolen or overpaid. People want to see us tackle fraud, waste and criminality. By tackling those who exploit the system and recovering the money for those who need it, we will, as the right reverend Prelate said, uphold the integrity of the system and trust in government. I commend the Bill to the House.