Public Authorities (Fraud, Error and Recovery) Bill

Baroness Anderson of Stoke-on-Trent Excerpts

Wednesday 15th October 2025 Lords Chamber

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

My Lords, so we begin Report. I thank all noble Lords for their genuinely constructive engagement on this important Bill, as we seriously engage in efforts to protect taxpayers’ money—something I know every Member of your Lordships’ House cares vehemently about. I especially thank the Opposition Front Benches, who have given much of their time to make sure this works. I hope that they will see, through the responses from the Government today, that we have tried to listen and make as many amendments as possible to make sure this Bill is effective and will work in practice.

Once again, I warmly welcome the amendments tabled by the noble Baroness, Lady Kramer, on the important issue of whistleblowing, as I did in Committee. The noble Baroness is committed and diligent in this area. As ever, she has proved to be tenacious and determined, but with due cause, ensuring that we can prevent some of the appalling scandals she named.

It is clear that protections for whistleblowing are a key aspect of counterfraud investigations. A 2023 National Audit Office report into whistleblowing showed that a total of 41 organisations employing civil servants recorded and reported 939 concerns over a three-year period. Fraud was consistently the most common category, representing 39.9% of all concerns across the three years. It is only right that the PSFA closely considers its role in this landscape. As such, I am pleased to have an opportunity to place on record our efforts since your Lordships last debated the issue. We are listening to your Lordships’ House. We are doing everything we can to ensure that both this legislation and the work of the PSFA are as effective and impactful as they can be.

Officials across government have come together to understand what can be done in the public sector fraud whistleblowing space. In particular, the PSFA Bill team has worked with the other Bill teams, where this important issue has also been raised recently in your Lordships’ House, to ensure that departments work in partnership to deliver a coherent response.

As a result, I am pleased to give the noble Baroness, Lady Kramer, a series of commitments this Government can make. First, to ensure that this important issue continues to be taken forward effectively, officials will continue co-ordinating across the whistleblowing landscape to identify areas where the PSFA can add value, such as joint guidance documents on public sector fraud. The PSFA will also seek to work closely with officials in the SFO and HMRC. HMRC has deployed a whistleblower incentivisation scheme and the SFO has developed proposals for a similar scheme. The PSFA and the SFO have already agreed to identify areas where they can support each other’s work on whistle- blowing. Once Jonathan Fisher’s review is published, the PSFA will work with other government departments to consider, and where possible adopt, his whistleblower recommendations.

I am also pleased to announce that as soon as is practicable—likely to be within 12 months of the powers being first used—the Government will ask the independent reviewer, who will be appointed under Clause 65 of this Bill, to conduct a review of the PSFA’s use of whistleblowing in cases of public sector fraud.

The PSFA will also endeavour to publish updates on whistleblowing in public sector fraud in its annual reports, where appropriate. Those reports will be used as an opportunity to communicate routes available for whistleblowers on public sector fraud. Also, once this Bill becomes law, PSFA will seek a place on the DBT prescribed persons list under the Public Interest Disclosure Act 1998.

I look forward to future engagement on this issue. Given the commitments I have outlined and the necessity of maintaining the focus of this legislation, I hope that the noble Baroness, Lady Kramer, will not press her amendments.

[Baroness Kramer (LD)]

My Lords, the Minister has described some real momentum. As I say, we would always want more; when we put down amendments, we have an ideal target in mind, but this is an area where progress matters. I thank the Minister and I will indeed withdraw my amendment.

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[Lord Palmer of Childs Hill (LD)]

My Lords, our principle generally is that the lowest level of government should make those decisions. To put it up to central government would be overloading central government. It would be like “Yes Minister” with a row of civil servants—bless them—dealing with something that has been sent up from the local authority or public body which did not need to be sent up. Although I have sympathy with what the amendments are trying to do, the idea of loading central government with issues that can be dealt with responsibly at a lower level seems to be against what we are trying to do in this House. So, respectfully, we will not be supporting these two amendments.

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

My Lords, 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 Bill is part of the Government’s response to this urgent and challenging problem. The Bill gives functions and powers to the Minister for the Cabinet Office, which will be exercised by authorised officers and investigators based in the Public Sector Fraud Authority.

I hope it will assist your Lordships’ House if I remind noble Lords of the PSFA’s mission. The PSFA is the UK Government’s centre of expertise for the management of fraud and associated error against the public sector. It leads the Government’s counterfraud function, which brings together the approximately 16,000 people who work in government departments and public bodies to fight fraud. The standards and guidance that the function creates, led by the PSFA, must be used in central government and can be used more widely in the public sector and beyond to improve the robustness of how we understand, prevent and respond to fraud.

These two amendments would make significant changes to the Government’s intention in bringing forward this Bill on how the PSFA works. They would change the impact of the Bill and are unnecessary to be put into law, so we cannot accept them.

On Amendment 2, the noble Baroness, Lady Finn, offered a version of this amendment in Grand Committee that simply deleted line 10, which I resisted because removing that line without putting something else in its place would have created uncertainty and potentially conflicted with the preservation of public authorities’ own fraud functions in Clause 2(5). It is clear this draft has been influenced by the debate on the original, and I thank the noble Baroness for it; however, the new version goes further and dramatically changes the impact of the Bill.

Amendment 2 would create an extensive new power for the Minister for the Cabinet Office and change the relationship between the PSFA and the public authorities it works with. The Government’s intention is that the PSFA offers a public sector fraud service, collaborating with public authorities which have been attacked by fraudsters to take action to investigate, enforce and recover the funds. Collaboration is vital in the Government’s fight against fraud. Noble Lords will be aware that last month the Government announced that, in the previous 12 months since April 2024, over £480 million was prevented from going into fraudsters’ pockets. Driving this kind of cross-government collaboration is what the PSFA is for. We can do more, which is why we need the Bill, but the PSFA is already working.

I firmly believe that the normal mechanisms of government can ensure that counterfraud co-operation happens, as it is already happening in the work of the current pilot unit in PSFA. In issues of national importance, there will also be some moral and public pressure for something to be done, so I believe it is not necessary for the Minister to have a directive power in law to investigate on their own initiative. We truly believe that the collaborative approach outlined in the Bill combined with the normal operations of government will ensure the PSFA has the access it needs.

The definition of public authority in Clause 71 is broad and this amendment would affect different public authorities differently. For central government departments, it would mean that a Minister below Secretary of State level could direct and override Secretaries of State. For local authorities, the amendment would mean a new power for central government to take over a responsibility without their consent. The Local Government Act 1999 already has powers to this effect, and we do not want to create a new one specifically for fraud.

Amendment 19 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 on this scale should already be investigated and reported on. There are established audit, assurance and reporting processes for this. In addition, the facts of this case would already have been established by the PSFA, and learning taken from it would be shared across government to aid the prevention of fraud. This amendment would create an extra burden on the department and replicate the work of the PSFA. It is unnecessary, as its core aim will be addressed through other activities. Therefore, after my very persuasive arguments, I encourage the noble Baroness, Lady Finn, to withdraw her amendments.

[Baroness Finn (Con)]

I thank the Minister for her incredibly persuasive arguments. We are clear that this is an unacceptable settlement if the PSFA can act only if invited by the very body that may have failed. That is not a system of scrutiny; it is an invitation to inertia. It cannot be right that officials in a department where fraud is suspected should have the power to decide whether to be investigated. The DWP does not wait to be invited before it goes after benefits cheats, and there is no reason why public officials should be held to a different standard.

The Government are proposing to create an authority with wide powers on paper but no real agency in practice—a watchdog told to bark only when asked. In short, it should be called out for what it is: a farce. Fraud against the taxpayer is not a matter for polite phone calls between Permanent Secretaries; it demands action that is statutory, swift and unambiguous. When credible evidence of fraud arises, that must be the starting gun for any investigation, not the moment the system looks away.

Our amendment gives the PSFA the ability to act proactively, with proper safeguards, wherever fraud occurs. If we are serious about protecting public money, we cannot design a system that waits to be asked before doing its job. I am not satisfied that the response from the Government meets the conditions set out, and therefore I want to test the opinion of the House.

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[Lord Palmer of Childs Hill (LD)]

My Lords, we are in a world of information-sharing and information-gathering, and this is where that starts and stops. Amendment 3 would ensure that

“information notices issued to banks and financial institutions include a clear statement that the person to whom the information relates is not necessarily guilty of suspected fraud”.

Amendment 4

“would limit the persons to whom information may be disclosed by requiring the Secretary of State to specify eligible persons in regulations”.

In our view, these are sensible safeguards and regulations. On that basis, we on these Benches broadly support the amendments.

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

My Lords, I appreciate the noble Baroness, Lady Finn, bringing forward these amendments again. I find myself agreeing with the concerns outlined by the noble Baroness and other Members of your Lordships’ House. I reassure all noble Lords that we are already undertaking this work, and that the safeguards are in place.

On Amendment 3 and the issue raised by the noble Baroness, Lady Fox, we will be including specific information in guidance for authorised officers to ensure that information notices advise the information-holder that the investigation is ongoing, and no inference should be drawn that the individual specified on the notice is guilty. This amendment is therefore not required as it is already our intention to do this, and it will be achieved in guidance.

Turning to Amendment 4, I again assure the noble Baroness, Lady Finn, and other Members of your Lordships’ House that I agree with the intention of the amendment, which is why there are already safeguards in the Bill that restrict the disclosure of information. Clause 5 details that:

“Information can only be disclosed for the purpose of exercising the core functions”.


This restricts to whom and for what purpose the information can be disclosed. However, also including a prescriptive list of persons who can have information disclosed to them would further restrict the intent of the clause and the effectiveness of its scope in exercising the core functions detailed in Clause 1 of the Bill.

I hope to further reassure noble Lords that the PSFA’s enforcement unit would also have memoranda of understanding for each person it would be sharing information with, as well as maintaining a data protection impact assessment to ensure that this information is shared and held in adherence to data protection legislation. We have taken every step to ensure that there are appropriate safeguards in the disclosure of information, while balancing this with making the powers relevant and effective for an investigation. I hope that this reassures noble Lords and that the noble Baroness will withdraw her amendment.

[Baroness Finn (Con)]

My Lords, I am grateful to the Minister for her response, to the noble Lord, Lord Palmer, for his support, and to the noble Lord, Lord Vaux, and the noble Baroness, Lady Fox, for their support for Amendment 3.

These are, on the face of it, small and technical matters, but they go to the heart of how the Bill will operate in practice. The smallest drafting choices, the subtlest omissions, can have real consequences for individuals caught up in these processes. We cannot allow the system to treat people as wrongdoers when nothing has been proven or concluded. The language of the Bill must make that absolutely clear. What may seem a flippant technicality in this Chamber can, in the real world, determine whether someone is wrongly stigmatised, denied banking services or placed under suspicion without cause. That is why these details matter, because fairness, clarity and restraint are not afterthoughts; they are the foundation of public confidence in the powers that this Bill creates. I thank the Minister for her engagement and hope that, as the Bill progresses, these small but important safeguards might be reflected in the final drafting. On that note, I beg leave to withdraw the amendment.

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[Lord Palmer of Childs Hill (LD)]

My Lords, clearly, it would be best if something such as who these investigators are was in the Bill so that we have more detail. What we are being offered by these amendments is to require the Minister to outline in statutory guidance the process for appointing authorised investigators. This is by no means as good as having it in the Bill, but I believe that statutory guidance has to be carefully considered, because who is appointed to investigate should be decided not just with a flick of a pen but with more careful consideration. We on these Benches are broadly supportive of this amendment, because we believe it would add additional transparency to the appointment process.

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

My Lords, it is essential that any individual authorised to use the powers enshrined in the Police and Criminal Evidence Act 1984 is competent to discharge their duties under the law. We are committed to ensuring that this is the case for the authorised investigators created by the Bill. However, for legislation to require the publication of guidance on an internal appointment process is not only unnecessary but inconsistent with established practice in this area across other government departments. Government departments with similar investigative powers—for example, HMRC, the Home Office, Defra and even the Food Standards Agency—are not required to and do not publish statutory guidance on this point.

Let me reassure your Lordships’ House that Ministers take their responsibilities seriously. It is for this reason, as we have consistently affirmed, that no investigator will be authorised to exercise these powers until the Minister is entirely satisfied that they possess the requisite training and expertise. This training will cover: proficiency in relevant aspects of PACE, particularly the legal framework and applications of Section 8 and Section 9, and PACE codes of practice as far as they apply to the PSFA’s powers; proper procedures for applying for and lawfully executing warrants, including entry, search, seizure and handling digital information; and proper handling and retention of and access to evidence. Crucially, they will be trained in safeguards for individual rights during investigations and warrant execution, and in the proper handling and retention of and access to evidence.

Training will be provided by the College of Policing by means of a series of bespoke training courses, the first of which has commenced this week. Individuals will be required to demonstrate proficiency in all relevant facets of PACE before the Minister will authorise them as authorised investigators, with particular emphasis on the legal framework alongside its accompanying codes of practice. These authorised investigators will be members of the government counterfraud profession, and they will be required to meet the appropriate professional standards.

Therefore, I urge noble Lords to consider that the existing framework, bolstered by our commitment to rigorous training, already provides necessary assurances and that an amendment to codify this is unnecessary. I reassure and remind noble Lords that these powers cannot be exercised in any specific case unless a court has granted a warrant—the ultimate safeguard. I hope that this explanation reassures noble Lords and that the noble Baroness will therefore withdraw her amendment.

[Baroness Finn (Con)]

My Lords, we will not seek to divide the House on this amendment. I am sorry to disappoint the noble Baroness, Lady Fox, for whose support I am very grateful, but we will look in later groupings today at safeguards on the PACE powers granted to civil servants.

The amendment speaks to an important point, one that we have raised repeatedly throughout the passage of this Bill. We are granting serious powers to officials under this legislation—so-called authorised investigators, who will be able to exercise these powers, some of which are drawn from the Police and Criminal Evidence Act. We can never forget that these are not minor administrative tools; they are police-level powers to search, seize and compel. If we are to trust such authority to civil servants then Parliament and the public deserve full oversight of how those powers are used and, quite simply, by whom. That is the question this amendment asks and it is one that must be answered clearly before this framework is implemented.

The process for authorising investigators, the standards they must meet and the accountability mechanisms that apply are not small matters of drafting detail; they go to the heart of public confidence in this regime. We appreciate that the Minister can tell us now how this process will work, but some sort of formal, documented statement setting this out would be immensely helpful as a way of us having this beyond the Minister’s word. While I trust the noble Baroness completely, we do not know if we can always trust her successor or her successor after that. Setting this out would allow everyone to know the standards and process and would ensure that these are being met, not only now but in the future.

In short, I am grateful to the Minister for her response, but I hope the Government will reflect seriously on this issue and possibly come back with something at Third Reading. The powers in Clause 7 are significant and so too must be the safeguards that accompany them. On that basis, I beg leave to withdraw the amendment.

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Moved by

[Baroness Anderson of Stoke-on-Trent]

6: Clause 9, page 7, leave out lines 32 to 34
Member's explanatory statement
This amendment, and my amendment to clause 9, page 7, lines 38 and 39, would remove provision that is no longer needed because of the general data protection override in section 183A of the Data Protection Act 2018, which was inserted by section 106(2) of the Data (Use and Access) Act 2025 and came into force on 20 August 2025.

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

My Lords, I was on my honeymoon last week, which is why our amendments were tabled in the name of the noble Baroness, Lady Sherlock. This time last week I was in Santorini—I told the noble Baroness I would get that in—and I think I have done awfully well to get to group 5.

The provisions of a Bill that recently passed in your Lordships’ House have a direct impact on how we draft and interpret legislation across government, including this Bill. As a result, we no longer need to state in the Public Authorities (Fraud, Error and Recovery) Bill that provisions authorising the processing of information do not override existing legislation. This is now a routine requirement across all government Bills. We are therefore making a series of amendments across Part 1 and Part 2 of the Bill to ensure that the rules and safeguards set out in the new Act are properly implemented throughout the Bill. The amendments to the PAFER Bill are a necessary step to align with this new legislation, bringing legal clarity and consistency across all legislation. These are technical but required amendments. I beg to move.

[Baroness Finn (Con)]

My Lords, we understand that these amendments are technical in nature, designed to ensure that the Bill is properly aligned with the changes made by the Data (Use and Access) Act 2025. We therefore appreciate that these are tidying amendments that do not alter the policy substance of the clause but simply ensure legal coherence. I thank the Minister for bringing them forward—and I hope she enjoyed her honeymoon.

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

My Lords, my honeymoon was fabulous.

I am grateful for the support of the House on these consequential amendments, following the Data (Use and Access) Act coming into force. I hope that noble Lords will provide their support to these amendments.

Amendment 6 agreed.

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

I thank the noble Baroness, Lady Finn, for raising the important issues around annual reporting and the PSFA—both the use of powers conferred on it by the Bill and the extent of fraud against public authorities—as well as her point on the implementation of direct deduction orders, particularly concerning the regulations, the publication of consultation outcomes and the impact these powers may have on the banking industry. While I agree with the intent behind these amendments, unfortunately they are duplicative or would otherwise create an unnecessary burden for the PSFA. I will address each in turn.

Amendment 16 would require that the outcome of any consultation required by regulation-making powers for direct deduction orders in Clause 38(6) is laid before Parliament prior to the implementation of regulations. This amendment is duplicative: where a consultation is required, the Explanatory Memorandum of the relevant statutory instrument must detail and consider the outcome of that consultation exercise. Furthermore, the Cabinet Office consultation principles also set out that where a consultation concerns a statutory instrument, His Majesty’s Government should publish responses before or at the same time as the instrument is laid. We completely agree with the noble Baroness, which is why the provisions are there.

Amendment 17 seeks to hold the PSFA to commit to

“an impact assessment covering projected costs and effects on the operational capacity of banks”,

should any changes be made to the means by which deduction orders are processed by way of regulation, as set out in Clause 38. This amendment is also duplicative, as statutory instruments require that the impact on the relevant sector is considered and set out in the Explanatory Memoranda—even if that is to say no impact is expected—with reasons given as to why. Where the impact is expected to exceed £10 million, a full and separate impact assessment must be prepared and published alongside the SI.

The Government are extremely mindful of the burdens this Bill places on businesses, including the banking sector. We too want to ensure that they are not subjected to disproportionate burden or costs in complying with these measures, and we want to assure noble Lords that the PSFA is working on how to effectively operationalise the recovery powers in partnership with representatives of the banking sector. Throughout the development of the Bill, we have tried to strike the right balance between requiring actions from banks in a fair and proportionate way and achieving our policy intent of recouping vital public funds lost to fraud and error. That is why there has been sustained engagement with key representatives of the sector including UK Finance, individual banks, building societies, His Majesty’s Treasury and the Financial Conduct Authority. We know that the sector is supportive of the Bill’s objectives from the evidence provided by UK Finance in Committee in the other place. We have benefited from the sector’s operational insights and, as discussed on the previous group, we have tabled a number of amendments as a direct result, to ease the implementation and delivery of the recovery powers.

Amendment 22 would require the PSFA to undertake a review after 12 months on the cost to banks of complying with provisions under Part 1 of the Bill. The Bill’s published impact assessment—which sets out all expected costs to business, including banks, from the PSFA’s measures—has been green-rated by the Regulatory Policy Committee and sets out, where it has been possible to do so, the minimal expected costs to businesses, including banks, of the measures in Part 1 of the Bill. Provisions already exist under Clause 24 for banks to be able to deduct administrative costs that would offset what the review would report on. This amendment would create disproportionate administrative burden on the PSFA when, candidly, it should be using its resource to pursue those who defraud the public purse.

Amendment 26 would require a report on the use of powers by the PSFA to be published and laid in Parliament. I know the noble Baroness genuinely cares about ministerial oversight and accountability of officers using these new powers. I assure her that in addition to the reports that will be commissioned from inspectorates —such as His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services—the independent person appointed in line with Clause 65 will proactively review the PSFA’s investigative use of the powers, including their efficiency and effectiveness. We have previously stated that these would be annual reports, and they will be laid before Parliament.

Lastly, I turn to Amendment 112, on annual reporting. This would require the PSFA to publish and lay in Parliament an annual report on the extent of fraud against public authorities based on the Government’s internal estimates. The PSFA already oversees the counterfraud performance of ministerial departments and public bodies and already publishes a report on the extent of fraud against public authorities through its fraud landscape reports. These set out levels of detected, prevented and recovered fraud and error as reported by departments and public bodies to the Government’s Counter Fraud Function’s centre of expertise. For transparency, these are now published online. We expect the next one to be published before the end of the financial year and can commit to sharing this with Members who have spoken in this debate.

I think I have touched on all the points raised, although there was a question from the noble Baroness, Lady Finn, on other safeguards. It may be helpful to reassure your Lordships’ House that we have the following additional safeguards in place. Authorised officers and investigators will be trained extensively and will be permitted to use the powers only once the training has been completed. They will follow detailed procedures and have strong guidance; for instance, on how to assess and handle potentially vulnerable suspects. There will be rights to make representations, request an internal review and appeal decisions through First-tier and Upper Tribunals across the civil penalty, debt recovery and information gathering powers. In addition, we will consult on and publish a code of practice detailing the calculation and application of penalties issued where fraud is found and where there is non-compliance with the information sharing and gathering requirements and debt recovery powers within the Bill.

I hope that reassures your Lordships’ House and the noble Baroness that we are already taking steps to achieve the same aim, and she can therefore withdraw her amendment.

[Baroness Finn (Con)]

My Lords, I thank the Minister for her remarks. I also thank the noble Lords, Lord Davies of Brixton and Lord Vaux, for their support for some of the amendments. I thank the Minister for the consideration she has given as well.

At the heart of this debate is a simple but important point: if we are to make the system work, we have to work with the banks, not simply through them. They are, in effect, being recruited as operational arms of the state, helping to investigate, enforce and recover public money. That partnership brings responsibilities on both sides. These amendments were never about creating obstacles; they were about ensuring that transparency, consultation and accountability are built into the process. The banks are being asked to play a vital role, and we must show them that their experience, concerns and costs will be reflected in how the Government engage with and implement the Bill. I beg leave to withdraw the amendment.

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

My Lords, the noble Baroness, Lady Finn, is entirely right that public authorities responsible for spending taxpayers’ money must manage their fraud risks carefully. While we expect the enforcement powers in this Bill to be a powerful force against public sector fraud, prevention of fraud by designing spending programmes and fraud controls in the first place is the most important tool that we have.

I shall set out the work that the PSFA already does to hold public authorities to account for their fraud risk management performance and set out some ways in which we can go further. I hope that, in doing so, I shall convince the noble Baroness that her amendment is unnecessary. It is already a requirement for major new areas of public spending to have a fraud risk assessment; that is set out in both Managing Public Money, which tells accounting officers their duties, and the Treasury’s Green Book, which details how to appraise a project. The PSFA scrutinises those fraud risk assessments, holding departments to account both for the absence of risk assessment and for fraud risk assessments that do not meet the standard. Some 31 organisations have so far been through the PSFA’s rigorous assurance regime.

The highest-risk government schemes receive additional scrutiny of their fraud risk management practices on a regular ongoing basis. The highest risk here is not justified only with reference to the size of spending, although that is important, but with the scale of fraud risks that a programme faces. That is in addition to the PSFA’s broader scrutiny of departmental performance and capability. The PSFA assesses and holds public bodies to account for: their compliance with the counterfraud functional standard; the make-up of their counterfraud workforce and level of investment; the ambition and performance against their impact targets; and their ability to collect and report to the PSFA on all frauds against them.

The PSFA publishes the fraud landscape reports. These outline the main risks and issues across government, including the levels of detected fraud and corruption, and associated areas in departments and public bodies, excluding tax and welfare, as these are published elsewhere.

However, publishing fraud risk assessments, as this amendment calls for, would provide a how-to guide for fraudsters. The PSFA works closely with the National Audit Office, which can, as it chooses, offer independent scrutiny and has done so in reports, such as Using Data and Analytics to Tackle Fraud and Error, in July, and An Overview of the Impact of Fraud and Error on Public Funds for the New Parliament 2023-24, in November last year. In short, much of what the noble Baroness calls for in this amendment is already happening, but she is quite right—as this is fundamentally a question of protecting taxpayers’ money—that we can go further, so we are.

First, fraud measurement is most sophisticated in HMRC and DWP, where detailed audits and sampling are possible and proportionate. In other areas of government, effective fraud measurement is typically prohibitively expensive. Fraud is a hidden crime, but the noble Baroness is right that we need to do more here. The PSFA is pressing for a fraud measurement plan to be put in place for the highest-risk schemes across government, and we will make those highest-risk schemes report to the PSFA on their levels of fraud and error. This will include what has been estimated, detected, recovered and prevented. We are now also asking the highest-risk schemes to report on levels of counterfraud resourcing so we can assure that resourcing matches the threat.

Secondly, accountability is critical. The PSFA will redouble its efforts to hold departments to account for substandard fraud risk management. Where fraud risk assessments are of poor quality, where departments are falling behind on the counterfraud standards or where counterfraud workforces are insufficient or made up of the wrong skills, Cabinet Office Ministers and their departmental counterparts will ensure accountability and drive improvement. The action that the noble Baroness calls for is therefore already under way or is something that we recognise as a gap and are taking action on.

The noble Baroness is right to call for action, but the appropriate place to pursue that action is not in this legislation but through the PSFA’s published mandate, which we will look at again in light of the noble Baroness’s points to check that it is fit for purpose. I would welcome a discussion with her and my officials on what changes to our published mandate would achieve her goals—the invitation will obviously also be open to all noble Lords who have an interest.

We are trying to make sure that the counterfraud landscape is fit for purpose across departments. We are both listening to the comments of your Lordships’ House as well as progressing with the Bill. I therefore hope that that provides reassurance to your Lordships’ House and specifically to the noble Baroness, and I hope that she can withdraw her amendment.

[Lord Gove (Con)]

My Lords, I listened with the close interest to the Minister’s response, which it seems to me can be crystallised in a few words: that my noble friend Lady Finn is absolutely correct; her amendment is on the button, but officials in the Cabinet Office regard it as simply too much work to implement and do not want to have this actually in the Bill, but to have some sort of arrangement, some side deal or side letter to address it. When we are dealing with sums of public money as significant as those acknowledged in the legislation, surely it would be better to accept the amendment because the Minister has acknowledged that it is spot on and there is not a single element in the logic put forward by the Opposition Front Bench with which she takes issue.

The only possible objection that the Minister raised is that a public assessment of fraud risk would be a how-to guide for fraudsters. Surely the fraudsters do not need support; it is other departments that need support in dealing with this issue. If she cannot accept the logic and power of the amendment, will she commit to coming back to the House within six or 12 months and reporting, if it is the case that the proposal that she puts forward is inadequate, that she will accept the amendment put forward by my noble friend Lady Finn? As is clear from the paucity of the arguments provided for her by her officials, there is no gainsaying the force with which my noble friend Lady Finn made her case.

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

I have a huge amount of time and respect for the noble Lord, which is why I am smiling. He knows better than to suggest that I can bring forward and accept an amendment in 12 months’ time, after the legislation has already passed. However, he is right, and I agree with the principle and intention of everything the noble Baroness, Lady Finn, proposes. My argument is that this is wrong vehicle. It is the published mandate and the role of the PSFA as it exists—which was established by the previous Government—that we should open up, to ensure that it is fit for purpose as a cross-government vehicle and outlines its clear objective. That is the offer that I made to the noble Baroness.

[Baroness Finn (Con)]

My Lords, I thank the Minister for her remarks and the careful consideration she has given this issue. I am really disappointed that the noble Lord, Lord Palmer, has decided that he can no longer support the amendment. He warmly welcomed a similar amendment in Committee, describing it as

“a comprehensive and rigorous approach to fraud risk management for public authorities overseeing significant spending schemes”.—[Official Report, 11/6/25; col. GC 243.]

At its core, this amendment is about building a culture of responsibility and transparency across government—one in which fraud prevention is owned by every department and every accounting officer, not simply outsourced to the PSFA. We cannot afford a system in which the authority becomes a convenient safety net, while departments step back from the task of managing their own risk. As we said in Committee, let us return to first principles: public money must be protected, not just recovered after it is lost. This must be a whole-of-government effort, driven by evidence, accountability and openness. Departments need to know how they are performing and Parliament needs to be able to see this. That means regular, comparable data that is published, verified and available for scrutiny by both Houses.

We appreciate the Minister’s response and the spirit in which it was given, but I agree entirely with my noble friend Lord Gove: we do not believe that the reporting requirements set out in her answer are adequate. We need to see real movement on how these efforts are assessed—which departments are performing well, which are falling behind and how that performance is being improved. This information must be made public and open for review, and we know that this can be done without compromising ongoing investigations.

Transparency and accountability are not threats to enforcement; they are its foundation. This amendment goes to the very heart of what this Bill should be about: creating a genuine culture of responsibility across the public sector when it comes to tackling fraud. For too long, fraud management has been treated as a technical or procedural exercise, buried within internal reporting chains and obscured by bureaucratic complexity. The effect has been that too many departments and agencies see fraud as someone else’s problem, something to be passed up to the centre or delegated down to a third-party body such as the PSFA. However, the fight against fraud cannot be subcontracted. It has to begin and end with the public authorities themselves, which are entrusted with billions of pounds of taxpayers’ money.

Our amendment seeks to ensure that accountability is clear, transparent and public. It would require departments not merely to report internally but to publish their own risk assessments, have their fraud rates independently verified and be held publicly to account for their performance. In the long run, the success of the PSFA should not be measured by how much it does but by how little it needs to do because public authorities have developed the systems, culture and leadership to manage fraud effectively themselves. Yet as the Bill stands, that is not the direction of travel. This amendment is therefore essential to shift the incentives away from centralised dependency and towards departmental ownership, transparency and responsibility.

I am extremely grateful for the offer of further discussions from the Minister, but this is a matter of principle and effectiveness. We cannot have great power, as the Government are proposing, without great responsibility. I therefore wish to test the opinion of the House.

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Moved by

[Baroness Anderson of Stoke-on-Trent]

23: Clause 66, page 35, line 29, leave out “may” and insert “must”
Member's explanatory statement
This amendment, together with my amendment to clause 66, page 35, line 30, would mean that the Minister must provide information where the information is reasonably required for the purposes of independent reviews carried out under clause 65.

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

My Lords, I now turn to government Amendments 23, 24, 68 and 69, regarding the disclosure of information to the independent reviewers. These amendments rightly respond to the challenge put forward in Committee by noble Lords, including the noble Lord, Lord Vaux, and the noble Baronesses, Lady Finn and Lady Kramer, to provide all relevant information to independent reviewers. I am pleased to make these amendments today to demonstrate this Government’s commitment to supporting the independent reviewers in the PSFA and the DWP to carry out robust and transparent reviews.

On the PSFA side, government Amendments 23 and 24 will oblige the Minister to disclose all reasonable information to independent reviewers appointed under Clause 65 for the purposes of carrying out the review. The independent reviewer will determine what information is reasonably required. With regard to the DWP, in Committee my noble friend Lady Sherlock made it clear that the DWP Secretary of State will provide the independent reviewer of eligibility verification measures with all relevant material so that they can carry out their review. Recognising the underlying concern and to clarify our intent, we are today bringing forward government Amendments 68 and 69, which oblige the Secretary of State to disclose necessary information to the independent reviewer of EVM for the purposes of carrying out the review.

To be clear, for both sets of amendments substituting the word “must” for the word “may” does not signal a change in our approach. The Government have always been committed to providing all relevant information that is reasonably required to the respective independent reviewers to support the open and transparent use of powers and to promote accountability. These amendments today reinforce that commitment and make it crystal clear.

I hope that these amendments reassure your Lordships’ House that the Government will provide all relevant information to the independent reviewers, and I encourage noble Lords to back them. I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, we have a lot of discussions in this House about the difference between “may” and “must”. I think in this case it is very important. It is essential that the independent reviewers, who are such an important safeguard throughout this Bill, are provided with all the information that they require, so I am delighted and thank the Minister for putting forward those amendments. My joy, however, is not unbridled, because she has caveated the “must” with

“where the information is reasonably required”.

Nowhere in this does it tell us who decides what is reasonable in this case. That opens the possibility of disagreement between the independent reviewer and the department, or the Minister, as to what is reasonable. That is regrettable. It would be better if the independent reviewer decided what they wanted, was given everything they required and it was up to them to decide what was reasonable. This provides the opportunity for doubt and disagreement, and we will come on to that in a later amendment next week. However, overall, I welcome these amendments.

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We look forward to hearing from the Minister that this will be corrected in due course and that the Government will bring forward a further amendment to ensure consistency and fairness across the Bill. For now, however, we thank the noble Baroness, Lady Sherlock, for tabling these important amendments and the Government for having listened and acted upon the concerns that were raised in Committee.

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

My Lords, I am grateful for the contributions of noble Lords to this group. I will respond specifically and reassure the noble Lord, Lord Vaux, about who will decide and how it will be decided what constitutes relevant material for the independent reviewer under Clause 65 and what happens if they disagree.

The independent reviewer under Clause 65 will determine what information is reasonably required from the PSFA. They must be able to demonstrate to the Minister that the information requested will allow them to carry out the review and how. What is and is not relevant for the independent EVM reviewer is a matter of fact. Information must be given to the reviewer only if it will allow them to carry out their functions as prescribed by Section 6 of new Section 121DC of the legislation. If required, the independent EVM reviewer must be able to demonstrate to the Secretary of State that any information they request will allow them to carry out their review.

There may be rare examples of information that the Minister or Secretary of State may not share, such as information relating to national security, should they deem that it would be unreasonable to do so. Should there be a disagreement between the Minister and the independent reviewer, a resolution mechanism will be agreed between the reviewer and government. Ultimately, the Minister may not disclose the information, and in extreme cases, any ministerial decision to withhold information could be subject to judicial review. The independent reviewer will also be able to comment on any information withheld from them in the report which will be laid before Parliament.

In response to the questions from the noble Baroness, Lady Finn, as to why “must” is not across the Bill and why the DWP has not echoed this requirement in Clause 89, this is, as the noble Baroness has mentioned, going to be debated in a forthcoming group. However, I note that this divergence arises from the construction of Part 1 of the Bill. Unlike the DWP, the PSFA has one clause, Clause 65, relating to all independent reviewers. We have noted that we intend to meet the duty of Clause 65 by appointing a new independent reviewer to review PSFA use of powers and by commissioning HMICFRS—I am not sure what is easier to say, the full name or the acronym—to conduct inspections of our new investigative powers and end-to-end case processes.

We are keen to let the independent reviewer whom the Government will appoint have access to all reasonable and relevant information, which may include live cases. We would not want HMICFRS to consider live cases given the significant disclosure burden. However, in the PSFA’s case, given the small volume of cases, we believe that we can handle that challenge should an issue arise. With DWP, it really is in terms of scale and access to live cases. With the PSFA, we think that we can manage the difference.

I hope that those points have reassured noble Lords. Obviously, we will continue to debate some of these issues next week. I am grateful for this short debate and any support for the government amendments. I hope others will support these important amendments, which will help to improve transparency and promote accountability.

Amendment 23 agreed.

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[Baroness Finn (Con)]

My Lords, the main focus of my remarks in this group will be on Amendment 35. This amendment, in my name and that of my noble friend Lord Younger of Leckie, would insert a new clause after Clause 70 to require the appointment of an independent reviewer to assess how the Public Sector Fraud Authority uses the PACE powers—the investigatory powers derived from the Police and Criminal Evidence Act 1984, which the Bill proposes to confer upon it.

Under the amendment, the independent reviewer would be tasked with examining how these powers are used in practice, including their effect on police time, their operational impact, whether they have improved the efficiency of investigations and whether any complaints or disciplinary issues have arisen in relation to their use. The reviewer would report to the Minister within five years of the powers coming into force and annually thereafter, with those reports laid before both Houses of Parliament.

We have brought this amendment forward as a genuine compromise. We on these Benches want to work with the Government to ensure that the Bill succeeds in its purpose, which is to strengthen our national effort to combat fraud and to deliver a substantial and lasting reduction in losses to the public purse. We are not opposed to giving investigators the tools they need to do that job, but if the Government are still intent, as we understand they are, on extending PACE powers to civil servants within the PSFA, then those powers must be accompanied by robust and transparent oversight.

This amendment is designed to provide precisely that. It is a balanced and proportionate measure that ensures accountability without hampering operational effectiveness. The Government have been clear in their reasoning for granting these powers. They have said that it will save police time and resources, that it will allow investigators to act more efficiently, and that powers will be used responsibly and, where necessary, in conjunction with the police. Our amendment would simply hold the Government to those assurances. It asks them to demonstrate through an independent review mechanism that that these powers are indeed delivering on the objectives they have set out.

If the Government are confident that the PSFA will use these powers effectively and responsibly, and I have no reason to doubt their confidence, then they should have no hesitation in supporting this amendment. It would help them prove their case. The amendment gives the Government five years before the first review—ample time for the new arrangements to bed in, for the PSFA to become established, and for the data to show whether the powers are working as intended. Thereafter, annual reporting would ensure continued transparency and accountability.

It is clear that this amendment is not an attempt to frustrate the Bill—quite the opposite. It is an attempt to make it stronger, fairer and more credible. Oversight and review are not obstacles to effective governance; they are its foundation. If these powers are to be trusted, they must also be tested. We are therefore offering the Government a constructive path forward to accept a mechanism that ensures evidence-based assessment of how these powers are used, whether they are proportionate, and whether they are delivering measurable benefits.

If the Government’s case is correct that these powers will save police time, strengthen enforcement and be exercised with care, then this amendment would simply enshrine a process that will confirm that success. It is a sensible, good faith proposal that supports the Government’s stated objectives and ensures that Parliament and, indeed, the public can have confidence that this expansion of powers is justified, proportionate and effective.

If the Government are confident in their case, they will support this amendment. It is drafted to aid them, not to hinder. It is to help them demonstrate transparently and independently that these powers are being used well and wisely. If they are not minded to support us, I hope that the Minister will take this opportunity to set out to the House what alternative proposals the Government are considering to address these concerns. If the Government have no alternative, then I ask the Minister whether we on these Benches might come back at a later stage with a new amendment designed to address them. We cannot forget that we are talking about substantial powers which will be wielded against people in this country outside these walls. If we do not legislate responsibly now, we risk the well-being of those people to whom we all owe a duty. I beg to move.

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

My Lords, it could almost be that we are back in Committee. It is the “Baroness Finn, Baroness Anderson show”. I do not think many people would pay, but still.

I welcome the continued and unwavering commitment of the noble Baroness, Lady Finn, to independent oversight. I once again reassure her that the Bill as it stands delivers rigorous and robust safeguards and oversight, addressing the intent behind these amendments efficiently without the need for duplicative amendments.

On Amendment 25, internal reviews are important as they provide a straightforward and affordable way to present a challenge to decision-making. They are an impartial element of many review processes. Under the current drafting, internal reviews can be requested to challenge, for instance, whether a direct deduction order is the most appropriate form of repayment or whether the deduction amount is fair and affordable, as well as the use of other powers in the Bill. The reviewing officer will be a highly trained authorised officer of a higher grade than the original decision-maker. They may decide to uphold, vary or revoke the direct deduction order. This decision will be based on an assessment of the materials held and any relevant new information provided. Crucially, should a review not provide satisfaction, there are further independent appeal rights through the First-tier Tribunal.

On Amendment 35, the independent oversight of the use of the powers under Part 1, including PACE powers, is so central to the passage of this Bill that we already have clauses in place to mandate it. As we have said, Clauses 65 and 66 require that an independent person appointed by the Minister undertakes reviews of the use of powers contained in this legislation. The independent person will conduct reviews to consider whether the exercise of the powers is in keeping with the legislation, codes of practice and relevant guidance. They will produce a report of their findings for the Minister, including any recommendations they deem appropriate. The Minister is then required to publish the report and lay it before Parliament.

As we have stated, the Government intend to meet the duty imposed by this clause in two ways. First, the Government will commission His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services—HMICFRS—to inspect the PSFA’s use of the new investigative powers, including end-to-end investigative processing. Secondly, the Government are creating a new position for an independent person to whom the PSFA oversight team will report. The independent person will carry out reviews and report on whether the PSFA’s use of the powers in this Bill is in keeping with the legislation, codes of practice and relevant guidance, and consider areas where HMICFRS or other oversight bodies have not already reported. The employment of an independent person will also fully comply with the Cabinet Office Governance Code on Public Appointments, which is overseen by the Commissioner for Public Appointments. Clause 66 provides for the arrangements of timing of reviews between the Minister and the independent person.

In summary, the amendments are duplicative at heart. The right to independent assessment is already built into the legislation, via appeal and in the form of the independent reviewer to be appointed to review the use of the Bill’s powers under Clause 65. These would not require the addition of extra costs, people or processes that Amendments 25 and 35 would entail.

However, the Government note that Amendment 35 specifies particular areas of focus for a reviewer beyond what is in the Bill. Your Lordships’ House has also raised other areas that it would like an independent reviewer to consider. We have been clear that the independent reviewer appointed under Clauses 65 and 66 will have discretion to decide how and where they focus their reviews. Even so, to ensure that the House’s concerns are heard, I am committing to compiling a list of all the concerns raised here and in the other place to put before the independent reviewer for consideration once appointed. I will also request that the independent reviewer meet with all parliamentarians who have raised areas where they think his or her work should be focused. That way, the independent reviewer and the report they will lay before Parliament will be certain to meet Parliament’s priorities for scrutiny of the use of these powers. Given these assurances and this additional option, I hope the noble Baroness will withdraw her amendments, as the purpose is already met by the Bill as it stands and the commitments that I have just made.