Baroness Anderson of Stoke-on-Trent
Main Page: Baroness Anderson of Stoke-on-Trent (Labour - Life peer)Public Authorities (Fraud, Error and Recovery) Bill
Baroness Anderson of Stoke-on-Trent Excerpts
Viscount Younger of Leckie (Con)
My Lords, I shall speak briefly as the other opposition Front-Bencher working on the Bill. I shall make a few introductory remarks on the purpose of the Bill as we begin Committee. I join my noble friend Lady Finn in welcoming this opportunity to have a productive, collaborative opening discussion on what the Bill is actually about and what it should be about.
Public sector fraud, as we have debated, is a crime that hurts every taxpayer in the country. It hurts every public service user and is an insult to everyone who works hard, pays their taxes and contributes to our society. This is a problem that we need to take steps to address, and the Government are right to reintroduce legislation and restart the process, which I know both Ministers acknowledge was started under the previous Government.
As noble Lords will be aware, my main focus will be on the second part of the Bill, which covers the DWP. This will not be covered so much in the amendments under discussion today, although I want to take the opportunity at the outset to flag up in advance and highlight some of the concerns that I have around these provisions and where my focus will be in the forthcoming Committee days. I hope this is helpful to the Committee.
First, on banks, there are still many questions over how the relationship between the DWP and the banks will manifest itself. We do not have clarity from the Government over how the process will work in practical terms or the costs that will be incurred by the DWP and financial institutions as a result of compliance under the terms of the Bill. As we highlighted at Second Reading, the Government, if they remain committed to human oversight of all decisions and reviews of information obtained from banks, could see a massive increase in their workload. Gaining greater clarity on this relationship, how it will work, the impact that it is anticipated to have and the resources required will form part of our approach on this part of the Bill.
Linked to this is the need to test the means to the end. What will be the cost for the expected return? How will the return be defined? That is the identity and recovery of fraud; also, the measurement of the deterrent factor in taking greater and more stringent measures to combat fraud—to take the challenge to the fraudsters, who have been seen to become ever more sophisticated. We will wish to challenge enforcement. What works? What are the sanctions for those who are convicted? Are they effective? What costs and resources are judged to be estimated in respect of this aspect of the Bill?
Secondly, we want to ensure that the Bill protects vulnerable people and recognises additional factors that may lie behind, for example, an overpayment. Proportionality in the exercise of these powers is vital, and we need to ensure that we do not cause greater harm than good in the pursuit of our shared objective. This concern is shared by noble Lords in this Committee. I am hopeful that we can reach an understanding with amendments that protect vulnerable people.
Finally, we see the Bill as an opportunity to combat those who seek to share information, allowing people to defraud the benefits and welfare system—the so-called “sickfluencers”. This is a serious problem. Thousands of people every day are consuming content that informs them of how to play examiners and score certain points based not on their actual health condition but on a script they have been taught online. These assessments are the mechanism through which the state determines eligibility for welfare payments. “Sickfluencers” who actively encourage dishonesty and make money out of a dishonest gaming system for exploitation must be stopped. We shall support amendments that seek to make this an explicit offence, so that there can be no room for doubt that these actions are wrong and could be criminal.
This is an important discussion on a topic that deeply affects everyone in our country. I welcome the opportunity to discuss ideas and suggestions for improvements to the Bill, which attempts to achieve a noble task. I and my noble friend Lady Finn will work in good faith with the Government and noble Lords across the Committee to improve the Bill and to make it effective and responsible.
Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)
My Lords, and so we begin. I thank all noble Lords present for their participation and engagement. On a personal note, before we get to the substance and serious detail of the Bill, this time last week I was having my make-up done for getting married, so I welcome noble Lords joining me on my honeymoon in our Palace.
Moving on to the substance, I remind your Lordships why we are here today. 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 Government said clearly in our manifesto that we will not tolerate fraud or waste anywhere and that we will safeguard taxpayers’ money. This Bill is part of those efforts. This is a Government focused on delivery. The Bill makes provisions
“about the prevention of fraud against public authorities and the making of erroneous payments by public authorities; about the recovery of money paid by public authorities as a result of fraud or error; and for connected purposes”.
This is already in the Bill’s title. There is no need for an additional new clause at the start of the Bill to set out a purpose that reiterates this, albeit in different language.
It is important for your Lordships to understand the real impact of fraud against the public sector. This is a dry term for something profoundly impactful. It is not government or state that is the ultimate victim of such fraud. It is not the Chancellor’s pocket that is picked, although the Treasury bears the brunt of at least £55 billion of fraud and error each year. The real victim is the British people. Every taxpayer who pays their fair share pays a fraud premium, because fraudsters cheat the system and skim from the top. It is taxpayers who are the victims. Every citizen who uses public services, knows how much good every penny can be put to in the communities in which we all live and rightly expects that the money will go to support their community is being defrauded. It is our citizens who are the victims.
Everyone who is in need, and who relies on the benefits and welfare systems that others cynically abuse, is a victim of public sector fraud. Noble Lords across your Lordships’ Committee will share my contempt for fraudsters who attack the British people in this way, and will want to take decisive action to start putting things right.
Baroness Finn (Con)
My Lords, I apologise for not congratulating the Minister for choosing to spend her honeymoon in these august surroundings. What better way?
At Second Reading, I highlighted the cultural problem with tackling fraud—that it is often safer to overlook than to uncover—so we have to change the culture and ensure that proper tackling of fraud is a cultural practice embedded within every public authority and government department. There is merit in creating a body with the powers to investigate fraud externally, but we need to make sure that proactive prevention and investigation into fraud start at home. Our Amendment 2 seeks to create an obligation for the Minister for the Cabinet Office to support public authorities in undertaking their own investigations into fraud when it occurs in said public authorities. In further developing the PSFA, the Bill provides us with a new resource and opportunity to support departments to intervene early and create mechanisms through which they can tackle this issue internally.
This objective has several key advantages. One major advantage is that this approach recognises that public bodies are complex, with unique funding mechanisms and operational procedures. Internal fraud teams bring intimate knowledge of these environments and have greater capacity to pursue targeted objectives, using knowledge that external agencies may lack. This allows for swifter detection of anomalies, targeted interventions and smarter use of data and insight.
Another significant advantage is that conducting internal fraud investigations inspires deterrence. Internal investigations can often begin before fraud escalates or becomes systemic. Timely action minimises losses and creates a departmental culture that stands more firmly against fraud. Not waiting for an external body to point out what has already gone wrong can embed a culture of deterrence and proactive interdepartmental counterfraud measures, which are an opportunity to minimise losses and therefore departmental damage.
Of course, internal investigation must never mean internal cover-up. The answer is not to sideline external oversight but to complement it. We must ensure that departments are equipped with the right skills, resources and authority to carry out investigations properly and that they are held to account when they fall short.
Our Amendment 24 seeks to strike this balance by requiring public authorities to conduct an internal review if they lose £50,000 or more through an overpayment or fraud, and to provide that report to the Minister for the Cabinet Office. This measure seeks to meet the benefits that I have just outlined, while embedding in law that responsibility for fraud cannot be outsourced. Authorities that lose money must take account of why this has happened and, fundamentally, they must also take responsibility for it. Making them accountable to the Minister is a mechanism through which we can achieve this.
I hope that the Government will consider supporting the amendments in this group, which seek to embed departmental accountability for fraud while utilising the resources of the PSFA to create intradepartmental cultures that deter and counteract fraud. I beg to move.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, if we continue at this speed, the Chief Whip will be disappointed that we are doing only seven groups. It is probably unlikely that we will continue at this speed, but I can aspire.
While I appreciate the comments from the noble Baroness, Lady Finn, I want to be clear that Amendment 2 is unnecessary as it is duplicative. It would insert “investigating”, as a way that the Minister can support other public authorities’ actions in response to fraud, separately from the explicit function of investigating if a request is made of the Minister by the public authority, which is earlier in the same clause. It is unnecessary because the word “tackling” in the same line of the clause cited covers any activity to support a public authority dealing with fraud and supporting them in their own investigations too. It is deliberately drawn broadly so, if adopted, this amendment would not change the scope of Part 1.
The Government’s intention with Part 1 is for the PSFA to become one of the ways that public authorities deal with fraud, by requesting that it take on a case for investigation, enforcement or recovery. The PSFA is also happy to support other public authorities in their own fraud investigations, and already does so. Which option is best will depend on the facts of the case.
Amendment 24 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 at this scale should already be investigated and reported on. There are established audit, assurance and reporting processes for this.
In addition, the facts of the case would already have been established by the PSFA, and learnings taken from it will be shared on a cross-government basis to aid the prevention of fraud—hence the establishment of the PSFA within the Cabinet Office. This amendment would create an extra burden on each department and replicate the work of the PSFA, and is unnecessary as its core aim will already be addressed through other activities.
I hope that this explanation reassures the noble Baroness, Lady Finn, and that she can therefore withdraw her amendment. I expect that we will discuss more of this in great detail as we continue.
Baroness Finn (Con)
My Lords, I thank the Minister for her response. As we draw the debate on this group to a close, I thank all noble Lords who have engaged with the issues—so I thank the Minister. We are clear in our recognition that tackling fraud must go beyond enforcement. It must be a culture embedded across every public authority and government department. Although it is right that the Public Sector Fraud Authority must have the powers and resources it needs to act decisively, with these amendments we highlight that fraud prevention cannot and must not rely on external investigation alone. The work must begin within departments themselves.
Amendment 2 reflects our view that the Minister for the Cabinet Office should have a duty to support public authorities in carrying out their own investigations, and the amendment seeks to use the resources of the PSFA to encourage early intervention, the development of internal counterfraud capability, and ensuring that every public body has the tools to act on fraud swiftly and effectively to counter fraud at home.
Our Amendment 24, which would require internal reviews for significant losses, is a proportionate and reasonable step towards building a culture of accountability across the public sector. If a public authority loses £50,000 or more through fraud or overpayment, it is right that the public body must work to understand what went wrong, and it is right that it must explain this to the Minister. Without our amendment, we risk allowing the same mistakes to recur, with no mechanism for learning or redress within the public body itself.
Our amendments seek to promote a culture of responsibility. They seek to ensure that no department or authority sees fraud as someone else’s problem or as a matter that will simply be dealt with elsewhere. The message that these amendments send is clear: tackling fraud must begin at home. These proposals are balanced, targeted and grounded in practical experience. I hope the Government will reflect carefully on these points and consider working with us to embed this into the Bill. I beg to withdraw the amendment.
Viscount Younger of Leckie (Con)
My Lords, I thank the noble Baroness, Lady Kramer, for raising whistle- blowers in respect of the Bill and for highlighting the importance of the protection of those who feel that they must speak out if they see an action or actions that they feel could be fraudulent or not in the public interest. Indeed, it could be actions that should be being taken but are not.
Ensuring that we have adequate protections for whistleblowers is vital to building confidence with the people we need to come forward if we are to tackle fraud. In respect of public sector fraud, such people are employed in local authorities or in the Civil Service. If certain protections are not in place, this can have a detrimental effect on recruitment, retention and perhaps career management.
In tackling fraud, we will inevitably ask—and, in fact, trust and expect—public officials to make the right calls and decisions in their day-to-day work. These decisions can often be incredibly tough, involving sensitive matters and perhaps involving close colleagues. So reassuring public sector workers that they will be protected when they do the right thing is of paramount importance, and we would support further reassurance from the Government that whistleblowers will be protected and supported when they come forward.
Amendment 3, tabled by the noble Baroness, Lady Kramer, presents a sensible proposal for the creation of a whistleblowing reporting channel that would guarantee anonymity and protect whistleblowers, who would themselves be legally defined. The noble Baroness might like to explain in her summing up, however, what she means by
“a process to update whistleblowers in cases of fraud”.
How would she see this work?
On her Amendment 66, we do not think it necessary to establish an office of the whistleblower, although I understand that, as she said, this is very much a probing amendment. It sounds laudable, with laudable aims, but we see this as potential overregulation—the setting up of another body, at an unknown cost and with an unknown number of employees and resources—when we believe that what we need is a proportionate and workable system, as the noble Baroness herself has said in her Amendment 3, and an established process by which fraud is able to be reported with protections in place.
There is a danger that if you set up a body such as a specific office for whistleblowing, you can perhaps unwittingly encourage too many false flags, where whistleblowing is almost encouraged and a bureaucracy is created. It is important that evidence of whistleblowing is protected only where it is substantive and where there are protections in place—not flimsy or based on hearsay, for example. Of course, wrongful reporting can have a devastating effect on people’s lives.
These are really questions for the Government to answer, because the noble Baroness, Lady Kramer, and I share the same objective: pushing and encouraging the Government, in the Bill, to demonstrate practically what actual new protections there are for those who see or perceive fraud in their area of public sector work, bearing in mind that fraudsters can be cunning and clever. It often surprises one who is ultimately seen to commit fraud—it is often in an unexpected area or from people you would never suspect of committing fraud.
I agree with the noble Baroness, Lady Kramer, that it is good to make comparisons with other whistleblowing processes, which she did with a deal of eloquence. I want to make a comparison with the NHS, as I understand that the NHS has upgraded its protections for whistleblowers. Thus Health Education England is listed as a prescribed person under the Public Interest Disclosure Act 1998, which was referred to by the noble Baroness, Lady Kramer. That means that workers at other organisations or companies who wish to raise concerns—in other words, whistleblowing—relating to the education, training and sufficient supply of healthcare workers at their employing organisation or company can do so to HEE. Prescribed persons enable workers to make public-interest disclosures to an independent body where the worker would prefer not to disclose to their employer direct, and the body may be able to take action on the disclosure.
We know that whistleblowing is the term used when a worker provides information to their employer or a prescribed person relating to wrongdoing. The wrongdoing will usually, though not always, relate to something that they have witnessed at work. This is also known as disclosure, which was raised by the noble Baroness as well. To be protected by whistleblowing law, a disclosure must be a qualifying disclosure. That means that the worker making the disclosure believes that doing so is in the public interest and it relates to one of the following categories, which I suspect the Committee will be aware of: criminal offence, breach of a legal obligation, miscarriage of justice, endangering health and safety, damage to the environment and covering up wrongdoing in any of those categories.
Workers have the right not to be subjected to any detriment as a consequence of making a disclosure. To qualify for protection when making a disclosure to a prescribed person, workers must have a reasonable belief that the matter falls within the prescribed persons remit and that the information disclosed is substantially true. Meeting these criteria is referred to as making a protected disclosure. Workers are encouraged to seek independent advice to help consider whether they might meet the criteria for making a protected disclosure. As the Committee may know, that can be obtained from Public Concern at Work or Speak Up or through a legal representative. In addition, HEE is required to report in writing annually on whistleblowing disclosures made to it as a prescribed person without identifying the workers concerned or their employers.
Rather than set up a new whistleblowing body— I have used the HEE as an example—I press the Government to find an existing mechanism, maybe within the Cabinet Office, a body that exists already and can be set up in the public sector and defined as a prescribed person specifically for public sector fraud, rather than setting up a particular office for the whistleblower.
We need to recognise that, although we are asking workers to do the right thing, we are also asking them to do something that is emotionally difficult and distressing. People should be empowered to stand up for the correct use of public money, which can happen only if cast-iron reassurances can be given to them.
With those explanations, I hope the Government will consider these points as they progress with the Bill, focusing on practical, sensible but proportionate proposals that will encourage people—which is the whole point—to come forward when they are made aware of some wrongdoing.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I welcome the amendments tabled by the noble Baroness, Lady Kramer, on the important issue of whistleblowing. Protections for whistleblowing are a key aspect of counterfraud investigations. A huge amount of the information originally received to guide our investigations comes from whistleblowers, so making sure that the appropriate protections are in place is incredibly important going forward. I welcome the opportunity to explore what more can be done and to reflect on what currently exists.
It will not surprise the noble Baroness that I am unlikely to commit to a new agency within this Bill today, but I welcome the opportunity to meet her to explore in more detail anything that she believes we can do within the confines of the Bill. I sat through a similar debate on the Armed Forces Commissioner Bill, when we also touched on these issues. I would like to reassure the noble Baroness, Lady Kramer, that the meeting she suggests is one that we have already discussed, but we will now advance it. I will meet all the agencies that she has highlighted to talk about what they do and do not require.
Currently, to qualify for the whistleblowing protections provided by the Public Interest Disclosure Act 1998, as inserted into the Employment Rights Act 1996, a worker needs to have a reasonable belief that their disclosure tends to show one of the relevant failures set out in legislation, that the disclosure is in the public interest and that the disclosure needs to be made to the relevant person—for example, the employer, a legal adviser or a prescribed person. The noble Baroness, Lady Kramer, touched on the challenges of using “workers”. DBT guidance sets out the definition of a worker as extending to agency workers and individuals supplied via an intermediary; non-employees undertaking training or work experience as part of a training course, otherwise than at an educational establishment; self-employed doctors, dentists, ophthalmologists and pharmacists in the NHS; police officers; student nurses; and student midwives. So although it is “worker”, there is a slightly wider definition.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, this has been a very useful debate, and I hope to be able to give some clarity on some of the issues that have been raised. It would be remiss of me, and I should have done it earlier, not to thank the noble Lord, Lord Maude, for starting the process of where we have ended up today. He and the noble Baroness, Lady Finn, started a great deal of this under the previous Government. We are now seeking to ensure that the PSFA has the appropriate powers to deliver what they started.
Before I move on to the substance of this group, I think it would be helpful to respond to a question that was touched on by the noble Lord, Lord Palmer, about what a public authority means with regard to the Bill and what we are actually talking about. Public authority is defined in Clause 70 “Interpretation”. The definition is:
“‘public authority’ means a person with functions of a public nature so far as acting in the exercise of those functions”.
It would include, for example, other government departments, arm’s-length bodies and local authorities. This is a broad definition that takes in a wide range of organisations and delivery mechanisms for public functions to ensure that fraud against the public sector in its widest sense can be tackled.
Whether a body comes into the definition of public authority will be tested before a case is adopted, but let us be clear that, especially when we are talking about fraud, it would be surprising if someone was targeting the public sector and they stopped at the remit of one government department just because we define it as one government department. We all know, and noble Lords who have served in government are even more aware, that MHCLG, the Cabinet Office, the DfE and the Department of Health will have multiple users that may touch on different levels of fraud, which is why it is important that we have the breadth of definition.
On the substance of this group, Amendment 4 would remove error from the scope of the amounts that the Minister can recover. This would significantly change and restrict the scope of the PSFA’s recovery function. It would mean that, if the PSFA investigates a case and does not find fraud but does find that a person has had money that they were not entitled to, it would not be able to take action to recover it, including using the debt powers in the Bill. The PSFA would have to refer the matter back to the public authority concerned to take whatever error recovery actions it is willing and able to take.
In response to concerns raised by many noble Lords, including the noble Baroness, Lady Fox—I am pleased that I was able to make her happy at the beginning of Committee stage—it is very likely that the PSFA will encounter payments that could be classed as error. Fraud and error are difficult to separate. Indeed, the National Audit Office and the PSFA do not attempt to do so in their measurement methodology. This is because proving fraud requires evidence of intent, and it is often impractical or impossible to do so. One of the purposes of the Bill is to do more to evidence fraud and take the right action to tackle it, but I hope noble Lords will agree that when you have money that you are not entitled to, you should pay it back and it should be recoverable if it is not paid back. That has always been a principle that the Government have adopted.
Before I move on to wider detail, I want to touch on some comments made by the noble Baroness, Lady Finn, on the loophole for public authorities. Public authorities are the victims, not the perpetrators. Even without powers, the PSFA enforcement unit is getting referrals. We do not foresee a shortage of cases coming our way. The PSFA must be able to triage and pursue the most impactful and value-for-money cases. This is a genuine question—which is why we are here in Committee—of culture and approach, and one that we should have a conversation about. The Government genuinely believe that a collaborative approach with other government departments will yield more co-operation in terms of investigations than a more aggressive approach. Being invited in will ensure that government departments actively engage with us, as has proven to be the case during our pilot so far.
I believe it will assist your Lordships’ Committee if I briefly set out the circumstances in which a public authority would recover an amount of money. Accounting officers of public authorities are required to follow the principles set out in the HM Treasury publication Managing Public Money in annexe 4.11, which is— apparently—readily available to noble Lords. The relevant section states:
“Most organisations responsible for making payments will sometimes discover that they have made overpayments in error. In principle public sector organisations should always pursue recovery of overpayments, irrespective of how they came to be made. In practice, however, there will be both practical and legal limits to how cases should be handled. So each case should be dealt with on its merits”.
Amendment 5 would remove the words:
“only at the request of that public authority”
from Clause 2(1). I believe the intention of this amendment is that PSFA should be able to simply decide to open a fraud investigation irrespective of the wishes of the target of fraud, in the same way that the police can open an investigation into other crimes. However, omitting the deleted words but not otherwise changing the clause would create an element of uncertainty over who is responsible, in the first instance, for dealing with fraud against a public authority. At the moment, it is clearly the public authority. If the intention of this amendment is that it should be for the Minister for the Cabinet Office to decide to investigate, whether or not the public authority wants the Minister to step in, this may conflict with the preservation of public authorities’ own fraud functions in Clause 2(5)(b).
Responsibility for managing fraud is, in the first instance, given to accounting officers of public authorities, as set out by Managing Public Money annexe 4.9—which I am sure all noble Lords have read. There may also be other unintended consequences by the adoption of this amendment, specifically whether the revised working of the clause might actually compel the Minister for the Cabinet Office to investigate all public sector fraud. That is something beyond the current capacity of the PSFA, which I am sure we will discuss in great detail later in Committee. If the PSFA finds fraud off its own bat, as it were, it might not then be clear on what legal basis, if any, it would be able to recover it, as it would not be acting on behalf of the public authority per se. The Government seek to maintain the status quo of acting at the request of public authorities as a matter of operational practice as set out in this Bill, in order to prevent any confusion.
The noble Lord, Lord Maude, raised a query about the Treasury not taking this seriously. The PSFA reports to the Cabinet Office and HMT. It works closely, advising HMT on fraud as part of the spending review process. I hope that that is somewhat reassuring, given where we are in the spending review process.
Amendment 6 would remove the restriction in Clause 2(2) on the PSFA undertaking cases at the request of the DWP and HMRC. This would be a significant change in policy intent. HMRC and DWP have 84% of the counterfraud resource across His Majesty’s Government, including thousands of people and their own designated powers. The PSFA role envisaged is supporting those departments which do not have well-developed fraud investigation, enforcement and recovery functions or powers, not seeking to subsume those with targeted powers that are already well established. For once, this is a government department not seeking to gather other people’s power and staff. Neither HMRC nor DWP need the further assistance of Part 1 of this Bill and there are many other public authorities which do.
Baroness Kramer (LD)
If the Minister does not mind, can I pick up the issue that the noble Lord, Lord Maude, raised? Nobody knows how to manage government more closely than him; he is deeper steeped in this than any of us. How does the Minister anticipate dealing with the fragmentation of investigation? If HMRC is chasing down someone, you can almost be certain that it will be dealing with public procurement in a different way and that there will be other issues around that particular entity. Is there a mechanism she sees that will break down those siloed lines?
Baroness Anderson of Stoke-on-Trent (Lab)
I reassure your Lordships’ Committee, particularly the noble Lord and the noble Baroness, that the PSFA and HMRC or the DWP can and will do dual investigations and work closely together. They have their own powers. I think the case of HMRC is probably more relevant than the DWP, but they will work collaboratively and do joint operations while having their own separate remits. It is not that they will not work together; however, we anticipate that especially where there is evidence—as I said earlier, it is about breadth of government—we would expect the majority of the PSFA’s work to be outside of those government agencies or public authorities.
Amendment 7 is unnecessary because it straight- forwardly duplicates matters already dealt with elsewhere in the Bill. Clause 1(1)(a) states that the Minister is given the function of investigating “suspected fraud” against public authorities. Clause 70, the interpretation clause, defines “suspected fraud” as
“conduct which the Minister has reasonable grounds to suspect may constitute fraud”.
I hope that the noble Baroness, Lady Finn, is content that the issues she raises in this amendment are appropriately dealt with.
Finally, Amendment 8 would restrict the fees that the PSFA could charge a public authority for investigation, enforcement or recovery action to no more than the amount that is recovered. Cash recovery is the hardest part of enforcement. Many initiated investigations will close without reaching the recovery stage—for example, because no fraud is found, an alternative approach is taken or because recovery is not possible even if the investigation is successful. The amendment would mean that no fee could be charged in those cases, despite the PSFA having necessarily invested resources into the investigation with the agreement of the public authority to have taken the case and undertaken the actions in the first place. That does not represent good value for money and runs contrary to the guidance in Managing Public Money on cost recovery.
In the most serious cases, cash recovery may not be the main or even a major factor; it will be the disruption of criminal gangs and prosecution of serious offenders. Such cases may be long, complex and multi-agency, and costs will probably exceed any potential recovery quite quickly. In cases of organised crime, assets may be irretrievable, laundered beyond reach or overseas. The public interest in investigation is to punish the criminals. The adoption of this clause would also fail to acknowledge or promote the deterrent effect of the investigations. The PSFA cannot be restricted in the cases that it selects by how much of its costs it can recover; that is counterproductive and counterintuitive.
I have two other points to raise.
Lord Vaux of Harrowden (CB)
I beg the noble Baroness’s pardon but, if the PSFA can charge more than it recovers, is that not a massive disincentive for the public authority to ask it to come in to begin with, given that it has to ask ?
Baroness Anderson of Stoke-on-Trent (Lab)
There is a balance here, because of the positives that go alongside this. There is a genuine issue that, if a criminal gang is actively targeting a public authority, the investigation and prosecution of those people in itself is something that the public authority would wish to see. There will always be costs involved in criminal activities, even if they cannot all be recovered. The police actively investigate criminal gangs, with the pragmatic understanding that not all costs can be recovered. There is also a deterrent effect in prosecuting people to ensure that everyone is aware that, if you defraud the state, you will be prosecuted. We will not always be able to get the money back, but we must be realistic about what is in front of us and what we can achieve.
Baroness Kramer (LD)
I have not thought this through, but a no win, no fee approach seems quite useful. If the PSFA, which will have many successful prosecutions where it brings in fees that are well above its actual costs, it will have a resource that will surely allow it to pursue cases where there is not a successful recovery but where it is important for the case to go ahead. I am just wondering whether there is not a model that might work more effectively.
Baroness Anderson of Stoke-on-Trent (Lab)
The noble Baroness makes an interesting point. That is why the Cabinet Office and the PSFA are adopting a test-and-learn approach to see what will and will not work. Having said that, we have to be realistic that we will not always be able to recover funds and someone has to pay for the cost of the investigation. The balance of what that looks like is something we will have to explore as cases progress.
Baroness Kramer (LD)
My Lords, I will just pick up the issue that has been raised by the noble Lord, Lord Vaux. We are dealing tomorrow with a statutory instrument that attempts to provide safeguards against banks and other organisations deciding to close people’s bank accounts or to deprive them of other financial services. It is often the people who are under the most financial pressure who find it difficult to get banked in the first place. They can get a basic bank account if they are lucky, but to get a bank account with any of the features that make financial life reasonable is exceedingly difficult. I therefore share the noble Lord’s concern that we do not start a hare running.
Banks are eager to offload people who do not have a lot of exciting and interesting activity. If this notice gives them an excuse to do that, I can see that an awful lot of banks will seize that opportunity, so I raise this as an issue to be wary of. In fact, we have an SI going in the opposite direction tomorrow, so this is really for the Government to make sure that one hand knows what the other hand is doing.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I apologise in advance, because I think we are about to have a vote—or not, if the noble Baroness, Lady Kidron, does not press her Motion.
Some significant points have been touched on in this very short debate. I will respond to each amendment in turn. Amendment 9 looks to introduce a test of reasonableness to determine whether an authorised officer has appropriately considered that information sought is both necessary and proportionate. Clause 3(1)(a) and (b) already set out the test for issuing an information notice: an authorised officer will have the power to compel information only when it is necessary and proportionate to do so, and only when the information being requested relates to a person whom an authorised officer has reasonable grounds to suspect has committed fraud.
Lord Vaux of Harrowden (CB)
What the Minister says is not quite true. It is where “the Minister considers” that it is necessary and proportionate to do so, not simply where it is necessary and proportionate to do so. That is an important difference—hence the reasonableness requirement.
Baroness Anderson of Stoke-on-Trent (Lab)
The noble Lord is going to inspire me to go into more detail. There must be reasonable grounds to suspect that fraud has taken place, which follows the basic rule that there must be an objective basis for that belief. It must be genuinely suspected that the fraud has been carried out by the individual, and the belief must be based on facts and/or information that are relevant to the likelihood of needing to obtain information for the purpose of investigating suspected fraud against public authorities. It must be objectively reasonable for them to suspect this, given the information available to them. The reasonable grounds test is a standard and widely accepted test used by various organisations, including the DWP, the Serious Fraud Office and the police. We are seeking to replicate that.
Baroness Anderson of Stoke-on-Trent (Lab)
I shall begin where I left off. I was responding to Amendments 12, 13 and 14. It is necessary that an appropriate period is provided for a first or third party to request a review of an information notice. That is why we introduced the seven-day period for information holders to request a review. This ensures that those attempting to hold up an investigation by requesting a review for no necessary or legitimate reason do not hold it up for an extensive period. If all safeguards were fully utilised as outlined across the Bill, it could already result in delays to the investigation of two years or more, potentially enabling continuing activities that defraud public authorities in that time. We are seeking to make every effort to balance appropriate safeguarding with effectiveness and protecting the public purse. Extending this period to 28 days would add an unnecessary delay in the investigative process.
Amendment 14 would have no material effect over and above what has already been drafted as, in the event that the notice is upheld or varied, details will be provided to the information holder in order to inform their next steps, should they continue to not comply. On Amendments 15 and 16, while I am sympathetic to the intent of the amendments tabled, we believe them to be unnecessary. It is vital that any data-sharing powers between public authorities are done in a way that is relevant and effective for an investigation. An example of this would be sharing information with the public authority that has been defrauded or with the Serious Fraud Office. Imposing a prescriptive list of persons—who could regularly change—who can have information disclosed to them will restrict the intent and scope of the Bill. The clause details that information can be disclosed only for the purpose of exercising the core functions of the Minister, which already restricts to whom and for what purpose the information can be disclosed.
The Bill already contains safeguards to ensure that all data processing, including data-sharing, must be done in accordance with current data protection legislation, which is why I hope that the noble Baroness, Lady Finn, is prepared to withdraw her amendment.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, your Lordships are speedy and my Chief Whip is confused, but I appreciate the opportunity to discuss some important issues and to put on the record things that I hope will reassure noble Lords.
Before I move to the substance of the amendments tabled by the noble Baroness, Lady Finn, I will respond to the question posed by the noble Baroness, Lady Kramer. I have not met StepChange, but that is an interesting suggestion. We have engaged with wider stakeholders. With regard to how the PSFA will be using the PACE powers that we request, that is in the next group of amendments so we will discuss those in more detail then, if that is okay. I will revert, and I will ensure that I have a meeting with StepChange before we progress such conversations. The people behind me are nodding at me.
As this group of amendments addresses three distinct areas of concern, I will take those in turn. I will start with the recruitment of authorised investigators. Under Amendment 17, the Minister would have to prepare and publish guidance on the process by which authorised investigators were appointed within six months of the Bill coming into force. We do not believe that the amendment is necessary. The PSFA is bound by well-established Civil Service recruitment principles under- pinned by relevant legislative provisions. All recruitment to the role of authorised investigator will be based on merit via fair and open competition.
Clause 7(3) of the Bill states that an individual can become an authorised investigator only if they have been authorised by the Minister to exercise the PACE powers conferred in the Bill. The Minister will not make such a determination unless they are content with the evidence provided to them demonstrating that the candidate has been suitably trained in the use of PACE powers and is ready to take on the responsibility of utilising them safely. All authorised investigators will receive bespoke training that will cover all aspects of investigative practice, including the relevant PACE powers. Training will be to the same standard as other law enforcement bodies that use PACE powers.
Authorised investigators will work to clear operational guidance to ensure that they are delivering the use of the powers in a lawful and transparent way. They will also become members of the government counterfraud profession, and their training will align with the profession’s investigator standard. Existing investigators within the PSFA’s enforcement unit, who will work to become the PSFA’s first authorised investigators, bring with them a wealth of relevant knowledge, skills and experience from previous roles in both the police and investigation services within government departments. These powers will be in safe hands. I hope noble Lords find that reassuring.
The disposal of property is incredibly important. On the face of it, the purpose of Amendment 18 is to remove the provision of the PSFA to make any changes to the relevant property that the court considers necessary for the purposes of avoiding or reducing any risk of the property being used in the commission of an offence. Noble Lords have indicated in the explanatory statement for the amendment that they wish to probe
“the Government’s expectations of what types of changes to seized property may be deemed necessary by the courts”.
Lord Vaux of Harrowden (CB)
My Lords, the noble Baroness, Lady Finn, has said it all, so I will be very brief. I have to say that I am extremely uncomfortable with giving these sorts of police powers to civil servants and others. We have an example in the recent past of powers being used inappropriately by a non-police agency in the Post Office Horizon situation. I am very uncomfortable about it. I am interested to hear why we should not allow the police to deal with these things and why we should give them to civil servants, but I will take some convincing.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I think it is now my turn to say, “I’m back”. This is a very important part of the Bill, and it is right that we discuss it in some detail. It was also raised by the noble Baroness, Lady Kramer, in the previous group.
I thank the noble Baroness, Lady Finn, for flagging her concerns regarding the PSFA seeking powers under the Police and Criminal Evidence Act 1984. For ease, I will now refer to it as PACE. Clause 7 designates authorised investigators with the necessary authority to use limited provisions from PACE within the remit of public sector fraud investigations. Specifically, they are the power to apply to the courts for a warrant to enter and search premises and seize evidence and special provisions to apply to the courts to gain access to certain types of material which are regarded as excluded material or special procedure material. These powers will only be used in criminal investigations to enable all reasonable lines of inquiry to be followed and all relevant evidence to be collected.
To reassure noble Lords, when executing a search warrant, authorised investigators will be accompanied by an officer who has the powers of a constable. This could be either a police officer or an officer from another government department, such as HMRC or the NCA, with the powers of a constable. They will ensure the safety of the authorised investigators and will be able to use their own powers of arrest or reasonable force if necessary. We are not seeking for the Cabinet Office to have powers of arrest. They will always be accompanied by appropriate officials who have powers under PACE.
Authorised investigators will adhere to the relevant PACE codes of practice, which provide robust safeguards around the use of these investigative tools. Every application for a search warrant or a court order under PACE must be scrutinised and authorised by the court. Authorised investigators will also be subject to robust internal and external scrutiny. This will come from the PSFA’s independent person, as appointed under Clause 64, His Majesty’s Inspectorate of Constabulary and Fire and Rescue Services and, as required, the Independent Office for Police Conduct.
To reassure the noble Lord, Lord Vaux, we are very aware of the Horizon scandal and the impact that that had on normal people’s lives. We want to put in every safeguard to make sure, and we hope we have, that these powers could not be used to replicate such a scandal. The PACE powers sought in Clause 7 are the minimum necessary to allow the PSFA to effectively undertake criminal investigations. We are not seeking the full use of PACE powers under this clause for the PSFA.
Turning to Schedule 1, this modifies the provisions of PACE adopted in Clause 7 so that they apply appropriately to authorised investigators within the PSFA. Schedule 1 provides a route for authorised investigators to apply to the court for access to excluded material. Access to special procedure material is provided under Clause 7 and Schedule 1 to PACE. It also establishes a legal framework that allows the PSFA to transfer evidence seized under PACE to other organisations, securing the chain of command—I mean the chain of evidence. It has been a long week; I was getting married a week ago.
Lord Vaux of Harrowden (CB)
My Lords, the Minister mentioned a number of safeguards, including the authorised officer being accompanied by a police constable. I cannot find any of that. Where can I find those safeguards?
Baroness Anderson of Stoke-on-Trent (Lab)
The noble Lord raises a very interesting point. It is in the guidance, but I will write to him so that he has a written record.
Baroness Finn (Con)
My Lords, I thank the Minister and repeat that to spend her honeymoon in this way is truly admirable.
Our proposal in this group is straightforward: that Clause 7 and the corresponding Schedule 1 do not stand part of the Bill. The powers set out in them are neither minor nor administrative; they are both sweeping and consequential, as the noble Lord, Lord Vaux, pointed out. They are powers to enter private premises, to search them in the absence of the owner, to seize property and to retain it indefinitely if deemed necessary.
Clause 7 permits junior civil servants in the Cabinet Office to apply for search warrants in connection with indictable offences. These officials, who are under no legal obligation to possess police-level investigative training or operational experience, would be empowered to enter someone’s property and seize anything they believe is linked to a criminal offence. They may seize computerised information. They may retain this property for as long as they consider necessary. These are serious powers. They are, in every meaningful sense, police powers, and we believe that it should be the police who exercise them.
That is not a theoretical objection; it is a practical one. If the Government believe that the investigation of fraud against the state demands this level of intervention, they should work with law enforcement to build capacity, not attempt to bypass it—as I said previously. The public expect these duties to be undertaken by the police, not officials from within the Cabinet Office.
We are not proposing an end to investigations by the PSFA—far from it. We recognise the importance of this work, and the Government’s own framing of this clause makes it clear that investigations can proceed substantially without the need for these powers. If that is the case, transferring this responsibility to trained police officers, rather than allowing civil servants to exercise it, would not hinder the PSFA’s ability to investigate fraud. It would ensure that intrusive state powers are exercised by those who are properly equipped to wield them.
This is a matter of constitutional balance and operational integrity. Clause 7 and Schedule 1 confer powers that go beyond the traditional remit of the Civil Service. They risk blurring the lines between executive authority and law enforcement. We therefore hope that noble Lords across the Committee, and the Government, will consider supporting this proposal as a measured change, keeping powers in the remit of those who are best placed to exercise them, while ensuring that PSFA investigations can continue in the pursuit of the objectives we all support.