Public Authorities (Fraud, Error and Recovery) Bill

Baroness Sherlock Excerpts

Report stage
Wednesday 15th October 2025 Lords Chamber

Moved by

[Baroness Sherlock]

7: Clause 9, page 7, leave out lines 38 and 39
Member's explanatory statement
See the explanatory statement for my amendment to clause 9, page 7, lines 32 to 34.

--- Later in debate ---

Moved by

[Baroness Sherlock]

8: Clause 19, page 12, line 25, at beginning insert “Subject to subsection (9A),”
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.

--- Later in debate ---

[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.

Amendment 8 agreed.

Moved by

[Baroness Sherlock]

9: Clause 19, page 12, line 32, at end insert—
“(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.

--- Later in debate ---

Moved by

[Baroness Sherlock]

10: Clause 26, page 16, line 14, leave out from second “notice” to end of line 26 and insert “relating to a proposed lump sum direct deduction order, or a lump sum direct deduction order under section 17, is given to a bank in relation to a liable person’s account, the bank must—
(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.

--- Later in debate ---

Moved by

[Baroness Sherlock]

11: Clause 32, page 19, line 31, at end insert—
“(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.

--- Later in debate ---

Moved by

[Baroness Sherlock]

12: Clause 37, page 22, leave out line 17
Member’s explanatory statement
This amendment is consequential on my amendment to clause 37, page 22, line 30.

--- Later in debate ---

Moved by

[Baroness Sherlock]

18: Clause 44, page 26, line 30, at end insert—
“(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.

--- Later in debate ---

Moved by

[Baroness Sherlock]

24: Clause 66, page 35, line 30, after “person,” insert “where the information is reasonably required”
Member’s explanatory statement
See the explanatory statement for my amendment to clause 66, page 35, line 29.