Public Authorities (Fraud, Error and Recovery) Bill

Debate between Lord Vaux of Harrowden and Baroness Kramer

Report stage
Tuesday 21st October 2025 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, as we have heard, this group relates to the measures in the Bill which would give the DWP the ability to require banks and other financial institutions to trawl all accounts that they hold to identify and provide information on accounts that have received certain benefits and which meet certain criteria as defined by DWP, all without any suspicion of wrongdoing. This is done by means of an eligibility verification notice, which can require periodic reporting—the noble Baroness did not mention this when she described it. For example, it could be daily, although there has been no clarity from the department or the Minister yet as to the periods that are intended. I should reiterate at this point: this is a much better Bill, and the safeguards are much greater than the last time we saw these clauses, but there is more to go.

I would like to make one other little correction to the noble Baroness on her example of universal credit. Her example was that the eligibility criterion that would be provided by DWP to the banks would be £16,000, because that is the limit. In fact, it could be a much lower number, because under the Bill:

“The eligibility indicators may be criteria to be met by a single account or by”


a number of “accounts combined”. For the universal credit example it might be £10,000 or £8,000, or something of that nature. In that situation, it is even more likely that eligibility indicators would be flagged for innocent people, but that is just a wrinkle within the Bill.

I think many of us are nervous about the introduction of what is effectively the suspicionless trawling of benefit recipients’ accounts, even with the safeguards that are there. However, I understand and have an awful lot of sympathy for the need to reduce fraud and error, and the need for the department to have the tools to do that. Amendment 45A, in the name of the noble Baroness, Lady Kramer, and others, would—as I think we are about to hear—remove the provision altogether. My approach in this group and the next has been to seek to strengthen the safeguards that surround the use of the powers rather than to remove them altogether.

To that end, I have tabled one amendment in this group, Amendment 49, which the noble Baroness has already alluded to. I am grateful to both the noble Baroness, Lady Kramer, and the noble Viscount, Lord Younger, for their support. It is very simple: it requires that the Secretary of State may issue an eligibility verification notice only if satisfied that it is necessary and proportionate to do so for the purposes set out in the Bill. It was quite surprising that this basic safeguard was not already in the Bill, because the same wording already appears in relation to all the other powers it creates. I had assumed that this was a drafting error or oversight, as I cannot imagine any reason why it should not be there in relation to these powers.

I am very pleased to say that, since I tabled Amendment 49, the Minister has tabled Amendment 48, which she has mentioned. That amendment does much the same thing, although it does not restrict the necessity and proportionality to the purposes of the Bill. That is regrettable, but I can live with the Minister’s version and I am grateful to her for doing this following the constructive discussions we have had on a range of issues throughout the process, for which we are very grateful.

The Minister’s other amendments also introduce small but useful tweaks to the safeguards, although I am not sure I would go as far as she does on their effect. With thanks to the Minister for her engagement, I will not move Amendment 49, but I should be clear that I do not believe that Amendment 48 and the others she has tabled remove the need for the changes we will discuss in the next group. We will have those discussions then, and I will obviously reflect on what she has said in the meantime.

[Baroness Kramer (LD)]

My Lords, I will be very brief. The noble Lord, Lord Vaux, has amendments in this and other groups, several of which I have signed, to try to ameliorate or provide safeguards for some of the most intrusive elements of the current draft of the Bill. I also have great sympathy with the amendments tabled by the noble Baroness, Lady Fox, around the issue of transparency, which is very evidently absent from most of the Bill. I will support those individuals if they press their amendments.

My Amendments 45A, 65 and 74A, in contrast to those of the noble Baroness, Lady Fox, and the noble Lord, Lord Vaux, are not nuanced. They would simply remove Clauses 75 and 76 and Schedule 3, in effect eliminating the requirement for banks to look into claimants’ bank accounts. They would destroy the principle that the Bill establishes: that a group of people, defined by the common characteristic that they are in receipt of benefits, should have a more limited right to privacy and data protection than the rest of the community.

I am also very concerned when banks become investigative agents of the state. I regard these as lines we simply should not cross. I know that the Minister does not share that view and is very content that those in receipt of benefits should be under a level of surveillance that is considered inappropriate for the rest of the community. To her credit, she has limited some of the most abusive features of the Bill that we received from the Commons, but she still asserts the underlying principle.

I also realise that this is very much a paving Bill for the intrusions that will follow the introduction of the digital ID. That scheme provides the tools that enable the state to carve out for surveillance any variety of groups of people whom it deems unworthy of sharing the general rights accorded under the law. I have tabled what are killer amendments, in effect, because the public need to know what exactly is at stake and what line has been crossed. I will not press my amendments, but I am also determined that the issues will not be quietly tidied away.

Public Authorities (Fraud, Error and Recovery) Bill

Debate between Lord Vaux of Harrowden and Baroness Kramer

Committee stage
Wednesday 4th June 2025 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I will very quickly make a couple of comments on Amendments 9 and 10. First, on Amendment 9, I have an amendment later in Committee that inserts a reasonableness point in a similar way, so I support this. However, I wonder whether this amendment is actually in the wrong place; I suggest that it ought to be in the initial line—“the Minister should reasonably consider”—as opposed to “reasonably proportionate”, but that is a small issue. I support the concept of Amendment 9.

Amendment 10 is quite important. This issue has been raised by the banking industry, and there is a very real concern that the receipt of a notice might provide reasonable grounds for the financial services firm to know or suspect that the customer has defrauded the public sector. In that situation, the failure to take action, for example to close or restrict the account, might conflict with wider anti-money laundering obligations and, possibly—I am not sure this is right—the corporate criminal offence of failure to prevent fraud. That might include having to exit customer relationships and so on.

So there is a very real concern from the financial services industry here. I am sure that that is not the intention of the Government in this situation but it is something that we need to think about, as the receipt of a notice cannot be seen as reasonable grounds to suspect fraud, because that would set all sorts of hares running against people who might be entirely innocent.

[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.

Bank Resolution (Recapitalisation) Bill [HL]

Debate between Lord Vaux of Harrowden and Baroness Kramer

Consideration of Commons amendments and / or reasons
Monday 12th May 2025 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, I want to ask the Minister a question that arises from this change. First, though, it is over six months since we debated these amendments. That does seem like an awfully long time for the Bill to disappear into limbo and come back, particularly when other Bills are being rushed through this House.

I wanted to ask the Minister to explain more about whether the resolution process could be used for larger banks, but I think he has actually answered that question. I am not sure his answer gives me an awful lot more confidence or comfort, but I am not going to oppose the Commons amendments. However, in the last six months, various comments have come from the PRA or the Bank of England about the fact that this Act, as it will be, may allow them to take some banks out of the MREL process. I wondered if the Minister might wish to comment on that and whether there are any consequences the other way round.

[Baroness Kramer (LD)]

My Lords, I have to say that I appreciate the explanation that we have just had from the Minister, but I and others remain disturbed by the Government’s decision not to accept the amendment, which was not just rational but well crafted, introduced by your Lordships in this House. The underlying Bill was initially presented to the House as providing a mechanism to save significant small banks from failing by recapitalising them from the Financial Services Compensation Scheme, rather than having to turn to the taxpayer. Regulated banks, as this House will know, are then required to replenish the FSCS when it is depleted for any reason, but, because the thrust of the language was around small banks—that was the intent, and that was the discussion that is in all the notes—this House very much agreed to it, with just a few probing points engaged with.

Thank goodness that we have a lot of very good brains in this House. The combination of my noble friends Lady Bowles and Lord Fox and the noble Baronesses, Lady Noakes and Lady Vere, realised that there was a significant loophole in the language. We did not realise in the beginning that any of this could be applied to the larger banks; that became clear only as those pursuing the legislation became more aware of the implications of its content. Now we have a Bill that permits the regulator to use the FSCS as its mechanism to rescue large banks. Let us be frank: it completely changes the whole profile of both risks and consequences. The amendment would have effectively closed that loophole.

The larger banks, as the Minister has said, already have their own dedicated process to recapitalise in case of failure, a process that was introduced after the 2008 crisis. The Bank of England requires each large bank to hold a tranche of MREL—in plain English, bail-in bonds—which can be converted to capital by the regulator in case of failure, with the consequence that the bank is thereby rescued. We need to understand why that is not considered by the Government to be an adequate system. The Minister has just said—if I understood him—that the regulators will always require that bail-in bonds are used first, and the FSCS is a resource of last resort. But that is not in the legislation. The legislation allows the regulator to turn first to the FSCS and ignore bail-in altogether. He will be very conscious that the Swiss regulator, with the failure of Credit Suisse, completely ignored the bail-in capability and chose other routes to manage the rescue of Credit Suisse.

Those who hold bail-in bonds—the investors who buy them—are extremely well remunerated for carrying the risk associated with a bail-in bond. I am trying to work out why they can now look at this legislation and begin to assume that they will have the benefits of receiving a risk premium for holding those bonds but never actually find that those bonds are forced into use in case of a failure. How can we rely on just a code to continue to determine that bail-in will be the first resort and not a later resort or no resort at all? Are the Government basically saying that there are now many circumstances they have identified in which bail-in is neither usable nor adequate? I refer to the Swiss example. What are the consequences for financial sustainability if we are saying that bail-in is a slightly busted system? Have there been blandishments from the various investors who have purchased bail-in bonds, trying to pressure the Government into creating an alternate route? What are the consequences for our small- and medium-sized banks if the FSCS is depleted by big bank failure?

The Minister says that the regulators will not ask for an unaffordable contribution from the various banks to replenish the FSCS, but it is our mechanism that ensures small depositors’ accounts. Who is going to do the replenishment if the number is too great to ask the banks to commit to it? I am quite troubled by this change in responsibility for where risk lies that is embedded in the Bill. If the Minister is so sure that the items in the code should be giving us reassurance, why have they not been introduced in this Bill as part of the legislation?

Bank Resolution (Recapitalisation) Bill [HL]

Debate between Lord Vaux of Harrowden and Baroness Kramer

Report stage
Monday 4th November 2024 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, I support both the amendments in the names of the two noble Baronesses who have just spoken. I probably have a slight preference for Amendment 16 on the expenses—it is more direct—but we need something in the Bill that reminds the Bank of England that it is spending other people’s money, and that it needs to do that carefully and with care. These amendments are aimed primarily at that end, so I support them both.

[Baroness Kramer (LD)]

My Lords, I will speak briefly in support of Amendment 7 in the names of the noble Baronesses, Lady Bowles, Lady Noakes and Lady Vere, but I am not as minded to support Amendment 16 for the following reasons. Some in this House will know that I dislike intensely the competitiveness and growth objective that has been attached to the PRA and the FCA. If you were going to set out a pattern to repeat the crash of 2007-08, those two objectives would be essential paving stones on that route, so I do not look to attach that particular amendment to the Bank of England in its overall resolution role in, for example, setting MREL. It should be setting MREL to reduce risk, not to follow the lowest common denominator in the international banking arena.

Ironically, if you take the growth and competitiveness secondary objective and just apply it to recapitalisation, it turns on its head and becomes a risk-reduction tool, because it basically limits the ability of the collapse of one bank to then infect all the other banks within the system. That seems to me to be a risk-reduction strategy, so I am very much in favour of the way in which it has been crafted under Amendment 7. I say that to reassure others in this House who may be afraid that playing fast and loose with the competitiveness and growth agenda is always a risk-increasing agenda rather than a risk-reduction agenda. In this narrow role, it works in the opposite direction.