Public Authorities (Fraud, Error and Recovery) Bill

Baroness Finn Excerpts

Report stage
Tuesday 21st October 2025 Lords Chamber

Moved by

[Baroness Finn]

27: Clause 67, page 36, line 1, at end insert—
“(A1) Investigatory and enforcement powers under sections 3 (information notices), 7 (Police and Criminal Evidence Act 1984 etc powers), 17 (direct deduction orders), and 39 (deduction from earnings orders) of this Act shall not be exercised except as provided for in this section.”Member’s explanatory statement
This amendment, together with others to this clause in the name of Baroness Finn, would ensure greater ministerial and parliamentary oversight when the powers provided for in this Bill are exercised by authorised officers on behalf of the Minister for the Cabinet Office.

[Baroness Finn (Con)]

My Lords, these amendments are tabled in my name and that of my noble friend Lord Younger of Leckie. I am also grateful for the support of the noble Lord, Lord Vaux of Harrowden. The amendments concern the crucial questions of ministerial and parliamentary oversight of the extensive investigatory and enforcement powers granted under the Bill. The Bill sets out to create a powerful investigatory body with wide authority, but the lines of accountability are unclear.

The first of my amendments roots the exercise of the powers provided for in this part of the Bill firmly within the framework of the Act itself. It makes it clear that investigatory and enforcement powers under Clauses 3, 7, 17 and 38—covering information notices, entry and seizure powers, direct deduction orders and deduction from earnings orders—may not be exercised except as expressly provided for in this clause. This is a vital safeguard. It ensures that these powers cannot be used arbitrarily or for purposes beyond those envisaged by Parliament. In essence, it ties the use of such powers to the functions and objectives clearly defined elsewhere in the Bill, preventing mission creep, ensuring accountability and anchoring their use in clear statutory purpose.

The second amendment, which is closely related, builds on that principle of restraint by setting out a clear system of authorisation, accountability and record-keeping. It would require that the most serious powers—those involving access to personal financial information, entry and search of premises, or the recovery of large sums of money—can be exercised only with explicit ministerial approval. This is not just bureaucracy; it is responsibility. It makes Ministers answerable for the exercise of powers in their name.

Other powers of a lesser nature would require sign-off at senior Civil Service level or above, ensuring that every exercise of authority is subject to appropriate scrutiny and senior oversight. In addition, the PSFA would be required to maintain a register recording each use of these powers—the date and nature of the action, the official or Minister who authorised it, and the justification for doing so. That register would then be laid before Parliament annually.

If we are to give such considerable powers to civil servants acting on behalf of Ministers, we must be absolutely certain that there are clear lines of responsibility and clear records of decision-making. Without those, we risk creating a dangerous vacuum of accountability. Let us be clear: the significant new powers which the Bill grants to officials are not to be taken lightly. They go to the heart of personal privacy, financial autonomy and, potentially, due process.

Under this amendment, certain especially intrusive powers, such as requiring the disclosure of personal financial records, applying for search and seizure warrants or imposing deduction orders of over £10,000, would require explicit approval from a Minister of the Crown. This would ensure that decisions with the potential to impact individuals’ lives in a profound way are not taken in isolation by junior officials, because if something goes wrong or those powers are misused or abused, it will not be the officials who are hauled before Select Committees or public inquiries—it is the Minister for the Cabinet Office who will be called upon to account for actions taken in his or her name, of which they may have had absolutely no knowledge. It is therefore vital that the Minister is satisfied that the action is justified and is willing to stand behind that decision if challenged. This line of accountability is crucial for proper oversight; it also protects the Minister.

We have seen through painful and enduring examples such as the Horizon scandal what happens when the chain of accountability between operational decision-makers and Ministers is allowed to break down. Victims are left without recourse, officials retreat into anonymity and Ministers are left to apologise for decisions they did not make and could not have prevented. We should learn from that experience. We should ensure that the exercise of coercive state powers, particularly powers as sensitive as these, is traceable, reviewable and ultimately answerable to Parliament.

These amendments were well received and supported by noble Lords across the House in Committee. I thank the noble Lord, Lord Vaux, for adding his name, and other noble Lords who supported these proposals. These amendments protect the Minister, the department and individuals who may be subject to these powers. They ensure that no power is used without proper authorisation, that every use is recorded, and that Parliament can see each year how these powers have been exercised and by whom. We support the Government’s ambition to tackle fraud and error in the public sector, but we must always remember that power without responsibility breeds mistrust. This is not an abstract constitutional point. It is a matter of basic fairness, good governance and trust in public administration.

For those reasons, this amendment is of vital importance. It provides the clear lines of authority and accountability that must underpin any responsible use of the significant powers in the Bill. The Government may say that safeguards already exist, but those safeguards are internal, opaque and unenforceable by Parliament. We are proposing a statutory framework for oversight that gives Ministers clarity, Parliament visibility and the public reassurance that power is being exercised carefully, lawfully and transparently. This amendment is not about obstructing the Government’s aims; it is about protecting them and protecting the integrity of the system we are building. I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, the Bill creates a wide range of unprecedented and intrusive powers for both the Cabinet Office and the DWP. Throughout the course of the Bill—and in its previous incarnation under the last Government—my focus has been on trying to ensure that these powers are restricted to what is actually required for the purposes of dealing with fraud against the public sector and that there are appropriate and strong safeguards against overreach and overuse of these powers.

I recognise and acknowledge that the Government have introduced a lot of safeguards into the Bill compared to those we had when we were discussing similar measures under the aborted Data Protection and Digital Information Bill last year. This is a much better Bill, but it still introduces a wide range of new powers, and, while better, there are still areas where the safeguards should be improved. In particular, when creating powers of this nature, it is important that the safeguards should be in the Bill and not left to codes of practice or internal departmental rules, both of which can be changed without scrutiny. We will come back to that theme several times later today.

These two amendments cover the police powers that the Bill would give to the Cabinet Office and the Public Sector Fraud Authority. I have serious doubts as to whether it is genuinely necessary to give search, entry and seizure police powers to civil servants anyway, but if we are to do so, it is essential that there are very robust safeguards around their use.

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[Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)]

My Lords, while I appreciate the intention behind these amendments, the reality of their drafting would give Ministers the ability to block politically inconvenient investigations. They would prevent counterfraud enforcement at any kind of scale, and they would expose the identities of civil servants investigating serious criminals. On that basis, we cannot accept them.

Although we cannot agree to the amendments, it might surprise the noble Baroness that I believe there is a lot that we agree on. We agree that the measures in the Bill are powerful and must be used with care; we agree that staff must be appropriately trained before they are able to use these powers; and we agree that robust oversight, both internal and external, is essential.

With regard to ministerial oversight, for as long as the powers sit in the Cabinet Office, they will be exercised in the name of the Minister for the Cabinet Office. However, the amendments go beyond accountability; they bring the Minister into specific operational decisions. It is not appropriate to mandate that the Minister for the Cabinet Office be brought into hundreds of operational decisions in the way that the amendments suggest.

First, Ministers must be free to delegate, or the work of government will grind to a halt. Your Lordships’ House would be rightly concerned if Cabinet Office Ministers, who need to make government more effective and efficient, were spending their days taking detailed counterfraud operational decisions.

Secondly, it would be inappropriate for Ministers—of whichever party happens to be in power—to take operational decisions on individual enforcement cases. That would make enforcement political. It would necessarily expose every case to charges of political interference; it would place honest Ministers in an invidious position; and it would give dishonest Ministers the power to block investigations that were politically inconvenient.

However, the noble Baroness is right that Ministers should know what is happening in their name. Ministers are accountable and must therefore choose how these powers should be delegated, not simply hand them over to civil servants and forget about them until a crisis occurs, which I know is a genuine concern. In response to the noble Baroness’s challenge, let me set out what Ministers will do before any of the powers are used.

Ministers will scrutinise the set-up of the PSFA, its plans to use the powers, the oversight arrangements in place, and the skills and experience of authorised officers and authorised investigators. They will also decide what thresholds they wish to set and what constraints they wish to place around the exercise of powers in their name. Ministers will decide what reports they want to receive and their frequency. They will also decide how they wish to appoint authorised officers and authorised investigators, and will take a strong interest in the training, experience and professionalism of those staff. Finally, Ministers will be accountable to your Lordships’ House and the other place to show that they have done that. I am happy to commit to Ministers bringing forward a statement before the powers are first used to demonstrate that these commitments have been fulfilled. Every time there is a change of Ministers, officials will ask for the new Minister’s view on these questions, and not silently continue out of sight, which I know is a genuine concern of the noble Baroness. She is absolutely right to draw attention to how delegation works in government; it is for Ministers who are accountable to decide on the appropriate delegation.

I turn to the seniority of civil servants provided for in proposed new subsection (1B) in Amendment 28. By requiring senior civil servant sign-off for every use of the powers in Part 1, the noble Baroness seeks to set the bar for internal authorisation too high. Currently, the PSFA’s enforcement unit is relatively small—I love using the word “relatively”; it is not large—so the number of information notices envisaged in a year, for example, could all be reviewed by a senior civil servant. However, we are making this legislation to last decades, and its operation cannot be contingent on keeping our capacity to pursue public sector fraudsters small. At any scale, requiring excessive civil servant grading in legislation is a strict operational limitation and unnecessarily expensive.

That is why those who use these powers successfully elsewhere in government, such as HMRC, do not have these requirements in either their legislation or their practice. It is not the grade that matters; it is skills, experience and professionalism. Authorised investigators and authorised officers in the PSFA will all be members of the Government Counter Fraud Profession. They will undergo bespoke training, on top of the previous knowledge, skills and experience they bring to the role. Current members of the PSFA’s enforcement unit bring a wealth of experience with them. They include former police officers, customs officers and other civil servants who have worked in investigatory roles across a number of departments.

Noble Lords have been clear in this debate that they are particularly concerned about the use of PACE powers. Let me remind your Lordships’ House that it is the courts that will authorise any application that the PSFA makes under PACE. No civil servant—of any grade—nor any Minister can authorise a search warrant or a production order under PACE. Only the courts can authorise such actions, each and every time we seek to use them.

That means that the PSFA must be able to demonstrate, to the court’s satisfaction, that there are reasonable grounds to believe that an offence of fraud has been committed against a public authority and, as set out in PACE, reasonable grounds to believe that the material sought is likely to be of substantial value to the investigation—I repeat: it must be of substantial value. This means that the subject of an application has the protection of a court’s scrutiny before authorised investigators can execute a warrant or production order.

Moreover, the powers in the Bill are subject to review by an independent person, as specified under Clause 65. I have committed to ensure that the independent person will be passed all the concerns raised by parliamentarians, including those we have heard today. The PSFA will be subject to inspections by His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services. Inspection reports will be made publicly available and will be laid before Parliament.

Finally, I turn to the question of maintaining a register that has to be laid before Parliament. We will of course keep meticulous records of how and when powers are used; that would be a bare minimum for good investigatory practice. Those records will be made available to the independent reviewer, who will report on the use of the powers to Parliament, ensuring democratic oversight. However, laying this register before Parliament carries significant risks; it may compromise ongoing cases and expose the identities of investigators to dangerous individuals, jeopardising their safety and the integrity of the justice system. We must remember that we are talking about people who undertake criminal activity—online in some cases—so publishing the names of the investigating officers could make them vulnerable.

On the points raised by the noble Baroness, Lady Finn, and the appalling Horizon scandal, I want to take this opportunity to reassure and remind noble Lords that the scandal was based on private prosecutions that the PSFA will not undertake.

I understand the noble Baroness’s concerns and have set out how Ministers will act in an effort to assuage them, but the amendment cannot stand. It would allow dishonest Ministers to block politically inconvenient investigations, it would make counter-fraud enforcement at any scale impossible, and it would expose the names of officials to the fraudsters they are investigating. I urge the noble Baroness to withdraw her amendment.

[Baroness Finn (Con)]

My Lords, I thank the Minister for her reply, but I must be absolutely clear that we are not satisfied that the tests we have set out have been met, or with the responses received. The Government ask this House to confer upon the Public Sector Fraud Authority powers that are extraordinary in scope: powers to compel information, to enter premises, to seize property, and to reach directly into the private finances of individuals. Those are powers that, in any other context, would belong to the police. We have voiced, as has noble Lord, Lord Vaux, reservations about granting police powers to civil servants in this instance.

Our amendments seek to provide a clear statutory foundation for the exercise of those investigator enforcement powers, ensuring that they are explicitly bound by the structures and intentions set out by Parliament. They provide a clear chain of accountability: from the official who exercises the power, through to the Minister who authorises it, and to the Parliament that must ultimately answer for it.

I hear what the Minister says about dishonest Ministers choosing to block an investigation, but ultimately, if a Minister chooses to block an investigation, that is a decision for the Minister who is responsible for the public finances and who will be accountable in Parliament for his or her decision. It is not about putting Ministers in charge of operations. The clear purpose behind these amendments is to create a clear chain of accountability for great powers, because that clarity matters. That is how responsible government works, and that is how public confidence is earned and sustained. Instead, the Government’s proposal leaves the PSFA largely insulated from meaningful scrutiny. It gives immense authority to civil servants, while shielding their actions from the transparency and parliamentary visibility that such authority demands. That is not proportionate oversight.

The recent China espionage scandal has laid bare the dangers of confusion and obfuscation when questions of accountability and responsibility are left unresolved. These amendments would provide the structure and safeguards the Bill so plainly lacks. They do not remove powers, but they make those powers defensible. When we are dealing with an authority that will routinely exercise serious and far-reaching powers, there can be no room for ambiguity. We must have clarity about who is responsible, who is accountable and where the lines of authority lie. These amendments provide that certainty. They embody the minimum requirements for a just and serious law.

We have tried at every stage of the Bill to work constructively with the Government, and I appreciate the engagement we have been given, but the state must be equipped to confront fraud in a way that preserves trust. That trust is earned through transparency and accountability. These amendments offer a constructive and proportionate way to embed those principles into the Bill. We have a duty to ensure that power is never granted without accountability and that no one, however well-intentioned, operates beyond the reach of ministerial and parliamentary scrutiny. For that reason, I wish to test the opinion of the House.

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Moved by

[Baroness Finn]

28: Clause 67, page 36, line 13, at end insert—
“(1A) The exercise of the following powers by an authorised officer requires explicit authorisation by a Minister of the Crown issuing information notices under section 3 requiring disclosure of personal financial records; applications for warrants under section 7 involving entry to premises and seizure of evidence; orders under sections 17 and 38 where the amount involved exceeds £10,000.(1B) All other investigatory and enforcement powers under this Act must be authorised by an official at Senior Civil Service grade or above.(1C) The Public Sector Fraud Authority must maintain a register recording—(a) the nature and date of each exercise of these powers;(b) the name and position of the official or Minister authorising the exercise;(c) the justification provided for exercising the powers.(1D) The Minister must lay before Parliament a copy of this register annually within three months of the conclusion of the financial year to which it relates.”Member's explanatory statement
This amendment, together with others to this clause in the name of Baroness Finn, would ensure greater ministerial and parliamentary oversight when the powers provided for in this Bill are exercised by authorised officers on behalf of the Minister for the Cabinet Office.

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[Baroness Anderson of Stoke-on-Trent (Lab)]

My Lords, I now turn to Amendments 34, 36, 37, 38, 39 and 40. This group of amendments addresses some concern we have heard throughout the passage of this Bill—most recently from the noble Baroness, Lady Finn, during Grand Committee—that the enforcement unit being part of the Cabinet Office means that there is limited oversight and accountability for the use of the powers in Part 1 of this Bill.

However, setting up the PSFA’s enforcement unit as a stand-alone statutory body would be disproportionate while it is still small. While I strongly believe that the PSFA has established a robust oversight provision and built a multitude of safeguards into this legislation, as well as into its processes and structures, I am aware of how complicated and contentious this space is, particularly in respect of protecting the public from the misuse or incorrect use of powers.

We have therefore tabled this group of amendments to enable the PSFA and the powers in this Bill to be merged with another statutory body, rather than necessarily being set up as a stand-alone statutory body, although the power to do that remains. This builds flexibility into the legislation to achieve the same aim, in terms of separation between investigators and Ministers in future, but avoids the need to set up an entirely new statutory body if it is not considered proportionate to do so.

Importantly, this would enable the PSFA’s enforcement unit to be moved at arm’s length from Ministers sooner, adopting the protections, governance and accountability set out in Schedule 2 to the Bill. As the Government have said during the passage of this Bill, it is not proportionate to set up a new stand-alone ALB for a small enforcement unit. These amendments allow for even a relatively small unit to be placed at arm’s length from Ministers, if desired, without incurring disproportionate overheads.

Ministers also have a responsibility to the taxpayer to ensure public money is spent judiciously and where it is most needed. It is counter to government policy to establish a new statutory body when its function could be undertaken by existing bodies. Building in this flexibility through these amendments enables us to achieve the same policy intent without necessarily adding to the proliferation of ALBs. When it is the right time to establish the PSFA’s enforcement unit at arm’s length from Ministers, that will happen only with engagement, debate and agreement with both Houses of Parliament.

Your Lordships’ House has spoken, and we have listened. I beg to move.

[Baroness Finn (Con)]

My Lords, we give this amendment a partial welcome. It speaks to a principle that we on these Benches have consistently raised in relation to the formation and constitution of the Public Sector Fraud Authority. The change proposed here—that the PSFA should be established through affirmative regulations rather than by simple commencement—is certainly a step in the right direction. It introduces an additional layer of parliamentary scrutiny and prevents the authority from being created entirely at the discretion of the Minister. That is an improvement, and we are pleased to see it reflected in this amendment.